Datasets:

shipWr3ck

/

gov_report_test_cleaned

like 0

crs_R45930

crs_R45930_0

<1. Introduction> Many Members of Congress have demonstrated an interest in the mandates, effectiveness, and funding status of U.N. peacekeeping operations in Africa as an integral component of U.S. policy toward Africa and a key tool for fostering greater stability and security on the continent. As a permanent member of the U.N. Security Council (the Council) with veto power, the United States plays a key role in establishing, renewing, and funding individual operations, including those in Africa. The United States is the largest financial contributor to U.N. peacekeeping. This report provides an overview of active U.N. peacekeeping operations in Africa, including their mandates, budget and funding mechanisms, key challenges, and U.S. policy toward each mission. It does not address broader U.N. peacekeeping issues or missions elsewhere, non-U.N. peacekeeping and stabilization efforts in Africa, or the activities of the U.N. Support Office in Somalia (UNSOS), which is a U.N.-authorized logistics mission that supports the African Union (AU) Mission in Somalia (AMISOM). For related information, see CRS In Focus IF10597, United Nations Issues: U.S. Funding of U.N. Peacekeeping ; CRS In Focus IF11171, Crisis in the Central African Republic ; CRS In Focus IF10116, Conflict in Mali ; CRS In Focus IF10218, South Sudan , and CRS Report R45794, Sudan's Uncertain Transition ; CRS Report R43166, Democratic Republic of Congo: Background and U.S. Relations ; and CRS Report RS20962, Western Sahara . <2. Setting the Context: U.N. Peacekeeping Operations> As of August 2019, the United Nations conducts 14 peacekeeping operations worldwide comprising more than 100,000 military, police, and civilian personnel. Of these operations, seven are in Africa ( Figure 1 ): the U.N. Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA), established by the Council in 2014; the U.N. Multidimensional Integrated Stabilization Mission in Mali (MINUSMA), established in 2013; the U.N. Interim Security Force for Abyei (UNISFA), established in 2011; the U.N. Mission in South Sudan (UNMISS), established in 2011; the U.N. Organization Stabilization Mission in the Democratic Republic of the Congo (DRC, MONUSCO), established in 2010 to succeed the U.N. Organization Mission in the DRC (MONUC); the U.N.-African Union Mission in Darfur (UNAMID), established in 2007; and the U.N. Mission for the Organization of a Referendum in the Western Sahara (MINURSO), established in 1991. These include the world's four largest U.N. peacekeeping operations by actively deployed uniformed personnel : MONUSCO, UNMISS, MINUSMA, and MINUSCA. The Africa operations illustrate how U.N. peacekeeping has significantly evolved since the first mission was established in the Middle East in 1948. U.N. peacekeeping once involved implementing cease-fire or peace agreements (as is the case for MINURSO, the oldest of the current Africa operations). Since the 1990s, however, the U.N. Security Council has increasingly authorized operations in complex and insecure environments where there may be no peace to keep and little prospect of a near-term resolution. Peacekeepers, particularly those operating in African missions, are increasingly asked to protect civilians, help extend state authority, disarm rebel groups, work with humanitarian actors, assist in restoring the rule of law, and monitor human rights, often in the absence of a comprehensive or effective cease-fire or peace settlement. <2.1. Establishment and Budget> Members of the Security Council vote to adopt resolutions establishing and renewing peacekeeping operations. The resolutions specify the mission mandate and timeframe and authorize a troop ceiling and funding level for each mission. The Council generally authorizes the U.N. General Assembly (the Assembly) to create a special account for each operation funded by assessed contributions by U.N. member states. The Assembly adopts the peacekeeping scale of assessments every three years based on modifications of the U.N. regular budget scale, with the five permanent Council members assessed at a higher level for peacekeeping than for the regular budget. The latest U.S. peacekeeping assessment, adopted in December 2018, is 27.89%. Other top contributors include China (15.22%), Japan (8.56%), Germany (6.09%), and France (5.61%). The approved U.N. budget for the 2019/2020 peacekeeping fiscal year is $6.51 billion. Of this amount, $4.82 billion (nearly 75%) is designated for the seven missions in Africa. U.N. members voluntarily provide the military and police personnel for each peacekeeping mission. Peacekeepers are paid by their own governments, which are reimbursed by the United Nations at a standard rate determined by the Assembly (about $1,428 per soldier per month). Some African countries including Ethiopia, Rwanda, and Ghana are among the largest troop contributors. Some experts and observers have expressed concern regarding possible funding shortages for U.N. peacekeeping operations, particularly those in Africa, and the impact it could have on their effectiveness. In a March 2019 report to the General Assembly (A/73/809), U.N. Secretary-General (SG) Ant nio Guterres noted an increase in the number of peacekeeping missions that are frequently cash constrained due to member state payment patterns and arrears, and "structural weaknesses" in peacekeeping budget methodologies, including inefficient payment schedules and borrowing and funding restrictions. These issues have led to some cash shortages, delays in reimbursements to some troop contributing countries (TCCs), and increased risks to "not only the functioning of its [U.N.] peacekeeping operations but also the people who serve in difficult environments." Ongoing difficulties in paying for peacekeeping operations could have implications for the internal stability of top African TCCs, which may view U.N.-funded troop salary reimbursements as a tool to reward and/or placate their large and potentially restive militaries. To help address the aforementioned issues, SG Guterres proposed several reforms that have been implemented or are under consideration by U.N. member states. The extent to which these efforts might improve the peacekeeping financial situation remains to be seen. <2.2. U.S. Funding> Congress authorizes and appropriates U.S. contributions to U.N. peacekeeping. Some Members have expressed an ongoing interest via legislation, oversight, and public statements in ensuring that such funding is used as efficiently and effectively as possible. U.S. assessed contributions to U.N. peacekeeping operations are provided primarily in annual State, Foreign Operations, and Related Programs (SFOPS) appropriations bills through the Contributions for International Peacekeeping Activities (CIPA) account. Congress has often debated the level and impact of U.S. funding for U.N. peacekeeping. In the early 1990s, the U.S. peacekeeping assessment was over 30%, which many Members of Congress found too high. In 1995, Congress set a 25% cap on funding authorized after 1995. Over the years, the gap between the actual U.S. assessment and the cap has led to shortfalls in peacekeeping funding. The State Department and Congress have often covered these shortfalls by raising the cap for limited periods through SFOPS appropriations measures, and allowing for the application of U.N. peacekeeping credits (excess U.N. funds from previous peacekeeping missions) to fund outstanding U.S. balances. During the Obama Administration, these actions allowed the United States to pay its assessments to U.N. peacekeeping missions in full. Congress has elected not to temporarily raise the cap since FY2016. In addition, since mid-2017, the Trump Administration has allowed for the application of peacekeeping credits up to, but not beyond, the 25% cap. As a result, the State Department estimates that the United States accumulated more than $700 million in cap-related arrears through the CIPA account in FY2017, FY2018, and FY2019 combined (in addition to other peacekeeping arrears). These are distributed across U.N. operations, including those in Africa. The Trump Administration has voted for the renewal and funding of existing U.N. peacekeeping operations. At the same time, it has been critical of overall and Africa-specific U.N. peacekeeping activities and called for a review of operations to ensure that they are "fit for purpose" and more efficient and effective. Most recently, the Administration's FY2020 budget proposed $1.13 billion for U.N. peacekeeping operations, a 27% reduction from the enacted FY2019 level of $1.55 billion (see Table 1 for a breakdown by African operations). The proposal states the Administration's "commitment to seek reduced costs by reevaluating the mandates, design, and implementation" of missions and to sharing the cost burdens "more fairly" among countries. In addition to its assessed contributions, the United States supports African troop and police contributors by providing training and equipment on a voluntary, bilateral basis. The State Department's Global Peace Operations Initiative (GPOI) is one key source of funding for such support, funded through the SFOPS Peacekeeping Operations (PKO) account as well as ad hoc regional funding allocations. The State Department also provides police assistance through its International Narcotics Control and Law Enforcement (INCLE) account. <3. Selected Policy Issues> U.S. support for expanding or maintaining individual U.N. peacekeeping operations in Africa or for approving new operations in response to emerging conflicts on the continent has fluctuated over time. During the Obama Administration, the United States backed new operations in the Central African Republic (CAR) and Mali both times at the urging of France, an ally and fellow permanent member of the U.N. Security Council while overseeing the closure of long-standing operations in Liberia and C te d'Ivoire as those countries stabilized in the aftermath of internal conflicts. U.N. Security Council members have not formally proposed new U.N.-conducted operations in Africa during the Trump Administration to date, although some have voiced support for authorizing U.N. assessed contributions and/or logistical support for an ongoing African-led operation in the Sahel region (see "African-led operations" below). Despite shifts in policy and on the ground, several overarching policy issues and debates continue to arise regarding U.N. peacekeeping in Africa. These fall into several categories discussed below. Civilian p rotection m andate fulfillment . Policymakers have debated what changes, if any, can or should be made to enable U.N. peacekeeping operations in Africa to fulfill mandates to protect civilians. This issue has been particularly salient with regard to MONUSCO (in DRC) and MINUSCA (in CAR). Both missions' mandates place a high emphasis on civilian protection amid ongoing conflicts and severe logistics and personnel protection challenges. Armed groups have repeatedly massacred civilians at close proximity to U.N. operating sites. Restrictions (or "caveats") imposed by troop-contributing countries on their forces' deployments, often attributable to force protection concerns, may imp ede civilian protection efforts in some cases. Mass atrocities . Some experts and observers have debated whether U.N. peacekeeping operations are an effective tool for preventing or addressing mass atrocities. U.S. support for MINUSCA's creation was nested within a high-level effort to prevent further mass atrocities in CAR; fulfilling this goal has proven challenging. In Mali, militias have engaged in a spate of civilian massacres in the center of the country, a region that was largely outside the purview of MINUSMA until the 2019 mandate renewal (as discussed below). Role of host governments . A key challenge is how and to what extent U.N. peacekeeping operations should pursue positive working relationships with host governments whose interests may not align with international stabilization efforts. In practice, peacekeeping personnel may require approvals from host governments to acquire entry visas or access certain parts of the country, for example. Pursuit of positive relations may, however, undermine perceptions of U.N. neutrality or trustworthiness in the context of an active conflict and/or state abuses. U.N. operations in CAR, DRC, and Mali, among others, are mandated to support the extension of state authority, although state security forces are a party to internal conflicts. These same U.N. missions are also tasked with facilitating peace talks between the government and rebel groups. Operations in Sudan and South Sudan have faced obstructions and threats from government officials and security forces, and the role of state security forces in attacks on civilians complicates the missions' civilian protection and reporting mandates. Counter t errorism . Some policymakers have questioned what role, if any, U.N. peacekeeping operations should play in addressing transnational terrorism in Africa. This debate has repeatedly arisen in the context of Mali, and may become relevant in other places (such as DRC, where the Islamic State has claimed ties to a local militia group). Despite calls from the Malian government and other regional leaders, the Security Council has declined to mandate MINUSMA explicitly to conduct counterterrorism operations, notwithstanding the mission's civilian protection and stabilization mandates. Sexual exploitation and abuse by U.N. peacekeepers . Members of Congress have demonstrated an ongoing interest in how the United Nations might better address sexual abuse and exploitation by U.N. peacekeepers particularly in MONUSCO and MINUSCA, which have the highest rates of substantiated allegations of sexual abuse and exploitation. Congress has enacted several provisions to address the issue. For example, SFOPS bills since FY2008 have prohibited the obligation of U.N. peacekeeping funding unless the Secretary of State certifies that the United Nations is implementing effective policies and procedures to prevent U.N. employees and peacekeeping troops from engaging in human trafficking, other acts of exploitation, or other human rights violations. African troop-contributing countries (TCCs) . Experts and policymakers have debated the advantages and drawbacks of relying on African countries to contribute the bulk of military and police personnel to U.N. peacekeeping operations in Africa. African troop contributors may be willing, but they often display capacity shortfalls and/or poor adherence to human rights standards. For example, in CAR, in a single year (2016), peacekeepers from the Republic of Congo and DRC among others were implicated in the abuse of minors, while Burundi's police contingent was repatriated due to abuses by its police services at home. In Mali, which has been the deadliest environment for U.N. peacekeepers since MINUSMA's establishment, top troop contributors include Burkina Faso, Chad, Senegal, and Togo which are among the world's poorest countries. Moreover, troop contributors that border the host country may have bilateral political interests that complicate their participation in peacekeeping operations. Some countries may also wield their contributions to such missions to deflect international criticism of their domestic political conditions. African-led operations . How and whether to fund and sustain African-led regional stabilization operations in lieu of, or as a complement to, U.N. peacekeeping operations has been debated in U.N. fora, in Africa, and among U.S. policymakers. Stabilization operations initiated by the African Union (AU) or sub-regional organizations are often superseded by U.N. peacekeeping missions. While African regional organizations can authorize rapid military interventions, they are generally unable to finance or sustain them, and donor governments may be reluctant to fund them over long periods. AMISOM established in 2007 and mandated to take offensive action in support of Somalia's federal government and against Islamist insurgents has remained the sole African-led military intervention to benefit from a U.N. support operation funded through assessed contributions. At times, U.N. and AU officials, France (a permanent Security Council member), and African heads of state have proposed a similar mechanism for other regional missions (notably in the Sahel), but successive U.S. Administrations have declined to support such proposals, preferring to provide funding on a voluntary and bilateral basis. In recent years, the AU has sought the use of U.N. assessed contributions to help fund its operations directly (see text box ). <4. Overview by Operation> The following sections provide background on each active U.N. peacekeeping operation in Africa, including U.S. policy and key issues. Operations are presented in reverse chronological order of their establishment by the U.N. Security Council (starting with most recently authorized). <4.1. Central African Republic (MINUSCA)> The Security Council established the U.N. Multidimensional Integrated Stabilization Mission in CAR (MINUSCA) in 2014 in response to a spiraling conflict and humanitarian crisis in the country. The crisis began in 2013 when a largely Muslim-led rebel coalition seized control of the central government; largely Christian- and animist-led militias emerged in response and brutally targeted Muslim civilians, resulting in a pattern of killings and large-scale displacement that U.N. investigators later termed "ethnic cleansing." MINUSCA absorbed a preexisting African intervention force, as well as a U.N. political mission in CAR. Although CAR returned to elected civilian-led government in 2016, rebel groups continue to control most of the countryside. Armed factions have continued to kill and abuse civilians, often along sectarian and ethnic lines. Whether a peace accord signed in early 2019 will bring greater stability remains to be seen. MINUSCA is currently mandated to protect civilians, support the extension of state authority, assist the peace process, and protect humanitarian aid delivery, among other tasks. It also has an unusual mandate to pursue "urgent temporary measures ... to arrest and detain in order to maintain basic law and order and fight impunity," under certain conditions. The mission has employed this authority against several militia leaders, with mixed effects on local security dynamics. Localized dynamics on the ground and a lack of domestic security force capacity also have stymied progress on stabilization. An analysis in late 2018 by nongovernment organizations attributed tenuous security improvements in parts of the country to MINUSCA's "robust military operations," as well as to its civilian-led support to local peacebuilding and disarmament efforts, while noting that "MINUSCA is neither authorized nor well-placed to use force with the objective of eliminating armed groups." In 2018, U.N. sanctions monitors issued a scathing assessment of a joint operation by MINUSCA and local security forces in the majority-Muslim "PK5" enclave of Bangui that aimed to dismantle a local militia. The sanctions monitors asserted that the operation had failed while also triggering intercommunal tensions and deadly clashes. Despite nearly reaching its full authorized troop ceiling, MINUSCA continues to exhibit operational capacity shortfalls, which the Security Council has attributed to "undeclared national caveats, lack of effective command and control, refusal to obey orders, failure to respond to attacks on civilians, and inadequate equipment." Force protection is a challenge: 35 MINUSCA personnel have been killed in "malicious acts" to date. (CAR is also one of the world's deadliest countries for aid workers.) Continued violence has fueled local frustrations with MINUSCA's perceived ineffectiveness as has a sweeping sexual abuse scandal implicating multiple MINUSCA contingents, as well as French troops deployed under national command. Hostility has also been driven by government officials who oppose an enduring U.N. arms embargo on the country, as well as "demagogic" actors who seek to discredit international forces and destabilize the government. In April 2018, demonstrators placed 17 corpses outside MINUSCA headquarters to protest alleged killings of civilians during the aforementioned troubled joint operation with local security forces in the PK5 enclave. Despite initial skepticism, the Obama Administration ultimately supported MINUSCA's establishment as part of its efforts to prevent mass atrocities in CAR. The Trump Administration has maintained support to date, and in 2017 backed a troop ceiling increase of 900 military personnel. The State Department's FY2020 budget request projects that "the role and size of MINUSCA will likely remain unchanged until the government gains the capacity to fully assume its responsibilities to protect civilians, ensure the viability of the state, and prevent violence." <4.2. Mali (MINUSMA)> The Security Council established the U.N. Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) in 2013 after state institutions collapsed in the face of an ethnic separatist rebellion in the north, a military coup, and an Islamist insurgent takeover of the north of the country. The mission absorbed a short-lived African intervention force and U.N. political mission. France also had launched a unilateral military intervention in early 2013 to free northern towns from Islamist militant control, and pressed for both the African-led mission and the transition to a U.N.-conducted operation. MINUSMA was initially mandated to support Mali's transitional authorities in stabilizing "key population centers," support the extension of state authority throughout the country, and prepare for elections, in addition to protecting civilians and U.N. personnel, promoting human rights, and protecting humanitarian aid, among other tasks. Civilian protection was elevated within the mandate in 2014, as was support for the launching of "an inclusive and credible negotiation process" for northern Mali, following a ceasefire between the government and separatist rebels and elections in late 2013. After the government and two northern armed group coalitions signed a peace accord in 2015, the Security Council deemed support for implementation of the accord to be the mission's top priority. As of mid-2019, the peace agreement remains largely un-implemented, while the Islamist insurgency (excluded from the peace process by design) has expanded into previously government-controlled central Mali, as well as neighboring Burkina Faso and, to a lesser extent, Niger. Since 2017, observers have raised alarm over a spate of civilian massacres in the center, attributed to state security forces and to ethnically based militias (some of which appear to have ties to state elements), which may constitute "ethnic cleansing." Renewing MINUSMA's mandate in June 2019, the Security Council decided that the mission's "second strategic priority," after support for implementation of the 2015 accord, would be to "facilitate" a future Malian-led strategy to protect civilians, reduce intercommunal violence, and reestablish state authority in the center of the country, followed by other tasks (Resolution 2480). Unlike most U.N. peacekeeping operations in Africa, MINUSMA includes sizable Western contingents, including from Canada (134), Germany (381), the Netherlands (116), Norway (92), and Sweden (253). The countries contributing the largest uniformed contingents (>1,000 each), however, are nearby (Burkina Faso, Chad, Senegal, Togo) or major global peacekeeping troop contributors (Bangladesh, Egypt). MINUSMA is the world's deadliest current U.N. peacekeeping operation, with 126 personnel cumulatively killed in "malicious acts" (roughly 20 per year on average), including at least 20 in the first half of 2019. African contingents have borne the brunt of these fatalities (112 of 126 deaths). In 2013, U.N. policy debates over MINUSMA's establishment centered on the wisdom of authorizing a peacekeeping mission in the context of threats from transnational Islamist terrorist organizations, namely, Al Qaeda in the Islamic Maghreb and its local affiliates and offshoots. Policymakers debated, in particular, whether U.N. personnel would be adequately protected and whether a U.N. operation could or should be given a counterterrorism mandate. Ultimately, MINUSMA was not given an explicit mandate to conduct counterterrorism or counterinsurgency operations. France, meanwhile, has maintained troops in the country as a de facto parallel force to target terrorist cells, a mission for which the U.S. military provides direct logistical support. Malian and other African leaders (backed by France, at times) have repeatedly called for U.N. assessed contributions to provide funding and sustainment for a regional counterterrorism force, most recently the "G5 Sahel joint force" initiative launched by Mali and neighboring states in 2017. U.N. Secretary-General Guterres, for his part, has urged the Security Council to establish a U.N. support office, funded through assessed contributions and independent of MINUSMA, to provide logistics and sustainment to a G5 Sahel force. Successive U.S. Administrations have opposed such proposals, citing a preference for voluntary and bilateral support as opposed to assessed contributions. <4.3. United Nations Interim Security Force for Abyei (UNISFA)> UNISFA was authorized by the U.N. Security Council on the eve of South Sudan's independence in June 2011, in an effort to mitigate direct conflict between Sudan and South Sudan at a prominent disputed area on their border. The mission's mandate originally focused only on Abyei, a contested border territory and historic flashpoint for conflict that was accorded special semi-autonomous status in the 2005 Comprehensive Peace Agreement (CPA) between Sudan's government and southern rebels. The mandate was expanded in late 2011 to support broader border security arrangements between the two countries, including a Joint Border Verification and Monitoring Mechanism (JBVMM), which the CPA signatories agreed to establish to monitor the full Sudan-South Sudan border. UNISFA's deployment to Abyei defused a violent standoff between the two countries' militaries, but tensions among local communities still have the potential to destabilize the border. Under the CPA, the residents of Abyei were to vote in a referendum in 2011 on whether the area should retain its special status in Sudan or join South Sudan, but an officially sanctioned process has yet to occur. The final status of Abyei is likely to remain unresolved until Sudan and South Sudan negotiate a solution. The April 2019 ouster of Sudan's President Omar al Bashir and the unfolding political transition may affect the situation in Abyei and other border areas. UNISFA was most recently reauthorized in May 2019, through November 15, 2019. The Security Council directed the mission to reduce its troop presence to 2,965 by October 2019 (from 4,140 previously authorized), while increasing the number of authorized police from 345 to 640. UNISFA's policing function to date has been hamstrung by Sudan's limited issuance of visas for police personnel. UNISFA is almost entirely composed of personnel from neighboring Ethiopia, based on a 2011 agreement between Sudan and South Sudan to demilitarize the area and allow Ethiopian monitors. There have been 36 UNISFA fatalities since 2011, with eight due to "malicious acts." The most recent peacekeeper fatality occurred in July 2019, when unidentified gunmen attacked a market. The U.N. Security Council has pressed, unsuccessfully, for the establishment of a temporary local administration and police service to maintain order in Abyei until a final political settlement is reached. The absence of a local administration, combined with the presence of armed elements and sporadic intercommunal violence, continues to drive humanitarian needs. UNISFA helps to maintain law and order in the absence of local police, and it engages in efforts to reduce intercommunal conflict. UNISFA's presence and its conflict prevention and mitigation efforts have reportedly helped to defuse tensions during the annual migrations of an estimated 35,000 Misseriya (a nomadic group) and their cattle south through Abyei. The mission also confiscates and destroys weapons and facilitates mine clearance. UNISFA has yet to operationalize its human rights monitoring mandate because of Sudan's nonissuance of visas, and because its facilitation of humanitarian aid has been limited by Sudanese restrictions on aid agencies' operations, aid funding shortfalls, and South Sudan's war. With regard to UNISFA's border security role, Sudan and South Sudan took limited action to stand up the JBVMM in the mission's early years, but there has been recent progress, possibly reflecting warming relations between the two countries. The United States, which served as a facilitator and guarantor of the CPA, has historically placed a high priority on peace between Sudan and what is now South Sudan. In mid-2011, when Sudanese troops and allied militia seized Abyei after its referendum was postponed, the Obama Administration declared the move to be an invasion of area and thus a violation of the CPA. The Security Council similarly condemned Sudan's "taking of military control" of Abyei and authorized UNISFA. Sudan's army subsequently withdrew as UNISFA deployed, and the mission's presence has since been seen as a deterrent to conflict between the two countries' forces. While relations between Sudan and South Sudan have improved in recent years, the instability in South Sudan and Sudan's Southern Kordofan state poses risks, and the political transition in Sudan creates further uncertainty regarding stability in the region. U.S. officials have previously expressed concern that the mission has continued longer than intended and that both Sudan and South Sudan have taken advantage of the relative stability its peacekeepers provide. <4.4. U.N. Mission in South Sudan (UNMISS)> UNMISS was established on July 9, 2011, the date of South Sudan's independence from Sudan. It replaced the U.N. Mission in Sudan (UNMIS), which had supported implementation of the peace deal that ended Sudan's north-south civil war. UNMISS, currently authorized through March 2020, is currently the U.N.'s second largest peacekeeping mission ( Figure 1 ). UNMISS was established with the aim of consolidating peace and security in the world's newest country, and helping to establish conditions for development after decades of war. The outbreak of a new internal conflict in December 2013, however, fundamentally changed the mission and its relationship with the host government. The war, now in its sixth year, has displaced more than 4 million people, and by some estimates over 380,000 people have been killed, including at least 190,000 in violent deaths. Shortly after the fighting began, the U.N. Security Council authorized an expansion of the mission from its prewar level of 7,000 troops and 900 police. Months later, as early mediation efforts failed to stop the conflict, the Security Council modified the UNMISS's mandate in Resolution 2155 (2014). As a result, the mandate changed from one that had supported peace-building, state-building, and the extension of state authority to one that sought strict impartiality in relations with both sides of the conflict, while pursuing four key tasks under a Chapter VII mandate: protecting civilians, monitoring and investigating human rights abuses, facilitating conditions conducive to aid delivery, and supporting a ceasefire monitoring. The Security Council again increased UNMISS's force size after the warring sides signed a peace deal in August 2015, and added to its mandate the task of supporting implementation of the peace agreement. The opposing parties formed a new Transitional Government of National Unity (TGNU) in April 2016, but the arrangement collapsed in July 2016, and the war resumed. The Security Council, in an effort to create conditions under which the opposition could safely return to the capital and revive the peace deal, authorized another increase to UNMISS's troop ceiling, to include a Regional Protection Force (RPF), with up to 4,000 troops to be drawn from East African countries. The tasks of the RPF were to include, among others, providing a secure environment in and around the capital of Juba, with the ability to be deployed "in extremis" elsewhere as needed. South Sudan's government objected to the RPF's mandate and resisted its deployment; meanwhile, the war spread and the number of armed groups proliferated. When the conflict began, UNMISS bases became shelters for tens of thousands of civilians fleeing the fighting and ethnically targeted attacks. As of September 2019, more than 180,000 people were still sheltering at five bases also known as Protection of Civilian (POC) sites including roughly 30,000 at the U.N. base in Juba. This is an unprecedented situation for a U.N. peacekeeping mission, and several of the sites, never intended for long-term settlements, feature living conditions that do not meet refugee camp standards. UNMISS has struggled to protect civilians within and around the POC sites, and responsibility for security of those locations limits its ability to protect civilians and humanitarian workers elsewhere. Nevertheless, U.N. officials and others suggest that thousands of civilians would be dead if not for UNMISS. Many of those sheltering at the sites reportedly fear being targeted based on their ethnicity if they leave. Access restrictions and bureaucratic obstruction further stymie the mission's capacity. UNMISS relations with the government have been tense since the war began, and South Sudanese officials have periodically stoked anti-U.N. sentiment based on misperceptions of the mission's role and allegations of partiality. U.N. bases have been attacked on several occasions, and mortar and crossfire have resulted in the deaths of civilians and U.N. staff in the bases. To date, 14 peacekeepers have been killed in "malicious acts." Two U.N. helicopters have been shot down in South Sudan, at least one of them by the army. The role of government forces in violence against civilians severely complicates UNMISS's civilian protection mandate, given the mission's reliance on the consent of the host government to operate. In September 2018, South Sudan's two largest warring factions those of President Salva Kiir and his rival, Riek Machar signed a new peace deal. Experts debate whether the deal is a viable framework for sustainable peace. The International Crisis Group (ICG) contends that, at minimum, "it is not a finished product and requires revision, a reality that mediators are not yet ready to admit." Implementation of the agreement is significantly behind schedule: the planned formation of a new unity government, delayed from May to November 2019, is in question as concerns about the accord's security arrangements remain unaddressed. The 2018 ceasefire has reduced the fighting in most parts of the country, but clashes continue in some areas, and U.N. reports document "the continued use of conflict-related sexual violence by the warring parties and "targeted" attacks on civilians, notably those "perceived to be associated with opposition groups." Amid mounting concerns that this latest deal could collapse, ICG (among others) argues that international pressure including from the United States, which played a key role in supporting South Sudan's independence and is the "penholder" on the situation in the Security Council may be critical to preventing a return to full-scale war. <4.5. African Union-United Nations Mission in Darfur (UNAMID)> UNAMID was first authorized in 2007, to succeed the African Union Mission in Sudan (AMIS), which deployed in 2004 in response to the unfolding crisis in Darfur, an area roughly the size of France. When UNAMID was established, it was authorized to have a significantly larger force than AMIS almost 26,000 personnel initially, including 19,555 troops with a Chapter VII mandate to protect U.N. personnel, aid workers, and civilians, and to support implementation of a 2006 peace deal. The Security Council also tasked UNAMID with monitoring and conflict mitigation responsibilities. UNAMID is the first, and to date only, hybrid peacekeeping operation, with a U.N. chain of command but dual selection and reporting procedures. (Sudan rejected a regular U.N. mission; a U.N.-AU hybrid was the compromise, with most of the troops drawn from African countries.) By 2011, at almost 90% of its authorized strength, it was one of the largest peacekeeping missions in history. UNAMID has faced pressures from multiple fronts, and has been described by some as "a mission that was set up to fail." The government of former President Omar al Bashir (ousted in April 2019) obstructed its operations and long pressed for its exit. Observers have periodically questioned the mission's credibility, amid allegations that it has self-censored reporting on state-backed crimes against civilians and peacekeepers and understated the level of ongoing violence. In 2009, a declaration by the outgoing head of UNAMID that the war in Darfur was over while violence continued drew concern from human rights groups and other observers. In 2013, the mission's spokesperson resigned, accusing UNAMID of a "conspiracy of silence"; a subsequent U.N. investigation found the mission had underreported and purposefully withheld information from U.N. headquarters concerning attacks by Sudanese forces on civilians and peacekeepers. The Bashir government periodically denied flight clearances and restricted the movement of UNAMID patrols. Access denials, along with insecurity, have long impeded humanitarian operations, and some parts of Jebel Marra, a rebel stronghold, remain inaccessible. Bureaucratic delays, including in the issuance of visas, have also impeded operations. The mission has faced other challenges, ranging from shortfalls in critical equipment and aviation assets to a hostile environment. There have been over 270 UNAMID fatalities since the mission began, with 73 deaths attributed to "malicious acts." In 2013, the U.N. Panel of Experts suggested that the "lack of a deterrent" against attacks on peacekeepers and humanitarian aid workers "may be a contributing factor to the persistence of this phenomenon." Over the years, the panel has recommended, unsuccessfully, that several individuals and groups deemed responsible for attacks be sanctioned. The Security Council has made no sanctions designations since 2006. The United States has not designated individuals under its Darfur sanctions regime (E.O. 13400) since 2007. The Security Council has reconfigured and gradually reduced UNAMID's mandate and mission since 2014, transferring some of its tasks to the U.N. country team. The country team's limited presence, capacity, and resources, however, have limited its ability to take on new responsibilities. Under pressure from Sudan's government for an exit strategy, the Security Council approved a reduction of troops in 2017, despite criticism from groups like Human Rights Watch that the cuts reflected a "false narrative about Darfur's war ending" (see below). Some independent experts suggest that the West suffers from "Darfur fatigue" and contend that flagging political will and pressure to cut peacekeeping budgets have driven decisions on UNAMID's exit, tentatively set under Resolution 2429 (2018) for June 30, 2020. Meanwhile, the Council has declared the mission's exit to be contingent on the security situation and progress on specified benchmarks. Over a decade after UNAMID's deployment, peace talks have not resolved Darfur's conflicts. The level of fighting subsided after a major government offensive in early 2016 gave the military dominance in the region. The government subsequently declared a ceasefire to which, per U.S. officials, it has largely adhered, contributing to the Administration's decision to lift some sanctions on Sudan in 2017. Recent U.N. reporting gives a mixed picture of the security situation. A joint U.N.-AU strategic review in 2018 concluded that Sudan's military gains since 2016 had led to the "consolidation of State authority across Darfur," with conditions now described as "lawlessness and criminality, aggravated by a protracted humanitarian crisis, continued human rights violations and the lack of development." A U.N. Secretary-General's report in April 2019 described the security situation in the region as "relatively stable," with the exception of Jebel Marra, where clashes continued and where a January 2019 U.N. Panel of Experts report suggested the government had waged large-scale military operations against rebels in 2018. Some rebels reportedly fled to Libya to rebuild their military capacity for possible return to Sudan. The Secretary-General's report also described serious intercommunal violence, attacks on civilians, and ongoing abuses by government forces as "an obstacle to lasting peace." The scale of displacement in Darfur has changed little in recent years: over 1.7 million people remain internally displaced, most of them in camps, and over 340,000 refugees are in Chad. In the wake of President Bashir's overthrow in April 2019, a joint U.N.-AU assessment team noted a spike in violence in several camps for internally displaced persons (IDPs). Their report suggested, though, that Darfur had generally "evolved into a post-conflict setting." The team submitted that the new political dynamics did not warrant a change of the June 2020 exit date and that conditions had been met for the drawdown to proceed, albeit gradually, with the mission transitioning from peacekeeping to peacebuilding. Several incidents suggest security conditions for U.N. and aid operations in Darfur worsened in mid-2019, however. In May, UNAMID's West Darfur headquarters was looted on the eve of its scheduled handover to Sudanese authorities; military and police personnel were implicated in the incident. In June, humanitarian relief facilities in South Darfur were looted and vandalized. The United Nations has reported that most of the facilities that UNAMID has closed as part of its drawdown have been occupied by state security forces. (The sites were supposed to be handed over to the government to be used for civilian purposes.) An internal UNAMID review of 10 closed sites indicated that nine were being used specifically by the paramilitary Rapid Support Forces (RSF), which have been implicated in human rights abuses. In June, the military leaders who seized power from Bashir demanded that remaining UNAMID bases be transferred to the RSF. The AU rejected the order, which was subsequently reversed. It is unclear whether the RSF has vacated the locations. U.N. human rights officials reported in June 2019 that the human rights situation in Darfur had deteriorated, with increased reports of killing, abduction, sexual violence, and other abuses. The AU Peace and Security Council determined at that time that the "drastic change on security and political developments has contributed to the deterioration of the security situation in Darfur," and called for remaining peacekeepers to be consolidated until the situation stabilized. Amnesty International, which has argued against UNAMID's closure, suggests doing so would "recklessly and needlessly place tens of thousands of lives at risk by removing their only safeguard against the government's scorched earth campaign." On June 27, the U.N. Security Council voted to pause the drawdown until October 31, with roughly 4,200 troops and 2,300 police remaining in Darfur as of July 31. It is difficult to predict how the situation in Darfur may evolve in the next year, as UNAMID's prescribed June 2020 exit date approaches. Arguably the most powerful figure among the security officials who seized power from Bashir is RSF commander Mohamed Hamdan Dagalo, aka "Hemeti," a former Janjaweed militia leader from Darfur. By some accounts, his forces have sought to expand their control in Darfur, and since Bashir's ouster they have been implicated in the killing of dozens of Darfuri civilians. He now holds a senior position in the new transitional government, and how he may influence the prospects for peace is subject to debate. Sudan's new reform-oriented prime minister has identified making peace with the country's insurgent groups as his top priority. As that process begins, in the context of a fragile transition, Sudanese, U.N., and AU officials are set to begin discussions on the future of U.N. peacekeepers in Darfur, and on whether a follow-on mechanism to UNAMID may be appropriate. <4.6. Democratic Republic of Congo (MONUSCO)> The currently largest U.N. peacekeeping operation originated as a response to the civil and regional conflict in the Democratic Republic of Congo (DRC) in the late 1990s. In 2010, the Security Council established the U.N. Organization Stabilization Mission in DRC (MONUSCO) to succeed the U.N. Organization Mission in DRC (MONUC, established in 1999), following the conclusion of a formal post-conflict transitional period in DRC. MONUSCO's mandate has generally prioritized the protection of civilians and the extension of state authority in eastern DRC, where multiple armed groups remain active. Other enduring tasks include the protection of U.N. personnel and facilities, support for demobilization of rebel combatants, and support for institutional and security sector reforms. Since 2018, MONUSCO has provided "life-saving logistics support to the Ebola response" in the context of the ongoing Ebola outbreak in eastern DRC, according to U.S. officials. In mid-2019, a top MONUSCO official, U.S. citizen David Gressly, became the U.N. Emergency Ebola Response Coordinator, tasked with leading a "strengthened coordination and support mechanism in the epicenter" of the outbreak zone. Since 2013, the Security Council has authorized an "intervention brigade" within MONUSCO consisting of three infantry battalions, one artillery company, and one special force and reconnaissance company to disarm rebel groups, including via unilateral and/or offensive operations. The intervention brigade has conducted such operations periodically, but the scope of its activity has been limited by troop contributors' evolving perceptions of their own national security interests in DRC, as well as capacity gaps. Observers have debated whether the concept could be a model for other situations, such as South Sudan and Mali. More broadly, human rights groups allege that MONUSCO forces have repeatedly failed to protect civilians from attacks by armed groups. Such instances may be attributed to multiple factors, including competing tasks, logistical challenges, a lack of capacity and political will among troop contributors, and the role of state actors in violence and their limited commitment to improve stability. MONUSCO personnel also have repeatedly been implicated in sexual abuse and exploitation. Between 2016 and 2018, a surge in political violence in major cities due to election delays placed new strains on the mission, as did the emergence of new conflicts in previously stable regions. Emergent, if nebulous, links between an opaque armed group in eastern DRC and the Islamic State organization may present further challenges. In 2015 and 2016, the Obama Administration successfully sought to preserve MONUSCO's troop ceiling in the lead-up to DRC's turbulent election period, despite pressure from the DRC government, U.N. officials, and some other Security Council members to decrease troop levels. In 2017, with elections pending, the Trump Administration shifted tack and secured a decrease in MONUSCO's troop ceiling, asserting that the mission was propping up a "corrupt" government in Kinshasa. The U.N. Secretary-General reported in 2017 that MONUSCO had pursued reforms to "yield efficiencies," but called for governments to "exercise caution in making further cuts to the Mission's budget that may compromise its ability to deliver on its core priorities." U.S. diplomats did not openly pursue, and the Security Council did not adopt, a troop ceiling decrease in the 2018 or 2019 mandate renewals. In March 2019, as DRC underwent a partial political transition following the delayed elections, the Security Council extended MONUSCO's mandate and troop ceiling for nine months and called for an independent strategic review of the mission, including the articulation of an "exit strategy." The State Department's FY2020 budget request asserts that MONUSCO forces "may begin drawing down in FY2020 as the DRC government assumes greater responsibility for security throughout the country." The budget request predated an explosion of Ebola cases in eastern DRC and the U.N.'s stepped-up role in response efforts. U.N. budget negotiations in mid-2019 produced a significant reduction in MONUSCO's civilian personnel and the closure of offices in various areas. <4.7. Western Sahara (MINURSO)> Morocco claims sovereignty over the whole of Western Sahara and administers some 85% of it, while the Polisario Front, which is hosted and backed by Algeria, seeks independence for the territory. Security Council Resolution 690 established the U.N. Mission for the Organization of a Referendum in the Western Sahara (MINURSO) in 1991 in the context of a cease-fire and peace settlement roadmap agreed to by Morocco and the Polisario. At the time of MINURSO's establishment, the Security Council called for a referendum to offer Sahrawis the indigenous inhabitants of Western Sahara a path to "self-determination." However, successive U.N. efforts to advance a referendum or other resolution options did not obtain the backing of one or both parties (Morocco and the Polisario), and/or of the Security Council. In the absence of a final settlement, the Security Council has maintained MINURSO to observe the 1991 ceasefire. The Security Council has not explicitly referred to a referendum in over a decade, instead calling for Morocco and the Polisario to engage in talks "without preconditions" to achieve a "mutually acceptable" resolution to the stand-off. Morocco has offered autonomy under Moroccan sovereignty as the only basis for negotiations, while the Polisario continues to call for a referendum on independence. Neither side has shown an interest in compromise. Military tensions escalated in 2016 and again in 2017 as Moroccan and Polisario forces reportedly entered the demilitarized "buffer zone." MINURSO's uniformed component consists almost entirely of military observers, who are unarmed. It is not a multidimensional mission in the mold of more recently authorized operations. In 2013, U.S. diplomats reportedly expressed support for adding human rights monitoring to the mission's mandate which Morocco ardently opposes prompting Morocco to expel hundreds of U.S. military personnel who were conducting an annual joint exercise in the country. In 2016, Morocco expelled MINURSO civilian staff in response to remarks by then-U.N. Secretary-General Ban Ki-moon referring to Morocco's "occupation" of the territory. Some staff, but not all, later returned to the territory. Successive U.S. Administrations appear to have judged that maintaining MINURSO is a relatively small price to pay for preventing a renewed conflict that could draw in other countries in the region. The Trump Administration has maintained support for U.N.-facilitated talks, while also seeking to increase pressure on the parties by shortening MINURSO's mandate renewals from one year to six months. This policy approach was closely associated with former National Security Advisor John Bolton, who has long expressed skepticism of MINURSO and advocated international pressure on Morocco to make concessions. Bolton's stance appeared to contribute to some momentum toward U.N.-facilitated talks in 2018, albeit without clear progress toward a settlement. The U.N. Secretary-General's then-Personal Envoy on the Western Sahara, Horst K hler, convened "roundtable" talks among Morocco, the Polisario, Algeria, and Mauritania in December 2018 the first time official representatives of Morocco and the Polisario had met since 2012 and again in March 2019, but no breakthrough was announced. In May 2019, K hler unexpectedly announced his resignation, citing health reasons. This development, combined with ongoing political instability in Algeria, has injected new uncertainty into the political process. <5. Issues for Congress> Members of Congress have examined U.N. peacekeeping operations as a core element of U.S.-Africa policy, and in the context of overarching appropriations and oversight activities. Congressional deliberations on FY2020 SFOPS appropriations in the context of the Administration's proposal to cut U.S. funding for U.N. peacekeeping overall, and for the Africa missions in particular have coincided with U.N. Security Council consideration of potentially significant changes to the mandates of several missions, including in Mali, Darfur (Sudan), and DRC, due to evolving conditions on the ground. The Senate Appropriations Committee report on the FY2020 Department of State, Foreign Operations, and Related Programs Appropriations Bill (released on September 18, 2019), leads with the observation that: Weak governance and conflict in Africa, the Middle East, and Central and South America are causing historically unprecedented population movements as refugees and internally displaced persons [IDPs] seek safer lives. [ ] The humanitarian requirements of the United Nations [UN] and other entities to address this global emergency have consistently exceeded the willingness and generosity of donors to respond. As Congress continues to shape the U.S. approach toward peacekeeping missions' mandates and budgets, it may consider issues such as: how and whether U.N. peacekeeping operations in Africa align with U.S. foreign policy priorities in the region and in individual countries; the impact that decisions on U.S. funding for peacekeeping may have on these countries, and the relative cost of other potential U.S. responses; and the role of other donors and actors in responding to security crises in Africa.

Many Members of Congress have demonstrated an interest in the mandates, effectiveness, and funding status of United Nations (U.N.) peacekeeping operations in Africa as an integral component of U.S. policy toward Africa and a key tool for fostering greater stability and security on the continent. As of September 2019, there are seven U.N. peacekeeping operations in Africa: the U.N. Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA); the U.N. Multidimensional Integrated Stabilization Mission in Mali (MINUSMA); the U.N. Interim Security Force for Abyei (UNISFA); the U.N. Mission in South Sudan (UNMISS); the U.N. Organization Stabilization Mission in the Democratic Republic of the Congo (MONUSCO); the African Union-United Nations Mission in Darfur (UNAMID); and the U.N. Mission for the Organization of a Referendum in Western Sahara (MINURSO). The United States, as a permanent member of the U.N. Security Council, plays a key role in establishing, renewing, and funding U.N. peacekeeping operations, including those in Africa. For 2019, the U.N. General Assembly assessed the U.S. share of U.N. peacekeeping operation budgets at 27.89%; since the mid-1990s Congress has capped the U.S. payment at 25% due to concerns that the current assessment is too high. During the Trump Administration, the United States generally has voted in the Security Council for the renewal and funding of existing U.N. peacekeeping operations, including those in Africa. At the same time, the Administration has been critical of U.N. peacekeeping activities—both overall and in Africa specifically—and called for a review of operations to ensure that they are "fit for purpose" and to improve their efficiency and effectiveness. Over the years, Congress has considered a range of overarching policy issues and debates regarding U.N. peacekeeping operations in Africa, including how effectively such operations fulfill their mandates, particularly related to civilian protection and peacekeeping; under what circumstances a U.N. peacekeeping mission might be an effective tool for addressing or preventing mass atrocities in Africa; to what extent and in what ways can U.N. peacekeeping operations effectively work with abusive or neglectful host governments and state security forces in Africa; how to prevent and address sexual exploitation and abuse by U.N. peacekeepers, particularly in operations in Africa; and the role of Africa-led (as opposed to U.N.-conducted) operations as a response to regional crises. This report focuses on U.N. peacekeeping missions in Africa; it does not address broader policy issues related to U.N. peacekeeping, the African Union Mission in Somalia (AMISOM), or the U.N. Support Office in Somalia (UNSOS). For more information on U.N. peacekeeping and U.S. funding, see CRS In Focus IF10597, United Nations Issues: U.S. Funding of U.N. Peacekeeping . For further analysis on the political and security context for the above operations, see CRS In Focus IF11171, Crisis in the Central African Republic ; CRS In Focus IF10116, Conflict in Mali ; CRS In Focus IF10218, South Sudan ; CRS Report R45794, Sudan's Uncertain Transition ; CRS Report R43166, Democratic Republic of Congo: Background and U.S. Relations ; and CRS Report RS20962, Western Sahara .

crs_R46212

crs_R46212_0

The stagnation of real hourly wages at the lower end of the income distribution, where workers tend to be less educated, has entered into the policy debate over many issues, including trade, immigration, and institutional factors such as the minimum wage. This lack of wage growth has also contributed to an increase in overall income inequality. The first section reviews changes in the distribution of hourly wages (as well as considering the effects of fringe benefits) and overall income. Following that review, the report reviews the evidence on the main factors that might have contributed to this lack of wage growth, including technological advancement, trade, the minimum wage, unions, the large firm wage premium, immigration, and reduced labor mobility. The final section of the report explores policy options that might be considered by Congress. <1. A Review of Long-Term Hourly Wage Growth> Over the 1979-2018 period, real wages at the 10 th percentile of the wage distribution grew by only 1.6%, whereas wages at the 50 th percentile grew by 6.1% and wages at the 90 th percentile grew by 37.6%. As shown in Table 1 , these patterns varied by sex, race, and ethnicity. From 1979 to 2016, examined by quintiles of wage earners, wages fell by 1.0% for the bottom 20% but rose by 27.4% for the top quintile. Wages rose for the lower-middle quintile by 0.8%, but rose by 3.4% in the middle quintile and by 11.5% in the upper-middle quintile. The wage differentials between the 10 th and the 50 th percentile remained relatively constant after 1990 until the recession in 2009, indicating a stabilization of inequality in the bottom half of the wage distribution; this change was primarily for male workers. For female workers, a more modest growth in the differential in the bottom half occurred, largely in the early 1980s, with little change thereafter. The differential in the upper half (between the 90 th and the 50 th percentile) increased at a more modest pace during the entire period. Wages are associated with educational achievement. College graduates are 15% of the bottom quintile and almost 80% of the top quintile. The highest wages on average are earned by those with advanced degrees, and the lowest by those with less than a high school diploma. In 2016, for workers over 25, those with less than a high school diploma had median weekly earnings of $504. Median weekly earnings were $1,156 for those with a bachelor's degree, $1,380 for a master's degree, $1,745 for a professional degree, and $1,664 for a doctoral degree. The wage premium for a college degree (the ratio of average wages for those with a college degree compared to those with a high school diploma) rose from 134% in 1979 to 168% in 2016; the premium for an advanced degree rose from 154% to 213% over that same period. The wage premium for a college degree rose steeply until about 2000 then continued to rise slightly after 2000. Over the 1979-2016 period, the share of workers with a college degree also increased (from 23% to 40%). This increase in the skill premium suggests that the demand for skilled workers rose relative to the supply over this time frame. Using the CPI, real wages of men with a high school diploma or less declined significantly between 1979 and 1999, while women with a high school diploma experienced small, but generally positive, growth during that period. In addition to the wage differential growth, labor compensation as a share of income has been falling since 2001, from 64.3% in the first quarter of 2001 to 58% in the fourth quarter of 2015. Labor compensation includes fringe benefits and proprietor's labor income as well as wages. During that same period, employee wages fell from 46.8% to 42.8% of gross domestic income (GDI). While the fringe benefits (supplements) share remained constant as a share of GDI, these benefits rose as a share of employee compensation. In contrast with the increased wage inequality and the increased college wage premium, where effects largely occurred by 2000, the fall in the labor share of income occurred primarily after 2000. Because wages account for a smaller share of the income of higher-income individuals, both the increased wage inequality and the decreased labor income share have led to increased income inequality. From 1979 to 2017, the income share of the bottom quintile fell from 5.3% to 3.5%, whereas the share of the top quintile rose from 41.9% to 50.1%. Income shares also fell for the lower-middle quintile (from 11.7% to 9.0%) and the middle quintile (from 17.2% to 14.7%), and (slightly) for the upper-middle quintile (from 23.8% to 22.7%). Note that labor compensation differs from wages, as it also includes benefits that typically account for about 30% of compensation. This difference also raises the question of whether the wage differentials documented for the period from the end of the 1970s to the mid-1990s were offset or accentuated by changes in nonwage compensation. Available evidence, however, indicates that labor compensation differentials increased more than wage differentials. Some of the decline in the labor compensation share may be due to the growth of entrepreneurial income at the top of the income distribution, which in turn may partly reflect shifting to pass-through business (where wages are not paid to entrepreneurs) from the standard corporate form, due to tax incentives. Thus, this shift may be, in part, a change in the characterization of income rather than a real shift. One study has estimated a national distribution of income and how it has changed over time accounting for all national income, including the fringe benefits of workers and those not in the labor force. This study compares the growth in income over two 34-year periods: from 1946 to 1980 and from 1980 to 2014. For the postwar period through 1980, the overall income growth rate and the overall pretax income annual growth rate were 2%, with pretax income of the bottom 50% of adults growing at approximately the 2% growth rate, whereas the top 10% grew at 1.7%. For the period from 1980 through 2014, the overall annual growth rate was lower, at 1.4%, but the annual growth rate of the bottom 50% rounded to zero, whereas the top 10% grew at 2.4%. The study's statistics show that the share of income of the bottom 50% declined from about 20% in 1979 to about 12% today. This study differs from other studies of income distribution that focus on family units; rather, it looks at incomes for all adults separately to focus on individuals. Although this study uses a different approach, it shows a similar pattern to other measures. To sum up these trends, lower-income workers experienced a decline in wages relative to the median that mostly occurred in the 1980s, the median wage earners experienced a decline with respect to the top wage earners throughout the period (with both effects causing a rise in the college wage premium from the 1980s to about 2000), and since 2000, the labor share of income has declined. All of these trends resulted in a stagnation of income among less-skilled workers relative to the overall population. <2. Factors Potentially Contributing to Wage and Income Inequality> This section discusses the factors potentially contributing to the lack of wage growth at the bottom of the wage distribution: technology, globalization, wage-setting institutions (the minimum wage, the decline in unions, and the decline in the large firm wage premium), immigration, and reduced labor mobility. It also considers the decline in the labor income share that contributed to inequality. <2.1. Technological Advancement> Many economists see technology and international trade as the major forces affecting labor markets, and a broad conclusion of the evidence on earnings inequality is that the largest immediate contributors included a rising demand for skills along with a slowdown in the growth of the supply of new college graduates. Historically, technological advancement has led to a massive increase in the standard of living but has also caused temporary disruptions, although the groups that are adversely affected have varied. With recent technological advances, those who fail to reap the benefits appeared to be less-skilled workers, based on a number of relationships observed in the economy. First, some effects arose from the displacement of workers in well-paid factory jobs with machinery using advanced technology. One illustration of the potential impact of technology in reducing the demand for manufacturing workers is the development of the mini-mill in steel production. Although the real value of shipments was relatively constant from 1980 through 2002, steel industry employment fell from 400,000 workers to 100,000 workers. Second, numerous studies found that the surge in wage inequality that appeared in the 1980s (and had its primary effects on inequality in the lower half of the wage distribution) reflected a rise in the demand for skilled workers that had been ongoing for some time and was perhaps accelerated by the computer revolution. There also appeared to be a relationship between positive wage changes and computer use by workers that suggested a technological cause to the changes in wage patterns. A number of studies showed that the utilization of more-skilled workers was correlated with capital intensity and the implementation of new technology based on both statistical and case studies. Studies showed a diffusion of computer-based processes during this period, which could substitute for routine jobs and is likely more important in clerical and production jobs than in managerial and professional jobs. Third, a finding that points to technology rather than trade as the more important source of increased demand for skilled workers was that wage dispersion occurred within industries rather than between industries. Growing wage differentials within a particular industry suggest a largely technology-driven reason, whereas a differential that arises across workers producing different products may point to a trade-driven effect (e.g., imports being produced with less skilled labor and exports with more). That is, if increased trade led to imported goods with lower prices, wages would decline in that industry relative to other industries, whereas if technology favored more-skilled workers, differentials in wages would occur within all industries. This outstripping of demand for skilled workers (primarily via technological change) relative to supply also reflected a slowdown in the growth of the share of workers with college degrees, because the increase in the college wage premium was largely attributable to younger men. The slowdown could be in part attributed to the end of the growth in college attendance induced by the Vietnam War and in part to the decline in the college wage premium prior to the 1980s. For example, as the war in Vietnam ended in the mid-1970s, the decline in college attendance prior to that period produced ripple effects in the form of a less-educated workforce into the 1980s. The pattern of wage changes differed from 1979 to today. In the 1980s, technology and automation changes led to a decline in employment and earnings at the bottom of the skill distribution relative to the top, whereas in the 1990s and later, information technology change did not affect the very lowest-skilled workers performing manual labor but did adversely affect moderately educated workers performing clerical tasks, and benefitted highly educated workers performing abstract tasks. Employment in both the least-skilled and most-skilled occupations grew relative to that in the middle-skilled occupations. Some studies linked this effect to technological advancement in information and communication, which allowed the substitution of machines for many routine tasks carried out by middle-skilled jobs. Technological change shifted from automation affecting manufacturing to the computerization of information affecting nonmanufacturing. Despite some evidence of a transitory effect from trade due to China's rapid emergence, the evidence presented in this and the following section suggests that technology is the more important driver of changes in wage differences. Some prominent labor economists appear to hold that view. When queried about the importance of automation versus trade, as reported in the New York Times , Lawrence Katz said, "Over the long haul, clearly automation's been much more important it's not even close." David Autor, interviewed in the same article, said automation has had a far bigger effect than globalization and stated "some of it is globalization, but a lot of it is we require many fewer workers to do the same amount or work. Workers are basically supervisors of machines." This technological advancement in favor of more-skilled workers is projected to continue in the future with increased use of industrial robots and susceptibility of jobs to computerization. Studies suggest that new technology and algorithms for big data will make computers substitutes for nonroutine cognitive tasks and an expanded range of manual tasks, while having less effect on jobs that require creative or social intelligence. A technological explanation for the decline in the labor share of income seems less likely. Even if technology led to more capital investment, such increases would not necessarily lead to a declining share of labor income. The reasons for the decline in the labor share of income are unsettled, although, as noted earlier, a recent study found that most top income is nonwage income, a primary source of which is private business profit, largely due to labor input by entrepreneurs, which could be considered labor income. <2.2. Globalization, International Trade, and Import Competition> Economists generally agree that the overall economy gains from international trade, even though (as is the case with technological progress) some groups may be harmed. (Trade in this section refers to international trade, consisting of imports from abroad and exports to other countries; the growth in this trade and other transactions with other countries is often referred to as globalization .) One study put the estimated increase in output from trade at 2% to 8% of gross domestic product (GDP). (Trade includes trade in final goods and services and trade in intermediate goods and services, sometimes referred to as offshoring .) Because trade largely involves a substitution of one type of production for another, there is no a priori expectation of an effect on income distribution. Although some studies have found a role for trade, most have found it a modest force compared to technology. As discussed in the previous section, one characteristic that points to a technology-based rather than a trade-based cause as the more important force is that increased wage differentials appeared within sectors rather than across sectors. If the cause were trade, such differentials would be expected to have appeared between import and export sectors. A second characteristic pointing against a trade-based cause as more important than technology is that inequality has increased in both advanced and developing countries. If the cause were trade (receiving imports from countries using low-skilled labor in exchange for exports using high-skilled labor), developing countries would likely be more, not less, equal. That both types of economies are becoming more unequal points to a technology-based explanation. Some studies also tried to directly estimate the effect of trade on the economy by examining how the lack of trade would affect prices and wages. These studies generally found a small effect on prices and income distribution, especially compared with technological change. Instances in which certain workers in local markets are adversely affected by imports may have led to the perception of an important role for trade. Studies have found an effect from China's rapid emergence in the world market, especially after 2000, when China entered the World Trade Organization (WTO); these studies found a decline in manufacturing jobs in areas producing products most competitive with imports, as well as persistent increased unemployment and a small decline in wages. These studies illustrate the adjustment costs of a large trade change on trade-impacted sectors, and especially on lower-wage workers who may find adaptation and mobility more difficult. They characterized the growth in China's imports as a shock and noted that this growth may soon be over, if it is not already, as wages in China have increased substantially. One study cited a loss of 2 million jobs in the United States over the period 1999 to 2011, which indicates an average of 166,000 jobs a year. To put the China effect in perspective, this amount is one-tenth of 1% of the U.S. workforce, and its cumulative effect over a dozen years was 1.4%. Thus, while the China shock as measured by displaced jobs may have been significant relative to other trade shocks, it did not likely have a major effect on the stagnation of wages at the lower end of the wage distribution, which has occurred over the past 40 years and was most pronounced before the increase in China trade began. The China study analysis focused only on effects in areas of high import penetration, but it did not consider overall effects in the economy. It is well known that bilateral trade balances or their effects in local markets cannot be used to infer results about the economy as a whole. An increase in imports leads to increases in output in other sectors of the economy that should be considered. A subsequent study that did so found these local effects were offset by growth in other areas and exports. Thus, trade can alter the compositional mix and location of jobs without necessarily having an effect on long-term inequality. Some research has indicated that globalization might have contributed to the increase in incomes of high-income individuals and their firms, such as high-tech multinational firms ("superstars" in their terminology), in part by expanding markets. This phenomenon could contribute to income inequality, but it did not do so by harming the wages of unskilled workers, but rather by increasing wages and profits (income) at the top of the income distribution. As for the decline in the labor share of income, that decline is unlikely to be linked to a traditional argument that the country has moved toward labor-intensive imports because the labor share has also fallen in the nontradeable sector (such as construction, sectors that involve the distribution of goods, and some services). However, the growth of highly successful multinational "superstar" firms may have made a contribution because the increased income would be capital income rather than labor income. In general, although estimating the effects of trade is complex, the current empirical evidence does not appear to support trade rather than technology as the more important cause of relative wage stagnation at the lower end of the wage distribution. <2.3. Wage-Setting Institutions> Technology, education, and trade explanations of the change in income and wage inequality are based on normal forces of supply and demand. However, economists studying the rise in inequality have also considered the decline of labor institutions that may have protected higher wages at the lower end of the wage distribution. This section considers three aspects of these wage-setting institutions: the minimum wage, union membership (and right-to-work laws), and the change in wage-setting norms (such as the large firm wage premium). <2.3.1. The Minimum Wage> The federal minimum wage, currently $7.25 per hour, is not indexed to inflation, and thus the real value has risen and fallen in an irregular pattern over time. For example, the minimum wage in 2015 dollars fell from $9.44 in 1979 to $6.34 in 1989. It has fluctuated since then, and declined from 1997 to 2006 to a lesser degree (from $7.58 to $6.23), and then increased. Some early studies found that the decline in the value of the minimum wage in the 1980s was responsible for the steep decline in relative wages at the bottom of the wage distribution during that time period. Some economists argued that the increase in inequality was an episodic event due to the minimum wage and was not traceable to skill-based technological change. A number of years have passed since these early studies and, while inequality at the bottom has stabilized (although with little real wage growth), the inequality increases have continued. This growth in inequality was primarily in the upper half of the wage distribution at levels where it could not have been due to the minimum wage; the study noting that point found a skill-based rather than minimum wage cause for changes through 2005. A study that extended data through 2012 and accounted for state minimum wages found negligible effects for male inequality between the 10 th and 50 th percentiles, finding a meaningful effect only for women. These findings suggest that the minimum wage may have played a relatively small role in increased inequality. <2.3.2. The Decline in Unions> Union membership in the private sector, which has been historically associated with a positive union wage premium (higher wage for union members) for blue-collar workers, declined significantly during the period of rising wage inequality. From 1973 to 1993, union membership in the private sector declined from 31% to 13%, and by 2018, it had declined to 6.4%. (Union membership in the public sector has increased slightly over that period, from 28.9% in 1973 to 33.9% in 2018.) There are two major reservations about assigning an important role to union membership in explaining increasing inequality in wages. The first is that during the period of the greatest decline in relative wages in the lower half of the distribution, the effect of unions, as determined by multiplying the differentials in the union wage premiums (increased wages due to union membership) across incomes by the change in union membership, accounted for only a small share of the difference (about 8%); the study reporting this effect also found that most of the change was due to technological change. Other studies indicate that the effect would be largely for men, perhaps up to 20% in that early period (the 1980s); over a longer time period, effects were confined to men and associated with increased inequality in the upper half of the wage distribution but reduced inequality in the bottom half. Another study, however, suggested that the union wage premium might understate the effect of unions to the extent that it establishes norms for nonunion jobs in the area or provides a threat to employers who could potentially lose workers to union jobs, finding that the decline in unions was responsible for one-third to one-fifth of the decline in wage inequality for men from 1979 to 2007, and up to one-fifth for women. This study suggests union effects could be larger than otherwise projected. Although some studies find significant effects from union membership in reducing wage differences, as acknowledged by the authors of studies finding a larger union effect, it is difficult to disentangle these effects from the effects of other factors particularly technological change that might have independently contributed to both wage inequality and the decline in union coverage. If technological change caused a decline in employment in industries that were typically heavily unionized, then the cause is primarily technological change, not deunionization. In addition, there is some evidence that the union wage premium (i.e., the excess of earnings of unionized versus nonunionized workers) has fallen in the private sector, which could have arisen from reduced firm profits (shared with workers) due to foreign competition or from technological advances. One policy tool that potentially affects union density as well the bargaining strength of unions is right-to-work (RTW) laws, which have been adopted in 27 states, predominantly in the southern, western, and midwestern states. Under RTW laws, workers receive the benefits of the union contract, but are not required to pay union dues. Many RTW laws have been in place for a long time, although recently, between 2012 and 2017, five states Indiana, Michigan, Wisconsin, West Virginia, and Kentucky adopted these laws. There is an extensive economics literature on RTW laws, although these studies are limited by an inability to control for preexisting antiunion sentiment or other unobserved variables (for example, southern states have historically had lower wages for other reasons and are more likely to have adopted RTW laws). Even so, most studies find relatively small effects on wages. A study that controlled for these potentially unrelated differences across states by examining the change in wages in states that recently adopted RTW laws found results suggesting a negligible effect. Overall, these studies suggest that RTW laws may reduce union membership and bargaining strength, with little effect on wages, particularly nationally. This reduction in wages was presumably spread over the income spectrum so that the effect on rising inequality is limited. Because most RTW laws (20 out of 27) were adopted prior to the increase in wage inequality, these laws would likely have played only a small role, if any, in the increase in inequality that began in the 1980s. <2.3.3. The Large Firm Wage Premium and Pay for Performance> Another wage-setting feature that appears to be fading is the large firm wage premium. Large firms tend to pay a premium, particularly to their lower-paid workers, compared with smaller firms. Wages paid by a firm with 10,000 employees were estimated to be 47% higher than those of smaller firms in 1980-1984 and 20% higher in 2010-2013, although researchers estimated that about a fourth of the decline was offset by increased fringe benefits. One estimate indicates that the decline in this premium accounted for 20% of the wage inequality from 1989 to 2014 (note, however, that this period postdated the major increase in inequality in the 1980s). One cause for the decreased premium is the decline of internal labor markets (ILMs) in large firms, in which wages are assigned to jobs rather than workers (that is, pay is set for doing a particular job and not for how well that job is done). ILMs were developed to curtail managerial discretion in order to reduce discrimination, favoritism, and nepotism, and were aimed at creating a sense of internal pay equity. ILMs compressed wages horizontally (across workers at similar levels) and vertically between more- and less-skilled workers, largely through raising the wage floor. The objective of ILMs was to ensure worker loyalty, reduce shirking, and discourage unionization. The decline in ILMs responded to a less certain environment where technological advancement, globalization, and deregulation increased competition. Signs of the decline in ILMs include reducing returns to tenure, more external hiring, lower tenure rates, a reduction in firm-sponsored training, and more pay-for-performance. Pay-for-performance has tended to reduce wages at the lower end and increase them at the higher end. Large firms also increased contracting with other firms and individuals to perform tasks (outsourcing), where wages can be dispersed without triggering a perception of wage inequity (this phenomenon is also referred to as the fissured workplace ). Some evidence indicates that outsourced janitors and security guards earn less than internal employees. Highly skilled employees may gain, however, from outsourcing. Other factors include the decline in unionization and a change in the view of the firm as a social institution that has occurred with global competition, technological advancement, and pressures from shareholders. Ultimately, the large firm wage premium, as with the decline in union wage effects, appears to be traced back, in part, to fundamental economic changes, which increased competition through technology and globalization. <2.4. Immigration> Another factor sometimes suggested as contributing to slow growth in the wages of less-skilled individuals is immigration. As with trade, the effect of immigration on wages and their dispersion cannot be determined a priori. Although immigrants increase the labor supply, they also increase the demand for goods and services. Immigrants in many cases are not close substitutes for native workers (for example, for jobs that require English language skills). Also, they may provide cost savings to firms that are passed along to consumers in the form of lower prices. There is an extensive literature estimating the effect of immigration on the wage structure by comparing wage changes in geographical locations with more immigrants to those with less or comparing occupations with more entry by immigrants to those with less. After a review of the evidence derived from two dozen studies, the National Academy of Sciences concluded in 2017 that the impact of immigration on the wages of native-born workers is small, and the effects are most likely on those who have not completed high school, for whom immigrants with low skills are the closest substitutes. Even in those cases, studies typically found effects on wages of less than 1% due to immigration. That study also indicates that there is little evidence of an effect on employment levels for the native born, although there might be effects for prior immigrants. Some evidence suggests that skilled immigrants have a positive wage effect on some groups of native-born workers, and immigration overall has a positive effect on long-term economic growth. One challenge with studies of immigration is controlling for the immigrants' choice of location or occupation (although a variety of methods have been used to do so). The findings cited above are bolstered by the results of the study of a rare natural experiment, the Mariel boatlift in 1980, where immigration occurred due to an external event when Cuban leader Fidel Castro allowed Cubans a temporary freedom to emigrate. A large share of the Cubans came to Miami, increasing the labor force there by about 7%. These immigrants were largely unskilled, with a high school or less education. No statistically significant effect was found on wages and employment of non-Hispanic workers with a high school or less education. The Mariel boatlift, although occurring many years ago, remains relevant because of the large surge of immigrants relative to the size of the labor force and the rare opportunity to examine a natural experiment that automatically controls for immigrants' choices. For income distributions, the foreign born would be included in the overall statistics and could increase inequality if they tended to have lower wages. The share of the workforce that is foreign born has been increasing, from 6.7% in 1980 to 9.2% in 1990, 12.4% in 2000, 16.5% in 2010, and 17.0% in 2016. However, little of the growth appeared in the 10 years between 1980 and 1990, when the increase in the college skill premium occurred. The foreign-born share, after a decline that began around 1910, began to increase about 10 years earlier than the increase in inequality observed from 1980 to the present. However, because immigrants are concentrated in both the upper and lower ends of the skill distribution, including them results in a small contribution to inequality. <2.5. Declining Labor Force Mobility> Another factor that may contribute to lower wages is the recently observed decrease in labor force mobility, in which data have shown declining interstate mobility and declining worker job changes. Although there have always been barriers to labor mobility (both social and economic), some decline might be due to an aging workforce or industry diversification (that is, more options for employment with a number of firms as compared to those with a dominant large employer) within a locality, although evidence indicates reduced mobility has also occurred among young workers and across educational types. Some effects of reduced mobility on wages may be associated with increasing employer concentration, which increases the ability of employers to set wages if there are few competing employers, such as in a one-factory town. There is some evidence of increasing employer concentration reducing the share of wages in manufacturing, but the estimated effect appears to be small. Labor mobility is an important guard against the power of employers, and some recent attention has focused on certain practices of firms and governments that limit changing jobs. Effects can arise from noncompete covenants (where employees agree not to join or start a competing firm). Employers justify noncompete contracts to recover the cost of training or protect trade secrets. Noncompete contracts are more likely to be found in high-paying jobs, but some evidence suggests they are also common in low-paying jobs. A related phenomenon is no-poaching contracts that ban other firms from hiring each other's employees; recent publicity and actions of state attorneys general about such practices in a number of large fast-food chain franchises has led to an agreement to end these practices. Other factors that might have contributed to reduced labor mobility are an increase in occupational licensing (although it is more likely to apply to more-educated workers) that increased barriers to entry and increased constraints imposed over time by high housing prices arising from land-use regulation, especially among lower-income workers. Geographic mobility may also be limited by the lack of portability of public benefits across state lines. The growth of health insurance tied to the employer may have also reduced job mobility, although this effect may be reduced due to the availability of subsidized insurance under the Affordable Care Act. Barriers to moving in the state and local public sector may occur due to defined benefit pensions. Subsidies to homeowners (such as itemized tax deductions for mortgage interest and property taxes) may benefit higher and middle incomes, but homeowners are the driving force behind zoning restrictions that make housing more expensive for relocating workers. The 2017 tax revision ( P.L. 115-97 ) has, however, significantly reduced the scope of these tax subsidies by limiting itemized deductions and increasing the standard deduction. These changes are scheduled to expire after 2025. <3. Policy Options> While some specific changes in policy may be suggested by the review of the causes of wage stagnation, it is not clear that simply reversing the causes would outweigh the benefits society accrues more broadly through technological advance and trade. This section discusses some policy options for those left behind by economic growth that might be considered if there is a desire to increase lower- and middle-income individuals' incomes or reduce inequality. Numerous targeted tools exist that the federal government could use to intervene to affect the income distribution. These policies include direct taxes and transfers that increase after-tax earnings; other policies that might increase pretax wages, such as wage subsidies and the minimum wage; and a variety of policies that might potentially provide more equality, such as education and training programs and relocation assistance. This discussion is intended to provide a review of a broad sweep of proposals. An in-depth analysis of each proposal is beyond the scope of this report. Many of these proposals would involve a cost in lost revenues from transfers, tax subsidies, and incentives, or from additional spending, which should be weighed against alternative uses of resources. Many of the regulatory changes discussed relating, for example, to unions or to practices affecting labor mobility are controversial and involve a trade-off between benefits to labor income and efficiency costs of intervening in a market economy. <3.1. Taxes and Transfers> The discussion in this report is based on pretax income, but government tax and transfer programs have affected the shape of posttax and post-transfer income. Table 2 reports estimates that show that the after-tax distribution is more equal than the pretax distribution and that tax and means-tested transfers played a bigger role in 2016 than in 1979. In 2016, taxes and transfers increased the income of the bottom quintile by 70% and increased the income of the second quintile by 6%. The third, fourth, and fifth quintiles had their income decreased via net tax payments by 9%, 16%, and 27%, respectively. These transfers provided the bottom 20% with a larger share of the income total, although some of those benefits were to those on public assistance. An increase in the income share of low-wage workers could be accomplished by a combination of reducing the taxation of lower-income workers, increasing direct transfers, and expanding refundable tax credits (which differ from ordinary transfers by being delivered through the tax system). Lower-income workers may benefit from programs providing general transfers or specific benefits, such as subsidies for food, housing, health insurance, and health care. If using transfers to address increased inequality, one consideration is whether to tie a transfer to wages or to make it a general transfer. For example, proposals for some forms of a universal basic income would provide a grant to everyone to provide a minimum income floor that could support individuals in all circumstances. Unless the plan is phased out with income, it could become quite costly, although it could substitute for targeted transfer programs. It could also be a work disincentive, particularly if phased out. Such a concern was raised in the past about a form of phased-out grant called a negative income tax where experimental studies showed work disincentives. An alternative approach is to expand the current earned income tax credit (EITC), a refundable credit based on wages that empirical studies have indicated encourages work. The EITC provides a credit for a percentage of wages up to a maximum where the credit is fixed over an income rate and then phased out. There has been particular interest in the tax treatment of childless workers who are eligible for a very small EITC. For 2018, families without children received an earned income credit of 7.65%, for a maximum credit of $519, which began phasing out below the poverty level. Families with one, two, or three or more children received credits of 34%, 40%, and 45%, respectively, and maximum credits of $3,461, $5,716, and $6,431, respectively. Childless workers can receive the credit only between the ages of 25 and 64, although some of these workers without children are noncustodial parents. Proposals have been made in the past to increase the credit and phaseout for childless workers, along with a variety of proposals to lower the minimum age to 21 or to increase credits in general, including for workers with children. The Economic Mobility Act of 2019 (Representative Richard Neal, H.R. 3300 ), ordered to be reported by the House Ways and Means Committee, would expand the EITC for childless workers for two years. It would double the credit rate to 15.3%, increase the maximum credit to $1,464, and increase the income level at which the credit phases out. It also would reduce the eligible age to 19 for those other than full-time students. Several other proposals have been advanced in the 116 th Congress to expand the earned income credit, including the LIFT the Middle Class Act (Senator Kamala Harris, S. 4 ); the Rise Credit unveiled by Senator Cory Booker; the Cost-of-Living Refund Act of 2019 (Senator Sherrod Brown and Representative Ro Khanna, S. 527 and H.R. 1431 ); and bills to expand the earned income credit and the child credit (Senator Sherrod Brown, with numerous cosponsors, S. 1138 , and Representative Daniel T. Kildee, H.R. 3157 , the latter titled the Working Families Tax Relief Act). Expanding the earned income credit would cost varying amounts depending on the proposal. The current EITC costs about $70 billion a year. The expanded EITC in H.R. 3300 for childless workers (proposed for 2019 and 2020) would cost an average of $9.7 billion a year. (This bill proposes some other minor changes in the EITC that are not included in this estimate.) In 2017, the Tax Policy Center estimated the cost of a variety of EITC proposals, with costs ranging from $0.5 billion per year (to double the credit for childless workers and reduce the age of eligibility to 21) to $21.6 billion for a general increase in credit rates. These changes would involve a modest increase in the credit. Larger increases or expanding overall benefits could cost considerably more. The LIFT the Middle Class Act, which has been proposed previously, has been estimated to cost close to $300 billion a year. The act would allow cash transfers of up to $6,000 for married couples (phased out at $100,000) and half that amount for singles. Earned income credits have the advantage of increasing income while encouraging work, but they reduce revenue and must be paid for by additional taxes or spending cuts, either now or in the future. If the object is to help low-income workers, these other changes should generally fall on higher-income individuals. One proposal that also contains a way to pay for the revision would replace the current EITC with a credit for 100% of the first $10,000 of earnings, paid for with an 11% value-added tax (VAT). <3.2. Employer Wage Subsidies> An alternative to credits to workers is providing employer wage credits. As with the EITC, the credit would be phased out to be targeted to lower-wage workers. Employer wage subsidies as a broad alternative to the EITC have not been adopted in the past and are not among active proposals except for narrowly targeted subsidies. The current general subsidy in place is the work opportunity tax credit (WOTC) for hiring individuals from certain targeted groups who have consistently faced significant employment barriers; it is a small program costing about $1 billion a year. Studies of this program have found a relatively low participation rate, although there is evidence that the credit results in higher wages for eligible employees and has expanded employment opportunities for long-term welfare recipients and disabled veterans. Some reasons for the low participation rate (firms may lack information or interest in a government program, or encounter high transaction costs or difficulties in identifying qualified workers) might not apply to a general wage subsidy, which could be more effective. Also, geographically targeted credits (discussed subsequently) and incremental tax credits (for increased hiring) have been used as a stimulus in past recessions, with mixed evidence on their effectiveness. An employer credit differs from an employee credit because the former cannot be based on family characteristics (including total family income). Also, in cases where the employer is paying the minimum wage and would continue to do so with the employer credit, there is no effect on wages, although the employer may be willing to hire employees who would not be hired without the subsidy. Employer subsidies have been confined to narrowly focused programs that are unlikely to have much effect on the broad issue of wage inequality. There do not appear to be any proposals for a general employer wage credit that would phase out with income. Both existing policies and proposed ones have indicated a preference for the employee-side credit (i.e., the EITC) rather than the employer credit as a generally available benefit for low-income workers, perhaps due to the desire to means test based on family income. <3.3. Increasing the Minimum Wage> An increase in the minimum wage would increase after-tax earnings, as a tax credit for working like the EITC does, but with some important differences. There is no explicit cost to the government (other than slightly higher wages for a small number of government employees); rather, the higher minimum wage benefits lower-wage workers and the cost is spread to other consumers through higher prices and reduced business income. Using a higher minimum wage to provide income to less-skilled workers can also cause unemployment. The trade-off depends on how responsive employer hiring is to increases in the required wage. Unlike the minimum wage, the EITC can also be based on family income and need (although this flexibility in the EITC has resulted in minimal benefits for childless workers). A generally higher minimum wage would provide benefits to teenagers and other younger individuals (such as college students) who may still be receiving support from parents or other family members and may come from higher-income families. A 2019 CBO study estimated the effects of raising the minimum wage to $15, $12, and $10. For the $15 option, the minimum wage would be indexed and exemptions for tipped, teenage, and disabled employees eliminated. While indicating that effects on employment are highly uncertain, CBO's median estimates for 2025 are reduced employment of 1.3 million for the $15 level, 0.3 million for the $12 level, and a negligible effect for the $10 level. Families below the poverty level would have incomes increased (in 2018 dollars) by $7.7 billion (a 5.3% increase in income), $2.3 billion (a 1.6% increase in income), and $0.4 billion (a 0.3% increase in income) respectively. Families with incomes between one and three times the poverty level would have incomes increased by $14.2 billion (a 3.5% increase in income), $2.3 billion (a 0.6% increase in income, and $0.3 billion (a negligible percentage increase in income), respectively. Higher-income families would have income reduced because of increased price levels. CBO's findings that a relatively small number of workers would be unemployed, especially for the smaller increases in the minimum wage, are based on its reading of the literature, although arguments have been made that the employment effects should be lower. Conflicting evidence exists on the minimum wage's effect on employment, with some studies finding no effect and others finding reductions in jobs or hours. If the minimum wage causes enough unemployment or lower hours, raising it has the potential to reduce earnings at the bottom of the income distribution, even though it increases earnings at the bottom of the wage distribution for those who remain employed. Effects found in prior research may be smaller than they were in the past. A number of states and localities have minimum wages higher than the federal minimum wage, and some have been raising them recently. In 2019, 13 states and the District of Columbia raised their minimum wages, with some of these increases stemming from ballot initiatives rather than state legislative actions. In addition, 18 states increased their minimum wages based on the cost of living. In 2020, 14 states increased their minimum wages due to previously approved legislative actions or ballot initiatives and 7 states increased levels based on the cost of living. <3.4. A Federal Job Guarantee> Another proposal, which has its roots further back in history, is a guaranteed job at a specified wage. Senator Kirsten Gillibrand has expressed some interest in such a plan. Senator Cory Booker has proposed a pilot program in high-need communities ( S. 2457 ). Senator Bernie Sanders has also proposed a federal job guarantee. A plan called the National Investment Employment Corps, administered by state and local governments with federal grants, would provide universal job coverage for all adult Americans with a minimum annual wage of $24,600 for full-time work and a minimum hourly wage of $11.83, indexed for inflation. The jobs would also include fringe benefits. The proponents contend that this program would set a floor in the labor market similar to a minimum wage and would provide jobs that address community needs, such as infrastructure, education, child and elder care, and other needs. They argue that the proposal would both end involuntary unemployment and eliminate working poverty. Another plan, the Marshall Plan for America, would target those without college degrees and pay $15 an hour, possibly including attendance at training programs. These types of plans are estimated to be costly, with two estimates of the more general plan at $450 billion to $670 billion per year, although some behavioral responses and declines in other transfers might reduce the cost. Aside from how to pay for a potentially large-scale program, many challenges may arise. Because there is cyclical fluctuation in unemployment, the size of the guaranteed job workforce would fluctuate, making a match between workers and needed tasks difficult. Unlike the market economy that determines jobs and products based on consumer demand, the assignment of work and output would have to be determined by fiat. When goods provided by the government are not based on the needs for collective goods or goods with public spillovers (such as a military force or highways), misallocation of resources may be more likely to occur. Some resources would be diverted from the private sector with a higher effective minimum wage through the government job alternative. There are also issues as to whether jobs would be established to match needs in local communities, and there could be considerable challenges with programs in sparsely populated rural areas. There might be a need for background checks and proper job placement because some applicants may not be suitable for certain jobs (such as home health care or child care). There are issues about how to treat workers who violate the terms of employment (such as persistent tardiness). Finally, jobs may need capital inputs (e.g., construction equipment) and supplies, and workers in rural areas may have problems finding transportation. <3.5. Wage Insurance> Wage insurance policies were proposed during the slowing of the economy in 2001 to relieve worker anxiety, counter the drop in earnings (estimated at an average of 16% for manufacturing workers), and encourage rapid reemployment. Wage insurance provides a payment for a period of time for part of lost wages when workers become involuntarily unemployed. Wage insurance was subsequently added to the Trade Adjustment Assistance program that currently applies to workers who are certified as having lost their jobs because of trade. This policy idea was mostly dormant until President Obama proposed wage insurance in his final State of the Union message in 2016. The proposal would apply to those making less than $50,000 and employed for three years: it would replace half of lost wages up to $10,000 for up to two years. CBO estimated a $3 billion annual cost. Canada had a temporary wage insurance pilot program, which was more generous than the Obama proposal, and some states have had wage bonuses for becoming reemployed. Some evidence suggested that subsidized workers reentered the workforce about 4% faster than those not subsidized. Concerns have been raised about eligibility and targeting in order to avoid providing incentives for workers to conduct poorer job searches and attracting workers with less stable work histories and employers that provide less stable unemployment. There is a potential benefit of the employer not being aware of the supplement (which is also the case for the EITC), thus reducing the potential stigma that some evidence suggests makes employers less likely to hire those with hiring vouchers. This lack of knowledge would also make it more difficult for the employer to offer reduced wages to those eligible for the supplement. Wage insurance would not help those permanently at the bottom of the income distribution but would help workers who lost their jobs to technological change or other factors adjust to new employment. <3.6. Enhancing Skill Acquirement> The government (at all levels) has a major role in providing for formal education through public schooling and subsidized state colleges and universities. The federal government provides grants (including means-tested Pell grants for students), student loans, and tax credits (which are of limited benefit to lower-income individuals because they are not fully refundable). Pell grants are available for certificates and occupational degrees, although they may not be available for short-term training because they are prorated for full versus part time and duration. Pell Grants are authorized at $22.5 billion, and tax credits cost $19.1 billion. Career technical and education services at the secondary and postsecondary levels are supported by the Carl D. Perkins Career and Technical Education Act of 2006 ( P.L. 109-270 ), which is funded at slightly over $1 billion. The Workforce Innovation and Opportunity Act (WIOA) provides employment and training for low-income and skills-deficient job seekers and workers laid off from their jobs. The workforce development programs include state formula grant programs of $3.3 billion, the Jobs Corps at $2.0 billion, and some national programs at $0.3 billion. For adult education and literacy, the amount is $0.7 billion. For rehabilitation for individuals with disabilities, $3.7 billion is available, primarily through $3.3 billion in rehabilitation grants to the states. Proposals to increase skill acquisition when young and support lifetime training to respond to changes in labor demands include expanding current higher education grant programs and making the tax credits refundable, or providing free education at community colleges or public universities. Some plans are aimed at improving the effectiveness of community colleges, where too little guidance may cause students to waste time and money, increasing the dropout rate and making the transfer of credits to four-year colleges more difficult. Another option is to expand WIOA programs. The evidence on the predecessor of WIOA, the Workforce Investment Act, indicated that the adult programs (whether they included training or not) were relatively successful in improving labor outcomes (higher wages and jobs), but not for dislocated workers. The Jobs Corp (a residential program for youths) also appeared to be relatively successful, although the Trade Adjustment Assistance program was relatively ineffective. Note that the size of spending in the United States on these programs is small (0.04% of GDP) compared to many other countries, and evidence is limited both due to data challenges and lack of interest by researchers given the program's small size. WIOA spending might be more effective if training were based on sectors and aimed at acquiring skills that could be used by multiple local employers rather than one company ; if it were planned with both labor and management input ; and if funding for labor management workforce intermediaries were provided. Apprenticeships are a proposal for those who do not wish to go to college or do not think they would succeed, largely for young entrants to the labor force. Employers may be reluctant to provide these programs because, once trained, apprentices may leave for other jobs. Apprenticeships could be funded through grants or tax credits for employers, or through funding training institutions, such as community colleges. S. 393 (Senator Tim Scott and Senator Cory Booker), introduced in the 115 th Congress and known as the LEAP Act, would have provided a credit for employers participating in qualified apprenticeship programs. The LEAP Act was introduced in the 116 th Congress by Representative Frederica Wilson ( H.R. 1660 ), Representative Rodney Davis ( H.R. 1774 ), and Representative Tom Reed ( H.R. 4238 ). Although grants are more cumbersome to administer, tax credits provide an incentive to classify all new hires as apprenticeships. Grants could be used to target apprenticeships to high-growth industries. Proposals have also been made for a general worker training tax credit for employers that would be allowed for training that led to an industry-recognized certification or training programs authorized under WIOA. President Trump has also proposed an expanded apprenticeship program that would include more industry involvement, although some have argued this proposal would weaken apprenticeships. Other options include tax subsidies and matching funds for lifetime training accounts or penalty-free withdrawals from retirement accounts, although most lower- and middle-income individuals usually do not have much in savings, retirement accounts, or, in many cases, pensions. S. 379 and S. 275 (Senator Amy Klobuchar, 116 th Congress) would allow tax-free distributions from tax-advantaged education savings plans to be used for expenses for various training and technical education. Uncertainty about work schedules is a barrier to training, especially for workers in lower-paying service-sector jobs. Senator Warren previously sponsored legislation that, among other things, would have required employers to give two weeks' notice of work schedules. <3.7. Strengthening Unions> It is not clear whether the decline in union membership was a reason for growing income inequality or whether the decline was itself the consequence of other factors, such as technological advancement and greater international competition. In addition, while unions act as a counterweight to the market power of employers and aid in workers sharing firms' extra profits, they can also create economic distortions by setting wages in a way that differs from how they are normally set in markets. There is, however, some evidence that unions increase blue-collar workers' wages, and increasing the size and effectiveness of unions is among proposals that could be considered. A package of these proposals has been advanced, including increasing penalties for employers who violate labor laws, prohibiting the hiring of replacement workers in a strike, establishing a mandatory arbitration process, eliminating right-to-work laws, and giving all public-sector employees the rights to organize and belong to unions. There is not much evidence about how successful these changes would be in increasing union membership. As noted in the discussion of right-to-work laws, there is some evidence that such laws reduce the bargaining strength of unions and lead to reduced wages. Another proposal does not involve government policy but would need to be undertaken by unions and union organizers: to organize multiemployer regional or local unions rather than company-wide unions. Company-wide unions face greater difficulties, as large employers are increasingly dispersed over a broad geographic area. <3.8. Encouraging Labor Mobility> Proposals to address the decline in labor mobility include increasing scrutiny of mergers for harmful labor market effects, banning noncompete agreements for low-wage workers, and banning no-poaching agreements. Some actions have already been taken on no-poaching by the Federal Trade Commission and the Department of Justice, in issuing regulations and pursuing cases under antitrust laws. Senators Cory Booker and Elizabeth Warren have proposed to outlaw no-poaching clauses in franchise agreements ( S. 2215 ). Other actions to encourage mobility include reducing tax subsidies for home ownership, as homeownership is a barrier to mobility itself as well as a driver of zoning restrictions (note that reductions were enacted on a temporary basis in the 2017 tax revision); providing greater enforcement against restrictive zoning that harms minorities; revising antitrust law to address state-sanctioned occupational licensing organizations; harmonizing eligibility rules for federal transfers; providing a tax subsidy for moving (a deduction for moving expenses was temporarily eliminated by the 2017 tax revision); providing cash subsidies to cities or states that relax zoning or make occupational licenses transferable across state lines; and providing penalties (e.g., disallowing the mortgage-interest deduction) in localities that do not permit enough housing construction. There are arguments for policies that discourage labor mobility, and land-use restrictions may benefit local residents even if they ultimately harm overall growth. Homeownership has benefits that may offset its negative impact on mobility. Employers also would argue that noncompete and no-poaching clauses are needed to allow a return on the cost of training and to protect trade secrets (although some question how important these concerns are for low-wage employees). <3.9. Geographic Targeting> An alternative to encouraging geographic labor mobility would be policies to increase economic activities in areas (often smaller cities and rural areas, but also larger cities) that face chronic unemployment. Geographically targeted subsidies have existed for many years in the income tax code, beginning with enterprise zones and currently including empowerment zones, the new markets tax credit, and the recently enacted opportunity zones. These programs are aimed at helping workers in distressed areas. These geographically targeted subsidies have generally not been found to be effective in encouraging jobs because they are of small size, they are sometimes limited to local employers, and most have encouraged investment rather than employment (investment in physical capital can take place with little additional employment or even displace labor). Three types of policies directed to high-unemployment areas might be considered: wage subsidies, training funds, and government infrastructure or facilities investment. Of these, location of public activity (e.g., military bases and veteran's facilities) and infrastructure facilities are perhaps most problematic. Infrastructure needs are determined by the population, and federal workers are a small part of the labor force. Imposing geographical restrictions could undermine other objectives as well. Another option is to adopt a guaranteed jobs programs in high-unemployment areas, such as in the pilot proposal advanced by Senator Cory Booker ( S. 2457 ). <3.10. A Note on General Economic Growth> Some propose to benefit low-income individuals by taking actions to generate overall economic growth, which often involves tax subsidies to investment. There are issues with this approach that suggest a consideration of the more targeted proposals. The first is that the past 40 years have shown that some groups can be left behind with economic growth that arises from technological advancement. The second is that it is difficult to formulate policies to stimulate economic growth using common approaches such as lowering marginal tax rates. Evidence suggests that tax cuts may not be particularly successful because supply responses are relatively inelastic. Additionally, a tax cut that is not financed by spending cuts adds to the deficit, which eventually crowds out private investment. <4. Conclusion> Wages at the bottom and, to a lesser extent, the middle of the wage distribution have grown slowly relative to those at the high end over the past 40 years, and this slow wage growth, along with a decline in the labor share of income, has contributed to a growing inequality of income. The evidence on the causes of wage stagnation for lower-wage workers points to technological advancement as the most direct primary cause. Globalization appeared to have smaller effects than technological advancement, although it increased overall income inequality by increasing incomes at the top. The decline in wage-setting institutions had relatively small effects and some of these effects can be traced to an indirect effect of technological change that affected unions and the large firm wage premium. Immigration changes appeared to have little or no effect. A decline in labor mobility appeared to make a small contribution. A variety of policy options have different promises and drawbacks. Perhaps the most successful policies, at least based on experience, are transfer programs, including the earned income credit, which is targeted to low-income wage earners. These programs involve potentially large costs and may require raising taxes on higher-income individuals. There is only limited evidence of the effects of a universal basic income and it would be costly if not phased out. Past evidence on a phased-out program found some negative effects on work effort. Experience with the minimum wage, at least at prior levels, has indicated an ability to transfer income with relatively small effects on unemployment, although the effectiveness of increases in the federal minimum wage is limited by widespread state adoption of higher minimum wage rates. Some policies, such as employer wage subsidies, worker training and employment programs, and geographic incentives, have had a mixed or relatively poor track record. Other proposals have been largely untried (such as a federal job guarantee and wage insurance); a job guarantee could cost several hundred billion dollars a year, according to estimates, and present some potentially problematic effects on the private economy, as well as difficulties in administering the program. Some of the more limited proposals may be successful but have small effects. Policies to benefit lower-income individuals through tax cuts to stimulate economic growth have not appeared to be particularly successful at addressing slow wage growth for low-wage workers.

Over the 1979-2018 period, real wages at the 10 th percentile of the hourly wage distribution grew by 1.6%, whereas wages at the 50 th percentile grew by 6.1% and wages at the 90 th percentile grew by 37.6%. These patterns varied by sex, race, and ethnicity. Most of the increase in wage inequality at the bottom of the distribution occurred by 1990 and leveled off by 2000, whereas inequality continued to grow at the top of the distribution after 2000. Lower wages are associated with less education, and the college wage premium (the ratio of earnings of those with a college degree over those with a high school degree) grew steeply until 2000. The labor income share of compensation has declined beginning around 2000. Both the growth in hourly wage inequality and the decline in the labor share of compensation contributed to greater inequality of before-tax income. From 1979 to 2017, the income share of the bottom quintile fell from 5.3% to 3.5%, whereas the share of the top quintile rose from 41.9% to 50.1%. Several factors potentially contributed to this change in wage inequality: technological advancement, globalization, wage-setting institutional changes (i.e., the minimum wage, presence of labor unions, and decline in the large firm wage premium), immigration, and declines in job mobility, across jobs in general and geographically. A review of the economic research suggests that a major force in causing this growing wage inequality and lower wage growth was skill-based technological change (change increasing the demand for skilled over unskilled workers). Although there is mixed evidence, most studies find a smaller, modest effect of globalization (although trade affects locations and sectors differently). The minimum wage appeared to play a relatively small role. The decline in wages has coincided with the decline in unions, but to some extent, the decline in unions was a consequence of the decline in jobs in heavily unionized sectors due to technological advancement. Given the size of the decline and the union wage premium, as well as tracing some of the decline to technology, unionization appears to be of limited importance. The decline in the wage premium for large firms may also be traced to increased competition from technological advancement and globalization. Evidence also indicates that immigration had little effect on the distribution of wages, but resulted in a slight increase in inequality because immigrants are concentrated at the upper and lower ends of the income distribution. A decline in labor force mobility has occurred in recent years and could have contributed in some way to inequality. Because the causes of the wage stagnation and growth inequality appear to be traceable largely to technological change, which is otherwise valued, other policies might be considered to increase the well-being of workers whose wages have stagnated. One policy option is to either increase transfers, including those provided through the tax structure, such as the earned income tax credit. Childless workers, in particular, have small earned income credits. Another option is to increase the federal minimum wage, although states are gradually undertaking these increases. A more far-reaching policy option is a federally guaranteed job. Proposals have also been made to expand wage insurance, which currently is available to only a narrow group of trade-affected workers. Policies to increase skill acquisition, including a greatly expanded apprenticeship program, could be considered, although they would have delayed effects on inequality. A variety of policies have been advanced to strengthen unions. In addition, a number of policies might be considered to increase labor mobility. Finally, a variety of geographically targeted provisions aimed particularly at increasing employment in chronically high unemployment areas could be considered. Transfers, including the earned income credit, have improved the distribution of after-tax income, but some other policies have a less successful track record, and some (such as a guaranteed job) are untried.

crs_R45962

crs_R45962_0

<1. Introduction> Mapping broadband availability, which means graphically displaying where broadband is and is not available on a map, is complex and depends on data with the accuracy of the map depending on the accuracy of the data used to compose the map. Congress has an interest in accurate broadband mapping data, because accurate data can help ensure that federal broadband programs target areas of the country that are most in need of assistance. The Telecommunications Act of 1996 ( P.L. 104-104 ) requires the Federal Communications Commission (FCC) to determine annually whether broadband is being deployed to all Americans on a timely basis, and the FCC relies on broadband mapping data to make this determination. Additionally, the FCC uses broadband mapping data to direct billions of dollars per year to deploy broadband in unserved or underserved areas. Congress has also taken an interest in broadband mapping due to concerns from constituents that certain areas, especially rural areas, remain underserved or unserved. Pinpointing where broadband is and is not available in the United States has been an ongoing challenge. Current data on broadband availability is provided by private telecommunications providers, collected by the FCC, and displayed on the FCC's Fixed Broadband Deployment Map. Difficulty in accurately mapping broadband availability has been attributed to a number of factors, including the adequacy of census block data, the lack of independent data validation outside the FCC, and the absence of a challenge process for consumers and other entities that believe the Fixed Broadband Deployment Map may overstate availability in their area. In early 2019, it came to the FCC's attention that inaccuracies in the Fixed Broadband Deployment Map's broadband data may cause broadband deployment to be overstated. The Fixed Broadband Deployment Map may indicate that areas have access to broadband when in reality, they do not. Inaccurate data on broadband deployment could lead to overbuilding in areas that currently have broadband while leaving other areas underserved or unserved. In the 116 th Congress, numerous pieces of legislation on improving broadband mapping efforts have been introduced, and multiple hearings have been held on the issue. In August 2019, the FCC adopted a Report and Order to establish a new Digital Opportunity Data Collection (DODC). The goal of this effort is to make the Fixed Broadband Deployment Map more accurate and reliable by among other things incorporating public feedback and obtaining additional granularity of data. Options for Congress in this area could include oversight of the FCC effort and additional legislative action to improve the accuracy of broadband mapping. <2. Broadband Defined> The term broadband commonly refers to high-speed internet access that is faster than dial-up access and is immediately accessible. Broadband includes several high-speed transmission technologies, such as: digital subscriber line (DSL), cable modem, fiber, wireless, satellite, and broadband over power lines (BPL). The internet became publicly available in the 1990s and has evolved since that time as information has continually become digital (e.g., job applications and government forms have moved online). However, not all Americans currently have equal access to broadband. As methods to reach the internet have evolved, so have speeds, with the FCC's current broadband benchmark speed set at 25 megabits per second (Mbps) download and 3 Mbps upload (25/3). Table 1 shows how the FCC's broadband definition has changed from 1996 to its current definition, which was adopted in 2015. <3. The Urban/Rural Digital Divide> The term digital divide refers to a gap between those Americans who use or have access to telecommunications and information technologies and those who do not. While urban areas likely see speeds close to 25/3, broadband speeds in rural areas often do not approach that speed with some areas having no access to broadband. Several factors contribute to geographic disparity, including terrain, population density, demography, and other market factors. These factors discourage build-out to areas that are not as densely populated, because they typically result in a lower return on investment for broadband providers. Although strides have been made in the deployment of broadband to rural areas, the urban/rural digital divide persists. In a survey conducted by the Pew Research Center in 2018, adults who live in rural areas were more likely to say that getting access to high-speed internet is a major problem in their local communities. The primary goal of broadband mapping is to identify areas without access to broadband so that policymakers can make informed decisions on policies to address the urban/rural digital divide. <4. Federal Agency Roles in Broadband Mapping> The major federal agencies involved in broadband mapping are the National Telecommunications and Information Administration (NTIA) in the Department of Commerce, the FCC, and the Department of Agriculture (USDA). <4.1. National Telecommunications and Information Administration> The Broadband Data Improvement Act ( P.L. 110-385 ), enacted on October 10, 2008, directed the Department of Commerce to establish a state broadband data and development grant program. One of the purposes of the program was to assist states in gathering data twice a year on the availability, speed, and location of broadband service as well as on the broadband services used by community institutions, such as schools, libraries, and hospitals. This data was used to establish the National Broadband Map, the first public, searchable, nationwide map of broadband availability, which was launched in 2011. This program, known as the State Broadband Initiative (SBI), was administered by NTIA, an agency in the Department of Commerce, and funded under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). Through the SBI program, NTIA awarded a total of $293 million to 56 grantees one from each of the 50 states, five territories, and the District of Columbia. The grantees were required to use the funds to promote broadband adoption and access tailored to their local needs and collect broadband-related data and provide it to NTIA. In 2015, the SBI program ended, collecting its last data as of June 30, 2014. The National Broadband Map was decommissioned on December 21, 2018, due to the age of the data. Mapping responsibility shifted to the FCC. In the Consolidated Appropriations Act of 2018 ( P.L. 115-141 ), Congress provided $7.5 million to NTIA to develop a National Broadband Availability Map. Specifically, Congress directed NTIA to acquire and display available third-party data sets to augment data from the FCC, other federal government agencies, state governments, and the private sector. The stated objective of this funding was "to help identify regions with insufficient service, especially in rural areas." In response, NTIA announced in February 2019 it had partnered with eight states California, Maine, Massachusetts, Minnesota, North Carolina, Tennessee, Utah, and West Virginia for a pilot to improve the FCC's Fixed Broadband Deployment Map. The first phase of NTIA's new National Broadband Availability Map was published in October 2019. It is available only to state and federal partners due to the inclusion of nonpublic data, which may be business sensitive or have other restrictions that prevent public disclosure. The conference report on the Consolidated Appropriations Act of 2019 ( P.L. 116-6 ) directed an additional $7.5 million to NTIA to continue this mapping effort. <4.2. Federal Communications Commission> In 2000, the FCC established the Form 477 Data Program to collect from providers "data regarding broadband services, local telephone service competition, and mobile telephony services on a single form and in a standardized manner." In 2013, an FCC Report and Order on Form 477 expanded the scope of the data collection program just as NTIA's National Broadband Map was nearing its end. Among the notable changes to the FCC program were: the collection of fixed broadband data by census block and of mobile broadband and mobile voice data by network coverage area; a requirement for providers of broadband services to provide maximum advertised speeds in each census block for fixed broadband and the minimum advertised speed in each coverage area for mobile broadband; provisions for providers to file all data in a single, uniform format instead of different formats across states; and the elimination of the use of speed tiers for broadband subscription data. The FCC collects data on both fixed and mobile broadband availability through Form 477. It does not combine the two sets of data into a single map; rather, it uses the fixed data to create the Fixed Deployment Broadband Map, and it uses the mobile broadband data to determine which areas are eligible for the Mobility Fund Phase II program (see " Eligibility for Federal Assistance " below). <4.2.1. Form 477 Fixed Broadband Data Methodology> Every six months, all facilities-based providers of fixed broadband are required to submit a list of all census blocks where they provide, or could provide, fixed broadband service to at least one location. For each census block, the provider is required to submit data specifying the last-mile technology used; whether the provider can or does offer consumer, mass market, or residential service; the maximum advertised download and upload speeds for consumer service; and whether the service is also available for business, enterprise, or government customers. In 2017, the FCC acknowledged some shortcomings of this methodology: Facilities-based providers of fixed broadband must provide in their Form 477 submissions a list of all census blocks where they make broadband connections available to end-user premises, along with the last-mile technology or technologies used. These deployment data represent the areas where a provider does, or could, without an extraordinary commitment of resources, provide service. Thus, the meaning of "availability" in each listed census block can be multifaceted, even within the data of a single filer. In a particular listed block, the provider may have subscribers or it may not. At the same time, the provider may be able to take on additional subscribers or it may not. The various combinations have varying implications that make it difficult to understand availability. Specifically, if a block was listed by a provider, it is impossible to tell whether residents of that block seeking service could turn to that provider for service or whether the provider would be unable or unwilling to take on additional subscribers. This may limit the value of these data to inform our policymaking and as a tool for consumers and businesses to determine the universe of potential broadband service providers at their location. <4.2.2. Form 477 Mobile Broadband Data Methodology> The collection of accurate and reliable mobile broadband data is particularly challenging, because a user's mobile wireless experience varies and is affected by factors such as terrain, user location, weather, network congestion, and the type of connected service. Under Form 477 filing rules, facilities-based providers of mobile broadband service are required to submit and certify, for each technology and frequency band employed, polygons in shapefiles that digitally represent the geographic areas in which a customer could expect to receive at least the minimum speed the provider advertises for that area. Additionally, mobile broadband providers must report the census tracts in which their service is advertised and available to potential customers. <4.2.3. Digital Opportunity Data Collection> In August 2019, the FCC adopted a Report and Order introducing the DODC. The DODC is intended to address some of the issues that currently lead to inaccurate broadband mapping data by collecting coverage polygons from broadband service providers, incorporating public input, and revising Form 477. Specifically, the DODC would: require all fixed providers to submit broadband coverage polygons depicting areas where they actually have broadband-capable networks and make fixed broadband service available to end-user locations; reflect the maximum download and upload speeds actually made available in each area, technology used, and differentiation between types of customer (e.g., residential, business, or a combination); incorporate public feedback on fixed broadband coverage; and require Universal Service Administrative Company (USAC) verification of broadband data. In conjunction, the FCC is seeking stakeholder comment on using the DODC exclusively for its broadband mapping and discontinuing use of Form 477. <4.2.3.1. DODC for Fixed Providers> The new data collection obligations will initially be limited to fixed broadband providers. For purposes of the DODC, service is considered to be available in an area if the broadband service provider has an active broadband connection or if it could provide such a connection within 10 business days of a customer request, without an extraordinary commitment of resources, and without construction charges or fees exceeding an ordinary service activation fee. <4.2.3.2. DODC for Mobile Providers> The FCC is currently seeking comment on how best to incorporate mobile broadband data into the DODC. The August 2019 Report and Order proposes revising the existing Form 477 data process for mobile providers by: transitioning the collection of mobile broadband-capable network deployment data to a USAC-administered portal created for fixed data; maintaining the commission's current Form 477 data collection for mobile broadband and voice data in the interim; and reducing the burden on service providers required to submit the form. These changes suggest that the FCC may be planning to add mobile broadband data to the Fixed Broadband Deployment Map. <4.3. Department of Agriculture> USDA's Rural Utilities Service (RUS) oversees federal programs that fund the deployment of broadband infrastructure. To help determine where to direct federal resources, USDA also maps broadband availability. However, USDA maps are used differently than the FCC's Fixed Broadband Deployment Map. While the FCC's map is used to determine where broadband is and is not, USDA uses its maps to provide a resource for visualizing existing or proposed broadband service areas. For example, the USDA's Broadband Program Mapping Tool is used by: existing borrowers or those interested in applying for funding under the Infrastructure Loan Program, Broadband Loan and Loan Guarantee Program, or Community Connect Grant Program, enabling them to draw existing or proposed service area maps; RUS to post Public Notices of proposed funded service areas for received loan applications, as well as by existing service providers to submit information on their service offerings; other entities that wish to upload an authenticated map of existing broadband services. USDA's other mapping tool is part of the ReConnect Program, which was established under the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), and is administered by RUS. For ReConnect, RUS established an eligibility area map and application mapping tool designed to assist in the determination of service area eligibility across the United States by displaying four categories of data: the FCC's Connect America Fund winners, nonrural areas, pending applications, and protected broadband borrower service areas. <5. Why Broadband Mapping Accuracy Matters> Accurate broadband data and mapping helps policymakers to make informed decisions about where federal funding should be directed, such as with the FCC's upcoming Rural Digital Opportunity Fund, and enables federal agencies to fulfill certain statutory requirements, such as the FCC's annual "reasonable and timely deployment" determination. <5.1. Eligibility for Federal Assistance> Accurate maps are important in federal funding decisions designed to target areas where broadband is needed the most. Without accurate data, maps may not be reliable indicators of need, and federal assistance may be provided to areas that already have adequate broadband services. This may result in overbuild in some areas and neglect of other areas, further widening the disparities between areas that are served and those that are not. In December 2018, FCC Commissioner Jessica Rosenworcel stated: Getting [the broadband map] right matters because we cannot manage what we do not measure. If we don't have proper maps, we will not be able to target policy solutions effectively. The FCC distributes billions of dollars each year to help accelerate the build-out of broadband so we can connect all our communities. It's irresponsible for the agency to do so without having a truly accurate picture of where those resources should go. A recent example of how inaccurate data has affected eligibility for federal assistance occurred in the FCC's Mobility Fund II program. In August 2018, the FCC published initial eligibility maps for Mobility Fund II, which were to be used in allocating up to $4.53 billion in support for rural wireless broadband expansion. In December 2018, the FCC announced it would launch an investigation into whether one or more major carriers violated the Mobility Fund reverse auction's mapping rules and submitted incorrect coverage maps. Until this investigation concludes, the FCC will not distribute the $4.53 billion. This incident drew congressional attention, including a letter to the FCC from a bipartisan group of 30 Senators, who wrote: As you know, many of us have expressed concern about the accuracy of the Federal Communications Commission's map of eligible areas for Mobility Fund Phase II Support (MFII). This map is intended to reflect areas that lack unsubsidized mobile 4G LTE service, but it unfortunately falls short of an accurate depiction of areas in need of universal service support. Another example is the FCC's recent announcement of the Rural Digital Opportunity Fund, which would distribute $20.4 billion over 10 years to expand broadband in rural areas. Though this initiative aims to help close the urban/rural digital divide, without accurate broadband mapping, it will be difficult to determine which areas are in most need of funds. FCC Chairman Ajit Pai stated: One important reason I'm so pleased that we are moving forward with this item is that we'll be putting the new maps to work right away. The Rural Digital Opportunity Fund Notice of Proposed Rulemaking that we adopted earlier today specifically proposes to use the new map to direct more than $4 billion in Phase II funding to deploy high-speed broadband networks to serve Americans living in areas of the country that Form 477's census-block level reporting deems served, but where some residents are actually not served. <5.2. Reasonable and Timely Deployment Determination> The Telecommunications Act of 1996 ( P.L. 104-104 ) requires the FCC to "initiate a notice of inquiry concerning the availability of advanced telecommunications capability to all Americans." In conducting this inquiry, the FCC must "determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion." If that determination is negative, the commission "shall take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market." Using data from Form 477, the FCC develops an annual Broadband Deployment Report, also referred to as the Section 706 Report, in which the FCC evaluates the availability of fixed and mobile broadband services. In its 2019 analysis, the FCC made a Section 706 finding that advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. This finding was supported by Chairman Pai, Commissioner Michael O'Reilly, and Commissioner Brendan Carr, with Commissioners Jessica Rosenworcel and Geoffrey Starks dissenting. The 2019 report makes frequent references to broadband mapping and concerns about data quality. <6. Broadband Mapping Challenges and Criticisms> Difficulty in mapping broadband availability has been attributed to a number of factors, including lack of data granularity, overstated availability, lack of independent data validation, and the difficulty in keeping up with real-time deployments. <6.1. Adequacy of Census Block Data> The FCC requires each broadband service provider to submit information on the services it offers at the census block level. Census blocks are the smallest unit of geography defined by the Census Bureau and are "statistical areas bounded by visible features, such as streets, roads, streams, and railroad tracks, and by nonvisible boundaries, such as selected property lines and city, township, school district, and county limits and short line-of-sight extensions and roads." Census blocks vary in size and population, and their geographical area can be especially large in rural areas. For the purposes of Form 477, the FCC considers a census block served if even one house or business in the block is served. Since census blocks in rural areas can be large, this may provide a misleading impression. For example, if fiber is connected to a home in one part of a census block, it may not be connected to another home in the same census block that is a mile down the road. With the use of census blocks, areas within a large block that might otherwise be eligible for federal assistance may not be considered eligible. The Utah Governor's Office of Economic Development told the NTIA: Basing data collection, planning efforts, and funding decisions on census blocks is problematic, particularly in blocks which are large, remote, and include terrain that makes it difficult to install infrastructure. For example, in Utah, the largest populated census block is 947 square miles. Under the current Form 477 submission process, any census block that is partially covered would be ineligible for all federal broadband programs, even if only a small percentage of households or census block area is covered. <6.2. Overstated Availability> Although staff examine FCC Form 477 data for quality and consistency, the FCC acknowledges that the data may understate or overstate deployment of services to the extent that broadband providers misreport or fail to report. For example, after the FCC released a draft annual Broadband Deployment Report in February 2019, it was discovered that a relatively new company, Barrier Communications Corporation, had apparently submitted data claiming presence in every single census block in Connecticut, the District of Columbia, Maryland, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia which collectively contain nearly 62 million people. A subsequent correction of this data resulted in the FCC issuing a revised Broadband Deployment Report. In April 2019, Microsoft asserted that the percentage of Americans without broadband access is much higher than the figures reported by the FCC. Microsoft claimed that although the FCC indicates that 24.7 million people do not have broadband available, Microsoft's own data indicates that 162.8 million people do not use the internet at broadband speeds of 25 Mbps or more. Microsoft released a map showing differences between the FCC's claimed broadband access and actual usage of broadband. NCTA The Internet and Television Association criticized this analysis, however, saying that it "conflates availability and usage" and, as a result, draws "a number of unsupportable conclusions." <6.3. Lack of Validation and Challenge Process> Broadband service providers self-report information on Form 477. Although the FCC reviews the data, it is not verified independently outside of the agency. There is also no challenge process in place if a consumer, provider, or other entity identifies any of the data as potentially inaccurate. Stakeholders who testified at an April 2019 hearing before the Senate Committee on Commerce, Science, and Transportation asserted that a challenge process is needed, citing the problems with the FCC's mobility fund auction and how it was difficult for wireless carriers to challenge mobile broadband availability data that the FCC had intended to use as a basis for awarding funding. <6.4. Real-Time Deployments> The FCC currently updates the Fixed Broadband Deployment Map every six months, but the map reflects data that is a year or more behind the current date. For example, as of October 2019, the Map reflects June 2018 data. The telecommunications industry is fluid. Broadband service providers are constantly changing, building new networks, or revising older networks. Once implemented, the FCC's new DODC will require broadband service providers to submit updates within six months of completing new broadband deployments, making changes to (including upgrading or discontinuing) existing offerings, or acquiring new or selling existing broadband-capable network facilities that affect the data submitted on their DODC filings. This may help produce maps that are more up to date. <7. Policy Issues for Congress> As Congress considers broadband mapping, it may consider ways to address the challenges of data granularity and lack of validation, the frequent differences between advertised and actual broadband speeds, the balance between short-term and long-term solutions, ways to improve interagency coordination, and state efforts that might be models for future federal action. Some of these issues are address by legislation already introduced in the 116 th Congress (see Appendix A ). <7.1. Granularity> How much more granular maps need to be to serve policymakers remains an open question. Increasing the granularity of data costs money, and costs may not be shared equally among stakeholders. Some stakeholders have expressed concern that requiring additional granularity might place a larger burden on smaller broadband service providers. As stated by WTA Advocates for Rural Broadband: The Commission's decision to use polygon shapefile reporting, and potentially create a location fabric, is a vast improvement over the current Form 477 regime that has overstated the amount of locations served. However, as the Commission is well aware, small providers have limited staff and resources such that new reporting requirements should be carefully balanced so as to provide necessary information without becoming overly burdensome. USTelecom has proposed a methodology to the FCC to provide additional granularity called the Broadband Serviceable Location Fabric (BSLF). The methodology contains: multiple sources of address, building, and parcel data to develop and validate a comprehensive database of all broadband serviceable locations in the two pilot states; a vendor to conform address formats, remove duplicates, and assign a unique latitude and longitude to the actual building where broadband service is most likely to be installed using a georeferencing tool; a mediated crowdsourcing platform that will enable consumers to submit information to improve the accuracy of the database; and customer address lists provided by participating companies to augment the validation process that will be automatically indexed to the final database to facilitate accurate broadband availability reporting. Different methods for reporting service availability will be tested. To test this methodology, USTelecom launched a Broadband Mapping Initiative Pilot in Virginia and Missouri. The results were released to the public in August 2019 and revealed that in Virginia and Missouri combined, over 450,000 homes and business are counted as served under the FCC's Form 477 process but are not receiving service from participating providers. Further, USTelecom stated that the pilot demonstrates it is now possible to identify and precisely locate virtually every structure in a geographic area that is capable of receiving broadband service. On one hand, USTelecom's initiative might yield better data; on the other hand, the cost of collecting that data would be higher than current methods. USTelecom's proposal estimates that the cost to implement the initial nationwide BSLF would be between $8.5 million and $11 million and, because the BSLF would be a living database, keeping it updated would cost approximately $3 million to $4 million per year. If Congress were to contemplate an initiative of this type, it might wish to consider whether funding at such levels for ongoing broadband map maintenance is sustainable and where the necessary funding would come from. <7.2. Lack of Validation> When broadband service providers submit Form 477, the FCC reviews the data, but there is no validation process outside of the agency to verify that the data is accurate. Having no validation process can be problematic, as there may be instances in which submitted data may be erroneous. In conjunction, there is also no present process in place for the public, providers, or other entities to challenge the data if they believe it to be incorrect. To improve accuracy, the FCC and other stakeholders have cited crowdsourcing as one method to get "boots-on-the-ground" information into the Fixed Broadband Deployment Map. For example, NCTA has proposed that after the FCC publishes maps based on the new FCC reporting regime, consumers and other stakeholders could submit evidence demonstrating potential inaccuracies. In its August 2019 Report and Order , the FCC directed USAC, under the oversight of the Commission's Office of Economics and Analytics, to create an online portal for local, state, and tribal governmental entities as well as members of the public to review and dispute coverage under the new DODC. However, NCTA raised a concern with delegating the responsibility to USAC: The delegation of such broad authority to USAC is unusual and raises many questions. NCTA suggests that a more traditional approach, i.e., delegating authority to the relevant Commission bureaus and offices, which would then direct USAC to take action where needed, is the better approach in this case. One option for Congress might be to enact legislation either confirming the delegation to the USAC or directing the FCC to conduct this activity in-house. Alternatively, Congress might choose to leave that decision to the FCC while focusing congressional oversight on how the USAC handles the DODC to determine whether the effort is being handled judiciously. <7.3. Actual versus Advertised Speeds> The FCC currently requires broadband service providers to submit maximum advertised upload and download speeds. However, in some cases these speeds can vary greatly from speeds the customer is actually receiving. For example, the FCC has identified Iowa as the only Midwestern state with virtually complete access to high-speed internet, with every county covered by download speeds of 25 Mbps. Speed tests conducted by the Open Technology Institute a technology program of the New America Foundation that formulates policy and regulatory reforms claims that internet users in Iowa actually experience download speeds of 25 Mbps only 22% of the time. Rather than the previous requirement of maximum advertised speeds, the FCC's August 2019 adopted Report and Order now requires broadband service providers to provide the maximum upload and download speeds actually made available in each area. This will provide greater insight into what speeds consumers are actually receiving, but relying on available maximum upload and download speeds may still not reflect the actual user experience due to network congestion or weather. Collecting information on actual speeds would provide additional insight into the broadband experience of actual consumers, but this might impose a burden on broadband service providers. One option for Congress might be to mandate a pilot project to assess the feasibility of download and upload speed collection that accurately reflects the consumer experience as well as the burden on providers. Alternatively, Congress might choose to leave this issue to the FCC's discretion. <7.4. Short-Term versus Long-Term Solutions> Should the FCC should adopt a short-term solution to fix mapping issues quickly, but perhaps not thoroughly? Or should it adopt a longer-term solution that might delay the distribution of funds of other initiatives but might ultimately achieve a more accurate result? NCTA's proposed solution of using shapefiles instead of census blocks and similar to what is currently used for mobile broadband reporting through Form 477 for fixed broadband data collection has been criticized as being overly vague, but NCTA believes its proposal offers the fastest solution: [For this reason], we agree with the FCC and members of Congress that the current broadband map must be meaningfully improved. We also believe that a pragmatic approach can yield significant improvements in the shortest timeframe. That is why NCTA has proposed a solution that can be implemented nationwide very quickly, without any need for a pilot, and would result in the granular data needed to more accurately identify areas that currently are not served by a fixed broadband provider. USTelecom disputes NCTA's approach, stating: We agree with NCTA that shapefiles are one of several reasonable methods for broadband providers to report their service data. The difference is that NCTA wants the FCC to stop at shapefiles and not create the BSLF, but shapefiles alone do not produce the detailed data the Commission needs to responsibly close the digital divide. The DODC will include the collection of polygons, but the FCC's Second Notice of Proposed Rulemaking seeks comment on ways that location-specific data could be overlaid onto the polygon-based data to precisely identify the homes and small businesses that have and do not have broadband access. A consideration for Congress is whether the need for more granular and accurate data justifies withholding federal broadband funding until better data are available or whether the goal of closing the urban/rural digital divide is so pressing that funding should proceed based on the data currently available. <7.5. Frequent Updates> The FCC collects data from broadband service providers every six months through Form 477 and updates the Fixed Broadband Deployment Map twice a year. However, the Fixed Broadband Deployment Map's data lags approximately a year and a half behind. For example, as of October 2019, the Fixed Broadband Deployment Map contains data with the latest public release as of June 2018. A consideration for Congress may be whether the Fixed Broadband Deployment Map could be updated more frequently (e.g., data could be collected every month) to reflect continuing network changes and, if so, whether that would impose a significant burden on broadband service providers. <7.6. Agency Roles and Interagency Coordination> The involvement of multiple agencies NTIA, FCC, and USDA in broadband mapping and the provision of broadband subsidies and technical assistance may present challenges for interagency coordination and communication. For example, without interagency coordination, there is a potential for federal broadband funding efforts to be duplicative. The 116 th Congress is considering additional legislation regarding interagency coordination (see Appendix B ). Interagency coordination was also a major focus of the February 2019 USDA American Broadband Milestones Initiatives Report . As an example, the report discusses how NTIA is working on creating a "one-stop shop" for broadband permitting and deployment. Finally, the conference agreement for the 2019 Consolidated Appropriation ( P.L. 116-6 ) has language regarding interagency coordination: To ensure these investments are maximized, the conference agreement reminds the Department to avoid efforts that could duplicate existing networks built by private investment or those built leveraging and utilizing other federal programs and directs the Secretary of Agriculture to coordinate with the Federal Communications Commission (FCC) and the National Telecommunications Information Administration (NTIA) to ensure wherever possible that broadband loans and grants issued under the broadband programs are targeted to areas that are currently unserved. <7.7. State Broadband Efforts> Some state broadband offices have undertaken broadband mapping efforts, which could serve as models for federal efforts. For example: Kansas' new map published in July 2019 shows service availability at the street level for broadband across the state; North Carolina's broadband map has a new user-reporting tool that allows residents to provide feedback and identify pockets of unserved and underserved areas; and Wyoming's interactive map shows the results of internet-speed tests and broadband availability across the state. The map displays a color-coded dot for every speed test that has been completed in the state, creating a visual demonstration of served and unserved areas, along with quality of service at those locations. <8. Concluding Observations> Broadband mapping has garnered congressional interest since the creation of the SBI under the Broadband Data Improvement Act ( P.L. 110-385 ) and introduction of the NTIA's National Broadband Map. Mapping efforts have continually improved since that time, but congressional interest in mapping accuracy has been heightened due to recent challenges that have resulted in potential overstatement of broadband availability. The FCC's DODC, which will take effect once specifications for the coverage polygons are defined through the FCC's comment-and-reply process, is a first step in obtaining more granular and accurate broadband mapping data. As the new collection effort unfolds, Congress may take an interest in monitoring whether the effort seems sufficient to alleviate the current broadband mapping issues, whether to wait on distribution of federal funding until the map is determined accurate, or whether additional legislative action should be taken. Appendix A. Broadband Mapping Legislation in the 116 th Congress H.R. 1644 (Doyle), introduced on March 8, 2019, as the Save the Internet Act of 2019, includes provisions that would require the Government Accountability Office to prepare reports on broadband internet access service competition, ways to improve broadband infrastructure in rural areas, challenges to accurate broadband mapping, and the benefits of standalone broadband. It would require the FCC to engage with tribal communities to address broadband needs, delay release of its 706 Report until broadband data inaccuracies are corrected, and submit to Congress a report containing a plan for how the FCC will evaluate and address problems with Form 477 broadband data. Passed by the House on April 10, 2019. Placed on the Senate Legislative Calendar under General Orders on April 29, 2019. H.R. 2643 (Latta), introduced on May 9, 2019, as the Broadband MAPS Act of 2019, would direct the FCC to establish a challenge process to verify fixed and mobile broadband service coverage data. Referred to the Committee on Energy and Commerce. H.R. 2741 (Pallone), introduced on May 15, 2019, as the LIFT America Act, would provide $40 billion to the FCC to establish a reverse auction (nationally and by states) that would fund broadband infrastructure deployment in unserved and underserved areas (Title I, Subtitle A). Section 11001 of the bill would direct how existing broadband data/mapping should be used and challenged. Referred to the Committee on Natural Resources, Subcommittee for Indigenous Peoples of the United States. H.R. 3055 (Serrano), introduced June 3, 2019, as the 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. As passed by the House, includes broadband mapping-related provisions. One provision would prevent NTIA from using funding to update broadband maps using only Form 477 data, and the other would provide $1 million in broadband mapping funding to NTIA. Placed on Senate Legislative Calendar under General Orders. Calendar No. 141. H.R. 3162 (McMorris Rodgers), introduced June 6, 2019, as the Broadband Data Improvement Act of 2019, would require the FCC to establish a reporting requirement under which each provider submits accurate and granular information regarding the geographic availability of broadband internet access and to establish a framework for an ongoing challenge process through which a provider or a member of the public may submit information challenging the accuracy of the information reflected on the National Broadband Map. Referred to the Committee on Energy and Commerce. H.R. 4024 (Finkenauer), introduced on July 25, 2019, as the Broadband Transparency and Accountability Act of 2019, would direct the FCC to require an entity to report data that reflects the average speed and characteristics of broadband service. It would also require the FCC to establish a process to use data that is reported by consumers, businesses, and state and local governments to verify the data used in the Broadband Map. Referred to the Committee on Energy and Commerce. H.R. 4128 (Luj n), introduced on July 30, 2019, as the Map Improvement Act of 2019, would direct the FCC to establish a standardized methodology for collecting and mapping accurate fixed broadband internet service and mobile broadband internet service coverage data. It would also establish an Office of Broadband Data Collection and Mapping within the FCC. Referred to the Committee on Energy and Commerce. H.R. 4227 (McEachin), introduced on September 6, 2019, as the Mapping Accuracy Promotes Services Act, would prohibit the submission to the Federal Communications Commission of broadband internet access service coverage information or data for the purposes of compiling an inaccurate broadband coverage map. Referred to the House Committee on Energy and Commerce. H.R. 4229 (Loebsack), introduced on September 6, 2019, as the Broadband Deployment Accuracy and Technological Availability Act, would require the FCC to issue rules relating to the collection of data with respect to the availability of broadband services. Referred to the House Committee on Energy and Commerce. S. 842 (Klobuchar), introduced on March 14, 2019, as the Improving Broadband Mapping Act of 2019, would require the FCC to establish a process to use coverage data reported by consumers and state, local, and tribal government entities to verify coverage data reported by wireless carriers. Additionally, it would direct the FCC to consider other measures, including, but not limited to, an evidence-based challenge process, to help in verifying coverage data reported by providers of both fixed and mobile broadband services. Referred to the Committee on Commerce, Science, and Transportation. S. 1485 (Manchin), introduced on May 15, 2019, as the Map Improvement Act of 2019, would require the FCC, in coordination with NTIA, to establish a standardized methodology for collecting and mapping accurate fixed and mobile broadband coverage data. It would establish an Office of Broadband Data Collection and Mapping at the FCC to serve as the central point of collection, aggregation, and validation of data. It would establish a technical assistance grant program at NTIA to support state and local entities in broadband mapping and assessing broadband adoption and pricing within their communities. Referred to the Committee on Commerce, Science, and Transportation. S. 1522 (Capito), introduced on May 16, 2019, as the Broadband Data Improvement Act of 2019, would direct the FCC to establish rules that require providers to submit more accurate and granular broadband data; a three-pronged data validation process involving public feedback, third-party commercial datasets, and an on-the-ground field validation process; and a periodic challenge process. It would require the National Broadband Map to be used by federal agencies to identify areas that remain unserved and track where awarded funds have actually resulted in broadband buildout. Referred to the Committee on Commerce, Science, and Transportation. S. 1822 (Wicker), introduced on June 12, 2019, as the Broadband Deployment Accuracy and Technological Availability Act, would require the FCC to issue rules to collect more granular broadband coverage data, including a decision on whether to collect verified information from others, such as state, local, and t ribal governmental entities that are primarily responsible for mapping or tracking broadband internet access service coverage for their respective jurisdictions. Referred to the Committee on Commerce, Science, and Transportation. S. 2275 (Bennet), introduced on July 25, 2019, as the Broadband Transparency and Accountability Act of 2019, would direct the FCC to require an entity to report data that reflects the average speed and characteristics of broadband service. It would also require the FCC to establish a process to use data that is reported by consumers, businesses, and state and local governments to verify the data used in the Broadband Map. Referred to the Committee on Commerce, Science, and Transportation. Appendix B. Broadband Interagency Coordination Legislation in the 116 th Congress H.R. 292 (Curtis), introduced on January 8, 2019, as the Rural Broadband Permitting Efficiency Act of 2019, would coordinate federal broadband permitting to encourage expansion of broadband service to rural and tribal communities. Referred to the Subcommittee on Conservation and Forestry. H.R. 1328 (Tonko), introduced on February 25, 2019, as the ACCESS Broadband Act, would establish the Office of Internet Connectivity and Growth within NTIA. The office would provide outreach to communities seeking improved broadband connectivity and digital inclusion, track federal broadband dollars, and facilitate streamlined and standardized applications for federal broadband programs. Passed by the House on May 8, 2019. H.R. 2601 (Peterson), introduced on May 8, 2019, as the Office of Rural Telecommunications Act, would direct the FCC to establish the Office of Rural Telecommunications, which would coordinate with RUS within the USDA, NTIA, and other federal broadband programs. Referred to the House Committee on Energy and Commerce. H.R. 3278 (Loebsack), introduced on June 13, 2019, as the Connect America Act of 2019, would provide for the establishment of a program to expand access to broadband and coordinate with other federal programs that expand access to broadband, such as the Connect America Fund or the Broadband e-Connectivity Pilot Program, to ensure the efficient use of program funds. Referred to the House Committee on Energy and Commerce. H.R. 3676 (Khanna), introduced on July 10, 2019, as the Measuring Economic Impact of Broadband Act of 2019, would direct the Secretary of Commerce to conduct an assessment and analysis of the effects of broadband deployment and adoption on the economy, including consultation with the heads of agencies and offices of the federal government as the Secretary considers appropriate. Referred to the House Committee on Energy and Commerce. H.R. 4283 (Pence), introduced on September 11, 2019, as the Broadband Interagency Coordination Act of 2019, would require federal agencies with jurisdiction over broadband deployment to enter into an interagency agreement related to certain types of funding for broadband deployment. Referred to the Committee on Energy and Commerce and the Committee on Agriculture. S. 454 (Cramer), introduced on February 12, 2019, as the Office of Rural Broadband Act, would establish an Office of Rural Broadband within the FCC that would coordinate with RUS/USDA, NTIA, and other FCC broadband-related activities. Referred to the Committee on Commerce, Science, and Transportation. S. 1046 (Cortez Masto), introduced on April 4, 2019, as the ACCESS Broadband Act, would establish the Office of Internet Connectivity and Growth within NTIA. The office would provide outreach to communities seeking improved broadband connectivity and digital inclusion, track federal broadband dollars, and facilitate streamlined and standardized applications for federal broadband programs. Referred to the Committee on Commerce, Science, and Transportation. S. 1289 (Klobuchar), introduced on May 2, 2019, as the Measuring Economic Impact of Broadband Act of 2019, would direct the Secretary of Commerce to conduct an assessment and analysis of the effects of broadband deployment and adoption on the economy, including consultation with the heads of agencies and offices of the federal government as the Secretary considers appropriate. Referred to the House Committee on Energy and Commerce. S. 1294 (Wicker), introduced on May 2, 2019, as the Broadband Interagency Coordination Act of 2019, would require federal agencies with jurisdiction over broadband deployment (FCC, USDA, NTIA) to enter into an interagency agreement related to certain types of funding for broadband deployment. Referred to the Committee on Commerce, Science, and Transportation.

Access to high-speed internet, also known as broadband, is increasingly important in the 21 st century, as more and more aspects of everyday life, such as job applications and homework assignments, become digital. Some areas of the United States—particularly rural areas—have limited or no access to broadband due to market, geographic, or demographic factors. The gap between those who have access to broadband and those who do not is referred to as the digital divide. The Federal Communications Commission (FCC), National Telecommunications and Information Administration (NTIA), and Rural Utilities Service (RUS) have developed maps to help guide resources toward closing the digital divide. Since 2018, the FCC has had the responsibility for developing a comprehensive map of broadband access in the United States. However, the data available to determine where to invest resources may be incomplete or inaccurate. For example, the FCC's current methodology considers a census block served if at least one home or business in that census block has broadband access. In addition, the data is self-reported by broadband service providers and not independently verified outside the FCC. On August 1, 2019, the FCC adopted a Report and Order introducing a new process, called the Digital Opportunity Data Collection (DODC), for collecting fixed broadband data. The new process would require broadband service providers to provide geospatial broadband coverage maps—which provide greater granularity than census blocks—indicating where fixed broadband service is actually made available. The new process would also implement a crowdsourcing mechanism for public feedback, as individual consumers will likely know whether they have access to broadband. The FCC also adopted a Second Further Notice of Proposed Rulemaking (FNPRM) , seeking comment on issues including the need for additional granularity and the potential sunset of the current data collection process upon complete implementation of the DODC. As the FCC implements the DODC process, Congress has a wide variety of options for oversight and legislation. For example, Congress may continue to consider issues such as the optimal level of data granularity, the process for independent validation, and costs and burdens of broadband data collection on both consumers and broadband service providers. Congress could consider providing federal funding for a broadband mapping pilot to thoroughly assess these factors and assist in determining how to strike the desired balance, as well as exploring what funding levels for ongoing broadband map maintenance would be sustainable and where the necessary funding would come from. Congress may debate whether to leave factors within the proposed DODC, such as the current delegation of broadband data collection authority to the Universal Service Administrative Company, to the discretion of the FCC, or Congress may wish to enact legislation to keep broadband data collection efforts under the purview of the FCC. To assist with future federal action, Congress may take into consideration successful state broadband mapping efforts, which could provide additional insight into models that could be replicated on a national scale. Congress may continue to debate potential short-term and long-term broadband mapping solutions, including whether federal funding for rural broadband expansion should be withheld until mapping issues are resolved. In conjunction, Congress may also contemplate whether to provide oversight over federal agency broadband activities or enact legislation regarding interagency coordination efforts on broadband deployment to reduce the potential for duplicative funding. Another consideration for Congress may be whether the FCC's Fixed Broadband Deployment Map could be updated more frequently so that data reflects continuing network changes and, if so, whether that would impose a significant burden on broadband service providers. Bills addressing many of these broadband mapping issues have been introduced in the 116 th Congress, including the Save the Internet Act of 2019 ( H.R. 1644 ), passed by the House on April 10, 2019, and the ACCESS Broadband Act ( H.R. 1328 ), passed by the House on May 8, 2019.

crs_R45952

crs_R45952_0

<1. Introduction> Offshore aquaculture is generally defined as the rearing of marine organisms in ocean waters beyond significant coastal influence, primarily in the federal waters of the exclusive economic zone (EEZ). Currently, marine aquaculture facilities are located in nearshore state waters, but no commercial facilities operate in U.S. federal waters. Some aquaculture advocates contend that developing such offshore aquaculture facilities could increase U.S. seafood production and provide economic opportunities for coastal communities; opponents counter that doing so could harm the environment and have negative impacts on other coastal activities, such as fishing. Offshore aquaculture development will likely depend on several interrelated legal and institutional requisites, such as establishing a regulatory framework, minimizing environmental harm, and developing the capacity to manage and support the industry. Regulatory uncertainty has been identified as one of the main barriers to developing offshore aquaculture in federal waters of the United States. According to the U.S. Commission on Ocean Policy, "aquaculture operations in offshore waters lack a clear regulatory regime, and questions about exclusive access have created an environment of uncertainty that is detrimental to investment in the industry." Some observers have concluded that "offshore aquaculture will not fully develop unless governments create a supportive political climate and resulting regulatory conditions." A framework also may be needed to assure environmentalists, fishermen, and other stakeholders that coastal and fisheries managers would have the authority to address potential threats to the environment and other impacts. According to most observers, congressional action may be necessary to develop a comprehensive regulatory framework for offshore aquaculture. Comprehensive legislation has been introduced a number of times since the 109 th Congress, but none of the bills have been enacted. Controversy has stemmed from different perspectives of aquaculturalists, environmentalists, fishermen, and others. Some environmental organizations and fishermen have asserted that poorly regulated aquaculture development has degraded the environment and harmed wild fish populations and ecosystems. Some segments of the commercial fishing industry are opposed to marine aquaculture because of potential development on fishing grounds, environmental effects on fish populations, and competition of cultured products with wild products in domestic markets. Offshore aquaculture advocates counter that a combination of farming experiences, technological advances, proper siting, and industry regulation has decreased environmental impacts and improved the efficiency of marine aquaculture. It appears that renewed efforts have emerged in the 116 th Congress to meet current challenges by attempting to improve regulatory efficiency, minimize environmental degradation, and avoid impacts on existing ocean uses. Additional related factors, such as technical advances, economic feasibility, and the level of government support, also are likely to affect future growth of the U.S. aquaculture industry. Although a regulatory framework appears to be necessary for establishing offshore aquaculture in federal waters, it may not be sufficient for significant development of the industry. Sometimes overlooked are the services that may be needed to establish a new industry, such as program administration, research, and other services (e.g., disaster assistance, insurance). Technical uncertainties related to harsher offshore environmental conditions and higher costs of operating farther from shore may slow extensive offshore development, especially in the immediate future. This report examines issues and challenges related to the development of offshore aquaculture in federal waters. It introduces the topic with background information that covers aquaculture production and methods, federal agencies involved in aquaculture, and potential congressional interest in the topic. It then focuses on three of the main challenges faced by the industry, including the current regulatory framework, environmental concerns, and economic viability. The report concludes with issues related to regulatory and institutional development that have been identified by researchers and stakeholders, potential issues for Congress, and a summary of legislation that has been introduced in recent Congresses. <2. Background> <2.1. Seafood Production> Global aquaculture production is nearly equal to the volume of seafood produced for human consumption by wild fisheries. From 1997 to 2016, world seafood production from wild sources (capture fisheries) leveled off at a range of 89 million metric tons (mmt) to 96 mmt. According to the United Nations Food and Agriculture Organization, further growth of global wild fisheries production is unlikely, because approximately 93% of marine stocks are now either fished unsustainably or fished at maximum sustainable levels. During the same period, world aquaculture production increased from 28.3 mmt to 80.0 mmt; it now makes up 47% of global fish production. It is likely that aquaculture production will continue to expand with advances in aquaculture technologies and the need to satisfy the demand of the world's growing population. Figure 1 illustrates the growth in global aquaculture production and relatively constant wild fisheries production. Nearly all of global marine aquaculture production is from inshore areas, such as estuaries and coastal areas, not from offshore areas. Wild fisheries in the United States are limited by the productive capacity of U.S. waters. Most U.S. stocks are now fished at their maximum sustainable levels. However, unlike worldwide trends, U.S. aquaculture production has generally stagnated and makes up a relatively small portion of total U.S. seafood production. In 2016, the United States ranked fifth in global seafood production at 5.36 mmt; 0.44 mmt (8.2%) of this total was produced by aquaculture. Figure 2 illustrates the relatively constant domestic production of aquaculture and wild fisheries. Most U.S. aquaculture production consists of freshwater species, such as catfish, trout, and crawfish. Growth in U.S. seafood consumption has depended on imports, which provide approximately 80% to 90% of the seafood consumed in the United States. Approximately 50% of seafood imports, such as shrimp from Southeast Asia and salmon from Norway or Chile, are produced by aquaculture in ponds and nearshore areas. According to some observers, U.S. reliance on seafood imports will continue to increase without changes to current policies and regulatory obstacles that currently impede expansion of aquaculture. <2.2. Aquaculture Overview> Aquaculture is broadly defined as the propagation and rearing of aquatic species in controlled or selected environments. Aquaculture is difficult to characterize because of the diverse nature of facilities, methods, technologies, and species that are cultured. Organisms are cultured in freshwater environments, land-based closed systems, coastal and estuarine areas, and offshore areas. Often, hatcheries are used to spawn fish and shellfish to produce eggs that are hatched and grown to specific stages; these organisms are then transferred to facilities where they are grown to marketable size. Aquaculture operations range from systems where there is only minimal control over the organism's environment to intensive operations where there is complete control at each stage of the organism's life history. For example, an intensive system would include freshwater species such as catfish that are often raised in shallow earthen ponds; production relies on control of inputs. Water, feed, and disease treatment are controlled to maximize growth while minimizing costs. Farming of finfish, such as salmon, also requires stocking at high densities and relies on extensive feeding. Commercial salmon aquaculture facilities often employ net pens ( Figure 3 ), which are moored to the bottom and located in protected inshore marine areas, such as bays and fjords. Bivalves such as oysters and clams are grown in estuaries and inshore areas, feeding on a diet of plankton and detritus that they filter from seawater. Bivalve aquaculture may employ varying degrees of control. In some cases, they are suspended on lines, in wire cages, and on rafts. Oyster larvae are grown in hatcheries and transferred to these structures as oyster spat or seed and grown to market size. Some oyster production is less intensive and depends on enhancement of the benthic (ocean bottom) environment by placing oyster shells on the bottom to facilitate attachment of wild oyster larvae. In Alaska, hatcheries are used to enhance the production of salmon fry, which are released to the wild to feed and grow until they are caught by fishermen as adults. These programs are run as nonprofit cooperatives overseen by Alaska fishermen. Most states and the U.S. Fish and Wildlife Service run public stocking programs, which often address a variety of objectives such as enhancing recreational fisheries and restoring depleted populations. Each strategy requires different inputs and interacts with the environment to differing degrees. Nevertheless, a common factor is to control some aspect(s) of the organism's life to enhance survival and growth. Over the last decade, catfish aquaculture has accounted for most food fish production by volume and revenue in the United States ( Table 1 ). However, catfish production has declined by nearly 44% over this period due to a variety of factors, including competition from Asian imports. For freshwater species, only crawfish production (78.0%) and revenue (66.2%) increased significantly. During the same period, production of salmon and oysters increased in both volume and revenue. Cultured oysters exhibited the largest increases in production (66.0%) and revenue (86.5%), which is likely related to greater demand for high quality raw oysters. However, except for cultured oysters, production of most domestic marine seafood products is from wild marine fisheries. <2.3. Offshore Aquaculture> As stated above, offshore aquaculture is the rearing of marine organisms in ocean waters beyond significant coastal influence, primarily in the federal waters of the EEZ. Aquaculturalists, the Department of Commerce, several task force and commission reports, and some academics have identified offshore aquaculture as a potential alternative to some land-based and nearshore aquaculture. Supporters of aquaculture have asserted that development of the industry, especially in offshore areas, has significant potential to increase U.S. seafood production and provide economic opportunities for coastal communities. The potential of offshore aquaculture in the United States is likely to differ by species, region, and technology. Despite plans for several offshore operations, no commercial offshore aquaculture facilities are currently operating in the U.S. EEZ. Some marine aquaculture facilities are located in nearshore state waters, however. In the future, inshore marine production is likely to be constrained by the availability of suitable sites, poor water quality, high coastal land values, and competition with other ocean uses. Potential aquaculture development in offshore areas has received increasing attention because of these limitations. The cost of working offshore may be greater than the costs of working in inshore and land-based areas, in part because offshore aquaculture in the EEZ would be subject to relatively high-energy offshore environments caused by high and variable winds and storms. However, research and technical advances have demonstrated that operating in these environments is feasible. Expansion of offshore aquaculture into clean, well-flushed waters appears to have nearly unlimited potential, although major technological and operational challenges remain. For example, further development will require structures and materials that will contain stocks under harsh oceanic conditions and keep costs low enough to remain profitable. It is likely that offshore aquaculture, at least initially, would employ species with established markets and production systems that are similar to those used in inshore areas. Examples of marine species that are candidates for offshore areas may include Atlantic salmon ( Salmo salar ), white sea bass ( Atractoscion nobils ), cobia ( Rachycentron canadum ), and blue mussel ( Mytilus edulis ). Currently, salmon net pen facilities operate in protected inshore waters of Maine and Washington. Several other net pen aquaculture facilities have operated in exposed state waters of Hawaii and Puerto Rico that have characteristics similar to those of offshore areas. Over the last two decades, permits have been issued to conduct research and limited commercial aquaculture in the EEZ. Recently, three mussel farms received permits from the U.S. Army Corps of Engineers (USACE) to operate in offshore waters. Several other ventures have been proposed; including proposals to operate commercial facilities in several regions. Researchers are developing systems to adapt facilities used in inshore areas to the unique needs of offshore aquaculture. Offshore systems (e.g., submersible cages, net pens, longline arrays) may be free-floating, secured to a structure, moored to the ocean bottom, or towed by a vessel. Systems have been developed to overcome problems associated with harsh open ocean conditions, including submersible cage designs that do not deform under strong currents and waves, and single-point moorings. Cage-mounted autonomous feeding systems have been developed that can operate both at the surface and submerged. Other components under development include mechanized and remote systems that can be controlled from land-based facilities; for example, universities and private-sector research interests are developing automated buoys that can monitor the condition of stock and feed fish on a regular basis for weeks at a time. <3. Federal Government Involvement in Aquaculture> Federal aquaculture, regulation, research, and support are conducted by a number of federal agencies. Their roles vary widely depending on the agency's statutory responsibilities, which may be related directly or indirectly to aquaculture. Congress enacted the National Aquaculture Act of 1980 to encourage development of the aquaculture industry and coordinate federal activities. The act established the Subcommittee on Aquaculture (SCA) to provide opportunities to exchange information and enhance cooperation among federal agencies. SCA's main functions include the following: reviewing national needs for aquaculture research, technology transfer, and technology assistance programs; supporting coordination and communication among federal agencies engaged in the science, engineering, and technology of aquaculture; collecting and disseminating information on aquaculture; encouraging joint programs among federal agencies in areas of mutual interest relating to aquaculture; and recommending specific actions on issues, problems, plans, and programs in aquaculture. SCA operates under the Committee on Environment of the National Science and Technology Council in the Executive Office of the President. SCA is chaired by the Secretary of Agriculture, in consultation with the Secretaries of Commerce and the Interior. In addition to the three main departments, SCA includes nine additional departments and agencies with an interest in aquaculture. SCA meets quarterly and has provided information on topics such as fish disease, aquaculture regulation, and other areas of interest. Most federal aquaculture activities and programs that are specific to aquaculture are carried out by the Department of the Interior (DOI), Department of Commerce (DOC), and the Department of Agriculture (USDA). Other federal agencies have roles that are indirectly related to aquaculture, such as regulatory programs that apply to a variety of aquatic or marine activities, including aquaculture. Examples include USACE for activities in navigable waters, the Environmental Protection Agency (EPA) for protection of environmental quality, and the Food and Drug Administration for regulation of drugs used to treat fish diseases. <3.1. U.S. Department of Agriculture> USDA plays a lead role in support of freshwater aquaculture for species such as catfish that are raised on private property in fishponds. USDA is authorized to conduct cooperative research and extension: it funds five aquaculture regional research centers. Work at aquaculture centers complements other USDA research and education programs undertaken at state land-grant universities. The USDA National Agricultural Statistics Service periodically conducts the national aquaculture census and collects and publishes other related statistical information. The Animal and Plant Inspection Service provides animal health certifications for exports of live species and products; assistance for producers experiencing losses from predators; and veterinary biologics for preventing and treating animal diseases, including those affecting aquatic species. The Farm Service Agency administers farm lending programs, including ownership, operating, and emergency disaster loans. Under certain circumstances, aquaculture operations may be eligible for disaster assistance under the Noninsured Crop Disaster Assistance Program and the Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program. It appears that some of USDA's programs and experiences that focus on land-based agriculture, such as finance, research, disaster assistance, marketing, and extension, may be adapted and applied to marine aquaculture development. <3.2. Department of the Interior> DOI's U.S. Fish and Wildlife Service (FWS) focuses on support of public efforts, such as stocking programs, that benefit recreational fishing of freshwater and anadromous species. FWS operates the National Fish Hatchery System, which consists of more than 60 facilities used to enhance fish stocks, restore fish populations, and mitigate fish losses. The system includes fish production and distribution facilities, fish health centers, fish passage facilities, and technology centers. FWS research programs indirectly benefit the private sector through research and applications that control fish disease and regulation of potentially invasive species. FWS and NMFS are responsible for regulating potential interactions between aquaculture activities and endangered species and marine mammals under the Endangered Species Act (ESA) and the Marine Mammal Protection Act (MMPA). <3.3. Department of Commerce> The NMFS Office of Aquaculture in DOC focuses on regulatory, technical, and scientific services related to marine aquaculture. NOAA headquarters provides general direction for the program and coordinates with other NOAA offices, federal agencies, and the general public. The program includes five regional aquaculture coordinators, who coordinate regulatory and permitting activities, serve as liaisons with the state and local government and stockholders, and assist with grant management. Aquaculture in federal waters is regulated as a regional fishery under the Magnuson Stevens Fishery Conservation and Management Act (MSA). NOAA's efforts to regulate offshore aquaculture are discussed in the following section concerning federal agency regulatory responsibilities (see Current Regulatory Framework). In October 2015, NOAA released its five-year strategic plan (2016-2020) for marine aquaculture. NOAA's vision is a "robust U.S. marine aquaculture sector that creates jobs, provides sustainable seafood, and supports a healthy ocean." The plan provides a blueprint of NOAA's involvement in marine aquaculture, including program impact, goals and strategies, deliverables, and crosscutting strategies. To increase aquaculture production, the program's four main goals are to develop coordinated, consistent, and efficient regulatory processes for the marine aquaculture sector; encourage environmentally responsible marine aquaculture using the best available science; develop technologies and provide extension services for the aquaculture sector; and improve public understanding of marine aquaculture. The plan also includes four crosscutting strategies to achieve these goals and objectives: strengthen government, academic, industry, and other partnerships; improve communications within NOAA; build agency infrastructure within NOAA; and develop sound and consistent management within NOAA. Various NOAA programs may support aquaculture both directly and indirectly. The National Sea Grant Marine Aquaculture Grant Program is the only U.S. government grant program that funds marine aquaculture exclusively. These grants focus on industry challenges, such as improving aquaculture feeds, enhancing seafood safety and quality, refining culture methods, and diversifying aquaculture species. Other NOAA offices or programs that may contribute to or become involved in aquaculture development include inspections provided by the NOAA Seafood Inspection Program, research conducted at NOA A regional fisheries science centers, and awards funded by the Saltonstall-Kennedy Grant Program. <4. Offshore Aquaculture Challenges> A broad array of challenges is associated with offshore aquaculture development and expansion. These challenges pertain to evolving production technology, uncertain economic costs and benefits, and potential environmental and social impacts. Generalizations about how to address these challenges are difficult to make because of the variety of candidate species, different technologies, and potential scales of operation. Major categories of concerns related to offshore aquaculture development include (1) the legal and regulatory environment; (2) potential environmental harm; (3) economic, trade, and stakeholder concerns related to development of a new industry; and (4) business and institutional support. <4.1. Current Regulatory Framework45> One of the main issues associated with marine offshore aquaculture is the concept of ownership and individuals' rights to use the marine environment for economic gain (in contrast to, for example, the catfish industry, where fishponds are constructed and operated on private land). Some envision development and management as a partnership, where the government's role is one of both enabler and steward. This partnership could provide for property rights and regulatory clarity, certainty, and stability. For example, the government already provides specific rights to businesses that extract or use resources of the continental shelf, such as oil and gas and wind energy development. Aquaculture regulation depends primarily on the geographic location and characteristics of aquaculture facilities. In state waters, in accordance with the federal Submerged Lands Act of 1953, coastal states exercise jurisdiction over an area extending 3 nautical miles (nm) from their officially recognized coast (or baseline ). States also have jurisdiction over internal waters, areas inside the baseline in bays and estuaries, such as the Chesapeake Bay or Puget Sound. States may impose restrictions or requirements as they see fit, subject to any applicable federal laws. If located in federal waters, in waters from 3 nm to 200 nm from the baseline, aquaculture facilities are regulated primarily by federal agencies under a number of federal statutes and regulatory requirements ( Figure 4 ). Some federal laws apply to marine aquaculture and waters of the United States generally and include facilities located in both state and federal marine waters. Currently, no single federal agency is authorized to approve or permit offshore aquaculture facilities in federal waters, generally the EEZ. USACE, NMFS (NOAA Fisheries), and EPA are separately authorized to regulate certain activities that are required to establish and operate aquaculture facilities. Federal agencies that issue permits are required to consult with other regulatory agencies concerning the potential effects of each application. The permitting process also involves consultation and other requirements that are incorporated into the review of these applications. The following sections summarize the required federal permits, consultation, and review requirements. <4.1.1. Federal Permits to Conduct Aquaculture in the Federal Waters> <4.1.1.1. Section 10 Permits> Section 10 of the Rivers and Harbors Act of 1899 (hereinafter referred to as Section 10) prohibits the unauthorized obstruction or alteration of any navigable water of the United States. Authorization by the Secretary of the Army, through USACE, must be provided before construction is initiated. Construction may include any structure or work in or affecting the course, condition, or capacity of navigable waters, excavation or fill, including aquaculture facilities, in or over any navigable waters of the United States within 3 nm from shore. Because aquaculture facilities may be located in and may affect navigable waters, the developer of the facility may be required to obtain authorization from USACE under Section 10. USACE's role is to regulate the use of the navigable water (not to regulate aquaculture per se). The Outer Continental Shelf Lands Act extends USACE authority over all artificial islands and all installations and other devices permanently or temporarily attached to the seabed, which may be erected for the purpose of exploring for, developing, or producing resources. Therefore, a Section 10 permit is also required prior to construction or placement of installations such as aquaculture facilities in federal waters from the seaward limit of state waters to the seaward limit of the outer continental shelf. The decision to issue a permit is based on the effects on navigation and the proposed activity's probable impacts on the public interest. The public interest is assessed by comparing the benefits that may be expected to accrue from the proposed activity and the reasonably foreseeable harm that reflects the national concern for the protection and use of important resources. Offshore aquaculture permits would be required for structures such as cages, net pens, or lines that are anchored or attached to the sea floor. Section 10 permit requirements for aquaculture development beyond 3 nm may differ from those within 3 nm, because installations or other devices that are not temporarily or permanently attached to the seabed do not appear to be included. Examples of facilities beyond 3 nm that may not require Section 10 permits include bottom shellfish culture or unmoored floating aquaculture facilities if they do not impede navigation. <4.1.1.2. National Pollutant Discharge Elimination System Permit> EPA protects water quality by regulating the discharges of pollutants into U.S. waters under the Clean Water Act (CWA). Under the CWA, a National Pollutant Discharge Elimination System (NPDES) permit is required to discharge pollutants from point sources into federal ocean waters. A point source is defined as "any discernable, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged." Aquaculture facilities may discharge materials such as fecal matter; excess feed; antifoulants; and therapeutic agents, such as antibiotics. EPA currently regulates aquaculture facilities as a point source if the activity qualifies as a Concentrated Aquatic Animal Production (CAAP) facility; CAAPs are defined according to discharge frequency and production level or as designated by EPA on a case-by-case basis if they are significant contributors of pollution. Commercial scale aquaculture operations in federal waters would be likely to trigger the CAAPs threshold and require a NPDES permit. <4.1.1.3. Fishing (Aquaculture) Permit> NMFS is the only federal agency that claims explicit management authority over offshore aquaculture. Currently, NMFS manages federal fisheries under authority of the MSA. The MSA regulates fishing in the EEZ through development and implementation of federal fishery management plans (FMPs). The MSA "does not expressly address whether aquaculture falls within the purview of the act." The MSA defines a fishery as "one or more stocks of fish ... and any fishing for such stocks" and fishing as the "catching, taking, or harvesting of fish." The Magnuson-Stevens Act does not expressly address whether aquaculture falls within the purview of the Act. However, the Magnuson-Stevens Act's assertion of exclusive fishery management authority over all fish within the EEZ, its direction to fishery management councils to prepare fishery management plans for any "fishery" needing conservation and management, together with the statutory definitions of "fishery" and "fishing," provide a sound basis for interpreting the Act as providing authority to regulate aquaculture in the EEZ. Under the MSA's authority, several regional fishery management councils and NMFS have exercised regulatory oversight over offshore aquaculture. In some cases, NMFS authorized offshore aquaculture in federal waters for research and experimental purposes under an exempted fishing permit. These permits are of limited duration and not intended to apply to development of permanent commercial operations. The Gulf of Mexico Fishery Management Council (GMFMC) has been particularly active on aquaculture issues. In 2009, an aquaculture FMP was approved by the GMFMC; NMFS issued its final rule to implement that FMP in 2016. The aquaculture plan establishes a regional permitting process for regulating aquaculture in the Gulf of Mexico EEZ. The regulations authorize permits for up to 20 facilities that are limited to combined total production of 64 million pounds annually of species that are native to the Gulf of Mexico. Applicants are required to acquire other federal permits before NMFS can issue a Gulf aquaculture permit. NMFS also has developed a memorandum of understanding to coordinate federal agency actions and outline the permitting responsibilities of each agency in the Gulf. However, a recent legal decision has cast doubt on NMFS's authority to regulate aquaculture under the MSA. In Gulf Fisherman ' s Association v . National Marine Fisheries Service , the U.S. District Court for the Eastern District of Louisiana held that NMFS exceeded its authority under the MSA when it adopted a regulatory scheme for aquaculture operations in the Gulf of Mexico. The court found that the MSA's grant of authority to regulate "fishing" and "harvesting" did not include aquaculture, noting that "[h]ad Congress intended to give [NMFS] the authority to create an entirely new regulatory permitting scheme for aquaculture operations, it would have said more than 'harvesting.' The MSA is a conservation statute, aimed at the conservation and management of natural resources. Fish farmed in aquaculture are neither 'found' off the coasts of the United States nor are they 'natural resources.'" Some are concerned that regional management of offshore aquaculture under the MSA may add another additional administrative requirements, especially if several regional fishery management councils develop their own, possibly contradictory, open ocean aquaculture management policies. Currently, commercial aquaculture is less likely to occur in federal waters under the jurisdiction of other regional fishery management councils because they have not prepared aquaculture FMPs or generic aquaculture amendments to the appropriate FMPs for species that could be cultured. In addition, it is unclear what regulatory authority NMFS and the regional councils might have over species, such as mussels, that are not managed under a federal FMP. <4.1.2. Federal Consultation and Review Requirements> Consultation and review requirements are often triggered by federal permitting programs. Some crosscutting environmental requirements are entirely procedural, because they require that the federal agency implement certain procedures to ensure the agency identifies and analyzes potential impacts the proposal would have on certain resources before deciding whether to issue the permit. Other environmental requirements may prohibit the agency from permitting the action, as proposed, unless the level of adverse impacts can be minimized or mitigated. <4.1.2.1. Coastal Zone Management Act> Under Section 306 of the Coastal Zone Management Act (CZMA), states may develop and implement a coastal management program (CMP) pursuant to federal guidance. State CMPs "describe the uses subject to the management program, the authorities and enforceable policies of the management program, the boundaries of the state's coastal zone, the organization of the management program, and related state coastal management concerns." Arguably the main feature of the CZMA is federal consistency. Federal agency activities that have reasonably foreseeable effects on a state's coastal zone resources and uses should be consistent with the enforceable policies of the state's coastal management plan. Section 307 of the CZMA requires any applicant for a required Federal license or permit to conduct an activity, in or outside of the coastal zone, affecting any land or water use or natural resource of the coastal zone of that state" to "provide in the application to the licensing or permitting agency a certification that the proposed activity complies with the enforceable policies of the state's approved program and that such activity will be conducted in a manner consistent with the program. Enforceable policies are legally binding state policies, such as constitutional provisions, laws, regulations, land use plans, or judicial or administrative decisions. Federal licensing and permitting (such as aquaculture permit requirements) is one of four general categories of federal activities that may be reviewed for consistency. The state lists federal licenses and permits that affect coastal uses and resources in its federally approved CMP. For listed activities, the applicant submits related data and information and a consistency certification that the proposed activity will be conducted in a manner consistent with the state's approved management program. For a listed activity outside the coastal zone (such as in federal waters), the state also must describe the geographic location or area in its CMP. If a license, permit, or geographic location in federal waters is not listed in the state's CMP, the activity is treated as unlisted. To review an unlisted activity, the state notifies the applicant, federal agency, and NOAA Office of Coastal Management (OCM) that it intends to review the activity. OCM decides whether to approve the request, generally based on whether the activity will have reasonably foreseeable effects on the state's coastal zone. If approved, the consistency review proceeds as in the case of a listed activity. The state may object to the applicant's consistency certification and stop the federal agency from authorizing the activity or issue a conditional concurrence to the applicant. The permit is issued for the activity if (1) the state concurs with the consistency determination; (2) the state fails to act, resulting in a presumption of consistency; or (3) the Secretary of Commerce overrules the state on appeal and concludes that the activity is consistent with CZMA objectives or is otherwise necessary for national security. In the vast majority of federal actions, states concur with the applicant's self-certification, often resolving any disputes collaboratively. <4.1.2.2. National Environmental Policy Act> The National Environmental Policy Act (NEPA) requires federal agencies to consider the potential environmental consequences of proposed federal actions but does not compel agencies to choose a particular course of action. If an agency anticipates that an action would significantly affect the quality of the human environment, the agency must document its consideration of those impacts in an environmental impact statement (EIS). If the impacts are uncertain, an agency may prepare an environmental assessment (EA) to determine whether a finding of no significant impact could be made or whether an EIS is necessary. NEPA creates procedural requirements but does not mandate specific outcomes. <4.1.2.3. Endangered Species Act and Marine Mammal Protection Act> NMFS and FWS have responsibilities under the ESA and the MMPA to review project proposals that may affect marine mammals or threatened and endangered species. If issuance of a federal permit may adversely affect a species listed under the ESA, consultation may be required under Section 7 of the ESA. Through consultation with either FWS or NMFS, federal agencies must ensure that their actions are not likely to jeopardize the continued existence of any endangered or threatened species or adversely modify critical habitat. If the appropriate Secretary judges that the proposed activity jeopardizes the listed species or adversely modifies critical habitat, then the Secretary must suggest reasonable and prudent alternatives that would avoid harm to the species. If reasonable and prudent measures are adopted, the federal action is allowed to go forward. The MMPA prohibits the harassment, hunting, capturing, killing (or taking ) of marine mammals without a permit from the Secretary of the Interior or the Secretary of Commerce. If marine mammals are likely to interact with aquaculture facilities and this interaction is likely to result in the taking of marine mammals, a marine mammal exemption would be required. To be eligible for an exemption, the aquaculture facility would need to obtain a Marine Mammal Authorization Program certificate from NMFS. <4.1.2.4. MSA Essential Fish Habitat> The MSA also requires the federal permitting agency (e.g., USACE) for any aquaculture facility to consult with NMFS if the activity has the potential to harm essential fish habitat (EFH). EFH is designated for all marine species for which there is an FMP and may include habitat in both state and federal waters. <4.1.2.5. National Marine Sanctuary Act> NOAA manages national marine sanctuaries established under the National Marine Sanctuary Act (NMSA). Federal agencies are required to consult with the Secretary of Commerce when federal actions within or outside a national marine sanctuary, including activities that are authorized by licenses, leases, and permits, are likely to harm sanctuary resources. If the Secretary finds that the activity is likely to injure a sanctuary resource, the Secretary recommends reasonable and prudent measures that the federal agency can take to avoid harm to the sanctuary resource. If the measures are not followed and sanctuary resources are destroyed or injured, the NMSA requires the federal agency that issued the permit to restore or replace the damaged resources. <4.1.2.6. National Historic Preservation Act> The National Historic Preservation Act (NHPA) is another procedural statute. Under Section 106 of NHPA, federal agencies must determine whether actions they may permit or license will have adverse effects on properties listed or eligible for listing in the National Register of Historic Places. Such sites could include shipwrecks, prehistoric sites, or other cultural resources. Federal agencies must determine whether such resources may be affected in consultation with state and/or tribal historic preservation officers. . <4.1.2.7. Fish and Wildlife Coordination Act> The Fish and Wildlife Coordination Act requires federal agencies to consult with FWS, NMFS, and state wildlife agencies when activities that are authorized, permitted, or funded by the federal government affect, control, or modify waters of any stream or bodies of water. Consultation generally is incorporated into the process of complying with other federal permit requirements, such as the NEPA and CWA. <4.1.3. Other Authorizations and Approvals> The Coast Guard has authority to control private aids to navigation in U.S. waters. Regulations require structures such as aquaculture facilities be marked with lights and signals for protection of maritime navigation. To establish a private aid to navigation, the applicant would need formal authorization from the appropriate U.S. Coast Guard district. The Bureau of Safety and Environmental Enforcement (BSEE) has regulatory responsibility for the offshore energy industry on the outer continental shelf. BSEE would review aquaculture applications and provide comments regarding potential conflicts, interactions, or effects on mineral exploration, development, and production operations. The Bureau of Ocean Energy Management (BOEM) manages development of the outer continental shelf energy and mineral resources. BOEM would require a right-of-use easement for any offshore aquaculture operations that uses or tethers to an existing oil and gas facility. <4.2. Environmental Concerns> One of the main features of many previous aquaculture bills has been consideration of environmental protection and monitoring of offshore aquaculture facilities. Critics of offshore aquaculture have expressed concern with potential environmental degradation and conflicts with existing uses of marine areas. They cite historic problems in inshore areas such as escapes of cultured organisms, the introduction of disease and invasive species, pollution in areas adjacent to net pens, and habitat loss which have created a negative perception of aquaculture. Aquaculture supporters assert that those who oppose marine aquaculture lack an understanding of aquaculture's benefits and risks and that "these perceptions persist despite significant scientific literature that contradicts the extent or existence of risk to the values that these groups want to protect." Supporters contend that, in many parts of the world, a combination of farming experiences, technological advances, proper siting, and industry regulation has decreased environmental impacts and improved efficiency of marine aquaculture. Some researchers suggest that by moving operations offshore and selecting appropriate sites, the remaining impacts can be further reduced. Others add that offshore waters would be less prone to environmental impacts than inshore waters because fish wastes and other pollutants would dissipate more rapidly in the deeper and better-flushed offshore areas. A present lack of knowledge owing to limited experience and few studies focusing specifically on offshore aquaculture limits understanding of potential harm to the environment from offshore aquaculture. Most information has been collected from inshore areas, where salmon net pens and other types of aquaculture farms have been established. Some characteristics of inshore operations are similar to those that would be established offshore (e.g., both are open to the surrounding environment); however, other characteristics of offshore operations, such as offshore currents, wind and waves, water quality, and depth, are likely to differ from inshore areas. Generally, the outcomes associated with offshore aquaculture development depend on characteristics of aquaculture sites and how technology is employed and managed. Over the years, researchers have identified several issues related to marine aquaculture and the use of net pens in inshore areas. These issues include water pollution from uneaten feed and waste products (including drugs, chemicals, and other inputs); habitat degradation, such as alteration of benthic habitat from settling wastes; sustainability of fish used in aquaculture feeds; use of antibiotics and other animal drugs; introduction of invasive species; escape of cultured organisms; and the spread of waterborne disease from cultured to wild fish. During the last two decades, technical advances and farming practices have reduced these impacts in nearshore areas. Existing laws and regulations also have established performance standards and addressed many of the potential adverse environmental effects of net pen aquaculture. <4.2.1. Fish Waste> Fish feed is the main source of waste from aquaculture and contributes to most environmental impacts associated with aquaculture. The discharge of wastes, such as unused feed, and metabolic fish wastes, such as nitrogen (ammonia and urea), has been an ongoing concern because of potential effects on water quality and degradation of the seafloor environment under net pens. Treatment of effluent is not feasible because wastes are discharged directly into the ocean through net enclosures. Impacts on the environment depend on a variety of factors, such as feed quality, digestion and metabolism, feeding rate, biomass of fish, and species. Site characteristics such as cage design, depth, currents, existing water quality or nutrient levels, and benthic features also influence nutrient dispersion and impacts. Impacts on water quality in the water column adjacent to net pens are often related to a combination of increases in nitrogen, phosphorus, lipids, and turbidity and depletion of oxygen. Eutrophication may occur when net pens are placed at high densities and flushing of semi-enclosed water bodies is poor. According to studies, aquaculture's contribution to nitrogen in areas adjacent to net pens ranged broadly from none to significant levels depending on a variety of factors, including environmental characteristics and species. In some cases, it appears that nutrients are flushed away from the immediate cage area to the surrounding water body. Management practices such as choosing sites with adequate current and depth are likely to improve circulation and dissipation of waste products. Solid feed and fish waste descend through the water column and may accumulate on the bottom below and around aquaculture facilities. In some cases, wastes accumulate at rates greater than the assimilative capacity of the environment, and the increase of respiration from microbial decomposition decreases oxygen levels (hypoxia) and changes sediment chemistry. This may cause hypoxia in sediments and the water overlying the bottom, which may in turn affect the abundance and diversity of marine organisms in the area. Reviews have identified changes to sediment chemistry as one of the primary impacts of marine aquaculture in the United States. Over the last several decades, harmful environmental impacts have been reduced because of advances in technology, improved facility siting, better feed management, and stricter regulatory requirements. Feed formulations have been modified to improve digestibility without losses in growth. When feed is more fully digested, the amount of waste (nutrient) outputs per unit of fish produced is reduced and fewer solid wastes and nutrients are released to the environment. Modifying feeding practices also has reduced the loss of uneaten food. Some facilities now use underwater devices to monitor feeding to avoid overfeeding and waste. Environmental monitoring also informs farmers and regulators of the need to leave a site fallow or to adjust feeding. Some researchers and aquaculturalists have proposed the use of multi-tropic aquaculture by adding other organisms such as invertebrates and seaweeds to the aquaculture system. The system would mimic natural tropic relationships, where wastes from cultured organisms are food for other organisms, such as shellfish, and supply nutrients for seaweed. These additions could lessen environmental impacts from nutrients and increase the efficiency of feed utilization. Proponents suggest that offshore aquaculture may produce fewer and less severe environmental impacts than those caused in nearshore areas. They hold that open ocean waters are normally nutrient deficient, and nutrients released from offshore aquaculture operations would likely dissipate. Critics question whether experiences with experimental facilities are relevant to future commercial operations, which may need to operate at larger scales to be profitable. Generally, environmental impacts are likely to vary depending on management and culture techniques, location, size and scale, and species. <4.2.2. Fish Diseases> Fish diseases are caused by bacteria, viruses, and parasites that commonly occur in wild populations. Aquaculture production is vulnerable to mortality associated with fish diseases, and serious losses have occurred. Disease outbreaks cost the global aquaculture industry an estimated $6 billion per year. Starting in 2007, the Chilean aquaculture industry suffered the worst disease outbreak ever observed in salmon aquaculture. The outbreak of infectious salmon anemia virus cost the industry 350,000-400,000 mt of production and $2 billion. Net pens are open to the marine environment, so pathogens may pass freely as water moves through net pen enclosures. Cultured organisms are often more susceptible to diseases because fish are kept at higher densities, which increases the rate of contact among fish and may induce stress. Research suggests that fish pathogens may be transferred from farmed to wild fish and that non-native pathogens may be introduced when fish are moved from different areas. Some fish farmers counter that more disease problems originate in wild populations, where reservoirs of disease naturally exist and are subsequently transferred to cultured organisms. For example, some researchers have identified sea lice as a serious problem for Atlantic salmon farming because of lost production and the costs of disease management. Studies demonstrate that high host densities in net pens promote transmission and growth of the parasite. It has been hypothesized that sea lice may be spread from salmon in net pens to wild counterparts that are passing in adjacent waters. Some assert that sea lice have harmed wild salmon populations migrating near infested salmon farms. Studies have shown that transmission is initiated from wild to cultured fish, and then the lice are transmitted back to wild salmon hosts. The extent of the impact on wild salmon is a matter of debate, because many different factors affect salmon population abundance. However, a recent study concluded that "Atlantic salmon populations are already under pressure from reductions in marine survival and the addition of significant lice-related mortality during the coastal stage of smolt out-migration could be critical." Sea lice control and prevention strategies have included the use of approved therapeutants (aquaculture drugs) and fallowing of sites between production cycles. <4.2.3. Drugs and Other Chemicals> Various drugs have been used to treat and prevent the occurrence of disease, including disinfectants, such as hydrogen peroxide and malachite green; antibiotics, such as sulfonamides and tetracyclines; and anthelmintic agents, such as pyrethroid insecticides and avermectins. Antibiotics are used to control bacterial diseases and are sometimes introduced to cultured fish in their feed. Drugs also are used to aid in spawning, to treat infections, to remove parasites, and to sedate fish for transport or handling. Viral diseases are managed by monitoring and focusing on management practices, such as lowering stress, selecting organisms with greater resistance, and providing feed with proper nutrients. However, in some cases it is necessary to depopulate farms to stop the spread of the disease. The Food and Drug Administration (FDA) is responsible for approving drugs used in aquaculture. The drug must be shown to be safe and effective for a specific use in a specific species. Only drugs approved by the FDA Center for Veterinary Medicine may be administered to aquatic animals. Drug withdrawal periods and testing are required to prevent the sale of fish that contain drug residues. The USDA Animal and Plant Health Inspection Service is responsible for controlling the spread of infectious diseases and requires an import permit and health certificate for certain fish species. Many states also have animal health regulations to prevent disease introductions and manage disease outbreaks. Aquaculture drugs such as antibiotics that are used to treat marine finfish may be transferred to open water environments when unconsumed feed or fish wastes pass through net pen enclosures. Extensive use of these agents may result in the development and spread of bacteria that are resistant to antibiotics. The use of many of these drugs reportedly is declining, as vaccines eliminate the need to treat bacterial diseases with antibiotics and other drugs. Examples include salmon farming in Norway, where antibiotic use has decreased by 95%, and in Maine, where antibiotics are now rarely used. Proponents of offshore aquaculture suggest that, because of the more pristine and better oxygenated water conditions offshore as compared to many inshore areas, the occurrence of fish diseases could be lower for offshore aquaculture. <4.2.4. Escapes, Genetic Concerns, and Invasive Species> The escape of organisms from aquaculture facilities, especially non-native species, is another environmental concern related to aquaculture. This issue might arise if genetically selected or non-native fish escape and persist in the wild. Historically, non-native species have been used in aquaculture, sometimes resulting in long-term environmental harm. For example, Asian carp such as silver, bighead, and grass carp were introduced to the United States from Asia to improve water quality of freshwater aquaculture ponds and waste treatment ponds. These species are now found in most of the Mississippi drainage area, and they have affected the basin's aquatic ecology and harmed species such as freshwater mussels and native fish. Genetic diversity could be affected if hatchery-raised fish spawn with wild conspecifics (wild fish of the same species). Interbreeding could result in the loss of fitness in the population due in part to the loss of genetic diversity. Genetic risks would depend on the number of escapes relative to the number of wild fish, the genetic differences between wild and escaped fish, and the ability of escaped fish to successfully spawn in the wild. There are also concerns that non-native fish could become established in the wild and compete with wild fish for food, habitat, mates, and other resources. Experiences with farmed Atlantic salmon may provide some insight regarding escape of farmed fish both within and outside their native ranges. Atlantic salmon have escaped from farms in the Pacific Northwest (outside their native range) and have been recaptured in Alaskan commercial fisheries. In 2017, over 100,000 Atlantic salmon escaped from facilities owned by Cook Aquaculture off Cypress Island, WA. Many of the escaped fish were recovered, and fishery managers assumed the remaining fish were unable to make the transition to a natural diet. In British Columbia, escaped Atlantic salmon have spawned and produced wild-spawned juvenile Atlantic salmon, but it is uncertain whether they have established self-reproducing breeding populations. Within the range of Atlantic salmon, farmed salmon have been found on spawning grounds during the period when wild Atlantic salmon spawning occurs. Domestication of farmed salmon has changed their genetic composition and reduced genetic variation. These changes have occurred because limited numbers of brood fish are used for spawning farmed fish and farmers select for specific traits. Much present-day farm production of Atlantic salmon is based on five Norwegian strains. Farmed and wild hybrids and backcrossing of hybrids in subsequent generations may change genetic variability and the frequency and type of alleles present in wild populations. The extent and nature of these changes to genetic variability may affect survival (fitness) of these populations. Changes in the genetic profiles of wild populations have been found in several rivers in Norway and Ireland, where interbreeding of wild and farmed fish is common. Large-scale experiments in Norway and Ireland show highly reduced survival and lifetime success rates of farmed and hybrid salmon compared to wild salmon. Some researchers have concluded that further measures are needed to reduce the escape of salmon from aquaculture farms and their spawning with wild populations. Researchers and managers have made several recommendations to decrease the risk of invasive species introductions and the loss of genetic diversity. There appears to be common agreement, as in the case of the Gulf of Mexico FMP, that only native species should be farmed. To decrease genetic risks associated with escapes, farmers might be required to use wild broodstock with a genetic makeup that is similar to local wild populations. However, by using this approach, farmers may forgo benefits of selective breeding. Another approach might involve the use of sterile fish created through techniques such as hybridization, chemical sterilization, polyploidy, and others. However, these methods are not always 100% effective and the approach may increase costs of production. <4.2.5. Interactions with Other Species> Interactions between aquaculture operations and marine wildlife may occur when predators in search of food are attracted to aquaculture facilities or if aquaculture sites overlap with the ranges or migration of marine species. These interactions are common in Chile, British Columbia, and Norway, where marine mammals and birds often are attracted to salmon farms. Most interactions are seasonal and involve sea lions, seals, and otters, as well as seabirds such as sea gulls and cormorants. Predation can result in loss of fish, damage to equipment, and stress to fish. Deterrence measures seek to address these concerns; for example, predator nets may be placed outside the main net to stop marine mammals directly accessing the net pen. Some farms also install bird nets over net pens to protect fish from bird predation. When nonlethal measures fail, sea mammals are sometime culled. Offshore facilities could affect some endangered species as they migrate or alter essential habitat for feeding, breeding, and nursing. Information on incidental entanglement and mortality is limited, because of the small number of facilities working in offshore areas. NOAA recently investigated longline aquaculture gear that might be used for mussel culture and found that interactions are rare. However, researchers questioned whether the small number of interactions indicates that this type of aquaculture is benign or is due to the failure to detect and report interactions. Minimizing impacts on protected species may require monitoring and research into natural interactions between predators and prey. Management strategies might involve preventive measures, such as spatial planning and aquaculture gear modifications. Wild fish also are sometimes attracted to net pens to consume feed that has fallen through net pen enclosures. The attraction of wild fish may provide a benefit, because their consumption of feed may lessen environmental impacts such as the release of nutrients or deposits of feed near net pens. At the same time, it could have negative impacts, such as the transfer of diseases from farmed to wild fish or from wild to farmed fish. Impacts related to changes in wild fish physiology from the ingestion of feed and changes in the distribution of wild fish are unknown. <4.2.6. Aquaculture Feeds and Related Issues> Fish feed is a critical input, because it must provide all of the essential nutrients and energy needed to meet the cultured organism's physiological requirements. The supply and use of aquaculture feed are directly related to the economic viability of aquaculture operations, fish growth and health, environmental quality, ecological concerns, and human nutritional benefits from aquaculture products. Fish meal and oil are used to produce feed for carnivorous species such as salmon, because these ingredients provide nutritional requirements that are similar to those found in the wild. Aquaculture feeds must have a composition that maintains growth and fish health while balancing the costs of feed components against the value of outputs associated with fish growth. Researchers note that future aquaculture production is likely to be constrained if feeds are limited to sources of fish meal and oil, which require wild fish production and fish processing wastes. Research efforts have focused on the use of fish meal and oil substitutes that are derived from terrestrial plants. Plant meal and oils now supply the bulk of feed ingredients, but they are not a perfect substitute and, in many cases, fish meal and oil are still an important component of most fish feeds. <4.2.6.1. Feed Production and Use> Nutritional requirements and feed composition vary according to species, the life stage of the organism (e.g., larvae, fry, fingerlings, adults), and management objectives. Fish feeds are formulated to provide a mixture of ingredients, such as proteins, lipids, carbohydrates, vitamins, and minerals, which provide the greatest growth at the lowest cost. Historically, fish meal and oil have been principal ingredients of many aquaculture feeds, because these ingredients have been a cost-effective means of providing the nutritional requirements of many cultured species. Fish meal and oil are obtained from reduction fisheries that target small pelagic species such as anchovies, capelin, herring, and menhaden and from fish processing wastes of wild and aquaculture products. Reduction fisheries target species that are generally less valuable than those used for human consumption. The fish are heated and pressed to obtain fish oil and milled and dried to produce fish meal. Since 2006, the annual world supply of fish meal has ranged from 4.49 mmt to 5.86 mmt and the supply of fish oil has ranged from 0.86 mmt to 1.08 mmt. In 2016, the United States produced 253,600 metric tons (mt) of fish meal and 80,500 mt of fish oil, approximately 5% and 8% of global production, respectively. Reduction fisheries supply approximately 70% of fish meal and fish oil, with the remainder obtained from fish processing wastes. In the last 20 years, global production of fish meal and oil has declined in part because of increasing use of fish from reduction fisheries for direct human consumption and tighter quotas and controls on unregulated fishing. The global decrease in total fish meal production has occurred despite increasing production of meal and oil from fish processing wastes. <4.2.6.2. Conversion of Aquaculture Feed to Fish Flesh> Researchers have found that fish meal (protein) and fish oil (lipids) are important ingredients for fish growth. Most feeds are formulated to increase efficiency by using high-energy lipid to allow for greater conversion of dietary protein into fish muscle. In addition to fish protein and oil, fish feeds may include plant proteins, terrestrial animal protein, carbohydrates, moisture, ash, vitamins, and minerals. In comparison to other animals, fish are relatively efficient in converting fish feed to flesh. For example, feed conversion ratios for Atlantic salmon are approximately 1.15 (approximately 1.15 kilograms [kg] of dry feed are used to produce 1.0 kg of salmon flesh [wet]). In 2013, salmon fish feed used on Norwegian farms consisted of approximately 18% fish meal and 11% fish oil. The amount of marine fish protein and oil needed to produce a unit measure of seafood such as salmon has been decreasing with the use of plant-based substitutes. The "fish in fish out" ratio is the amount of wild fish needed to produce the fish meal and fish oil required to produce one kilogram of farmed fish. The ratio of "fish in to fish out" varies according to the nutritional requirements of different species, with higher ratios for carnivorous fish such as eels (1.75) that are fed higher fish protein and fish oil diets and lower ratios for omnivorous fish such as tilapia (0.18). When aggregated across species, worldwide aquaculture is a net producer of fish protein, with estimates ranging from 0.22 kg to 0.5 kg of wild marine fish used to produce a kilogram of farmed seafood. <4.2.6.3. Substitutes for Fish Meal and Oil> Over the last two decades, research on fish dietary requirements has contributed to progress in developing substitutes for fish meal and oil from terrestrial plant ingredients and other potential sources, such as marine algae. This has led to reductions in the use of fish meal and oil as ingredients in fish food. Terrestrial plant meal and oils now supply the bulk of feed ingredients for most fish species. The focus of research has been on plant protein and oil sources such as soy, canola, sunflower, cottonseed, and others. For example, the Norwegian salmon industry has reduced the content of fish meal and oil in fish feed from over 60% to less than 25% by using plant proteins and oils. In spite of decreasing global production of fish oil and meal, use of plant-based substitutes has allowed production of feeds for all aquaculture to expand at 6% to 8% per year. Increasing demand and a limited supply of fish meal and oil have caused prices to triple for these ingredients in recent years. These price increases are likely to continue, because production is generally limited to supplies from wild sources. The cost of aquaculture feeds accounts for approximately 50% of net pen aquaculture operating costs. Limited wild supplies and rising feed costs have encouraged researchers and aquaculturalists to improve feeding techniques to reduce waste, modify feed formulations, use alternatives such as waste from fish-processing plants, and investigate new sources. Substitution has become more attractive, as the prices of fish meal and oil have risen faster than the prices of plant proteins and oils. Fish can be cultured with substitutes for fish meal and oil, but the commercial use of substitutes depend on whether the lower costs of the substitute can offset losses associated with lower growth rates, less disease resistance, and inferior nutritional value of aquaculture products. Although significant progress has been made in using plant protein and oil substitutes for fish feeds, there are still limitations to their use. In the near future, some fish meal and oil will still be needed in feed formulations. Plant meals are deficient in certain essential amino acids and contain fiber, carbohydrates, and certain antinutritional factors, which can adversely affect absorption, digestion, and growth. Nutritional quality of plant proteins can be improved through chemical and mechanical processing, which can reduce certain antinutrients and concentrate protein. Plant oils are an excellent source of energy, but they do not contain omega-3 fatty acids (eicosapentaenoic acid [EPA] and docosahexaenoic acid [DHA]). These fish oils have been found to improve immune responses and fish health generally. Fish species have differing tolerances to diets without certain fatty acids, which appear to be related to their natural diet. The use and substitution of plant protein and oils is likely to increase with further research into alternatives and as prices of fish meal and oil increase. <4.2.6.4. Fish Health> Proper feed formulations also are essential to promote fish health and prevent disease outbreaks. When fish are farmed at high densities, good nutrition tends to reduce stress, decrease the incidence of disease, and boost immune systems. A deficiency in any required nutrient may impair health by affecting the organism's metabolism and increasing susceptibility to disease. Research has shown that the use of plant oils and the ratio of different fatty acids can affect the immune response in fish. Dietary additives of immunostimulants, probiotics, and prebiotics have been found to increase immunity, feed efficiency, and growth. An ongoing challenge is to improve knowledge and commercial application of feed formulations, especially for nutrimental requirements of newly domesticated species. <4.2.6.5. Human Health and Preferences> The human health benefits of seafood are widely recognized because fish species contain high-quality protein, oils, minerals, and vitamins. Some research has found that diets that include omega-3 fatty acids enhance early brain and eye development and reduce heart disease and cognitive decline later in life. Feeds with plant-based substitutes can affect the quality of seafood products because these alternatives lack the fatty acids that are beneficial to human health. Farmed fish products that have been fed plant substitutes for fish oil may have lower concentrations of beneficial fish oils in their flesh. Two potential ways to reduce the use of fish oils in feed while maintaining high levels of omega-3 fatty acids in fish are (1) to develop genetically modified plants, fungi, or microbes to produce DHA and EPA for use in fish feeds or (2) to grow fish on low fish oil diets in the beginning of the production cycle and boost the omega-3 fatty acids in fish diets to raise their levels at the end of the production cycle. There also are growing public health concerns about persistent organic pollutants, such as polychlorinated biphenyls (PCBs), and inorganic contaminants, such as heavy metals, in farmed fish. The accumulation of contaminants varies by location and associated sources of pollutants. It can occur in both wild and farmed fish. Fish fed with fish meal and oils may accumulate contaminants from marine sources. Several studies have reported elevated levels of contaminants in feeds and farmed Atlantic salmon flesh. An advantage of using plant protein and oil is the potentially lower contaminant levels than those found in some wild seafood products. Several studies have found that replacing fish protein and oil with plant-derived material lowered the level of contaminants significantly. Consumer perceptions of changes in the quality of fish raised with substitute feeds also may affect acceptance of aquaculture products. There are widely held beliefs regarding the composition and health benefits of farmed and wild fish. Studies have shown that there are differences in taste and texture of fish farmed with alternative proteins and oils, but consumer preference studies have yielded mixed results. Public perceptions of aquaculture products also include concerns with the use of therapeutants such as antibiotics and the crowding and industrial nature of fish farming. <4.2.6.6. Sustainability Concerns> Some stakeholders have described the use of fish meal and oils for aquaculture feeds as an issue related to the sustainability of forage species and marine ecosystems. More than 30% of global fish production and a large portion of fish meal and oil used for aquaculture feeds (75%) is derived from the harvest of forage species, such as herring, anchovies, capelin, and menhaden. Fatty acids are produced by marine algae (phytoplankton), consumed and concentrated in fish that consume algae, and transferred to organisms higher in the food chain that consume forage species. As stated earlier, forage species have a relatively low economic value, and most are not marketed for direct human consumption. However, their biomass is relatively large because they feed at somewhat low tropic levels, and they can be caught fairly easily in large volumes because they are schooling species. Forage species serve as prey for higher tropic level fish species such as tuna, cod, and striped bass, marine mammals, and marine birds. Aquatic ecologists question whether aquaculture demand and increasing prices may encourage higher levels of fishing pressure and cause or continue overfishing of forage fish populations. Management of wild fish stocks is improving in many parts of the world, and many stocks are now considered to be well managed. However, some researchers have concluded that fishing for forage species should be limited to relatively low levels, because forage species are needed to support production of other marine species. Research using ecosystem models suggests that forage fish should be fished at lower rates to benefit the ecosystem rather than at rates that would provide long-term maximum yield. One report recommended that catch rates should be reduced by half and biomass of forage fish should be doubled. However, other researchers have questioned whether there is a strong connection between forage fish abundance and the abundance of their predators; they conclude that harvest policies for forage species need to be guided by a variety of factors that recognize the complexities of fisheries and ecosystems. <4.3. Economics, International Conditions, and Stakeholder Concerns> Increasing demand for seafood, advances in aquaculture methods, and increases in global aquaculture production have led many observers to take an optimistic view of potential offshore aquaculture development in the United States. Nevertheless, the future of offshore development is uncertain because of the paucity of experiences in establishing and managing U.S. offshore aquaculture facilities. Greater regulatory certainty may encourage U.S. offshore development, but economic viability will determine whether the industry expands and produces significant quantities of seafood. The viability of offshore aquaculture in the United States is likely to depend on future developments, such as further technical advances, economic conditions, and social and political acceptance. Another economic consideration for policymakers is how to integrate policies that recognize the potential costs (externalities) of environmental harm that may be caused by offshore aquaculture and are not captured by markets. In addition to economics, user conflicts and related political factors are likely to play a role in the potential development of an offshore industry. <4.3.1. Factors Related to the Economic Viability of Offshore Aquaculture> The economic potential of offshore aquaculture will depend on the prices of seafood products and the cost to produce them. The following discussion identifies some of the factors that will determine whether offshore aquaculture may be profitable. <4.3.1.1. Demand> The quantity demanded for an aquaculture product is a function of price each point along the demand curve is the quantity that consumers are willing to buy at a specific price. Consumers are generally willing to buy less product at higher prices and more product for lower prices. A change in demand, a shift of the demand curve, depends on a variety of factors, such as changes in income, prices of substitutes (domestic wild fish) and complements, and consumer tastes and preferences. Offshore aquaculture production will compete with a variety of other protein products, such as imported seafood; domestically produced wild fish; and agriculture sources such as chicken, pork, and beef. Generally, demand for seafood products is rising both globally and domestically because of increasing population levels and incomes. The health benefits of seafood are also influencing changes in consumer preferences, with general movement away from traditional protein sources such as beef. Other types of domestic marine aquaculture production, such as land-based and inshore aquaculture, may compete with offshore aquaculture, but currently these activities provide a relatively small portion of the seafood consumed in the United States. Domestic sources of seafood may increase marginally as some overfished stocks recover, but most domestic fisheries are already at or near their natural limits. Some have reported that offshore aquaculture could produce a higher-quality product because of the constant flow of clean water through net pens. If it can be shown that offshore products contain fewer toxin residues or if offshore products can be raised without aquaculture drugs, these products may become more attractive to health-conscious consumers. The FDA Seafood Safety Program and the NOAA Seafood Inspection Program also may reassure U.S. consumers of the safety and quality of domestic seafood, including seafood produced by offshore aquaculture. These factors may allow offshore producers to differentiate their products and receive higher prices relative to imports or other domestic seafood, especially in niche markets. <4.3.1.2. Supply> The amount of seafood that aquaculturalists will be willing to produce at a given price depends on production costs. Economic conditions determine the costs of labor, hatchery supplies for stocking, feed, maintenance, and other inputs. For most aquaculture operations, the bulk of costs are for feed and stocking of early life stages, such as finfish fingerlings or oyster seed. Fixed costs include equipment depreciation, insurance, taxes, and lease payments. Shifts in supply result from changes in input prices, which also may be affected by technology, weather conditions, and other influences. At the level of individual farms or facilities, most costs are not set and often depend on short-run and long-run choices of the aquaculturalist. For example, in the short run, the producer may change feed quality and quantity, harvest intervals, or stocking rates, while in the longer term she may change species, location, technology, and scale. Costs to produce seafood in offshore aquaculture facilities are likely to be higher than costs in inshore areas, because of the need for more resilient cage materials and construction, shore-side infrastructure, specialized vessels, and automation of facility systems. The location of offshore aquaculture facilities also is likely to increase costs for fuel, monitoring, harvest, and security. According to the Food and Agriculture Organization, offshore facilities operating at distances of greater than 25 nm from shore are unlikely to be profitable, because costs increase with distance from shore. Some have speculated that offshore facilities will need to take advantage of economies of scale because of the relatively high costs of transporting materials between inshore and offshore facilities. Operating large-scale operations will require new coastal facilities and networks to supply and transport feed, construction materials, fingerlings, and harvested fish. Logistics networks to supply these inputs would need to be developed in coastal areas, where "working waterfronts" are already threatened due to competing uses and the relatively high cost of coastal real estate. These startup costs may exclude smaller producers who may not have access to the capital and resources needed to establish large-scale operations. Financial risk, generally the probability of losing money, is another factor that is related to potential viability of offshore aquaculture and may affect the availability of capital and insurance. Risk is defined as uncertain consequences, usually unfavorable outcomes, due to imperfect knowledge. Assessing risk for offshore aquaculture is complicated by different species, technologies, site characteristics, and the lack of experience working in offshore areas. Risks may be greater in offshore than inshore areas because of the threat of severe weather conditions and exposed offshore environments. Attracting investment may be difficult because offshore aquaculture is a new industry with limited experiences for investors to evaluate. As risk and uncertainty increase, generally, a greater revenue stream is required to justify the same level of investment. Known risks can be reduced by decreasing the probability of adverse outcomes, such as by using stronger materials to build more resilient structures. The cost of reducing risks must be weighed against the probability and magnitude of potential losses. Another approach to reducing risk is through insurance. Insurance transfers risk from the producer to the insurance underwriter through payments of insurance premiums. The cost of insurance premiums may be higher for offshore than inshore areas because of greater uncertainty and potentially higher risks of losses for offshore facilities. <4.3.2. Private Benefits and Externalities> The previous discussion of supply and demand considers private costs of production that are borne by the producer. Policymakers are concerned with a broader definition of costs that may affect individuals who are not involved in the aquaculture business often referred to as externalities . Externalities are defined as spillover costs or benefits, which are unintended consequences or side effects associated with an economic activity. For example, commercial fishermen may be harmed by habitat degradation caused by pollution from aquaculture because of associated declines of wild populations. When externalities are not considered, markets become inefficient because more of a good or service is produced than when the externality is fully considered. The recognition of externalities is another way in which policymakers can examine the tradeoffs related to the private benefits from aquaculture production and the environmental harm caused by the activity. In the case of offshore aquaculture, external costs may be associated with environmental harm from pollution, escaped organisms, disease transmission, and other effects. The existence of externalities means that policymakers may need to consider whether and to what degree the government should intervene to account for these costs. Intervention may involve regulatory measures that minimize externalities while maximizing benefits associated with the industry (e.g., fish production). Decisions related to site selection, technology, and facility operations are likely to be some of the main factors that determine the level of offshore aquaculture externalities. <4.3.3. International Factors and Domestic Experiences> <4.3.3.1. Trade> DOC has expressed concern with increasing U.S. imports of seafood products. According to NMFS, 80%-90% of the seafood consumed in the United States is imported. International trade in seafood has grown over the last several decades. The value of seafood trade is now more than twice the trade of meat and poultry combined. Relatively high-value seafood from wild fisheries and aquaculture dominates imports. In 2017, the United States imported approximately 2.7 mmt of edible seafood valued at $21.5 billion. After accounting for exports valued at $5.7 billion, the value of imports was $15.8 billion greater than exports of edible seafood products. Approximately half of seafood imports are cultured. The two main imported products are farmed shrimp and salmon. In 2017, shrimp accounted for $6.5 billion and salmon accounted for $3.5 billion of U.S. seafood imports. Supporters of offshore aquaculture assert that development of offshore areas and associated increases in seafood production could reduce the U.S. deficit in seafood trade. The Department of Commerce Strategic Plan states that, "a strong U.S. marine aquaculture industry will serve a key role in U.S. food security and improve our trade balance with other nations." Some may counter that the seafood trade deficit is not a good reason to support development of the aquaculture industry. Cultured salmon and shrimp imports have lowered prices and, therefore, the profits of domestic wild fisheries and aquaculture producers, but U.S. consumers have benefited from lower salmon and shrimp prices. According to economic theory, countries gain from trade when they specialize in products that they are best at producing. If other countries have an absolute or comparative advantage in aquaculture, the United States would likely benefit from supporting other industries. Advocates of aquaculture note that the United States has advantages compared to other countries because of its extensive coastline and EEZ, skilled labor, technology, domestic feed production, stable government and economy, and large seafood market. Others counter that U.S. federal waters are exposed to high winds and wave action for large parts of the year, whereas other parts of the world have readily available inshore areas and calmer offshore waters that could be developed, as well as lower labor costs. Overall operating costs and environmental standards for aquaculture in other countries are often lower than in the United States. Some have speculated that costs of inputs such as labor and less strict regulations provide producers outside the United States with an insurmountable competitive advantage. Other observers stress that costs may be lower in other countries, but if prices are high enough, U.S. producers may still be able to operate profitably. Domestic producers also have some advantages, such as a large and relatively wealthy market and lower shipping costs than those for imports. The government sometimes provides government-sponsored trade protections such as tariffs or import quotas to new industries. Protection may be rationalized by an infant industry that claims it requires time to overcome short-term cost disadvantages. Cost disadvantages may be related to the need to become more efficient by constructing new facilities, training workers, and installing new equipment. In these cases, tariffs would act as a subsidy that increases the domestic price of the good. When the industry becomes more efficient, the tariff would expire. However, as the industry becomes larger and more politically powerful, it may become difficult to remove the tariff. <4.3.3.2. U.S. Experiences> U.S. aquaculture production from inshore marine areas and freshwater ponds and raceways is small relative to global production levels. The bulk of U.S. aquaculture production is from freshwater catfish, crayfish, and trout. Catfish production increased from 62,256 mt in 1983 to its peak of 300,056 mt in 2003. Factors that have supported the industry's development include research and development, marketing efforts, industry leadership, and vertical integration. However, production decreased from 215,888 mt in 2009 to 145,230 mt in 2016. An increase of pangasius (an Asian catfish) and tilapia imports has contributed to lower prices, which have contributed to decisions by less profitable catfish farms to take acreage out of production. Salmon is the only marine finfish with significant U.S. marine aquaculture production, but it has struggled to compete with relatively inexpensive imports from Norway, Chile, and Canada. These countries are endowed with protected coastal areas such as fjords or bays where net pens may be deployed. Although environmental regulations and limitations on inshore leases may have affected U.S. salmon aquaculture production, stagnant prices and competitive imports also appear to have played a role. There is room for expansion of inshore net pen salmon aquaculture in areas of Maine, Washington, and Alaska. However, many residents in these areas do not support establishing or expanding net pen aquaculture because of environmental concerns and potential impacts on existing fishing industries. The ban on finfish aquaculture in Alaska and regulatory constraints in other states reflect these concerns. <4.3.3.3. Offshore Development in Other Countries> Currently, nearly all worldwide marine aquaculture production is from relatively well-protected inshore waters. Countries in the forefront of efforts to move offshore have experience with inshore aquaculture and with aquaculture industries that are characterized by relatively large investments in vertically integrated firms. Norway and China are the two largest investors in offshore aquaculture development, but neither country has facilities that are operating commercially. Their efforts have focused on developing structures that can withstand harsh offshore conditions and operate at scales that may offset the higher costs of offshore areas as compared to inshore areas. Norway's industry already has extensive experience with inshore salmon aquaculture industry and is a leader in developing technology needed to move farther offshore. Norway has granted development licenses in offshore waters, and Norwegian companies are experimenting with different offshore concepts. Although there has been significant investment in offshore aquaculture in Norway, it is unclear whether these concepts will be profitable. It appears that long-term business strategies are still focused on inshore waters. Offshore aquaculture facilities are also under development in other countries, including Mexico, Panama, and Turkey. The characteristics of specific regions also may offer advantages, as some believe future development will occur in the calm water tropical belt between 10 N and 10 S. One former offshore aquaculture farmer believes future investment will focus on new species in tropical and subtropical regions. It appears that growth of marine aquaculture may take different approaches in different parts of the world, with further increases in production from proven nearshore areas and research and development of potential land-based and offshore areas. Generally, movement offshore is likely to occur if seafood demand continues to increase and suitable nearshore areas are occupied or constrained by other factors. <4.3.4. Stakeholder Concerns and Aquaculture Development> Some stakeholders have expressed concerns about offshore aquaculture that include environmental degradation, competition for ocean space, and market interactions between wild fishery and aquaculture products. Historically, user conflicts associated with aquaculture have occurred in inshore areas where oceans activity and use are more intensive. For example, some fishermen oppose aquaculture and perceive it as competition that lowers prices and fishing revenues. Most interactions are characterized as conflicts, but in some cases synergistic relationships may emerge. Environmental concerns have been among the most controversial elements of the aquaculture debate, including expansion of aquaculture into offshore waters. Generally, environmental and commercial fishing interests have been opposed to plans for offshore aquaculture development because of potential harm to marine resources. They have asserted that poorly regulated inshore aquaculture development has degraded the environment and harmed wild fish populations and ecosystems. Concerns identified by these stakeholders include pollution, the use of wild species for fishmeal, fish escapement, threat of disease and parasites, harm to marine wildlife, and general impacts on marine ecosystems. Most commercial fishing and environmental interests advocate a precautionary approach. Industry supporters and aquaculturalists respond that research, innovation, and management practices have reduced or eliminated environmental risks. Generally, aquaculturalists assert that many previous environmental concerns have been addressed and that long-term aquaculture production relies on maintaining a clean and productive environment, an objective that environmental and fishing industry advocates also hold. Some also view offshore aquaculture as an additional means to support the domestic seafood industry, which has decreasing levels of employment in many regions. Some have noted that synergistic effects might support infrastructure and services such as docks, cold storage, and processing facilities that benefit both wild fishing and aquaculture. Seafood imports from aquaculture production have affected seafood markets and coastal communities, such as salmon fishermen in Alaska and shrimp fishermen in the Gulf of Mexico. Prices fell during the 1990s, as global salmon and shrimp aquaculture production and associated imports increased. This shift caused significant economic difficulties for Alaska salmon fishermen, processors, and communities. Wild salmon prices have recovered to some extent, likely due to growing consumer differentiation between wild and cultured products. Some have responded that competition will occur with or without domestic growth in aquaculture because imports of farmed products are likely to continue and grow. Other changes that have been attributed to aquaculture include accelerated globalization of the seafood industry, increased industry concentration and vertical integration, and introduction of new product forms. Marine aquaculture, especially the offshore aquaculture industry, is a small and new industry with few committed supporters and relatively little money and political influence. One observer noted that, "marine aquaculture will become politically stronger as it grows but it is difficult to grow without becoming politically stronger." The industry also faces opposition from environmental and commercial fishing interests. Several developments will need to take place if offshore aquaculture can be expected to become established and grow into a viable commercial industry; these developments are discussed in the next section. <5. Institutional Needs and Industry Support> <5.1. Regulatory Framework for Offshore Aquaculture> Most stakeholders agree that a regulatory framework likely needs to be developed before establishing offshore aquaculture in U.S. federal waters. A potential framework would need to fulfill the government's public trust responsibilities while remaining flexible enough to take advantage of evolving technology and markets. Many of the basic elements of the framework would depend on legislation providing statutory authority and requirements for leasing offshore areas, agency leadership and interagency coordination, and environmental protection. A regulatory framework could provide the industry with clear and understandable requirements for aquaculture facilities while minimizing potential environmental harm. Supporters of offshore aquaculture have advocated for a permitting and consultation process that is more timely, efficient, and orderly than the existing process. Most also agree that the regulatory process should be transparent and support public involvement. <5.1.1. Lead Agency> NMFS has been the lead federal agency for marine aquaculture in inshore areas and for the potential development of offshore aquaculture. According to a 2008 U.S. Government Accountability Office (GAO) study, "there is no lead federal agency for regulating offshore aquaculture, and no comprehensive law that directly addresses how it should be administered, regulated, and monitored." Stakeholders also have supported NOAA's role in managing federal aquaculture research, including research and development of offshore aquaculture technologies. Since publication of the GAO report, NMFS has attempted to regulate offshore aquaculture under the MSA. A recent court decision, however, cast doubt on whether NOAA has the authority under MSA to regulate offshore aquaculture. Several studies have recommended that NOAA should be granted clear authority to regulate offshore aquaculture. They point out that NOAA already has authority to evaluate proposed marine activities and projects to ensure the protection of marine mammals, endangered species, and marine sanctuaries. Furthermore, NOAA is responsible for federal management of marine fisheries and essential fish habitat. <5.1.2. Permits and Leases> One of the needs for offshore aquaculture development is permitting or leasing of discrete ocean areas. Within the EEZ, the United States has sovereign rights for the purpose of exploring, exploiting, conserving, and managing natural resources, whether living and nonliving, of the seabed and subsoil and superjacent waters. The federal government grants rights to develop specific areas for specific activities in the EEZ are granted. Currently, no permitting or leasing program is specific to offshore aquaculture and leases depend on permits and consultation requirements under different laws and agencies that apply to marine activities generally. Observers generally agree that aquaculture developers will need assurances that they will have exclusive rights via leases or permits to use specific ocean areas for agreed-upon periods. A leasing system could provide aquaculturalists with clearly defined rights to ocean space including the water surface, water column, and ocean bottom. Other characteristics of a leasing system might include transferability of the lease or permit, which would allow the aquaculturalist to transfer the permit or lease and benefit from its sale or use. Stakeholders told GAO that clear rights to use specific ocean areas would be needed to obtain loans. Proponents of offshore aquaculture development stress that, without some form of long-term (at least 25 years) permitting or leasing, offshore aquaculture will have problems securing capital from traditional funding sources and obtaining suitable insurance on the capital investment and stock. The Gulf of Mexico Aquaculture Fishery Management Plan (Gulf FMP) provides a 10-year site permit and 5-year permit renewals. Aquaculture industry representatives have expressed concern that these intervals are too short because of the time it will take their businesses to become profitable. Environmentalists would prefer "shorter timeframes to ensure more frequent reviews and closer scrutiny of environmental impacts during the lease or permit renewal process." In state waters, Maine grants 10-year leases for salmon net pen aquaculture. Hawaii grants 20-year leases for permits in its waters. The public's primary concerns are likely to include minimizing harmful effects on environmental quality and conflicts among ocean uses. Most recognize that a leasing framework will require review of potential environmental impacts of offshore aquaculture. This review likely would require the preparation of a programmatic environmental impact statement (PEIS) with a follow-up site-specific environmental review before a facility might be established. A PEIS could review potential environmental impacts of offshore aquaculture over broad areas of the ocean. Aquaculturalists generally agree that this approach would be useful if it reduced the need for facility-specific reviews. Some have suggested that permits should be issued on a case-by-case basis by determining whether a specific site is appropriate for the proposed aquaculture facility. Others oppose this approach, because it could lead to an approval process that is less consistent and it could make it more difficult for regulators to assess cumulative impacts of different facilities within a region. Still others have suggested that ocean planning should identify both appropriate and prohibited areas for aquaculture. Regulators could assess potential sites for permitting aquaculture before and independently of individual permit applications. Some believe that this would make permitting more predictable and consistent. For example, the likelihood of harm to marine mammals might be decreased by limiting permits for aquaculture facilities to areas with a low risk of interactions. However, some aquaculturalists question whether regulators will choose the most viable sites for aquaculture. <5.1.3. Conditions of Use> A regulatory framework is likely to require specific conditions on the use of a site. These requirements likely will vary depending on the species and technology employed. Nevertheless, some basic requirements related to environmental quality, inspections, and other public concerns are likely to be common to many offshore aquaculture operations. The Gulf FMP includes specific requirements that could be applicable to managing offshore aquaculture in other regions. A partial list of operational requirements under the Gulf FMP includes the following: placing at least 25% of the facility in the water at the site within two years of issuance of the permit; marking each system placed in the water with an electronic locating device; obtaining juveniles for stocking from certified hatcheries within the United States; providing a health certificate prior to stocking fish at the aquaculture facility; complying with all FDA requirements when using drugs or other chemicals; monitoring and reporting environmental survey parameters consistent with NMFS guidelines, inspecting for interactions or entanglements of protected species; and allowing access to facilities to conduct inspections. Some have recommended requirements for aquaculture facility plans to address potential contingencies, such as fish escapes from aquaculture facilities. Some representatives of fishery management councils supported marking or tagging hatchery fish as a potential means of tracking escaped organisms. However, some have questioned whether the added costs of marking fish are warranted and contend that tagging requirements should depend on the level of associated risk to natural resources. Monitoring could also be required to track interactions with marine life and other changes to the environment. State regulators in Maine and Washington have developed monitoring requirements for net pen salmon aquaculture, such as monitoring the benthic community under net pens. Both states also require notification of disease outbreaks and can require specific mitigation measures depending on the severity of the outbreak. Federal monitoring requirements could be informed by state experiences and modified as better information becomes available. The Gulf FMP includes reporting requirements for stocking, major escapement, pathogen episodes (disease), harvest, change of hatchery, marine mammal and sea bird entanglement, and other activities or events. Aquaculture facilities in offshore areas would occupy areas that may be used for other ocean uses, such as oil and gas development, wind and tidal energy, maritime transportation, and commercial and recreational fisheries. Some have recommended that "development of a national aquaculture management framework must be considered within the context of overall ocean policy development, taking into account other traditional, existing, and proposed uses of the nation's ocean resources." If conflicts develop over access to particular areas, a process would need to be developed to identify suitable areas in federal waters for aquaculture development and/or to mediate disputes. For example, commercial and recreational fishermen may have concerns regarding access to areas they have fished historically and potential interactions of cultured and wild fish. Some ocean managers have suggested that overlaying maps of different jurisdictions, ocean uses, and conditions favorable to aquaculture would be useful in avoiding user conflicts. <5.1.4. Other Management Entities> As a regulatory framework for offshore aquaculture is developed, it could be enhanced by improving coordination and cooperation among federal, state, territorial, and tribal entities. Existing groups, such as the Subcommittee on Aquaculture, have provided a means for communication among federal agencies that might be used to enhance federal coordination of offshore aquaculture development and management. The fishery management councils established under the MSA likely would have a role in offshore aquaculture development. Each of the eight regional councils develops FMPs for wild marine fisheries within its particular region. These plans are then sent to NMFS for approval and implementation. Historically, fishery management councils have had a role in considering whether to support offshore aquaculture in federal waters. In addition to the Gulf of Mexico FMP for aquaculture, several exempted fishing permits were issued for limited periods to investigate potential aquaculture development in federal waters off New England. Potential interactions with wild fisheries and harm to essential fish habitat and wild fish populations are likely to be fishery management councils' main concerns. In addition to consultation requirements under the Coastal Zone Management Act, the state role in developing a regulatory framework for offshore aquaculture may deserve additional consideration. Some stakeholders support an opt-out provision allowing states to refuse development in federal waters adjacent to state waters. Others suggest that the opt-out provision should apply only within a certain distance of shore (such as 12 nm). In response to earlier proposed legislation, NOAA supported a 12 nm distance to provide states with a buffer zone and simplify the difficulties of projecting state boundaries out to 200 nm. Harmonizing aquaculture regulations with adjacent states could provide an advantage to future development, because states would be in a position to limit or promote offshore aquaculture development. <5.1.5. Federal Support for Offshore Aquaculture> Some assert that federal government assistance would be needed to promote the initial development of a U.S. offshore aquaculture industry. Assistance could range from general support of research to direct support of industry needs, such as finance. One argument in support of government assistance is that, in comparison to relatively well-known agriculture sectors such as animal husbandry, there are more uncertainties associated with offshore aquaculture. With the exception of Atlantic salmon, culture of most marine finfish is still at a relatively early stage of development. Development of offshore aquaculture is likely to require new culture techniques for rearing species not presently cultured. For this reason, the U.S. Oceans Commission recommended more assistance for aquaculture generally and an active government role to foster industry development. Stakeholders identified federal research needs in four areas: developing fish feeds that do not rely on harvesting wild fish; developing best management practices; exploring how escaped offshore aquaculture-raised fish might impact wild fish populations; and developing strategies to breed and raise fish while effectively managing disease. In addition to improving culture techniques, further research of interactions between aquaculture and the environment and potential harm to specific species and ecosystems could inform decisions related to site selection and monitoring needs. A remaining question is which agency or agencies will provide the support needed for offshore aquaculture development. Some may question whether NOAA has adequate institutional experience with aquaculture or whether additional resources are needed to provide adequate program management and services. Some NOAA programs support the fishing industry, but none focus specifically on offshore aquaculture. Similarly, USDA administers a number of programs that support agriculture in areas such as finance, research, extension, market development, and disaster assistance, but none are specifically focused on offshore aquaculture. Legislation in the 116 th Congress to support offshore aquaculture may address whether and how NOAA and/or USDA programs could be adapted to the needs of offshore aquaculture, which is the appropriate agency to manage specific programs, and what level of federal support is appropriate. <6. Potential Issues for Congress> Currently, development of offshore aquaculture appears unlikely because of regulatory, technical, and economic uncertainties. One of the main issues for Congress is whether legislation can be developed that could provide the industry with greater regulatory certainty while assuring other stakeholders that environmental quality can be maintained and other potential conflicts minimized. Research and development of inshore facilities have shown that offshore aquaculture is technically feasible but have not shown whether moving facilities to offshore areas would be profitable. It is likely that the investment required for commercial development of offshore aquaculture facilities will depend to some degree on greater regulatory certainty. For example, one business that was developing offshore aquaculture in Puerto Rico has moved its operations to Panama; according to the owner, U.S. regulations made expansion impossible. Aquaculturalists and investors are likely to require secure property or leasing rights and clear regulatory requirements before investing in large-scale operations. Stakeholders with concerns that aquaculture will degrade the environment also may need assurances that adequate regulation, inspections, and enforcement will be required features of a regulatory program. These concerns have been reflected in several aquaculture bills that would prohibit offshore development until comprehensive legislation is enacted. Previous congressional actions, such as hearings and bills, have concentrated on several areas, which include providing institutional support for aquaculture, such as planning, research, and technology transfer; identifying a lead agency to administer and coordinate aquaculture development and regulation; establishing and streamlining permit and consultation requirements to improve the efficiency of the permitting process; developing processes to consult and communicate with other stakeholders to reduce user conflicts; and minimizing environmental harm and addressing environmental concerns through planning and monitoring. If aquaculture is developed in the EEZ, most stakeholders likely would agree that there is a need for better coordination, clear regulation, and focused agency leadership. Some assert that congressional action will be necessary to support both commercial development and environmental protection. <7. Congressional Actions> Congress has made several attempts to pass offshore aquaculture legislation, including bills in the 109 th , 110 th , 111 th , 112 th , and 115 th Congresses, but none of these bills were enacted. Bills also were introduced that would have prevented aquaculture development in federal waters until statutory authority for offshore aquaculture development is enacted. While many stakeholders continue to call for federal legislation, it has been difficult to find a common vision among them for future development of an offshore aquaculture industry. <7.1. 116th Congress> In the 116 th Congress, no comprehensive offshore aquaculture legislation has been introduced, but several bills have been introduced that are related to offshore aquaculture and aquaculture generally. The Keep Finfish Free Act of 2019 ( H.R. 2467 ) would prohibit the issuance of permits to conduct finfish aquaculture in the EEZ until a law is enacted that allows such action. The Commercial Fishing and Aquaculture Protection Act of 2019 ( S. 2209 ) would amend the MSA to provide assistance to eligible commercial fishermen and aquaculture producers. Assistance could be provided when an eligible loss occurs due to an algal bloom, freshwater intrusion, adverse weather, bird depredation, disease, or another condition determined by the Secretary of Commerce. Other bills include the Prevention of Escapement of Genetically Altered Salmon to the United States Act ( H.R. 1105 ) and the Shellfish Aquaculture Improvement Act of 2019 ( H.R. 2425 ). <7.2. 115th Congress> In the 115 th Congress, the Advancing the Quality and Understanding of American Aquaculture Act (AQUAA Act; S. 3138 and H.R. 6966 ) would have established a regulatory framework for aquaculture development in federal waters. The bills would have provided NMFS with the authority to issue aquaculture permits and to coordinate with other federal agencies that have permitting and consultative responsibilities. They also would have identified NOAA as the lead federal agency for providing information on federal permitting requirements in federal waters. S. 3138 and H.R. 6966 would have required the Secretary of Commerce to develop programmatic environmental impact statements for areas determined to be favorable for marine aquaculture and compatible with other ocean uses. Section 9 of the bills stated that it would not supersede the requirements of the National Environmental Policy Act of 1969 (NEPA) and that individual projects may require additional review pursuant to NEPA. The bills would have required the Secretary of Commerce to consult with other federal agencies, coastal states, and fishery management councils to identify the environmental and management requirements and standards that apply to offshore aquaculture under existing federal and state laws. The bills also identified 10 standards that should be considered for offshore aquaculture and applied when issuing permits conducting programmatic environmental impact statements. These standards included other ocean uses, conservation and management of fisheries under the MSA, and minimizing adverse impacts on the marine environment, among others. S. 3138 and H.R. 6966 would have provided institutional support of offshore aquaculture by establishing the Office of Marine Aquaculture within NOAA. The Office of Marine Aquaculture would have been responsible for coordinating NOAA activities related to regulation, scientific research, outreach, and international issues. The Office of Marine Aquaculture would have replaced the current Office of Aquaculture, which conducts activities that are similar to those proposed by the bills. The bills also would have made NOAA the lead agency for establishing and coordinating a research and development aquaculture grant program A bill was also introduced ( H.R. 223 ) that would have prohibited the issuance of permits to conduct finfish aquaculture in the EEZ except in accordance with a law authorizing such action. Similar bills also were introduced in earlier Congresses to stop offshore aquaculture development in the EEZ. <7.3. Congressional Actions Prior to the 115th Congress> Offshore aquaculture bills also were introduced in the 109 th , 110 th , 111 th , and 112 th Congresses. Generally, these bills focused on establishing a regulatory framework to develop offshore aquaculture in federal waters of the EEZ. The bills varied to some degree on the balance between the potential rights and responsibilities of aquaculturalists, especially between aquaculture development and environmental protection. For example, S. 1195 (109 th Congress), and H.R. 2010 and S. 1609 (110 th Congress) would have supported production of food, encouraged development, established a permitting process, and promoted research and development of offshore aquaculture. In contrast, H.R. 4363 (111 th Congress) and H.R. 2373 (112 th Congress) would have focused to a greater degree on potential impacts of offshore aquaculture. These bills stressed elements such as determining appropriate locations, issuing regulations to prevent impacts on marine ecosystems and fisheries, and supporting research to guide precautionary development of offshore aquaculture. Other bills that would have constrained offshore aquaculture development were introduced in the 108 th , 109 th , 110 th , 112 th , 113 th , and 114 th Congresses. Most of these bills would have prohibited the issuance of permits for marine aquaculture facilities in the EEZ until requirements for issuing aquaculture permits are enacted into law. <8. Conclusion> The United States is the largest importer of seafood products in the world, and nearly half of domestic seafood imports are produced by aquaculture. Aquaculture development and production in the United States have lagged behind other countries due to a variety of factors, such as relatively inexpensive imports, regulatory policies, user conflicts, and higher costs of production. Some have speculated that marine aquaculture facilities could be developed farther offshore in federal waters, where they would be subject to fewer user conflicts and have space to operate in relatively clean ocean waters. However, movement to offshore areas also would involve several significant challenges, such as establishing a regulatory framework, developing new technologies, and competing with other existing sources of seafood. According to many stakeholders and researchers, the lack of a governance system for regulating offshore aquaculture hinders the industry's development in the United States. Development of marine offshore aquaculture would likely require a new regulatory framework for establishing offshore aquaculture in federal waters. A regulatory framework potentially could provide the industry with clear requirements for its development while minimizing potential environmental harm. It remains an open question whether legislation could be crafted to achieve a balance between providing the certainty sought by potential commercial developers of aquaculture and satisfying environmental and other concerns of stakeholders such as environmentalists and fishermen. While a new regulatory framework potentially could provide greater certainty to offshore aquaculture developers, other challenges would remain. For example, offshore aquaculture may involve higher costs and greater risk of losses associated as compared to inshore operations. Lack of experience operating in offshore areas and limited knowledge of culture techniques for many candidate marine species contribute to the financial risk of offshore aquaculture. Some observers expect that offshore aquaculture may occur incrementally as inshore areas are developed and culture techniques are refined. Federal support may be needed for finance, research, extension, market development, and disaster assistance, similar to USDA support of agriculture.

Regulatory uncertainty has been identified as one of the main barriers to offshore aquaculture development in the United States. Many industry observers have emphasized that congressional action may be necessary to provide statutory authority to develop aquaculture in offshore areas. Offshore aquaculture is generally defined as the rearing of marine organisms in ocean waters beyond significant coastal influence, primarily in the federal waters of the exclusive economic zone (EEZ). Establishing an offshore aquaculture operation is contingent on obtaining several federal permits and fulfilling a number of additional consultation and review requirements from different federal agencies responsible for various general authorities that apply to aquaculture. However, there is no explicit statutory authority for permitting and developing aquaculture in federal waters. The aquaculture permit and consultation process in federal waters has been described as complex, time consuming, and difficult to navigate. Supporters of aquaculture have asserted that development of the industry, especially in offshore areas, has significant potential to increase U.S. seafood production and provide economic opportunities for coastal communities. Currently, marine aquaculture facilities are located in nearshore state waters. Although there are some research-focused and proposed commercial offshore facilities, no commercial facilities are currently operating in U.S. federal waters. Aquaculture supporters note that the extensive U.S. coastline and adjacent U.S. ocean waters provide potential sites for offshore aquaculture development. They reason that by moving offshore, aquaculturalists can avoid many user conflicts they have encountered in inshore areas. Offshore areas also are considered to be less prone to pollution and fish diseases. Environmental organizations and fishermen generally have opposed development of offshore aquaculture. They assert that poorly regulated aquaculture development in inshore areas has degraded the environment and harmed wild fish populations and ecosystems. Those who oppose aquaculture development generally advocate for new authorities to regulate offshore aquaculture and to safeguard the environment and other uses of offshore waters. Some segments of the commercial fishing industry also have expressed concerns with potential development of aquaculture on fishing grounds and competition between cultured and wild products in domestic markets. Proponents of aquaculture counter that in many parts of the world a combination of farming experiences, technological advances, proper siting, and industry regulation has decreased environmental impacts and improved efficiency of marine aquaculture. They argue that many who oppose marine aquaculture lack an understanding of the benefits and risks of aquaculture and that opposition persists despite research that contradicts the extent or existence of these risks. Generally, the outcomes associated with aquaculture development depend on a variety of factors, such as the characteristics of aquaculture sites, species, technology, and facility management. Regardless of potential environmental harm, it remains to be seen whether moving to offshore areas would be profitable and if offshore aquaculture could compete with inshore aquaculture development and lower costs in other countries. Comprehensive offshore aquaculture bills were introduced in the 109 th , 110 th , 111 th , 112 th , and 115 th Congresses, but none were enacted. In the 115 th Congress, the Advancing the Quality and Understanding of American Aquaculture Act (AQUAA; S. 3138 and H.R. 6966 ) was introduced; AQUAA would have established a regulatory framework for aquaculture development in federal waters. It also would have provided National Oceanic and Atmospheric Administration (NOAA) Fisheries with the authority to issue aquaculture permits and coordinate with other federal agencies that have permitting and consultative responsibilities. Conversely, since the 109 th Congress, bills have been introduced that would constrain or prohibit the permitting of aquaculture in the EEZ. The Keep Finfish Free Act of 2019 ( H.R. 2467 ), introduced in the 116 th Congress, would prohibit the issuance of permits to conduct finfish aquaculture in the EEZ until a law is enacted that allows such action. It remains an open question whether legislation could be crafted that would provide the regulatory framework desired by potential commercial developers of offshore aquaculture and avoid or minimize risks of environmental harm to the satisfaction of those currently opposed to offshore aquaculture development.

crs_R45965

crs_R45965_0

<1. Introduction> This report provides an overview of the judiciary's FY2020 budget request, as well as information about Congress's consideration of the judiciary's request. The first section of this report includes subsections covering each major action involving the judiciary's FY2020 budget request, including the initial submission by the President of the judiciary's request on March 11, 2019; a hearing held on March 7, 2019, by the House Financial Services and General Government Appropriations Subcommittee on the budget request for the U.S. Supreme Court; the House subcommittee markup on June 3, 2019; the House Appropriations Committee markup on June 11, 2019; passage by the House on June 26, 2019; the Senate subcommittee markup on September 17, 2019; the Senate Appropriations Committee markup on September 19, 2019; enactment of a continuing resolution on September 27, 2019 ( P.L. 116-59 ); enactment of a second continuing resolution on November 21, 2019 ( P.L. 116-69 ); and enactment of FY2020 appropriations for the judiciary in the FY2020 Consolidated Appropriations Act ( P.L. 116-93 , December 20, 2019). The second section of the report provides information about the specific discretionary appropriations requested by the judiciary for FY2020, as well as information about the mandatory appropriations and administrative provisions included in the appropriations process. The third section provides information about the various courts, judicial entities, and judicial services that are covered by appropriations for the judiciary. The report also identifies some of the courts and judicial services that are not covered by such appropriations (but are covered by other appropriations bills). Finally, the report provides information about ongoing policy issues affecting the judiciary that may be of interest to Congress during FY2020. <2. FY2020 Consideration: Overview of Actions> This section provides an overview of the major actions involving congressional consideration of FY2020 judiciary appropriations. The final status of FY2020 judiciary appropriations is summarized in Table 1 . <2.1. Submission of FY2020 Budget Request on March 11, 2019> The President's proposed FY2020 budget request was submitted on March 11, 2019. It contained a request for $8.29 billion in new budget authority for judicial branch activities, including $7.62 billion in discretionary funds and $669.8 million in mandatory funding for judges' salaries and judicial retirement accounts. By law, the judicial branch appropriations request is submitted to the President and included in the budget submission without change. Appropriations for the judiciary comprise approximately 0.2% of total budget authority. <2.2. Subcommittee Hearings on the Supreme Court's FY2020 Budget Request> The Financial Services and General Government Appropriations Subcommittee held hearings on the FY2020 budget request of $106.8 million for the U.S. Supreme Court. This request was included in the judiciary's overall FY2020 budget request of $8.29 billion and represents approximately 1.3% of that total. Associate Justices Samuel A. Alito and Elena Kagan testified before the subcommittee regarding the Supreme Court's budgetary request. It was the first public hearing since 2015 regarding the Supreme Court's budget. According to Representative Mike Quigley (IL), chairman of the subcommittee, it is his "intent to hold a hearing with the Supreme Court at least once a year to discuss the resources needed for the highest court" and to hear the Justices' "thoughts regarding America's court system." He also expressed his view that "hearings such as this one is a great way for the public to get more exposure to our third branch." One issue raised during the subcommittee's hearings was the use of cameras or video recordings in Supreme Court proceedings. In his opening remarks, Chairman Quigley stated that "one government institution remains closed to the public eye the U.S. Supreme Court" and "due to antiquated practices and policies, we have no video record" of the Court's most important decisions. He further stated that "it is not unreasonable for the American people to have an opportunity to hear firsthand the arguments and opinions that will shape their society for years to come." Justice Alito, in response, stated that while the Court wants as much access for the public as possible, it does not "want access at the expense of damaging the decision-making process." Similarly, Justice Kagan stated that cameras might adversely affect the way the Court functioned. She emphasized that the kind of questioning a Justice uses in the courtroom might be taken out of context in a video broadcast. For example, video of Court proceedings shown by a news program might cause viewers to perceive that a Justice has a particular view or opinion on an issue when, instead, the Justice is playing devil's advocate and posing challenging questions to one or both sides in a case. Other issues discussed or mentioned at the subcommittee hearing include cost-cutting measures the Court has undertaken by revising existing contracts and cutting back on discretionary spending in order to meet the cost-of-living adjustment for federal employees; the priority the Court has placed on enhancing its physical and cybersecurity with previous funds appropriated by Congress; the implementation of a new electronic case filing system; and a revamp of the Court's website to make it more user-friendly and highlight important information (e.g., the current term calendar). Justice Alito also noted in his testimony that the Court was not requesting any new programmatic increases in funds. <2.3. House Appropriations Subcommittee on Financial Services and General Government Markup> On June 3, 2019, the House subcommittee held a markup of the FY2020 Financial Services and General Government (FSGG) bill. The subcommittee, by voice vote, recommended a total of $7.51 billion in discretionary funds for the judiciary. <2.4. House Appropriations Committee Markup> On June 11, 2019, the House Appropriations Committee held a markup of the FY2020 FSGG bill. The committee recommended $7.51 billion in discretionary funds for the judiciary. The $7.51 billion in discretionary funding recommended for the judiciary represents approximately 31% of the total $24.55 billion in discretionary funding included in the entire FSGG appropriations bill (which also funds such entities as the Department of the Treasury, the Executive Office of the President, the Consumer Product Safety Commission, the Federal Trade Commission, the Securities and Exchange Commission, and the Small Business Administration). The FY2020 FSGG bill was ordered reported by a roll call vote of 30-21 ( H.R. 3351 , H.Rept. 116-122 ). No amendments were offered during the committee markup that were related to the judiciary. The House report that accompanied the committee's markup addressed the issue of video access to Supreme Court proceedings, which had been discussed at the subcommittee's hearings on the Supreme Court's FY2020 budget request. The committee stated that "providing the American people with the opportunity to access Supreme Court arguments in real time via video and/or live audio would greatly expand the Court's accessibility to average Americans and provide historical and educational value." Consequently, the committee encouraged the Court "to take steps to permit video and live audio coverage in all open sessions of the court unless the Court decides that allowing such coverage in any case would violate the due process of one or more of the parties before the Court." <2.5. Passage by the House> The FSGG appropriations bill was passed by a roll call vote of 224-196 in the House on June 26, 2019. No amendments were offered during House consideration that were related to the judiciary. <2.6. Senate Appropriations Subcommittee on Financial Services and General Government Markup> On September 17, 2019, the Senate subcommittee held a markup of the FY2020 Financial Services and General Government (FSGG) bill and approved it by voice vote. The subcommittee recommended a total of $7.42 billion in discretionary funds for the judiciary. <2.7. Senate Appropriations Committee Markup> On September 19, 2019, the Senate Appropriations Committee held a markup of the FY2020 FSGG bill. The committee recommended $7.42 billion in discretionary funds for the judiciary. The $7.42 billion in discretionary funding recommended for the judiciary represents approximately 31% of the total discretionary funding included in the entire FSGG appropriations bill (which also funds such entities as the Department of the Treasury, the Executive Office of the President, the Consumer Product Safety Commission, the Federal Trade Commission, the Securities and Exchange Commission, and the Small Business Administration). The FY2020 FSGG bill was ordered reported by a roll call vote of 31-0 ( S. 2524 , S.Rept. 116-111 ). No amendments were offered during the committee markup that were related to the judiciary. The Senate report that accompanied the committee's markup emphasized that it "is imperative that the Federal judiciary devote its resources primarily to the retention of staff." Additionally, the report stated that "it is also important that the judiciary contain controllable costs such as travel, construction, and other expenses." The Senate report did not address the issue of video access to Supreme Court proceedings, which had been discussed at the House subcommittee's hearing on the Supreme Court's FY2020 budget request. <2.8. Enactment of First Continuing Appropriations Resolution> Final enactment of the judiciary's budget did not occur prior to the beginning of FY2020. Consequently, the judiciary was funded through November 21, 2019, by the Continuing Appropriations Act, 2020. The act passed the House on September 19, 2019, and the Senate on September 26, 2019. It was signed by the President on September 27, 2019. <2.9. Enactment of Second Continuing Appropriations Resolution> Final enactment of the judiciary's budget did not occur prior to November 22, 2019. Consequently, the judiciary was funded from November 22, 2019, through December 20, 2019, by the Further Continuing Appropriations Act, 2020. The act passed the House on November 19, 2019, and the Senate on November 21, 2019. It was signed by the President on November 21, 2019. <2.10. Final Enactment of FY2020 Regular Appropriations for the Judiciary> Enactment of the judiciary's budget for FY2020 was included in the FY2020 Consolidated Appropriations Act. The total amount in discretionary funds appropriated for the judiciary was $7.49 billion, and the amount in mandatory funds provided for the judiciary was $705.48 million. The act passed the House on December 17, 2019, and the Senate on December 19, 2019. It was signed by the President on December 20, 2019. <2.11. Enactment of Supplemental Appropriations for Response to COVID-19> On March 27, 2020, the House passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to address the nationwide impact of Coronavirus Disease 2019 (COVID-19). The act, in part, provides funding for the federal judiciary to respond to the pandemic. Specifically, the CARES Act makes appropriations to the federal judiciary "to prevent, prepare for, and respond to coronavirus, domestically or internationally." By law, Congress designated such appropriations to be for an emergency requirement. The three judiciary accounts that received funds under the act include the Supreme Court of the United States Salaries and Expenses account ($500,000); the Courts of Appeals, District Courts, And Other Judicial Services Salaries and Expenses account ($6 million); and the Defender Services account ($1 million). <3. FY2020 Judiciary Budget Request> <3.1. Discretionary Appropriations> The judiciary's FY2020 discretionary budget request totaled $7.62 billion and represented a 5.1% increase from the $7.25 billion in discretionary appropriations enacted by Congress for FY2019. Table 2 lists, for each account included in the judiciary's discretionary budget, (1) the amount enacted by Congress for FY2019, (2) the judiciary's FY2020 request, (3) the FY2020 amount that passed the House, (4) the FY2020 amount that was reported by the Senate Appropriations Committee, and (5) the FY2020 enacted amount. <3.2. Three Largest Discretionary Accounts for FY2020> Of the judiciary's FY2020 total discretionary request for $7.62 billion (see the second column in Table 2 ), the greatest percentage was for the Salaries and Expenses Courts of Appeals, District Courts, and Other Judicial Services account representing 70.6% of the request. The second-greatest percentage was for the Defender Services account, representing 16.2% of the total discretionary request. The third-greatest percentage was for the Court Security account, representing 8.4% of the request. The remaining 4.8% of the FY2020 discretionary request was for the other accounts listed in the table. Similarly, of the $7.49 billion that was enacted by Congress for the judiciary's FY2020 budget, the greatest percentage was for the Salaries and Expenses Courts of Appeals, District Courts, and Other Judicial Services account (see the final column in Table 2 ) representing 70.1% of the enacted amount. The second-greatest percentage was for the Defender Services account, representing 16.5% of the total enacted amount. The third-greatest percentage was for the Court Security account, representing 8.5% of the enacted amount. The remaining 4.8% of the FY2020 enacted amount was for the other accounts listed in the table. <3.3. Three Largest Percentage Increases from FY2019 Enacted Amounts> Of the accounts listed in Table 2 , the largest percentage increase between the amount enacted in FY2019 and the amount requested by the judiciary for FY2020 was for the Defender Services account a 7.3% increase from the FY2019 amount enacted to the FY2020 request. The second-greatest increase was for the Vaccine Injury Trust Fund account, a 6.3% increase. The third-greatest increase was for the Court Security account, a 5.6% increase. Of the same accounts listed in the table, the largest percentage increase between the amount enacted in FY2019 and the amount enacted by Congress for FY2020 was for the Fees of Jurors and Commissioners account a 7.6% increase from the FY2019 enacted amount. The second-greatest increase was for the Defender Services account, a 7.3% increase. The third-greatest increase was for the Vaccine Injury Trust Fund account, a 7.1% increase. <3.4. Percentage of Judiciary's FY2020 Request Enacted by Congress> Overall, Congress enacted $7.49 billion, or 98.2%, of the judiciary's FY2020 budget request of $7.62 billion. Additionally, the enacted FY2020 amount for each account was, in each case, at least 95% of the judiciary's FY2020 request for that account. For example, for the Supreme Court Building and Grounds account, Congress provided $15.6 million representing 95.1% of the judiciary's FY2020 request of $16.4 million. Altogether, for seven accounts, Congress appropriated less than the amount requested by the judiciary in its FY2020 budget submission. For two accounts, Congress passed the same amount as was requested by the judiciary. And for three accounts, Congress appropriated more than the amount requested by the judiciary in its FY2020 budget submission. The federal courts, judicial entities, and judicial programs funded by the various accounts listed in Table 2 are discussed below in greater detail in the section of the report titled Courts, Programs, and Other Items Funded by the Judiciary Budget . <3.4.1. Discretionary Appropriations in Recent Years> <3.4.1.1. FY2019> FY2019 judiciary funding was provided in Division D, Title III, of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), which was enacted on February 15, 2019. The act provided $7.25 billion in discretionary funds for the judiciary. <3.4.1.2. FY2018> FY2018 judiciary funding was provided in Division E, Title III, of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), which was enacted on March 23, 2018. The act provided $7.11 billion in discretionary funds for the judiciary. <3.4.1.3. FY2017> FY2017 judiciary funding was provided in Division E, Title III, of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which was enacted on May 5, 2017. The act provided $6.93 billion in discretionary funds for the judiciary. <3.4.2. Use of Nonappropriated Funds> The judiciary also uses nonappropriated funds to help offset its funding requirements. The majority of these nonappropriated funds are from the collection of fees, primarily court filing fees and fees associated with obtaining case and docket information online from various federal courts. These monies are used to offset expenses that would otherwise be covered by the discretionary Salaries and Expenses subaccount for the courts of appeals, district courts, and other judicial services. The numbers presented in this report reflect the net resources for the judiciary, and do not include these offsetting nonappropriated funds. <3.5. Mandatory Appropriations> Mandatory appropriations are used to meet the constitutional and statutory obligations associated with the salaries and expenses of certain types of judgeships (and, consequently, are not considered discretionary appropriations for the judiciary). Such mandatory appropriations fall into two categories: (1) funds used to pay the salaries of Article III judges (Supreme Court Justices, U.S. courts of appeals judges, etc.) and certain other types of federal judges (e.g., bankruptcy judges); and (2) funds used for several judicial retirement accounts specifically, the Judicial Officers' Retirement Fund (28 U.S.C. 377(o)); the Judicial Survivors' Annuities Fund (28 U.S.C. 376(c)); and the U.S. Court of Federal Claims Judges' Retirement Fund (28 U.S.C. 178(1)). The mandatory appropriations enacted for FY2020 totaled $705.5 million. Of the FY2020 mandatory amount, $465.4 million, or 66.0%, is for salaries and expenses associated with judgeships that the judiciary is constitutionally (or statutorily) required to pay. The remaining $240.1 million (or 34.0% of FY2020 mandatory appropriations) was to provide for judicial retirement funds. There was a similar breakdown in the use of mandatory funds for FY2019. Of the $637.0 million in mandatory appropriations provided for FY2019, $425.3 million (or 66.8%) was to fund the salaries and expenses associated with Article III judges and certain other types of federal judges. The remaining $211.7 million (or 33.2% of FY2019 mandatory appropriations) was to provide for judicial retirement funds. <3.6. Administrative Provisions> The judiciary's FY2020 request also contained administrative provisions related to (1) the authorization of salaries and expenses for the judiciary's use of experts and consultant services; (2) allowing the transfer between judiciary accounts of up to 5% of any appropriation, with some accounts prohibited from increasing by more than 10% as a result of any such transfer of appropriations; (3) a limitation of $11,000 for official reception and representation expenses incurred by the Judicial Conference of the United States; (4) language enabling the judiciary to contract, under certain circumstances, for repairs costing less than $100,000; (5) the continuation of a court security pilot program; and (6) a one-year extension of various temporary judgeships. The bill passed by the House included each of these six provisions. The bill, however, specified that no judiciary account, "except in certain circumstances," may increase by more than 10% as a result of the transfer of appropriations between judiciary accounts. The Senate committee-reported bill included each of these six provisions. The bill, however, limited (similar to the House bill) "to 10 percent the amount that may be transferred into any one appropriation." The final enacted FY2020 appropriations for the judiciary included each of the six administrative provisions. In terms of the second provision identified above, the enacted bill allows the transfer between judiciary accounts of up to 5% of any appropriation, with some accounts prohibited from increasing by more than 10% as a result of any such transfers. Any transfer that occurs must also be treated as a reprogramming of funds under the act and meet certain other requirements. <4. Courts, Programs, and Other Items Funded by the Judiciary Budget> <4.1. U.S. Supreme Court> The U.S. Supreme Court is the final arbiter in the federal court system. Congress has authorized nine judgeships for the Court. Among the nine Justices on the Court, one is also appointed as Chief Justice of the United States. Justices are appointed by the President with the advice and consent of the Senate. <4.2. U.S. Courts of Appeals> U.S. courts of appeals, or circuit courts, take appeals from U.S. district court decisions and are also empowered to review the decisions of many administrative agencies. When hearing a challenge to a district court decision from a court located within its geographic circuit, the task of a court of appeals is to determine whether or not the law was applied correctly by the district court. Cases presented to U.S. circuit courts are generally considered by judges sitting in three-member panels (circuit courts do not use juries). The nation is divided into 12 geographic circuits, each with a U.S. court of appeals. There is also one nationwide circuit, the U.S. Court of Appeals for the Federal Circuit (discussed in the text below). Altogether, 167 judgeships for these 12 regional circuit courts are currently authorized by law. The First Circuit (comprising Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico) has the fewest number of authorized judgeships, 6, while the Ninth Circuit (comprising Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) has the most, 29. U.S. circuit court judges are appointed by the President with the advice and consent of the Senate. Such appointments are considered to be effective for life (under Article III of the U.S. Constitution), meaning judges remain in office until they die, assume senior status, resign, retire, or are removed by Congress through the process of impeachment. <4.3. U.S. Court of Appeals for the Federal Circuit> This court has nationwide jurisdiction over certain types of cases, including international trade, government contracts, patents, trademarks, certain money claims against the United States government, federal personnel, veterans' benefits, and public safety officers' benefits claims. The court also reviews certain administrative agency decisions. In FY2018, the court's jurisdiction consisted of "administrative law cases (20%), intellectual property cases (67%), and cases involving money damages against the United States government (13%)." There are 12 judgeships authorized for the U.S. Court of Appeals for the Federal Circuit. Judges serving on the Federal Circuit are appointed by the President with the advice and consent of the Senate. Such appointments are considered to be effective for life (under Article III of the U.S. Constitution), meaning judges remain in office until they die, assume senior status, resign, retire, or are removed by Congress through the process of impeachment. <4.4. U.S. Court of International Trade> This court has nationwide jurisdiction over civil actions related to the customs and international trade laws of the United States. Most of the cases heard by the court "involve antidumping and countervailing duties, the classification and valuation of imported merchandise, actions to recover unpaid customs duties and civil penalties, and various actions arising generally under the tariff laws." In 2018, the court reported a total of 242 case filings. There are nine judgeships authorized for the U.S. Court of International Trade. Judges serving on the Court of International Trade are appointed by the President with the advice and consent of the Senate. Such appointments are considered to be effective for life (under Article III of the U.S. Constitution), meaning judges remain in office until they die, assume senior status, resign, retire, or are removed by Congress through the process of impeachment. <4.5. U.S. District Courts (Including Territorial Courts)> District courts are the federal trial courts of general jurisdiction. These trial courts determine facts and apply legal principles to resolve disputes. Trials are conducted by a district court judge or, in some cases, a magistrate judge. Each state has at least one district court (there is also one district court in each of the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands). States with more than one district court are divided into judicial districts, with each district having one district court. For example, California is divided into four judicial districts each with its own district court. Altogether there are 94 district courts. At present, there are 677 district court judgeships authorized by law. Congress has authorized between 1 and 28 judgeships for each district court, with district courts serving more populous areas generally having more authorized judgeships. Among judicial districts with Article III judgeships, the Eastern District of Oklahoma (Muskogee) has the fewest number (with 1 authorized judgeship), while the district courts located in the Southern District of New York (Manhattan) and the Central District of California (Los Angeles) have the greatest number (each with 28 authorized judgeships). U.S. district court judges are appointed by the President with the advice and consent of the Senate. Such appointments are considered to be effective for life (under Article III of the U.S. Constitution), meaning judges remain in office until they die, assume senior status, resign, retire, or are removed by Congress through the process of impeachment. Territorial district court judges, serving the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands, are also appointed by the President with the advice and consent of the Senate (under Article IV of the U.S. Constitution). These appointments, however, are not effective for life but are for a fixed 10-year term in office. <4.5.1. U.S. Magistrate Judges> Certain types of trials and proceedings held by district courts can also be conducted by magistrate judges. A district court judge may refer certain matters to a magistrate judge (e.g., a magistrate judge may be assigned to hold a pretrial conference or an evidentiary hearing). A magistrate judge may also conduct any type of civil trial as long as the parties consent (i.e., there is consent jurisdiction ), and they may also preside over all misdemeanor criminal trials as long as a defendant has waived his right to a trial before a district judge. Magistrate judges cannot preside over felony criminal cases (but can handle pretrial matters and preliminary proceedings in such cases). As of September 2018, the Judicial Conference has authorized 547 full-time magistrate judge positions, 29 part-time positions, and 3 combination clerk/magistrate judge positions. Magistrate judges are non-Article III judges appointed by district court judges. Full-time magistrate judges serve a term of eight years and may be reappointed. In 2018, magistrate judges disposed of a total of 1,219,163 matters this included 348,421 civil matters that had been referred to them by district court judges; 17,112 civil cases in which they were the presiding judges for all proceedings by consent of the parties; 213,964 felony pretrial matters (e.g., disposing of certain types of motions); and 426,865 felony preliminary proceedings (e.g., search warrant applications). Other matters disposed of by magistrate judges included Class A misdemeanor cases, petty offense cases, and cases brought by prisoners (involving, for example, habeas corpus petitions and civil rights claims). The number of magistrate judge positions is determined by the Judicial Conference of the United States. A magistrate judge is appointed by majority vote of the active district court judges serving on the court to which the magistrate judge would serve. A full-time magistrate judge serves a term of eight years and may be reappointed. <4.6. U.S. Bankruptcy Courts> Federal courts have exclusive jurisdiction over bankruptcy matters (i.e., a bankruptcy case cannot be filed in state court). Bankruptcy courts are units of the federal district courts and exercise jurisdiction over bankruptcy matters as granted by statute and referred to them by their respective district courts. In 2018, debtors filed a total of 773,375 bankruptcy petitions a 2% decline from 2017. Of all petitions filed in 2018, nonbusiness (mostly consumer) petitions accounted for approximately 97% and business petitions accounted for 3%. As of September 2018, there were a total of 350 bankruptcy judgeships authorized by Congress (i.e., the number of bankruptcy judges is determined by Congress). Bankruptcy judges are non-Article III judges appointed by the court of appeals for the circuit where the bankruptcy court is located. Judges are appointed for a term of 14 years and may be reappointed. <4.7. U.S. Court of Federal Claims> This court had nationwide jurisdiction over various types of monetary claims against the federal government, including "those involving tax refunds, federal taking of private property for public use, pay and dismissal of federal civilian employees, pay and dismissal of military personnel, land claims brought by Native Americans and/or their tribe(s), contract disputes, bid protests, patents and copyright, congressional reference, and the National Vaccine Injury Compensation Act." Each January, pursuant to 28 U.S.C. 791(c), the clerk of the Court of Federal Claims submits to Congress a statement of all the judgments rendered by the court. The statement "notes the names of the claimants, the amounts, the dates of entry and nature of the claims, and the disposition for all judgments rendered the previous fiscal year." In 2018, filings increased in the court by 16% to 2,224. The increase was due, in part, to a 223% increase in cases involving taken property and a 30% increase in contract/injunction cases. The court consists of 16 non-Article III judges who are appointed for a term of 15 years by the President with the advice and consent of the Senate. <4.8. Probation and Pretrial Services> Federal probation and pretrial services officers investigate and supervise defendants and offenders within the federal criminal justice system. A pretrial services officer "supervises defendants awaiting trial who are released" and provides reports "upon which the court can determine the conditions of release or detention while criminal cases are pending adjudication." A probation officer "provides the court with reliable information concerning the offender, the victim, and the offense committed, as well as an impartial application of the sentencing guidelines." Officers also "supervise offenders sentenced to probation, as well as offenders coming out of federal prison who are required to serve a term of supervised release." In 2018, pretrial services officers prepared 95,442 pretrial services reports for judges an increase of 12% from 2017. Of these reports, 97% were prebail reports. Additionally, officers provided pretrial services supervision for approximately 23,600 defendants an increase of 2% from 2017. Such supervision included providing various support services (e.g., substance abuse treatment and location monitoring) and informing the courts and U.S. attorneys of any apparent violations of release conditions. In 2018, a total of 129,706 individuals were under postconviction supervision by probation officers a decrease of 4% from 2017. Of those under postconviction supervision, 47% had been convicted of drug offenses; 18% had been convicted of property offenses; and 14% had been convicted of firearms offenses. Federal probation officers also prepared 67,039 presentence investigative reports an increase of 5% from 2017. <4.9. Defender Services> The Sixth Amendment of the U.S. Constitution guarantees the right to representation by counsel in serious criminal proceedings. The federal judiciary has, historically, exercised "responsibility for appointing counsel in federal criminal proceedings for those unable to bear the cost of representation." This account in the judiciary budget funds the operations of federal defender organizations responsible for providing representation to defendants financially unable to retain counsel in federal criminal proceedings. At present, there are 81 authorized federal defender organizations that employ more than 3,700 lawyers, investigators, paralegals, and support personnel. This account also provides funds to reimburse the services of private appointed counsel (i.e., panel attorneys ) in federal criminal proceedings. The rates paid to panel attorneys cover both attorney compensation and office overhead. There are case maximum amounts that limit the compensation paid to a panel attorney based on the type of case to which he or she is appointed. Consequently, the costs associated with this account are driven, in part, by the number and type of prosecutions brought by U.S. Attorneys offices. <4.10. Court Security> This account provides for protective guard services and security systems and equipment for United States courthouses and other facilities housing federal court operations. The majority of funding for court security is transferred to the U.S. Marshals Service (USMS), which is responsible for ensuring "the safe and secure conduct of judicial proceedings" and for providing "protection for federal judges, other court officials, witnesses, jurors, the visiting public and prisoners." At present, the Marshals protect 711 judicial facilities and approximately 2,200 federal judges. The Marshals also have protective responsibility for approximately 26,000 federal prosecutors and court officials. In FY2018, the Marshals assessed or handled 4,542 threats and inappropriate communications against protected persons. As part of its mission to protect the federal judicial process, the U.S. Marshals Service administers the Judicial Facility Security Program (funded by the Court Security account). The program "oversees the daily operation and management of security services performed by approximately 5,300 court security officers" and "installs and maintains security systems for the protection of federal courthouses and other judicial facilities." <4.11. Fees of Jurors and Commissioners> This account in the judiciary's budget funds the fees and allowances provided to petit and grand jurors and compensation for jury and land commissioners. Petit jurors serve on a trial jury, while grand jurors serve on a grand jury. Petit jurors are paid $50 per day but can, after serving 10 days on a jury, receive up to $60 per day. Grand jurors are also paid $50 per day but can, after serving 45 days on a grand jury, receive up to $60 per day. Petit and grand jurors are also reimbursed for reasonable transportation expenses and parking fees. Jurors can receive a subsistence allowance that covers their meals and lodging if they are sequestered during their service. A jury commissioner is appointed in some cases to work with the clerk of court to manage the random selection of petit and grand jurors. The compensation paid to a jury commissioner is $50 per day (plus the reimbursement of reasonable expenses related to his or her service). According to the U.S. Administrative Office of U.S. Courts, "costs associated with this account can be unpredictable and are driven by the number of jury trials, the length of those trials, and statutory rates for reimbursement paid to jurors." <4.12. Vaccine Injury Compensation Trust Fund> The National Childhood Vaccine Injury Act of 1986 created a program to provide compensation to people found to be injured by certain vaccines. The program "is designed to encourage vaccination by providing a streamlined system for compensation in rare instances where an injury results from vaccination" and provides "an alternative to traditional products liability and medical malpractice litigation for persons injured by their receipt or one or more of the standard childhood vaccines." The program, according to the Department of Justice, "has succeeded in providing a less adversarial, less expensive, and less time-consuming system of recovery than the traditional tort system that governs medical malpractice, personal injury, and product liability cases." The Vaccine Injury Compensation Trust Fund provides funding for the compensation program, covering claims related to vaccine-related injuries or deaths for covered vaccines administered on or after October 1, 1988. An individual who believes he or she has been injured by a covered vaccine can seek compensation from the fund by filing a claim against the Secretary of the Department of Health and Human Services in the U.S. Court of Federal Claims. Since the program began in 1988, over 6,000 individuals have received more than $3.9 billion (combined) for such claims. The Department of the Treasury manages the fund's investments and produces a monthly Vaccine Injury Compensation Report . <4.13. Administrative Office of the U.S. Courts> The Administrative Office of U.S. Courts (AO) "is the agency within the judicial branch that provides a broad range of legislative, legal, financial, technology, management, administrative, and program support services to federal courts." A main responsibility of AO is to provide staff support and counsel for the Judicial Conference, the national policymaking body for the federal courts, and the Conference's committees. With input from the Judicial Conference, AO also develops the annual judiciary budget for submission by the President and approval by Congress. <4.14. Federal Judicial Center> As the federal judiciary's research and education entity, the Federal Judicial Center (FJC) "develops orientation and continuing education programs for judges and other court personnel. It also studies judiciary operations and recommends to the Judicial Conference how to improve the management and administration of the federal courts." The operations of the FJC are "overseen by a board of directors whose members are the Chief Justice, the director of the Administrative Office, and seven judges chosen by the Judicial Conference." <4.15. United States Sentencing Commission> The United States Sentencing Commission is an independent agency that is located within the federal judiciary. It was created by Congress in 1984 "to reduce sentencing disparities and promote transparency and proportionality in sentencing." As such, the commission establishes and amends sentencing guidelines for the federal criminal justice system, as well as "monitors sentencing recommendations by probation officers and operates an information center on sentencing practices." The commission consists of seven voting members appointed by the President and confirmed by the Senate, with members serving staggered six-year terms. No more than four members of the commission can be members of the same political party, and at least three members must be federal judges. In order for a sentencing guideline to be amended, the amendment must receive the affirmative votes of four members of the commission. The commission has a staff of approximately 100 employees. The commission is also advised by "four standing advisory groups representing the views of practitioners, probation officers, victims, and tribal lands." The purpose, in part, of the advisory group representing the views of tribal lands is to provide the commission "its views on federal sentencing issues related to American Indian defendants and victims and to offenses committed in Indian Country." <5. Selected Courts Not Funded by the Judiciary Budget> Three specialized courts within the federal court system are not funded under the judiciary budget: the U.S. Court of Appeals for the Armed Forces (funded in the Department of Defense appropriations bill), the U.S. Court of Appeals for Veterans Claims (funded in the Military Construction, Veterans Affairs, and Related Agencies appropriations bill), and the U.S. Tax Court (funded under Independent Agencies, Title V of the FSGG bill). Additionally, federal courthouse construction is funded within the General Services Administration account under Independent Agencies, Title V of the FSGG bill. <6. Selected Ongoing Policy Issues for FY2020> <6.1. Number of U.S. District and Circuit Court Judgeships> Congress determines through legislative action both the size and structure of the federal judiciary. Consequently, the creation of any new permanent or temporary U.S. circuit and district court judgeships must be authorized by Congress. The Judicial Conference of the United States, the policymaking body of the federal courts, makes biennial recommendations to Congress that identify any circuit and district courts that, according to the Conference, require new permanent judgeships to appropriately administer civil and criminal justice in the federal court system. In evaluating whether a court might need additional judgeships, the Judicial Conference examines whether certain caseload levels have been met, as well as court-specific information that might uniquely affect a particular court. The Judicial Conference's most recent recommendation, released in March 2019, calls for the creation of five permanent judgeships for the U.S. Court of Appeals for the Ninth Circuit (composed of California, eight other western states, and two U.S. territories). The Conference also recommends creating 65 permanent U.S. district court judgeships, as well as converting 8 temporary district court judgeships to permanent status. According to the Judicial Conference, since the enactment of the most recent omnibus judgeship bill in 1990 ( P.L. 101-650 ), the number of U.S. circuit court judgeships has remained at 179 while appellate court case filings increased by 15% through the end of FY2018. During this same time period, Congress enacted legislation that increased the number of permanent and temporary district judgeships by 4% (from 645 to 673) while district court case filings increased by 39%. In terms of specific types of cases, civil cases increased by 34% during the same period, and cases involving criminal felony defendants increased by 60%. The House Appropriations Committee, in its report that accompanied the committee's passage of the FSGG funding bill, noted that the Judicial Conference recently recommended the creation of a "significant number of new Article III judgeships" for the nation's circuit and district courts. The committee also expressed its concern that, "absent executive and congressional action to fill existing judicial vacancies and the passage of comprehensive bipartisan legislation to create new judgeships, the ability of the federal courts to administer justice in a swift, fair, and effective manner could be compromised." <6.2. Judicial Security> There is ongoing congressional interest in the safe conduct of court proceedings and the security of federal judges. Congress has, in the past, appropriated funds specifically to enhance the personal security of judges. For example, an FY2005 supplemental appropriations act included a provision providing funds for home intrusion detection systems for federal judges. Additionally, the Court Security Improvement Act of 2007 included various measures to enhance security for judges and court personnel, as well as courtroom safety for the public. The act, for example, amended 18 U.S.C. 930(e)(1) to prohibit the possession of dangerous weapons (other than firearms, which were already prohibited) in federal court facilities. The judiciary works closely with the U.S. Marshals Service (USMS) to ensure that adequate protective policies, procedures, and practices are in place for the federal courts. As discussed in the text above, the Marshals are largely responsible for protecting federal courthouses, judges, and other judicial employees. In FY2018, after the USMS assessed the level of danger in explicit threats and inappropriate communications directed at judges and other court officers, there were 531 predicated protective investigations opened "based on the presence of or potential for criminal activity." The House Appropriations Committee, in the report accompanying its markup of the FY2020 judiciary budget, stated that the committee considers it a priority to improve the physical security of federal judicial facilities and "to ensure the integrity of the judicial process." <6.3. Cost Containment by the Judiciary> The judiciary continues the cost containment initiatives that it began in 2004. Specific areas of focus for containing costs include office space rental, personnel expenses, information technology, and operating costs. The Senate report that accompanied the Appropriations Committee's markup addressed the issue of cost containment, stating that the "judicial branch is subject to the same funding constraints facing the executive and legislative branches. It is imperative that the Federal judiciary devote its resources primarily to the retention of staff. Further, it is also important that the judiciary contain controllable costs such as travel, construction, and other expenses." Of particular focus by the judiciary is an effort to cut costs associated with office space and rental payments. The Administrative Office of U.S. Courts (AO) announced in December 2018 that the federal judiciary "has succeeded dramatically in its five-year quest to reduce building space and rent costs, exceeding its original reduction goals by nearly 30 percent." Additionally, AO noted that "rent has been cut more than $36 million a year," with additional savings anticipated in the future. In its FY2020 budget summary, the Administrative Office of U.S. Courts (AO) emphasized that, as of September 30, 2018, approximately 1.1. million usable square feet had been removed from the judiciary's rent bill. Examples of the judiciary's space reduction campaign include the following: The bankruptcy court for the District of New Hampshire "was relocated from leased space in Manchester into the District Court in Concord, NH. Savings: 20,000 square feet." In New York, the bankruptcy court in Buffalo "relocated into the district courthouse. In Manhattan, the Bankruptcy Court reduced space by digitizing paper records. Combined savings: 39,000 square feet." The bankruptcy court in San Francisco "saved over 25,000 square feet and $1.5 million in annual rent by moving into the Phillip Burton Federal Building and U.S. Courthouse." Courthouse "library reductions in Camden, NJ; Wilmington, DE; Harrisburg, PA; Philadelphia; and U.S. Virgin Islands saved over 18,000 square feet." The Sixth Circuit's library headquarters in Cincinnati "relocated to space formerly used for Clerk's Office file storage. Total savings: 15,000 square feet." Courthouses for which there was no permanently assigned judge, that is, non resident courthouses , "were closed in Bryson City, NC; Wilkesboro, NC; Beaufort, SC; and Parkersburg, WV. Total savings: over 35,000 square feet." "In Miami, 33,000 square feet and $900,000 in annual rent were saved by relocating the Bankruptcy Court into the C. Clyde Atkins U.S. Courthouse. Two magistrate judges were relocated, and a circuit library and jury assembly area were vacated." The Administrative Office of U.S. Courts also noted that, in addition to space reduction, the judiciary has "undertaken significant efforts to develop alternative organizational models that may result in cost savings, including expanding shared administrative services within and among" district courts. The House Appropriations Committee noted in its report that it recognizes the judiciary's "cost containment efforts over the past 12 years and is pleased with the [its] savings and cost avoidance." The committee noted, specifically, that the reduction of usable square feet from the judiciary's rent bill "equates to an annual cost avoidance of nearly $36,000,000 and $105,000,000 over the past five years."

Funds for the judicial branch are included annually in the Financial Services and General Government (FSGG) appropriations bill. The bill provides funding for the U.S. Supreme Court; the U.S. Court of Appeals for the Federal Circuit; the U.S. Court of International Trade; U.S. courts of appeals and district courts; the Administrative Office of the U.S. Courts; the Federal Judicial Center; the U.S. Sentencing Commission; federal defender organizations that provide legal representation to defendants financially unable to retain counsel in federal criminal proceedings; security and protective services for courthouses, judicial officers, and judicial employees; and fees and allowances paid to jurors. The judiciary's FY2020 budget request of $8.29 billion was submitted to Congress on March 11, 2019. By law, the President includes, without change, the appropriations request submitted by the judiciary in the annual budget submission to Congress. The FY2020 budget request included $7.62 billion in discretionary funds, representing a 5.1% increase over the FY2019 enacted level of $7.25 billion provided in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ; February 15, 2019). The FY2020 budget request also included $669.8 million in mandatory funds to pay the salaries and benefits of certain types of federal judges and to also provide for judicial retirement accounts. The House Appropriations Committee held a markup ( H.R. 3351 ) on June 11, 2019, and recommended the judiciary receive a total of $7.51 billion in discretionary funds. The House passed H.R. 3351 on June 26, 2019. The Senate Appropriations Committee held a markup ( S. 2524 ) on September 19, 2019, and recommended the judiciary receive a total of $7.42 billion in discretionary funds. The FSGG appropriations bill was not enacted prior to the beginning of FY2020 on October 1, 2019. Subsequently, the judiciary was funded through November 21, 2019, by the Continuing Appropriations Act, 2020 ( P.L. 116-59 , September 27, 2019) and from November 22, 2019, through December 20, 2019, by the Further Continuing Appropriations Act, 2020 ( P.L. 116-69 , November 21, 2019). Final FY2020 appropriations for the judiciary were included in the FY2020 Consolidated Appropriations Act ( P.L. 116-93 ). Congress provided a total of $8.19 billion, with $7.49 billion in discretionary funds and $705.5 million in mandatory funds. The act passed the House on December 17, 2019, the Senate on December 19, 2019, and was signed by the President on December 20, 2019. In recent years, appropriations for the judiciary have comprised approximately 0.2% of total budget authority.

crs_R46097

crs_R46097_0

<1. Introduction> Domestic violence is a term often used to describe abuse of a spouse or child in the home. I ntimate partner violence (IPV) is a subset of domestic violence that is committed against a spouse, or current or former dating partner. IPV is treated as a public health issue and is monitored by the Centers for Disease Control and Prevention (CDC) at the national level. According to the CDC, approximately one in five women and one in seven men report having experienced severe physical violence from an intimate partner in their lifetime. In addition, crime statistics suggest that 16% of all U.S. homicide victims are killed by an intimate partner. Nearly half of female homicide victims are killed by a current or former male intimate partner. IPV criminal offenses are typically defined and prosecuted at the state level; however, federal law imposes penalties on some domestic violence offenders. Military IPV offenders may be prosecuted in civilian courts, but are also subject to punitive measures within the military justice system under Uniform Code of Military Justice (UCMJ) provisions. From a military effectiveness perspective, IPV may lead to productivity losses, degraded servicemember or unit readiness, and subsequent costs to the Department of Defense (DOD). When servicemembers are victims, associated mental and physical trauma may affect their ability to deploy or serve in worldwide assignments and can lead to capability gaps in units. In addition, qualified veterans who were victims of IPV may require additional care for co-morbid conditions through the Veterans' Health Administration (VHA). Congress has constitutional authority to fund, regulate, and oversee the Armed Forces, including the military justice system. Congress has used this authority in recent years to mandate domestic violence prevention and victim response policies, programs, and services. As such, there is enduring congressional interest on domestic violence prevention and response, victim well-being, and perpetrator accountability. This report starts with an overview of IPV in the Armed Forces, including risk factors, prevalence, and concerns specific to military families and certain subgroups. The next section focuses on DOD prevention activities, including efforts to screen out high-risk individuals, increase awareness, and address relationship stresses before they escalate. This section is followed by a discussion of intervention activities implemented by clinical service providers, military commanders, and other stakeholders. The next section describes actions taken by DOD and the Congress to provide victim support, resources, and advocacy. Following that, the report touches on how military law enforcement organizations respond to and investigate allegations of domestic abuse and how offenders are held accountable under the military justice system. Finally, the report touches on some continuing issues for congressional oversight and action. <2. Background> Intimate partner violence (IPV) is a crime characterized by recidivism and escalation, meaning offenders are likely to be repeat abusers, and the intensity of the abuse or violence is likely to grow over time. IPV can harm victims in various ways, resulting in physical injury, mental health problems, and adverse pregnancy outcomes (e.g., low birth weight, preterm birth, and neonatal death). Many victims of IPV continue to struggle with stress and anxiety long after incidents occur. For example, national surveys have found that among victims of IPV, 41% of women and 10% of men have experienced symptoms of post-traumatic stress disorder (PTSD). In addition, alleged perpetrators can face decreased productivity at work, loss of income, and incarceration. Domestic violence can also affect the behavior and well-being of subsequent generations. Research has shown that children who grow up in a home where IPV occurs are at higher risk for behavioral, cognitive, and emotional disorders. Relatedly, studies have indicated that perpetrators often have a history of experiencing abuse or witnessing abusive relationships within their families as a children or young adults. Factors unique to military service may exacerbate risks for both perpetrators and victims of IPV. First, servicemembers and their families frequently move for various assignments. This separates individuals from natural support networks, which can heighten stress on intimate partnerships, including those involving caretakers, and lead to social isolation. Whereas a victim of domestic abuse might normally escape a situation by temporarily moving in with a local family member or trusted friend, this option may not be readily available, particularly for those located at overseas or remote installations. Similarly, difficulties in coping with frequent moves and other pressures associated with military service (e.g., a spouse's long hours, shift work, or unpredictable deployments) may contribute to marital conflict and instability (e.g., reunification cycles, separation, or divorce). In addition, frequent household moves may complicate the capacity of nonmilitary spouses to achieve full employment. Lack of financial independence and the threat of lost or reduced military benefits may serve as a disincentive for military spouse victims to seek help in cases of abuse. Finally, prior interpersonal trauma is also indicated as a risk factor for both perpetrators and victims. Some data suggest that women who have experienced abuse in childhood may be more likely to join the military to escape a violent or unstable home environment. At the same time, some factors unique to military service may mitigate IPV incidence. For example, access to health care (TRICARE), stable pay and benefits, and the availability of installation-based family support services may help with financial stability and early intervention for at-risk couples. In addition, military servicemembers who are perpetrators of abuse may face more immediate or severe sanctions for IPV than their civilian counterparts (e.g., reductions in pay, loss of employment, and/or benefits). Military commanders have broad discretion to impose administrative remedies, penalties, or referrals for judicial action for abusers under their command (see section on " Commander's Authority "). In this way, military commanders can play an important role in IPV intervention, and in establishing a climate where victims feel safe to report and perpetrators are held accountable. <3. DOD Organization and Definitions> Prior to 1980, the military services (Army, Navy, Air Force, and Marine Corps) conducted their own family advocacy programs, primarily under their respective military medical service programs. In response to a 1979 U.S. General Accounting Office (now called the U.S. Government Accountability Office) report that characterized military service family violence prevention programs as inconsistent and understaffed, DOD established the Military Family Resource Center (MFRC) as a three-year demonstration project through a DOD-subsidized grant from the Department of Health and Human Services (HHS). In 1981, Congress first appropriated funds for DOD family violence prevention and between 1981 and 1983, responsibility for total funding of the program transitioned to DOD's sole responsibility. During that time, DOD also published Directive 6400.1, establishing the Family Advocacy Program and an Advocacy Committee with representatives from the services and DOD. Given the success of the MFRC demonstration and DOD's interest in consolidating programs under a single secretariat, DOD transferred MFRC activities to the Office of the Deputy Assistant Secretary of Defense for Force Management and Personnel in August of 1985. The Military Family Act of 1985 formally established an Office of Family Policy under the Office of the Secretary of Defense to "coordinate programs and activities of the military departments to the extent that they relate to military families." Congress later amended and codified the act under Chapter 88 of Title 10, U.S. Code , in 1995 as part of the National Defense Authorization Act (NDAA) for Fiscal Year 1996 and renamed the Office of Family Policy as the Office of Military Family Readiness Policy. Currently, this office falls under the purview of the Office of the Under Secretary of Defense (USD) for Personnel and Readiness (P&R). Within USD (P&R), the Deputy Assistant Secretary of Defense for Military Community and Family Policy has oversight responsibility for military family programs, including domestic violence prevention and response. The military services implement domestic violence prevention and response through the Family Advocacy Program (FAP). Military law enforcement activities fall under the purview of USD (P&R) and the Defense Human Resource Activity (DHRA), while central incident databases are housed in the Defense Manpower Data Center (DMDC), also under DHRA. <3.1. Family Advocacy Program (FAP)> Currently, the Family Advocacy Program (FAP) is the designated program within DOD and the services to address "domestic abuse, child abuse and neglect, and problematic sexual behavior in children and youth" through prevention, awareness, treatment, and rehabilitation services. The military services implement the FAP. FAP managers also work in coordination with civilian agencies involved in domestic violence response. In 2016, Congress required the FAP to provide an annual report to Congress on child abuse and neglect and domestic abuse in military families. <3.1.1. Family Advocacy and Family Assistance Funding> Family advocacy and family assistance programs are funded through annual appropriations as part of the Defense-wide Operation and Maintenance budget for DOD dependents education. DOD-requested FAP funds are directed to each of the military services to implement clinical intervention programs, "in the areas of domestic abuse, intimate partner violence, child abuse and neglect, and problematic sexual behavior in children and youth." FAP funding also supports a DOD hotline for reporting allegations of child abuse, training for domestic violence responders and members of the chain of command, public awareness activities, support for obtaining civilian protection orders, and research on domestic violence prevention. According to DOD budget documents, defense-wide funding for family assistance supports programs and outreach services to include, but not limited to: the 1-800 Military OneSource call center; the Military and Family Life Counseling Program; financial outreach and non-medical counseling; Spouse Education and Career Opportunities; child care services; youth programs; morale, welfare and recreation programs and, support to the Guard and Reserve service members, their families, and survivors. Funding supports DoD-wide service delivery contracts to support all Active Duty, Guard, and Reserve Components. The total defense-wide funding request for family assistance and family advocacy for FY2020 was $877 million, an increase of 5.5% from the previous year (see Table 1 ). <3.1.2. FAP Personnel and Accreditation> DOD policy requires specific credentialing for those assigned as FAP managers, including a master's or doctoral level degree in the behavioral sciences from an accredited U.S. university or college, state licensure, and certain experience. Service Secretaries are also responsible for establishing criteria for other FAP personnel, and for annual accreditation and certification of installation FAPs. According to DOD, the FAP is supported by over 2,000 government and contracted personnel. <3.2. Definitions> The CDC uses the term intimate partner violence (IPV) to describe "physical violence, sexual violence, stalking and psychological aggression (including coercive acts)" by a current or former spouse or dating partner. DOD often refers to IPV as domestic violence or domestic abuse. Domestic violence is defined as an offense with legal consequences under the U.S. Code , the UCMJ, and state laws, while domestic abuse refers to a pattern of abusive behavior. DOD defines four types of abusive behavior: (1) physical abuse, (2) emotional abuse, (3) sexual abuse, and (4) neglect of spouse (see text box below on "DOD Definitions of Domestic Abuse and Domestic Violence"). Under the DOD definition, a victim of domestic violence may be a current or former spouse, an intimate partner sharing a common domicile, or a person with whom the abuser shares a child. Under the CDC's definition, an intimate partner does not need to share a common domicile or child. DOD's narrower definition of what constitutes IPV correlates to victim and dependents' eligibility for certain benefits or services following an incident of reported abuse (see section below on " Victim Support and Services "). Sexual violence involving military personnel in which the offender and victim do not share a domicile, child, or other legal relationship (i.e., spouse or former spouse), is typically handled by DOD's Sexual Assault Prevention and Response (SAPR) program. <4. Incident Data and Reporting> DOD collects data on domestic abuse incidents through the FAP Central Registry, created by in 1994. In 1999, as part of the FY2000 NDAA, Congress explicitly mandated that DOD maintain a centralized database and collect annual reports from the Services on (1) Each domestic violence incident reported to a commander, a law enforcement authority of the armed forces, or a family advocacy program of the Department of Defense. (2) The number of those incidents that involve evidence determined sufficient for supporting disciplinary action and for each such incident, a description of the substantiated allegation and the action taken by command authorities in the incident. (3) The number of those incidents that involve evidence determined insufficient for supporting disciplinary action and for each such case, a description of the allegation. The military services collect data at the installation level. Each installation's FAP enters data into its respective service registry and then submits reports to the DMDC, which maintains the registry for all of DOD. Data elements include demographic information, individual identifiers (i.e., name and social security number), relationship indicators, incident details (e.g., location and date), and the type and severity of abuse. When an FAP office receives a report of domestic abuse, an incident determination committee (IDC) determines whether the incident "met criteria" to be submitted and tracked within the database. Incidents that do not meet the criteria for domestic abuse are also included in the database, but identifiable individual information is not tracked. DOD uses the aggregate data in this registry to produce annual reports to Congress, analyze the scope of abuse and trends, and support budget requests for domestic violence prevention resources. The FAP Central Registry is not the only database that includes domestic violence information involving military servicemembers. DOD also maintains the Defense Incident-Based Reporting System (DIBRS) as a central repository at DMDC for criminal incident-based statistical data. DIBRS includes criminal activity related to domestic abuse, but would typically not capture cases without law enforcement involvement. (See section on " Crime Reporting to National Databases " for more detail.) While GAO has highlighted concerns about gaps and overlaps in these two databases (see text box below on "GAO Reviews of DOD Domestic Violence Data Collection Efforts"), DOD has resisted consolidating them, stating that DIBRS and the Services' FAP Central Registries, from which the DoD Central Registry contains limited data elements, serve fundamentally different purposes: law enforcement and clinical treatment, respectively. [ ] Using the FAP database for law enforcement data collection purposes will significantly degrade the perception of the FAP as a program that provides clinical assistance to troubled families. In some cases, the DOD's database for military sexual assault, the defense sexual assault incident database (DSAID) may also capture data on incidents of sexual abuse involving spouses or intimate partners. The prevalence of intimate partner sexual assault or stalking of servicemember victims may also be captured in DOD's annual workforce and gender relations (WGR) surveys. These surveys would not generally capture all types of domestic abuse, and surveys do not include military spouses. Therefore, while incidents of domestic abuse that are reported to FAP or other military officials are generally captured in the data, it is possible that the actual prevalence (including unreported incidents) within the military is higher than reported. <4.1. What Proportion of the Military-Connected Population is Affected?> The total active duty population is over 1.3 million, approximately 16% of whom are women. In addition, the total number of active duty military spouses is about 600,000, about 25% of which are age 25 or younger. Based on data collected by the services, there were 16,912 reported incidents of spouse and intimate partner abuse in FY2018. Of these, roughly half (8,039) of the reports met the criteria for abuse under DOD definitions, affecting 6,372 victims (see Figure 1 below). Physical abuse accounted for 73.7% of all met criteria incidents, followed by emotional abuse (22.6%). Sexual abuse and neglect accounted for a smaller proportion of domestic abuse incidents 3.6% and 0.06% respectively. There has been little change in the rate or number of reported incidents that met criteria for domestic abuse since FY2009. While the total number of incidents in FY2018 is 19% lower than the number of incidents at the most recent peak in FY2011, the total force size also shrank during that time. In fact, the rate of incidents that met criteria for spouse abuse has not varied significantly since FY2008. While there are no clear trends in the number of incident reports, there are some indications that the categories of abuse being reported may have changed over the past eight years. The number of reported domestic abuse incidents involving sexual abuse has generally increased incrementally since FY2009, when DOD added this as a category for reporting (there was a slight drop in reported incidents in FY2018). This change in reporting may be due to a number of factors, including an actual increase in these types of IPV; cultural shifts in the perception of sexual abuse within existing relationships; and greater general awareness of sexual violence, reporting avenues, and available resources among military servicemembers, military-connected intimate partners, and first responders. <4.1.1. Victim Profile> Victims of reported abuse are predominately (two-thirds) female. About half of the victims who report ed spouse abuse to DOD and two-thirds who report ed intimate partner abuse were members of the military at the time the abuse took place ( see Table 2 below ). In FY201 8 , DOD reported 15 domestic abuse fatalities ( 13 spouses and 2 intimate partners) . Of the fatalities, three victims had previously reported abuse to DOD's FAP and four of the perpetrators had been reported previously for at least one prior abuse offense. Nine of the offenders were civilians with military victims. <4.1.2. Offender Profile> Servicemembers account for a majority of reported offenders. In FY2018, 57% of the reported spouse-abuse offenders were servicemembers. DOD-reported female offenders were more likely to be civilians, and were the perpetrators in 40% of physical spouse abuse incidents (see Table 3 ). This percent of female physical abuse offenders reported by DOD is higher than the literature would predict for the general population. Multiple studies suggest that women are less likely to be the primary perpetrator of physical violence in a relationship and that when they use violence it is nearly always in response to physical violence by their partner. However, it is unclear from the data if physical abuse perpetrated by women is retaliatory. Sexual abuse cases were almost entirely perpetrated by men (96%) which is consistent with the research. Perpetration of IPV in military partnerships may be underrepresented in DOD incident data, particularly if the victims are civilians, unmarried to the perpetrator, or not residing on a military installation. Incidents that occur outside of a military installation are less likely to be witnessed by military first responders and unmarried civilian intimate partners of a servicemembers are typically ineligible to be treated at military treatment facilities (MTFs). Coordination between civilian and military officials for domestic violence reporting is discussed in later sections (see " Confidentiality: Restricted and Unrestricted Reporting " and " Community Coordination "). <4.1.3. Younger Troops are at Higher Risk of Offending and Being Victimized> National-level data suggest that intimate partner violence primarily begins at a young age: an estimated 71% of females and 58% of males reported having first experienced sexual violence, intimate partner physical violence, or stalking before the age of 25. In addition, approximately 23% of female victims reported having first experienced intimate partner violence before the age of 18. Similarly, rates of reported domestic abuse in the military are highest among junior enlisted (E-3 and below) families who are typically between the ages of 18 and 24. In FY2018, the rate of offenders in the grades of E-1 to E-3 was 15.1 per 1,000 married couples; in contrast to the overall rate of 5 per 1,000 married couples (see Figure 2 ). <4.2. How does IPV in the Military Compare to the Civilian Population?> A number of factors complicate comparisons of military and nonmilitary IPV datasets, particularly the infrequent reporting of national civilian data and differences between how DOD and federal nonmilitary data are reported, collected, and aggregated. For example, each state may have different laws and processes for recording IPV, whereas all military branches use a common IPV definition and process. In addition, military members and their spouses and partners are, on average, younger than the general population. Therefore, direct (unweighted) comparisons of incident rates at the national or local level should be interpreted with some caution. Some studies, nonetheless, have compared IPV prevalence data across military and civilian populations. Since 2010, the CDC has conducted the National Intimate Partner and Sexual Violence Survey (NISVS), which collects data from adult men and women on past-year and lifetime experiences of sexual violence, stalking, and intimate partner violence at the state and national levels. In 2010, CDC randomly sampled military women and wives of active duty members to compare IPV prevalence rates among civilians, military women and military spouses and generally found similar prevalence rates across the populations. Where there were differences, active duty women were generally found to have a decreased risk of IPV relative to the civilian population. Nevertheless, active duty women who were deployed in the previous three years were significantly more likely to have experienced physical and sexual IPV compared with those who had not deployed. <5. Prevention> DOD has focused on a number of activities to prevent IPV and mitigate the escalation and repetition of violence or abuse following an initial offense. The CDC has identified several individual, relationship, community, and societal risk factors for domestic violence (see Appendix B ) . Some of these risk factors are inherent in the military environment. For example, youth is considered a risk factor, and the bulk of servicemembers are recruited and enlisted or appointed between the ages of 17-26. On the other hand, military protocols for entry screening, education and training, and support structures may provide protective factors and deterrence. <5.1. Entry Screening> DOD and the services use medical, cognitive, and other qualification standards to screen those seeking entry into the Armed Forces for IPV risk factors. For example, DOD medical standards generally prohibit enlistment or appointment of individuals with a history of personality or behavioral disorders. In addition, a history of drug or alcohol abuse can be a disqualifying factor. Past misconduct and criminal convictions can also disqualify individuals. Those disqualified from service may request a conduct waiver, which typically requires specific information about the offense(s) and "letters of recommendation from responsible community leaders, such as school officials, clergy, and law enforcement officials, attesting to the applicant's character or suitability." Convicted domestic violence offenders, on the other hand, are typically ineligible for conduct waivers, pursuant to the Lautenberg Amendment Gun Control Act of 1968. Domestic battery or other violent offenses committed without conviction may also be disqualifying. In recent years, as recruiting quantity targets have increased to force end-strength numbers, the Services, and particularly the Army, have increased the use of conduct, and other waivers. Some have questioned whether those with waivers for any kind of misconduct (e.g., drug, alcohol, or traffic violations) are at higher risk for misconduct offenses while serving in the military. One study of Army enlistments between 2003 and 2008 found that while those with conduct waivers for any reason did have higher rates of alcohol and drug-related offenses, the waivers were not significantly associated with substantiated incidents of domestic abuse. <5.2. Education, Training, and Awareness> Prevention programs for domestic violence include education and training components, some of which are required in both law and policy. The FY2000 NDAA required DOD to establish a standard training curriculum for commanding officers on handling domestic violence cases. In a 2004 memorandum, the USD (P&R) also required specialized training for military chaplains on confronting a potential domestic violence situation. The Family Advocacy Program (FAP) is charged with promoting awareness of domestic abuse through education, training, and information dissemination. Training for commanders, troops, counselors, and health care personnel typically focuses on increasing awareness of IPV warning signs and appropriate responses. Training for troops might include workshops or briefings on healthy relationships and family resiliency. Generally, domestic violence prevention training is not mandatory and is not applied uniformly across and within the services. The military services have experimented with tailored education programs for higher-risk demographics. The Navy, for example, has initiated a series of workshops on relationship abuse awareness and prevention that targets junior enlisted members. DOD's Military Onesource website also offers a range of self-serve resources and tools to learn more about domestic violence. <5.3. Military and Family Life Counseling> Relationship stressors are indicated as risk factors for IPV. Part of DOD's prevention activities include no-cost, nonmedical, confidential counseling services for members and their families through the Military and Family Life Counseling (MFLC) program. These services are part of DOD's prevention activities and include relationship counseling, anger/conflict management, and deployment adjustment (i.e., separation and reintegration). DOD provides these services through a contractor to active and reserve personnel and their immediate families at over 200 military installations or in nearby civilian community centers worldwide. Family life counselors do not handle domestic abuse cases these are typically referred to the FAP and medical providers, as required. Members and their spouses may also participate in other service-level programs, like chaplain-led marriage retreats or family resiliency workshops under their installation's family readiness program. While commanders or others may refer couples to these programs, participation in them is generally optional. <6. Interventions> While prevention activities generally target the entire population, interventions are targeted at high-risk couples or individuals, or provided after a first alleged offense. Interventions include removing individuals and family members from any immediate risk of harm, initiating an investigation, ensuring ongoing safety, and preventing future escalation or offender recidivism. Response to domestic abuse often involves coordination among military commanders, law enforcement officials, health care personnel, social workers, and legal representatives. DOD policies outline specific roles and responsibilities for each of these responders. The FY2019 NDAA required the establishment of multidisciplinary teams on military installations to enhance collaboration in response and management of domestic abuse cases. The law requires each team to include (1) one or more judge advocates, (2) personnel from military criminal investigation organizations (MCIOs), (3) mental health professionals, (4) family advocacy caseworkers, and (5) other personnel as appropriate. <6.1. Clinical Interventions> When an incident is reported to the FAP, a team assesses the situation and coordinates clinical case management, including treatment, rehabilitation, and ongoing monitoring and risk management. FAP employees are typically professional social workers. According to DOD, there are over 2,000 funded positions across the military departments for delivery of FAP services, including "credentialed/licensed clinical providers, Domestic Abuse Victim Advocates, New Parent Support Home Visitors, and prevention staff." <6.2. Military Protective Orders> Once a servicemember has allegedly committed an act of domestic violence, and it is reported to the member's commander, the commander is responsible for holding the perpetrator accountable and taking actions to protect the victim. The commander may, for example, issue a military protective order (MPO) to help ensure the victim's safety. An MPO generally prohibits contact between the alleged offender and the domestic violence victim. A servicemember must obey an MPO at all times, whether inside or outside a military installation; violations may be subject to court martial or other punitive measures. The commanding officer may also restrict an accused servicemember to a ship or to his or her barracks to keep the parties separate. There may be some cases when the victim is a servicemember and the alleged abuser is a civilian. Commanders cannot issue an MPO for civilians, but may arrange for temporary housing on the installation for the servicemember victim and bar the accused civilian from installation access. While military commanders have a high degree of control over the activities on an installation, they typically lack jurisdiction over events in civilian communities. Approximately 63% of military personnel live in private housing located outside of a military installation. Because of this, coordination between military and civilian law enforcement authorities is often required to provide for victim safety. The FY2000 NDAA included a provision to create incentives for collaboration between military installations and civilian community organizations working to prevent and respond to domestic violence. In 2002, Congress required that civilian protection orders (CPOs) have full force and effect on military installations. This means that if a servicemember violates the terms of a CPO, he or she may be subject to disciplinary actions under the UCMJ, in the same way as if violating an MPO. Military commanders, by regulation, are also encouraged to issue an MPO to support an existing CPO, or to provide some protection to a victim while the victim pursues a CPO. MPOs are unenforceable by civilian law enforcement. In 2008, however, Congress required the commander of a military installation to notify civilian authorities when an MPO is issued, changed, or terminated with respect to individuals who live outside of the installation. Procedures for coordination and information-sharing between military and local officials are established through formal memoranda of understanding (MOUs). <6.3. Expedited Transfer and Administrative Reassignments> In an effort to protect servicemembers reporting sex-related offenses from retaliation, Congress required in 2011 that DOD develop policies and procedures for consideration of station changes or unit transfers of active duty member victims who report sex-related offenses under the UCMJ. Per statute, an individual's commanding officer must approve or disapprove an application for transfer within 72 hours of submission. If the commander disapproves the transfer, the applicant may request review from the first general officer in the chain of command. The law requires a decision from the general officer within 72 hours of the submission of the request. Congress expanded the application of such transfer policies and procedures to cover military servicemembers who are victims of physical or sexual IPV through the FY2018 NDAA. The act specified that transfer policies and procedures are to be implemented once abuse has occurred, irrespective of whether the offender is a member of the Armed Forces. In the FY2014 NDAA, Congress also added a provision that allows commanders and others with authority to reassign or remove from a position of authority individuals who are alleged to have committed or attempted sex-related offenses. The law is specific that reassignment action is "not as a punitive measure, but solely for the purpose of maintaining good order and discipline within the member's unit." Advocates for this provision had argued that reassignment of the victim could be seen as penalizing the victim instead of the perpetrator. Covered offenses under the expedited transfer (10 U.S.C. 673) and administrative reassignment (10 U.S.C. 674) authorities currently do not include the UCMJ offense for domestic violence, which was added in 2018 as part of the FY2019 NDAA (See section below on " Domestic Violence Punitive Article "). <7. Victim Support and Services> In the past decade, DOD has developed methods for incident reporting, data collection, and analysis of IPV trends. There is some evidence to suggest, however, that the actual prevalence of domestic abuse in the military could be underreported. While DOD conducts annual surveys of servicemembers to determine the prevalence of sexual assault and harassment in the military, it does not conduct or report on similar surveys with the military spouse population or on the prevalence of non-sex-related abuse by intimate partners. Indeed, IPV prevalence can be difficult to measure, and within the academic literature there is a broad range of prevalence estimates for victimization and perpetration involving military servicemembers. One meta-analysis undertaken by the VA suggests that among active duty servicemembers, the 12-month prevalence of IPV perpetration was 22%, and victimization was 30% rates higher than those of actual incident reports within DOD. Another (nonscientific) survey conducted by a military family advocacy group in 2017 found that 15% of the military and veteran family respondents did not feel physically safe in their relationship. Among those experiencing abuse, the survey found that "87% of military spouse respondents did not report their physical abuse, citing their top two reasons for not reporting the abuse was that they felt it was not a big deal and they did not want to hurt their spouse or partner's career." Intimate partner abuse for the perpetrator is often connected with coercive control and monitoring of the victim's activities (e.g., controlling phone or email passwords, and restricting bank account access), and thus some victims may be fearful of seeking help. Confidentiality concerns, financial dependency, and lack of support structures can all create barriers to reporting IPV. Congress and DOD have taken some actions to try to reduce these barriers, to encourage victims to report, and to increase access to victim support services. <7.1. Confidentiality: Restricted and Unrestricted Reporting> Responding to concerns from military family members about confidentiality in reporting incidents of domestic abuse, Congress required in 1999 that DOD establish policies and procedures, which provide "maximum protection for the confidentiality of dependent communications" with service providers, such as therapists, counselors, and advocates. DOD has since developed distinct reporting streams that can accommodate varying levels of confidentiality. In an unrestricted reporting scenario, domestic abuse is reported to law enforcement, FAP, or the chain of command. Such a report would typically set off a sequence of actions to include a criminal investigation of the alleged offender. In some cases, a victim may be hesitant to trigger these events but may want to access support services in a confidential manner. In recognition that some victims may be deterred from reporting based on confidentiality concern, DOD has established a restricted reporting option. With some exceptions, this reporting option allows victims to disclose information to a victim advocate, victim advocate supervisor, or healthcare provider without that information being disclosed to other authorities. The restricted reporting options allows the victim time to access medical care, counseling, and victim advocacy services while providing some time to consider relationship choices and next steps. <7.2. Victim Advocacy Services> In 2003, as part of the FY2004 NDAA, Congress called for the development of a Victim Advocate Protocol for victims of Domestic Violence. Among other things, the Protocol requires victims of domestic abuse be notified of victim advocacy services and be provided access to those services 24 hours a day (either in person or by phone). Victim advocates play a substantial role in supporting the victim following a domestic violence incident. They help victims and other at-risk family members by developing a safety plan, referring them to ongoing care through military or civilian providers, and providing information on other resources (e.g., chaplain or legal services, transitional compensation). Victim advocates can be DOD employees, military contractors, or other civilian providers. <7.3. Special Victims' Counsel/Victims' Legal Counsel> A Special Victims' Counsel (SVC) or Victims' Legal Counsel (VLC) is a judge advocate or civilian attorney who satisfies special training requirements and is authorized to provide legal assistance to victims of sexual assault throughout the military justice process. Currently SVC/VLC services are not authorized for victims of domestic violence; however, recent legislative proposals have sought to expand such services to this population. A provision in the FY2019 NDAA required DOD to submit a report on feasibility and advisability of expanding SVC/VLC eligibility to victims of domestic violence and asked for an analysis of personnel authorizations with respect to the current case workload. DOD found that expanding this eligibility to domestic violence victims would "significantly increase the caseload of SVC/VLC programs across the board." If SVC/VLC support were made available to victims of domestic violence, each of the military services "would require additional SVC/VLC authorizations and sufficient time to train personnel to implement new mission requirements." <7.4. Transitional Compensation> Some spouses are wholly or highly financially dependent on their military intimate partner, possibly discouraging some victims from reporting IPV. Therefore, the prospect of the member being incarcerated or discharged from the military can provide a disincentive for an abused spouse to seek help. In a 1993 House Armed Services hearing on Victims' Rights, the Ranking Member noted that "with few exceptions, when a military member is incarcerated because of violence or abuse, the family is cut loose by DOD and left without medical coverage, without counseling, without housing, without the support of the military community." Congress sought to redress this disincentive to reporting through the FY1994 NDAA, which authorized the temporary provision of monetary benefits, called transitional compensation , to dependents of servicemembers or former servicemembers who were separated from the military due to IPV. One of the motivating arguments for establishing the transitional compensation benefit was that it could provide a measure of financial security to spouses or former spouses. The provision was codified in 10 U.S.C. 1059 and applies to cases involving members who, on or after November 30, 1993 are separated from active duty under a court-martial sentence resulting from a dependent-abuse offense, separated from active duty for administrative reasons if the basis for separation includes a dependent-abuse offense, or sentenced to forfeiture of all pay and allowances by a court-martial that has convicted the member of a dependent-abuse offense. Transitional compensation payments are exempt from federal taxation, provided at the dependency and indemnity compensation (DIC) rate, and authorized for at least 12 months but no more than 36 months . For individuals to be eligible, they must be current or former dependents of servicemembers, including spouses, former spouses, or dependent children. Intimate partners who are not or were never married to servicemembers are generally ineligible to receive compensation from DOD. While in receipt of transitional compensation, dependents are also entitled to military commissary and exchange benefits, and may receive dental and medical care, including mental health services, through military facilities as TRICARE beneficiaries. <7.4.1. Forfeiture and/or Coordination of Benefits> Recipients of transitional compensation benefits must certify eligibility on an annual basis to retain payments. In addition, payments will cease if the eligible spouse or former spouse remarries, on the date of remarriage, cohabitates with the servicemember after punitive or other adverse action has been executed, or is found to have been an active participant in the conduct constituting the criminal offense, or actively aided or abetted the member in such conduct against a dependent child. Payments may also cease if a court-martial sentence is remitted, set aside, or mitigated to a lesser punishment. Spouses or former spouses may not receive both transitional compensation and court-ordered payments of retired pay and must elect to receive one or the other of those benefits, if applicable. <7.5. Access to Retired Pay and Benefits> A military servicemember typically becomes eligible for a pension from the federal government after 20 years of service. Under the Uniformed Services Former Spouses Protection Act (USFSPA), up to 50% of the member's disposable military retired pay may be awarded by court order to a former spouse in a divorce settlement. In some cases, a member may be eligible for retired pay by virtue of longevity in service; however, punitive actions in response to member misconduct may terminate eligibility for retired pay. In 1992, Congress authorized the military departments to make court-ordered payments of an amount of disposable retired pay to abused spouses or former spouses in cases where the member has eligibility to receive retired pay terminated due to misconduct related to the abuse. So, for example, if a retired member, through court martial sentencing as a result of a domestic violence offense, becomes ineligible to receive retired pay, the Defense Finance and Accounting Service (DFAS) may still pay a court-ordered portion of what the member might otherwise be eligible for, to the member's spouse or former spouse. A spouse or former spouse, while receiving payments under this chapter, is also eligible to receive any other benefits a spouse or former spouse of a retired member may be entitled, including medical and dental care, commissary and exchange privileges, and the Survivor Benefit Plan. <7.6. Emergency Housing and Accommodations> In situations where a servicemember is the perpetrator of violence, the commanding officer may restrict that individual to the barracks, ship, or other installation housing and issue MPOs (as discussed in section " Military Protective Orders ". The primary objective is typically to remove the offender from the home, to protect the victim. On the other hand, there may be scenarios where commanders have less control over housing of the perpetrator (e.g., in the case where the offender is a civilian living outside an installation). In such cases, DOD policies also require that victim advocates facilitate provision of shelter and safe housing resources for victims. According to the services, commanders typically draw on a number of housing options on the installation (e.g., temporary lodging) or in the local civilian community (e.g., shelters, hotels, etc.). <7.7. Relocation Benefits> Military families move frequently to different assignments worldwide, often far away from family and support networks. Moving expenses for the family under a member's orders are paid by the Department of Defense. Generally, civilian spouses are only eligible for these benefits when the family moves together under the military sponsor's orders. For some abused spouses, it may be prohibitively expensive to independently execute a household move following a domestic abuse incident, particularly for those accompanying servicemembers stationed overseas. In 2003, as part of the FY2004 NDAA, Congress added a provision that allows for certain travel and transportation benefits for dependents who are victims of domestic abuse in the absence of military orders for a permanent change of station move. When relocation is advisable to ensure the safety of the victim, the Secretary of the military department concerned may authorize movement of household effects and baggage at the government's expense, plus travel per diem paid to the dependent. The authorization for these benefits allows for a move to an appropriate location in the United States or its possessions, or if the abused dependent is a foreign national, to their country of national origin. <7.8. Federal Crime Victims Fund> In 1984, the Crime Victims Fund (CVF, or the Fund) was established by the Victims of Crime Act (VOCA, P.L. 98-473 ) to provide funding for state victim compensation and assistance programs. The CVF does not receive appropriated funding. Rather, deposits to the CVF come from a number of sources including criminal fines, forfeited bail bonds, penalties, and special assessments collected by the U.S. Attorneys' Offices, federal courts, and the Federal Bureau of Prisons from offenders convicted of federal crimes. The largest source of deposits into the CVF is criminal fines. U.S. military servicemembers and their families are eligible for these victim assistance and compensation programs. The Office for Victims of Crime (OVC) within the Department of Justice (DOJ) administers the CVF. As authorized by VOCA, the OVC awards CVF money through formula and discretionary grants to states, local units of government, individuals, and other entities. Grants are allocated according to VOCA statute, and most of the annual funding goes toward the two VOCA formula grants: the victim compensation formula grant and victim assistance programs. The grants are distributed to states and territories according to guidelines established by VOCA. Victim compensation formula grants may be used to reimburse crime victims for out-of-pocket expenses such as medical and mental health counseling expenses, lost wages, funeral and burial costs, and other costs (except property loss) authorized in a state's compensation statute. Victims are reimbursed for crime-related expenses that are not covered by other resources, such as private insurance. Since FY1999, medical and dental services have accounted for close to half of the total payout in annual compensation expenses. In FY2017, "the vast majority of applications related to a victimization (52,461 or 96%) were related to domestic and family violence." Victim assistance formula grants support a number of services for crime victims, including the provision of information and referral services, crisis counseling, temporary housing, and criminal justice advocacy support. States are required to prioritize the following groups: (1) underserved populations of victims of violent crime, (2) victims of child abuse, (3) victims of sexual assault, and (4) victims of spouse abuse. States may not use federal funds to supplant state and local funds otherwise available for crime victim assistance. According to the OVC, victims of domestic violence make up the largest number of victims receiving services under the victim assistance formula grant program. In FY2017, over five million crime victims were served by these grants, 43% of whom were victims of domestic and/or family violence. <8. Military Law Enforcement Response> DOD and the Services have a general framework under the UCMJ, and other laws, for responding to violent offenses. DOD domestic abuse policies superimpose specific requirements onto this framework. Among other things, DOD policy states commanders are required to respond to reports of domestic abuse in the same manner as they would to credible reports of any other crime and must ensure that military service offenders are held accountable for acts of domestic violence through appropriate disposition under the UCMJ. Similarly, law enforcement and military criminal investigation personnel are required to investigate reports of domestic violence and respond to them as they would to credible reports of any other crime. In 1993, as part of the FY1994 NDAA, Congress specified certain responsibilities for military law enforcement officials in response to domestic violence. In particular, the law requires that in cases where there is evidence of physical injury, or where a deadly weapon or dangerous instrument has been used, officials must report the incident within 24 hours to the appropriate commander and to a local FAP representative. Military law enforcement includes both installation law enforcement (ILE), MCIOs, and the Defense Criminal Investigative Service (DCIS), which is an arm of the DOD Inspector General. The term defense criminal investigative organization (DCIO) is used to describe the military criminal investigative organizations and DCIS. Current DOD policy requires that either a MCIO or another appropriate law enforcement organization investigate domestic violence and specifies that MCIOs are to investigate all unrestricted reports of domestic violence involving sexual assault or aggravated assault with grievous bodily harm. <8.1. DODIG Review of Law Enforcement Actions> A 2019 report by the Department of Defense Inspector General (DODIG) found that law enforcement response actions were generally consistent with DOD policies; however, the DODIG noted DCIOs did not consistently comply with DOD policies when responding to nonsexual domestic violence incidents involving adult victims (see Table 5 ). In particular, the audit revealed that responders often did not have necessary equipment for collecting and preserving evidence and that incident reports did not get proper supervisory review. In 22% of the reviewed cases law enforcement failed to report the incident to the FAP and in 82% of those cases failed to submit criminal history data to the Defense Central Index of Investigations (DCII), the Federal Bureau of Investigation (FBI) Criminal Justice Information Services Division (CJIS), and the Defense Forensics Science Center. (See discussion below under " Crime Reporting to National Databases .") In general, actions by the Navy Criminal Investigative Service (NCIS) the only MCIO included in the IG report were more likely to be in compliance than those by military law enforcement. In the report, the Army and the Air Force do not distinguish between ILEs and MCIOs, and relevant criminal investigation jurisdiction policies for these military services show that their MCIOs do not have responsibility for investigating domestic violence. Presumably, with the exception of the NCIS data, all other data in the table are based on ILE responses to domestic violence incidents. Among other things, the DOD IG found that military service law enforcement organizations, largely ILE, did not consistently comply with DOD policies when responding to nonsexual domestic violence incidents involving adult victims. The IG findings and the data in the table appear to suggest that ILE are less proficient at domestic violence responses and investigations, whereas an MCIO, using NCIS as the sole example, is more proficient at responding to them. <8.2. Crime Reporting to National Databases> Law and policy require military law enforcement to provide certain crime reports to DOD and national crime databases throughout a criminal investigation of a servicemember. The Services are required to maintain automated information systems that comply with the Defense Incident-Based Reporting System (DIBRS), which complies with the FBI National Law Enforcement Data Exchange (N-DEx) System. The FBI's N-DEx system is a repository of criminal justice records and data from law enforcement agencies in the United States and it is managed by the FBI's Criminal Justice Information Service (CJIS). DIBRS captures criminal incidents of domestic violence that are reported to law enforcement in compliance with the following laws ; The Uniform Federal Crime Reporting Act of 1988, The Victims' Rights and Restitution Act of 1990, The Lautenberg Amendment to the Gun Control Act, and The Jacob Wetterling, Megan Nicole Kanka, and Pam Lychner Sex Offender Registration and Notification Program. DIBRS data is subsequently reported to the Federal Bureau of Investigation's National Incident-Based Reporting System (NIBRS). As repository for federal and state crime activity, NIBRS data is used for analyzing crime trends and developing policy approaches to reduce criminal activity. Specific records of investigations are located in the Defense Central Index of Investigations (DCII), an automated central index that identifies investigations conducted by DOD investigative agencies. DCII is typically used by DOD security and investigative agencies and other federal agencies to determine security clearance status and the physical location of criminal and personnel security investigative files. Per DOD policy for collating investigation data, MCIOs are responsible for Titling and indexing subjects of criminal investigations in the DCII when there is credible information that a subject of an investigation committed a criminal offense (under the UCMJ or any other federal criminal statute). Reporting disposition information within 15 days of final disposition of military judicial or nonjudicial proceedings; approval of a request for discharge, retirement, or resignation in lieu of court-martial; or, discharge resulting from anything other than honorable characterization of service based on investigations UCMJ violations. Submitting fingerprint cards and final disposition of investigations to the FBI CJIS regarding servicemembers investigated for violating an offense under the UCMJ, based on probable cause. <9. Military Justice System> While some domestic violence offenders in the military may be subject to local or host nation jurisdiction, active duty servicemembers worldwide may be held accountable for domestic violence offenses under the military justice system. The military justice system is established in Title 10 of the United States Code and is separate from and independent of the federal criminal justice system established in Title 28. Congress enacts this authority through the articles (statutes) that make up the UCMJ, under Chapter 47, of Title 10, U.S. Code . The President implements the UCMJ by executive order through the Manual for Courts-Martial (MCM). The MCM establishes detailed rules for administering justice. Among other things, The MCM contains the major components of military justice: Ju risdiction Court-Martial Convening Authority for the three levels of courts-martial and the jurisdiction of each one (chapter II, part II, MCM). Criminal Procedure Code Rules for Courts-martial provide for the administration of military justice (chapters III XIII, part II, MCM). Rules of Evidence Military Rules or Evidence established the evidential procedure for judicial proceedings at a court-martial (part III, MCM). Criminal Code Punitive Articles in the UCMJ criminalize specific conduct (part IV, MCM). The MCM also includes the procedure for nonjudicial punishment (NJP) and maximum punishment information for each punitive article. <9.1. Commander's Authority> The authority to prosecute or refer charges to court martial falls within the jurisdiction of a command and its commander. Commanders at every level are responsible for deciding whether to take action regarding misconduct occurring in a command over which they have authority. When addressing misconduct, a commander acts as an adjudicator of first instance to determine whether misconduct warrants disposition in a judicial, nonjudicial, or administrative process. A commander can also determine to take no action against an offender. These determinations are known as disposition decisions. They are made at the lowest level of command with direct authority over an offender, unless disposition authority is withheld by a higher-level commander. DOD requires all commanders to refer allegations of domestic violence by a victim, or credible reports of domestic violence by a third party, to an appropriate law enforcement organization. Law enforcement personnel must promptly complete a detailed written report of the investigation and forward it to the alleged offender's commander. The commander must then review the report and obtain advice from an appropriate legal officer before determining disposition. <9.2. Court-Martial> Upon review of the investigative report, the commander may refer the case to court-martial for trial. There are three courts-martial levels with jurisdiction over UCMJ offences. The first two levels summary and special courts-martial are courts of limited jurisdiction (minor and misdemeanor offenses). The third and highest level general court-martial is a court of general jurisdiction (felony offenses). A general court-marital can impose the maximum punishment prescribed for a crime in the UCMJ. A trial by general court-martial typically consists of a military judge, prosecutor, defense counsel, and members. The members are a panel of servicemembers who can render guilty or not guilty verdicts, like a civilian jury, and make sentencing decisions, unlike a civilian jury. <9.3. Domestic Violence Punitive Article> The punitive articles in the UCMJ are the offenses that fall within the jurisdiction of a court-martial. Prior to 2019, domestic violence offenses were typically prosecuted under the general offense of assault under Article 128 (Assault). Congress amended the UCMJ in the National Defense Authorization Act for Fiscal Year 2019 by adding a specific punitive article for domestic violence Article 128b effective on January 1, 2019. This punitive article prescribes punishment, as a court-martial may direct, for any person subject to UCMJ jurisdiction who: (1) commits a violent offense against a spouse, an intimate partner, or an immediate family member of that person; (2) with intent to threaten or intimidate a spouse, an intimate partner, or an immediate family member of that person- (A) commits an offense under [the UCMJ] against any person; or (B) commits an offense under [the UCMJ] against any property, including an animal; (3) with intent to threaten or intimidate a spouse, an intimate partner, or an immediate family member of that person, violates a protection order; (4) with intent to commit a violent offense against a spouse, an intimate partner, or an immediate family member of that person, violates a protection order; or (5) assaults a spouse, an intimate partner, or an immediate family member of that person by strangling or suffocating; Article 128b generally requires a threat or violent offense or the specific act of strangulation or suffocation to trigger the UCMJ. Research has found that strangulation is an associated risk factor for intimate partner homicide of female victims. <9.4. Sentencing> After a guilty verdict or plea, and without delay, a court-martial imposes a sentence that is within its authority and discretion. Specific punishments for UCMJ offenses tried by a court-martial are reprimand; forfeiture of pay and allowances; fine; reduction in pay grade; restriction to specified limits; hard labor without confinement; confinement; punitive separation; and death. A single punitive article can include a range of offenses from minor to serious; the maximum punishment increases as the severity of the offense increases. As noted above, domestic violence was previously included in the general assault article (Article 128) before it became a nominative offense under Article 128b. Punishment under Article 128 includes a maximum punishment as low as three months for simple assault and a maximum punishment as high as dishonorable or bad conduct discharge, total forfeitures, and 20 years' confinement, for assault with intent to commit specified offenses, such as murder, rape, and rape of a child. Domestic violence was distinguishable from other types of assault under Article 128 (Assault) by the greater severity of its punishment. DOD has not yet amended the most recent MCM issued in 2019 to include a maximum punishment for Article 128b (Domestic Violence), which became law around the time DOD issued the 2019 MCM. <9.5. Military Rules of Evidence> The Military Rules of Evidence (MRE) are established by executive order as part of the Manual for Courts-Martial. They are analogous to civilian rules of evidence, particularly the Federal Rules of Evidence. There are two rules within the MRE that specifically apply to domestic violence (i.e., privileged conversations with victim advocates, and testimony of children who witness an event). <9.5.1. Victim Advocate Victim Privilege> A victim who has suffered direct physical or emotional harm as the result of a sexual or violent offense has a privilege to refuse to disclose, and to prevent any other person from disclosing, a confidential communication made between the alleged victim and a victim advocate, or between the alleged victim and DOD Safe Helpline staff. The communication must have been made for the purpose of facilitating advice or assistance to the victim. A victim advocate is a person, other than a trial counsel, any victims' counsel, law enforcement officer, or military criminal investigator in the case, who is appropriately designated as such. <9.5.2. Remote Live Testimony of a Child> If a child is a victim or witness of domestic violence, a military judge must allow remote live testimony if the judge finds on the record that It is necessary to protect the welfare of the particular child witness; The child witness would be traumatized, not by the courtroom generally, but by the presence of the accused; and, The emotional distress suffered by the child witness in the presence of the accused is more than slight. To make these findings a "military judge may question the child in chambers, or at some comfortable place other than the courtroom, on the record for a reasonable period of time, in the presence of the child, a representative of the prosecution, a representative of the defense, and the child's attorney or guardian ad litem." Remote live testimony is not required if the accused voluntarily excludes himself or herself from the courtroom. <10. Issues for Congress> The consequences of intimate partner and domestic violence to servicemembers and families can be severe and even fatal. Congress has taken a number of actions over the past three decades to expand the provision of prevention and support responses, improve data collection and monitoring of IPV prevalence, deepen civilian and military collaboration on addressing and monitoring IPV, among other things. In the 116 th Congress, there have been several proposals to augment services for military-connected IPV victims. Nevertheless, recent reports and testimony have identified several ongoing issues for oversight. These include Community coordination, Coverage and access to victim services, Law enforcement response, Data collection federal reporting requirements , and Mitigating risk factors. <10.1. Community Coordination> In many IPV cases involving the military, the abused or the abuser is a civilian, and incidents happen both on and off military installations. The UCMJ applies worldwide to active duty servicemembers; however, local, state, and foreign governments (for members serving in foreign countries) may have overlapping jurisdiction for domestic violence response, investigation, and prosecution. Local law enforcement authorities may have different protocols for domestic violence response depending on the location. Domestic violence victim advocates have often asserted that insufficient coordination between military and state/local authorities threatens the safety of victims when they move between installations and the civilian community. DOD regulations require certain information to be shared between installation commanders and local authorities, but it is unclear if processes for information sharing are consistent across bases and if gaps are sufficiently addressed. For example, at a September 2019 House hearing, a representative of a victims' advocacy group noted that while CPOs are given full force and effect on military installations, victims may not know whom to notify on the installation that they have a CPO and that everyone involved needs clear registration procedures. <10.2. Coverage and Access to Victim Services> While there have been a number of efforts to improve and expand victim services, there may still be some barriers to coverage and access. A 2019 study based on interviews of FAP personnel found that there was variation in the services offered across services and installations with smaller installations sometimes lacking a full range of programs. The study also found that, on average, FAP offices are open five days a week for approximately 41 hours per week, with a small portion (3%) offering weekend hours. Some FAP personnel noted that these hours may make it difficult for working civilian spouses, or those in need of childcare, to be able to attend counseling appointments. In addition, some servicemembers and spouses may not be aware of their eligibility for services. In 2019 testimony to the House Armed Services Military Personnel Subcommittee, an IPV survivor noted that during the period of her abuse, she was not aware of the FAP or other services available to her. The 2019 FAP study also found that public awareness and outreach activities, "are not a strong emphasis of [FAP] programming." In terms of coverage, some military-connected IPV victims may not be eligible for services under existing law and policy. For example, unmarried civilian intimate partners of a servicemember would not typically have access to military relationship counseling services, military health care, transitional monetary benefits, or other resources on the installation. In addition, due to the part-time nature of their work, members of the Reserve Component and intimate partners of members, may not have consistent access to installation resources and mental/behavioral health coverage. For example, the National Guard has reported that it does not offer a curriculum on Domestic Abuse Response and Intervention Training; rather, it relies on FAP services of its parent services (Army and Air Force) for members called to duty on federal orders. Finally, another aspect to consider is the period of transition during discharge or separation from the military. Military veterans, including retirees and their civilian spouses are generally not eligible for FAP services but may be eligible for some services through the VA. For example, he VA does offer some social work programs including the Veteran Health Administration's Intimate Partner Violence Assistance Program. <10.3. Law Enforcement Response> DODIG's 2019 findings of deficiencies in military law enforcement response to domestic violence incidents (as discussed in " DODIG Review of Law Enforcement Actions ") suggest that further congressional oversight of DOD actions in this area could be warrented. DOD domestic violence policy requires the DODIG to develop relevant policy for MCIOs and to oversee their investigations of domestic violence, similar to DODIG responsibility for sexual assault investigations. Current DODIG policy assigns MCIOs responsibility for initiating a criminal investigation in response to all allegations of adult sexual assault, a serious offense under the UCMJ. That is, these investigations are not within the jurisdiction of installation law enforcement. There was no similar mandate for all allegations of domestic violence under Article 128 (Assault), with the exception of unrestricted reports of domestic violence involving sexual assault or aggravated assault with grievous bodily harm. If the maximum punishment of Article 128b were to be established at one year or more a serious offense such a move may preclude investigations by installation law enforcement investigators whose investigative jurisdiction is limited to minor offenses with punishment for a year or less. <10.4. Data Reporting> Several DODIG and GAO reports have raised concerns with DOD data collection, management, and reporting to internal DOD and federal databases. The reliability of data can have implications for congressional oversight and funding, in terms of accurate estimates of the size and scope of IPV issues and identifying high-risk military populations for targeted programs. While DOD and the services have undertaken efforts to improve the quality and reliability of data, this is a potential area for continued oversight and audit. Questions also remain as to whether those responsible for entering data into the various systems (i.e., law enforcement, FAP personnel) are adequately trained on their statutory and regulatory obligations. Consideration may be given as to whether incident data accurately captures IPV that goes unreported to the FAP, or if further surveys or studies of the military spouse population are needed. In addition, proper entry of criminal data is necessary for adequate enforcement of other laws, for example, those prohibiting convicted IPV offenders from purchasing firearms. <10.5. Mitigating Risk Factors> Another way to address IPV prevention is to address risk factors. One method is through DOD programs and policies that help to improve family stability and resiliency and promote a positive and supportive command climate. From a broad perspective, any actions to reduce personnel tempo (PERSTEMPO), whether through fewer deployments, more time at home station between deployments, or through fewer unaccompanied assignments can help to reduce family stresses associated with departure and reintegration. Another option for reducing stress on military families is to manage permanent change of station (PCS) moves to extend time on station. Frequent moves can impair social support networks and have been found to have a negative impact on spousal employment and earnings. While personnel management efforts could be made to reduce deployments and PCS moves, national security concerns may sometimes necessitate high PERSTEMPO. DOD and the services have several other programs to support families, for example, child and youth programs (e.g., subsidized child-care services), spouse employment assistance, and other family readiness services. In Congress's oversight and appropriations roles, one area of consideration is whether these programs are funded at appropriate levels given current or anticipated demands on military servicemembers. Finally, given the military commander's unique authority, the command climate he or she establishes within a unit is an important aspect of IPV prevention. DOD policies specify that military commanders have a duty for care not only of their troops, but also of the troop's families. Commanders may address issues among the troops through positive reinforcement of healthy relationships and attitudes or through punitive administrative actions. The CDC has identified problematic gender norms as a potential risk factor for IPV. Some reporting has identified prevailing negative stereotypes, attitudes, and memes directed at the military spouse community. Commanders can have significant influence on acceptable and unacceptable behavior in the workplace. In addition, several abused spouses have testified that they felt their partner's commander did not provide adequate support, follow established procedures, or take complaints of abuse seriously. In cases where victims of IPV are servicemembers, there may also be concerns about retaliation from a commander or military peers for reporting or seeking help particularly if the offending spouse is also a military servicemember. One response to this might be a survey of IPV victims to better understand their perceptions of command response and their experiences with other responders such as victim advocates and law enforcement or military justice personnel. Similar surveys have been done with victims of sexual assault. Options to remedy concerns about commander response may be to require higher-level review of IPV complaints, or to enhance protections from retaliation against those who report IPV. Appendix A. Selected Legislation Appendix B. CDC Risk Factors for Intimate Partner Violence Individual Risk Factors Low self-esteem Low income Low academic achievement Young age Aggressive or delinquent behavior as a youth Heavy alcohol and drug use Depression Anger and hostility Antisocial personality traits Borderline personality traits Prior history of being physically abusive Having few friends and being isolated from other people Unemployment Emotional dependence and insecurity Belief in strict gender roles (e.g., male dominance and aggression in relationships) Desire for power and control in relationships Perpetrating psychological aggression Being a victim of physical or psychological abuse (consistently one of the strongest predictors of perpetration) History of experiencing poor parenting as a child History of experiencing physical discipline as a child Relationship Factors Marital conflict: fights, tension, and other struggles Marital instability: divorces or separations Dominance and control of the relationship by one partner over the other Economic stress Unhealthy family relationships and interactions Community Factors Poverty and associated factors (e.g., overcrowding) Low social capital: lack of institutions, relationships, and norms that shape a community's social interactions Weak community sanctions against IPV (e.g., unwillingness of neighbors to intervene in situations where they witness violence) Societal Factors Traditional gender norms (e.g., women should stay at home, not enter workforce, and be submissive; men support the family and make the decisions) Appendix C. Acronyms

Intimate partner violence (IPV) is a national public health issue. IPV is also a crime characterized by recidivism and escalation, meaning offenders are likely to be repeat abusers, and the intensity of the abuse or violence is likely to grow over time. Like the broader phenomenon of domestic violence and abuse, a subset of which includes IPV, associated physical and mental trauma for those who are victims of abuse, as well as for those minor children who witness the abuse, can have both immediate and long-term health effects and significant costs to society. When military servicemembers are involved as either victims or perpetrators of IPV, the consequences of IPV can also harm unit readiness. Congress has constitutional authority to fund, regulate, and oversee the Armed Forces, including the military justice system. Congress has used this authority in recent years to mandate domestic violence prevention and victim response policies, programs, and services. In addition, Congress has acted to improve accountability measures for military perpetrators through statutory changes to the Uniform Code of Military Justice (UCMJ). Within the Department of Defense (DOD), IPV may include domestic violence and domestic abuse. Domestic violence is defined as an offense with legal consequences under the U.S. Code , UCMJ, and State laws, while domestic abuse refers to a pattern of abusive behavior. Within DOD, the Family Advocacy Program (FAP) is responsible for clinical assessment, supportive services, and treatment in response to domestic abuse, child abuse, and neglect in military families. Military responses to incidents of IPV may involve military law enforcement, unit or installation commanders, and military health personnel. In some cases, military and civilian officials may coordinate additional responses to IPV. In FY2018, DOD reported 16,912 incidents of spouse and intimate partner abuse (the active servicemember population totals over 1.3 million). Roughly half (8,039) of these incident reports met the criteria for abuse under the DOD definition. Some of these incidents have severe consequences. In FY2018, there were 15 confirmed domestic abuse fatalities involving military personnel as perpetrators or victims; in three of the cases, the victims had reported prior incidents of abuse to FAP personnel. Congress has taken numerous actions over the past few decades to address risk factors for IPV among the servicemember population, to raise awareness, to protect victims, and to hold perpetrators accountable. More recently, in the 116 th Congress, lawmakers added a punitive article to the UCMJ specifically for domestic violence offenses (prior offenses had been prosecuted under the punitive article for assault). As Congress continues to consider policy issues related to IPV, areas for continued oversight include community coordination in prevention and response, coverage and access to military-sponsored victim services, the appropriateness of law enforcement response, data collection and federal reporting requirements, and other programs that can help mitigate risk factors for IPV.

crs_R45966

crs_R45966_0

<1. Introduction> The Temporary Assistance for Needy Families (TANF) block grant provides grants to states, the District of Columbia, territories, and tribes to help them finance a wide range of benefits and services that address economic disadvantage among children. It is best known as a source to help states finance public assistance benefits provided to needy families with children. However, a state may use its TANF funds "in a ny manner that is reasonably calculated" to help achieve TANF's statutory goals to assist families so that children may live in their own homes or with relatives; end dependence on government benefits for needy parents through work, job preparation, and marriage; reduce out-of-wedlock pregnancies; and promote the formation and maintenance of two-parent families. TANF was created by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; P.L. 104-193 ). That law provided TANF program authority and funding through FY2002. Since that original expiration of funding, TANF has been funded through a series of extensions (one for five years, and others for shorter periods of time). Most current TANF policies date back to the 1996 law. The major TANF issues facing the 116 th Congress stem from questions about whether or not TANF's current policy framework allows states to de-emphasize addressing the original concerns that led to the creation of TANF, which centered on the terms and conditions under which needy families with children could receive public assistance benefits. Most families receiving public assistance in TANF's predecessor programs were headed by single mothers. TANF public assistance (for the remainder of this report, the term "assistance" will be used) takes the form of payments to families to help them meet ongoing basic needs, such as food, clothing, and shelter. The assistance is often paid in cash (a monthly check), but it might also be paid on behalf of families in the form of vouchers or payments to third parties. To be eligible for assistance, a family must have a minor child and be determined as "needy" according to the rules of the state. The amount of the assistance benefit is also determined by the state. In July 2017, the monthly TANF assistance benefit for a family of three ranged from $170 a month in Mississippi to $1,021 per month in New Hampshire. To provide context for a discussion of TANF issues in the 116 th Congress, this report describes the main issues discussed in the debates leading to the enactment of PRWORA in 1996; provides an overview of the TANF block grant and its funding; discusses current uses of TANF funds; describes how states are held accountable for achieving the federal goals of TANF and the "work participation requirements"; and discusses the decline in the TANF caseload and the implications for how it affects child poverty. The report also describes legislation introduced in the 115 th and the 116 th Congress as it relates to the issues of TANF funding levels and distribution, the uses of funds, and the "work participation" requirements. This report does not address all potential issues related to TANF, particularly those related to issues of family structure (a discussion of responsible fatherhood issues, for example, can be found in CRS Report RL31025, Fatherhood Initiatives: Connecting Fathers to Their Children ). <2. The Debates That Led to the Creation of TANF> The modern form of assistance to needy families with children dates back to the mothers' pensions (sometimes called "widows' pensions") funded by state and local governments beginning in the early 20 th century. Federal funding for these programs was first provided in the Social Security Act of 1935, through grants to states in the Aid to Dependent Children (ADC) program, later renamed the Aid to Families with Dependent Children (AFDC) program. The purpose of these grants was to help states finance assistance to help mothers (mostly single mothers and widows or women married to a disabled father) stay at home and care for their children. The goal of keeping mothers out of the labor force to rear their children was met by resistance from some states and localities. Politically, any consensus regarding this policy goal eroded over time, as increasing numbers of women particularly married white women joined the labor force. Additionally, those receiving assistance were increasingly African American families where the father was alive but absent. Benefits and the terms and conditions under which benefits were provided varied considerably by state. A series of administrative and court decisions in the 1950s and 1960s made the terms under which AFDC was provided more uniform across the states, though income eligibility thresholds and benefit levels continued to vary considerably among states up to the end of AFDC and the enactment of TANF. In 1969, the Nixon Administration proposed ending AFDC and replacing it with a negative income tax. While the program would have provided an income guarantee, it also would have gradually phased out benefits as an incentive to work. This proposal passed the House twice but never passed the Senate. In 1972, the Senate Finance Committee proposed to guarantee jobs to AFDC recipients who had school-age children. This proposal was not adopted in the full Senate. President Carter proposed combining the negative income tax with a public service jobs proposal. This, too, was not enacted. In 1981, during the Reagan Administration, the focus of debates over assistance to needy families shifted to a greater emphasis on work requirements and devolution of responsibility to the states. In 1982, President Reagan proposed to shift all responsibility for AFDC to the states, while the federal government would assume all responsibility for Medicaid. This was not enacted. The 1980s also saw an increasing concern that single parents were becoming dependent on assistance. Research showed that while most individuals used AFDC for short periods of time, some received assistance for long periods. There was continuing concern that receipt of AFDC assistance generally limited to single mothers led to more children being raised in single parent families. The Family Support Act of 1988 established an education and training program and expanded participation requirements for AFDC recipients. Additionally, the federal government and states fielded numerous experiments that tested approaches to moving assistance recipients (mostly single mothers) into work. These experiments indicated that mandatory participation in a program providing employment services could increase employment and earnings and reduce receipt of assistance. The cash assistance caseload began to increase in 1988, rising to its historical peak in March of 1994. Amid that caseload increase, then-Presidential candidate Bill Clinton pledged to "end welfare as we know it." The subsequent plan created by the Clinton Administration was not adopted; instead, House Republicans crafted a plan following the 1994 midterm elections that became the basis of the legislation enacted in 1996. PRWORA created TANF and established a statutorily set amount of funding to states under the TANF basic block grant through FY2002; new rules for assistance recipients, such as a five-year time limit on federally funded benefits; and a broad-purpose block grant, giving states flexibility in how funds are used. <3. TANF Funding Levels and Distribution among the States> The bulk of TANF funding is in the form of a basic block grant. Both the total amount of the basic block grant ($16.5 billion per year) and each state's share of the grant are based on the amount of federal and state expenditures in TANF's predecessor programs (AFDC and related programs) in the early to mid-1990s. States must also expend a minimum amount of their own funds on TANF or TANF-related programs under the maintenance of effort (MOE) requirement. That minimum totals $10.4 billion per year. The MOE is based on state expenditures in the predecessor programs in FY1994. PRWORA froze funding at both the national and state levels through FY2002. TANF has never been comprehensively reauthorized; rather, it has been extended through a series of short-term extensions and one five-year extension. Thus, a funding freeze that originally was to run through FY2002 has now extended through FY2019. There have been no adjustments for changes such as inflation, the size of the cash assistance caseload, or changes in the poverty population to the total funding level or each state's level of funding. <3.1. Distribution of Funding Among the States> While there were some federal rules for the AFDC program, states determined their own income eligibility levels and benefit amounts paid under it. There were wide variations among the states in benefit amounts, and some states varied benefit amounts by locality. In January 1997, the maximum AFDC benefit for a family of three was $120 per month in Mississippi (11% of the federal poverty level) and $703 per month in Suffolk County, NY (63% of the federal poverty level). The variation in AFDC benefit amounts created wide differences in TANF funding relative to each state's number of children in poverty because PRWORA "locked in" these historical variations in the funding levels among the states. The state disparities in TANF funding, measured as the TANF grant per poor child, have persisted. Figure 1 shows that, generally, Southeastern states have lower grants per child living in poverty than states in the Northeast, on the West Coast, or in the Great Lakes region. PRWORA included a separate fund, supplemental grants, that addressed the funding disparity among the states. From FY1998 to FY2011, supplemental grants were made to 17 states, all in the South and West, based on either low grant amounts per poor person or high rates of population growth. Supplemental grants were funded at $319 million (compared to the $16.5 billion in the basic TANF block grant), and hence had a limited effect on total TANF grant per poor child. Funding for these grants expired at the end of June 2011 and has not been reauthorized by Congress since. <3.2. Impact of Inflation on the Value of the Block Grant> Over time, inflation has eroded the value (purchasing power) of the TANF block grant and the MOE spending level. While annual inflation has been relatively low since FY1997 (averaging 2.1% per year), the decline in TANF's purchasing power has compounded to a loss in value of 36% from FY1997 to FY2018. Under the Congressional Budget Office's (CBO's) January 2019 inflation projections, if TANF funding remains at its current (FY2019) level through FY2029, the value of the TANF block grant would degrade even further, falling to half of its value in FY1997. Figure 2 shows the decline in the value of the TANF grant from FY1997 through FY2018, and as projected under the CBO January 2019 economic forecast. <3.3. Contingency Funds for Recessions> PRWORA established a contingency fund (originally $2 billion) that would be available in states with high unemployment or increased food assistance caseloads. Its funding was depleted in the last recession (exhausted in FY2010). Beginning with FY2011, the fund has received appropriations of $608 million per year. The fund provides extra grants for states that have high and rising unemployment (a 6.5% unemployment rate that is also at least 110% of the rate in the prior two years) or Supplemental Nutrition Assistance Program (SNAP) caseloads that are at least 10% higher than they were in 1994 or 1995; and spend more from their own funds than they spent in FY1994. The law provides that a state may receive up to 20% of its basic block grant in contingency funds; however, the funds are paid on a first-come-first-served basis. If the appropriation is insufficient to pay the full amount of contingency funds, they are prorated to the qualifying states. Both population growth and the increase in the rate at which SNAP-eligible households receive benefits have resulted in most states continuing to meet the SNAP caseload trigger for contingency funds through FY2019. Thus, most states with sufficient state spending on TANF-related activities could continue to draw from the contingency fund. The fund generally spends all of its total each year, regardless of the health of the economy and thus, it is not serving its original purpose to provide a source of counter-cyclical funding. <3.4. Legislation Related to Funding Levels and Distribution> The bills discussed in this report, with the exception of the RISE Out of Poverty Act ( H.R. 7010 , 115 th Congress), would maintain the overall TANF funding level and its distribution among the states, essentially extending the funding freeze that has prevailed since FY1997. A five-year reauthorization was proposed in the Jobs and Opportunity with Benefits and Services for Success Act, both as reported from the House Ways and Means Committee in the 115 th Congress ( H.R. 5861 ) and in its revised version in the 116 th Congress ( H.R. 1753 / S. 802 ). Both versions of the bill would eliminate the TANF contingency fund and use savings to offset an equal increase in mandatory child care spending. The Promoting Employment and Economic Mobility Act ( S. 3700 ; 115 th Congress) would have been a three-year reauthorization. H.R. 7010 would have indefinitely authorized funding for TANF. It would have provided for both an initial increase in TANF funding and ongoing annual increases. The initial increase for each state would have reflected both inflation and child population growth since 1997; future increases would have increased the block grant annually for those factors. While H.R. 7010 would not have redistributed funds among the states, the increases in funding would have been greater for those states that experienced faster child population growth than for those with slower growth, no growth, or population losses. In addition to the higher, capped funding amount of the basic block grant, H.R. 7010 would have provided open-ended (unlimited) matching funds for subsidized employment and to guarantee child care to certain populations. It would also have increased TANF contingency funds. Table 1 summarizes provisions related to TANF funding levels and the distribution of funds in selected legislation introduced in the 115 th and 116 th Congresses. <4. Use of Funds> Though most of the debates leading to PRWORA in 1996 and the creation of TANF focused on assistance to needy families with children, the law as written created a broad-purpose block grant. Thus, TANF is not a program. It is a funding stream that is used by states for a wide range of benefits and services. <4.1. Authority to Spend TANF Funds and Count MOE Dollars> States have broad discretion on how they expend federal TANF grants. States may use TANF funds "in any manner that is reasonably calculated" to accomplish the block grant's statutory purposes, which involve TANF increasing the flexibility of states in operating programs designed to provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and encourage the formation and maintenance of two-parent families. There are no requirements on states to spend TANF funds for any particular benefit or activity. Current law does not have a statutory definition of "core activities" to guide states to prioritize spending among the wide range of benefits and services for which TANF funds may be used. States also determine what is meant by "needy" for activities related to the first two statutory goals of TANF. And states may use federal TANF funds for activities related to reducing out-of-wedlock pregnancies and promoting two-parent families without regard to need. In addition to expending federal funds on allowable TANF activities, federal law permits states to use a limited amount of these funds for other programs. A maximum of 30% of the TANF block grant may be used for the following transfers or expenditures: transfers to the Child Care and Development Block Grant (CCDBG); transfers to the Social Services Block Grant (SSBG) (the maximum transfer to the SSBG is set at 10% of the basic block grant); and a state match for reverse commuter grants, providing public transportation from inner cities to the suburbs. The range of expenditures on activities that states may count toward the maintenance of effort requirement is like the authority to spend federal funds quite broad. The expenditures need not be "in TANF" itself, but in any program that provides benefits and services to TANF-eligible families in cash assistance, child care assistance, education and job training, administrative costs, or any other activity designed to meet TANF's statutory goals. States may count expenditures made by local governments toward the MOE requirement. Additionally, there is a general rule of federal grants management that permits states to count as a state expenditure third-party (e.g., nongovernmental) in-kind donations, as long as they meet the requirements of providing benefits or services to TANF-eligible families and meet the requirements for the types of activities that states may count toward the MOE requirement. Most federal rules about state accountability apply only to expenditures on assistance and families receiving assistance. TANF has few federal rules for the other expenditure categories. Thus, the federal rules under the CCDBG (e.g., the CCDBG health and safety requirements) apply only to federal TANF dollars transferred to CCDBG. These rules do not apply to TANF funds spent on child care but not transferred to CCDBG. The same principle applies to spending in most other expenditure categories where federal programs exist (e.g., child welfare services and early childhood education, such as Head Start). There is also little in the way of accountability for TANF spending other than assistance spending. <4.2. TANF Expenditures> Expenditures on TANF assistance have shrunk as a share of total TANF spending. As shown in Figure 3 , total (federal and state) expenditures on assistance totaled $21.9 billion in FY1995 under AFDC. This accounted for more than 7 out of 10 dollars spent on AFDC and related programs. However, by FY2018 assistance accounted for 1 out of 5 TANF dollars. Figure 4 shows the national total of TANF federal and state dollars by activity in FY2018. Most states shifted spending toward areas such as refundable tax credits and child welfare, pre-kindergarten, and other services. Additionally, for child care and work education and training, the reported expenditures are the total expenditures made from TANF and MOE funds not necessarily expenditures to support families receiving assistance. There is also considerable variation among the states in the share of spending devoted to each of these major categories of expenditures. Figure 5 shows expenditures by major category and state for FY2018. States are sorted by the share of their total expenditures devoted to assistance. The figure shows a wide range of expenditure patterns among the states. For example, the share of total expenditures devoted to assistance range from a low of 2.5% (Arkansas) to a high of 65.8% (Kentucky). Child care expenditures vary from zero in two states (Tennessee and Texas) to a high of 65.6% (Delaware). TANF's flexible funding permits states to use TANF funds in different and innovative ways. For example, states used TANF funds to develop nurse home visiting programs prior to the creation of the primary federal program (Maternal, Infant, and Early Childhood Home Visiting). States also used the flexibility inherent in TANF to develop subsidized jobs programs and different models of subsidizing jobs, including subsidizing private sector jobs. <4.3. Legislative Proposals on the Use of TANF Funds> The Jobs and Opportunity with Benefits and Services for Success Act, both as reported from the House Ways and Means Committee in the 115 th Congress ( H.R. 5861 ) and its revised version in the 116 th Congress ( H.R. 1753 / S. 802 ), has provisions that would require at least 25% of TANF expenditures from federal funds and expenditures counted as MOE dollars to be spent on "core" activities. The bills would provide a statutory definition of "core" activities that includes assistance, work activities, work supports, case management, and nonrecurrent short-term benefits. They would prohibit direct spending on child care within TANF by requiring that TANF dollars be transferred to the CCDBG in order for states to use federal TANF funds for child care, and they would restrict TANF spending on child welfare services. They would also phase out the ability of states to count the value of donated, in-kind services toward their MOE spending requirement. Additionally, they would limit TANF funds to providing benefits and services only to families with incomes under 200% of the federal poverty level (FPL). The version in the 116 th Congress would prohibit direct spending on early childhood education with TANF federal dollars. The RISE Out of Poverty Act ( H.R. 7010 , 115 th Congress) would not have directly limited states' use of basic block grant funds, though it had some provisions related to standards for cash benefit amounts that could affect state spending on assistance versus other benefits and services. H.R. 7010 also had separate matching funds for subsidized employment and guaranteed child care. S. 3700 (115 th Congress) would not have restricted the use of TANF funds. Rather, it would have required additional reporting by states on TANF expenditures. It would have required separate reports on the amount of TANF spending on (1) families that received assistance, and (2) those below 200% of the federal poverty level. Table 2 summarizes provisions related to the use of TANF funds in legislation proposed in the 115 th and 116 th Congresses. <5. Work Requirements> A major focus of the debates that led to the enactment of PRWORA was how to move assistance recipients into employment. Under AFDC law, most adult recipients were reported as not working (at least, not working in the formal labor market). In the 1980s and 1990s, both the federal government and the states conducted a series of demonstrations of different employment strategies for AFDC recipients, which concluded that mandatory work participation requirements in combination with funded employment services could, on average, increase employment and earnings and reduce assistance expenditures. These demonstrations also found that if such requirements and services were further combined with continued government support to supplement wages, family incomes could, on average, be increased. Mandatory participation requirements meant that if an individual did not comply with work requirements, they would be sanctioned through a reduction in their family's benefit. TANF implemented work requirements through a performance system that applies to the state , rather than implementing requirements on individuals; thus, the mandatory work participation requirements that apply to individual recipients are determined by the states rather than federal law. States have considerable flexibility in how they may implement their requirements. <5.1. Performance Measurement: The Minimum Work Participation Rate> The performance standard states must meet, or risk being penalized, is a minimum work participation rate (WPR). The minimum WPR is a performance standard for the state; it does not apply directly to individual recipients. The TANF statute requires states to have 50% of their families receiving assistance who have a "work-eligible individual" meet standards of participation in work or activities that is, a family member must be in specified activities for a minimum number of hours. There is a separate participation standard of 90% that applies to the two-parent families. A state that does not meet its minimum WPR is at risk of being penalized through a reduction in its block grant. The WPR represents the percentage of families with a work-eligible individual who are either working or participating in job preparation activities. Federal rules list those activities, and also require participation for a minimum number of hours per week (which vary by family type). Federal TANF law limits the extent to which states may count pre-employment activities such as job search and readiness or education and training. <5.1.1. Alternative Ways of Meeting the Minimum WPR> The complex rules of the WPR can be met through several different routes in addition to engaging unemployed recipients in job preparation activities: assistance paid to needy parents who are already working, caseload reduction, and state spending beyond what is required under TANF. States receive credit toward their minimum WPR for "unsubsidized employment" employment of a work-eligible individual in a regular, unsubsidized job. In the early years of TANF, states began to increase aid to families that obtained jobs while they received assistance. States changed the rules of their programs to allow families with an adult who went to work while on TANF to continue receiving assistance at higher earnings levels and for longer periods of time after becoming employed. This policy helped states meet their minimum WPR, as unsubsidized employment counts toward meeting that requirement. Additionally, such "earnings supplements" helped raise incomes of working recipients. In recent years, states have implemented new, separate programs that provide assistance to low-income working parents. For example, Virginia has a program that provides $50 per month for up to one year to former recipients who work and are no longer eligible for regular TANF assistance. Other states, such as California, provide small (e.g., $10 per month) TANF-funded supplements to working parents who receive Supplemental Nutrition Assistance Program (SNAP) benefits. Because these programs are TANF-funded and are assistance, they too help states meet the minimum WPR requirements. The statutory work participation targets (50% for all families, 90% for two-parent families) can be reduced by a "caseload reduction credit." This credit reduces the participation standard one percentage point for each percentage point decline in the number of families receiving assistance since FY2005. Additionally, under a regulatory provision, a state may get extra credit for caseload reduction if it spends more than is required under the TANF MOE. Because of the caseload reduction credit, the effective standards states face are often less than the 50% and 90% targets, and they vary by state and by year. Another practice states have engaged in to help meet their minimum WPR is aiding families in "solely state-funded programs" those funded with state dollars that do not count toward the TANF MOE. If a family is assisted with state monies not counted toward the TANF MOE, the state is not held accountable for that family by TANF's rules. Many states have moved two-parent families out of TANF and into solely state-funded programs, as these families carry a higher minimum work participation rate. In FY2018, 25 jurisdictions reported no two-parent families in their TANF assistance caseload, though all but two of these jurisdictions did aid two-parent families. Some states have excluded other families from TANF, particularly those less likely to be employed. For example, Illinois assists several categories of families in a non-TANF, solely state-funded program: parents with infants, refugees, pregnant women, unemployed work-eligible individuals not assigned to an activity, and individuals in their first month of TANF receipt. <5.1.2. Meeting the Minimum WPR in 2018> In FY2018, all states except Montana met their all-family (50%) minimum WPR standard. In that year, 18 states met their minimum all-family WPR through caseload reduction alone; and 4 additional states plus Puerto Rico met their minimum all-family WPR through a combination of caseload reduction and credit for state spending in excess of what is required under MOE rules. That is, 23 jurisdictions met their mandatory work participation standard without needing to engage a single recipient in work or job preparation activities. Note that these jurisdictions did report that some recipients in some of their families were working or engaged in job preparation activities, although they did not have to be in order to meet federal requirements. In terms of participation in work or job preparation activities in FY2018, states relied heavily on "unsubsidized employment" (i.e., families that receive TANF assistance while a work-eligible member is employed in a regular, unsubsidized job). As shown in Figure 6 , participation in unsubsidized employment was the most common activity, with a monthly average of 40.8% of TANF work-eligible individuals reporting unsubsidized employment during FY2018. In terms of funded employment services, the highest rate of participation among work-eligible individuals was 6.5% in job search and readiness in FY2018. In that year, 3.0% of work-eligible individuals participated in vocational educational training. Close to half of all work-eligible individuals reported no work or participation in activities during a typical month in FY2018. <5.2. Sanctions for Refusing to Comply with Work Requirements> Work requirements mean that participation in work or a job activity is mandatory for certain recipients of assistance. Individuals who do not comply with a work requirement risk having their benefits reduced or ended; thus, such financial sanctions operate as an enforcement mechanism. TANF requires a state to sanction a family by reducing or ending its benefits for refusing to comply with work requirements; however, under current law TANF does not prescribe the sanction the state must use, and the amount of the sanction is determined by the state. Most states ultimately end benefits to families who do not comply with work requirements, though a lesser sanction is often used for first, and sometimes second, instances of noncompliance. States can define "good cause" and other exceptions for families refusing to comply, allowing them to avoid sanctions. Additionally, federal law and regulations provide protections against sanctioning certain recipients. States are prohibited from sanctioning single parents with a child under the age of six if the parent cannot obtain affordable child care. States can also provide a waiver of program rules (including work requirements) for victims of domestic violence. <5.3. TANF Legislation Addressing Work Participation> Data indicating that nearly half of all work-eligible individuals were not engaged in activities in a typical month and states' reliance on unsubsidized employment has raised concerns that states have not focused on moving unemployed recipients into work. The effectiveness of the minimum WPR standard the primary federal provision to motivate states to try to engage unemployed recipients has been questioned. As discussed above, the caseload reduction credit has lowered the minimum WPR required of states, sometimes to zero. States have engaged in various practices to help them meet the minimum WPR. Even with relatively low rates of participation in job preparation activities, most states have met their WPR, raising the question as to whether states are "hitting the target, but missing the point." <5.3.1. Outcome Measures of Performance> The Jobs and Opportunity with Benefits and Services for Success Act, both as reported from the House Ways and Means Committee in the 115 th Congress ( H.R. 5861 ) and its revised version in the 116 th Congress ( H.R. 1753 / S. 802 ), would replace the minimum WPR with a new performance system based on employment outcomes. H.R. 5861 would have replaced the WPR with employment outcomes based on the measures used in the Workforce Innovation and Opportunity Act (WIOA) programs, measuring employment rates and earning levels among those who exit TANF assistance. Each state would have been required to negotiate performance levels with HHS. States that failed to meet those levels would have been at risk of being penalized. The proposal would also have required the development of a model to adjust the outcomes statistically for differences across states in the characteristics of their caseloads and economic conditions. H.R. 1753 / S. 802 introduced in the 116 th Congress would also end the minimum WPR, but replace it with a different outcome measure: the number of people who have left TANF assistance and are employed after six months divided by the total TANF caseload. Each state would negotiate a performance level with HHS on this measure, and risk being penalized through a reduction in its block grant if it fell short of that level. States would also be required to collect and report data on the WIOA measures that were contained in the 115 th Congress version of the bill, but these would be for informational purposes only. The other bills discussed in this report would have retained the WPR. However, S. 3700 (115 th Congress) would have required the collection of WIOA-like performance measure data and a study by HHS of the impact of moving from the WPR to a performance system based on outcome measures. Examining outcomes is often intuitively appealing. Outcomes such as job entry or leaving assistance with a job seem to measure more aptly whether TANF is achieving its goal of ending dependence of needy parents on government benefits through work. However, outcome measures can have their own unintended consequences in terms of influencing the design of state programs. The most commonly cited unintended consequence is "cream skimming," improving performance outcomes through serving only those most likely to succeed and leaving behind the hardest-to-serve. The statistical adjustment models contained in these proposals attempt to mitigate the incentive to "cream skim," but such models might not capture all relevant differences in caseload characteristics. In addition, it can be argued that outcomes do not directly measure the effectiveness of a program. Some families would leave the cash assistance rolls even without the intervention of a program. The effectiveness of a program can also be measured by whether the program made a difference: that is, did it result in more or speedier exits from the program and improve a participant's employment and earnings? That can only be measured by an evaluation of the impact of a program. There is research indicating that long-term impacts of labor force programs are not necessarily related to short-term outcome measures. <5.3.2. Universal Engagement> Current law requires that each adult (or minor who is not in high school) be assessed in terms of their work readiness and skills. States have the option to develop an Individual Responsibility Plan (IRP) on the basis of that assessment, in consultation with the individual, within 90 days of the recipient becoming eligible for assistance. As of July 2017, 37 states and the District of Columbia had IRP plans for TANF assistance recipients. Under current law, the contents of the plan must include an assessment of the skills, prior work experience, and employability of the recipient. The IRP is also required to describe the services and supports that the state will provide so that the individual will be able to obtain and keep employment in the private sector. In 2002, the George W. Bush Administration proposed, as part of its TANF reauthorization, a "universal engagement" requirement. The legislation written to implement the Administration's reauthorization proposal would have required states to create a written individualized plan for each family. This universal engagement proposal passed the House three times between 2002 and 2005 and was included in bills reported from the Senate Finance Committee during that period, but it was never enacted. H.R. 5861 , the version of the Jobs and Opportunity with Benefits and Services for Success Act in the 115 th Congress, revived the notion of requiring a plan for each work-eligible individual. The plan, required within 60 days of an individual becoming eligible for benefits, would have incorporated a requirement that the individual participate in the same activities that currently count toward the WPR for the minimum number of hours that currently apply in the rules for WPR participation. The minimum hours vary by family type (e.g., 20 hours per week for single parents, 30 for other family types). States would have had the ability to determine the sanction for noncompliance. H.R. 1753 / S. 802 , the revised version of this bill in the 116 th Congress, directs states to require that all work-eligible individuals who have been assessed and have an individualized plan, except single parents caring for infants, engage in the listed activities for a minimum number of hours based on the individuals' family types. Further, it specifies a formula (hours of participation divided by required hours) for sanctioning families with individuals who refuse to comply with work requirements, instead of allowing states to determine the sanction. States with families who fail to meet these requirements would be at risk of being penalized through a reduction in their block grant. The requirement in H.R. 1753 / S. 802 that all work-eligible individuals participate or be subject to sanction may raise a number of issues: As discussed, current law and regulations afford protections against sanctioning single parents with children under six who cannot obtain affordable child care, and victims of domestic violence. It is unclear how these protections would interact with a new "universal engagement" proposal. The emphasis on an individual participation requirement rather than a participation rate may raise questions about whether other groups should be exempted or afforded special treatment. For example, should ill, disabled, aged parent, or caretaker recipients be exempt from requirements? Further, individuals with disabilities must be accommodated in the workplace, and reduced hours is one of the potential accommodations. Thus, if Congress were to consider requiring disabled individuals to work, it might consider special dispensations for them that included a reduced-hour requirement. Research suggests that mandatory participation requirements result in fairly large amounts of noncompliance. The bill specifies how that noncompliance would be dealt with a proportional reduction in benefits but evidence is lacking on the impacts of that specific sanction versus other forms of sanctioning. The pre-1996 research, while finding that sanctioning was important in enforcing mandatory requirements, which led to higher employment and lower assistance, did not produce evidence on whether any specific form of sanctioning was more effective than others. H.R. 7010 (115 th Congress) also included "universal engagement" provisions, but their general intent was to require that each family have a plan rather than to enforce work participation requirements. This bill also would have required states, before sanctioning noncomplying recipients, to notify the family of the noncompliance; provide the noncomplying individual with an opportunity for a face-to-face meeting; and consider whether the noncompliance resulted from mental or physical barriers to employment, limited English proficiency, or failure to receive or access services in the family's plan. Table 3 summarizes the work participation provisions of the selected TANF legislation in the 115 th and 116 th Congresses. <6. The TANF Caseload Decline and Child Poverty> The debate that led to the creation of TANF in 1996 focused on assistance to needy families with children primarily those with one parent, usually a mother without employment in the formal labor market. As discussed earlier in this report, three provisions of law largely shaped the current TANF landscape: limited funding for TANF; TANF's broad authority for states to use funds on a wide range of activities, which has allowed states to use TANF funds for activities unrelated to assistance and the population receiving assistance; and the mandatory work participation rates, which provide states incentives to reduce the cash assistance caseload as well as expand aid to families with earnings. <6.1. Caseload Decline: Reduction in Need or Fewer Families in Need Receiving Benefits?> Figure 7 shows estimates that fewer eligible people actually received cash assistance for selected years over the period covered. The selected years include 1995, the year before the enactment of PRWORA; 2000 and 2007, which both represent peaks in the economic cycle; 2010, the year following the end of the most recent recession; and 2016, the most recent year for which data are available. The figure shows that the population eligible for assistance has varied with the economic cycle. However, except for a brief uptick in the caseload during the most recent recession, the number of people receiving assistance has generally declined. The TANF caseload decline resulted from both a decline in the population eligible for assistance (the population in need) and a decline in the share of the eligible population actually receiving benefits; however, much of it was the result of the decline in the share of the eligible population receiving benefits. In 1995, 81.6% of estimated AFDC-eligible individuals received benefits. In 2016, 26.6% of people estimated to be eligible for TANF cash assistance received benefits. <6.2. Child Poverty and Its Alleviation> How has the decline in the share of eligible individuals affected the child poverty rate? Figure 8 compares the national child poverty rate using income that does not include assistance and income with assistance (AFDC in 1995, TANF thereafter) included. In the selected years the figure covers, both AFDC and TANF reduced the child poverty rate by less than 1 percentage point. In 1995, AFDC income reduced the observed poverty rate by 0.9 percentage points. In 2016, TANF reduced the observed poverty rate by 0.2 percentage points. Though AFDC did relatively little to change the child poverty rate, it did reduce the severity of poverty for children. Figure 9 compares the child deep poverty rate (family incomes under 50% of the poverty threshold) using income that does not include assistance and income with assistance (AFDC in 1995, TANF thereafter) included. AFDC income reduced the deep child poverty rate from 11.2% to 6.6% in 1995. In contrast, TANF assistance decreased the child deep poverty rate from 7.7% to 7.1% in 2016. Another way to examine how the decline in the share of individuals eligible for TANF has diminished the role assistance has played in alleviating child poverty is to examine the pre- and post-assistance aggregate poverty gap. The poverty gap for a poor family is the difference between its poverty threshold and total money income. For example, if a family's poverty threshold is $25,000 and it has money income equal to $20,000, its poverty gap is $5,000. If another family with the same poverty threshold has money income equal to $10,000, its poverty gap is $15,000. The poverty gap for a nonpoor family is, by definition, $0. The aggregate poverty gap is the poverty gap for each poor family summed, and it therefore represents a measure of the depth of poverty (in dollars) for every family in the country combined. If the aggregate gap were somehow filled (i.e., if the family in the first example earned or received an extra $5,000, the family in the second earned or received an extra $15,000, and this same pattern repeated for all families in poverty) poverty would be eliminated. Table 4 shows the pre- and post-assistance poverty gaps for families with children for selected years from 1995 to 2016 in constant (inflation-adjusted) 2016 dollars. In 1995, AFDC reduced the poverty gap by over $24 billion (more than 27% of the pre-assistance poverty gap of approximately $90 billion). After 1996, the poverty gap varied with the economic cycle. However, the share of the gap that was reduced by TANF assistance declined throughout the period in both dollar and percentage terms. In 2016, TANF cash assistance reduced the poverty gap by approximately $4 billion, or 5.7%. <6.3. TANF Legislation Addressing the Caseload Decline and Child Poverty> The drop in the share of TANF-eligible individuals who receive benefits may raise the question of whether a goal of TANF should be caseload reduction per se, regardless of whether or not the size of the population in need is growing. Under TANF, the primary incentive for states to maintain or reduce the number of families receiving assistance is that states are provided a limited amount of TANF funds. States bear the financial risk of the costs of an increase in the number of families receiving assistance. Such an increase would mean a state would have fewer TANF funds to spend on activities other than assistance. The state might have to use more non-TANF dollars if it wanted to make up the shortfall. On the other hand, fewer families receiving assistance frees up funds to use for such activities. All the bills discussed in this report would maintain a limitation on TANF funds distributed to states to finance assistance, though the RISE Out of Poverty Act ( H.R. 7010 , 115 th Congress) would increase those funds for inflation and population growth. All the bills discussed in this report would either eliminate or limit the caseload reduction credit against the TANF work participation standards. This would eliminate or limit one incentive for states to reduce their assistance caseload. However, states would still have the incentive to reduce their caseload because of limited funding. The bills discussed in this report that would require a minimum percentage of TANF spending be on "core" activities do not directly address the question of whether the caseload decline has left a population unserved. They would constrain states in what they spend TANF dollars on, not who benefits from this spending. States would be able to meet the requirement by spending a sufficient amount on work activities, but those dollars could serve disadvantaged parents who do not receive assistance. H.R. 7010 would have required states to have procedures in place, such as pre-sanction reviews, and prohibit full-family sanctions for failure to meet program requirements. These provisions could have affected the share of the TANF-eligible population that receives assistance. All of the bills discussed in this report except S. 3700 (115 th Congress) would make child poverty reduction a goal of the TANF block grant. H.R. 7010 would have also required states to determine family budgets sufficient to meet needs and required them to ensure that the amount of assistance paid by the state meets those needs. This is not a requirement under current law. Under AFDC, states were required to determine a dollar standard of "need," but were not required to pay assistance in the amount of "need." Table 5 summarizes provisions related to child poverty reduction and incentives for caseload reduction in selected TANF legislation proposed in the 115 th and 116 th Congress. <7. Conclusion> The debates that led to the creation of TANF focused on the terms and conditions under which assistance for needy families with children had been provided. However, Congress created TANF as a broad-purpose block grant that funds a wide range of benefits and services related to childhood economic disadvantage. Since the mid-1990s, states have shifted spending from assistance to those other TANF-funded benefits and services. Spending on assistance fell as the number of families and individuals receiving assistance fell. Much of the decline in the assistance caseload resulted from a drop in the share of eligible people receiving benefits. A substantial number of children and their parents were eligible for TANF assistance but did not receive it; in 2016, an estimated total of 12.4 million individuals were eligible but did not receive TANF assistance, compared to 4.5 million individuals who received benefits at some point in that year. The result was a diminished impact of assistance on alleviating child poverty. Other means-tested programs have grown in terms of spending and recipients (e.g., the Earned Income Tax Credit (EITC), the child credit, the Supplemental Nutrition Assistance Program (SNAP), and Medicaid). However, these programs do not provide ongoing cash assistance to families to meet basic needs. SNAP provides food assistance, Medicaid provides medical assistance, and the refundable tax credits the EITC and the refundable portion of the child credit provide families with income only once a year at tax refund time. If policymakers conclude there is an unmet need for ongoing cash assistance to families to meet basic needs, they might consider changes to TANF or consider other alternatives outside of TANF. A common feature of most of the bills discussed in this report is an attempt to focus a greater share of TANF dollars on activities related to assistance and work, and revamp the way state programs are assessed on their performance in engaging assistance recipients in work or job preparation activities. The elimination of the caseload reduction credit would remove one of the incentives to reduce the number of families receiving assistance. However, there are proposals that would go beyond changes to TANF to address issues related to economic security for families with children. In 2019, a National Academy of Sciences panel on child poverty proposed converting the child tax credit, with a refundable portion that is currently paid once a year through tax refunds, into a monthly, almost universal child allowance. The NAS proposal would provide the child allowance to families both with and without earnings. The NAS stated: The principal rationale for a child allowance paid on a monthly basis is that it would provide a steady, predictable source of income to counteract the irregularity and unpredictability of market income . Because the child allowance would be available to both low-income and middle-class families, it would carry little stigma and would not be subject to the varying rules and administrative discretion of a means-tested program, thereby promoting social inclusion. Other proposals would seek to guarantee jobs or subsidize jobs. For example, the ELEVATE Act ( H.R. 556 / S. 136 ), introduced by Representative Danny Davis and Senator Wyden, would provide matching grants to states (100% federally funded grants during recessions) to subsidize wage paying jobs for individuals. These proposals echo some of the proposals that were made during past debates. Guaranteed incomes a child allowance is, in effect, a guaranteed income for families with children and guaranteed or expanded jobs programs were both proposed in the past. Should Congress again consider such proposals, they may raise issues that have been recurring themes in the debates on policies for low-income individuals, such as whether benefits should be universal or targeted; whether intervention should be in the form of income, services, or employment; whether there should be behavioral conditions (e.g., a requirement to work) attached to aid; and whether policies should be determined nationally or at the state and local levels.

The Temporary Assistance for Needy Families (TANF) block grant was created by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; P.L. 104-193 ). That law culminated four decades of debate about how to revise or replace the Aid to Families with Dependent Children (AFDC) program. Most AFDC assistance was provided to families headed by single mothers who reported no work in the labor market, and the debates focused on whether such aid led to dependency on assistance by discouraging work and the formation and maintenance of two-parent families. TANF provides a fixed block grant to states ($16.5 billion total per year) that has not been adjusted at either the national or state levels since 1996. The TANF block grant is based on expenditures in the AFDC program in the early to mid-1990s, and thus the distribution of funds among the states has been "locked in" since that time. The purchasing power of the block grant has also declined over time due to inflation. Since 1997, it has lost 36% of its initial value. The debates that led to the creation of TANF in 1996 focused on the terms and rules around public assistance to needy families with children. However, PRWORA created TANF as a broad-purpose block grant. States may use TANF funds "in any manner that is reasonably calculated" to achieve the block grant's statutory purposes, which involve TANF providing states flexibility to address the effects or the root causes of economic and social disadvantage of children. For pre-TANF programs, public assistance benefits provided to families comprised 70% of total spending. In FY2018, such public assistance comprised 21% of all TANF spending. States spend TANF funds on activities such as child care, education and employment services (not necessarily related to families receiving assistance), services for children "at risk" of foster care, and pre-kindergarten and early childhood education programs. There are few federal rules and little accountability for expenditures other than those made for assistance. Before the 1996 law, many states experimented with programs to require work or participation in job preparation activities for AFDC recipients. PRWORA established "work participation requirements." Most of these requirements relate to a performance system that applies to the state as a whole, and are not requirements that apply to individuals. The system requires states to meet a minimum work participation rate (WPR). The complex rules of the WPR can be met through several different routes in addition to engaging unemployed recipients in job preparation activities: caseload reduction, state spending beyond what is required under TANF, and assistance to needy parents who are already working. In FY2018, all but one state met the participation standard. A total of 18 states met their minimum WPR through caseload reduction alone. Spending on assistance and the number of individuals receiving assistance have both declined substantially since the mid-1990s. The reduction in the assistance caseload was caused more by a decline in the percentage of those who were eligible receiving benefits than a decline in the number of people who met TANF's state-defined definitions of financial need. Assistance under TANF alleviates less poverty than it did under AFDC. While there have been expansions in other low-income assistance programs since PRWORA was enacted, such as the refundable tax credits from the Earned Income Tax Credit (EITC) and the child tax credit, those programs do not provide ongoing assistance on a monthly basis. Some of the TANF reauthorization bills introduced in the 115 th and 116 th Congresses attempt to focus a greater share of TANF dollars on activities related to assistance and work. Additionally, these bills would revise the system by which state programs are assessed on their performance in engaging assistance recipients in work or job preparation activities.

crs_R46221

crs_R46221_0

One of the basic rationales underlying the grant of patent rights is that such rights provide an incentive for inventors to innovate. Part of the bargain, however, is that those rights will expire after a defined time period. This principle appears in the U.S. Constitution, which empowers Congress "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Congress has also enacted this principle into law: a patent on a new invention will generally expire twenty years after the corresponding patent application was filed. Intellectual property (IP) rights, including patent rights, are generally considered to play an essential role in encouraging the research and development (R&D) necessary to create new pharmaceutical products. Because these periods of exclusivity can allow the patent holder, such as a drug manufacturer, to charge higher-than-competitive prices, the patent holder has an incentive to prolong the period of exclusivity, such as by filing for additional patents to cover a product. In the pharmaceutical context, critics argue that some brand-name drug and biological product manufacturers (the brands) use patenting strategies to "game[] the patent system" to maximize profits and forestall competition from generic drug or biosimilar manufacturers (the generics). Others reject this charge, contending that these practices are a legitimate use of the patent system and are necessary to incentivize the billions of dollars in R&D that lead to new, life-saving drugs. This report discusses four pharmaceutical patenting practices commentators have criticized: "Evergreening" : Commentators allege that some pharmaceutical companies obtain new patents to cover a product as older patents expire to extend the period of exclusivity without significant benefits for consumers. "Product Hopping" : Commentators also contend that as patents on a product expire, pharmaceutical companies will attempt to switch the market to a slightly different product covered by a later-expiring patent, "hopping" from one product to the next. "Patent Thickets" : Commentators further argue that pharmaceutical companies have allegedly surrounded their products with many overlapping patents on a single product. Critics allege that these patent "thickets" may deter potential competitors even if the patents are weak or invalid, due to the time, expense, and uncertainty of challenging a significant number of patents. "Pay-for-Delay" Settlements : Brand and generic pharmaceutical companies will often settle litigation that results when a generic seeks to enter the market to compete with the patented branded product. Certain settlement agreements involve the transfer of value from the brand to the generic in return for the generic delaying its market entry. Such "pay-for-delay" or "reverse payment" settlements are characterized as anticompetitive because they may delay the entry of cheaper generic drugs into the market, thereby allowing the brand to maintain its exclusivity period on a patent that otherwise may have been invalidated, to the benefit of the settling companies but at the expense of consumers. These practices take place against a backdrop of a broader public policy debate over drug pricing. The Department of Health and Human Services (HHS) has found that national spending on pharmaceutical products has risen in recent years and predicted that these expenditures will continue to rise faster than overall healthcare spending. Commentators acknowledge that factors other than IP rights contribute to the price consumers pay for prescription drugs and biological products (biologics), including consumer demand, manufacturing costs, R&D costs, the terms and structure of private health insurance, and the involvement of government insurance programs such as Medicaid . Nevertheless, pharmaceutical products are often protected by IP rights . Some studies have shown that IP rights are among the most important factors driving high drug prices. As these pharmaceutical patenting practices may affect drug prices, they have attracted congressional interest. Several legislative proposals seek to curtail these patenting practices by reducing their effectiveness or outlawing them entirely. Proponents see such legislation as a potential way to lower pharmaceutical prices. This report explains these allegedly anticompetitive patenting practices and reviews a number of proposals to reform them. First, this report provides a brief legal background, including the basics of Food and Drug Administration (FDA) law, patent law, antitrust law, and the interaction between patent rights and FDA approval of pharmaceutical products. This report next overviews the patenting practices that some pharmaceutical companies have allegedly used to extend their effective periods of patent protection. Finally, this report details a number of proposals aimed at reforming or limiting such practices. <1. Legal Background> <1.1. FDA Regulation of Pharmaceutical Products> FDA must approve new drugs and biologics prior to their marketing in interstate commerce. The FDA regulatory processes for drugs and biologics are similar, broadly speaking, but also distinct in certain aspects. <1.1.1. New and Generic Drug Approval> FDA approves new drugs through the new drug application (NDA) process. To obtain approval, the manufacturer must submit an NDA that demonstrates, among other things, that the drug is safe and effective for its intended use. The manufacturer must provide to FDA clinical data establishing the new drug's safety and effectiveness. The studies necessary to establish safety and efficacy are often expensive and lengthy; in 2015 to 2016, the median cost of a single clinical trial was $19 million, and in one instance was $347 million. The average cost to develop a new drug has been generally estimated to be between $1 billion to $3 billion, and the average time for FDA approval is over twelve years. To encourage competition and lower drug prices through generic drug entry, the Hatch-Waxman Act of 1984 (Hatch-Waxman) created a streamlined approval process for generic drugs. Rather than file an NDA, Hatch-Waxman allows generics to file an abbreviated new drug application (ANDA) that relies on FDA's prior approval of another drug with the same active ingredient (the "reference listed drug" or RLD) to establish that the generic drug is safe and effective. The generic may thus forgo conducting lengthy and expensive clinical trials by instead demonstrating that the generic drug is pharmaceutically equivalent and bioequivalent to the RLD. <1.1.2. Biological Products and Biosimilar Licensure> Like drugs, biologics are products intended for use in the prevention and treatment of human disease. Biologics are distinct from drugs, however, in that they are derived from biological material, such as a virus or blood component. Biological products "are generally large, complex molecules" that "may be produced through biotechnology in a living system, such as a microorganism, plant cell, or animal cell." A biologic may only be marketed in the United States after its manufacturer submits and FDA approves a biologics license application (BLA). To approve a BLA, FDA must determine that the biologic is "safe, pure, and potent," and that the production and distribution process "meets standards designed to assure that the biological product continues to be safe, pure, and potent." Like Hatch-Waxman, the Biologics Price Competition and Innovation Act of 2009 (BPCIA) sets out an abbreviated approval process to encourage early market entry of biologics that are sufficiently similar to an already approved biological product (the "reference product"). A biological product is sufficiently similar to an approved biologic if it is "biosimilar" to (or interchangeable with) the reference product. To show biosimilarity, the manufacturer must submit, among other things, data demonstrating that its product is "highly similar to the reference product notwithstanding minor differences in clinically inactive components" with no "clinically meaningful differences" between the two products "in terms of the safety, purity, and potency of the product." To balance the interest in competition which the abbreviated approval pathways aim to encourage with the countervailing interest in encouraging innovation, federal law also establishes periods of regulatory exclusivity that limit FDA's ability to approve generic drugs and biosimilars under certain circumstances. These exclusivities generally aim to encourage new drug or biologic applicants to undertake the expense of generating clinical data and other information needed to support an NDA or BLA. Other exclusivities are designed to encourage generic or biosimilar (follow-on product) manufacturers to submit abbreviated applications as soon as permissible. <1.2. Patent Law> Patents, which are available for a wide variety of technologies beyond pharmaceuticals, grant the patent holder the right to exclude others from making, using, selling, or importing a patented invention within the United States for a defined term of years. A person who makes, uses, sells, or imports a patented invention without permission from the patent holder during this period infringes the patent and is potentially liable for monetary damages and subject to other legal remedies. Patents are generally justified on the basis that temporary exclusive rights are necessary to provide incentives for inventors to create new and useful technological innovations. This rationale maintains that absent legal protections, competitors could freely copy inventions once marketed, denying the original creators the ability to recoup their investments in time and effort, and reducing the incentive to create in the first place. Patent incentives are said to be particularly necessary for products like pharmaceuticals, which are costly to develop, but easily copied once marketed. Because patents grant a temporary and limited "monopoly" to the patent holder, they may lead to increased prices for goods or services that the patent covers. The existence of a patent on a particular manufacturing process, for example, generally means that only the patent holder (and persons licensed by the patent holder) can use that patented process until the patent expires. In some circumstances, this legal exclusivity may allow the patent holder (or her licensees) to charge higher-than-competitive prices for goods made with the patented process, as a monopolist would, because the patent effectively shields the patentee from competition. Patents are obtained by formally filing a patent application with the U.S. Patent and Trademark Office (PTO), initiating a process called patent prosecution. A PTO patent examiner will evaluate the patent application to ensure it meets all the applicable legal requirements to merit the grant of a patent. In addition to requirements regarding the technical disclosure of the invention, the claimed invention must be (1) new, (2) useful, (3) nonobvious, and (4) directed to patentable subject matter. If the PTO issues (i.e., grants) a patent, its term typically expires twenty years from the patent application's filing date. This twenty-year term may be extended in certain circumstances. For example, the patent term may be adjusted to account for excessive delays in patent examination at the PTO. In the pharmaceutical context, patents claiming a drug product or medical device (or a method of using or manufacturing the same) may be extended for up to five years to account for delays in obtaining regulatory approval from FDA, if certain statutory conditions are met. Patent rights are generally independent and distinct from the regulatory exclusivities administered by FDA. Patent rights granted by the PTO are based primarily on the technological novelty of the claimed invention, while regulatory exclusivities granted by FDA result from the completion of FDA's regulatory process for particular pharmaceutical products meeting certain criteria. Patents are not self-enforcing. That is, to obtain relief from infringement, the patent holder generally must sue the alleged infringer in court. If such a lawsuit succeeds, the patent holder may obtain monetary damages and, in certain cases, an injunction, which is a court order that prohibits the defendant from infringing the patent in the future. Patents thus provide a negative right to prevent another person from practicing (i.e., making, using, selling, or importing) the claimed invention. Patents do not themselves, however, provide the patent holder any affirmative right to practice the invention. In the pharmaceutical context, this principle means that even if a drug or biologic manufacturer has a patent on a particular product (or inventions related to making or using that product), it still cannot market that product without FDA approval. <1.3. Types of Pharmaceutical Patents> If a person is the first to synthesize a particular chemical believed to be useful for the treatment of human disease, she may file for a patent on that chemical itself, and presuming that the application meets all requirements for patentability the PTO will grant the patent. Patents on a pharmaceutical product's active ingredient (sometimes called "primary patents" ) may be of particular value to the manufacturer because these patents are usually difficult to "invent around" (i.e., develop a competing product that does not infringe the patent). However, primary patents are hardly the only patents that cover pharmaceuticals, and are not necessarily the most important to manufacturers as a practical matter. Indeed, for biologics, if the active ingredient is naturally occurring, it may not be legally possible to patent an unaltered form of the biologic itself because it constitutes patent-ineligible subject matter. Pharmaceutical patents may cover many different features of a drug or biologic beyond a claim on the active ingredient itself. Such "secondary patents" may claim, among other things 1. formulations of the drug or biologic (e.g., an administrable form or dosage); 2. methods of using the pharmaceutical (e.g., an indication or use for treating a particular disease); 3. methods of manufacturing the pharmaceutical product or manufacturing technologies used to make the pharmaceutical; 4. methods of administrating the pharmaceutical or technologies used to administer the pharmaceutical; or 5. other chemicals related to the active ingredient, such as crystalline forms, polymorphs, intermediaries, salts, and metabolites. Like other inventions, for an inventor to receive a patent on any of these innovations, it must be new, useful, nonobvious, and sufficiently described in the patent application. In addition, if a person invents an improvement on any of these technologies for example, a new formulation of the drug, a new use, a different manufacturing process, etc. then the inventor can file for a patent on that improvement, which receives its own patent term. Although the term "improvement patent" is traditionally used, it is a somewhat misleading phrase, as the new version need not be "better" to be patentable. Rather, the improvement must simply be new and nonobvious that is, "more than the predictable use of prior art elements according to their established functions." Any person wishing to practice the improved form of the invention will need permission from both the holder of the patent on the original technology and the holder of the improvement patent (who need not be the same entity), if neither patent has yet expired. If the original patent has expired but the improvement patent has not, patent law does not impede any person from making and using the original, unimproved version. <1.4. Patent Dispute Procedures for Generic Drugs and Biosimilars> Federal law contains specialized procedures for certain pharmaceutical patent disputes, with the general goal of encouraging early resolution of disputes relating to generic and biosimilar market entry. The act of applying with FDA for approval of a generic drug or biosimilar triggers these procedures. Under certain circumstances, patent law treats the filing of such FDA applications as an "artificial" act of patent infringement, allowing for the resolution of patent disputes before the generic or biosimilar product is marketed to the public. These procedures can affect whether and when a generic drug or biosimilar can be marketed and, as a result, determine when a brand-name product becomes subject to direct competition. The procedures differ depending on whether the pharmaceutical is regulated as a drug or as a biologic. The Hatch-Waxman Act governs the approval process for small-molecule drugs. Under Hatch-Waxman, a drug manufacturer must list in its NDA any patent claiming the drug that is the subject of the application or a method of using that drug. FDA includes these patents in its list of approved products known as the Orange Book . When a generic manufacturer files an ANDA, it must provide a certification for each patent listed in the Orange Book with respect to the referenced drug. In particular, with some exceptions, the generic applicant must provide one of four certifications under the following paragraphs: (I) there is no patent information listed; (II) the patent has expired; (III) the date the patent will expire; or (IV) the patent is invalid and/or not infringed by the generic applicant. Paragraph (I) and (II) certifications do not affect FDA's ability to approve the ANDA. If the generic applicant makes a Paragraph (III) certification, however, FDA may not approve the ANDA until the patent at issue has expired. A Paragraph (IV) certification triggers Hatch-Waxman's specialized patent dispute procedures, often resulting in litigation. First, the generic applicant must give notice of the ANDA and the Paragraph (IV) certification to the patentee and NDA holder. The patent holder then has forty-five days to sue the generic applicant. If she does file suit, FDA generally cannot approve the ANDA for thirty months while the parties litigate the patent dispute a period often referred to as the "thirty-month stay." As an incentive for a generic to enter the market, Hatch-Waxman also provides 180 days of marketing exclusivity to the first generic to make a Paragraph (IV) certification. A different patent dispute resolution scheme, governed by the BPCIA, applies to biologics and biosimilars. Under the BPCIA, regulatory approval of biologics is not directly contingent on resolution of patent disputes. Moreover, in contrast to the Hatch-Waxman approach, patent information need not be listed as part of the original BLA. As a result, no patent information is currently listed in the Purple Book , FDA's lis t of approved biological products (i.e., the biologics analogue of the Orange Book ). Accordingly, patent disputes involving biosimilars may be resolved through the BPCIA's "patent dance," "a carefully calibrated scheme for preparing to adjudicate, and then adjudicating, claims of infringement." The first step in the patent dance process is triggered when, not later than twenty days after FDA accepts a biosimilar application, the applicant provides the application to the reference product sponsor, along with information on how the biosimilar is manufactured. "These disclosures enable the [reference product] sponsor to evaluate the biosimilar for possible infringement of patents it holds on the reference product (i.e., the corresponding biologic)." The biosimilar applicant and reference product sponsor then engage in a series of information exchanges regarding the patents that each party believes are relevant, as well as the parties' positions as to the validity and infringement of the patents. Depending on the extent of their participation in this information exchange, each party may have the opportunity to litigate the patents at the conclusion of the patent dance, or later on, when the biosimilar is marketed. Injunctive relief to compel the biosimilar applicant to engage in the patent dance is unavailable under federal law. <1.5. Antitrust Law> Some of the patenting practices described below have been challenged under the federal antitrust laws; thus, background on this area is helpful in understanding those challenges. The Supreme Court has stated that the "primary purpose of the antitrust laws" is to protect and promote competition "from which lower prices can later result." To this end, antitrust law generally aims to "prohibit . . . anticompetitive conduct and mergers that enable firms to exercise market power." The Sherman Antitrust Act of 1890 (the Sherman Act) "contains two main substantive provisions that prohibit agreements in restraint of trade and monopolization, respectively." Certain pharmaceutical patenting practices have been challenged under each of these two sections. <1.5.1. Section 1 of the Sherman Act> Section 1 of the Sherman Act bars "[e]very contract, combination . . . , or conspiracy, in restraint of trade or commerce." Although that language appears to sweep broadly, the Supreme Court has interpreted Section 1 to only bar unreasonable restraints on trade. In evaluating the reasonableness of contractual restraints on trade under Section 1, courts have found that "some agreements and practices are invalid per se, while others are illegal only as applied to particular situations." Unless the agreement falls within a per se illegal category, courts generally apply a "rule-of-reason" analysis to determine whether a restraint on trade is reasonable. Per Se Illegal. Certain agreements are considered per se illegal "without regard to a consideration of their reasonableness" "because the probability that these practices are anticompetitive is so high." Only restraints that "have manifestly anticompetitive effects" and lack "any redeeming virtue" are held to be per se illegal. Examples of per se illegal restraints include agreements for horizontal price fixing, market allocations, and output limitations. To prevail on a claim of a per se illegal agreement, the plaintiff need only demonstrate that the agreement in question falls in one of the per se categories; in other words, "liability attaches without need for proof of power, intent or impact." The Rule - of - Reason Analysis. Challenged restraints that are not in the per se illegal category are generally analyzed under the rule-of-reason approach. While the Supreme Court has not developed a canonical framework to guide this totality-of-the-circumstances reasonableness inquiry, most courts take a similar approach in resolving rule-of-reason cases. Under this burden-shifting approach, a Section 1 plaintiff has the initial burden of demonstrating that a challenged restraint has anticompetitive effects in a "properly defined product" and geographic market that is, that the restraint causes higher prices, reduced output, or diminished quality in the relevant market. If the plaintiff succeeds in making this showing, the burden then shifts to the defendant to rebut the plaintiff's evidence with a procompetitive justification for the challenged practice. For example, if a Section 1 plaintiff alleges that the challenged restraint produces higher prices, the defendant might attempt to contest that allegation or show that any price increases are offset by improvements in its products or services. If the defendant cannot produce such a justification, the plaintiff may prevail. However, if the defendant adequately demonstrates a procompetitive justification, the burden then shifts back to the plaintiff to show either (1) that the restraint's anticompetitive effects outweigh its procompetitive effects or (2) that the restraint's procompetitive effects could be achieved in a manner that is less restrictive of competition. Quick Look Analysis. In certain instances, courts may use "something of a sliding scale in appraising reasonableness," applying a more abbreviated rule-of-reason analysis to an agreement, referred to as a "quick look." In identifying this intermediate standard of review, the Supreme Court explained that, because "[t]here is always something of a sliding scale in appraising reasonableness," the "quality of proof required" to establish a Section 1 violation "should vary with the circumstances." As a result, the Court has concluded that in certain cases specifically, those in which "no elaborate industry analysis is required to demonstrate the anticompetitive character" of a challenged agreement plaintiffs can establish a prima facie case that an agreement is anticompetitive without presenting the sort of market power evidence traditionally required at the first step of the rule-of-reason analysis. While there is no universally accepted "quick look" framework, several courts of appeals have endorsed a modified burden-shifting approach in "quick look" cases. Under this approach, if a Section 1 plaintiff can establish that a challenged restraint is obviously likely to harm consumers, the restraint is deemed "inherently suspect," and therefore presumptively anticompetitive. A defendant can rebut this presumption by presenting "plausible reasons" why the challenged practice "may not be expected to have adverse consequences in the context of the particular market in question," or why the practice is "likely to have beneficial effects for consumers." If the defendant fails to offer such reasons, the plaintiff prevails. However, if the defendant offers such an explanation, the plaintiff must address the justification by either explaining "why it can confidently conclude, without adducing evidence, that the restraint very likely harmed consumers" or providing "sufficient evidence to show that anticompetitive effects are in fact likely." If the plaintiff succeeds in making either showing, "the evidentiary burden shifts to the defendant to show the restraint in fact does not harm consumers or has 'procompetitive virtues' that outweigh its burden upon consumers." However, if the plaintiff fails to rebut the defendant's initial justification, its challenge is assessed under a full rule-of-reason framework. <1.5.2. Section 2 of the Sherman Act> Section 2 of the Sherman Act 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." Despite the facially broad language of Section 2, the Supreme Court has clarified that monopolization is only illegal if "it is accompanied by an element of anticompetitive conduct ." It is not illegal to possess monopoly power that is the result of, for example, "a superior product, business acumen, or historic accident." Thus, establishing a Section 2 violation requires proving that the defendant "possessed monopoly power in the relevant market" and acquired or maintained that power using anticompetitive conduct. Courts generally analyze whether conduct is anticompetitive (i.e., step two of the analysis) using a rule-of-reason approach. <1.5.3. Enforcement> Federal antitrust laws are primarily enforced through three mechanisms: (1) enforcement actions brought by the U.S. Department of Justice's Antitrust Division, (2) enforcement actions brought by the Federal Trade Commission (FTC), or (3) lawsuits brought by a private party or by a state attorney general on behalf of a private party. In particular, Section 5 of the FTC Act gives the FTC authority to combat "[u]nfair methods of competition" generally, which includes violations of the Sherman Act. FTC enforcement typically begins with a confidential investigation into the relevant conduct. A company may resolve the investigation by entering into a consent order agreeing to stop or to address the potentially anticompetitive practices. If the FTC and the company do not reach a consent order, the FTC may begin an administrative proceeding or may seek relief in the federal courts. The administrative proceeding is similar to a court proceeding, but is overseen by an administrative law judge (ALJ). If the ALJ finds that there has been a violation, the FTC may issue a cease-and-desist order. The ALJ's decision is appealable to the full FTC, then to a U.S. Court of Appeals and, finally, to the Supreme Court. <2. Pharmaceutical Patenting Practices> Patent holders generally seek to use their rights to the fullest extent permitted by law, regardless of their patent's technological field. From the patent holders' perspective, the practices described below are appropriate uses of the legal rights granted by their patents, which were obtained only after a rigorous examination process that demonstrated compliance with the patentability requirements. Critics, however, view these practices as harmful strategies that exploit the patent system in ways that Congress did not intend. <2.1. "Evergreening"> <2.1.1. Definition> Evergreening, also known as patent "layering" or "life-cycle management," is a practice by which drug innovators allegedly seek "to prolong their effective periods of patent protection [through] strategies that add new patents to their quivers as old ones expire." As discussed above, because different aspects of pharmaceutical products (and improvements thereon) are patentable, dozens of different patents can protect a single pharmaceutical product. The average number of patents per drug has been steadily rising since Hatch-Waxman was enacted in 1984. On average, there are 2.7 patents listed for each product listed in the Orange Book . Particularly profitable products, however, are usually protected by many more patents. One recent study of the top twelve drugs by gross U.S. revenue found that pharmaceutical manufacturers obtained an average of seventy-one patents on each of these drugs. For example, this study found that Celgene, the maker of the top-selling plasma cell myeloma drug Revlimid, filed 106 U.S. patent applications covering that product, resulting in ninety-six issued patents. The study also found that the price of Revlimid increased by 79% since 2012. <2.1.2. Debate> Because later-filed patents often claim aspects of the drug other than its active ingredient, these patents are sometimes called "secondary" patents. Critics of evergreening maintain that, by obtaining secondary patents on improvements or ancillary aspects of a pharmaceutical product, manufacturers effectively extend patent protection beyond the term set by Congress. In doing so, according to these critics, secondary patents unfairly shield a pharmaceutical product from generic or biosimilar competition, thereby resulting in higher drug prices. In the view of evergreening critics, moreover, many of these secondary patents are of questionable validity. While secondary patents tend to be challenged more frequently and more successfully than patents covering a pharmaceutical's active ingredient, the combination of secondary patents and a strong primary patent creates a barrier to generic entry because a generic manufacturer may delay or simply decline entry when faced with the prospect of defeating both patents. According to Bloomberg Law , in 2017 the cost of litigating a Hatch-Waxman lawsuit was $1.8 million in cases involving over $25 million in risk. Commentators have suggested that these costs can be compounded when there are several patents at issue, even if those patents are comparably weaker. Thus, even when a product is protected by comparably weak patents, critics of evergreening argue that the costs of invalidating those patents strengthen the branded products's position in the market and can lengthen its effective period of exclusivity. Defenders of evergreening respond that the term is "inherently pejorative" because it creates the impression that pharmaceutical companies are exploiting the patent system. Defenders contend that there is nothing inherently suspect about secondary patents, which must meet the same requirements for patentability and pass through the same examination procedures as any other patent. Indeed, those requirements bar a secondary patent on an obvious variation of the primary patent or on another product or invention already available to the public. "[I]t is often the case," defenders contend, "that the value of a follow-on patent is comparable to, or even might exceed, that of a primary patent." One example arguably supporting this view is the drug Evista (raloxifine). Evista was "initially studied as a potential treatment for breast cancer" but, in 1997, FDA approved the drug for the prevention of osteoporosis. At that time, there were only a few years left on Evista's initial patent, which was filed in 1983. If the brand could not patent the new use (i.e., for prevention of osteoporosis), one commentator has argued that insufficient incentives would have existed to make the investment in R&D necessary to bring the drug to market. Defenders also argue that the ability to receive a patent on a later-developed formulation provides a significant incentive to address problems with the original formulation. For example, the original formulation of Lumigan, which is used to treat glaucoma, resulted, at times, in sufficiently severe red eye that patients would discontinue its use. Researchers subsequently developed an improved formulation with significantly decreased risk of this side effect. Defenders of secondary patents contend that without the possibility of patent protection, there would have been little incentive to perform this sort of research due to the significant costs involved. Secondary patents are also defended on the grounds of being necessary to recoup development costs. A recent study found that even though the patent term is generally twenty years, delays in PTO and FDA approval can decrease the nominal Orange Book patent term to 15.9 years, and generic competition can result in an effective market exclusivity of only 12.2 years. This effective market exclusivity is less than the sixteen years that one commentator suggests is necessary to recoup the brand's fixed costs for research, development, and clinical testing. Moreover, as secondary patents tend to be improvements to primary patents, brands argue that they are necessarily narrower than those primary patents. Thus, brands argue that when the primary patent expires, any other company including a generic may enter the market and produce the invention covered by that primary patent, assuming that the generic can design around any unexpired secondary patents. Doctors and patients can then decide whether the benefit conferred by a product covered by a secondary patent is worth the increased cost over the generic version of the product formerly covered by the primary patent. Finally, defenders also note that recent congressional action has decreased the cost of challenging patents, decreasing the impact of these later-filed "evergreening" patents. In 2011, Congress enacted the America Invents Act (AIA), which created a number of proceedings for reviewing a patent's validity after it is granted. One such proceeding is inter partes review (IPR), a PTO procedure that was implemented to "improv[e] patent quality and provide a more efficient system for challenging patents that should not have issued; and reducing unwarranted litigation costs." Generally, any person who is not a patent's owner may file a petition for IPR beginning nine months after the patent issues. The PTO then decides whether to initiate review of the patent. If review is initiated, then the patent challenger must prove that the patent is invalid by a preponderance of the evidence a lower requirement than the clear-and-convincing-evidence standard used when challenging the patent in court. The statute requires that the PTO's final decision be issued not more than one year after the decision to institute review. The median cost for litigating an IPR to that final decision is $324,000. Thus, IPR provides a relatively fast and relatively inexpensive method to challenge issued patents, particularly when compared to litigating in the courts. <2.1.3. Current Law> No statute currently specifically forbids evergreening. Instead, substantive patent law, particularly the law of obviousness, provides limits on whether the PTO may grant later-filed patents. Specifically, a patent may not be granted if "the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious" before the patent application was filed. The Supreme Court has not articulated a specific test for whether an invention would have been obvious, instead preferring a flexible approach that takes the facts and circumstances of the state of the art into account. The Court has identified, however, some situations in which an invention likely would have been obvious. For example, if the invention involves "the simple substitution of one known element for another or the mere application of a known technique to a piece of prior art ready for the improvement," the invention likely would have been obvious. At bottom, if the invention is "a predictable variation" of what came before, then the law of obviousness "likely bars its patentability." Other doctrines also affect the viability of later-filed patents. Because the patent statute limits a person to " a patent" for a new invention, a single patentee may not obtain a later patent that covers the exact same invention as an earlier patent. This doctrine is referred to as "statutory double patenting" because it derives from the patent statute and prevents patenting of the same invention twice by the same inventor. The courts have extended double patenting to bar an inventor from patenting obvious variations of his earlier patents as well. This second form of double patenting, referred to as "obviousness-type double patenting," prohibits a later patent that is not "patentability distinct" from an earlier commonly owned patent. In other words, the doctrine bars a patent owner from receiving a patent on an obvious variation of one of its earlier-filed patents. A patentee may overcome the obviousness-type double patenting issue, however, by using a "terminal disclaimer" that is, by disclaiming any portion of the later patent's term after the expiration of the earlier patent. <2.2. "Product Hopping"> <2.2.1. Definition> Critics of current pharmaceutical patent practices have observed that patent evergreening can be used in conjunction with a practice they call "product hopping." Product hopping is the process by which a brand, as the patents on an older branded drug are expiring, uses its current dominant market position to switch doctors, pharmacists, and consumers to a newer version of the same (or similar) drug with later-expiring patents. In other words, the brand forces a "hop" from one product to another. The new version of the product may be, for example, an extended release form or new dosage (e.g., moving from twice-a-day to once-a-day), a different route of administration (e.g., moving from capsules to tablets, or tablets to film strips), or a chemical change (e.g., moving to a different enantiomer). The switch to the new version may be accompanied by a marketing campaign or discounts and rebates to encourage doctors, insurers, and patients to switch to the new version; in some cases, production of the older version may even be discontinued. Product hopping tends to take one of two forms: a "hard switch," where the brand removes the original product from the market, and a "soft switch," where the brand leaves the original product on the market. The case of Abbott Laboratories v. Teva Pharmaceuticals USA, Inc. provides an example of a hard switch. That case involved Abbott's changes to its drug TriCor, which was used to treat cholesterol and triglycerides. Abbott allegedly lowered the strength of the drug, switched it from a capsule to a tablet, stopped selling capsules, bought back supplies of capsules from pharmacies, and marked capsules as "obsolete" in the national drug database. Once generics developed equivalents for the reformulation, Abbott allegedly again lowered the strength of the drug, stopped selling the original tablets, and again changed the code for the old tablets to "obsolete." A soft switch allegedly occurred in Schneiderman v. Actavis PLC . There, Actavis produced Namenda IR (IR), a twice-daily drug designed to treat Alzheimer's disease. As the patents on IR neared expiration and generics prepared to enter the market, Actavis introduced a once-daily version of the drug, Namenda XR (XR), and allegedly attempted to induce doctors and patients to switch from IR to XR. Although the generic versions would have been substitutable for IR, the differences is dosing (10 mg in IR and 28 mg in XR) meant that the generic versions would not be substitutable for the new XR product. Initially, both IR and XR were on the market together. During that time, Actavis allegedly stopped marketing IR and "spent substantial sums of money promoting XR to doctors, caregivers, patients, and pharmacists." Actavis also sold XR at a discount, making it much less expensive than IR, and issued rebates to ensure that patients did not have to pay higher copayments for XR than IR. When it appeared that the soft switch would only convert 30% of IR users to XR, Actavis allegedly implemented a hard switch by announcing that it would discontinue IR and attempting to stop Medicare health plans from covering IR. <2.2.2. Debate> Critics of product hopping deride it as an anticompetitive practice that inhibits the entry of generic and biosimilar competitors, allowing the brand to maintain its dominant market position (and higher prices) without substantial benefits for consumers. In particular, critics contend that by shifting product demand from the previous product to a new product, the market for a generic form of the previous version dissipates by the time the generic can enter the market. All fifty states have enacted drug product selection (DPS) laws, which aim to lower consumer prices by allowing, and sometimes even requiring, pharmacists to fill a prescription written for a brand-name drug with a generic version of that drug. Typically, however, pharmacists may only substitute a generic drug for a branded drug if the generic version is "AB-rated" by FDA. To receive an AB rating, the generic must be therapeutically equivalent to the branded drug, which means it must have the same active ingredient, form, dosage, strength, and safety and efficacy profile. The generic must also be bioequivalent in other words, the rate and extent of absorption of the generic cannot significantly differ from that of the brand drug. Thus, if the brand's new version of a drug, for example, changes the form of the drug (e.g., capsule to tablet) or the dosage of the active ingredient (e.g., 10 mg to 12 mg) from the older version, the generic product may not receive the AB rating required to be substitutable by pharmacists. Even if the generic is eventually able to obtain an AB rating to allow substitution, that process may take years to achieve. Thus, the "hop" to a new product can prevent automatic substitution with a generic product, thereby giving the brand an additional period during which it is substantially unaffected by generic competition. Defenders of product hopping respond that manufacturers have legitimate reasons to create new patented products and encourage doctors to prescribe the new product instead of an old product for which there is generic competition. One commentator has argued that patent law encourages brands to create new drugs or switch to new versions of drugs because they receive an exclusive period during which they may charge higher prices. That period is critical, it is argued, to recoup the estimated $2.6 billion average cost of bringing a new drug to market compared to the $1 million to $2 million to bring a new generic product to market. Once a branded drug's patents expire, however, the brand will lose 80% to 90% of its sales to generic drugs. Thus, according to one commentator, brands have little incentive to keep marketing a product that is subject to generic competition; doing so would arguably transfer approximately 80% of the sales to their generic competitors. That is, even if the brand succeeds in convincing a doctor to prescribe the old product, DPS laws would allow a pharmacist to substitute a generic product instead. Given these economic realities, defenders argue that the brand would be effectively paying to market its competitors' products. Accordingly, it is argued that product hopping aims at maximizing profits for the brand (which can be used for additional R&D) and preventing free-riding by generics, not at preventing competition. Commentators also respond that generic manufacturers could reduce the impact of product hopping by marketing their own products. In that view, generic manufacturers choose to rely on DPS laws for sales. Instead, one commentator argues, the generic companies could promote their own products in the same way that brand manufacturers do. In any event, patients and doctors can arguably choose to use the generic version of the old product if the brand's new product is not worth the cost. <2.2.3. Current Law> There is no existing statute specifically prohibiting product hopping. Those practices, however, have been challenged under the antitrust laws as anticompetitive attempts to maintain a monopoly in violation of Section 2 of the Sherman Act. Schneiderman provides one example. In that case, the U.S. Court of Appeals for the Second Circuit (Second Circuit) held that the soft switch, described above, was not sufficiently anticompetitive to violate Section 2. Specifically, the court determined that as long as Actavis continued to sell both XR and IR, with generic IR drugs on the market, "patients and doctors could evaluate the products and their generics on the merits in furtherance of competitive objectives." The Second Circuit further held that once Actavis implemented a hard switch by withdrawing IR, it "crosse[d] the line from persuasion to coercion" and therefore violated Section 2. The court next determined that Actavis's purported procompetitive justifications for the hard switch were pretextual because the hard switch was an attempt to impede generic competition and, in any event, the procompetitive benefits were outweighed by anticompetitive harms. Accordingly, the court affirmed the district court's grant of an injunction requiring Actavis to make IR "available on the same terms and conditions" as before the hard switch. <2.3. "Patent Thickets"> <2.3.1. Definition> Critics have argued that pharmaceutical manufacturers develop "patent thickets" to protect their products. This term is used in two slightly different ways, both relating to products covered by a high number of patents. First, a patent thicket may describe the situation in which multiple parties have overlapping patent rights on one product, such that a "potential manufacturer must negotiate licenses with each patent owner in order to bring a product to market without infringing." Patent thickets, in this sense, raise concerns about inefficient exploitation of a technology because the multiplicity of patent owners increases transaction costs and creates coordination challenges. Second, the term may be used in a different sense to describe an incumbent manufacturer's practice of amassing a large number of patents relating to a single product, with the intent of intimidating competitors from entering the market, or to make it too costly and risky to do so. <2.3.2. Debate> Commentators have observed that it is generally not unusual for a single product to be protected by multiple patents. For example, it has been estimated that a single smartphone may be protected by as many as 250,000 patents. Even the individual technologies in the phone may be covered by many patents. For example, Bluetooth 3.0 incorporates "contributions of more than 30,000 patent holders," and more than 800 patent holders contributed to the micro SD removable memory storage card. Unlike pharmaceuticals, however, the patents on products like semiconductors or smartphones are typically not all owned by the same entity, and thus are examples of the first type of patent thicket (i.e., one in which multiple parties have overlapping patent rights on one product). Commentators contend that patent thickets on such technologies generally do not confer the same market power as a patent portfolio on a new pharmaceutical owned by a single drug manufacturer. In the pharmaceutical context, concerns about patent thickets have mainly been raised with regard to the second type of patent thicket and, in particular, with regard to biologics. This may be, at least in part, because those pharmaceuticals are derived from living cells or other biological material. Naturally occurring source material is generally not eligible for patenting under Section 101 of the Patent Act, but methods for transforming that source material into a biological product generally are patentable. Manufacturing a pharmaceutical using living cells is often complicated, offering more opportunities for patenting relative to chemically synthesizing small-molecule drugs. As changes are implemented to either the biologic product or its manufacturing process throughout the original patent term, those changes can be claimed as inventions and used to extend the effective patent protection. For example, a company producing a biologic could attempt to patent the use of a different medium for cell growth or an adjustment to the dosing. The patent portfolio that covers Humira, pharmaceutical manufacturer AbbVie's flagship biologic, has been characterized as an example of the second type of patent thicket. Critics contend that this patent portfolio has helped keep Humira competitors off the market for an extended time period. One study found that AbbVie filed 247 patent applications on various aspects of Humira, resulting in 132 issued patents. The Biosimiliars Council alleges that AbbVie filed seventy-five patents relating to Humira in the three years before biosimilar competition was set to begin, extending nominal patent protection through 2034. The council alleges that it will cost "roughly $3 million per patent" to challenge the Humira patents. In August 2017, just before biosimilar manufacturer Boehringer received FDA approval to launch its Humira biosimilar in the United States, AbbVie filed a lawsuit alleging that the biosimilar would infringe 1,600 claims across 74 of AbbVie's patents. Boehringer settled the lawsuit earlier this year, citing "the inherent unpredictability of litigation, [and] the substantial costs of what would have been a long and complicated legal process and ongoing distraction to our business." AbbVie has similarly settled litigation with the other potential manufacturers of Humira biosimilars. Although the primary patent on Humira expired in 2016, no biosimilars will enter the U.S. market until January 31, 2023, at the earliest. The alleged patent thicket surrounding Humira has been the subject of litigation on other bases, including under the antitrust laws. In March 2019, a welfare fund filed an antitrust suit against AbbVie alleging that its patent thicket approach unreasonably restrained competition in violation of Sections 1 and 2 of the Sherman Act, and seeking billions of dollars in damages when AbbVie doubled the cost of Humira. Also in March, the mayor and city council of Baltimore, MD, brought a class action lawsuit alleging that, absent AbbVie's conduct, biosimilars of Humira could have been available in the United States as early as 2016. Other similar lawsuits have been filed, although none is aimed at invalidating AbbVie's patents. The lawsuits currently remain pending. Critics have voiced concerns that other drug manufacturers may attempt to amass similar patent portfolios on their biologics as those covering Humira, thereby postponing biosimilar competition from entering the market. Johnson & Johnson, for example, protects its Remicade product with more than one hundred patents. Biogen/Genentech similarly protects its cancer treatment Rituxin with what some could characterize as a patent thicket. Rituxin was the subject of 204 patent applications and ninety-four issued patents, potentially resulting in forty-seven years blocking competition. Indeed, the success of the patent thicketing strategy has led to speculation that other companies will follow suit. Defenders of this patenting practice raise similar arguments as those in support of evergreening: that the patents on these products represent innovation that the patent laws were designed to incentivize, and that each patent has passed through the rigorous examination process and been determined to be novel and nonobvious. For example, AbbVie has stated that Humira "represents true innovation in the field of biologics," warranting protection through various patents. Other experts note that "[t]here's nothing unusual about the multilayered way AbbVie has sought to patent and protect Humira," and that patent thickets simply "tak[e] advantage of existing law." Accordingly, companies with patents relating to numerous aspects of their products likely view each patent as protecting significant patentable innovations of the sort that the patent system is designed to incentivize. Indeed, experts note that creating a biologic like Humira "isn't easy work." Scientists must genetically engineer a cell line to secrete large amounts of the biologic, purify the results, and modify dosages for different diseases, among other "incremental tweaks." Each of those steps in the process brings challenges that may require innovative solutions, and those solutions may be the subject of patents. As AbbVie's CEO noted, the Humira "patent portfolio evolved as [AbbVie] discovered and learned new things about Humira." Thus, defenders view this practice as a legitimate method of protecting the different aspects of their innovations. <2.3.3. Current Law> No statute specifically forbids patent thickets. As with evergreening, substantive patent law (including the nonobviousness requirement and prohibition on double patenting) provides some of the primary restrictions on patent thickets. In other words, the ability to receive secondary patents is limited by the rule that new patents cannot be an obvious variation on the prior art or on the patentee's own prior patents. On the other hand, obviousness-type double patenting restrictions may have less impact on patent thickets than on evergreening due to the availability of terminal disclaimers. As explained supra , a patentee may overcome obviousness-type double patenting issues by disclaiming any portion of the later patent's term after the expiration of the earlier patent. Because the alleged goal of evergreening is to extend the exclusivity period for as long as possible, there is little incentive to file a terminal disclaimer. By contrast, the purported goal of a patent thicket is to accumulate a large number of patents protecting a single product, a goal that would be unaffected by terminal disclaimers. Thus, restrictions on obviousness-type double patenting have a lesser impact on preventing patent thickets, as compared to preventing evergreening. <2.4. "Pay-for-Delay" Settlements> <2.4.1. Definition> As described above, patent litigation can result when generic drug and biosimilar manufacturers seek to market a drug or biologic before patent rights on the branded version expire by challenging the validity of the brand-name companies' patents and/or their applicability to the follow-on product. Some brand-name companies resolve or settle such litigation through settlement agreements with the generic manufacturer whereby the brand-name company pays the generic manufacturer a sum of money (or other compensation) in return for the generic manufacturer agreeing to delay market entry. This practice, referred to as "reverse payment settlements" or "pay-for-delay settlements," allows the brand-name company to (1) avoid the risk that its patents will be invalidated, (2) delay the market entry of generic competition, and (3) effectively extend its exclusive right to market the listed drug. Because these agreements terminate the litigation, the questions of patent validity and infringement remain open. Pay-for-delay settlements are not limited to cash payments from the brand to the generic. The U.S. Court of Appeals for the Third Circuit (Third Circuit) recently addressed such a settlement involving Wyeth, Inc.'s branded depression treatment drug, Effexor XR. In that case, the plaintiffs alleged that Wyeth and generic manufacturer Teva Pharmaceutical Industries Ltd. (Teva) reached an anticompetitive pay-for-delay settlement. This agreement is an example of the varied facts that result in such settlements. Teva filed an ANDA for a generic version of Effexor XR, and Wyeth sued for patent infringement. According to the plaintiffs (a class of direct purchasers of Effexor XR), an unfavorable preliminary ruling caused Wyeth to fear that it would lose the litigation, allowing generic manufacturers to enter the Effexor XR market. Accordingly, Wyeth and Teva entered into a settlement in which the parties agreed to vacate the unfavorable preliminary ruling; Teva agreed not to enter the market with its Effexor XR generic until approximately five years after the agreement (nearly seven years before Wyeth's patents expired); Wyeth agreed not to market a competing "authorized generic" during Teva's 180-day exclusivity period; Wyeth agreed to permit Teva to sell a generic version of another product, Effexor IR, before the original patent on Effexor expired and without a Wyeth-authorized generic; and Teva agreed to pay royalties to Wyeth on its sales of both generic versions of Effexor. Pursuant to a consent decree, Wyeth and Teva submitted the agreement to the FTC. The FTC did not object to the agreement. Notably, unlike Actavis , in this case Wyeth did not pay money directly to Teva. Instead, Wyeth's agreement not to market an authorized generic during Teva's 180-day exclusivity period would cause Teva to reap increased sales during that period. In other words, although Wyeth did not directly pay Teva to stay off of the market, the agreement ensured that Teva would receive compensation in other ways. <2.4.2. Debate> The FTC and others have alleged that pay-for-delay settlements "have significant adverse effects on competition" in violation of antitrust laws, including Section 1 of the Sherman Act and Section 5 of the FTC Act. When evaluating agreements for potential antitrust violations, the court focuses its inquiry on "form[ing] a judgment about the competitive significance of the [settlement] . . . 'based either (1) on the nature or character of the contracts, or (2) on surrounding circumstances giving rise to the inference or presumption that they were intended to restrain trade and enhance prices.'" The Supreme Court has recognized that "reverse payment settlements . . . can sometimes violate the antitrust laws," and courts have allowed antitrust litigation challenging certain reverse payment settlements to proceed under existing law. Defenders of such agreements contend there are significant benefits from pay-for-delay settlements. For example, AbbVie has settled suits with each of the companies that sought to introduce biosimilars to Humira. Even while accusing AbbVie of "patent abuses" relating to Humira, the Biosimilars Council has touted using settlements between brands and biosimilars to resolve patent thickets. The council contends that the Humira settlements are "pro-consumer" because, although biosimilar market entry will be delayed until seven years after the primary patent on Humira has expired, entry will still occur before several of the secondary patents covering Humira will expire. As the Supreme Court has recognized, pay-for-delay settlements may provide significant procompetitive benefits, and whether a particular settlement is procompetitive or anticompetitive will depend on a number of factors that vary from case to case. <2.4.3. Current Law> In Actavis v. FTC , the Supreme Court held that the rule of reason is the appropriate level of analysis in challenges to pay-for-delay agreements. Although the Court recognized the potential for such agreements to have anticompetitive effects, it acknowledged that "offsetting or redeeming virtues are sometimes present." Such justifications might include "traditional settlement considerations, such as avoided litigation costs or fair value for services." Accordingly, the FTC (or other plaintiffs) has to prove fully the anticompetitive effects of a particular agreement before the burden shifts to the defendant. The Third Circuit case involving Wyeth provides an example of the current analysis. Although the FTC did not object to the agreement, purchasers of Effexor XR filed a class action lawsuit against Wyeth and Teva alleging, inter alia, that the settlement agreement was an unlawful restraint of trade under Section 1 of the Sherman Act. The Third Circuit concluded that the plaintiffs had plausibly alleged an anticompetitive pay-for-delay settlement. The court determined that Wyeth's agreement not to manufacture a competing generic product during Teva's 180-day exclusivity period was an adequate allegation of a sufficiently large payment because it ensured that Teva would be the only generic product on the market, and thus Teva would receive all generic Effexor XR sales during that period. Moreover, the court concluded that the payment could not be justified as a simple effort to avoid the costs of litigation. Accordingly, the court determined that the plaintiffs had adequately alleged that the agreement between Wyeth and Teva was the kind of pay-for-delay agreement forbade by the Supreme Court in Actavis . <2.5. Combinations of Practices> Although this report has described the various patenting practices in isolation, they can be used concurrently. For example, product hopping can be combined with pay-for-delay settlements to delay generic entry while the brand switches the market to a new product. A manufacturer considering product hopping will often be more successful in preventing competition from the generic if it can convert the market to the new product before the generic enters the market. In one case, the brand estimated that it would sell ten times more tablets if it could switch doctors to the new product before the generic entered the market. One example of a drug manufacturer allegedly combining product hopping and pay-for-delay settlements to prevent competition for its product involves Cephalon, maker of the branded sleep disorder medication Provigil. Between its secondary patent and a period of regulatory exclusivity, protection of Provigil expired in April 2015. Due to the narrowness of the secondary patent, however, the generic companies planned to enter the market with noninfringing products in 2006. Cephalon estimated that, once the generic versions entered the market, there would be a 75% to 90% price reduction in Provigil, reducing revenues by more than $400 million in the first year alone. In 2006, Cephalon attempted to move the market to a new product, Nuvigil, which was patent-protected until 2023. But because FDA had not yet approved Nuvigil in late 2005, Cephalon settled its patent lawsuits with the generics, paying them more than $200 million to delay market entry until 2012. Although Cephalon argued its settlement would allow generic versions of Provigil to enter the market three years before the expiration of the Provigil secondary patent in 2015, following the settlement, Cephalon increased the price of Provigil and stopped marketing it. At the same time, Cephalon promoted Nuvigil both through its sales force and by discounting its price. Because of the pay-for-delay settlement, Cephalon had three years to switch the market to Nuvigil before generic entry in 2012, rather than have Provigil compete with the generics in 2006. Thus, Cephalon combined product hopping with pay-for-delay settlements to prolong its period of exclusivity. <3. Selected Proposals for Addressing Pharmaceutical Patenting Practices> Pharmaceutical patenting practices have attracted significant interest from both commentators and Congress. This section of the report reviews several proposals, from both legislation and the academic literature, that seek to reduce or eliminate these patenting practices. This review is not intended to be comprehensive, nor does it evaluate the merits of these proposals. Instead, the proposals are reviewed as representative examples of the various types of legal changes under consideration. As discussed above, patenting practices are only one factor that may contribute to consumer prices in the highly complex pharmaceutical market. Thus, the discussed proposals relating to patenting practices are one potential method to reduce drug prices. Numerous legislative proposals intended to reduce drug prices exist, but because these proposals relate only indirectly to pharmaceutical patenting practices, they are outside the scope of this report. <3.1. Limiting Evergreening> Proposals targeting evergreening primarily aim to make it harder for companies to receive later-filed or secondary patents, reduce the impact of later-filed patents, or incentivize challenges to patents. <3.1.1. Increasing Examination Resources> Several commentators have proposed that increasing patent examination resources could reduce the number of arguably weaker later-filed patents. These commentators contend that patent examiners "often do not have enough time or resources to investigate whether a patent application is truly inventive." In these commentators' view, allocating more resources to the PTO would potentially prevent low-quality patents from issuing in the first place, thus preventing the need for accused infringers to spend time and resources defending against infringement or attempting to invalidate such patents. Although one commentator notes that "most patents are not economically significant," he also recognizes that the PTO "is not well positioned to identify which patents are important and which are worthless." <3.1.2. Enhancing Patentability Standards> Some proposals aim to reduce evergreening by making it more difficult for later-filed applications to meet the requirements for patentability. For example, one commentator has suggested raising the substantive patentability requirements for later-filed or secondary patents. Specifically, the commentator suggests amending the patent statute to require that an application for a patent on a secondary invention "demonstrate through clear and convincing evidence in the written description that such invention has increased efficacy as compared to the original." The proposal defines "increased efficacy" as "a proven improvement in the mechanism of action, as disclosed in the patent claims," and "mechanism of action" as "the process by which a drug functions to produce a therapeutic effect, as disclosed in the patent claims." In the commentator's view, this would reduce evergreening by requiring that the secondary patent actually improve the manner in which the pharmaceutical product operates, and thus incentivize pharmaceutical companies to create new drugs, "rather than creating minor changes that prolong the time they can profit off monopolies at the expense of patients." At least one other country has adopted a similar standard: Under Indian law a patent may not issue on "a new form of a known substance which does not result in enhancement of the known efficacy of that substance." <3.1.3. Reducing the Impact of Later-Filed Patents> The Terminating the Extension of Rights Misappropriated (TERM) Act of 2019 is one example of a legislative proposal to curtail patent evergreening by reducing the impact of later-filed patents. If enacted, it would establish a presumption that, in patent challenges under Hatch-Waxman or BPCIA procedures, the patentee "disclaimed the patent term for each of the listed patents after the date on which the term of the first patent expires." In effect, this presumption would mean that later-expiring patents listed in the Orange Book (or provided during the BPCIA's "patent dance") would, as a default, be treated as expiring on the date when the earliest-expiring patent on the drug or biologic expires. However, the patentee would be able to overcome this presumption by affirmatively demonstrating with a preponderance of the evidence that the later-expiring patents on the drug or biologic claim "patentably distinct inventions." Because the law of double patenting already requires later-expiring patents to cover patentably distinct inventions to be valid, the TERM Act's legal effect would be to place the burden of proving patent validity on the patentee for certain later-expiring pharmaceutical patents. Under current law, patents are presumed valid in a judicial proceeding unless the challenger proves patent invalidity by clear and convincing evidence. The TERM Act would also require the PTO to determine if changes to patent examination practice may be necessary. Specifically, the Act would require the PTO to review the agency's patent examination procedures to determine whether the PTO is using the best practices to avoid the issuance of duplicative patents relating to the same drug or biologic. The bill would also require the PTO to determine the need for new practices or procedures to (1) improve examination of patents relating to the same drug or biological product and (2) reduce the issuance of patents that "improperly extend the term of exclusivity." Finally, the Act would require the PTO to submit a report to the House Committee on the Judiciary containing its findings and recommendations. The Reforming Evergreening and Manipulation that Extends Drug Years Act (REMEDY) Act, like the TERM Act, seeks to curb evergreening by reducing the benefit of later-filed patents. Under the REMEDY Act, a generic's filing of a Paragraph (IV) certification in an ANDA would only trigger Hatch-Waxman's thirty-month stay if the patent claims a "drug substance" that is, the drug's active ingredient. The stay would not be available for a patent that claims only a "drug product or method of use for a drug," unless the patent also claims the drug substance itself. In that case, the bill would allow FDA to approve the generic product immediately, without waiting for the litigation to determine the validity of the nondrug substance patents. This approach is aimed at allowing the generic to enter the market more quickly by limiting the grounds under which a brand can receive a thirty-month stay of FDA approval. The Act would also require that patents canceled by the PTO be removed from the Orange Book . The bill would also clarify that challenging a patent that is later struck from the Orange Book would not affect the first-generic-filer 180-day exclusivity period. <3.1.4. Encouraging Patent Challenges> Other anti-evergreening proposals aim to incentivize challenges to pharmaceutical patents after those patents issue. For example, the Second Look at Drugs Patents Act of 2019 (SLDPA) would encourage administrative challenges to patents added to the Orange Book . Under the SLDPA, unlike current law, a brand would be required to notify the PTO that it was adding patents to the Orange Book . After receiving that notification, the PTO would need to publish a notice regarding each patent and request that any eligible person file an IPR challenging that patent. Such patents would be "provisionally" included in the Orange Book until either the PTO confirmed the relevant patents' patentability or until certain time has passed without any challenge to the patents (300 days if the patent had issued when FDA approved the relevant drug, or fifteen months if the patent issued after approval). If any patent claims are canceled as a result of an IPR, the bill would require the brand to submit a request that the patent be removed from the Orange Book (if all claims are canceled) or that the canceled claims be removed from the Orange Book . Taken together, the SLDPA would provide notice regarding particular patents that generics may want to challenge and would encourage such challenges. As another method of encouraging patent challenges, one commentator has proposed that Congress require the PTO to implement an "Invalidity Challenge Reimbursement Program" (ICR program) that would require the PTO to reimburse "petition fees, reasonable attorney fees, and related expenses incurred by accused infringers who have prevailed in a post-issuance proceeding" at the PTO "by invalidating at least one patent claim." The proposal envisions that such a program could be paid for by the PTO charging an "ICR fee" on each patent in force. As their costs would be reimbursed if they are successful, the commentator contends that this system would provide greater incentives to encourage an accused infringer to challenge a weak patent. Moreover, the commentator notes that the PTO is currently generally unaffected when it issues a low-quality patent. In the commentator's view, requiring the PTO to reimburse successful challenges to patents may create an incentive for the PTO to examine applications more carefully before issuing patents. <3.2. Addressing Product Hopping and Patent Thickets> Some bills aim to curtail certain pharmaceutical patenting practices directly. One such proposal is the Affordable Prescriptions for Patients Act of 2019 (APPA), which would make product hopping an antitrust violation and would set a limit on the number of certain patents that could be asserted in biologics litigation. The first portion of the bill addresses product hopping. It would amend the FTC Act to define when product hopping constitutes a violation of the federal antitrust laws. The bill would allow the FTC to prove a prima facie case of product hopping by showing that a manufacturer had engaged in either a "hard switch" or a "soft switch" during a certain period. Specifically, the manufacturer would have to engage in a switch between when the manufacturer first received notice that an applicant submitted an ANDA or biosimilar license for a particular product and 180 days after the generic drug or biosimilar product is first marketed. The APPA defines a "hard switch" in two ways. The first definition would prevent a manufacturer from requesting that FDA withdraw approval for a listed product and then marketing a "follow-on product" (i.e., a new version of the drug). Accordingly, the bill would alter current law, under which a brand manufacturer can freely ask FDA to withdraw approval for one of its products, possibly preventing a generic from marketing a competing product due to the lack of a reference product. The APPA's second definition of a hard switch would prevent a manufacturer from marketing or selling a follow-on product after withdrawing, intending to withdraw, discontinuing the manufacture of, or destroying a product to impede competition from a generic. The bill would therefore change current law, which generally allows manufacturers to take those actions to reduce the supply or desirability of an older product. Commentators have argued that such practices encourage patients to use the new follow-on product, reducing demand for the original product and the opportunity for competition from any potential generic for the original product. The bill's definition of a soft switch aims to capture other forms of product hopping that impede competition. Under the proposed language, a soft switch occurs when a manufacturer markets or sells a follow-on product and takes actions to impede competition for a generic product or a biosimilar version of the manufacturer's product. The bill would also allow the manufacturer to rebut a prima facie case of product hopping. First, a manufacturer would be able to justify its conduct by first establishing that it would have taken the same actions even if a generic had already entered the market. For a hard switch, the manufacturer must also establish either (1) the actions that it took related to safety risks to patients of the original product; or (2) if it withdrew, intended to withdraw, discontinued the manufacture of, or destroyed a product, that there was a supply disruption that was outside the control of the manufacturer. For a soft switch, the manufacturer must establish that it had "legitimate pro-competitive reasons, apart from the financial effects of reduced competition, to take the action." The APPA would also make two changes aimed at reducing the impact of patent thickets for biological products. First, the bill would broaden the types of patents that a brand biologic manufacturer could assert in premarketing litigation by extending the list of "artificial" acts of infringement under 35 U.S.C. 271(e) to include patents claiming methods or products used to manufacture a biological product. Second, the APPA would limit the number of certain patents that the brand could assert in litigation. Specifically, the brand would be limited to asserting at most twenty patents that (1) claim the biologic or method or product used in the manufacture of a biologic, (2) were listed during the patent dance, and (3) were filed more than four years after approval of the reference product or include a claim to a manufacturing process not used by the brand. Certain later-issued patents (i.e., those that issued after the brand provided its initial list to the biosimilar manufacturer during the patent dance) would be even further limited. The APPA would nonetheless authorize a court to increase how many patents the brand can assert if done so promptly and if such an increase is in the interest of justice or for good cause. <3.3. Limiting the Availability of Hatch-Waxman's Thirty-Month Stay> A number of bills, such as the Orange Book Transparency Act of 2019 (OBTA), would change the patent listing requirements for the Orange Book . Under current law, the brand must include any patent that claims the drug or a method of using the drug. FDA regulations specify that "drug substance (active ingredient) patents, drug product (formulation and composition) patents, and method-of-use patents" must be listed in the Orange Book , whereas "[p]rocess patents, patents claiming packaging, patents claiming metabolites, and patents claiming intermediates" shall not be submitted to FDA. The OBTA would clarify the types of patents that may be listed in the Orange Book , only allowing listing of patents that (1) claim methods of using a drug or (2) claim the drug and are a drug substance (active ingredient) or drug product (formulation) patent. Limiting the types of patents that may be listed would limit the availability of the thirty-month stay of FDA approval of a generic because the stay is available only if the brand sues on one of the patents for which the generic made a Paragraph (IV) certification. Moreover, the OBTA would require FDA to list in the Orange Book each applicable regulatory exclusivity period for each drug. Finally, the bill would require the Government Accountability Office to submit a report to Congress detailing the types of patents included in the Orange Book , to include data on certain drug patents. <3.4. Increasing Biologic Patent Transparency> Other bills would focus on increasing transparency to combat patent thickets and facilitate generic or biosimilar entry. The Purple Book Continuity Act of 2019 (PBCA) would require a BLA holder to provide to FDA, and FDA to publish in the Purple Book , any patents the brand provides to the biosimilar company during the patent dance. Further, the bill would require FDA to revise the Purple Book every thirty days to include (1) any new biologics that FDA licensed during that period and (2) information on patents that BLA holders provided to FDA during that period. The PBCA would also require FDA to list any exclusivity period that applies to each listed biologic, information that is not always currently included in the Purple Book . Moreover, the brand must notify FDA if any biologic license was withdrawn or suspended for safety reasons, and FDA would, in turn, have to remove that product from the Purple Book for the relevant period. By including the patents associated with a particular biologic, supporters of this approach argue that biosimilar manufacturers will be better able to evaluate the relevant patents before market entry. PBCA further directs the Secretary of HHS to conduct a study regarding the type of information that should be included in the Purple Book , and transmit the results to Congress. The Biologic Patent Transparency Act (BPTA) similarly would require patent information to be listed in the Purple Book , and would require the Purple Book more generally to be published in "a single, easily searchable, list." However, the BPTA's listing requirement is somewhat broader than the PBCA, including any patent that the brand "believes a claim of patent infringement could reasonably be asserted by the holder" (and not just patents provided during the patent dance) to be listed in the Purple Book . Much like the PBCA, the BPTA would also require FDA to update the Purple Book every thirty days. The bill would further bar the brand from bringing an action for infringement of a patent that should have been, but was not, included in the Purple Book . <3.5. Reforming Pay-for-Delay Settlements> The Preserve Access to Affordable Generics and Biosimilars Act (PAAGBA) seeks to limit the ability of brands to pay generic or biosimilar manufacturers to delay their market entry. To this end, PAAGBA creates a presumption of illegality for certain patent settlement agreements, moving away from a rule-of-reason analysis. The proposed legislation would amend the FTC Act to specifically authorize the FTC to initiate enforcement proceedings against parties to "any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product or biological product." Such agreements would be presumed to have anticompetitive effects if the brand agrees to provide the generic with "anything of value," including monetary payments or distribution licenses, in exchange for the generic agreeing "to limit or forego research, development, manufacturing, marketing, or sales" of the generic product "for any period of time." The presumption would not attach, however, to agreements where the only compensation given to the generic is the right to market the product before relevant patents or exclusivities expire, reasonable litigation expenses, or a covenant not to sue for infringement. PAAGBA would not make agreements that fit its definitions per se illegal. The parties to the agreement could overcome the presumption of anticompetitive effect with "clear and convincing evidence" that (1) the agreement provides compensation "solely for other goods or services" from the generic company or (2) the agreement's "procompetitive benefits . . . outweigh the anticompetitive effects." In evaluating this evidence, the fact finder cannot presume that entry would only have occurred after the expiration of the patent or statutory exclusivity. It also cannot presume that allowing entry into the market before the patent or statutory exclusivity period expires is necessarily procompetitive. If the FTC proves that parties to an agreement violated these provisions, PAAGBA would provide for assessment of a civil monetary penalty against each violating party. The civil penalty must be "sufficient to deter violations," but no more than three times the value that the respective violating party gained from the agreement. If the brand did not gain demonstrable value from the agreement, the value the generic received would be used to calculate the penalty. In calculating the penalty for a particular party, an FTC ALJ would consider "the nature, circumstances, extent, and gravity of violation"; the agreement's impact on commerce; and the culpability, history of violations, ability to pay, ability to continue doing business, and profits or compensation gained by all parties. Any penalties assessed would be in addition to, rather than in lieu of, any penalties imposed by other federal law. The FTC would also be able to seek injunctions and other equitable relief, including cease-and-desist orders. In addition, an ANDA filer that was party to such an agreement would forfeit its 180-day exclusivity awarded for challenging a patent using a Paragraph (IV) certification.

Intellectual property (IP) rights in pharmaceuticals are typically justified as necessary to allow manufacturers to recoup their substantial investments in research, development, and regulatory approval. IP law provides exclusive rights in a particular invention or product for a certain time period, potentially enabling the rights holder (e.g., a brand-name drug manufacturer) to charge higher-than-competitive prices. If rights holders are able to charge such prices, they have an incentive to lengthen the period of exclusive rights as much as possible. Indeed, some commentators allege that pharmaceutical manufacturers have engaged in patenting practices that unduly extend the period of exclusivity. These critics argue that these patenting practices are used to keep drug prices high, without any benefit for consumers or innovation. Criticisms center on four such practices: " E vergreening " : So-called patent "evergreening" is the practice of filing for new patents on secondary features of a particular product as earlier patents expire, thereby extending patent exclusivity past the original twenty-year term. Later-filed patents may delay or prevent entry by competitors, thereby allowing the brand-name drug manufacturer (the brand) to continue charging high prices. " Product Hopping " : Generic drug manufacturers allege that as patents on a particular product expire, brand manufacturers may attempt to introduce and switch the market to a new, similar product covered by a later-expiring patent—a process known as "product hopping" or "product switching." This practice takes two forms: a "hard switch," where the older product is removed from the market, and a "soft switch," where the older product is kept on the market with the new product. In either case, the brand will focus its marketing on the new product in order to limit the market for any generic versions of the old product. " Patent Thickets " : Generic and biosimilar companies also allege that the brands create "patent thickets" by filing numerous patents on the same product. These thickets allegedly prevent generics from entering the market due to the risk of infringement and the high cost of patent litigation. " Pay-for-D elay " Settlements : Litigation often results when a generic or biosimilar manufacturer attempts to enter the market with a less expensive version of a branded pharmaceutical. Core issues usually include whether the brand's patents are valid, and whether the generic or biosimilar product infringes those patents. Rather than litigate these issues to judgment, however, the parties will often settle. Such settlements may involve the brand paying the generic or biosimilar to stay out of the market—referred to as "reverse payment" or "pay-for-delay" settlements. These settlements are allegedly anticompetitive because they allow the brand to continue to charge high prices without risking invalidation of its patent, thus unjustifiably benefiting the settling companies at the expense of the consumer. Drug manufacturers respond that their patenting practices protect new, innovative inventions, as Congress intended when it created the patent system. In their view, the terms for these practices are unfairly pejorative, or, at most, describe outlier behavior by a few companies. Defenders of these patenting practices reject their characterization as anticompetitive and emphasize that strong patent rights are needed to encourage innovation and life-saving research and development efforts. In recent years, some commentators and Members of Congress have proposed patent reforms that seek to limit or curtail these patenting practices, which some perceive as contributing to high prices for pharmaceutical products. Such proposals aim, for example, to reduce the impact of later-filed patents (e.g., TERM Act of 2019, H.R. 3199 , and REMEDY Act, S. 1209 / H.R. 3812 ); to encourage challenges to pharmaceutical patents (e.g., Second Look at Drugs Patents Act of 2019, S. 1617 ); to make product hopping an antitrust violation in certain circumstances (e.g., Affordable Prescriptions for Patients Act of 2019, S. 1416 ); to facilitate generic market entry (e.g., Orange Book Transparency Act of 2019, H.R. 1503 ); to increase transparency as to the patents that cover biological products (e.g., Purple Book Continuity Act of 2019, H.R. 1520 , and Biologic Patent Transparency Act, S. 659 ); and to reform pay-for-delay settlements (e.g., Preserve Access to Affordable Generics and Biosimilars Act, S. 64 / H.R. 2375 ).

crs_R45942

crs_R45942_0

<1. Background and Context> Amtrak legally the National Railroad Passenger Corporation was created by the Rail Passenger Service Act of 1970 and began operating in 1971, taking over intercity passenger service from financially distressed private railroad companies. It originally did not own any rail infrastructure, eventually coming to own some assets cast off by bankrupt private railroads. It is operated as a private company and not a government corporation, but the President appoints the members of its Board of Directors and its primary stockholder is the U.S. Department of Transportation (DOT), with a small proportion of common stock held by other railroad companies. Amtrak currently serves over 500 stations in 46 states and the District of Columbia, running over 300 trains per day on a network approximately 22,000 miles long ( Figure 1 ). Since 2008, Amtrak services have been grouped into three business lines: (1) the Washington-New York-Boston Northeast Corridor (NEC), (2) short-distance corridors under 750 miles long with service supported by state governments, and (3) long-distance trains serving destinations over 750 miles apart, usually once per day on an overnight schedule. Under the Fixing America's Surface Transportation (FAST) Act of 2015 ( P.L. 114-94 ), the state-supported short-distance and long-distance routes were grouped together into the National Network. Amtrak's Thruway network of over 150 intercity bus routes serves as a feeder service for passenger trips originating or terminating in cities off the rail system. Over 31 million trips were taken on Amtrak in 2018, a company record. Amtrak system ridership has exceeded 30 million trips every year since 2011, and has increased 26% over the last 15 years, with much of that growth coming on Amtrak's state-supported short-distance corridors ( Figure 2 ). Approximately 48% of all Amtrak trips were taken on state-supported routes in 2018, compared with 38% on the Northeast Corridor and the remaining 14% on long-distance trains. State-supported routes have accounted for the plurality of Amtrak trips among its three business lines every year since 2005. One contributing factor to the growth of state-supported route traffic over that period is that Amtrak and its state partners have added new routes and additional daily trains. Despite record ridership levels, Amtrak trains are roughly as full as they have been at any point in the past decade (see discussion of load factor below), and Amtrak passengers account for a small fraction of intercity passenger travel volume nationwide. In 2017, the most recent year for which such data are available, Amtrak generated 6.5 billion passenger-miles (one passenger-mile is equal to one passenger traveling one mile) of traffic volume; by comparison, domestic air travel generated 694 billion passenger-miles, over 100 times as many as Amtrak. Highway users generated an estimated 5.5 trillion passenger-miles in 2017, including 365 billion on buses, though this includes trips that are not intercity in nature. However, Amtrak passenger-miles have seen a greater cumulative percent increase since 2004 than highway passenger-miles, and saw a greater cumulative percent increase than domestic air passenger-miles from 2008 to 2015 before being overtaken in 2016 ( Figure 3 ). Though Amtrak ridership has been steady or rising in terms of trips taken, Amtrak passenger-miles have declined somewhat since 2013, suggesting an increase in shorter trips. The NEC is the only market in which Amtrak serves a larger proportion of intercity trips than airlines, with both lagging far behind highway travel. Lack of equipment and track capacity have inhibited Amtrak from increasing service on the NEC. <2. Amtrak's Finances5> Amtrak's expenses exceed its revenues each year. In FY2018, Amtrak's revenues totaled $3.2 billion, against expenses of $4.1 billion, for a net loss of $868 million. That loss was covered by federal grants made to Amtrak by DOT (see the discussion of funding issues later in this report). Revenues covered 79% of the railroad's total expenses in FY2018, the highest ratio over the 15 years for which comparable data are available (see Figure 4 and Table 1 ). Under pressure from Congress and several Administrations, Amtrak has reduced but not eliminated its reliance on federal subsidies to support its operations. Amtrak had net losses of roughly $900 million in each of FY2017 and FY2018, the first two years in the past 15 in which net losses were less than $1 billion. One important reason for this improvement is a doubling of revenue from commuter railroads using the NEC from pre-2016 to post-2016, due to higher payments required under the cost allocation policy established by Section 212 of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA; Division B of P.L. 110-432 ) and enforceable by the Surface Transportation Board (STB) under Section 11305 of the FAST Act. By Amtrak's preferred metric, which adjusts the net loss by removing depreciation and certain other expenses, annual operating losses have been reduced to a figure smaller than $250 million in each of the past five fiscal years; this figure was over twice as large in nominal terms in the years prior to 2007 ( Figure 5 ). The effect is more dramatic when taking the effects of inflation into account; in constant 2019 dollars, the figure was four times as large in 2007 as it was in 2018. This metric, dubbed the a djusted o perating r esult , is seen by Amtrak as more closely reflecting the need for federal operating support, but it does not take the railroad's capital investment needs into account. By another measure, which allocates costs and revenues to each available seat-mile of passenger capacity offered, Amtrak has recovered at least 96% of operating costs every year since 2014, up from below 80% in the preceding years ( Figure 6 ). One contributing factor to this improved financial performance is likely the requirement, contained in PRIIA, that operating losses on short-distance routes located off the NEC be offset by state funds, effective on the first day of FY2014. One measure of efficiency is the passenger load factor, which measures what percentage of the available seats is being used by passengers. Amtrak's load factor has varied within a fairly narrow band since 2004. Its current load factor, 51%, is near the record load factor Amtrak reported in FY1988. Load factor varies across Amtrak's three business lines, with NEC and Long Distance trains at 58% and 57%, respectively, in FY2018, while state-supported routes lagged at 40%. Improving load factor is one way of boosting revenue without increasing costs, but this can be difficult if passenger traffic is not distributed evenly along a route. Routes on which one station generates a large share of originating and terminating traffic are likely to have relatively low load factors in some segments but higher load factors in the "peak segment." For example, if a train on the NEC is sold out between Philadelphia and New York, Amtrak may not be able to accommodate passengers who wish to travel between Baltimore and New York, resulting in empty seats between Baltimore and Philadelphia. If Amtrak were to accommodate these riders with additional cars, this could reduce load factor even as it increases ridership. <3. Funding Issues> As discussed above, Amtrak has never generated sufficient revenue to cover its operating and capital expenses. The Administration requests funding for Amtrak each year as part of its DOT budget request. Amtrak also submits a separate appropriation request to Congress each year; typically, that request is larger than the Administration's request. Table 2 shows the difference in the requests submitted for FY2020. Congress addresses Amtrak's subsidy in the annual Transportation, Housing and Urban Development, and Related Agencies Appropriations Act. For most of Amtrak's existence, Congress has divided Amtrak's grant into two categories, operating and capital grants. The operating grant could be thought of as relating to Amtrak's annual cash loss, and the capital grant as relating to the depreciation of Amtrak's assets, as well as an amount for Amtrak debt repayments. Congress changed the structure of federal grants to Amtrak in Title XI of the FAST Act. Starting in FY2017, Amtrak's appropriation has been divided between funding for the operationally self-sufficient NEC, which has large capital needs, and the National Network, which has modest capital needs (as the tracks are almost entirely owned and maintained by freight railroads) but runs an operating deficit of several hundred million dollars. The change was intended to increase transparency of the costs of Amtrak's two major lines of business and eliminate cross-subsidization between them; operating profits from the NEC and state access payments for use of the NEC will be reinvested in that corridor, and passenger revenue, state payments, and federal grants for the National Network will be used for that account. Amtrak's reliance on annual appropriations has made it difficult to fund long-term capital projects. DOT's Inspector General has noted that the lack of long-term funding "has significantly affected Amtrak's ability to maintain safe and reliable infrastructure and equipment, and increased its capital program's annual cost." Amtrak's FY2020 budget request suggests a multiyear appropriation to provide some additional stability without fundamentally altering the mechanism by which Amtrak receives its federal funding. Most federal funding for highway and transit programs is provided by a special form of budget authority, contract authority, which allows DOT to obligate funds from the Highway Trust Fund in advance of an appropriation. This permits DOT to commit to support highway projects that may take several years to complete. There have been proposals to create a similar trust fund for Amtrak, in order to provide a greater level of financial stability and permit such long-term funding of capital projects. Such efforts have faced objections from some Members of Congress opposed to Amtrak receiving federal funding. There is also a practical challenge to identifying a revenue source for an Amtrak trust fund. The Highway Trust Fund, which receives revenue from taxes on motor fuels and heavy trucks, is not authorized to spend money on intercity rail services; in any event, the revenues flowing into the fund are far below the level required to support the levels of federal highway and transit spending authorized by Congress, necessitating several transfers of money from the general fund since 2008. If a passenger rail trust fund were to be funded solely from a tax on passengers, the cost of Amtrak tickets could rise by several dollars per ticket at current ridership levels, potentially contravening the purpose of the fund by reducing ridership. <4. Issues for Congress> <4.1. Maintaining and Improving the Northeast Corridor> Amtrak has stated that there is a $28.1 billion backlog of state-of-good-repair projects on the NEC, which Amtrak revenue alone is unable to fund, and which does not include capital projects deemed necessary to increase capacity. It seems unlikely that private investors would be prepared to provide that funding in exchange for a share of the operating profits generated by NEC passenger trains. The obstacles facing such an investor would be largely the same as the ones currently facing Amtrak: operating profits are insufficient to cover capital costs, and the ability to increase revenue by running additional trains into Penn Station in New York City, by far the most popular origin and destination point on the NEC, will be limited until and unless major capital improvements not included within the state-of-good-repair backlog, including a new tunnel under the Hudson River, are completed. The fragmented control of NEC infrastructure, some of which is owned by state governments, would persist even if Amtrak's assets in the corridor were operated by some private entity. A provision of the FAST Act required the Federal Railroad Administration (FRA) to solicit proposals to design, build, operate, and maintain high-speed rail systems on federally designated high-speed rail corridors, including the NEC. No such proposal was submitted for the NEC. Plans to create a separate entity to own and/or operate the NEC, including as part of larger plans to reorganize or privatize the entire passenger rail system, have been proposed but have never been adopted in full. In 2002, the Amtrak Reform Council submitted its recommendations to Congress for a "restructured and rationalized national intercity rail passenger system" as required by the Amtrak Reform and Accountability Act of 1997. Among other measures, the council endorsed organizing NEC infrastructure assets under a separate government corporation that would control the assets and manage rail operations and capital improvements. The council admitted in its recommendations that this new infrastructure company would not be able to fund its own capital needs, and endorsed continued federal funding in addition to funds committed by the states. A similar suggestion, which was known as the Competition for Intercity Passenger Rail in America Act, was proposed in 2011 by the leadership of the House Committee on Transportation and Infrastructure but never introduced. Some proposals have called for a dedicated funding source, backed by taxes or fees within the region served by the NEC. The thinking behind this is that restructuring of the NEC would be more attractive politically if it were dependent mainly on revenue raised within the region rather than on federal government resources. As the NEC passes through eight states and the District of Columbia, creation of a dedicated regional funding source is likely to require some form of interstate agreement, with each state concerned that its contribution is commensurate with the benefits it expects to receive. <4.2. The Future of the National Network> Critics of Amtrak have often questioned the necessity of continuing to operate long-distance trains, which usually require the largest operating subsidies, both in total dollars and in dollars per trip or per passenger-mile. Proponents of passenger rail have contended that these operating losses are distorted by Amtrak accounting practices, pointing to the allocation of fixed costs to individual routes and the differing treatment of state and federal grant funds. Amtrak has responded that its accounting practices, based on a performance tracking system developed by DOT's Volpe Transportation Systems Center in conjunction with the Federal Railroad Administration (FRA) and Amtrak, accurately allocate costs among its various routes. Amtrak points out, for example, that while its California Zephyr between Chicago and Emeryville, CA, has greater revenue per trip than an average Northeast Regional train on the NEC, the long-distance train requires nine times as many employees, twice as much equipment, and more switching operations in rail yards for every trip. Amtrak has proposed shifting its focus from maintaining existing levels of service on all 15 long-distance routes currently in the Amtrak system to shorter corridors that would be supported by the states. Amtrak is under pressure to accomplish two goals that at times seem to work against one another: to serve as the national passenger railroad, including through the operation of long-distance routes, and to reduce or eliminate the need for federal subsidies. Federal law provides that "Amtrak shall operate a national rail passenger transportation system which ties together existing and emergent regional rail passenger service and other intermodal passenger service." The phrase "national rail passenger transportation system" is defined to include "long-distance routes of more than 750 miles between endpoints operated by Amtrak as of the date of enactment of the Passenger Rail Investment and Improvement Act of 2008." However, Amtrak also has statutory power to discontinue routes, notwithstanding the above provisions. In its FY2020 budget request, the Trump Administration proposed a reduction in annual appropriations to the National Network, with the expectation that either states would support continued operation of long-distance routes or Amtrak would discontinue them. The Administration proposed to offset this reduction with a $550 million appropriation to a new Restoration and Enhancements discretionary grant program, which would allow states to gradually ramp up to their full contributions, with a federal subsidy decreasing each year over a five-year period. In its own FY2020 budget request, Amtrak requested an appropriation equal to the full $1.8 billion authorization contained in the FAST Act, but stated some support for changing the way the National Network is funded in the future (emphasis added): Amtrak appreciates the Administration's focus on expanding intercity passenger rail service to today's many underserved cities and corridors across the nation. We believe that a modernization of the National Network, with the right level of dedicated and enhanced federal funding , would allow Amtrak to serve more passengers efficiently while preserving our ability to maintain appropriate Long Distance routes. Removing federal support for long-distance service could create a circumstance in which, if one state along the route declined to contribute to its operating costs, Amtrak might be left with little recourse other than to discontinue the route. Proponents of continued long-distance train service point to the large proportion of trips taken on long-distance trains between origins and destinations other than the endpoints, and to the trains' relatively high load factor (57% in FY2018) compared to other Amtrak routes (58% on the NEC, 40% on state-supported routes), an indicator of efficient utilization of passenger space. However, depending on the number of cars in each train, this could conceal an inefficient utilization of engines and engineers, as a short train may require the same crew as a longer one no matter how many passengers are aboard. Existing state-supported routes could also face service cuts due to a lack of state support. The Chicago-Indianapolis Hoosier State route was created in 1980 to provide service on days when the thrice-weekly Cardinal long-distance train did not operate. When PRIIA Section 209 went into effect at the beginning of FY2014, requiring the state of Indiana to cover all operating losses associated with the route, state political support began to wane, and the route was threatened with discontinuance. Under a different section of PRIIA, the state contracted with a private railroad company to operate the route, but that company withdrew from the agreement before the base contract period had expired, returning responsibility to the state government. The Hoosier State was discontinued on June 30, 2019, after Indiana declined to provide further funding. Section 210 of PRIIA required Amtrak to generate performance improvement plans for all 15 of its long-distance routes, starting with the 5 worst-performing routes based on 2008 data. These reports contained a number of recommended actions to improve long-distance train performance according to various metrics: the Customer Satisfaction Index (CSI), on-time performance (OTP), and cost recovery (CR). There has been uneven improvement in long-distance train performance in the intervening years. Two routes have higher CSI scores (now referred to as eCSI scores) than they did in 2008, six routes have better on-time performance, and five have improved cost recovery rates. All other scores for these routes have stayed the same or worsened. The extent to which any actions taken as a result of the Section 210 plans either improved route performance or mitigated its decline is unclear. <4.3. Access to Freight Rail Infrastructure and On-Time Performance> Freight train interference is one cause of poor on-time performance on Amtrak routes. By law, Amtrak is to be given "preference" over other railroad traffic when using tracks it does not own. In practice this preference has been difficult to enforce, as freight railroads have little incentive to be overly accommodating to Amtrak trains, for which they are reimbursed only the incremental cost of Amtrak's use of their tracks. Sections 207 and 213 of PRIIA directed FRA, Amtrak, and STB to develop minimum on-time performance standards, and gave STB enforcement power over railroads that failed to meet these standards. Final metrics and standards went into effect in 2010, before being suspended in 2012 amid court challenges. Following a series of court decisions that ultimately upheld Amtrak's role in developing performance standards but altered the role of the STB, FRA and Amtrak are free to reformulate new on-time performance standards. At a June 2019 Senate hearing, Amtrak CEO Richard Anderson said this could be completed in less than 90 days, though he declined to commit to a specific timeline. Anderson compared these standards to similar metrics in use in the commercial aviation industry. Current law permits the U.S. Department of Justice (DOJ) to enforce Amtrak's statutory track preference. Anderson has noted in communications with lawmakers that DOJ has done so only once in Amtrak's history, against the Southern Pacific railroad in 1979. Amtrak has requested that a similar enforcement power be granted statutorily to Amtrak, going so far as to recommend specific bill language that would allow Amtrak to sue host railroads. Another option is to make funding available to states to assist them in purchasing tracks used by passenger trains from their freight railroad owners. The state of Michigan pursued this strategy, using roughly $150 million in federal grant funds awarded in 2011 to purchase the 135-mile rail corridor from Kalamazoo to Dearborn on the Chicago-Detroit corridor. At the time of the transaction in 2012, previous owner Norfolk Southern Railway had placed several sections of the corridor under slow orders due to poor infrastructure conditions. After several years of repairs and construction funded in part by additional federal grants beyond those used to purchase the line, Amtrak's on-time performance on the Chicago-Detroit Wolverine service rose from 53% in FY2015 to nearly 70% in FY2016, though it has declined slightly since (and 70% is still below the 80% standard initially set under PRIIA 207). Using a slightly different ownership structure, the state of North Carolina supports several passenger trains per day between Raleigh and Charlotte on tracks owned by the North Carolina Railroad, a state-owned entity that leases its tracks to Norfolk Southern. Norfolk Southern agreed to increased passenger service on the line in return for extensive public investment in improving and expanding the infrastructure. The number of daily trains offered by the state-supported Piedmont service has increased, and the service has exceeded the 80% on-time performance standard for state-supported routes in five of the past seven years. Public ownership of rail infrastructure can be beneficial for passenger rail on-time performance because of the lessened incentive to give priority to freight traffic. Where a freight railroad may find it more profitable to delay passenger trains to accommodate freight trains, a public owner might give preference to passenger services instead. However, in situations that involve public-sector purchases of busy freight lines, it is likely that the affected freight railroads would demand protection for their services as a condition in any sale agreements. Freight railroads are less likely to give up control of their busiest main lines than in the case of parallel or secondary lines. One issue that has hindered congressional efforts to encourage competition in passenger rail service is that freight railroads' statutory obligation to carry passenger trains applies only to trains operated by Amtrak. This may be one reason that states that have initiated state-supported routes have uniformly contracted with Amtrak to be the operator. For other operators to be able to compete with Amtrak on equal footing, legislation may be needed to address their rights to make use of freight railroads' infrastructure. <4.4. Food and Beverage Service> Amtrak has served food and beverages since it began operating in 1971, continuing the practice of its predecessor companies. As far back as 1981, Congress prohibited Amtrak from providing food and beverage service at a loss, and this prohibition is still in the statutes governing Amtrak: Amtrak may ... provide food and beverage services on its trains only if revenues from the services each year at least equal the cost of providing the services. The law does not define what is to be included in the "cost of providing the services." Amtrak has stated that providing food and beverage service is essential to meeting the needs of passengers, especially on long-distance trains, and it has interpreted the law as requiring that revenues cover the costs of food and beverage items and commissary operations but not the labor cost of Amtrak employees providing food service aboard trains. When on-board labor costs are excluded, Amtrak says, the service covers its costs. When labor costs are included, however, the service operates at a significant deficit (see Table 4 ). Amtrak has taken measures, at Congress's direction, to reduce costs for food and beverage service. In 1999, it shifted from handling food and beverage supplies internally to contracting out such activities. More recently, Amtrak announced it would be discontinuing its traditional dining car service on several long-distance routes, in part to save money. A House proposal in the 112 th Congress would have required FRA to contract out Amtrak's onboard food and beverage service but acknowledged that the service may operate at a loss. Section 11207 of the FAST Act requires Amtrak to develop a plan to eliminate food and beverage service losses, and prohibits federal funds from being used to cover losses starting five years after enactment but also provides that no Amtrak employee shall lose his or her job as a result of any changes made to eliminate losses. Congress provided that Amtrak could eliminate the losses on food and beverage service through "ticket revenue allocation." Although that phrase is not defined in the law, it implies that Amtrak could declare that a portion of the ticket prices paid by certain passengers is dedicated to food and beverage service, as it already does for passengers traveling in first-class accommodations. <5. Positive Train Control Interoperability Issues> Positive train control (PTC) is an interconnected system of signals and communication devices designed to prevent collisions and derailments by automatically slowing or stopping a train if its engineer fails to do so. The Railway Safety Improvement Act of 2008 (RSIA; Division A of P.L. 110-432 ) required all tracks used by passenger trains to be equipped with PTC by the end of 2015, now effectively extended to December 31, 2020, by subsequent laws and regulations. All Amtrak-owned or -controlled track had PTC in operation on January 1, 2019, except approximately one mile of slow-speed track in the complex Chicago and Philadelphia terminal areas, and PTC is installed on 85% of other railroads' route miles that Amtrak uses. However, to fully comply with the PTC mandate, PTC-equipped Amtrak trains must be certified interoperable with all PTC systems installed by host railroads, and Amtrak's PTC system must be interoperable with other railroads' PTC-equipped trains that use its tracks. At the end of 2018, Amtrak had achieved interoperability with 2 railroads out of a total of 13 that use its tracks, though this does not necessarily reflect Amtrak's progress achieving interoperability with its host railroads. The Government Accountability Office has found that of all railroads subject to the statutory mandate, only two commuter railroads have achieved full operation and full interoperability. If Amtrak does not achieve 100% interoperability with its host railroads by the deadline, absent a waiver or subsequent extension (which FRA has stated it will not issue), Amtrak would need to suspend rail service on noncompliant lines or risk enforcement action in the form of financial penalties for each day it operates in violation of the mandate.

Amtrak—officially the National Railroad Passenger Corporation—has been the national intercity passenger railroad since 1971, and currently serves over 500 stations on a network approximately 22,000 miles long. In some markets, such as the busy Northeast Corridor (NEC) connecting Washington, New York, and Boston, it has captured a greater share of intercity passengers than domestic airlines. In other, more rural markets, some see it as a vital link to the national transportation system despite low levels of ridership. Though Amtrak is legally a private for-profit corporation, the federal government controls the company's operations. A five-year authorization of federal funding for Amtrak was included in the Fixing America's Surface Transportation (FAST) Act of 2015 ( P.L. 114-94 ), which expires at the end of FY2020. Since its inception, Amtrak has depended on annual appropriations from the federal government to cover its capital (infrastructure, vehicles) and operating (train crews, maintenance) costs. Amtrak's financial health has improved in recent years. In 2018, according to the railroad, revenue covered 79% of its expenses, the highest ratio it has ever reported. Amtrak's preferred metric for financial performance, its adjusted operating loss, declined to $168 million, but this figure does not take its capital needs into account. Increased contributions from commuter railroads that use the NEC have played an important role in reducing the need for federal support. Amtrak's ridership continues to increase, as does its relative share of passenger miles traveled, though both remain small on a national scale when compared to road and air traffic. Despite these improvements, a large backlog of capital projects remains unfunded, and Amtrak remains under pressure to further reduce its need for operating subsidies. Capacity constraints will make further ridership increases difficult to achieve without capital expenditures for additional equipment and track improvements. The Amtrak system is divided into two subsets for funding purposes, the NEC and the National Network (everything else), each facing its own set of challenges. Congress may want to explore opportunities to further differentiate these systems in terms of how they are funded and managed. Comparatively high revenues on the NEC compared to operating costs have prompted occasional proposals to either partially or fully privatize the existing service, while its large capital backlog and lack of a long-term dedicated funding source have raised questions about whether a new NEC-only funding mechanism is needed. The National Network, meanwhile, encompasses both short-distance corridors supported by state governments and long-distance routes that require the largest federal subsidies in the Amtrak system. Amtrak is under pressure to accomplish two goals that at times seem to work against one another: to serve as the national passenger railroad, including through the operation of long-distance routes, and to reduce or eliminate the need for federal subsidies. While Congress has repeatedly taken steps to preserve long-distance passenger trains, both the Trump Administration and Amtrak have voiced support for shifting focus away from long-distance trains and toward serving a larger number of shorter corridors. Any such rebalancing, however, would be contingent on state support that is far from certain. Apart from funding, other issues facing Amtrak have been on the congressional agenda for years. On-time performance has seen only sporadic improvement since the enactment of a 2008 law designed to enforce the preferential treatment, codified in statute since the 1970s, of Amtrak trains running on freight tracks. Onboard food and beverage service, long seen by critics as a contributor to financial losses but by supporters as integral to the rail travel experience, has mirrored Amtrak as a whole in improving its financial performance while still falling short of goals set by Congress. Installation of a key safety technology mandated in 2008 is continuing according to federally approved schedules, but Amtrak routes that operate on track owned by freight or commuter railroads face the additional hurdle of demonstrating interoperability with those railroads' safety systems, putting the timeline to full implementation at risk.

crs_R45827

crs_R45827_0

<1. Introduction> The funding of public elementary and secondary schools in the United States involves a combination of local, state, and federal government revenues. State and local governments generally provide over 90% of the revenue available for public elementary and secondary education on an annual basis, with the federal government providing the remainder. As such, there is consistent congressional interest in understanding how the majority of available funds are provided to local educational agencies (LEAs) and, ultimately, to public schools. This report intends to provide context for consideration of the comparatively small but important role of the federal assistance programs in financing public education, discuss some of the ways that state and local finance policies and practices intersect with federal involvement, and explain selected key concepts in this field. The report provides a basic overview of the mechanisms used by states and LEAs to fund public education and an introduction to core school finance concepts. It begins with an examination of the sources of funding for public elementary and secondary education and how these funding sources vary by state and over time. It then considers how states and LEAs raise revenue for public education through different types of taxes, including property taxes. The report then focuses on state school finance programs, the varieties of policies under which states provide funds to LEAs, and the local units of government that administer public K-12 education. This includes an examination of the key concept of "equalization" in state school finance programs. School finance programs often incorporate state-level weighted student funding programs, under which additional funds are provided to LEAs for the education of students with certain high-cost needs (e.g., associated with low family income or student disabilities) or who are in high-cost educational programs (such as technical education). The next section of the report considers LEA programs to finance individual public schools. This is followed by a discussion of aspects of the largest federal K-12 education aid program, Title I-A of the Elementary and Secondary Education Act (ESEA), that incorporate a state school finance equity factor or weighted student funding components. In addition, a new ESEA Title I-E, as most recently comprehensively amended by the Every Student Succeeds Act (ESSA; P.L. 114-95 ), authorizes the Secretary of Education to provide participating LEAs with flexibility to consolidate eligible federal funds with state and local funding for individual public schools to create a "single school funding system based on weighted per-pupil allocations for low-income and otherwise disadvantaged students." The report concludes with a review of recent efforts to collect and report data on the level of expenditures per pupil at individual public schools within LEAs, a topic that has garnered increasing interest among policymakers in recent years. <2. Percentage Shares of Revenues for Public Elementary and Secondary Education by Government Level> 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 federal share peaked in the recessionary period of 2009-2011, and has declined thereafter. Table 1 provides the local, state, and federal shares for selected years over the 50-year period from 1965-1966 to 2015-2016. There is substantial variation among the states with respect to the shares of public elementary and secondary education revenues provided by state, local, and federal governments ( Table 2 ). For example, Hawaii, with a statewide system of public elementary and secondary education and no LEAs, provides virtually no local government revenues; almost 90% of funding comes from the state government. At the other end of this spectrum, the District of Columbia, which has no state government, provides approximately 90% of revenues from local sources. The other states fall between these two extremes of providing all or almost all of the nonfederal revenue from either state or local sources. Illinois has the lowest state share of revenues (24.1%) and the highest local share (67.4%) of the 50 states. <3. Sources of State and Local Government Revenues Used for Public Elementary and Secondary Education> Revenues are raised at the state and local levels to support public elementary and secondary education. Local revenues may be raised directly by an LEA itself (fiscally independent LEAs), or be raised and provided to an LEA by a general purpose unit of local government, such as a county or city (fiscally dependent LEAs). The primary source of local revenues for public elementary and secondary education is the property tax. This tax is primarily applied to real property (residences, commercial buildings, etc.), and in some cases to vehicles or boats. According to data from the U.S. Census Bureau for 2016, 72.0% of all local government tax revenues were from property taxes, 17.4% were from sales taxes, 6.0% were from individual and corporate income taxes, and the remaining 4.6% came from motor vehicle and other miscellaneous taxes. The property tax is an annual percentage of the assessed value of residential and commercial "real" property (i.e., buildings and land) and, in some localities, "personal" property (i.e., automobiles, other vehicles, and occasionally other items such as livestock). The property tax rate unit is often referred to as a "mill" or one-thousandth of the assessed value of the property. Because almost three-quarters of all local government revenues come from property taxes, variations in the value of such real or personal property relative to the number of school-age children in a locality is usually the primary cause of local variations in capacity to raise revenues per pupil for public elementary and secondary education. Beyond differences in taxable property per pupil, localities in many states are able to select their local property tax rate, at least within a limited range, and may choose to tax themselves at higher rates than other localities in the same state. State revenues for public elementary and secondary education are raised from a variety of sources, primarily personal and corporate income and retail sales taxes, "excise" taxes such as those on tobacco products and alcoholic beverages, plus lotteries in several states. According to data from the U.S. Census Bureau for 2016, 47.8% of all state government tax revenues were derived from sales taxes, 42.2% were from individual and corporate income taxes, 1.7% were from property taxes, and the remaining 8.3% came from motor vehicle and other miscellaneous taxes. <4. State School Finance Programs> As depicted in Table 2 , 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. Starting in the early 20 th century, all states began to establish public elementary and secondary finance programs in order to diminish somewhat the high degree of inequality in revenues per pupil that would result if funding were based only on local taxable resources and the willingness of local citizens to tax themselves. The primary policies under which states allocate these revenues among their LEAs have been catalogued and categorized by school finance analysts on several occasions in recent decades. For several years, the U.S. Department of Education's National Center for Education Statistics (NCES) financed and supported a joint effort with the American Education Finance Association and the National Education Association to compile detailed information on the characteristics of state school finance programs. However, the most recent of these publications was released in 2001, was based on the 1998-1999 school year, and has not been updated. Since the publication of the last NCES catalog of state school finance programs, individual education policy analysts have coordinated efforts to update at least some of the information. For example, annual updates of key school finance policies for each state have recently been published by Professor Deborah Verstegen of the University of Nevada at Reno. Note that while those organizing and compiling the surveys of state school finance programs provide guidance intended to elicit consistent responses from the states, responses are generally prepared by different individuals in each state who may not describe various policies using the same terminology or focus. The programs through which state funds are provided to LEAs for public elementary and secondary education have traditionally been categorized by those involved in the compilations discussed above and other education finance analysts into five types of programs: (1) Foundation Programs, (2) Full State Funding Programs, (3) Flat Grants, (4) District Power Equalizing, and (5) Categorical Grants. In many cases, states often have elements of two or more of these types of programs in their school finance policies. Precise counts of how many states have finance programs in each of these categories vary due to differences in the time at which analyses are conducted combined with the evolution of state policies over time, as well as variations of interpretation by individuals in each state responding to state policy surveys, among other factors. Nevertheless, there is general agreement that the first of these types of state school finance programs, typically referred to as Foundation Programs, is much more common than the other four types, and may be found to some degree in as many as 80% of the states. <4.1. Foundation Programs> Foundation Programs began to come into existence in the 1930s. A typical Foundation Program includes required local tax effort, state equalization aid, and local leeway funds. Under a Foundation Program, the state establishes an annual target level of funding per pupil applicable to all of the state's LEAs. As is discussed further below, the pupil count may be undifferentiated, or may be weighted to take into consideration a variety of pupil characteristics (such as grade level, type of educational program, special educational needs such as disabilities, low family income, or English Learner (EL) status) and sometimes estimated differences in the costs of providing education services in different localities. The funding target is most often (and historically) conceptualized as a "minimum" level of funding per pupil, or in some cases more recently as a level of funding necessary to provide an "adequate" educational program. In any case, Foundation Programs are designed to guarantee a "base" level of funding, not to achieve absolute fiscal equality among the LEAs of a state. The state target level of funding per pupil is likely to be influenced by budgetary and other political considerations. The state pays each LEA a percentage of this assumed total that varies inversely with local taxable property wealth per pupil, or some other measure of local capacity to raise revenues. The state percentage is higher for LEAs with low fiscal capacity per pupil, and lower for those with high fiscal capacity per pupil. Foundation Programs vary in their provisions regarding local tax rates. In most states with Foundation Programs, the state specifies at least a minimum rate at which localities must tax themselves. In other states, a local tax rate is assumed in the calculation of the Foundation Program's state share, based on the difference between the assumed total expenditure level and the state percentage of this, but localities are not actually required to tax themselves at this rate. In addition, LEAs might be allowed to raise local tax rates beyond the level required under state law, at least to a limited extent, but will not receive any state supplementation of the additional funds raised. These are commonly referred to as "leeway funds," as LEAs have the leeway to choose a local tax rate higher than the standard level established under state law. Thus, a Foundation Program equalizes funding per pupil (however "pupil" may be defined) but only up to a target level, with LEAs often free to raise additional funds (not matched by the state) if they wish. Many states also combine Foundation Programs with one or more of the additional types of programs discussed below (except for Full State Funding) in a tiered or layered funding system. <4.2. Full State Funding Programs> Full State Funding is only found in Hawaii. Under such a policy there are virtually no local revenues. States such as Vermont and New Mexico come close to this category through programs that involve very limited local funding sources. <4.3. Flat Grants> Flat Grants are historically important, having been a dominant form of state aid in the early part of the 20 th century. While the role of Flat Grants as the primary form of state aid for public elementary and secondary education has almost disappeared, they are included as a supplement to Foundation Programs or other programs in a number of states. As the name implies, this type of program provides grants of an equal amount per pupil to all LEAs in a state, regardless of the level of taxable property wealth in those localities or specific pupil characteristics. <4.4. District Power Equalizing> Usually called District Power Equalizing , this program type focuses specifically on equalizing the ability of different LEAs in a state to raise revenues from their available taxable property. These policies establish a minimum level of revenue that may be raised for each unit of local tax rate. For example, a state policy might set a standard that at least $1,000 per enrolled student be generated for each 5 mills of local property tax rate. If a locality cannot raise the standard level of funding per unit of tax rate, due to insufficient taxable property in the LEA, then state funds would be provided to make up the difference (often limited to a specified maximum local tax rate). In other words, this program type provides for a minimum guaranteed tax base for public elementary and secondary education in the state. It is often said that District Power Equalizing focuses on equity for taxpayers, while frequently allowing substantial variation in local tax rates and thereby in total state and local funding per pupil, depending on local preferences. Reportedly, fewer states than in the past currently rely primarily on this type of program, though several still incorporate it as part of a multifaceted state school finance system (i.e., in conjunction with Foundation Programs, etc.). <4.5. Categorical Grants> While apparently no state relies totally on Categorical Grants, many states use them in combination with the program types discussed above. Categorical Grants provide funding based on the number of students with specific needs (students with disabilities or limited English proficiency, from low-income families, etc.) or in particular educational programs (career and technical programs, etc.). States may allow such funding to be treated as general aid by LEAs, or they may require that funds be used to serve the specific students upon whom the grants are based. At the federal level, the largest federal programs of aid to public elementary and secondary education are Categorical Grants. These include ESEA Title I, Part A, under which funds for the education of disadvantaged children are allocated primarily on the basis of estimates of the number of school-age children in low-income families. <4.6. Categorization of State Finance Programs> As mentioned above, it is difficult to place all states neatly into one of the five aforementioned categories based on current and consistent data and terminology. Nevertheless, one relatively recent effort to do so categorized 37 states as relying primarily on Foundation Programs, 1 state as using Full State Funding, 1 state as relying primarily on Flat Grants, 2 states as relying primarily on District Power Equalizing, and the remaining 9 states as employing combinations of these types of state school finance programs. Another effort to place states in school finance program groups was published in 2003, and was based on the NCES compilation of state programs for 1998-1999. This analysis placed 35 states in the Foundation Program category, 1 state in the Full State Funding category, 2 states in the Flat Grants category, and 6 states in the District Power Equalizing category, with the remaining 6 states using combinations of these types of programs. A more recent effort to categorize state school finance programs found that "approximately 80%" of all states use Foundation Programs, 1 provides Full State Funding (though a few others approach this), 1 relies primarily on Flat Grants, and 2 rely primarily on District Power Equalizing, but that increasingly many states combine two or more of these program types in a tiered funding system. Finally, in August 2019, the Education Commission of the States (ECS) published data indicating that 36 states rely primarily on a Foundation model of K-12 education finance, while 8 states rely primarily on a "Resource Allocation" model, 3 states rely on a hybrid of Foundation and Resource Allocation models, 1 state relies on a hybrid of a Foundation Model and a Hold Harmless policy, and the final 2 states rely on "Other" models of school finance. <5. 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. School finance equalization would seem to imply "equal spending per pupil" among a state's LEAs. However, the meanings of both "equal" and "per pupil" may vary widely. Relatively few observers advocate absolute equality of dollars spent on behalf of every pupil in the state. Almost all state school finance programs allow for some level of spending differences based on local willingness to pay for public elementary and secondary education, differences in the costs of educating various categories of high-need pupils, or differences in the costs of providing education services in different geographic areas. State school finance programs frequently account for certain types of pupils whose education imposes higher than average costs on LEAs, which might include pupils with disabilities, from low-income families and/or living in areas with high concentrations of poverty, with limited proficiency in the English language, or living in sparsely populated areas. Analysts of school finance programs sometimes use the term "horizontal equity" to refer to equal funding on behalf of similar pupils in different LEAs across a state, and "vertical equity" to refer to different levels of funding on behalf of pupils with different levels of need. If a state school finance program provides more funds on behalf of high-cost pupils than other pupils in an effort to provide vertical equity, and if the distribution of these pupils is uneven across the state's LEAs, then the state's school finance system might be considered by many analysts to be equalized yet have significant differences in spending per enrolled pupil overall. Regardless of how one adjusts for the distribution of different types of pupils, there are two basic ways in which school finance equalization has been defined. By far the most common method is based on equalization of the level of revenues or expenditures per pupil, however "pupil" might be defined. The other, somewhat less common, method focuses on equalizing the amount of funds per pupil that each LEA could raise per unit of local tax rate. The first method would equalize actual amounts of funds available, while the second would equalize local ability to raise revenues. These two basic concepts of equalization are reflected in many of the state school finance programs discussed above. Foundation Programs often incorporate provisions to provide higher amounts per pupil on behalf of one or more categories of high-need pupils, and Categorical Grants often provide increased funds to serve specific high-need pupil groups. In contrast, District Power Equalizing programs focus on equalizing the funds that could be raised per unit of local tax rate. <5.1. Examples of Relevant School Finance Court Cases> Beginning in the early 1970s, equalization of resources for public elementary and secondary education across the LEAs in each state has been the topic of a variety of state and, to a much lesser extent, federal court cases. In 1971, in the case of Serrano v. Priest , the California State Supreme Court ruled that the quality of a child's education should not depend on the taxable property wealth of the locality in which her or his family resides. This was the first of an ongoing series of cases brought in state courts, based on state statutory law and state constitutions. At the federal level, the U.S. Supreme Court decided in 1973, in the case of San Antonio Independent School District v. Rodriguez, that differences in local expenditures per pupil within a state did not violate the U.S. Constitution, as long as these differences were the result of state actions intended to meet a public purpose, such as increased local control of education that might accompany substantial reliance on local revenue sources. Following this decision, the issue of school finance equalization has been addressed primarily in state courts, based on state constitutional provisions, rather than federal courts. <5.2. Weighted Student Funding in State School Finance Programs> In the discussion of state school finance programs above, it was stated that 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). As noted earlier, existing surveys of state school finance programs, which rely on different respondents in each state, vary in the level of detail and use of terminology in describing the programs in each state. Nevertheless, 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. Another study of the extent to which states use pupil weighting in their school finance programs was published in August 2019 by ECS. These data include fewer categories of pupil weights in state school finance programs than the aforementioned study. Overall, based on this study, 42 states, the District of Columbia, and Puerto Rico used weights for at least one pupil category. The number of states reported in these two recent studies as applying weights to different pupil categories in their school finance programs is summarized in Table 3 . Pupil weighting categories for which no data are provided in the third column of this table were not included in the ECS study. It should be noted that the Verstegen study was based on survey data collected from state departments of education on state school finance policies that were in effect during the 2017-2018 school year. The study did not include the District of Columbia or Puerto Rico. The ECS study relied on relevant state statutory language, regulations, and guidance that was in effect as of July 1, 2019, in the 50 states, the District of Columbia, and Puerto Rico. As detailed in Table 3 , according to both studies states most often add funding weights for pupils who are English learners, have low family income, or have disabilities. States often employ multiple weights for pupils with specific types of disabilities (i.e., higher weights are assigned as the level of disability increases), and sometimes increase low family income weights for pupils in LEAs or schools with high concentrations of low-income pupils (i.e., higher weights are assigned as the concentration of children from low-income families increases). States that do not employ pupil weights in their primary funding formulas sometimes provide extra funding for high-need pupils through separate Categorical Grants. 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. For example, the state of Oregon bases allocations under its primary school finance formula on a weighted count of students in average daily membership (enrollment) in each of the state's LEAs, which is referred to as the average daily membership weighted (ADMw) count. This policy applies additional weights to counts of students who are English learners; students who are pregnant or are in parenting programs; students with disabilities; students in low-income families; foster, neglected, or delinquent students; and students in remote or small schools. Another source of information on the extent to which weighted student funding and related concepts are employed in state school finance programs is the Edunomics Lab at Georgetown University. This organization compiles information on the share of state elementary and secondary education funds that various states allocate via primary state aid formulas incorporating weighted student funding, which it also refers to as the "student based allocation." The Edunomics Lab has reported that 20 states allocated 33% or more of their state aid funds through a weighted student funding formula during at least some part of the period from FY2014 to FY2019. <6. LEA Programs to Finance Public 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. LEAs may also use weighted student funding formulas to allocate funds to individual public schools, but more often they use other funding strategies. This section of the report provides an overview of conventional intra-LEA budgeting policies and the use of weighted student funding policies by LEAs. <6.1. 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. <6.2. 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 the LEAs that are currently implementing weighted student funding policies for intra-LEA allocations to schools. However, the Edunomics Lab compiles data on such LEAs, and it has identified several relatively large urban LEAs that allocated between 21% and 89% of their funds to schools through weighted student funding formulas in FY2017 and/or FY2018. These are Baltimore City, Boston, Chicago, Cleveland, Denver, Douglas County (Colorado), Houston, Indianapolis, Jefferson County (Colorado), Metro Nashville, Milwaukee, New York City, Newark, Norwalk (Connecticut), Orleans Parish, Prince George's County (Maryland), and San Francisco. This is not an exhaustive list of LEAs employing weighted student funding for schools, especially with respect to smaller LEAs, but it may be considered to be illustrative of the current extent of the practice. For example, the Boston public school system allocates funds to individual public schools on the basis of weighted student counts that vary by grade level, pupils with disabilities (multiple categories), ELs, pupils with low family income, and pupils in career and technical education programs. According to Boston Public Schools, the use of weighted student funding promotes the school system's goals of equity, empowerment for school-level staff, innovation by individual schools, accountability, and transparency regarding the level of funding available to each school. Advocates for weighted student funding policies within LEAs argue that they promote equity by explicitly connecting funding levels with the distribution of high-need pupils, as defined by the LEA, resulting in higher state and local funding in schools with higher proportions of these pupils. Advocates also argue that transparency is enhanced when school budgets reflect funds actually spent at each individual school. They further argue that weighted student funding of schools enhances school choice and school-based management practices, where applicable, and promotes flexibility in resource use by schools. However, 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. <7. Use of Equalization Strategies and Weighted Student Funding in ESEA> The ESEA includes one program and one secretarial authority that incorporate elements of the equalization and weighted student funding strategies used by states and LEAs. The Title I-A program 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. It is also the largest ESEA program ($15.9 billion), accounting for over 60% of all ESEA funds in FY2019 ($25.2 billion). The formulas used to determine grants to LEAs under Title I-A include both an equity component and weighted student funding elements. Title I-E provides the Secretary of Education (the Secretary) with authority 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." Both ESEA Title I-A and Title I-E are discussed below. <7.1. Title I-A> Under the ESEA Title I-A program, different portions of each year's appropriation for grants to LEAs are allocated under one of four different formulas Basic Grant, Concentration Grant, Targeted Grant, and Education Finance Incentive Grant (EFIG). For each formula, a maximum grant is calculated by multiplying a "formula child count," consisting primarily of estimated numbers of school-age children in low-income families, by an "expenditure factor" based on state average per pupil expenditures for public K-12 education. For some formulas, additional factors are multiplied by the formula child count and expenditure factor. These maximum grants are then reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant and "hold harmless" provisions. The formula child population used to determine Title I-A grants for the 50 states, the District of Columbia, and Puerto Rico consists of children ages 5 to 17 (1) in low-income families, according to estimates for LEAs from the Census Bureau's Small Area Income and Poverty Estimates (SAIPE) program; (2) in institutions for neglected or delinquent children or in foster homes; and (3) in families receiving Temporary Assistance for Needy Families (TANF) payments in excess of the poverty income level for a family of four persons. Children in low-income families account for about 97% of the total formula child count, so the other formula population categories are of limited significance overall. Each element of the formula child count is updated annually. In general, LEAs must have a minimum number of formula children and/or a minimum formula child rate to be eligible to receive a grant under a specific Title I-A formula. Among the four Title I-A formulas, the EFIG formula contains an equity factor as well as a weighted student funding component. The Targeted Grant formula also contains a weighted student funding component. Both types of funding factors are discussed below. <7.1.1. Equity Factor> Under the EFIG formula, a measure of the equity of state school finance programs plays a role in the determination of the level of funds each state receives. More specifically, Title I-A grants under the EFIG formula are made to states on the basis of their formula children, an expenditure factor based on state average per pupil expenditures for public elementary and secondary education, an effort factor based on average per pupil expenditure for public elementary and secondary education relative to personal income per capita for each state compared to the nation as a whole, and an equity factor based on variations in average per pupil expenditure among the LEAs in each state. Thus, state total grants under the EFIG formula are based on each state's share, compared to the national total, of a population factor multiplied by an expenditure factor, an effort factor, and an equity factor, adjusted by a state minimum grant provision. The equity factor is based on a measure of the average disparity in expenditures per pupil among the LEAs of a state called the coefficient of variation (CV). The CV is expressed as a decimal proportion of the state average per pupil expenditure. In the CV calculations for this formula, an extra weight (1.4 vs. 1.0) is applied to estimated counts of children from low-income families. The effect is that grants would be maximized for a state where LEA-level expenditures per pupil from a low-income family are 40% higher than expenditures per pupil from a non-low-income family. Typical state equity factors range from 0.00 (for the single-LEA jurisdictions of Hawaii, Puerto Rico, and the District of Columbia, where by definition there is no variation among LEAs), to approximately 0.30 for a state with high levels of variation in expenditures per pupil among its LEAs. The equity factors for most states fall into the 0.10-0.20 range. In calculating grants, the equity factor is subtracted from 1.30 to determine a multiplier to be used in calculating state grants. As a result, the lower a state's expenditure disparities among its LEAs are, the lower its CV and equity factor will be, and the higher its multiplier and its grant under the EFIG formula will be. Conversely, the greater a state's expenditure disparities among its LEAs are, the higher its CV and equity factor will be, and the lower its multiplier and its grant under the EFIG formula will be. Of the $15.9 billion appropriated for Title I-A for FY2019, EFIG received $4.0 billion (25.3% of total Title I-A funding) for the 2019-2020 school year. <7.1.2. Weighted Student Funding> The EFIG formula also employs a weighted student funding concept in the allocation of grants to states. In the calculation of the formula's equity factor, state and local funds per pupil are calculated using a greater weight for students from low-income families (1.4) than for other students (1.0). As a result, a state where greater state and local funds are available for the education of students from low-income families than for other pupils would have a numerically low equity factor and ultimately higher grants under the EFIG formula. The weighted student concept is also employed in the Title I-A Targeted Grant formula and in an additional way in the intrastate allocation of EFIG formula funds to LEAs within states. As with the EFIG formula, the Targeted Grant formula received $4.0 billion (25.3% of total Title I-A funding) for the 2019-20 school year. Under the Targeted Grant formula, as well as the intrastate allocation of funds under the EFIG formula, formula child counts and formula child rates are assigned weights, with higher weights applied as the formula child count or rate increases in an LEA. The higher the formula child count or rate is, the higher the grants per formula child an LEA would receive will be. Under the Targeted Grant formula, one set of weighting factors is applied to all LEAs based on formula child counts and one set is applied to all LEAs based on formula child rates. In contrast, under the EFIG formula three sets of weights are used for weighting formula child counts and three sets are used for the weighting of formula child rates. The set of weights used under the EFIG formula depends on the value of each state's equity factor (described above), with lower weights applied to LEA grant calculations in states that have a lower equity factor (i.e., relatively low disparities in expenditures per pupil among the state's LEAs) and higher weights applied to LEA grant calculations in states that have a higher equity factor (i.e., relatively high disparities in expenditures per pupil among the state's LEAs). In determining LEA grants under both the Targeted and EFIG formulas, the higher of the two weighted student counts (one calculated based on formula child counts and one calculated based on formula child weights) is used in calculating grants for each LEA. <7.2. Title I-E> The Title I-E authority allows the Secretary to enter into a demonstration agreement with LEAs that are using or agree to implement weighted student funding systems to establish budgets for, and allocate funds to, individual public schools. In order to enter into a local flexibility demonstration agreement under the Title I-E authority, each LEA must have a weighted student funding system that meets specific requirements. The LEA's system must use weights or allocation amounts that provide "substantially more funding" than is allocated to other students to English learners (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 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 year prior to entering into the agreement. 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. It must also allocate a "significant portion of funds," including state and local funds and eligible federal 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. In addition, the percentage of state and local funds and eligible federal funds allocated through the LEA's weighted student funding system must be sufficient to carry out the purposes and requirements of the demonstration agreement. Eligible federal funds that may be consolidated in an LEA's weighted student funding system include, for example, 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 or the Perkins Career and Technical Education Act) are considered eligible funds for purposes of consolidation. 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. 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. <8. Recent Efforts to Collect and Publish School-Level Financial Data> A separate development relevant to the adoption of weighted student funding by some LEAs has been increasing interest in the collection and reporting of school-level finance data for public schools. While historically there have not been comprehensive state or federal efforts to calculate or report on specific budgets or expenditure levels for individual public schools, federal efforts to require and support the reporting of such information have expanded rapidly in recent years. The availability of school-level financial data, based on standard concepts applied consistently nationwide, could be especially helpful in the administration of a key fiscal accountability requirement of the ESEA Title I-A program, as discussed below. Such data could also inform state and local level consideration of equity among schools and groups of students, and increase transparency regarding budgeting and financial decisions by LEAs. One factor that may help explain this increasing attention is the "comparability" requirement associated with the ESEA Title I-A program. This is a requirement that services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools within the same LEA. If all of an LEA's schools participate in Title I-A, then services funded from state and local revenues must be "substantially comparable" in each school within the LEA. The Title I-A comparability requirement is intended to ensure that state and local funds are used to provide a comparable level of services in Title I-A schools compared with non-Title I-A schools prior to the receipt of Title I-A funds. Comparability is measured only with respect to the public schools within the same LEA, not statewide. It is designed to ensure that federal Title I-A funds provide a net increase in funding for Title I-A schools compared to non-Title I-A schools, and do not simply replace state and local funds that would, in the absence of Title I-A, be provided to the Title I-A schools. In demonstrating comparability, LEAs are prohibited from using staff salary differentials for years of employment in determining expenditures per pupil from state and local funds or instructional salaries per pupil from state and local funds. That is, actual staff salaries are not used in comparability determinations. In recent years, there has been renewed attention to the extent to which the comparability requirement is being enforced, and to the nature and quality of school-level expenditure data used to determine compliance. More broadly, a number of other federal requirements and research efforts have reflected this increased interest in school-level finance data collection and reporting. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 , Title VIII) included a one-time requirement for states to compile and report expenditures for all public schools for the 2008-2009 school year. States were required to report total personnel salaries for all school-level instructional and support staff; salaries specifically for instructional staff; salaries specifically for teachers; and nonpersonnel expenditures, if available. ED provided guidelines on the specific types of expenditures that states and LEAs should include in their reports. States and LEAs were asked to report school-level expenditures from state and local funds only, and to exclude expenditures for special education, adult education, school nutrition programs, summer school, preschool, and employee benefits. All expenditure data was to be reported based on actual expenditures, including those for staff salaries. A study of the implementation of the Title I-A comparability requirement that was based on the data collection required by the ARRA determined that within LEAs that had both Title I-A and non-Title I-A schools, "more than 40 percent of Title I schools had lower personnel expenditures per pupil than did non-Title I schools at the same grade level." For example, at the elementary school level 46% of Title I-A schools had state and local personnel expenditures per pupil that were below the average for non-Title I-A schools in the same LEA, while 54% exceeded the average for non-Title I-A schools in the same district. Title I-A middle schools and high schools were marginally less likely to have below-average per-pupil personnel expenditures (42% and 45%, respectively) compared to non-Title I-A schools in the same LEA. Across all levels of elementary and secondary education, 48% of Title I-A schools were not receiving the same level of per-pupil state and local personnel expenditures as non-Title I-A schools in the same LEA. While this does not represent a violation of the Title I-A comparability requirements, which are not based on actual personnel expenditures, it is an indication that a sizable group of Title I-A schools may not actually be as equally resourced as non-Title I-A schools prior to the receipt of Title I-A funds. In discussing this study, ED stated that, "[t]raditional district allocation methods have been shown to create significant funding disparities between Title I and non-Title I schools." Separately, ED's Office for Civil Rights began to collect selected school-level expenditure data starting with the 2009-2010 school year. These data are captured every second year as part of the ongoing Civil Rights Data Collection, and include total personnel salaries; salaries specifically for teachers, instructional aides, support services staff, and school administrators; and nonpersonnel expenditures. All expenditure data must be based on actual expenditures. Unlike data collected under the ARRA (discussed above) and ESEA (discussed below) requirements, these data are collected directly from schools and LEAs, not states. In spring 2014, the Office of Management and Budget (OMB) and ED's Office of Planning, Evaluation, and Policy Development (OPEPD) requested that ED's National Center for Education Statistics (NCES) develop a school-level finance data collection, as such a collection had not been developed on a comprehensive, annual basis. In response, NCES launched pilot efforts to expand ongoing surveys of state and LEA finances to include school-level financial data as well. Beginning with the 2013-2014 school year, NCES conducted a pilot School-Level Finance Survey (SLFS) to evaluate the feasibility of collecting school-level finance data in conjunction with the School District Finance Survey and National Public Education Financial Survey for states and LEAs, jointly conducted by NCES and the Census Bureau. Twelve states participated in this pilot survey for the 2013-2014 school year, and 17 states for 2014-2015 (although only 15 states provided data deemed to be usable by NCES). Based on pilot survey results for the 2014-15 school year, NCES determined that (1) approximately one-half of the participating states were able to report complete personnel and/or nonpersonnel data for at least 95% of their public schools, (2) SLFS data are generally consistent with data reported in other school finance surveys, (3) the development of standardized protocols "enhances the efficiency of reporting school-level finance data, (4) there remain "numerous inherent challenges in collecting school-level finance data," (5) and, nevertheless, "the feasibility of collecting and reporting school-level finance data of reasonable quality is relatively high." A major concern regarding school-level expenditure surveys is achieving consistency among the states on what kinds on expenditures to include or exclude. The SLFS currently includes 15 unique expenditure items covering a wide variety of personnel expenditures (6 items), including salaries, as well as nonpersonnel expenditures (9 items), such as educational technology. Excluded from these items are employee benefits and services provided centrally by LEAs such as transportation, capital spending, food services, central administration, and building operations and maintenance. Data for each of the 15 expenditure items were collected two ways: (1) without additional exclusions (other than the aforementioned exclusions), and (2) with additional exclusions for expenditures paid from most federal funds, expenditures for prekindergarten, and expenditures for special education. Beginning with the 2015-2016 school year, the SLFS was opened to all states on a voluntary basis. Beginning with the 2017-2018 school year data collection, NCES began collecting complete operational expenditure data. NCES noted that "[c]omplete, accurate, and comparable school-level finance data across states will take time and effort to achieve." However, NCES also noted that recent ESEA school-level finance reporting requirements (discussed below), further development of standardized internal protocols for school-level finance accounting, and continued SEA collaboration with NCES and the Census Bureau on the SLFS data collection should result in improved school-level finance data. Further, as mentioned above, the ESSA amended ESEA Title I-A to require participating states to include in school report cards data on expenditures at each public school. These report cards are to include "the per-pupil expenditures of Federal, State, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of Federal, State, and local funds, disaggregated by source of funds, for each local educational agency and each school in the State for the preceding fiscal year" (Section 1111(h)(1)(C)(x)). States are currently beginning to report expenditure data in response to this requirement. <8.1. Appendix. Glossary of Acronyms> ARRA: American Recovery and Reinvestment Act ( P.L. 111-5 ) CV: Coefficient of variation 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 ) LEA: Local educational agency NCES: National Center for Education Statistics (ED) OMB: Office of Management and Budget OPEPD: Office of Planning, Evaluation, and Policy Development (ED) SAIPE: Small Area Income and Poverty Estimates SEA: State educational agency SLFS: School-Level Finance Survey TANF: Temporary Assistance for Needy Families

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. According to the most recent data, state governments provide 47.0% of these revenues, local governments provide 44.8%, and the federal government provides 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, and 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 local educational agencies (LEAs) for public elementary and secondary education have traditionally been categorized into five types: (1) Foundation Programs, (2) Full State Funding Programs, (3) Flat Grants, (4) District Power Equalizing, and (5) Categorical Grants. Of these, Foundation Programs are most common, although many states use a combination of program types. 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). After state funds reach LEAs, they are combined with locally raised funds to provide educational resources to students in individual schools. 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 contrast, a number of LEAs have in recent years applied the weighted student funding concept to developing and implementing individual school budgets. The federal Elementary and Secondary Education Act (ESEA) includes one program (Title I-A) and one secretarial authority (Title I-E) that incorporate elements of the equalization and weighted student funding strategies used by states and LEAs. Two of the four ESEA Title I-A allocation formulas employ pupil weighting concepts in the allocation of funds to states and LEAs, and one of those formulas also takes into consideration disparities in expenditures per pupil among each state's LEAs in calculating grants. The ESEA Title I-E authority allows the Secretary of Education to enter into a demonstration agreement with LEAs that are using or agree to implement weighted student funding systems to establish budgets for, and allocate funds to, individual schools. A separate development relevant to many aspects of public elementary and secondary education finance has been increasing interest in the collection and reporting of school-level finance data for public schools. While historically there have not been comprehensive state or federal efforts to calculate or report on specific budgets or expenditure levels for individual public schools, federal efforts to require and support the reporting of such information have expanded rapidly in recent years.

crs_R44565

crs_R44565_0

<1. Introduction> The rapid growth of digital technologies in recent years has created new opportunities for U.S. consumers and businesses but also new challenges in international trade. For example, consumers today access e-commerce, social media, telemedicine, and other offerings not imagined thirty years ago. Businesses use advanced technology to reach new markets, track global supply chains, analyze big data, and create new products and services. New technologies facilitate economic activity but also create new trade policy questions and concerns. Data and data flows form a pillar of innovation and economic growth. The "digital economy" accounted for 6.9% of U.S. GDP in 2017, including (1) information and communications technologies (ICT) sector and underlying infrastructure, (2) digital transactions or e commerce, and (3) digital content or media. The digital economy supported 5.1 million jobs, or 3.3% of total U.S. employment in 2017, and almost two-thirds of jobs created in the United States since 2010 required medium or advanced levels of digital skills. As digital information increases in importance in the U.S. economy, issues related to digital trade have become of growing interest to Congress. While there is no globally accepted definition of digital trade, the U.S. International Trade Commission (USITC) broadly defines digital trade as follows: The delivery of products and services over the Internet by firms in any industry sector, and of associated products such as smartphones and Internet-connected sensors. While it includes provision of e-commerce platforms and related services, it excludes the value of sales of physical goods ordered online, as well as physical goods that have a digital counterpart (such as books, movies, music, and software sold on CDs or DVDs). The rules governing digital trade are evolving as governments across the globe experiment with different approaches and consider diverse policy priorities and objectives. Barriers to digital trade, such as infringement of intellectual property rights (IPR) or protective industrial policies, often overlap and cut across sectors. In some cases, policymakers may struggle to balance digital trade objectives with other legitimate policy issues related to national security and privacy. Digital trade policy issues have been in the spotlight recently, due in part to the rise of new trade barriers, heightened concerns over data privacy, and an increasing number of cybertheft incidents that have affected U.S. consumers and companies. These concerns may raise the general U.S. interest in promoting, or restricting, cross-border data flows and in enforcing compliance with existing rules. Congress has an interest in ensuring the global rules and norms of the internet economy are in line with U.S. laws and norms. Trade negotiators continue to explore ways to address evolving digital issues in trade agreements, including in the proposed U.S.-Mexico-Canada Agreement (USMCA). Congress has an important role in shaping digital trade policy, including oversight of agencies charged with regulating cross-border data flows, as part of trade negotiations, and in working with the executive branch to identify the right balance between digital trade and other policy objectives. This report discusses the role of digital trade in the U.S. economy, barriers to digital trade, digital trade agreement provisions and negotiations, and other selected policy issues. <2. Role of Digital Trade in the U.S. and Global Economy> The internet is not only a facilitator of international trade in goods and services, but is itself a platform for new digitally-originated services. The internet is enabling technological shifts that are transforming businesses. According to one estimate, the volume of global data flows (sending of digital data such as from streaming video, monitoring machine operations, sending communications) is growing faster than trade or financial flows. One analysis forecasts the global flows of goods, foreign direct investment (FDI), and digital data will add 3.1% to gross domestic product (GDP) from 2015-2020. The volume of global data flows is growing faster than trade or financial flows, and its positive GDP contribution offsets the lower growth rates of trade and FDI (see Figure 1 ). Focusing domestically, the Bureau of Economic Analysis (BEA) estimates that, from 1997-2017, real value added for the digital economy outpaced overall growth in the economy each year and, in 2017, the real value-added growth of the digital economy accounted for 25% of total real GDP growth. The increase in the digital economy and digital trade parallels the growth in internet usage globally. According to one study, over half of the world's population use the internet, including 95% of people in North America. As of 2017, 75% of U.S. households use wired internet access, but an increasing number rely on mobile internet access as the internet is integrated into people's everyday lives; 72% of U.S. adults own a smartphone. As of the end of 2018, approximately 40% of internet traffic in the United States came from mobile devices. Each day, companies and individuals across the United States depend on the internet to communicate and transmit data via various media and channels that continue to expand with new innovations (see Figure 2 ). Cross-border data and communication flows are part of digital trade; they also facilitate trade and the flows of goods, services, people, and finance, which together are the drivers of globalization and interconnectedness. The highest levels reportedly are those flows between the United States and Western Europe, Latin America, and China. Efforts to impede cross-border data flows could decrease efficiency and other potential benefits of digital trade. Powering all these connections and data flows are underlying ICT. ICT spending is a large and growing component of the international economy and essential to digital trade and innovation. According to the United Nations, world trade in ICT physical goods grew to $2 trillion in 2017 with U.S. ICT goods exports over $146 billion. Semiconductors, a key component in many electronic devices, are a top U.S. ICT export. Global sales of semiconductors were $468.8 billion in 2018, an increase of 6.81% over the prior year. U.S.-based firms have the largest global market share with 45% and accounted for 47.5% of the Chinese market. Given the importance of semiconductors to the digital economy and continued advances in innovation, countries such as China are seeking to grow their own semiconductor industry to lessen their dependence on U.S. exports. ICT services are outpacing the growth of international trade in ICT goods. The OECD estimates that ICT services trade increased 40% from 2010 to 2016. The United States is the fourth-largest OECD exporter of ICT services, after Ireland, India, and the Netherlands. ICT services include telecommunications and computer services, as well as charges for the use of intellectual property (e.g., licenses and rights). ICT-enabled services are those services with outputs delivered remotely over ICT networks, such as online banking or education. ICT services can augment the productivity and competitiveness of goods and services. In 2017, exports of ICT services grew to $71 billion of U.S. exports while services exports that could be ICT-enabled were another $439 billion, demonstrating the impact of the internet and digital revolution. ICT and other online services depend on software; the value added to U.S. GDP from support services and software has increased over the past decade relative to that of telecommunications and hardware. According to one estimate, software contributed more than $1.14 trillion to the U.S. value added to GDP in 2016, an increase of 6.4% over 2014, and the U.S. software industry accounted for 2.9 million jobs directly in 2016. Internet-advertising, an industry that would not exist without ICT, generated an additional 10.4 million U.S. jobs. <2.1. Economic Impact of Digital Trade> As the internet and technology continue to develop rapidly, increasing digitization affects finance and data flows, as well as the movement of goods and people. Beyond simple communication, digital technologies can affect global trade flows in multiple ways and have broad economic impact (see Figure 3 ). First, digital technology enables the creation of new goods and services, such as e-books, online education, or online banking services. Digital technologies may also add value by raising productivity and/or lowering the costs and barriers related to flows of traditional goods and services. For example, companies may rely on radio-frequency identification (RFID) tags for supply chain tracking, 3-D printing based on data files, or devices or objects connected via the Internet of Things (see text box ). In addition, digital platforms serve as intermediaries for multiple forms of digital trade, including e-commerce, social media, and cloud computing. In these ways, digitization pervades every industry sector, creating challenges and opportunities for established and new players. Looking at digital trade in an international context, approximately 12% of physical goods are traded via international e-commerce. Global e-commerce grew from $19.3 trillion in 2012 to $27.7 trillion in 2016, of which 86% was business-to-business (B2B). One source estimates that cross-border business-to-consumer (B2C) e-commerce sales will reach approximately $1 trillion by 2020. These estimates do not quantify the additional benefits of digitization upon business efficiency and productivity, or of increased customer and market access, which enable greater volumes of international trade for firms in all sectors of the economy. Digitization efficiencies have the potential to both increase and decrease international trade. For example, one analysis found that logistics optimization technologies could reduce shipping and customs processing times by 16% to 28%, boosting overall trade by 6% to 11% by 2030; at the same time, however, automation, Artificial Intelligence (AI), and 3-D printing could enable more local production, thereby reducing global trade by as much as 10% by 2030. The overall impact of digitization has yet to be seen. One study coined the term "digital spillovers" to fully capture the digital economy and estimated the global digital economy, including such spillovers, was $11.5 trillion in 2016, or 15.5% of global GDP. Their analysis indicated that the long-term return on investment (ROI) for digital technologies is 6.7 times that of nondigital investments. Blockchain is one emerging software technology some companies are using to increase efficiency and transparency and lower supply chain costs that depends on open data flows of digital trade. For example, in an effort to streamline processes, save costs, and improve public health outcomes, Walmart and IBM built a blockchain platform to increase transparency of global supply chains and improve traceability for certain imported food products. The initiative aims to expand to include several multinational food suppliers, farmers, and retailers and depends on connections via the Internet of Things and open international data flows. With increased applications, the Internet of Things may have a global economic impact of as much as $11.1 trillion per year, according to one study. Because of its ubiquity, the benefits and economic impact of digitization are not restricted to certain geographic areas, and businesses and communities in every U.S. state feel the impact of digitization as new business models and jobs are created and existing ones disrupted. One study found that the more intensively a company uses the internet, the greater the productivity gain. The increase in internet usage is also associated with increased value and diversity of products being sold. The internet, and cloud services specifically, has been called the great equalizer, since it allows small companies access to the same information and the same computing power as large firms using a flexible, scalable, and on-demand model. For example, Thomas Publishing Co., a U.S. mid-sized, private, family-owned and -operated business, is transporting data from its own computer servers to data centers run by Amazon.com Inc. Digital platforms can minimize costs and enable small and medium-sized enterprises (SMEs) to grow through extended reach to customers or suppliers or integrating into a global value chain (GVC). More than 50% of businesses globally rely on data flows for cloud computing (see text box ). Digitization of customs and border control mechanisms also helps simplify and speed delivery of goods to customers. Regulators are looking to blockchain technology to improve efficiency in managing and sharing data for functions such as border control and customs processing of international shipments. With simpler border and customs processes, more firms are able to conduct business in global markets (or are more willing to do so). A study of U.S. SMEs on the e-commerce platform eBay found that 97% export, while that number is a full 100% in countries as diverse as Peru and Ukraine. Netflix, a U.S. firm offering online streaming services, increased its international revenue from $4 million in 2010 to more than $5 billion in 2017. A similar argument has been made for firms and governments in low- and middle-income countries who can take advantage of the power of the internet to foster economic development. According to one official of the Asia-Pacific Economic Cooperation Forum (APEC), technology has enabled SMEs to open in new sectors such as ride-sharing and online order delivery services, and provides them with a "bigger, better opportunity to grow and learn that to join a global value chain." Another study of SMEs estimated that the internet is a net creator of jobs, with 2.6 jobs created for every job that may be displaced by internet technologies; companies that use the internet intensively effectively doubled the average number of jobs. However, the costs of digital trade can be concentrated on particular sectors (see next section). <2.1.1. Digitization Challenges> The U.S. digital economy supported 3.3% of total U.S. employment in 2017, and those jobs earned approximately one and a half times the average annual worker compensation of the overall U.S. economy, making them attractive source for future growth. Software, and the software industry, contributes to the GDP in all 50 states, with the value-added GDP of the software industry growing more than 40% in Idaho and North Carolina. Industries, such as media and firms in urban centers, account for a larger share of the benefits. Many in business and research communities are only beginning to understand how to take advantage of the vast amounts of data being collected every day. However, sources of "e-friction" or obstacles can prevent consumers, companies, and countries from realizing the full benefits of the online economy. Causes of e-friction can fall into four categories: infrastructure, industry, individual, and information. Government policy can influence e-friction, from investment in infrastructure and education to regulation and online content filtering. According to some experts, economies with lower amounts of e-friction may be associated with larger digital economies. While there are numerous positive digital dividends, there are also possible negative and uneven results across populations, such as the displacement of unskilled workers, an imbalance between companies with and without internet access, and the potential for some to use the internet to establish monopolies. While new technologies and new business models present opportunities to enhance efficiency and expand revenues, innovate faster, develop new markets, and achieve other benefits, new challenges also arise with the disruption of supply chains, labor markets, and some industries. For example, one study found a mismatch between workforce skills and job openings such as in Nashville, TN, which has an abundance of workers with music production and radio broadcasting skills but a scarcity of workers with IT infrastructure, systems management, and web programming skills. Another source notes over 11,000 open computing jobs in Michigan, with average salaries of over $80,000. The World Bank identified policy areas to try to ensure, and maintain, the potential benefits of digitization. Policy areas include establishing a favorable and competitive business climate, developing strong human capital, ensuring good governance, investing to improve both physical and digital infrastructure, and raising digital literacy skills. According to the World Economic Forum Global Competitiveness Index 4.0, the United States is ranked at the top with a score of 85.6% compared to the global median score of 60%. The study identifies the key drivers of productivity as human capital, innovation, resilience, and agility, noting that future productivity depends not only on investment in technology but investment in digital skills. While the United States is considered a "super innovator," the report also notes "indications of a weakening social fabric and worsening security situation as well as relatively low checks and balances, judicial independence, and transparency." With the rapid pace of technology innovation, more jobs may become automated, with digital skills becoming a foundation for economic growth for individual workers, companies, and national GDP. Over two-thirds of U.S. jobs created since 2010 require some level of digital skills. The OECD found that generic ICT skills are insufficient among a significant percentage of the global workforce and few countries have adopted comprehensive ICT skills strategies to help workers adapt to changing jobs. <3. Digital Trade Policy and Barriers> Policies that affect digitization in any one country's economy can have consequences beyond its borders, and because the internet is a global "network of networks," the state of a country's digital economy can have global ramifications. Protectionist policies may erect barriers to digital trade, or damage trust in the underlying digital economy, and can result in the fracturing, or so-called balkanization, of the internet, lessening any gains. What some policymakers see as protectionist, however, others may view as necessary to protect domestic interests. For examples of the types of digital trade barriers that are in place around the globe, please see Appendix. Despite common core principles such as protecting citizen's privacy and expanding economic growth, governments face multiple challenges in designing policies around digital trade. The OECD points out three potentially conflicting policy goals in the internet economy: (1) enabling the internet; (2) boosting or preserving competition within and outside the internet; and (3) protecting privacy and consumers more generally. Ensuring a free and open internet is a stated policy priority for the U.S. government. Like other cross-cutting policy areas, such as cybersecurity or privacy, no one federal entity has policy primacy on all aspects of digital trade, and the United States has taken a sectoral approach to regulating digitization. According to an OECD study, the United States is the only OECD country that uses a decentralized, market-driven approach for a digital strategy rather than having an overarching national digital strategy, agenda, or program. The Department of Commerce works to promote U.S. digital trade policies domestically and abroad. In 2015, Commerce launched a Digital Economy Agenda that identifies four pillars: 1. "Promoting a free and open Internet worldwide, because the Internet functions best for our businesses and workers when data and services can flow unimpeded across borders"; 2. "Promoting trust online, because security and privacy are essential if electronic commerce is to flourish"; 3. "Ensuring access for workers, families, and companies, because fast broadband networks are essential to economic success in the 21 st century"; and 4. "Promoting innovation, through smart intellectual property rules and by advancing the next generation of exciting new technologies." Commerce's digital attach program under the foreign commercial service helps U.S. businesses navigate regulatory issues and overcome trade barriers to e-commerce exports in key markets. The Administration also works to promote U.S. digital priorities by identifying and challenging foreign trade barriers and through trade negotiations. As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers. Tariff barriers may be imposed on imported goods used to create ICT infrastructure that make digital trade possible or on the products that allow users to connect, while nontariff barriers, such as discriminatory regulations or local content rules, can block or limit different aspects of digital trade. Often, such barriers are intended to protect domestic producers and suppliers. Some estimates indicate that removing foreign barriers to digital trade could increase annual U.S. real GDP by 0.1%-0.3% ($16.7 billion-$41.4 billion), increase U.S. wages up to 1.4%, and add up to 400,000 U.S. jobs in certain digitally intensive industries. <3.1. Tariff Barriers> Historically, trade policymakers focused on overt trade barriers such as tariffs on products entering countries from abroad. Tariffs at the border impact goods trade by raising the prices of products for producers or end customers, if tariff costs are passed down, thus limiting market access for U.S. exporters selling products, including ICT goods. Quotas may limit the number or value of foreign goods, persons, suppliers, or investments allowed in a market. Since 1998, WTO countries have agreed to not impose customs duties on electronic transmissions covering both goods (such as e-books and music downloads) and services. While the United States is a major exporter and importer of ICT goods, tariffs are not levied on many of the products due to free trade agreements (FTAs) and the World Trade Organization (WTO) Information Technology Agreement (see below). Tariffs may still serve as trade barriers for those countries or products not covered by existing FTAs or the WTO ITA. U.S. ICT services are often inputs to final demand products that may be exported by other countries, such as China. U.S. ICT services have shown increasing growth rates since the middle of 2014. <3.2. Nontariff Barriers> Nontariff barriers (NTBs) are not as easily quantifiable as tariffs. Like digital trade, NTBs have evolved and may pose significant hurdles to companies seeking to do business abroad. NTBs often come in the form of laws or regulations that intentionally or unintentionally discriminate and/or hamper the free flow of digital trade. Nondiscrimination between local and foreign suppliers is a core principle encompassed in global trading rules and U.S. free trade agreements. While WTO agreements cover physical goods, services, and intellectual property, there is no explicit provision for nondiscrimination for digital goods. As such, NTBs that do not treat digital goods the same as physical ones could limit a provider's ability to enter a market. Broader governance issues, including rule of law, transparency, and investor protections, can pose barriers and limit the ability of firms and individuals to successfully engage in digital trade. Similarly, market access restrictions on investment and foreign ownership, or on the movement of people, whether or not specific to digital trade or ICT sectors, may limit a company's ability enter a foreign market. Other NTBs are more specific to digital trade. <3.2.1. Localization Requirements> Localization measures are defined as measures that compel companies to conduct certain digital-trade-related activities within a country's borders. Governments often use privacy protection or national security arguments as justifications for these measures. Though localization policies can be used to achieve legitimate public policy objectives, some are designed to protect, favor, or stimulate domestic industries, service providers, or intellectual property at the expense of foreign counterparts and, in doing so, function as nontariff barriers to market access. In recent free trade agreements, the United States has aimed to ensure an open internet and eliminate digital trade barriers, while preserving flexibility for governments to pursue legitimate policy objectives (see below). <3.2.1.1. Cross-Border Data Flow Restrictions> According to a 2017 USITC report, data localization was the most cited policy measure impeding digital trade, and the number of data localization measures globally has doubled in the last six years. One study found that over 120 countries have laws related to personal data protection, often requiring data localization. Regulations limiting cross-border data flows and requiring local storage are a type of localization requirement that prohibit companies from exporting data outside a country. Such restrictions can pose barriers to companies whose transactions rely on the internet to serve customers abroad and operate more efficiently. For example, data localization requirements can limit e-commerce transactions that depend on foreign financial service providers or multinational firms' full analysis of big data from across an entire company or global value chain. Regulations limiting cross-border data flows may force companies to build local server infrastructure within a country, not only increasing costs and decreasing scale, but also creating data silos that may be more vulnerable to cybersecurity risks. According to some analysts, computing costs in markets with localization measures can be 30%-60% higher than in more open markets. Data localization requirements pose barriers to companies' efforts to operate more efficiently by migrating to the cloud or to SMEs attempting to enter new markets. According to some estimates, cloud computing accounted for 70% of related IT market growth between 2012 and 2015, and is expected to represent 60% of growth through 2020. Most of the largest global providers of cloud computing services are U.S. companies (Amazon, Microsoft, Google, and IBM). Regulations or policies that limit data flows create barriers to firms and countries seeking to consume cloud services. One U.S. business group noted increased forced localization measures, citing examples in China, Colombia, the European Union (EU), Indonesia, South Korea, Russia, and Vietnam. The Business Software Alliance's 2018 Global Cloud Computing Scorecard highlighted barriers to cloud services in Indonesia, Russia, and Vietnam. For example, to comply with localization requirements and continue to serve consumers of Google's many cloud services (e.g., Gmail, search, maps) globally, the company is opening more data centers in the United States and internationally. Finding a global consensus on how to balance open data flows, cybersecurity, and privacy protection may be key to maintaining trust in the digital environment and advancing international trade. Countries are debating how to achieve the right balance and potential paths forward in plurilateral and multilateral forums and trade negotiations (see " U.S. Bilateral and Plurilateral Agreements "). <3.2.1.2. Other Localization Requirements> In addition to cross-border data flow restrictions, localization policies include requirements to use local content, whether hardware or software, as a condition for manufacturing or access to government procurement contracts; use local infrastructure or computing facilities; or partner with a local company and transfer technology or intellectual property to that partner. Localization requirements can also pose a threat to intellectual property (discussed below). In April 2018, the Commerce Department announced plans to develop a "comprehensive strategy to address trade-related forced localization policies, practices, and measures impacting the U.S. information and communications technology (ICT) hardware manufacturing industry." In creating a strategic response to the increase in protectionist localization policies globally, Commerce aims to preserve the competitiveness of the U.S. ICT sector. <3.2.2. Intellectual Property Rights (IPR) Infringement> While the internet and digital technologies have opened up markets for international trade, they also present ongoing and unique challenges for the protection and enforcement of intellectual property (IP), which are creations of the mind such as an invention, literary/artistic work, design, symbol, name, or image embodied in a physical or digital object. Intellectual property rights (IPR) are legal, private, enforceable, time-limited rights that governments grant to inventors and artists to exclude others from using their creations without their permission. Examples of IPR include patents, copyrights, trademarks, and trade secrets. Innovations in digital technologies fuel IPR infringement by enabling the rapid duplication and distribution of content that is low-cost and high-quality, making it easy, for instance, to pirate music, movies, software, and other copyrighted works, and to share them globally. The internet provides "ease of conducting commerce through unverified vendors, inability for consumers to inspect goods prior to purchase, and deceptive marketing." Both copyright- and trademark-based industries face challenges tackling not only infringement in physical marketplaces, but increasingly also online marketplaces. Cyber-enabled theft of trade secrets is of growing concern. Trade secrets are essential to many businesses' operations and important assets, including those in ICT, services, biopharmaceuticals, manufacturing, and environmental and other technologies. IPR infringement in the digital environment is particularly difficult to quantify but considered to be significant, potentially exceeding the volume of sales through traditional physical markets. A 2016 industry study estimated the value of digitally pirated music, movies, and software (not actual losses) to be $213 billion in 2013 and growing to as much as $384-$856 billion in 2022. The IP Commission estimated that the annual cost to the U.S. economy from counterfeit goods, pirated software, and theft of trade secrets continues to surpass $225 billion and could reach $600 billion. Efforts to address IPR infringement raise issues of balance about, on one hand, protecting and enforcing IPR to protect the rights of content holders and incentivize innovation in the digital environment and, on the other hand, setting appropriate limitations and exceptions to ensure other economically and socially valuable uses. Content industries say that IP theft costs them sales, detracts from legitimate services, harms investors in these businesses, damages their brand or reputation, and hurts "law-abiding" consumers. Some technology product and service companies, as well as some civil society groups, assert that overly stringent IPR policies may stifle information flows and legitimate digital trade and these groups support "fair use" exceptions and limitations to IPR. Other IPR-related barriers to digital trade include government measures, policies, and practices that are intended to promote domestic "indigenous innovation" (i.e., develop, commercialize, and purchase domestic products and technologies) but that can also disadvantage foreign companies. These measures can be linked to "forced" localization barriers to trade. China, for instance, conditions market access, government procurement, and the receipt of certain preferences or benefits on a firm's ability to show that certain IPR is developed in China or is owned by or licensed to a Chinese party. Another example is India's data and server localization requirements, which USITC firms assert hurt market access and innovation in their sector. (See above.) <3.2.3. National Standards and Burdensome Conformity Assessment> Local or national standards that deviate significantly from recognized international standards may make it difficult for firms to enter a particular market. An ICT product or software that conforms to international standards, for example, may not be able to connect to a local network or device based on a local or proprietary standard. Also, proprietary standards can limit a firm's ability to serve a market if their company practices or assets do not conform with (nor do their personnel have training in) those standards. As a result, U.S. companies may not be able to reach customers or partners in those countries. Similarly, redundant or burdensome conformity assessment or local registration and testing requirements often add time and expense for a company trying to enter a new market, and serve as a deterrent to foreign companies. For example, India's Compulsory Registration Order (CRO) mandates that manufacturers register their products with laboratories affiliated with or certified by the Bureau of Indian Standards, even if the products have already been certified by accredited international laboratories, and is an often-cited concern for U.S. businesses facing delays getting products to market. If a company is required to provide the source code, proprietary algorithms, or other IP to gain market access, it may fear theft of its IP and not enter that market (see above). <3.2.4. Filtering, Blocking, and Net Neutrality> In some nations, government seeks strict control over digital data within its borders, such as what information people can access online, and how information is shared inside and outside its borders. Governments that filter or block websites, or otherwise impede access, form another type of nontariff barrier. For example, China has asserted a desire for "digital sovereignty" and has erected what is termed by some as the "Great Firewall." A change to China's internet filters also blocks virtual private network (or VPN) access to sites beyond the Great Firewall. VPNs have been used by Chinese citizens to use websites like Facebook and by companies to access data outside of China (e.g., information from foreign subsidiaries or partners). While China is the most well-known, it is not alone in seeking to control access to websites. For example, Thailand established a Computer Data Filtering Committee to use the court system to block websites that it views as violating public order and good order, as well as intellectual property. In Russia, citizens protested government censorship, including the blocking of a popular messaging application along with other websites and online tools. Several U.S. and foreign policymakers have expressed concern about the influence that violent or harmful content online may have upon those who view or read it. In response, some countries have introduced legislation to regulate internet content, for example, to fight the impact and spread of violent material and false information. In the United States, significant First Amendment freedom of speech issues are raised by the prospect of government restrictions on the publication and distribution of speech, even speech that advocates terrorism. As a result, what users can access online may vary across countries, depending on national policy and preferences. These differences illustrate the complexity of the internet and evolving technologies, and the lack of global standards that prevails in other areas of international trade. National-level net neutrality policies also differ widely. Net neutrality rules govern the management of internet traffic as it passes over broadband internet access services, whether those services are fixed or wireless. Allowing internet access providers to limit or otherwise discriminate against content providers, foreign and domestic, may create a nontariff barrier. In the United States, the Federal Communications Commission (FCC) classification of broadband internet service providers (ISPs) has been controversial domestically and may differ from how U.S. trading partners regulate ISPs. <3.2.5. Cybersecurity Risks> The growth in digital trade has raised issues related to cybersecurity, the act of protecting ICT systems and their contents from cyberattacks. Cyberattacks in general are deliberate attempts by unauthorized persons to access ICT systems, usually with the goal of theft, disruption, damage, or other unlawful actions. Cybersecurity can also be an important tool in protecting privacy and preventing unauthorized surveillance or intelligence gathering. Although there is overlap between data protection and privacy, the two are not equivalent. Cybersecurity measures are essential to protect data (e.g., against intrusions or theft by hackers). However, they may not be sufficient to protect privacy. Cyberattacks can pose broad risks to financial and communication systems, national security, privacy, and digital trade and commerce. According to the White House Council of Economic Advisers, malicious cyberactivity (i.e., business disruption, theft of proprietary information) cost the U.S. economy up to $109 billion in 2016. Cybersecurity risks run across all industry sectors that rely on digital information. In the entertainment industry, for example, Iranian hackers stole unreleased episodes of HBO's "Game of Thrones" series, holding them for ransom, and potentially costing the company and risking intellectual property and harm to the corporate reputation. The Federal Bureau of Investigations (FBI) suspects Chinese hackers were behind a cyberattack on the Marriot's Starwood hotel chain that resulted in potentially stealing IPR and the personal information of up to 327 million hotel customers, including their birthdates and passport numbers. An FBI official testified to the Senate Judiciary Committee that Chinese espionage efforts have become "the most severe counterintelligence threat facing our country today." Cybersecurity threats can disrupt business operations or supply chains. The 2017 WannaCry ransomware attack impacted public and private sector entities in over 150 countries with direct costs of at least $8 billion due to computer downtime, according to one estimate. In the widespread attack, computers in homes, schools, hospitals, government agencies, and companies were hit. The United States publicly attributed the cyberattack to North Korea, stating that "these disruptions put lives at risk." Compromises of ITC supply chains can also pose a threat to organizations that rely on the tampered hardware as was alleged, for example, with some Supermicro microchips used in ITC manufacturing in China. Companies that rely on cloud services to store or transmit data may choose to use enhanced encryption to protect the communication and privacy, both internally and of their end customers. This, in turn, may impede law enforcement investigations if they are unable to access the encrypted data. However, restrictions on the ability for a firm to use encryption may make a company vulnerable to cyberattacks or cybertheft, demonstrating the need for policies and regulations to balance competing objectives. <4. U.S. Digital Trade with Key Trading Partners> The European Union (EU) and China are large U.S. digital trade partners and each has presented various challenges for U.S. companies, consumers, and policymakers. <4.1. European Union> Differences in U.S. and EU policies have ramifications on digital flows and international trade. The two partners' varying approaches to digital trade, privacy, and national security, have, at times, threatened to disrupt U.S.-EU data flows. The transatlantic economy is the largest in the world, and cross-border data flows between the United States and EU are the highest in the world. In between 2003 and 2017, total U.S.-EU trade in goods and services (exports plus imports) nearly doubled from $594 billion to $1.2 trillion. ICT and potentially ICT-enabled services accounted for approximately $190 billion of U.S. exports to the EU in 2017. The two sides also account for a significant portion of each other's e-commerce trade (see Figure 4 ). The United States and EU account for almost half of each other's digitally deliverable service exports (e.g., business, professional, and technical services) and many of these services are incorporated into exported goods as part of GVCs (see Figure 5 and Figure 6 ). The UK alone accounted for 23% of U.S. digitally deliverable services exports. Almost 40% of the data flows between the United States and EU are through business and research networks. Despite close economic ties, differences between the United States and EU in their approaches to data flows and digital trade have caused friction in U.S.-EU economic and security relations. To address some of these differences, in 2013, the United States and the EU began, but did not conclude, negotiating a broad FTA. Negotiations included a number of digital trade issues such as market access for digital products, IPR protection and enforcement, cybersecurity, and regulatory cooperation, among other things. On October 16, 2018, the Trump Administration notified Congress under Trade Promotion Authority (TPA) of its intent to enter into negotiations with the EU. The Administration's specific negotiating objectives envision a wide-ranging agreement, including addressing digital trade, along with trade in goods, services, agriculture, government procurement, and other rules, such as on IPR and investment. However, no agreement exists on the scope of the negotiations. The EU negotiating mandates, in contrast, are narrower; they authorize EU negotiations with the United States to address industrial tariffs (excluding agricultural products) and nontariff regulatory barriers to make it easier for companies to prove that their products meet U.S. and EU technical requirements. The Administration also notified Congress under TPA of its intent to negotiate a trade agreement with the UK post-Brexit, and the corresponding specific negotiating objectives likewise envision a broad agreement addressing digital trade issues. The UK cannot formally negotiate or conclude a new agreement until it exits the EU, which has exclusive competence over trade policy and negotiates trade deals on behalf of all EU member states. Details about the future UK-EU trade relationship remain largely unknown, and it is uncertain when and to what extent the UK will regain control of its national trade policy a major objective for Brexit supporters. These factors directly shape prospects for a proposed bilateral U.S.-UK free trade agreement. <4.1.1. EU-U.S. Privacy Shield> The United States and EU have different legal approaches to information privacy that extends into the digital world. After extensive negotiations, the EU-U.S. Privacy Shield entered into force on July 12, 2016, creating a framework to provide U.S. and EU companies a mechanism to comply with data protection requirements when transferring personal data between the EU and the United States. Under the Privacy Shield program, U.S. companies can voluntarily self-certify compliance with requirements such as robust data processing obligations. The agreement includes obligations on the U.S. government to proactively monitor and enforce compliance by U.S. firms, establish an ombudsman in the U.S. State Department, and set specific safeguards and limitations on surveillance. The United States and Switzerland also agreed to the Swiss-U.S. Privacy Shield, which will be "comparable" to the EU-U.S. agreement. The Privacy Shield also involves an annual joint review by the United States and the EU, the second of which was completed in October 2018. Under the review, the commission found that the Privacy Shield is working and that the United States had made improvements and changes since the first review. The Commission, however, also noted areas of concern and specific recommendations. <4.1.2. General Data Protection Regulation (GDPR)> The EU's General Data Protection Regulation (GDPR), effective May 2018, established rules for EU member states to safeguard individuals' personal data. The GDPR is a comprehensive privacy regime that builds on previous EU data protection rules. It grants new rights to individuals to control personal data and creates specific new data protection requirements. The GDPR applies to (1) all businesses and organizations with an EU establishment that process (perform operations on) personal data of individuals (or "data subjects") in the EU, regardless of where the actual processing of the data takes place; and (2) entities outside the EU that offer goods or services (for payment or for free) to individuals in the EU or monitor the behavior of individuals in the EU. These measures have raised concerns about the GDPR's extraterritorial implications. While the GDPR is directly applicable at the EU member state level, individual countries are responsible for establishing some national-level rules and policies as well as enforcement authorities, and some are still in the process of doing so. As a result, some U.S. stakeholders have voiced concern about a lack of clarity and inadequate country compliance guidelines, as well as about the potential high cost of data storage and processing needed for compliance. Despite the lack of precise guidance, many companies have taken steps to implement its requirements. For example, Amazon touts its compliance with GDPR requirements and aims to assist its Amazon Web Services (AWS) corporate customers, many of whom are small and medium businesses, with their own compliance. It can be more challenging for SMEs to fully understand GDPR and comply with its notification and other requirements such as an individual's "right to be forgotten" and on data portability; there are indications that some U.S. businesses have chosen to exit the EU market. Some experts contend that the GDPR may effectively set new global data privacy standards, since many companies and organizations are striving for GDPR compliance to avoid being shut out of the EU market, fined, or otherwise penalized. In addition, some countries outside of Europe are imitating all or parts of the GDPR in their own privacy regulatory and legislative efforts. European Data Protection Authorities may have reinforced U.S. companies' concerns by initiating several enforcement actions in the fall of 2018, including a 50 million (approximately $57 million) fine on Google. <4.1.3. Digital Single Market (DSM)> Like the GDPR, EU policymakers are attempting to bring more harmonization across the region through the Digital Single Market (DSM). The DSM is an ongoing effort to unify the EU market, facilitate trade, and drive economic growth. The DSM's three pillars revolve around better online access to cross-border digital goods and services; a regulatory environment supporting investment and fair competition; and driving growth through investment in infrastructure, human capital, research, and innovation. Among its initiatives is a mandate to allow cross-border flows for nonpersonal data within the EU (with limited exceptions), but not necessarily externally. <4.2. China> China presents a number of significant opportunities and challenges for the United States in digital trade. The modernization of the Chinese economy, coupled with a large and increasingly prosperous population, has led to a surge in the number of Chinese Internet users and made China a major source of global ecommerce. China's internet users grew from 21.5 million in 2000 to 829 million as of March 2019, and this trend will likely continue, given China's relatively low internet penetration rate (see Figure 7 .) China's online retail sales in 2018 totaled $1.1 trillion (more than double the U.S. level at $505 billion) and were the world's largest. E-Marketer predicts that China's e-commerce retail sales will reach $1.99 trillion in 2019, accounting for 35.3% of total sales and 55.8% of global online sales. U.S. firms may benefit from expanding digital trade in China, but they may also face numerous challenges in the Chinese market. The USTR's 2019 report on foreign trade barriers included a digital trade fact sheet that cited countries and practices of "key concern." Three Chinese digital policies were listed, including its restrictions on cross-border data flows and data localization requirements; extensive web filtering and blocking of legitimate sites, including blocks 10 of the top 30 global sites and up to 10,000 sites in total, affecting billions of dollars in potential U.S. business; and cloud computing restrictions and requirements to partner with a Chinese firm to enter the market and to transfer technology and IP to the partner. The American Chamber of Commerce in China (AmCham China) 2019 business survey found that 73% of respondents who were engaged in technology and R&D-intensive industries stated that they faced significant or somewhat significant market barriers in China. The lack of sufficient IPR protection (cited by 35% of respondents) and restrictive cybersecurity-related policies (cited by 27% of respondents) ranked among the top three factors prohibiting firms from increasing innovation activities in China. The survey reflected significant concerns by member firms over eight Chinese ICT policies and restrictions (such as internet restrictions and censorship, IPR theft, and data localization requirements), with 72% to 88% of respondents stating that such measures impacted their competiveness and operations in China either somewhat or severely (see Table 1 ). A Digital Trade Restrictiveness Index (DTRI) of 65 economies created by the European Centre for International Political Economy found China to have the most restrictive digital policies, followed by Russia, India, Indonesia, and Vietnam. The index report noted: China applies the most restrictive digital trade measures in many areas, including public procurement, foreign investment, Intellectual Property Rights (IPRs), competition policy, intermediary liability, content access and standards. The restrictions do not only impose higher costs for trading digital goods and services, they can also block digital trade altogether in certain sectors. In addition, China's data policies are extremely burdensome for companies, and the country also applies some quantitative trade restrictions and restrictions on e-commerce. <4.2.1. Internet Governance and the Concept of "Internet Sovereignty"> The Chinese government has sought to advance its views on how the internet should be expanded to promote trade, but also to set guidelines and standards over the rights of governments to regulate and control the internet, a concept it has termed "Internet Sovereignty." The Chinese government appears to have first advanced a policy of "Internet Sovereignty" around June 2010 when it issued a White Paper titled "the Internet of China," which stated the following: Within Chinese territory the Internet is under the jurisdiction of Chinese sovereignty. The Internet sovereignty of China should be respected and protected. Citizens of the People's Republic of China and foreign citizens, legal persons and other organizations within Chinese territory have the right and freedom to use the Internet; at the same time, they must obey the laws and regulations of China and conscientiously protect Internet security. In 2014, the Chinese government established the Central Internet Security and "Informatization" Leading Group, headed by Chinese president Xi Jinping, to "strengthen China's Internet security and build a strong cyberpower." A year later, President Xi addressed an internet conference, stating "we should respect the right of individual countries to independently choose their own path of cyber development, model of cyber regulation and Internet public policies, and participate in international cyberspace governance on an equal footing." Some analysts contend that China's internet sovereignty initiative represents an assertion that the government has the right to fully control the internet within China. Some see this as an attempt by the government to control information that is deemed a threat to social stability, in violation of the right to freedom of speech, which is guaranteed in China's Constitution. Other critics of China's internet sovereignty policy view it as an attempt by the government to limit market access by foreign internet, digital, and high technology firms in China, in order to boost Chinese firms and reduce China's dependence on foreign technology. <4.2.2. Cyber-Theft of U.S. Trade Secrets> China is considered by most analysts to be the largest source of global theft of IP and a major source of cybertheft of U.S. trade secrets, including by government entities. To illustrate, a 2011 report by the U.S. Office of the Director of National Intelligence (DNI) stated: "Chinese actors are the world's most active and persistent perpetrators of economic espionage. U.S. private sector firms and cybersecurity specialists have reported an onslaught of computer network intrusions that have originated in China, but the IC (Intelligence Community) cannot confirm who was responsible." The report goes on to warn that China will continue to be driven by its longstanding policy of "catching up fast and surpassing" Western powers. The growing interrelationships between Chinese and U.S. companies such as the employment of Chinese-national technical experts at U.S. facilities and the off-shoring of U.S. production and R&D to facilities in China will offer Chinese government agencies and businesses increasing opportunities to collect sensitive US economic information. In May 2014, the U.S. Department of Justice issued a 31-count indictment against five members of the People's Liberation Army for cyber-espionage and other offenses that allegedly targeted five U.S. firms and a labor union for commercial advantage, the first time the Federal government had initiated such action against state actors. In April 2015, President Obama issued Executive Order 13964 authorizing certain sanctions against "persons engaging in significant malicious cyber-enabled activates." This led to China send ing a high-level delegation to Washington, DC , a nd, o n September 25, 2015, Presidents Obama and Xi announced that they had reached an agreement on cyber-security and trade secrets that stated that neither country's government " will conduct or knowingly support cyber-enabled theft of IP, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors. " Specifically, the two s ides agreed to Not conduct or knowingly support cyber-enabled theft of IP, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors; Establish a high-level joint dialogue mechanism on fighting cybercrime and related issues; Work together to identify and promote appropriate norms of state behavior in cyberspace internationally; and Provide timely responses to requests for information and assistance concerning malicious cyber activities. The two sides also agreed to set up a high-level dialogue mechanism (which would take place twice a year) to address cybercrime and improve two-way communication when cyber-related concerns arise (including the creation of a hotline). The first meeting of the U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues was held in December 2015. China and the United States reached agreement on a document establishing guidelines for requesting assistance on cybercrime or other malicious cyber activities and for responding to such requests. Two more meetings were held in 2016. The dialogue was continued in October 2017 under the Trump Administration. The Administration's Section 301 trade dispute between the United States and China may have led to a suspension of the dialogue (see below). It is difficult to assess the effectiveness of the September 2015 U.S.-China cyber agreement in reducing the level of Chinese cyber intrusions against U.S. entities seeking to steal trade secrets as no official U.S. statistics on such activities are publicly available. In August 2018, the U.S. Deputy Director of the Cyber Threat Intelligence Integration Center stated that "the intelligence community and private-sector security experts continue to identify ongoing cyber activity from China, although at volumes significantly lower than before the bilateral U.S.-China cyber commitments of September 2015." In October 2018, CrowdStrike, a U.S. cybersecurity technology company, identified China as "the most prolific nation-state threat actor during the first half of 2018." It found that Chinese entities had made targeted intrusion attempts against multiple sectors of the economy. In December 2018, U.S. Assistant Attorney General John C. Demers stated at a Senate hearing that from 2011-2018, China was linked to more than 90% of the Justice Department's cases involving economic espionage and two-thirds of its trade secrets cases. <4.2.3. Cybersecurity Laws> According to the USTR's 2017 report on China's WTO accession, China has not fulfilled all of its WTO market opening commitments. The USTR cited "significant declines in commercial sales of foreign ICT products and services in China," as evidence that China continued to maintain "mercantilist policies under the guise of cybersecurity." The Chinese government pledged not to use recently enacted cyber and national security laws and regulations to unfairly burden foreign ICT firms, or to discriminate against foreign ICT firms in the implementation of various policy initiatives to promote indigenous innovation in China. Some Chinese laws or proposals include language stating that critical information infrastructure should be "secure and controllable," an ambiguous term that has not been precisely defined by Chinese authorities. Other proposals of concern to U.S. firms appear to lay out policies that would require foreign ICT firms to hand over proprietary information. Examples of measures of concern to foreign ICT firms include Cybers ecurity Law , passed by the government on November 7, 2016 (effective June 1, 2017), ascertains the principles of cyberspace sovereignty; defines the security-related obligations of network product and service providers; further enhances the rules for protection of personal information; establishes a framework of security protection for "critical information infrastructure"; and establishes regulations pertaining to cross-border transmissions of important data by critical information infrastructure. Some analysts have expressed concerns that one of the main goals of the new law is to promote the development of indigenous technologies and impose restrictions on foreign firms, and many multinational companies continue to voice concerns about the lack of clarity of the law's requirements, how the law will be interpreted and implemented through subsequent regulations, and to what extent it will impact their operations in China. National Security Law , enacted in July 2015, emphasizes the state's role in driving innovation and reviewing "foreign commercial investment, special items and technologies, internet information technology products and services, projects involving national security matters, as well as other major matters and activities, that impact or might impact national security." Such restrictions could have a significant impact on U.S. ICT firms. According to BEA, U.S. exports of ICT services and potentially ICT-enabled services (i.e., services that are delivered remotely over ICT networks) to China totaled $18.7 billion in 2017. <4.3. Section 301 Action against China over Intellectual Property and Innovation Issues> Concerns over China's policies on IP, technology, and innovation policies led the Trump Administration, in August 2017, to launch a Section 301 investigation of those policies. On March 22, 2018, President Trump signed a Memorandum on Actions by the United States Related to the Section 301 Investigation that identified four broad IPR-related policies that justified U.S. action under Section 301, stating that China 1. Uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology tra nsfers from American companies; 2. Uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies; 3. D irects and facilitates investments and acquisitions which generate large-scale technology transfer; and 4. Conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information. The USTR estimates such policies cost the U.S. economy at least $50 billion annually. Under the Section 301 action, the Administration proposed to (1) implement 25% ad valorem tariffs on certain Chinese imports (which in sum are comparable to U.S. trade losses); (2) initiate a WTO dispute settlement case against China's "discriminatory" technology licensing (which it did on March 23, 2018); and (3) propose new investment restrictions on Chinese efforts to acquire sensitive U.S. technology. The Administration did not act on the last issue after Congress passed the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) ( P.L. 115-232 ) in August 2018 to modernize the existing U.S. review process of foreign investments in terms of national security. Among its changes, FIRRMA expanded the types of investment subject to review, including certain noncontrolling investments in "critical technology." The Trump Administration subsequently imposed tariff hikes on $250 billion worth of imports from China in three separate stages in 2018, while China increased tariffs on $110 billion worth of imports from the United States (See Figure 8 ). In May 2019, the United States increased the tariff levels on the third tranche of products imported from China. China subsequently increased its tariff levels on its third tranche. <5. Digital Trade Provisions in Trade Agreements> As the above analysis of EU and China policies demonstrates, there is not a single set of international rules or disciplines that govern key digital trade issues, and the topic is treated inconsistently, if at all, in trade agreements. As digital trade has emerged as an important component of trade flows, it has risen in significance on the U.S. trade policy agenda and that of other countries. Given the stalemate in comprehensive WTO multilateral negotiations, trade agreements have not kept pace with the complexities of the digital economy and digital trade is treated unevenly in existing WTO agreements. More recent bilateral and plurilateral deals have started to address digital trade policies and barriers more comprehensively. The use of digital trade provisions in bilateral and plurilateral trade negotiations may help spur interest in the creation of future WTO frameworks that focus on digital trade and provide input for ongoing plurilateral negotiations occurring in the aegis of the WTO (see below). <5.1. WTO Provisions> While no comprehensive agreement on digital trade exists in the WTO, other WTO agreements cover some aspects of digital trade and new plurilateral negotiations may set new rules and disciplines. <5.1.1. General Agreement on Trade in Services (GATS)> The WTO General Agreement on Trade in Services (GATS) entered into force in January 1995, predating the current reach of the internet and the explosive growth of global data flows. GATS includes obligations on nondiscrimination and transparency that cover all service sectors. The market access obligations under GATS, however, are on a "positive list" basis in which each party must specifically opt in for a given service sector to be covered. As GATS does not distinguish between means of delivery, trade in services via electronic means is covered under GATS. While GATS contains explicit commitments for telecommunications and financial services that underlie e-commerce, digital trade and information flows and other trade barriers are not specifically included. Given the positive list approach of GATS, coverage across members varies and many newer digital products and services did not exist when the agreements were negotiated. To address advances in technology and services, the Committee on Specific Commitments is examining how certain new online services, such as platform services, or specific regulations, such as data localization, could be classified and scheduled within GATS. <5.1.2. Declaration on Global Electronic Commerce> In May 1998, WTO members established the "comprehensive" Work Programme on Electronic Commerce and established a temporary customs duties moratorium on electronic transmission that has been extended multiple times. While multiple members submitted proposals to advance multilateral digital trade negotiations under the Work Programme, no clear path forward was identified. <5.1.3. Information Technology Agreement (ITA)> The WTO Information Technology Agreement (ITA) aims to eliminate tariffs on the goods that power and utilize the internet, lowering the costs for companies to access technology at all points along the value chain. Originally concluded in 1996, the ITA was expanded to further cut tariffs beginning in July 2016. The expanded ITA is a plurilateral agreement among 54 developed and developing WTO members who account for over 90% of global trade in these goods. Some WTO members, such as Vietnam and India, are party to the original ITA, but did not join the expanded agreement. Like the original ITA, the benefits of the expanded agreement will be extended on a most-favored nation (MFN) basis to all WTO members. Under the expanded ITA, the parties agreed to review the agreement's scope in the future to determine if additional product coverage is warranted as technology evolves. While the WTO ITA has expanded trade in the technology products that underlie digital trade, it does not tackle the nontariff barriers that can pose significant limitations. <5.1.4. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)> The TRIPS Agreement, in effect since January 1, 1995, provides minimum standards of IPR protection and enforcement. The TRIPS Agreement does not specifically cover IPR protection and enforcement in the digital environment, but arguably has application to the digital environment and sets a foundation for IPR provisions in subsequent U.S. trade negotiations and agreements, many of which are "TRIPS-plus." The TRIPS Agreement covers copyrights and related rights (i.e., for performers, producers of sound recordings, and broadcasting organizations), trademarks, patents, trade secrets (as part of the category of "undisclosed information"), and other forms of IP. It builds on international IPR treaties, dating to the 1800s, administered by the World Intellectual Property Organization, or WIPO (see below). TRIPS incorporates the main substantive provisions of WIPO conventions by reference, making them obligations under TRIPS. WTO members were required to fully implement TRIPS by 1996, with exceptions for developing country members by 2000 and least-developed-country (LDC) members until July 1, 2021, for full implementation. TRIPS aims to balance rights and obligations between protecting private rights holders' interests and securing broader public benefits. Among its provisions, the TRIPS section on copyright and related rights includes specific provisions on computer programs and compilations of data. It requires protections for computer programs whether in source or object code as literary works under the WIPO Berne Convention for the Protection of Literary and Artistic Works (Berne Convention). TRIPS also clarifies that databases and other compilations of data or other material, whether in machine readable form or not, are eligible for copyright protection even when the databases include data not under copyright protection. Like the GATS, TRIPS predates the era of ubiquitous internet access and commercially significant e-commerce. TRIPS includes a provision for WTO members to "undertake reviews in the light of any relevant new developments which might warrant modification or amendment" of the agreement. The TRIPS Council has engaged in discussions on the agreement's relationship to electronic commerce as part of the WTO Work Programme on Electronic Commerce, focusing on protection and enforcement of copyright and related rights, trademarks, and new technologies and access to these technologies; new activity by the TRIPS Council to this end appears to be limited in recent years. <5.1.5. World Intellectual Property Organization (WIPO) Internet Treaties> The World Intellectual Property Organization (WIPO) has been a primary forum to address IP issues brought on by the digital environment since the TRIPS Agreement. The WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty often referred to jointly as the WIPO "Internet Treaties" established international norms regarding IPR protection in the digital environment. These treaties were agreed to in 1996 and entered into force in 2002, but are not enforceable, including under WTO dispute settlement. Shaped by TRIPS, the WIPO Internet Treaties are intended to clarify that existing rights continue to apply in the digital environment, to create new online rights, and to maintain a fair balance between the owners of rights and the general public. Key features of the WIPO Internet Treaties include provisions for legal protection and remedies against circumventing TPMs, such as encryption, and against the removal or alteration of rights management information (RMI), which is data identifying works or their authors necessary for them to manage their rights (e.g., for licenses and royalties). The liability of online service providers and other communication entities that provide access to the internet was contested in the negotiations on the WIPO Internet Treaties. In the end, WIPO Internet Treaties leave it to the discretion of national governments to develop the legal parameters for ISP liability. As of March 2019, the WIPO Internet Treaties had 96 contracting parties. The United States implemented the WIPO Internet Treaties through the Digital Millennium Copyright Act of 1998 (DMCA) ( H.R. 2281 ), which set new standards for protecting copyrights in the digital environment, including prohibiting the circumvention of antipiracy measures incorporated into copyrighted works and enforcing such violations through civil, administrative, and criminal remedies. The DMCA also, among other things, limits remedies available against ISPs that unknowingly transmit copyright infringing information over their networks by creating certain "safe harbors." India was one of the latest countries to join the treaties, entering them into force on December 25, 2018. The United States continues to call on trading partners, such as Turkey and Mexico, to fully implement the WIPO Internet Treaties. <5.1.6. WTO Plurilateral Effort> On the sidelines of the WTO Ministerial Conference, in December 2017, the United States, as part of a group of over 70 WTO members, agreed to "initiate exploratory work together toward future WTO negotiations on trade related aspects of electronic commerce." The U.S. objectives include market access, data flows, nondiscriminatory treatment of digital products, protection of intellectual property and digital security measures, and intermediary liability, among others. The group formally launched the e-commerce initiative in January 2019. The official joint statement lists includes advanced economies such as the United States, the EU, and Australia, and also several developing countries such as China and Brazil. India stated it will not join, preferring to maintain its flexibility to favor domestic firms, limit foreign market access, and raise revenue in the future through potential customs duties. After the meeting, the U.S. Trade Representative's (USTR) statement emphasized the need for a high-standard agreement that includes enforceable obligations. The EU noted e-signatures, customs duties, forced disclosure of source code, and data localization measures among the potential new rules to be discussed. Some analysts raise concerns that the EU may seek more limited commitments on issues such as cross-border data flows. China has proposed the negotiations be limited to exploratory discussions rather than establishing obligations on topics such as data flows and data storage. The negotiating parties continue to discuss the scope of any potential agreement, but the outlook may be challenging given the different approaches and policies especially among the U.S., EU, and China. <5.2. U.S. Bilateral and Plurilateral Agreements> As traditional trade policy does not clearly reflect the pervasiveness of the digital economy, and data is increasingly incorporated into international trade, the line between goods and services, and the application of the existing multilateral trade agreement system, is not always clear. As discussed above, the WTO agreements provide limited treatment of some aspects of digital trade. The United States has sought to establish new rules and disciplines on digital trade in its bilateral and plurilateral trade negotiations. <5.2.1. Existing U.S. Free Trade Agreements (FTAs)> The United States has included an e-commerce chapter in its FTAs since it signed an agreement with Singapore in 2003 that has progressively evolved. The e-commerce chapter of U.S. FTAs usually begins by recognizing e-commerce as an economic driver and the importance of removing trade barriers to e-commerce. Most chapters contain provisions on nondiscrimination of digital products, prohibition of customs duties, transparency, and cooperation topics such as SMEs, cross-border information flows, and promoting dialogues to develop e-commerce. Some of the FTAs also include cooperation on consumer protection, as well as providing for electronic authentication and paperless trading. All FTAs allow certain exceptions to ensure that each party is able to achieve legitimate public policy objectives, protecting regulatory flexibility. The U.S.-South Korea FTA (KORUS) contains the most robust digital trade provisions in a U.S. FTA currently in force. In addition to the provisions in prior FTAs, KORUS includes provisions on access and use of the internet to ensure consumer choice and market competition. Most significantly, KORUS was the first attempt in a U.S. FTA to explicitly address cross-border information flows. The e-commerce chapter contains an article that recognizes its importance and discourages the use of barriers to cross-border data but does not explicitly mention localization requirements. The financial services chapter of KORUS also contains a specific, enforceable commitment to allow cross-border data flows "for data processing where such processing is required in the institution's ordinary course of business." In 2018, the Trump Administration and South Korea agreed to limited modifications of the agreement, but no changes were made to provisions directly impacting digital trade. <5.2.2. United States-Mexico-Canada Agreement (USMCA)> The released text of the proposed USMCA with Canada and Mexico aims to revise and update the trilateral North American Free Trade Agreement (NAFTA), and illustrates the Trump Administration's approach to digital trade. The final text of the agreement pulls from and builds on many of the provisions from the Trans-Pacific Partnership (TPP) negotiated under President Obama which the United States did not ratify. The provisions of the proposed USMCA establish new rules and disciplines to remove trade barriers and counter discriminatory action while also providing governments with flexibility. The provisions go much further than the KORUS agreement in establishing obligations on multiple aspects of digital trade, and contrast sharply with China's authoritarian approach discussed above. USMCA provisions prohibit customs duties and discrimination against digital products, requirements for source code or algorithms disclosure, or technology transfer mandates. The agreement protects electronic authentication and signatures, electronic payment systems, and consumer access to the Internet. Provisions require anti-spam measures, domestic legal frameworks for online consumer and personal privacy protection, and identifies specific key principles and international guidelines that the parties must take into account. USMCA contains broad provisions to protect cross-border data flows and restrict data localization requirements; for financial services, open data flows is subject to the financial regulator having access to data necessary to fulfill its regulatory and supervisory role. The digital trade chapter also prohibits liability of internet intermediaries, in line with current U.S. law, and promotes the publication of government data through open-data formats. The parties agree to cooperate on and promote a number of issues including risk-based cybersecurity, privacy, SMEs, and the APEC Cross-Border Privacy Rules (see below). <6. Other International Forums for Digital Trade> Given the cross-cutting nature of the digital world, digital trade issues touch on other policy objectives and priorities, such as privacy and national security. While U.S. and international trade agreements are one way for the United States to establish market opening and new rules and disciplines to govern digital trade, not every issue is necessarily suitable for an international trade agreement and not every international partner is ready, or willing, to take on such commitments. In other international forums outside of trade negotiations, other tools can be used to encourage high-level, nonbinding best practices and principles and align expectations. G-20. The influential Group of 20 (G-20) is one venue for establishing common principles, and digital issues have been on its agenda recently. At the 2017 meeting, G-20 leaders established the Digital Economy Task Force (DETF). The G-20 Digital Economy Ministerial Meeting issued a declaration that identified requisites for a thriving digital economy and specific recommendations. As host, Japan is expected to build on the digital economy agenda in 2019, with a specific emphasis on privacy and data governance. OECD. The OECD provides a forum to discuss principles and norms to facilitate a thriving digital economy. The OECD issued a series of reports in 2017 and 2018 related to digital trade, including an assessment of the digital transformation of each OECD economy and bridging the digital gender divide. The reports identified specific challenges and recommendations, including establishing a national digital strategy and removing market access barriers. The United States could work with its OECD partners to reinforce principles, including an open Internet and the need to balance public policy objectives. The OECD Global Forum on the Digital Security for Prosperity also allows for multi-stakeholder international engagement to discuss issues such as the governance of digital security issues. APEC. The Asian Pacific Economic Cooperation (APEC) forum presents another opportunity for sharing best practices and setting high-level principles on issues that may be of greater concern to developing countries with less advanced digital economies and industry. APEC is implementing the Cross-Border Privacy Rules (CBPR) system to be consistent with the already established APEC Privacy Framework. According to the Business Software Alliance, most countries across the globe have data protection frameworks based on either the APEC CBPR system or the EU regime, but some countries still lack privacy laws. Currently, the United States, Japan, Mexico, Canada, South Korea, Singapore, Taiwan, and Australia are CBPR members; the Philippines is in the process of joining. Some observers view CBPR, which aims to reflect a diversity of national privacy regimes, as a scalable solution that could potentially be adopted multilaterally. Others may view the EU regime as a more comprehensive, top-down approach. Due to its voluntary nature, APEC has served as an incubator for potential plurilateral agreements. Regulatory cooperation. Ongoing regulatory cooperation efforts are another important tool for addressing differences between parties, better aligning regulatory requirements, and reducing inconsistencies and redundancies that can hamper or discriminate against the free flow of data, goods, and services. These forums provide an opportunity for U.S. agencies to work directly with overseas counterparts and focus on specific aspects of digital trade such as online privacy, consumer protection, and rules for online contract formation and enforcement. The EU-U.S. Privacy Shield is one example of regulatory authorities working together to address such issues. <7. Issues for Congress> Policy questions continue to evolve as the internet-driven economy and innovations grow. Digital trade is intimately connected to and woven into all parts of the U.S. economy and overlaps with other sectors, requiring policymakers to balance many different objectives. For example, digital trade relies on cross-border data flows, but policymakers must balance open data flows with public policy goals such as protecting privacy, supporting law enforcement, and improving personal and national security and safety. The complexity of the debate related to cross-border data flows and digital trade more generally involves complementary and competing interests and stakeholders. Companies and individuals who seek to do business abroad, and trade negotiators who seek to open markets may focus on maintaining open market access, which may include cross-border data flows, while others may want to limit foreign competition. Privacy advocates may focus on protecting personal information. Meanwhile, law enforcement and defense advisors may seek the ability to access or limit information flows based on national security interests. Digital trade raises numerous complex issues of potential interest to Congress with possible legislative and oversight implications. Issues include Understanding of the economic impact of digital trade on the U.S. economy and the effects of localization and other digital trade barriers on U.S. exports, jobs, and competition. Examining how best to balance market openness and cross-border data flows with other policy goals, such as right to privacy and the government's need for access to protect safety and national security. Considering if the United States would benefit from overarching digital privacy policy and what lessons can be drawn from other countries' experiences, and how to best balance this with U.S. trade negotiating objectives. Effectively addressing important digital trade barriers and cybertheft. Considering how best to assure public confidence and trust in network reliability and security that underlie the global digital economy and allow it to effectively and efficiently function. Examining evolving U.S. trade policy efforts, including how the proposed USMCA, WTO plurilateral, and potential new bilateral negotiations may address U.S. trade barriers, set new rules and disciplines, and respond to different standard-setting practices that may have global reach, including by the EU and China. Assessing if U.S. agencies have the necessary tools to accurately measure the size and scope of digital trade in order to analyze the impact of potential policies. Assessing the effectiveness of the Trump Administration's Section 301 actions involving Chinese trade practices and other bilateral efforts related to cybersecurity and digital trade. <7.1. Appendix. Digital Trade Barriers> Barriers to Internet Services Discriminatory treatment of digital goods and services Duties on digital goods or services Foreign investment restrictions Intermediary liability without safe harbor or fair-use provisions that could make internet platforms responsible for content posted by users Low de minimis threshold for customs duties on imported goods, including e-commerce purchases "Snippet tax" on search engines that quote text snippets as part of search results Taxes on over-the-top (OTT) services such as media, messaging, or voice-over-internet-protocol (VOIP) Web filtering and blocking of content Localization Barriers Data localization requirements prohibiting cross-border data flows and requiring the use of local servers for data storage or processing Limited or no access to foreign government procurement markets Requirement for use of local technology Comprehensive privacy regulations that may discriminate against foreign providers Technology Barriers Restrictions or prohibitions on use of encryption Source code, technology, or other intellectual property rights (IPR) forced transfer requirements Local testing and certification for imported information technology (IT) equipment may add costs or delays for imported goods Other Barriers Cybersecurity threats or local requirements Weak IPR enforcement

As the global internet develops and evolves, digital trade has become more prominent on the global trade and economic policy agenda. The economic impact of the internet was estimated to be $4.2 trillion in 2016, making it the equivalent of the fifth-largest national economy. The digital economy accounted for 6.9% of current‐dollar gross U.S. domestic product (GDP) in 2017. Digital trade has been growing faster than traditional trade in goods and services. Congress has an important role to play in shaping global digital trade policy, from oversight of agencies charged with regulating cross-border data flows to shaping and considering legislation implementing new trade rules and disciplines through trade negotiations. Congress also works with the executive branch to identify the right balance between digital trade and other policy objectives, including privacy and national security. Digital trade includes end-products, such as downloaded movies, and products and services that rely on or facilitate digital trade, such as productivity-enhancing tools like cloud data storage and email. In 2017, U.S. exports of information and communications technology-enabled services (excluding digital goods) were an estimated $439 billion. Digital trade is growing on a global basis, contributing more to global domestic product (GDP) than financial or merchandise flows. The increase in digital trade raises new challenges in U.S. trade policy, including how to best address new and emerging trade barriers. As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers. In addition to high tariffs, barriers to digital trade may include localization requirements, cross border data flow limitations, intellectual property rights (IPR) infringement, forced technology transfer, web filtering, economic espionage, and cybercrime exposure or state-directed theft of trade secrets. China's policies, in particular, such as those on internet sovereignty and cybersecurity, pose challenges for U.S. companies. Digital trade issues often overlap and cut across policy areas, such as IPR and national security; this raises questions for Congress as it weighs different policy objectives. The Organisation for Economic Co-operation and Development (OECD) points out three potentially conflicting policy goals in the internet economy: (1) enabling the internet; (2) boosting or preserving competition within and outside the internet; and (3) protecting privacy and consumers, more generally. While no multilateral agreement on digital trade exists in the World Trade Organization (WTO), other WTO agreements cover some aspects of digital trade. Recent bilateral and plurilateral agreements have begun to address digital trade rules and barriers more explicitly. For example, the proposed U.S.-Mexico-Canada Agreement (USMCA) and ongoing plurilateral discussions in the WTO on a potential e-commerce agreement could address digital trade barriers to varying degrees. Digital trade is also being discussed in a variety of international forums, providing the United States with multiple opportunities to engage in and shape global norms. With workers in the high-tech sector in every U.S. state and congressional district, and over two-thirds of U.S. jobs requiring digital skills, Congress has an interest in ensuring and developing the global rules and norms of the internet economy in line with U.S. laws and norms, and in establishing a U.S. trade policy on digital trade that advances U.S. interests.

crs_R46261

crs_R46261_0

On December 31, 2019, the World Health Organization (WHO) was informed of a cluster of pneumonia cases in Wuhan City, Hubei Province of China. Illnesses have since been linked to a disease caused by a previously unidentified strain of coronavirus, designated Coronavirus Disease 2019, or COVID-19. Despite containment efforts in China, the United States, and elsewhere, by late February there were indications that the COVID-19 outbreak may have entered a new phase, with community spread occurring or suspected in several countries other than China, including in the United States. Diagnostic testing is a critical part of the public health response to and clinical management of the COVID-19 caused by the SARS-CoV-2 virus. Efforts in the United States to develop and disseminate a test for COVID-19 have faced challenges. Manufacturing and quality issues with the nation's test developed by the Centers for Disease Control and Prevention (CDC) resulted in essentially all testing going through CDC's laboratory facility in Atlanta through early March, despite distribution of test kits to state and local public health labs beginning in early February. CDC's initial test kits had to be remanufactured and redistributed, which, along with other factors, has significantly delayed access to testing throughout the country. It has been reported that the CDC's Atlanta laboratory is currently under investigation by the Department of Health and Human Services (HHS) for possible quality issues related to its manufacture of the test kits, which may have led to the contamination of one reagent and thus to the quality issues with the test. In this context, on February 29, 2020, in an effort to facilitate the expansion of testing capacity as the first cases of community spread were confirmed in the United States, the Food and Drug Administration (FDA) announced a significant new policy. This policy, issued via agency guidance and effective immediately, allows certain laboratories principally clinical and commercial laboratories that have developed and validated their own COVID-19 diagnostics to begin to use the tests prior to the test receiving an Emergency Use Authorization (EUA) from the agency. Diagnostic testing for COVID-19, in part because it is caused by a novel pathogen, has been led and carried out to date through the country's public health infrastructure. This includes primarily the CDC and the country's network of state and local public health laboratories. In contrast, in most situations, diagnostic testing is carried out by a number of facilities, including private commercial laboratories (e.g., Quest, LabCorp), hospital and other clinical laboratories, and laboratories in academic medical centers, among others. FDA's February 29 guidance aims to facilitate the expansion of diagnostic testing from the public health setting into the clinical health care and commercial settings, leveraging significant standing resources throughout the country, including facilities, trained personnel, expertise, materials, and equipment. It is FDA's intention that this expansion will help the country meet the increasing and substantial demand for testing generated by community spread of the disease and expanded clinical testing guidelines issued by the CDC. In addition, because many cases of COVID-19 are reportedly mild or asymptomatic, widespread access to testing which informs development of important metrics such as the case fatality rate is critical to understanding the scope and extent of the disease in the United States, and to efficiently directing resources to mitigate its impact in the broader community. Diagnostic tests formally called in vitro diagnostic (IVD) devices may be commercially developed and distributed as "kits" or developed, validated, and carried out by a single laboratory. This second type of test known as a laboratory-developed test, or an LDT is the more commonly used type of test because of its flexibility and differing federal regulatory requirements, among other reasons. Although the CDC's test is being manufactured as a test kit and initially has been distributed to specific CDC-qualified labs, the FDA guidance targets LDTs that are generally carried out in clinical and academic settings or private commercial laboratories. All clinical laboratories in the United States, regardless of whether they are part of the country's public health infrastructure or part of the health care delivery system, are regulated by the Clinical Laboratory Improvement Amendments of 1988 (CLIA) program, administered by the Centers for Medicare & Medicaid Services (CMS). Federal agencies involved in the regulation of IVDs include FDA and CMS. FDA derives its authority to regulate the sale and distribution of medical devices, such as IVDs, from the Federal Food, Drug, and Cosmetics Act (FFDCA) and the Public Health Service Act (PHSA). CMS's authority to regulate IVDs is through CLIA ( P.L. 100-578 ). FDA regulates the safety and effectiveness of diagnostic tests, as well as the quality of the design and manufacture of the diagnostic test. CMS regulates the quality of clinical laboratories and the clinical testing process. <1. Diagnostic Tests> <1.1. What Are IVD Tests?> In vitro diagnostic devices are defined in FDA regulation as a specific subset of medical 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 also include components of tests, which can include both non-diagnostic ingredients, called general purpose reagents (GPRs), and the active ingredient in a diagnostic test, referred to as the analyte specific reagent (ASR). In general, an IVD device may be a "commercial test kit" (a product developed, produced, and sold by a manufacturer for distribution to multiple laboratories) or a "laboratory developed test" (a product developed by and used in a single laboratory). LDTs may use components (e.g., general purpose reagents like a buffer) that are either manufactured in-house by the laboratory or commercially developed and distributed. <1.2. What Is an LDT?> A laboratory-developed test is a class of IVD that is designed, manufactured, and used within a single laboratory. LDTs are often used to test for conditions or diseases that are either rapidly changing (e.g., new strains of known infectious diseases) or the subject of quickly advancing scientific research (e.g., genomic testing for cancer). The majority of genetic tests a type of IVD that analyzes various aspects of an individual's genetic material (e.g., DNA, RNA) are LDTs. <1.3. How Are IVD Tests Regulated?> In general, oversight of in vitro diagnostic devices focuses on ensuring their safety and effectiveness; their accuracy and reliability; the quality of clinical laboratories that carry out IVD testing; the utility of the information generated by IVDs in clinician and patient decision-making; and the truthfulness of claims made about IVDs that are marketed directly to consumers. As with other medical devices, the application of FDA regulatory requirements to IVDs depends on the IVD's risk classification according to its intended use. Classification is based, in turn, on the risk the device poses to the patient. For IVDs, which are informational tests, the risk to the patient is that of an incorrect test result, either a false positive or a false negative result, either of which may cause serious harm to the individual. In the case of infectious diseases for example, COVID-19 the risk of a false negative test extends beyond the individual patient into the community at large. The FDA has three classes of medical device: Class I (low risk), Class II (moderate risk), and Class III (high risk). Regulatory controls are dependent on the class of a given medical device. COVID-19 diagnostics would most likely fall in Class III, as they would be considered to be high-risk devices. <1.4. How Are LDTs Regulated?> The regulation of laboratory-developed tests has been the subject of ongoing debate over the past 20 years, driven in large part by an increase in the number and complexity of genetic tests over this time. In general, the FDA has maintained that it has clear regulatory authority over LDTs, as it does with all IVDs that meet the definition of medical device in the FFDCA. However, the FDA traditionally exercised enforcement discretion over LDTs choosing not to enforce applicable statutory and regulatory requirements with respect to such tests meaning that most of these tests have neither undergone premarket review nor received FDA clearance or approval for marketing. To date, FDA has instead focused its enforcement efforts on commercial IVD kits, which are broadly commercially marketed. In recent years, despite the absence of specific agency guidance on the regulation of LDTs, FDA has nevertheless begun to assert authority over LDTs, and specifically over some direct-to-consumer (DTC) genetic tests, that it considers to be higher-risk tests. <1.4.1. What Is CLIA and How Is It Involved in LDT Regulation?> CLIA of 1988 provides CMS with authority to regulate clinical laboratories. CLIA establishes quality standards for clinical laboratory testing and a certification program for clinical laboratories that perform testing using IVD devices. All laboratories that perform diagnostic testing for health-related reasons (i.e., with results returned to the patient or a health care practitioner) are regulated by CMS under the authority of CLIA. For CLIA to apply, testing must be carried out on a human specimen. CLIA certification is based on the level of complexity of testing that the laboratory performs, specifically (1) low (therefore, waived) complexity, (2) moderate complexity, and (3) high complexity. FDA is responsible for categorizing tests according to their level of complexity. CLIA requirements are used to evaluate a test's analytical validity , defined as the ability of a test to detect or measure the analyte it is intended to detect or measure. Laboratories that perform moderate- and high-complexity testing must meet specific standards and requirements as a condition of certification, including proficiency testing (PT), patient test management, quality control, personnel qualifications, and quality assurance. All LDTs, including genetic tests offered as LDTs, are considered high-complexity tests under CLIA. All COVID-19 diagnostics would be considered to be high complexity tests under CLIA. <1.5. How Are IVDs Regulated by the FDA During an Emergency Such as the Outbreak of COVID-19?> In certain public health or other emergency situations, the HHS Secretary may declare that existing circumstances justify the use of unapproved medical products for certain uses, or approved medical products for unapproved uses. This declaration facilitates access to not-yet-approved medical products in an expedited manner during certain emergency situations. In the case of the COVID-19 disease, HHS Secretary Azar determined that "there is a public health emergency and [declared] that circumstances exist justifying the authorization of emergency use of in vitro diagnostics for detection and/or diagnosis of the novel coronavirus." On the basis of this declaration, FDA issued an Emergency Use Authorization authorizing the emergency use of the CDC-developed diagnostic test for COVID-19. The FDA also issued an EUA to the state of New York for an LDT developed by the state public health labs. To date, these are the only two EUAs for coronavirus diagnostics that the FDA has issued. <1.5.1. How Does the Emergency Use Authority Apply to LDTs if They Are Generally Exempted from Premarket Requirements?> During an emergency, all laboratory-developed tests testing for the relevant pathogen (in this case, SARS-CoV-2) must either be approved, cleared, or authorized under an EUA to be legally carried out. As noted above, FDA generally waives most regulatory requirements (e.g., premarket review) for LDTs in normal situations; nevertheless, LDTs may only be used with authorization (e.g., an EUA) during an emergency declaration pursuant to FFDCA Section 564. That is, statutory requirements under FFDCA Section 564 apply to LDTs as they do to other medical products, and they apply to both commercial test kits which are normally subject to FDA regulatory requirements and to LDTs. The EUA process is usually used to expedite access to medical products that would otherwise need premarket approval or clearance in emergency situations. However, because premarket approval requirements for LDTs are generally waived through enforcement discretion by the agency, the EUA represents additional regulatory requirements for the use of an LDT in emergency situations. This is because, among other things, in the case of a communicable disease, the test result has implications beyond the individual being tested, and so a false negative result could have serious consequences for the community. Therefore, FDA states that these tests need an EUA in an emergency prior to clinical use as do other medical products. In contrast, for commercial test kits, the EUA represents an abbreviated mechanism that allows the unapproved product to be used without undergoing the FDA premarket review typically required (for a complex molecular test for a novel pathogen, that review would generally be a Premarket Approval, or PMA, for high-risk medical devices). Despite a request from the Association of Public Health Laboratories (APHL) to FDA, the agency declined to exercise enforcement discretion with respect to LDTs that detect SARC-CoV-2 and diagnose COVID-19 and the requirement that they receive an EUA prior to use. APHL maintains that these labs are regulated by CLIA, and that this regulatory oversight is sufficient. However, on February 29, 2020, FDA announced a new policy allowing certain laboratories that have developed and validated COVID-19 LDTs to begin to use the test clinically prior to it receiving an EUA from the agency but after validation of the test and notification of the agency (see " What Steps Did FDA Take to Expand Testing Capacity in Response to the Problems with CDC's Test? "). <2. The CDC 2019-Novel Coronavirus (2019-nCoV) Real-Time Reverse Transcriptase (RT)-PCR Diagnostic Panel> <2.1. How Does the CDC's COVID-19 Diagnostic Test Work?> The diagnostic test developed by the CDC, called the 2019-Novel Coronavirus (2019-nCoV) Real-Time Reverse Transcriptase (RT)-PCR Diagnostic Panel, is a complex molecular diagnostic test that relies on generally standard molecular biology laboratory techniques. Specifically, the test uses a technique called Polymerase Chain Reaction (PCR), a standard in vitro technique for amplification of DNA. Because the SARS-CoV-2 virus the virus that causes COVID-19 is an RNA virus, the RNA must be first reverse transcribed to generate copy DNA, or cDNA, which is then amplified (multiple copies are generated) using PCR. PCR relies on primers very short single stranded pieces of DNA that are complementary to and bind with specific regions of the viral genome and thus define the specific genomic region to be amplified. The test then relies on a probe, or a single-stranded piece of DNA that is chemically or radioactively labelled, that can bind to and thus detect the amplified target portion of the viral genetic material. CDC's original test used three sets of primers and probes: two to target specific regions of a designated gene within the SARS-CoV-2 viral genome, and a third that was specific to all SARS-like coronaviruses (see " What Quality Problems Did the CDC's Test Experience on Rollout to the State and Local Public Health Laboratories? "). The test also includes a number of authorized control samples, including a positive control for SARS-CoV-2 and a "no template control" to test for system contamination. Together, these controls help ensure that the test is functioning properly. <2.2. What Type of IVD Is the CDC's Test and Who May Carry It Out?> The CDC's test is being developed by the agency as a test kit and is generally authorized to be distributed to state and local public health laboratories to augment public health testing capacity. The test received an EUA from the FDA on February 4, 2020, under which "authorized laboratories" may receive and carry out the test despite the fact that it is not FDA-approved or FDA-cleared, and that it does not meet all related regulatory requirements for marketing. The EUA notes that "[t]esting is limited to qualified laboratories designated by CDC and, in the United States, certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), (42 U.S.C. 263a), to perform high complexity tests." CDC-qualified laboratories with a CLIA certification for high-complexity testing able to receive the test kits include U.S. state and local public health laboratories, Department of Defense (DOD) laboratories, and select international laboratories. The public health laboratories must verify the test themselves prior to using it, and are currently required to send presumptive positive cases back to the CDC in Atlanta for confirmatory testing by the agency. <2.2.1. What Is the Role of the Commercial Manufacturer IDT in the Development and Distribution of the CDC's Test Kit?> The Trump Administration had estimated that approximately 1 million tests would be broadly available imminently, facilitated by leveraging manufacturing of the CDC test kit by a private company, Integrated DNA Technologies (IDT), a manufacturer that has been working with CDC. According to HHS Secretary Azar on March 5, 2020, IDT will send the CDC test kit to "hospitals, other labs around the country, commercial, public health labs" by the end of the week of March 2. The test kit being manufactured by IDT, identical to the CDC test kit and referred to as "IDT 2019-novel coronavirus kit," is being qualified by CDC in lots, and FDA reports that these CDC-qualified, IDT-manufactured test kits are covered by the CDC's EUA authorization of February 4, 2020. FDA notes that if a lab purchases a test kit from IDT, the laboratory does not need its own EUA to carry it out, but that "[t]esting using CDC's EUA-authorized protocol and CDC qualified lots of reagents is considered to be testing done under the CDC's EUA. Labs performing such testing should follow any applicable conditions set forth in the EUA." LabCorp, a large commercial laboratory, is already reporting that it can perform the CDC test "if needed to meet testing demand" and that the test is only for use with "authorized specimens collected from individuals who meet CDC criteria for COVID-19 testing." IDT is manufacturing test kits in two sizes, with the largest having a capacity of 500 reactions (approximately 250 individual patients). <2.3. What Quality Problems Did the CDC's Test Experience on Rollout to the State and Local Public Health Laboratories?> As noted above, the CDC's test kit used three sets of probes and primers or reagents to detect and identify viral DNA beyond that specific to COVID-19. One of these reagents, the one meant to detect any SARS-like coronavirus including SARS-CoV-2, was returning inconclusive results. In response, the CDC validated a new protocol for their test that allows it to be run excluding the faulty reagent, running the test with only the other two diagnostic components. CDC has the authority to modify the test through enforcement discretion granted by FDA. The agency determined that the exclusion of this reagent does not affect the accuracy or the sensitivity and specificity of the test. Certain laboratories have continued to experience problems running the test, even when using the modified protocol, with at least one laboratory reporting that the first reagent was also returning inconclusive results. This problem severely limited the state and local public health laboratories' ability to carry out the CDC's test. In response to these issues, the New York State Department of Health requested and was granted the FDA's second EUA for its own laboratory-developed test, the New York SARS-CoV-2 Real-time RT-PCR Diagnostic Panel. Testing is limited under the EUA to two laboratories in New York the Wadsworth Center, New York State Department of Public Health, and the New York City Department of Health and Mental Hygiene, Public Health Laboratories. New York was one of the states that had continued difficulty implementing CDC's original test kit, even with the modified protocol. In response, CDC is also manufacturing new test kits after reportedly resolving the manufacturing issue that affected the original test kit. This time, however, CDC is manufacturing test kits with only the two reagents that were unaffected by the quality issue that are specific to SARS-CoV-2 and those kits are being made available to qualified CDC labs through the International Reagent Resource. , These test kits are expected to result in the public health laboratories having capacity to test up to 75,000 patients. Some believe that the CDC's choice to develop and mitigate quality problems with its own COVID-19 diagnostic when an accepted diagnostic was available through the World Health Organization (WHO), which was efficiently distributing a German-developed test globally early in the outbreak, was a decision that cost the United States time in its response to the virus's introduction and spread in the country. Some speculated about the use of the third reagent that was to detect SARS-like coronaviruses and whether it had been strictly necessary if the test was still accurate at diagnosing COVID-19 without that reagent included in the test at all, or if it had instead overcomplicated the test. In general, there have been questions raised about the CDC's handling of the development and distribution of its test, and its response to the quality problems that occurred, and the impact this may have had on the country's ability to detect community spread of the disease before it occurred more widely. <2.4. What Steps Did FDA Take to Expand Testing Capacity in Response to the Problems with CDC's Test?> On February 29, 2020, as problems with the rollout of the CDC-developed diagnostic test continued, FDA announced a new policy to immediately leverage LDTs developed in high-complexity commercial, reference, and clinical laboratories nationwide to expand testing capacity. Specifically, the new agency guidance allows CLIA-certified high-complexity laboratories that have developed and validated their own COVID-19 diagnostics to use the tests while the laboratory is preparing, and FDA is reviewing, their EUA submission. , The FDA guidance states that laboratories have 15 days after validating their test to submit an EUA application to FDA, and the guidance recommends confirming the test's first five negative and positive results against an EUA-authorized diagnostic. According to FDA, it "does not intend to object to the use of these tests for clinical testing while the laboratories are pursuing an EUA with the FDA. Importantly, this policy only applies to laboratories that are certified to perform high-complexity testing consistent with requirements under Clinical Laboratory Improvement Amendments." The guidance includes detailed information about FDA's expected methods for test validation. Pursuant to this FDA guidance, on March 5, 2020, LabCorp announced that it had begun offering its LDT, the LabCorp 2019 Novel Coronavirus (COVID-19), NAA test "for ordering by physicians or other authorized healthcare providers anywhere in the U.S.," and that it is currently pursuing an EUA with the agency for the test. This test is to take between three to four days to return results, and a health care provider must order and authorize it, and obtain the required specimen from the patient. Under the FDA's new guidance, Quest has also announced that it will begin testing for coronavirus with its own LDT, beginning March 9, 2020, and that it plans to pursue an EUA with the agency within 15 days, as required by the guidance.

On December 31, 2019, the World Health Organization (WHO) was informed of a cluster of pneumonia cases in Wuhan City, Hubei Province of China. Illnesses have since been linked to a disease caused by a previously unidentified strain of coronavirus, designated Coronavirus Disease 2019, or COVID-19. Despite containment efforts in China, the United States, and elsewhere, by late February there were indications that the COVID-19 outbreak may have entered a new phase, with community spread occurring or suspected in several countries other than China, including in the United States. Diagnostic testing is a critical part of the public health response to and clinical management of COVID-19, caused by the SARS-CoV-2 virus. Efforts in the United States to develop and disseminate a test for COVID-19 have faced challenges. Manufacturing and quality issues with the nation's test—developed by the Centers for Disease Control and Prevention (CDC)—resulted in significant delay in access to testing throughout the country. In this context, on February 29, 2020, in an effort to facilitate the expansion of testing capacity as the first cases of community spread were confirmed in the United States, the Food and Drug Administration (FDA) announced a new policy, issued via agency guidance and effective immediately, that would allow certain laboratories—principally clinical and large commercial and reference laboratories—that have developed and validated their own COVID-19 diagnostic to begin to use the test prior to it receiving an Emergency Use Authorization (EUA) from the agency. FDA's February 29 guidance aims to facilitate the expansion of diagnostic testing from the public health setting into the clinical health care and commercial settings. Doing so may help the country meet the increasing and substantial demand for testing generated by community spread of the disease and expanded clinical testing guidelines issued by the CDC. This report does not address financing or coverage of diagnostic testing for COVID-19.

crs_R45976

crs_R45976_0

<1. Introduction> Traditional macroeconomic theory addresses two main questions. First, macroeconomic theory and policy seek to mitigate short-term economic fluctuations (or stabilize the economy) that leave productive resources idle for a time. Second, macroeconomists seek to recommend public policies that maximize living standards (economic growth) over the long term, while keeping debt at sustainable levels. The role of monetary policy and the maintenance of a stable price level are embedded in both issues. In the past few years, the U.S. economy has experienced persistently low interest rates despite near-full employment and federal deficits and debt significantly above their historical averages. These characteristics have led to debate over the optimal trajectory of long-term federal debt in an economic environment with relatively low borrowing costs. Recently, an economic theory outside of mainstream economic views, called Modern Monetary Theory (MMT) by its proponents, has been receiving attention in the public debate. Interest in this theory may in part reflect concerns about the deficit financing needed for new spending programs in health, education, infrastructure, and other areas. MMT suggests that deficit financing can be used without harmful economic effects in circumstances of low inflation rates and low interest rates, conditions that currently exist despite indications that the country is at full employment. This report first explains mainstream macroeconomic theory. It then surveys the available MMT literature to provide a basic understanding of the differences (or lack thereof) between the defining relationships established in MMT and mainstream economics. It next discusses whether MMT can be used to justify deficit financing. Finally, it discusses how existing government institutions may present barriers in adopting the prescriptions of MMT for managing the economy. Unlike mainstream macroeconomic theory, where consensus has been reached on how core relationships translate into mathematical equations, there is no comparative mathematical statement of MMT. Some academic economists have translated MMT into a mathematical framework, and the explanation of the differences between mainstream and MMT theory are based on those discussions. Proponents of MMT do not necessarily accept that framework, however. <2. Explaining Mainstream Economic Views> Although basic macroeconomic models vary in many ways, any macroeconomic model that allows for fiscal and monetary policy to influence the economy has three relationships in the economy that must be in balance: (1) the asset market where investment equals saving (called the IS curve ), (2) the money relationship where the supply and demand for money must equate (commonly called the LM curve ), and (3) the economy-wide relationship where aggregate demand equals aggregate supply. The first two of these equations compose what is referred to as the IS-LM model . These three relationships, in turn, determine output, prices, and the interest rate in the economy. Macroeconomic models formalize the relationship between economic variables, allowing researchers to quantify the effect of a change in one variable on the rest of the system (also called comparative statics ) and to observe how economic patterns align with model predictions. The IS-LM model is characterized by a limited role of expectations of future economic conditions and sticky prices . While there are a number of different macroeconomic models, especially those that add expectations, this section uses the simplified model, which forms the core of forecasting models as well as models used by government agencies in projecting the economy. More sophisticated forecasting models of the economy have many equations that capture variation in types of goods, investments, and assets, but this simplified model can be used to explain the standard model and provide a foundation for interpreting MMT. Most academic research is directed toward more complex models (sometimes referred to as modern macroeconomic s ), which are discussed briefly below. The basic IS-LM model is useful for illustrating the differences in MMT and mainstream models. <2.1. Short Run: The Business Cycle> In mainstream macroeconomic models, the short run is characterized by fixed capital investment, or that the equipment and nonlabor resources available to firms are fixed. Output decisions are therefore a function of productivity, employment, and IS-LM outcomes. <2.1.1. The Investment-Savings Balance (IS)> The IS curve begins with the recognition that output (or income) is the sum of its components: private consumption, investment, and government spending. For simplicity, this models a closed economy; in an open economy there would be a fourth component, net exports. If consumption and government spending are subtracted from output, the result is saving; thus, this relationship could be restated as savings equals investment. Consumption is a fraction of disposable income, which is income minus taxes. Therefore, consumption rises when disposable income rises (which occurs when income rises and/or taxes fall). While consumption depends on income and taxes, investment depends on the interest rate, rising when interest rates fall and declining when they rise. As a result, there are a series of pairs of income levels and interest rates where this relationship is in balance, and income is higher when interest rates are lower. It is through this relationship that fiscal policy can be used to expand or contract the economy. If government spending is increased, or if taxes are decreased (which increases disposable income and therefore increases consumption), demand increases. The recipients of these increased amounts of income then spend a portion of that income, which leads to successive rounds of spending that are called multipliers . <2.1.2. Money Supply and Demand (LM)> Another critical relationship is that between money supply and money demand, which must be equal for markets to clear. Money is composed of cash, including checking accounts, and its close substitutes. Holding prices constant for the moment, and with a fixed money supply, there are two uses of money. First, some money is needed to carry out transactions in the economy, and thus more money is demanded as income (output) increases. Second, money is needed as a liquid form of asset holdings, and the higher the interest rate, the less money is held because it earns no interest and is exchanged for other forms of assets that earn interest. Similar to the IS curve, this relationship also creates pairs of interest rates and output levels where money supply and demand balance traces out a curve (the LM curve), this time with income higher as interest rates increase. In this case, however, a fixed amount of money demand occurs when both output and interest rates are high or when both are low. When interest rates are high, less money is desired as an asset and more is freed up to support a higher level of transactions (and therefore income). <2.1.3. Determination of Output and Interest Rates> Where the IS and LM relationships intersect is where income and interest rates will be determined in the economy, holding prices constant. With significant unemployment, any fiscal or monetary stimulus would be transmitted into output effects, moving the economy closer to the output achieved under full employment. The effects of expansionary fiscal policy in the IS-LM model are shown in Figure 1 . When expansionary fiscal policy through increased spending, decreased taxes, or some combination of the two occurs (IS 1 to IS 2 ) and the money supply remains fixed (LM), interest rates (r) will rise (point A to point B). This rise occurs because when more money is needed for transactions, money held as an asset must be reduced and interest rates must be higher. This rise in interest rates offsets some of the effects of increased income by reducing investment. Thus, holding money supply fixed, increases in income (Y) that would have occurred if interest rates were fixed is now reduced as investment decreases. The monetary policy implications in an IS-LM model are illustrated in Figure 2 . With expansionary monetary policy (LM 1 to LM 2 ), more money is available to support income and transactions at every interest rate (point A to point B). However, that level of income is inconsistent with the level of income that balances the investment savings (IS) relationship, and interest rates fall, leading to more investment, with some of the increased money supply used to hold more money as a liquid asset. That is, by interacting with the investment savings (IS) relationship, output and interest rates fall below the amount implied by the money expansion alone. Output (Y) is higher than it was previously, and interest rates are lower. Thus, a monetary expansion increases output and lowers interest rates. Note that while the basic model uses monetary supply as the primary monetary policy tool, due to difficulties in measuring the money supply, monetary authorities generally target interest rates when making policy choices. Figure 3 , Figure 4 , and Figure 5 show the basic ways monetary policy can respond to a fiscal policy shift (in these examples through a contractionary fiscal policy shift) in an IS-LM model. Monetary policy may be neutral ( Figure 3 ) with respect to a fiscal contraction (IS 1 to IS 2 ) if there is no change in the money supply, so that some of the output effect is mitigated (point A to point B) relative to an accommodating policy. Monetary policy may be accommodating ( Figure 4 ) if the money supply also contracts (LM 1 to LM 2 ) to keep the interest rate constant, allowing maximum output effects (in this case, reducing output) to occur (point A to point B). Monetary policy may be offsetting ( Figure 5 ) if the money supply expands (LM 1 to LM 2 ) to return output to its original level (point A to point B). <2.1.4. Demand and Supply (AD-AS)> The LM curve actually has a third variable, the price level. The real money supply depends on the price level; if prices rise and nominal money supply is fixed, the real money supply falls. Thus, there is a third relationship in the system. This relationship requires an equilibrium between aggregate demand and aggregate supply (AD-AS). In the short run, the capital stock is fixed, and the output in the economy depends on hiring unemployed labor. (There is also an underlying labor supply and labor demand relationship.) The effects are captured in the aggregate supply equation. As prices rise, the supply of output increases and the demand decreases. Thus, this relationship shows an equilibrium aggregate price level and output in the economy. As shown in Figure 6 and Figure 7 , the effect of fiscal and monetary policies on output (Y) and the price level (P) is a function of aggregate supply and demand. Either a fiscal or monetary expansion will shift the aggregate demand curve toward more output at every price level. The supply curve is relatively flat when there is significant underemployment in the economy, meaning that output can increase without affecting prices. When the economy is at full employment the supply curve is almost vertical, and a shift in the demand curve will increase prices and not output. An increase in the price level will decrease the real money supply. If the initial stimulus were a fiscal stimulus, the real money supply would contract, at full employment, to restore the old output level, but with higher interest rates. In effect, the fiscal stimulus would have substituted consumption or government spending for investment (referred to as crowding out ). If the stimulus were originally a monetary stimulus, the real money supply would shift back to its old position and neither the output nor its composition would change. Continual attempts to provide stimulus at full employment would result in a continually increasing price level and, in the case of a fiscal stimulus, continued crowding out of investment. <2.1.5. Extensions of the Basic Model: Open Economy> This basic model can be expanded in many ways with increased complication and detail. As suggested above, multiple sectors, multiple types of investments, and other details can be introduced. One important element is to allow for an open economy, with exports and imports, foreign investment in the United States, and U.S. investment in foreign countries. Expanding the model in this way, in its simplest form, requires a new relationship, the balance of payments, which requires equal supply and demand for U.S. dollars. This additional relationship requires a new variable, the exchange rate. It also requires net exports in addition to consumption, investment, and government spending, to be added to the IS equation. An open economy tends to diminish the effect of fiscal stimulus. As interest rates rise in the United States, foreign capital is attracted into the United States. To make those investments, foreigners demand dollars and supply foreign currency. The increased dollar demand increases the price of the dollar in foreign currency, and this higher price makes exports more costly and imports less costly. This results in a decrease in net exports, reducing the increase in output. In the extreme, if international capital were perfectly mobile and the United States were a small country, any effect of a fiscal stimulus would theoretically be completely offset, leading to a substitution of consumption and government spending for net exports. Because capital is not perfectly mobile and the United States is a large country, fiscal policy should still be effective in stimulating or restraining the economy. Monetary policy theoretically becomes more powerful in an open economy: as an increase in the money supply causes the interest rate to fall, capital flows out of the country, causing net exports to rise. <2.1.6. Extensions of the Basic Model: Investment and the Accelerator> Another modification to the model is to recognize that investment can respond to expected demand. With this extension, as the economy expands and that expansion is expected to be sustained, firms will increase investment in capital goods (known as the accelerator effect ), thereby increasing their capacity. The rate at which capital accumulates in an expanding economy will therefore reflect the rate at which capital investment increases in response to output and the rate of capital depreciation (or how much capital value is lost in any one period) over time. <2.1.7. Extension of the Model: Consumption and Labor a Function of the Interest Rate, and Rational Expectations> Economists had long been concerned that the IS-LM model does not fully account for expectations of future behavior, and lacked the microeconomic foundations where individuals allocate consumption and leisure over time. One way to incorporate such an idea is to make consumption determined by the interest rate as well as disposable income, reflecting the idea that as the interest rate rises individuals want to save more (and consume less). This effect has also been extended to the allocation of leisure and labor, and is most formally contained in dynamic stochastic general equilibrium (DSGE) models. DSGE models include a demand block, a supply block, and a monetary policy relationship. In general, while modifications could easily allow consumption to depend on interest rates, use of a full-blown DSGE model is more common among academics than among private forecasters or government forecasters. The model has been criticized by a number of mainstream academics. <2.2. The Long Run: Economic Growth> Over the long run, economic business cycle models converge into economic growth models. Economic growth in the longer term is assumed to be at full employment, and the economy grows with the labor force, capital accumulation, and technological advances. The long run, unlike the short run (where the economy can gain from reducing unemployment), is characterized by fixed resources and tradeoffs. What is most relevant to fiscal and monetary stimulus is that mainstream economic theory suggests that using fiscal stimulus may be good for growth in the short run, but can be harmful in the long run. If fiscal deficits allow consumption to increase at the expense of investment, as would be the case with running the deficit that causes the debt to grow faster than GDP, the economy will continually experience slower growth as the capital stock fails to grow at a quick enough pace. Excessive monetary stimulus, meanwhile, would lead to price level increases that, if followed persistently would lead to an inflationary spiral. The most common growth model is one that reflects a more or less steady-state growth (although that growth pattern may reflect growth in the labor supply). <3. Modern Monetary Theory> This section explores MMT's basic macroeconomic principles and distinctive characteristics and discusses how to interpret the model into the more conventional IS-LM framework. Because MMT is an emerging ideology, definitively identifying the research that encapsulates it can be difficult. Publications and other works from both proponents of MMT and mainstream economists used in this report are listed in the references section. Though some MMT proponents have expressed caution in viewing MMT through a traditional macroeconomic framework, this approach is consistent with work found both elsewhere in the MMT literature and in mainstream economic analysis, including research with theoretical elements aligning with some of MMT's central assertions. MMT's theory does not take into account self-imposed constraints (i.e., those other than resource constraints), such as lack of a sovereign currency, or of other institutions, such as independence of the monetary authority (the Federal Reserve in the United States) and the Treasury that allows the creation of money to finance government spending. As will be discussed subsequently, U.S. institutions may limit the application of MMT to the management of the economy. As with all macroeconomics, some of the theory is about description and some about prescription, but MMT varies by including prescriptive points that restrain monetary policy to keep a fixed interest rate (this policy will leave fiscal policy as the only tool to address the business cycle). According to the model, when fiscal stimulus produces no inflation, there are still unused resources in the economy, and when fiscal stimulus leads to inflation, the stimulus will be reduced or reversed, thereby reducing the deficit or converting it to a surplus. <3.1. The Investment-Savings Balance (IS)> Just as with the basic macroeconomic model, analysis of MMT's macroeconomic principles may begin by accounting for all the choices available with output in a closed economy, which are private consumption, investment, and government spending. In equilibrium (when aggregate expenditures are equal to output), this accounting identity can be reframed to show that the difference between national saving and investment is equal to the difference between government spending and government taxes (or the federal budget deficit), which can also be found in the basic approach. One notable distinction between MMT and the basic macroeconomic structure is that MMT assumes private investment levels are insensitive to changes in the interest rate (or the rate of return that investment would offer), at least when the economy is below capacity. The insensitivity of investment to interest rates means that unlike the basic model, where there are a series of output and interest rate combinations where the investment and savings levels are in balance, with MMT desired investment and savings are equivalent at a single level of output, regardless of the interest rate. This relationship alone (which may be described as having a vertical IS curve) is possible in certain permutations of the basic macroeconomic model. As with the basic approach, consumption may be a positive function of income with the MMT investment and interest rate assumption. Fiscal policy may still be used to influence economic outcomes in the short run with an investment savings relationship consistent with MMT. In the basic model, the effect of expansionary fiscal policy (or an increase in the deficit, or spending more than received in taxes) would, all else equal, increase interest rates, which would thereby reduce private investment and influence present and future saving and consumption patterns. Under the MMT condition, investment levels would be unaffected by the change in interest rates caused by the shift in government activity. Expansionary fiscal policy (as seen in Figure 1 ) would therefore still increase income and output in a given period, with a decrease in government deficits having the opposite effect. Even if the IS curve is sensitive to interest rates, the same outcome could be achieved by an accommodating money supply response that keeps the interest rate fixed (which is also a part of the MMT approach, as discussed below), although this outcome would be the result of a policy choice rather than of fundamental economic factors. <3.2. Money Supply and Demand (LM)> As with mainstream macroeconomic theory, equilibrium in MMT requires equivalence between money supplied and money demanded. The concept of money, however, is applied differently in MMT than in mainstream macroeconomics, which has ramifications for money's relationship with other economic variables and how it may be managed by monetary and fiscal policy. Rather than taking money as the cash and close substitutes created by a central bank, MMT proponents believe that money in a financial system is legitimized as the government accepts it as payment for taxes. In this view, government spending may be thought of as "creating" the money that circulates in an economy. At the simplest level, assuming the Federal Reserve and the Treasury are the same entity (ignoring self-imposed constraints), the monetary authority provides the money to finance government spending (i.e., by depositing money in the Treasury checking account) which injects money into the economy which is, in turn, used to pay taxes. In a more complex model where the Federal Reserve supports the aims of the Treasury, the money would be lent to the Treasury, directly or indirectly, and thus some discussions also speak of the government lending money into existence. This distinction in the concept of money alone does not generate differences in the beliefs about the viability of long-term deficit financing (which is discussed further below). MMT proponents assert that the interaction of market operations undertaken by banking institutions and Federal Reserve actions that are designed to meet interest rate targets effectively allow banking institutions to make their own lending choices independent of reserve requirements and other restrictions. In their view, this greatly restricts the ability of the Federal Reserve (or any central bank) to control the supply of money, even if they can influence market interest rates. Assuming the central bank affects interest rates without direct control over the money supply is not necessarily inconsistent with the mainstream macroeconomic approach. The LM curve is horizontal because the target is the interest rate, although even if the interest rate changed, it would not affect output ( Figure 8 may be used as a reference). The central bank can set any rate, but could set a low rate, perhaps near or at zero, which would lower the cost of government borrowing (in situations where the central bank cannot directly add funds to the government's checking account). Again, the LM curve is not necessarily horizontal because it is naturally that way (MMT discussions do not present a formalized LM curve), but it is horizontal if a fixed interest rate is targeted. The level of that fixed interest could be chosen at any rate, although many adherents support a zero nominal interest rate. Such an interest rate could be made consistent with a low and stable rate of inflation by changing fiscal policy (e.g., if inflation is increasing, taxes should be increased and spending cut). Setting a determinable price level requires a contractionary fiscal policy when demand exceeds potential output to prevent continuing inflation. MMT's notion that monetary policy can maintain any chosen interest rate over an extended time period is a significant deviation from mainstream monetary theory. That assertion requires the absence of any other significant economic force influencing interest rates, including the effects of expected inflation. The existence and impact of inflation expectations is well documented and supported in the economic literature. If there are such nonmoney influences, the adoption of a chosen interest rate may only be maintained with constant injections of money that cause consequent inflationary pressures. Contractionary fiscal policy may not by itself be able to constrain these pressures. The notion that a sovereign government can generate as much money as it chooses without inducing inflation is another notable deviation of MMT from conventional economic analysis. In examining writings by MMT proponents, it is not always clear whether the reliance on fiscal policy (rather than monetary policy) to address an underemployed economy is descriptive (only fiscal policy works) or prescriptive (only fiscal policy should be used because it is too difficult to undertake monetary policy). Proponents appear to believe that the monetary authorities can influence interest rates, including through the buying and selling of bonds as well as directly setting certain interest rates. It is also not clear whether the vertical IS curve is relevant only in an underemployed economy. If the rule for monetary policy is not prescriptive and investment is always insensitive to interest rates, it is difficult to square the theory with the use of monetary policy in the early 1980s to contract the economy and squeeze out inflation, an event widely accepted by economists and consistent with mainstream theory. <3.3. Determination of Output and Interest Rates> The MMT assumption of investment being insensitive to interest rates means that only fiscal policy can be used to shift an underperforming economy to full output in the short run. Under those assumptions, deficit financing in a recession would be an effective way of closing the corresponding gap in output and income, and the Federal Reserve would be tasked with restraining any subsequent increase in interest rates. This combination has been described as an "extreme Keynesian" approach in the mainstream literature. The IS-LM curves generated by MMT assumptions are shown in Figure 8 . Because under the MMT model the selection of an interest rate plays no role in investment or consumption decisions, proponents call for an interest rate that is more or less fixed at a lower level than current targets. Providing for a low level of interest would reduce federal borrowing costs, although fixing rates too close to zero raises questions about how the government and other borrowers would convince creditors to lend money when the relative costs of holding more liquid assets are lowered. <3.4. Demand and Supply (AD-AS)> With interest rates assumed to be fixed and monetary policy largely taken out of business cycle management, the MMT equilibrium output where aggregate demand meets aggregate supply is a function of total factor productivity (as before, the capital stock is assumed to be fixed), fiscal policy choices, and employment. If fiscal stimulus occurs in an underemployed economy, output will increase. If the economy is at full employment, fiscal stimulus will not increase real output, but rather induce inflation, which is a signal to undertake contractionary fiscal policy. With no investment sensitivity to interest rates, or if the interest rate is fixed by the monetary authorities, a fiscal stimulus at full employment will under the MMT model theoretically lead to an inflationary spiral. This effect means that it would be crucial to be able to exert fiscal discipline if inflation appears. Again, these effects are a function of MMT's IS and LM assumptions and mirror the fiscal policy findings in the "extreme Keynesian" mainstream view. Unlike the mainstream model, where an increase in demand at full employment leads to a contraction of the real money supply which chokes off demand (leaving the level of demand fixed but its mix changed), there is no link between the IS-LM curve and AD-AS curve that produces an equilibrium in prices and output. Instead, excess demand produces an increase in the price level that must be met with a contractionary fiscal policy in MMT. (In effect, explicit action must also be taken in the mainstream model where the Federal Reserve is managing business cycles, but the Federal Reserve targets interest rates rather than money aggregates. The Fed must recognize the inflationary pressure and take explicit action to offset it with higher interest rates.) Proponents of MMT also advance a federal job guarantee. A job guarantee is not integral to the MMT theory described above, because such a theory would presumably hold, according to MMT advocates, regardless of the presence of the job guarantee. Nevertheless, it is widely advocated by MMT proponents. Although how the jobs guarantee is structured is largely undefined, such a policy would likely reduce the fluctuation in employment levels across business cycles and increase government deficit financing. It would presumably be designed to largely eliminate certain types of unemployment (circumstances where individuals willing to work cannot find a job at a reasonable wage either because of the business cycle or a mismatch of skills and labor demand), although frictional unemployment (where individuals are engaged in job searches) would remain. The specific characteristics and implementation process of any job guarantee would likely play a significant role in determining its ultimate effect on output, employment, and price levels. Because there is cyclical fluctuation in unemployment, the size of the guaranteed job workforce would fluctuate, making a match between workers and needed tasks difficult. Unlike the market economy that determines jobs and products based on consumer demand, the assignment of work and output would have to be determined largely by fiat. When goods provided by the government are not explicitly based on the needs for collective goods or goods with public spillovers (such as a military force or highways), misallocation of resources may be more likely to occur. Some resources would, theoretically, be diverted from the private sector with a higher effective minimum wage through the government job alternative. The job market in the United States is not uniform, presenting additional challenges for a proposed job guarantee. For example, there could be considerable difficulties satisfying the guarantee in sparsely populated rural areas, filling jobs requiring background checks, or because some applicants may not be suitable for certain jobs (such as home health care or child care). There are also issues about how to treat workers who violated the terms of employment (such as persistent tardiness). Finally, jobs may need capital inputs (e.g., construction equipment) and supplies, and workers in rural areas may have problems finding transportation. <3.5. The Open Economy> With an open economy the IS curve contains an additional element, net exports, which is sensitive to interest rates. Mainstream economic theory postulates that if interest rates rise, capital investment in the United States rises, increasing the demand for dollars, raising the price of the dollar, and decreasing net exports (by both a decrease in exports, which are more costly to foreigners, and an increase in imports). Applied to the MMT model, this would mean that the IS curve would no longer be vertical because investment activity would respond to interest changes. In that case, monetary policy that allowed the interest rate to rise would offset a fiscal stimulus. However, the same output effects of fiscal policy as in the closed economy would occur if the monetary authorities kept the interest rate fixed. An open economy means that some U.S. debt is held by foreigners and adds to concerns that the relatively low interest rates may make the financing of the debt more difficult, since the central bank and the Treasury are independent. The low interest rates would make Treasury debt less attractive to investors. This is important because Treasury must raise funds by selling bonds if tax revenues are insufficient for expenditures, and the Federal Reserve cannot lend directly to the Treasury under current law . <4. Does MMT Justify Deficit Financing?> Much of the analysis in MMT literature and related research focuses on its application in the short-term, or in managing business cycles. Less discussed is how the MMT model applies to long run economic variables, including growth and debt sustainability. This section discusses MMT's generally short-term view of deficit financing and contrasts it with mainstream economics, which is usually focused on the longer term. Mainstream economics does not call for balanced federal budgets, and is broadly supportive of deficit financing in managing sufficiently large economic shocks. It does, however, recognize limits on the amounts that the federal government (or any economic actor) may borrow: constraints determined by the availability and willingness of investors to finance its borrowing needs at normal interest rates. In the mainstream view, this borrowing is constrained by the total amounts available for investment (savings in dollars) at a given point in time and the attractiveness of other borrowing options available on the market. In the long term, this constraint means that the amount of federal debt relative to output cannot rise indefinitely. In a basic macroeconomic model this constraint is violated when the long-term interest rate exceeds the long-term economic growth rate, as the general return on investments generated from expansionary policy will be smaller than the interest payments required to finance that activity. MMT proponents have generally called for a more active fiscal policy role in managing negative economic shocks. Moreover, the MMT claim that sovereign governments that issue debt in their own currency (like the United States) cannot be forced to default leads to the general perception that an MMT-driven economic structure would involve larger deficits and higher debt levels than those experienced in an economic structure shaped by mainstream economic thinking. This belief is supported by the call for a central bank that consistently sets interest rates near or at zero, which, all else equal, would support deficit financing at lower economic growth rates rather than with higher interest rates if mainstream economic thinking was applied. The notion that a sovereign government cannot be forced to default appears to be a central tenet of MMT because of the view that money creation can substitute for taxes or borrowing to finance government. There have been, however, many instances of sovereign governments defaulting explicitly, or implicitly either by inflating the currency, renegotiating terms, or using other measures to address a difficulty in financing debt. These other options might be considered default by another name. While the United States does not appear to face any current concerns about the ability to sell its debt, were a collapse in the market to occur, it might be impossible or at least extremely costly to undertake the needed measures (higher taxes to stem the inflation appearing with money creation). In meeting its statutory mandate of minimizing long-run federal borrowing costs, Treasury may redeem and reissue debt at levels that far exceed the amounts required strictly from new deficit-financing activity. For example, Treasury issued $11.7 trillion in marketable debt in FY2019, which represented more than 70% of the federal marketable debt portfolio. Any dramatic increase in interest rates accompanying a debt crisis would thus likely generate higher interest rates not only for debt generated by new federal deficits, but also for a significant portion of the existing debt stock that is redeemed and reissued. For example, net interest payments during the Greek debt crisis (described below) increased by amounts equivalent to roughly $200 billion in FY2019 dollars, which would require significant tax rate increases, base broadening, or both if needed to meet a sudden change in interest obligations. If the federal debt position were viewed by the market to be unsustainable, it could lead to a collapse in the demand for Treasury securities that would cause a "debt cycle." In this case, an observation by some investors to sell or avoid federal debt issuances before they defaulted would raise federal interest rates, which would require more federal borrowing and could lead to further investor avoidance and interest increases. Beyond the significant effects on the federal borrowing position, such a process could also have ramifications elsewhere in the financial markets, as federal securities are often used as a currency substitute for overnight interbank lending and other activities central to general financial operations. MMT proponents also claim that government deficits must be small enough to limit inflation. It is unclear how this claim distinguishes MMT in a practical sense from the mainstream view, as mainstream macroeconomics would also support fiscal or monetary intervention to avoid significant increases in interest rates in response to rising debt. In the mainstream and MMT case, there is concern that by the time actors identify an urgent debt sustainability problem, it may be difficult to address. Such a situation would likely be accompanied by a negative economic shock that would make immediately raising taxes (net of spending) difficult, while increasing the money supply risks entering a debt spiral. In the MMT case, such a concern does not arise because of the assumption that the Federal Reserve could finance spending (an assumption at odds with institutional constraints discussed in the next section). Further questions arise when examining the applicability of MMT policies to the United States and other nations that already have relatively high real debt levels. In its most recent long-term budget outlook, the Congressional Budget Office (CBO) estimated that federal debt held by the public would rise from 78% of GDP in FY2019 to 92% of GDP in FY2029 and 144% of GDP in FY2049, well beyond the historical peak. It is possible that a high existing debt stock could practically restrict the availability or effectiveness of MMT-supported fiscal policies in managing business cycles, given the institutional constraints discussed in the next section. However, currently there are no signs that the federal borrowing capacity is near exhaustion in the short term or medium term, as interest rates remain below Fed-targeted levels. Recent international experiences speak to the complexity of borrowing capacity. Both Greece and Japan experienced rapid growth in government debt in the past decade. Organisation for Economic Co-operation and Development (OECD) data on general government debt (including municipal government debt) indicate that Greek debt rose from 115% of GDP in 2006 to 189% of GDP in 2017, while Japanese debt rose from 180% of GDP to 234% of GDP over the same time period. A loss in market confidence in Greek debt led to a severe recession there, with GDP contracting by 9 percentage points in 2011, and long-term interest rates reaching 22% in 2012. Japanese borrowing was viewed to be more sustainable despite being higher, with relatively flat GDP levels and long-term interest rates close to zero in recent years. <4.1. Applying MMT to Federal Institutions> When weighing the merits of structural changes, it may be useful to consider the characteristics of the institutions with power to address business cycles in the current system. Members of the Federal Reserve Board of Governors have typically been chosen without regard to political affiliation. The Federal Reserve's Federal Open Market Committee meets at least every six weeks to adjust open market operations as needed, allowing for a relatively quick and efficient way of implementing monetary policy modifications. Fiscal policy decisions managing business cycles are largely made through enactment of new legislation, and thus may be affected by the legislative calendar and other political considerations. In practice, these factors may make the evidential threshold for a fiscal policy response higher than that for action by the Federal Reserve. The Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ), for instance, was enacted in part to alleviate effects of the Great Recession in October 2008, 10 months after the start of the recession as identified by the National Bureau of Economic Research. In contrast, the Federal Reserve also undertook significant action in fall 2008, but was also able to begin taking countercyclical actions as early as September 2007. One may also wish to be mindful of the current independence of the Treasury and the Federal Reserve. In MMT, these groups are treated as a single entity, which is equivalent to assuming that the Federal Reserve can make funds available to the Treasury to spend as it needs. Present laws prohibit the Federal Reserve from lending or allowing overdrafts to the Treasury, so the Treasury must sell bonds at whatever interest rate prevails when revenues are inadequate to finance spending. The Federal Reserve faces no statutory limits on how much federal debt it may purchase in the secondary market, however, so that it can lend indirectly. The degree of independence between the Federal Reserve and the Treasury has varied over time, however, with periods of relatively high cooperation. Even if the Federal Reserve can lend indirectly to the Treasury, it has different objectives than cheap financing of the debt. The Federal Reserve acts under a statutory mandate of "maximum employment, stable prices, and moderate long-term interest rates." If the Federal Reserve determines, for instance, that such a mandate warrants contractionary policy, it has the authority to enact contractionary policy, even if such actions would negate expansionary fiscal policy efforts. It is possible, therefore, that MMT-supported policies may need the support of both federal policymakers and Federal Reserve actors to take full effect. Economists have justified delegating this authority to the Federal Reserve on the ground that an insulated institution is more likely to choose policies consistent with low inflation. If correct, subordinating the Federal Reserve could result in a choice of policies under the MMT framework that removes this check against high inflation. <5. References> Barro, Robert J. "On the Determination of the Public Debt." Journal of Political Economy 87, no. 5 (October 1979): 940. Bell, Stephanie. The Hierarchy of Money. The Jerome Levy Economics Institute, Working Paper Series 231, April 1998. . "Do Taxes and Bonds Finance Government Spending?," Journal of Economic Issues 34, no. 3 (September 2000): 603. Blanchard, Oliver J. Public Debt and Low Interest Rates . National Bureau of Economic Research, NBER Working Paper No. 25621, February 2019. Chick, Victoria. The Theory of Monetary Policy , vol. 5 . London: Gray-Mills Publishing Limited, 1973. Chinn, Menzie D. Notes on Modern Monetary Theory for Paleo-Keynesians , Spring 2019, at https://www.ssc.wisc.edu/~mchinn/mmt_add2.pdf . Fullwiler, Scott. "Functional Finance and the Debt Ratio-Part I." New Economic Perspectives (blog), December 2012, at http://neweconomicperspectives.org/2012/12/functional-finance-and-the-debt-ratio-part-i.html . Lerner, Abba P. "Functional Finance and the Federal Debt." Social Research , no. 1 (February 1943): 38. Palley, Thomas K. Money, F iscal P olicy and I nterest R ates: A C ritique of Modern Monetary Theory . The Hans Boeckler Foundation, IMK Working Paper No. 109, January 2013. Rachel, Lukasz, and Lawrence H. Summers. On Falling Neutral Real Rates, Fiscal Policy, and Secular Stagnation . Brookings Papers on Economic Activity, March 2019, at https://www.brookings.edu/bpea-articles/on-falling-neutral-real-rates-fiscal-policy-and-the-risk-of-secular-stagnation/ . Rogoff, Kenneth. "Modern Monetary Nonsense." Project Syndicate, March 2019, at https://www.project-syndicate.org/commentary/federal-reserve-modern-monetary-theory-dangers-by-kenneth-rogoff-2019-03?barrier=accesspaylog . Rowe, Nick. "Reverse-Engineering the MMT Model." A Worthwhile Canadian Initiative (blog), 2011, at https://worthwhile.typepad.com/worthwhile_canadian_initi/2011/04/reverse-engineering-the-mmt-model.html . Sharpe, Timothy P. "A Modern Money Perspective on Financial Crowding-Out." Review of Political Economy 25 (November 2013): 586. Shiller, Robert. "Modern Monetary Theory Makes Sense, Up to a Point." The New York Times , March 29, 2019, at https://www.nytimes.com/2019/03/29/business/modern-monetary-theory-shiller.html . Tcherneva, Pavlina R. "The Role of Fiscal Policy." International Journal of Political Economy 41, no. 2 (Summer 2012): 5. Wray, L. Randall. Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Monetary Systems. 2 nd ed. New York: Palgrave Macmillan, 2015.

Explaining persistently low interest rates despite large deficits and rising debt has been one of the central challenges of macroeconomists since the end of the Great Recession. This dynamic has led to increasing attention to Modern Monetary Theory (MMT), presented as an alternative to the mainstream macroeconomic way of thinking, in some fiscal policy discussions. Such discussions are at times restricted by a difficulty, expressed by policymakers and economists alike, in understanding MMT's core principles and how they inform MMT's views on fiscal policy. MMT suggests that deficit financing can be used without harmful economic effects in circumstances of low inflation rates and low interest rates, conditions that currently exist despite indications that the country is at full employment. This report surveys the available MMT literature in order to provide a basic understanding of the differences (or lack thereof) between the defining relationships established in MMT and mainstream economics. It then explores how such distinctions may inform policy prescriptions for addressing short- and long-run economic issues, including approaches to federal deficit outcomes and debt management. Included in this analysis are observations of how policy recommendations from MMT and mainstream economics align with current U.S. economic and governance systems. In mainstream macroeconomic models, the asset market is characterized by the sensitivity of investment to interest rates, a determinant of investment returns. Money is typically defined as cash and close substitutes, and used for transactions and held as an asset. In the short run, the capital stock (equipment and other factors of production outside of labor) is assumed to be fixed, and output is dictated by the employment level. Fiscal and monetary policy decisions can be used to expand or contract the short-run economy (with distinct effects for each), and those decisions help to inform growth, the stock of capital and labor, and other decisions in the long run. In general, expansionary fiscal policies, including stimulus policies and other programs that increase net deficits and debt, are thought to be helpful when addressing negative shocks in demand, but they may crowd out private investment and reduce long-term growth if used when the economy is otherwise in balance. Persistent increases in real debt (which occurs when the stock of debt grows more quickly than the economy) are viewed as unsustainable, as they would eventually lead to a lack of real resources to borrow against. Though some MMT adherents have disputed the notion that the model can be viewed through the basic macroeconomic framework, efforts to do so reveal a few key distinctions. In the MMT model of short-run behavior, investment decisions are insensitive to interest rates, and are instead a function of current consumption levels. MMT holds a much broader view of money, asserting that monetary value can be created by financial institutions in a way that renders monetary policy ineffective in dealing with short-run economic fluctuations. MMT supporters therefore prefer a larger fiscal policy role in managing business cycles than mainstream economists, generally claiming that fiscal borrowing constraints are less imposing than mainstream economists believe in countries with a sovereign currency, and call for direct money financing of fiscal policy actions by the central bank. The translation of the MMT approach to long-run output is unclear, though a jobs guarantee supported by MMT adherents would likely change the nature of the relationship between employment and output levels. Full alignment with the economic and political system supported by MMT would likely involve a dramatic shift in the roles and powers of U.S. fiscal institutions. Adopting an MMT framework would involve much more fiscal policy to account for a reduced monetary policy role. Policymakers would also likely need to execute fiscal policy decisions more quickly than has been done in the past in assuming an increased role in economic management. Projections of future debt growth due to spending pressures from social programs have led to a current concern about deficit financing, recognizing the institutional challenges in conducting tax and spending fiscal policy. MMT is largely focused on short-run management of the economy, with tax and spending policies aimed at maintaining a fully employed economy without inflation. The MMT approach appears to implicitly assume that a high level of debt will not be problematic because it can be financed cheaply by maintaining low interest rates. Underlying this policy is the assumption that Congress can act quickly to counteract deficit-driven inflation with tax increases or spending cuts that would allow the economy to maintain low interest rates on public debt.

crs_R46143

crs_R46143_0

<1. Introduction> The Office of Federal Student Aid (FSA) within the U.S. Department of Education (ED) is the primary entity responsible for the administration and oversight of the federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329, as amended). As such, FSA is the largest provider of postsecondary student financial aid in the nation, performing functions that are akin to those of large banks, to which it has sometimes been compared. In FY2019, FSA oversaw the provision of $130.4 billion in Title IV aid to 11.0 million students attending approximately 6,000 participating institutions of higher education (IHEs). In addition, in FY2019, FSA managed a student loan portfolio encompassing 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. FSA is a performance-based organization (PBO) pursuant to Section 141 of the HEA. Conceptually, PBOs are intended to be results-driven organizations that have clear objectives and measurable goals designed to improve an agency's performance and transparency. PBOs are led by chief executives who are personally accountable for meeting measurable goals within the organization. In exchange, PBOs are granted greater discretion than other government agencies to operate more like private-sector companies, with more control over the budget, personnel decisions, and procurement. FSA was established under the Higher Education Amendments of 1998 ( P.L. 105-244 ) as the federal government's first PBO. This was done in response to the belief that ED needed restructuring to improve federal student aid delivery. In recent years, FSA has come under scrutiny for its oversight of IHEs participating in the student aid programs and contracted student loan servicers, its perceived lack of transparency to stakeholders, and its accountability to and engagement with stakeholders. This report provides information about the structure and organization of FSA, the nature of the work it performs, and its characteristics as a PBO. Additionally, the report attempts to synthesize some challenges experienced by FSA that have received considerable attention in recent years. There has been considerable interest in this set of issues from the 116 th Congress. As Congress contemplates the reauthorization of the HEA, it might examine some of the issues raised by these critiques and the way FSA's organization as a PBO may affect congressional goals and policies. This report begins by discussing the HEA provisions that distinguish FSA from other types of federal agencies. This is followed by a discussion of the legislative history of the creation of FSA as a PBO and of HEA Title IV programmatic changes that may affect its operations. Next, the report describes the current operations and structure of FSA. Finally, it discusses several issues related to FSA's operations and how they may relate to its structure as a PBO. The issues presented have received recent congressional and stakeholder attention and have been identified in reviews of FSA's operations. There have been numerous recent reports that have examined aspects of FSA's operations. Appendix A provides a bibliography of recent Government Accountability Office (GAO) and ED Office of Inspector General (IG) reports relating to FSA's operations. Appendix B provides a list of selected acronyms used in this report. <2. FSA as a PBO: Distinctions from Most Agencies> Federal programs are usually carried out by or through agencies that are established in statute, with structural refinements established through directives issued by the agency head. Over time, Congress has created governmental and quasi-governmental entities with varying characteristics to address diverse needs in different contexts. Most federal agencies in the executive branch, however, are designed to be directly or indirectly accountable to the President. Furthermore, most federal agencies must comply with general management laws regarding financial management, procurement, information management, personnel, and other administrative practices. As a PBO, FSA has organizational features that are distinct from most other departmental subunits in the executive branch of the federal government. As the name suggests, PBOs are designed to have a greater focus on results outcomes rather than outputs. To this end, they are required to have clear objectives and measurable goals. PBO leaders are to be held professionally accountable for meeting measurable goals within the organization, with continued tenure and a portion of compensation linked to these measures of success. In exchange, these organizations and leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies. Key statutorily established features of FSA include, among others, the appointment and compensation arrangements for its chief operating officer (COO) and other senior managers, exemptions from certain government-wide personnel and procurement requirements, and greater independence from political pressure in the exercise of its functions. <2.1. FSA Leadership> Most high-level subunits within departments are led by political appointees who are appointed by the President or the Secretary and serve at their pleasure for an indefinite term. Political appointments are not subject to the same requirements as career appointments to the Senior Executive Service (SES) or appointments to the competitive service. Depending on the authority used to make a political appointment, compensation will usually be determined by the Executive Schedule, the SES pay system, or the General Schedule. Consistent with the PBO framework, the HEA contains provisions aimed to enable FSA to attract leadership with demonstrated ability and expertise, incentivize leadership to meet performance goals, and shield FSA leadership from political pressures. FSA is led by a COO, whom the Secretary of Education appoints for a term of three to five years. The appointment is to be made based on "demonstrated management ability and expertise in information technology (IT), including experience with financial systems, and without regard to political affiliation or activity." The COO's work and priorities are governed by a performance agreement with the Secretary that includes measurable organizational and individual goals. The COO may be reappointed to additional terms of three to five years if her or his performance is satisfactory. The HEA also specifies the manner in which a COO may be removed: REMOVAL. The Chief Operating Officer may be removed by (A) the President; or (B) the Secretary, for misconduct or failure to meet performance goals set forth in the performance agreement in paragraph (4). The President or Secretary shall communicate the reasons for any such removal to the authorizing committees. The law appears to authorize the President to remove the COO at will. In addition, the Secretary may remove the COO "for misconduct or failure to meet performance goals set forth in the performance agreement." Either the President or the Secretary must provide their reasons for removal to the authorizing congressional committees. The COO's compensation includes basic pay, which is tied to the pay levels of the SES, and an annual bonus not to exceed 50% of the basic pay. The senior managers of FSA are appointed by the COO without regard for the competitive service appointment provisions of Title 5 of the U.S. Code . The work and priorities of these senior officials are governed by annual performance agreements with the COO that include measurable organizational and individual goals. Senior managers serve at the pleasure of the COO or, in the event that the COO position is vacant, the Secretary. As is the case for the COO, the compensation of senior managers includes basic pay, which is tied to the pay levels of the SES, and an annual bonus. The total annual compensation of a manager may not exceed 125% of the maximum basic pay for the SES pay system. <2.2. FSA Personnel Flexibilities> Unless otherwise specified in law, executive branch employment is governed by the civil service laws of Title 5 of the U.S. Code . Consistent with the PBO framework, HEA includes provisions that give FSA more flexibility in the staffing, classification, and pay of its employees. The statute stipulates that FSA shall not be subject to any cap on the number or grade of its employees. FSA and the Office of Personnel Management (OPM) are directed to jointly develop and implement personnel flexibilities that are consistent with Title 5 of the U.S. Code . In addition, the COO is authorized to establish technical and professional positions that are not subject to the provisions of Title 5 pertaining to competitive service appointments. The HEA provision places covered positions in the excepted service, under which FSA could use alternative hiring procedures that relax the traditional competitive hiring procedures in Title 5 (such as application of veterans' preference, public notice, and/or modified qualification standards). FSA is directed to develop a performance management system consistent with Title 5 that establishes goals or objectives for employees. <2.3. FSA Procurement Flexibilities> When executive branch agencies need to acquire goods or services to carry out their functions, they are required to comply with the Federal Acquisition Regulation (FAR) and applicable procurement statutes. The PBO procurement provisions of HEA are consistent with this overarching requirement while also permitting certain flexibilities. They state, "Except as provided in this section, the PBO shall abide by all applicable Federal procurement laws and regulations when procuring property and services." The procurement flexibilities provided to the PBO include, for example, those related to the use of experts and consultants. Whereas agencies are generally constrained in obtaining such services by limitations and conditions of Title 5 of the U.S. Code such as requirements for a specific appropriation or other statutory authorization and for reporting to OPM on such actions the PBO may obtain such services without regard to this provision. In another example of procurement flexibility, HEA provides the PBO with authority to "use a two-phase process for selecting a source for a procurement of property or services." In such a process, an agency first issues a general solicitation and then issues a second solicitation with more specific requirements to a limited group of vendors from among respondents to the first solicitation. In contrast, the FAR provides for the use of this authority under limited circumstances. In a final example, the circumstances and criteria under which the PBO may pursue a procurement with only one company differ from those followed by most agencies. Whereas in most instances the FAR allows "sole-source" procurement only where the needed services or supplies are available from only one responsible source and no other substitute will meet the agency's needs, FSA may use "single source" procurement to obtain certain systems where multiple vendors could supply the product but one vendor is "the most advantageous source for purposes of the award." <2.4. FSA Independence> As noted above, most high-level subunits within departments are led by political appointees who serve at the pleasure of, and under the direction of, the Secretary. In some cases, however, subunits are statutorily structured to have some independence from political leadership. A variety of structural mechanisms in different combinations have been used over time to establish such independence. Consequently, agencies vary in their level of structural independence from political leadership. In addition, notwithstanding these structural features, a specific leader of such a departmental subunit might elect to adhere to the Secretary's agenda for other political or policy reasons. Although HEA explicitly states that FSA is subject to the direction of the Secretary, the agency is afforded a greater level of independence from political leadership than most departmental subunits in the executive branch. This is due to HEA provisions that pertain to the appointment and removal of the FSA COO, as well as those that stipulate FSA's independence in carrying out certain functions. As noted above, the COO's appointment is to be made for a three- to five-year term on the basis of specified abilities, expertise, and experience "without regard to political affiliation or activity." Although the COO may be removed from office before the end of a term, the statute includes atypical specifications of the circumstances and manner in which this may occur. The statute also specifies that FSA "shall exercise independent control of its budget allocations and expenditures, personnel decisions and processes, procurements, and other administrative and management functions." Although this authority is subject to the direction of the Secretary, it is not a common specification for a departmental subunit. <3. Establishment of a PBO to Administer Federal Student Aid> FSA was established as the federal government's first PBO in 1998. When Congress established this structure, it departed from conventional organizational arrangements that were then in use within the federal government. The PBO model was drawn from government innovations in Great Britain in the 1980s and 1990s. It was then developed and promoted for American governmental use by the National Partnership for Reinventing Government (NPR), a major Clinton Administration governmental reform initiative. The Administration's rollout of the PBO touted the model's potential benefits and portrayed it as a commonsense development in the effort to streamline the federal government and make it more responsive to its "customers." The NPR initiative, led by Vice President Al Gore, aimed to improve federal government performance by reorganizing agencies and processes to be guided by market principles and incentives. NPR's first report put forth hundreds of recommendations. These recommendations were intended to lead to better government service delivery and greater "customer" satisfaction. In general, this would be accomplished through the streamlining of personnel practices, procurement, and other government operations; improvement of management tools and incentives; and promotion of efficiency and economy in administration. Administration-endorsed PBO-related legislation was introduced in late 1995, but it was not until early 1996 that the Vice President introduced the PBO concept as a major new focus of the ongoing NPR. The aim was to improve government service delivery by implementing certain functions through the use of business-like practices and incentive structures. Agencies reorganized as PBOs would be freed from adherence to certain procurement and civil service laws and would, at the same time, develop systems of performance incentives and accountability for results. In advocating for the creation of federal PBOs, Vice President Gore stated: Government agencies need to change their incentives and internal cultures to shift from a focus on process to a focus on customers and achieving results. They need to become more responsive to citizens, yet account for program costs and safeguard broader public interests. This can be done by creating performance-based organizations (PBOs) that set forth clear measures of performance, hold the head of the organization clearly accountable for achieving results, and grant the head of the organization authority to deviate from governmentwide rules if this is needed to achieve agreed-upon results. PBOs involve structural changes as well as changes in incentives affecting federal employees. The NPR identified seven candidates for conversion, but none has been formally converted into a PBO. However, one of the entities targeted for conversion, the Patent and Trademark Office, was statutorily reorganized and given many PBO-like structural characteristics. Because it has these features, some observers have referred to it as a PBO. Though not contemplated as a potential PBO within the scope of the initial NPR list, FSA represented the first organization aligned with the PBO framework outlined in the NPR. In addition to FSA, one other entity the Air Traffic Organization of the Federal Aviation Administration has been explicitly established as a PBO in statute. <3.1. Legislation to Establish a PBO to Administer Federal Student Aid> Prior to the establishment of FSA, federal student loan programs were administered by the Office of Student Financial Assistance Programs (SFAP), a unit within ED's Office of Postsecondary Education (OPE). As discussed below, in the mid-1990s, leadership of these programs had temporarily become divided between SFAP and a unit in the Secretary's office that had been established for the purpose of accelerating the implementation of the Direct Loan program. Although the Higher Education Amendments of 1998 ( P.L. 105-244 ) established FSA's PBO structure, interest in converting SFAP into a PBO seems to have arisen as early as 1996 amid growing concerns within Congress and ED that the student financial aid programs were "severe[ly]" mismanaged. The model was attractive to some congressional advocates of SFAP reform, as it appeared that its design features might address some of the agency's perceived problems while maintaining the financial assistance function within ED. Moreover, it appears that the possibility of establishing a PBO within ED to implement these programs was under consideration by the Secretary prior to Vice President Gore's introduction of the new organizational model in 1996, which, as described earlier, did not include SFAP as a candidate for conversion into a PBO. As the Clinton Administration was introducing the PBO model, congressional committees were monitoring and expressing concern about difficulties in the management of the student financial aid programs at ED. At a July 1996 hearing, ED's IG reported on a number of difficulties at ED, including program leadership being divided between OPE and the Senior Advisor to the Secretary for Direct Lending, poor coordination and communication between these offices, poor OPE staff morale, and a shortage of employees qualified in IT and financial analysis. Related problems included an interruption in efforts to improve the existing Federal Family Education Loan program, growth in the backlog of institutional cohort default rate appeals, confusion in the student loan community about where to find help for technical questions, concerns about the monitoring of financial statements and the procurement of needed IT, and difficulties with the processing the Free Application for Federal Student Aid (FAFSA). In a February 12, 1996, memorandum, the Secretary reportedly expressed an interest in establishing SFAP as a PBO. ED's IG testified in July of that year that such a transition appeared to be premature but that certain changes such as leadership from a highly qualified chief executive officer to provide a stable, long-term leadership and consistency of purpose and a significant, focused reengineering effort could be made to SFAP to prepare it for such a transition. In May 1997, the Advisory Committee on Student Financial Assistance (ACSFA) reported that implementation of financial aid programs was plagued by staff without the necessary experience, outdated computer systems and "a web of large, uncoordinated, uncompetitive contracts which fail to deliver on time and produce unacceptable cost overruns." ACSFA recommended restructuring the delivery of federal student aid under a PBO and reengineering Title IV systems and contracts, two processes the committee asserted were closely linked. During a July 1997 hearing, the Assistant Secretary heading OPE testified that the Administration was reviewing the PBO model among several different organizational modifications that might improve management of federal student assistance programs. By March 1998, the Secretary was voicing his support specifically for the PBO approach, stating that such a conversion would enhance ED's flexibility with regard to potential management and procurement reforms and allow it to more efficiently deliver student aid yet also hold it accountable for results and allow the Secretary to maintain control of policy. In September 1997, the chair and ranking member of the House Committee on Education and the Workforce subcommittee with jurisdiction over higher education policy introduced a standalone bill to establish a PBO within ED to manage the information systems associated with Title IV programs. In his introductory remarks, the chair noted problems with federal student aid information systems and financial statements before asserting, "A customer-focused, performance-based organization within the Department, run by an experienced Chief Operating Officer, can take the steps necessary to properly reengineer the current systems and contracts." Provisions from this bill were included in the HEA reauthorization bill as reported by the committee in April 1998. The Senate Committee on Labor and Human Resources reported out its main bill for HEA reauthorization in May 1998. This bill included provisions that were "developed in cooperation with the administration" to establish a federal student aid-related PBO in ED. The role of the PBO that would have been established by this legislation was arguably broader than that in the House committee-reported measure. The PBO established in the House bill would have been "a discrete management unit responsible for managing the information systems supporting" Title IV programs, whereas the Senate bill would have empowered the PBO "to administer various functions relating to student financial assistance programs authorized under" Title IV. Text from the committee reports concerning the PBO sections of the reauthorization legislation provides a snapshot of the committees' perceptions about the management of financial aid distribution programs by ED at the time. Report language also laid out the committees' intentions for and expectations of this change in organizational structure and management paradigm. Both the House and Senate committees of jurisdiction appeared to be concerned with perceived management problems at ED. The House Committee on Education and the Workforce discussed the prevalence and persistence of IT problems and their apparent impact on the ability of ED to deliver student aid economically, effectively, and efficiently. Specifically, the committee noted ED's limited progress in integrating numerous data systems despite legislative mandates; the tripling over five years of ED's budget for student aid information systems; and the fact that even with significant expenditures, student aid systems required dozens of paper forms and experienced "needless" process delays and breakdowns. The Senate Committee on Labor and Human Resources described a more general and overlapping set of issues related to the need to improve the administration of Title IV aid and problems regarding the Direct Loan Consolidation program, the printing of the FAFSA, and reports that ED was falling significantly behind in its efforts to become Year 2000 compliant. Both the House and Senate committees intended for the establishment of a PBO organizational structure to address the management problems they had identified. For example, the House Committee on Education and the Workforce noted that the purposes of the proposed change were to increase effectiveness, economy, and efficiency by giving administrators greater management flexibility while requiring greater accountability for results. The committee also expected that a PBO structure would accomplish the following aims that were specifically delineated in the HEA: Improve service to program participants, Reduce the costs of administering the programs, Increase accountability, Provide greater flexibility in management and administration of the programs, and Integrate the information systems that support the federal student aid programs. In doing so, the committee stated: The Committee firmly believes that a customer-based, Performance-Based Organization within the Department, operated by an experienced Chief Operating Officer can take the necessary steps to properly reengineer the current systems and contracts . The Committee also believes the creation of a PBO will result in a more efficient, effective, less expensive and less bureaucratic financial aid delivery system. The end result should be a system that is easy for students and parents to use and one that ensures that students have the information they need to select the education that is best for them all while ensuring that taxpayer funds are being used efficiently and effectively. The Senate Committee on Labor and Human Resources also identified its goal for the change, although it did so more generally. The committee also noted its effort to divide policy functions, which were to be retained by OPE, from operational functions, which were to be carried out by the new PBO: The goal of the performance-based organization has been, and remains, to improve the delivery of student financial aid to students and their families. In order to accomplish this, the committee has attempted to identify the functions performed by the Office of Postsecondary Education and segregate those that are essentially policy functions that must be retained by OPE from those that are administrative and that may appropriately be handled by the performance-based organization. The PBO will be responsible for administration of the information and financial systems that support student financial assistance programs as well as any additional functions that the Secretary determines are necessary or appropriate to improve the delivery of student aid. Both the Senate- and House-passed bills would have established a new PBO vested with responsibilities related to federal student aid delivery. Specific differences between the competing versions regarding the new entity's authority, purposes, functions, relationship with ED, and other organizational features were ironed out through a conference process that yielded a consensus measure. Resolution of the PBO-related differences does not appear to have been a sticking point in the conference process. The conference report was agreed to by the two chambers and President Clinton signed the Higher Education Amendments of 1998 into law on October 7, 1998. <3.2. 2008 Higher Education Act PBO Amendments> In 2008, the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) amended the HEA PBO provisions. The report of the Senate Committee on Health, Education, Labor and Pensions noted its general approval, at that time, of the PBO as implemented: The committee applauds the efforts since the last reauthorization to implement the PBO. Schools and individuals have benefited from improved efficiency in originating, servicing and processing grant and loan aid. The ombudsman has provided needed guidance to students struggling to navigate the complex system. There is strong support for continuation of these efforts to make further progress in the delivery of student financial aid. In line with this assessment, the 2008 amendments appear to have clarified and expanded FSA's role in the administration of Title IV programs. They changed the characterization of the PBO's functions from "operational" to "administrative and oversight," seemingly broadening the mandate of the agency. In addition, whereas the previous provisions vested the PBO with responsibility for administration of the information and financial systems supporting Title IV programs, the 2008 amendments enlarged the scope of responsibilities beyond this specified support function to administration of "the Federal student financial assistance programs authorized under title IV." The HEOA also amended FSA's personnel and procurement flexibility provisions, as discussed below. <4. Changes to Title IV Aid Affecting FSA's Operations> Since FSA's inception, both statutory and regulatory changes have been made to the Title IV student aid programs. These changes may have had an effect on FSA's operations. At the time of FSA's formation in 1998, HEA Title IV authorized and ED administered two primary federal student loan programs: the Federal Family Education Loan (FFEL) program and the Direct Loan program. These two programs provided borrowers with loans for postsecondary education with substantially similar terms and conditions as one another, but each program had significantly different administrative structures. Private lenders originated FFEL program loans, and either they or secondary market loan purchasers (who bought loans from originating lenders) were responsible for completing many loan servicing tasks, including working with postsecondary institutions to track students' enrollment and loan eligibility status, billing borrowers, and conducting initial collection services if a loan became delinquent. Additionally, under the FFEL program, state and nonprofit guaranty agencies received federal funds to administer many aspects of the program, such as providing technical assistance to IHEs and lenders, providing credit and loan rehabilitation counseling to borrowers, and performing collections work. Under the Direct Loan program, the federal government essentially serves as the "banker" by providing loans to students and their families using federal capital. ED assumes the primary role in administering the Direct Loan program (described below), including providing technical assistance to IHEs, contracting with loan servicers to perform day-to-day administrative tasks, providing loan counseling to borrowers, and initiating collections work. In May 2008, in response to concerns about the continued availability of FFEL program loans due to several FFEL program lenders curtailing or ceasing their participation in the program, the Ensuring Continued Access to Student Loans Act of 2008 ( P.L. 110-227 ) granted ED the temporary authority to purchase student loans made under the FFEL program. In October 2008, P.L. 110-350 extended this authority through July 1, 2010. After purchasing loans made under the FFEL program, control of loan servicing was transferred to ED. In 2009, the SAFRA Act ( P.L. 111-152 , Title II) terminated the authority to make new loans under the FFEL program after June 30, 2010. Since July 1, 2010, the Direct Loan program has been the primary federal student loan program, although many FFEL program loans remain outstanding, and FFEL program lenders and guaranty agencies remain responsible for administering several aspects of those programs. These changes have vested FSA with a larger scope of responsibility than Congress might have originally contemplated when it authorized FSA's PBO structure, as FSA became responsible for administering a larger share of the federal student loan programs (in terms of loan volume and individual borrowers associated with these changes) than for which it had previously been responsible under the FFEL program. Moreover, the switch to almost 100% direct lending in 2010 had the effect of fundamentally altering the federal student loan marketplace. During the roughly 15-year period that the two programs operated concurrently, IHEs and borrowers were provided the opportunity to "shop around." That is, IHEs chose whether to apply to participate in the FFEL program or Direct Loan program, and the caliber of administrative and servicing work available within the respective loan programs may have been a factor in those decisions. Additionally, schools opting to participate in the FFEL program usually compiled preferred lender lists that they shared with students. Again, assessments of the caliber of administrative and servicing work provided through differing lenders likely factored into the selection of lenders for such lists. Borrowers attending FFEL program participating IHEs were free to select among an array of lenders, including but not limited to those on the preferred lender lists. There were opportunities available for IHEs and for borrowers who were dissatisfied with customer service to pursue other options. The competition that existed within the FFEL program and across the loan programs provided incentives for those involved in administrative and servicing work to provide enhanced customer service. By transitioning to a single model of federal student lending (the Direct Loan program) under which a single entity (the federal government) both makes and is responsible for administering loans, the federal student loan marketplace transitioned from one with some built-in incentives to provide enhanced customer service to one in which there may be less incentive to do so. Several other changes in the Title IV aid programs since FSA's creation as a PBO may have also had the effect of increasing the scope and complexity of FSA's administrative functions. These include but are not limited to the following: increases in the amount and type of aid benefits available to students, including extension of PLUS Loan availability to graduate and professional students under the Deficit Reduction Act of 2005 ( P.L. 109-171 ) and the authorization of the TEACH Grant program under the College Costs Reduction and Access Act of 2007 ( P.L. 110-84 ); authorization and implementation of myriad income-driven loan repayment plans that allow borrowers to make monthly payments in amounts indexed to their adjusted gross income; increased complexity of aid benefits, including establishment of a 6% interest rate cap on federal student loans during military service under the Servicemembers Civil Relief Act ( P.L. 108-189 ), the Public Service Loan Forgiveness (PSLF) program under the College Costs Reduction and Access Act, cumulative lifetime maximums on certain students' eligibility to receive Pell Grants established under the HEOA and amended under the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), and limitations placed on certain borrower's eligibility to borrow Direct Subsidized Loans established under the Moving Ahead for Progress in the 21 st Century Act ( P.L. 112-141 ); and changes made to aid administration, including the process to receive a discharge of federal student loans after a determination that a borrower is totally and permanently disabled as established under the HEOA and implemented via subsequent regulatory changes, the requirement that ED (via FSA) contract with not-for-profit loan servicers under the SAFRA Act, and regulatory changes to borrower defense to repayment discharge procedures. <5. FSA Functions and Structure> Section 141 of the HEA tasks FSA with managing administration and oversight of the Title IV federal student aid programs. Among other functions, FSA develops and maintains the FAFSA; obtains student aid funds from the Treasury and makes them available for disbursement to students; contracts with third parties that perform myriad administrative tasks associated with the Title IV programs (e.g., loan servicing); provides information on the Title IV programs to students, Title IV participants (e.g., IHEs), Congress, and other stakeholders; and provides oversight of Title IV program participants, including IHEs and the third-party loan servicers with which it contracts. The HEA specifically establishes two roles within FSA the COO and the Student Loan Ombudsman to carry out FSA's functions, but much of FSA's organizational structure has been established through administrative action by the COO. In addition, many outside entities may have an interest in or have asserted a role over aspects of the federal student aid programs. Thus, in coordination with ED, FSA maintains relationships with outside stakeholders, executive branch entities, and Congress. FSA also maintains relationships with offices within ED at large. <5.1. Statutorily Specified FSA Functions> HEA Section 141 specifies several high-level aspects of aid administration for which FSA is responsible. These include the following: The administrative, accounting, and financial management functions for the Title IV aid programs, including collection, processing, and transmission of data to students, IHEs, and other authorized stakeholders; development of specifications for software and procurement of systems to support Title IV aid administration; acquisitions of all hardware and software and procurement and management of all IT contracts to support Title IV aid administration; contracting for information and financial systems to support Title IV aid administration; providing customer service, training, and user support related to Title IV aid administration; and ensuring the integrity of the Title IV aid programs. Development, in consultation with the Secretary, of FSA's annual budget. The Secretary may delegate additional functions to FSA as necessary or appropriate to achieve FSA's purposes. FSA is given control of its budget allocations and expenditures, procurements, personnel decisions and processes, and other administrative and management functions but remains subject to the direction of the Secretary. The HEA specifies that the Secretary "shall maintain responsibility for the development and promulgation of policy and regulations" related to Title IV aid. In doing so, the HEA requires the Secretary to "request the advice of, and work in cooperation with" FSA. To fulfill its statutory responsibilities, FSA undertakes many discrete tasks (discussed below). <5.1.1. Awarding, Disbursing, and Servicing Aid> Students wishing to receive Title IV student aid must annually apply for assistance using the FAFSA, which is developed and maintained by FSA in accordance with specifications set forth in the HEA. After a student submits the FAFSA, an automated system contracted by FSA processes the FAFSA, and then IHEs (or the third-party servicers with which they contract) use information from it to calculate the amount of aid for which a student is eligible. FSA obtains funds from the Treasury and makes them available to IHEs, which in turn disburse those funds to students. Once a grant is disbursed, in many cases administrative functions are significantly decreased. However, FSA may be required to implement and/or oversee administrative functions after a grant has been disbursed. For instance, if an individual receives a Pell Grant in excess of the amount for which he or she is eligible, he or she may be required to return a portion to FSA. Once a Direct Loan program loan is disbursed, FSA assigns it to a contracted loan servicer. Loan servicers perform a variety of administrative functions such as collecting payments and performing delinquency prevention activities. FSA may, if necessary, assign a defaulted loan to a contracted private collection agency (PCA), which attempts to recover payment on defaulted loans from borrowers. FSA may also use other options to collect on defaulted Direct Loans, including referring a borrower's account to the Treasury Offset Program. <5.1.2. Contracting> In FY2018, FSA maintained major contracts with approximately 20 vendors, totaling about $1.1 billion. (These contracts constituted approximately 63% of appropriations provided for student aid administration in general in FY2018. ) Services for which FSA maintains contracts include servicing of Direct Loans and ED-held FFEL program loans and Perkins Loans, collection of defaulted Direct Loans and ED-held FFEL program loans and Perkins Loans, and IT infrastructure to support myriad tasks such as the processing of submitted FAFSAs. FSA also has a contract for the National Student Loan Data System (NSLDS), which is a central database for student aid. NSLDS maintains detailed administrative data to track Title IV grants and loans throughout their lifecycle and support Title IV administrative functions such as verifying a student's Title IV eligibility. <5.1.3. Information and Assistance to Third-Party Stakeholders> Numerous individuals and entities have a stake in the Title IV federal student aid programs and rely on FSA to provide timely and accurate information regarding the programs. Students, their families, and borrowers rely on FSA to provide information and assistance throughout the entire financial aid process. IHEs and FSA's third-party contractors rely on communications and assistance from FSA to administer various aspects of the aid programs. Members of Congress and the general public rely on FSA for information about the performance of the Title IV aid programs. FSA operates several websites that enable stakeholders to access relevant information about program operations. FSA maintains the website www.studentaid.gov , which is FSA's "primary online portal for customers" and the 'Information for Financial Aid Professionals' website, which consolidates guidance and resources related to Title IV administration for use by the entire financial aid community. FSA also operates several repositories of Title IV program data to enable it and stakeholders to access information about the programs and their performance. HEA Section 485B tasks ED with development of the NSLDS. FSA has primary responsibility for administration of the NSLDS and has contracted with a third party to operate it. FSA also maintains the Data Center a centralized, publicly available source for selected administrative data and other information related to the Title IV programs. The Title IV program data on FSA's Data Center are often derived from NSLDS. In addition, FSA operates the Enterprise Data Warehouse Analytics, which contains data from multiple FSA data sources, such as NSLDS. It provides FSA with analytic tools to provide "quick and accurate access to inform internal and external data requests" and is often used to provide Title IV program data and analysis to internal stakeholders such as ED's Budget Office and to external stakeholders such as congressional requesters, other federal agencies, and the public. FSA also makes its statutorily required annual report to Congress publically available. Finally, the Ombudsman Group a subunit within FSA provides students and aid recipients with a single point of entry (the Feedback and Dispute Management System) to provide feedback or to file complaints and disputes about the Title IV programs. <5.1.4. Oversight> FSA has a large oversight role in ensuring that various Title IV program participants comply with Title IV program requirements. Both statute and regulations prescribe many aspects of the Title IV programs, including student aid program terms and conditions and requirements IHEs must meet to participate in the programs. IHEs and third-party contractors play a significant role in ensuring that the Title IV programs are administered properly. In addition, some Title IV programs (e.g., the campus-based aid programs ) vest a larger share of administrative functions with IHEs, while others (e.g., the FFEL program) vest additional administrative functions with outside entities such as guaranty agencies. <5.1.4.1. IHEs and Their Third-Party Servicers> FSA's oversight of IHEs relates largely to ensuring that they meet eligibility requirements to participate in the Title IV programs and that they (and any third-party servicers with which they may contract) properly administer the Title IV programs. FSA certifies an IHE's eligibility to participate in the Title IV programs and recertifies its eligibility thereafter. FSA verifies each IHE's accreditation status and whether the IHE is legally authorized to operate within a state. FSA also evaluates an IHE's financial responsibility and administrative capability to administer the Title IV programs. After an IHE is certified to participate in the Title IV programs, FSA ensures that it is conforming to eligibility and administrative requirements. FSA does this by performing program reviews and by reviewing required IHE compliance audits and financial statement audits conducted by third-party auditors. FSA reviews the IHE's required third-party compliance and financial statement audits and attempts to resolve issues with them. During a program review, FSA evaluates an IHE's compliance with Title IV requirements. Review priority is given to certain IHEs specified in statute (e.g., those IHEs with high cohort default rates). FSA has the authority to impose sanctions and corrective actions on IHEs and their third-party servicers. Examples include imposing fines, imposing specific conditions or restrictions related to administration of Title IV funds, and terminating Title IV participation. <5.1.4.2. FSA Contractors> FSA's oversight of its third-party contractors generally consists of ensuring that they fulfill the terms and conditions of their contracts with FSA. In general, federal agencies, including FSA, have a number of tools to help ensure a contractor adequately performs a contract. Examples include requiring corrective action, using performance-based incentives, and terminating the contract. FSA contracts with numerous third-parties for a variety of goods and services related to administration of the Title IV programs, including student loan servicers and PCAs. In FY2019, FSA contracted with 12 student loan servicers to perform a variety of tasks largely related to the Direct Loan program. FSA uses performance-based incentives to encourage loan servicers to meet desired results (e.g., ensuring borrowers are in current repayment status and meeting customer service satisfaction goals). It does so by basing the number of borrower loan accounts allocated and compensation levels on servicers' ability to meet stated goals. In addition, FSA issues guidance to loan servicers to assist them in day-to-day operations and conducts monitoring activities, such as completing annual compliance audits and assessing borrower-servicer interactions. FSA also contracts with numerous PCAs to attempt to collect the $140.3 billion in defaulted loans of 7.2 million borrowers. Similar to its oversight of loan servicers, FSA uses performance-based incentives to meet desired goals. PCA compensation is based on a PCA's overall performance. Previously awarded contracts have based borrower account allocation on PCA performance. However, current PCA contracts with FSA are not readily available for review, and it is unknown how future PCA contracts might be structured. In addition, FSA issues guidance to PCAs to assist them in day-to-day operations and conducts monitoring activities, such as assessing PCAs' interactions with borrowers. <5.1.4.3. Entities Engaged in Selected Title IV Programs> For FFEL program loans not held by ED, guaranty agencies administer many aspects of the program, such as providing default aversion assistance to FFEL program lenders and services related to the federal loan guarantee. In the campus-based programs, IHEs perform many of the administrative functions described earlier in this section (e.g., award disbursement and loan servicing) and are also afforded some discretion in determining the mix and amount of campus-based aid funds awarded to students. FSA oversees these entities in their fulfillment of these functions. <5.2. Selected FSA Statistics> As described above, the scope of FSA's operations covers many activities and responsibilities. Selected statistics and additional information provide insight into the scale of FSA's operations. Table 1 presents information on funds obligated for student aid administration. Table 2 presents data on full-time equivalent (FTE) employment for federal student aid administration. Table 3 presents selected trends relevant to student aid administration. To provide context and a sense of scale, in relation to ED as a whole, nearly every year since ED's creation as a Cabinet-level department (October 1979), functions currently under FSA have accounted for the majority of ED spending (including both Title IV aid disbursements and aid administration expenses). Moreover, while the number of FTE staff at ED has declined since FY1981, the number of FTEs at FSA has generally increased over time. In FY2016, FSA accounted for about one-third of ED's FTEs. It is estimated that the largest share of staff being supported through student aid administration funding are staff supported through loan servicing contracts (discussed below). <5.2.1. Funding for Federal Student Aid Administration> There are two broad categories of funding obligations for federal student aid administration: (1) salaries and expenses and (2) student loan servicing. Table 1 presents annual funding obligated for federal student aid for FY2009-FY2019. Over this period of time, obligations for federal student aid administration increased from $754 million in FY2009 to $1.7 billion in FY2019. Obligations for student aid administration have increased by 47% since FY2011 (the first full fiscal year in which no new FFEL program loans were made). Beginning with FY2016, obligations for loan servicing have constituted the majority of student aid administration costs. <5.2.2. FTE Employment for Federal Student Aid Administration> Figures on FTE employment for FY2009-FY2019 for federal student aid administration are presented in Table 2 . The number of FTE employees working on federal student aid administration has risen from 1,058 in FY2009 to 1,480 in FY2019, a 40% increase. Other offices within ED besides FSA also perform student-aid related administrative activities. In addition, a number of contractor staff (e.g., loan servicing staff) provide outsourced business operations for student aid administration. For example, FSA reported that approximately 12,000 contracted staff augmented its FTE employees in FY2016. <5.2.3. Trends Relevant to Federal Student Aid Administration> Over the past several years, the workload of FSA has increased considerably. Table 3 provides information related to FSA's workload, including the number of FAFSAs processed, the number of students receiving aid, the total dollar amount of federal student aid provided through the Title IV federal student aid programs, the total number of federal student loan recipients who have outstanding balances, and the total dollar amount of principal and interest outstanding. As shown in Table 3 , the number of individuals receiving Title IV aid and the number of FAFSAs processed peaked in FY2011 and FY2012, respectively. However, the total number of federal student loan recipients with outstanding loan balances and the total dollar amount of principal and interest outstanding increased substantially over the period examined and increased year-over-year for each complete fiscal year under review. <5.3. FSA Structure> Section 141 of the HEA establishes FSA's PBO structure as a discrete management unit within ED and subject to the direction of the Secretary in the exercise of its functions. FSA operates under the coordination of the Office of the Under Secretary, which is the office within ED that coordinates policies and programs related to postsecondary education, as well as vocational and adult education. Although the HEA specifically establishes two roles within FSA (the COO and the student loan ombudsman), much of FSA's organizational structure and leadership arrangements have been established through administrative action by the COO, subject to the direction of the Secretary. In addition, FSA interacts with various other offices within ED to facilitate the implementation of ED policies in aid administration. <5.3.1. Statutorily Mandated Roles> FSA is composed of numerous offices, each responsible for varying aspects of Title IV student aid administration. Two FSA roles are specifically mandated by the HEA: the chief operating officer and the student loan ombudsman. These offices have been charged with carrying out both statutory and administratively delegated functions, as discussed below. <5.3.1.1. Chief Operating Officer (COO)> The HEA assigns several responsibilities to FSA's COO. The Secretary has delegated additional responsibilities to the COO. In practice, while responsibilities are assigned or delegated to the COO, individual employees or offices within FSA may perform the day-to-day tasks associated with fulfilling those responsibilities. HEA Section 141(d) vests management of FSA in a COO and mandates several of the COO's activities and responsibilities. Annually, the COO and the Secretary must publically make available a five-year performance plan for FSA that establishes measurable goals and objectives for FSA. In developing the plan, the Secretary and the COO are to consult with stakeholders such as students, IHEs, and Congress. The COO is required annually to submit to Congress a report on FSA's performance that is to include, among other items, (1) an independent financial audit, (2) the results achieved during the year relative to the performance plan goals, (3) the evaluation of the COO and senior managers, and (4) recommendations for legislative and regulatory changes to improve administration of the Title IV student aid programs. In preparing the report, the COO is to establish appropriate ways to consult with stakeholders, including students and IHEs. FSA states that the Annual Report satisfies these responsibilities. HEA Section 142 authorizes the COO, subject to the authority of the Secretary, to procure property and services to perform its functions. In practice, while the Secretary is considered ED's senior procurement official, it appears that FSA typically has significant autonomy in its contracting functions. The HEA specifies that the Secretary maintains responsibility for the development and promulgation of policy and regulations related to Title IV aid. However, in developing and promulgating Title IV student aid policies and regulations, the Secretary is required to request the advice of and work in cooperation with the COO. FSA's Policy Liaison and Implementation Staff (PLIS) is the office within FSA that consults with the Secretary on Title IV student aid policies and regulations. Among other functions, PLIS implements policy (and supports FSA staff in implementing policy) developed by ED through the Office of the Secretary, the Office of the Under Secretary, and OPE. PLIS also works with the Office of the Under Secretary to formulate policy recommendations and identify policy issues affecting the Title IV student aid programs; provide advice on regulations, policies, administrative policy guidance, and procedures; prepare preliminary drafts of subregulatory guidance for consideration by ED and draft policy electronic announcements for review by FSA staff; and design, manage, and monitor the Experimental Sites Initiative. Finally, the HEA specifies that the COO is to disseminate information to stakeholders on the student loan ombudsman (described below). The Secretary may delegate additional functions to the COO (and FSA in general) to achieve FSA's purposes. Authorities that the Secretary has delegated to the COO include, but are not limited to, authority to take certain personnel actions, such as carrying out reductions-in-force for FSA in coordination with ED, approving telework agreements, and handling FSA employee grievances; programmatic authorities related to Title IV programs, such as awarding certain formula grants (e.g., awarding campus-based funds to IHEs) and entering into agreements with entities outside of ED (e.g., IHEs or other federal agencies); authority to compromise, waive, and write-off certain claims against individuals under Title IV programs, such as waiving or writing off the collection of current or defaulted federal student loans; authority to develop, implement, and manage an Employee Personnel Security Program and a Contractor Personnel Security Program in accordance with established ED directives and guidance. <5.3.1.2. Student Loan Ombudsman> HEA Section 141(f) specifies that the COO, in consultation with the Secretary, shall appoint an ombudsman "to provide timely assistance to borrowers of loans made, insured, or guaranteed under Title IV." Specifically, the ombudsman is to (1) review and attempt to informally resolve borrower disputes with Title IV loan program participants and (2) compile and analyze data on borrower complaints and make recommendations. Each year, the ombudsman is to submit to the COO (for inclusion in the COO's annual report) a report describing the ombudsman's activities and effectiveness during the preceding year. FSA's Ombudsman Group is the specific office tasked with fulfilling the HEA Section 141 requirements for a student loan ombudsman. The Ombudsman Group also administers FSA's comprehensive informal complaint resolution and customer inquiry/case resolution processes related to all Title IV student aid programs, not just those related to student loans, although the most frequent types of cases received by the Ombudsman Group relate to student loans. Addressing customer cases regarding non-loan Title IV student aid programs is not part of the ombudsman's specific statutory mandate. <5.3.2. FSA's Relationship with Other Actors> Many tasks related to student aid are vested (either through statute or secretarial authority) with other ED offices, and other executive branch entities may have an interest in or jurisdiction over aspects of federal student aid. In addition, FSA is subject to congressional direction (e.g., via amendments to the HEA or appropriations laws) and oversight. As such, FSA may have occasion to interact and maintain relationships with numerous outside stakeholders. <5.3.2.1. ED's Office of the Secretary> The Secretary "is responsible for the overall direction, supervision, and coordination of all activities of [ED] and is the principal adviser to the President on Federal policies, programs, and activities related to education in the United States." The Office of the Secretary directly oversees the Office of the Under Secretary (which, in turn, oversees FSA). In addition, the Office of the Secretary oversees several other entities that interact with FSA on a regular basis: The Office of the Inspector General is responsible for "identifying waste, fraud, abuse, and criminal activity involving ED funds, programs, and operations." To this end, it conducts independent audits and reviews of ED programs, including the Title IV student aid programs and FSA's operations. The Office of General Counsel (OGC) is responsible for providing "legal assistance to the Secretary concerning the programs and policies of the Department." OGC also provides legal assistance to other ED offices, including FSA. Among other services, OGC provides legal advice, litigation services, legislative services (e.g., drafts legislative proposals), and assistance in drafting subregulatory guidance. The Office of Budget Service has the lead responsibility for, among other functions, ED's budget, budget and related legislative policies for ED programs, and the review and analysis of ED program operations, including budget and policy implementation. It develops cost estimates for the Title IV student aid programs and maintains computer models to estimate such costs, coordinates methodology and data with FSA and OPE, and liaises with FSA other ED offices to analyze data sources and assumptions for the student aid cost estimation models. <5.3.2.2. ED's Office of the Under Secretary> The Office of the Under Secretary oversees policies, programs, and activities related to vocational and adult education, postsecondary education, college grant aid, and federal student loans. The Under Secretary directs and coordinates policies, programs, and activities related to postsecondary education and federal student aid. The Under Secretary also supervises FSA, which administers federal student aid, and OPE, which provides overall direction, coordination, and leadership on matters related to postsecondary education. The Under Secretary serves as the principal advisor to the Secretary on postsecondary education. As previously described, HEA Section 141 specifies that the Secretary maintains responsibility for the development and promulgation of policy and regulations related to Title IV aid but must coordinate with FSA. With Under Secretary oversight, OPE fulfills the policy development and promulgation role for the Secretary. OPE develops both regulations and subregulatory guidance for the Title IV student aid programs (e.g., Dear Colleague letters to financial aid professionals). In doing so, OPE liaises with FSA's PLIS (and other offices such as OGC) in the development, implementation, and dissemination of Title IV student aid policy. <5.3.2.3. Other Executive Branch Entities> Other executive branch entities may have some level of authority over or interest in aspects of federal student aid programs. As such, ED and FSA may maintain relationships with these entities to help ensure proper functioning of the aid programs. Based on its functions, FSA likely, at least in part, has played a role in these partnerships even when ED may be officially responsible. Executive branch entities with which ED and FSA may maintain relationships to help ensure proper functioning of the aid programs include the following: Department of the Treasury . FSA obtains funds from Treasury to make available to students in the form of federal student aid. FSA may refer a borrower's defaulted loan to the Treasury Offset Program for offset of certain benefits such as federal income tax refunds and Social Security benefits. Moreover, while the Debt Collections Improvement Act generally requires federal agencies to transfer nontax debts that are 180 days or more delinquent to Treasury's Fiscal Service for centralized debt collection (referred to as cross-servicing), since 2001, the Secretary of the Treasury has granted FSA a permanent exemption from this requirement. Thus, FSA is responsible for collecting delinquent and defaulted federal student loan debt assigned to or held by ED. The act also authorizes the Secretary of the Treasury to exempt certain classes of debt from cross-servicing. Since 2005, debts that are being collected through administrative wage garnishment and meet certain conditions have been exempted from cross-servicing. Consumer Financial Protection Bureau (CFPB) : The CFPB has asserted a role in ensuring compliance with consumer protection laws that may apply to federal student loans. For example, the CFPB has brought lawsuits against some FSA-contracted federal student loan servicers for consumer compliance violations relating to federal student loan servicing. CFPB also maintains resources for both federal student loan and private education loan borrowers and fields complaints from student loan borrowers. The CFBP and ED participated in an interagency task force to help ensure sufficient oversight of proprietary IHEs. However, it appears that the CFPB and ED may no longer be working together as closely as they previously had been. For example, in 2017, ED terminated its memoranda of understanding with the CFPB to share data and information relating to the student loan servicing market, stating that the CFPB violated the terms of the memoranda. Department of Justic e (DOJ) : DOJ may play a role in law enforcement related to federal student loans, including, through U.S. Attorneys' offices, prosecuting violations of federal criminal laws and representing the federal government in civil proceedings. For instance, FSA may refer a defaulted federal student loan borrower's account to DOJ for civil litigation against the borrower. In addition, DOJ may file lawsuits against federal student loan program participants, such as contracted student loan servicers, for failure to comply with federal statutes related to student loans and individuals for acts of fraud. Other executive branch entities with which ED and FSA may interact include the Federal Trade Commission, the Internal Revenue Service (IRS), the Department of Veterans Affairs, and the Social Security Administration. In processing the FAFSA, FSA's Central Processing System matches student provided information against other federal entities' databases to confirm elements of each student's aid eligibility. In total, the Central Processing System performs matches against databases maintained by the Department of Defense, DOJ, the Social Security Administration, the Department of Veterans Affairs, the Department of Homeland Security, and the Selective Service System. In addition, FSA's systems interface with the IRS Data Retrieval Tool, which links students', students' spouses, and parents' IRS tax information to the FAFSA and/or the income verification component of applying for and recertifying information for the various income-driven repayment plans. To initiate and/or maintain these relationships, ED and FSA may enter into formal agreements (e.g., memoranda of understanding) with the relevant federal entity or maintain a less formal interagency relationship. <5.3.2.4. Congress> Congress may guide and affect the way FSA operationalizes and manages the day-to-day functions of the federal student aid programs. First, Congress and the President may enact laws that impact or amend federal student aid programs or FSA itself. For example, Congress could amend the HEA Sections 141-143, which relate specifically to FSA as a PBO, or the Title IV student aid programs in general. In addition, during the appropriations process, Congress determines discretionary funding levels for FSA activities. In some instances, Congress may include stipulations or directives regarding the use of these funds. Second, Congress exercises oversight of FSA. This oversight may include requiring FSA or ED representatives to testify before Congress, requiring or requesting FSA to report additional information regarding its operations, and requesting that GAO or the IG conduct an in-depth investigation of FSA. Congress has exercised its oversight authority regarding Title IV aid administration numerous times in recent years. <5.3.3. FSA's Performance under Five-Year Performance Plan> The COO is required to annually report to Congress on FSA's progress in achieving its goals and objectives described in its five-year performance plan (also known as the strategic plan). Among other items, the performance plan is to address FSA's responsibilities in improving service to stakeholders, reducing costs of administering the Title IV student aid programs, improving and integrating the systems that support the student aid programs, and other areas identified by the Secretary. The Secretary and FSA, in consultation with stakeholders, develop the strategic objectives described in FSA's five-year performance plan. As part of the plan, FSA develops the metrics by which its performance under these strategic objectives are measured. FSA also sets its specific annual goals for meeting each metric. In doing so, most of its annual goals are based on FSA's performance under the metric in the prior year. Table 4 presents information on FSA's performance for each metric under its strategic objectives as set forth in its Strategic Plan: FY2015-19 for FY2016-FY2019. For each metric, FSA's goal and actual performance are presented. The text for FSA's actual performance under each measurement indicates whether FSA met its goal in the given year. Bolded text indicates that FSA did not achieve its goal, while regular text indicates that FSA did achieve its goal. In general, over the four fiscal years examined, FSA met most of its goals. FSA consistently met its goals relating to usership of its online resources (customer visits to studentaid.gov and social media channel subscribership), persistence among first-time filing aid recipients, percentage of contract dollars competed by FSA, and collection rate. In addition, it consistently met both of its goals under Strategic Goal C improving operational efficiency and flexibility which included goals on aid delivery cost per application and percentage of outstanding Direct Loans in current repayment status. For many instances in which FSA did not meet its goals, in the following year, FSA downwardly adjusted its goal under the relevant metric. For those instances in which FSA met its goal, whether it subsequently adjusted the goals in the following year varied. <6. Assessments of FSA as a PBO> Close observers assessed FSA's progress in addressing the congressionally identified issues that prompted FSA's establishment as a PBO in 1998. Immediately following the enactment of the HEA provisions establishing a PBO, ACSFA acknowledged the difficulty of simultaneously undertaking a major reorganization and system modernization. ACSFA noted the commitment and energy of the first permanent COO and praised "his willingness to communicate with the higher education community" as well as his early senior personnel choices. ACSFA also criticized the priorities of the new unit as well as its adherence to the congressional intent behind, and the requirements of, the new statute. Among other concerns, it noted that ED appeared to be transplanting the organizational arrangements of SFAP (FSA's predecessor), as an office of OPE, into a new PBO that reported directly to the Secretary without making more fundamental changes to its management and organizational structure; ED was failing to "adequately separate policy making and regulatory responsibilities of OPE and operations responsibilities of the PBO as intended by Congress;" and rather than "directing its attention and scarce resources toward solving its basic systems, data, and contract problems, the PBO appear[ed] to be concentrating on the twin objectives of improving day-to-day customer service and providing students web access to their data through 'a single federal point of contact' for all financial aid transactions." In 2002, ACSFA reported, among other findings, that some progress had been made on transferring policymaking functions to OPE but that "functions related to institutional eligibility and guarantor and lender oversight" remained within the purview of FSA. ASFCA called for the transfer of these functions to OPE, with OPE consulting with FSA to ensure that proposed federal aid policies supported FSA operations. ACSFA also reported that FSA was strengthening the capacity of its management, systems, and operations staff while reducing its reliance on contractors and recommended FSA continue to do so. In addition, it expressed concern that minimal progress had been made on systems integration. ACSFA called for ED to "incorporate specific integration goals and schedules into its strategic and tactical plans and quicken the overall pace of data and systems integration as a means of reducing cost and increasing efficiency." By 2001, FSA had developed an organizational performance plan identifying three strategic goals: increase customer satisfaction, increase employee satisfaction, and reduce unit costs. However, ED's IG and GAO noted that it did not clearly address some of the new office's statutory purposes that had been identified during the HEA reauthorization process. For example, both entities found that the performance plan did not sufficiently address the means by which systems integration would be accomplished, nor did it include any objective measures of forward movement in that area. Both ED's IG and GAO recommended that FSA establish clear goals, strategies, and performance measures related to systems integration. FSA disagreed with the IG's recommendation, reasoning that the agency could not achieve its three stated goals without systems integration. In a response to the GAO recommendation, which came later, however, ED's Deputy Secretary agreed with the recommendation, committing to directing that FSA's performance plan "be revised to establish measurable goals and milestones for systems integration efforts to provide both direction to FSA and enhance its accountability." The GAO report also assessed the progress FSA had made in measuring and achieving its three strategic goals. It noted that FSA had made measurable progress in the general improvement of customer and employee satisfaction two of its three strategic goals. With regard to its third goal (reduce unit costs), GAO found that the indicator FSA used to measure unit cost was deficient. GAO also noted that the relationship between FSA and ED was still evolving: Education continues to take steps to clarify FSA's level of independence and its relationship with other Education offices . With the arrival of the current administration Education established special interim operating procedures for all department units, including FSA, that were intended to ensure that personnel and financial resources are managed effectively and efficiently throughout the department. Education now provides greater direction and oversight of FSA than was provided previously. Education is currently reviewing FSA's role and responsibilities as part of the departmentwide management planning effort. The results will be used to guide future decisions concerning FSA's level of independence and its relationship to other department offices. In 2005, GAO removed the Title IV federal student aid programs from its High Risk List. The student aid programs had been on GAO's High Risk List since the list's inception in 1990. In removing the Title IV student aid programs from the list, GAO found that while FSA still needed to take additional steps to fully address some of its recommendations, overall, management of the programs had improved enough to warrant removal from the High Risk List. In removing the student aid programs from its High Risk List, GAO cited many factors, including FSA's "sustained improvements to address financial mismanagement and internal control weaknesses," receipt of an unqualified or "clean" opinion on its financial statements for FY2002-FY2004, actions to ensure that aid was not being awarded to ineligible students, actions to "integrat[e] its many disparate information systems," steps to reduce student loan default rates, and steps to address its "human capital challenges." In more recent years, FSA has been praised for its handling of the transition to 100% direct lending under the Direct Loan program and for other improvements to the administration of the Title IV aid programs, such as implementation of the IRS Data Retrieval Tool to allow students and their parents to import their federal income tax data directly into their FAFSA. Some more recent GAO and IG reports have noted cases in which FSA met its objectives. Some sizable issues have also been identified in GAO and IG reports, by some Members of Congress, and by other stakeholders. For example, FSA's oversight of its contracted loan servicers has come under scrutiny from Congress, ED's IG, GAO, and the CFPB. Seemingly large deficiencies in ED's implementation of and communication with borrowers about of the PSLF program have been identified by GAO and have garnered congressional interest as well. Concerns have also been raised over FSA's ability to identify and address poorly performing IHEs or those that may be at risk of closure. These more recent issues are discussed in more detail below. <7. Current Issues> ED's federal student aid operations were statutorily reorganized into a PBO with the hope of addressing significant management problems, including limited progress in integrating numerous data systems, student aid delivery delays and breakdowns, and infighting over student aid delivery turf among ED's senior managers. In this context, the then-untried PBO model seemed promising: It was built on the idea that business-like performance incentives and management flexibility would motivate and permit the organization and its leaders to provide economical, efficient, and effective service to student aid recipients. The organization would be given a higher-than-typical level of independence from political leadership and direction on operational processes in return for accountability for results, as measured by performance agreements and assessments. Potential concerns about independent policymaking by a PBO's leaders could be allayed by separating the policymaking functions from the operational functions. The former would remain accountable to Administration leadership, and the latter would be vested in the semi-independent PBO. While the establishment of FSA as a PBO seems to have addressed at least some of the congressional concerns prompting its establishment, new issues have arisen in recent years, and some of the previously cited issues that led to the adoption of a PBO approach may yet remain unresolved. Federal oversight entities and other outside observers have raised issues pertaining to FSA, including those relating to oversight, transparency, and accountability. As these issues receive continued attention, and as Congress contemplates the reauthorization of the HEA, this final section of the report highlights some of the issues relating to FSA's operations that have garnered attention over the past several years. Issues highlighted and options for addressing them have, for the most part, been gathered from reports from GAO, ED's IG, and outside organizations. CRS has identified some of the options available to address these issues. In some instances, documents referenced here refer to ED and/or the Secretary of Education and not specifically to FSA and/or its COO. However, based on its functions, FSA is likely pertinent to the topics being addressed. Where possible, CRS has indicated in footnotes where a cited source refers to ED more generally and CRS has inferred that FSA has some responsibility for a function or activity being discussed. <7.1. Oversight Functions> HEA Section 141 specifies that one of FSA's functions as a PBO is to ensure the integrity of the federal student aid programs. Thus, FSA is tasked with overseeing a variety of entities that play a role in administration of the Title IV student aid programs. FSA's oversight of IHEs and contracted loan servicers has been criticized in recent years. Some criticisms have focused on perceived deficiencies in FSA's assessment of IHEs, its ability to proactively mitigate risk in the Title IV programs, and its ability to resolve issues at IHEs in a timely manner. Similarly, FSA has experienced difficulties in its monitoring of loan servicers. Some of these difficulties seem to have stemmed from FSA providing incomplete or fragmented guidance to loan servicers, which have impeded their efforts to comply with requirements for servicing federally held loans and to assist borrowers in navigating the aid programs. The oversight issues introduced here are explored in greater depth below. Should any congressional action be taken to address these issues, Congress might consider whether or how it should specify desired outcomes and actions taken by FSA. There may be tradeoffs between meeting congressional goals and shoring up current perceived oversight deficiencies and enabling FSA to operate independently and with flexibility to address difficult or novel issues. Consideration might also be given to the apparent difficulties in separating operational functions delegated to FSA from policymaking retained by ED. <7.1.1. IHE Oversight> FSA oversees, through enforcement activities, IHE compliance in meeting requirements to participate in the Title IV aid programs. These requirements are intended to ensure that IHEs provide sufficient educational quality, provide a level of consumer protection, and ensure administrative and fiscal integrity of Title IV programs at IHEs. Through oversight of the IHEs participating in the Title IV student aid programs, FSA is able to identify instances of noncompliance and take appropriate action, such as sanctioning IHEs or providing assistance to IHEs to come into compliance both tools that can help mitigate student and taxpayer risk. Interest in the issue of FSA's oversight of IHEs has arisen, at least in part, due to the prominent closures of several large multi-campus IHEs in recent years, affecting thousands of students. In response to these closures, GAO and ED's IG have launched several investigations and have found that FSA staff do not always follow internal procedures for institutional review and that some internal procedures did not have controls in place to prevent IHEs from manipulating Title IV participation requirements. These frailties could result in failure to identify IHEs that are not complying with Title IV requirements or that are at risk of abruptly closing. For example, one IG report found that FSA did not conduct IHE program reviews in accordance with its own internal procedures, which could lead to "limited assurance that program reviews are appropriately identifying and reporting all instance of noncompliance." The IG noted that FSA staff did not consistently complete and maintain required program review forms, adequately document institutional fiscal testing requirements relating to Title IV aid disbursement at IHEs, or obtain all required information for review of an IHE's distance education programs. Perhaps relatedly, some FSA staff reported feeling "overwhelmed" with the amount of work they were required to perform in the time allotted, and some of their managers believed that allotted time may be inadequate to complete some more complex program reviews, which could have been contributing factors to FSA not consistently conducting program reviews according to procedures. In another report, the IG found that FSA needed to improve internal processes to help it identify IHEs that may be at risk of an abrupt closure. Specifically, the IG found that FSA did not act in a timely manner to resolve Corinthian College's (a large IHE that abruptly closed in 2015) failing composite score appeal, nor did it promptly require Corinthian College to post a letter of credit upon finding that the school's composite score was failing. The IG asserted that such weaknesses may enable some IHEs to avoid FSA sanctions or additional oversight, which in turn may result in a greater risk of harm to students (e.g., enrollment in an IHE that may be at risk of a precipitous closure) and loss of taxpayer funds (e.g., the cost of student loan discharges due to the IHE's closure). The IG also found that FSA had taken some steps to implement new tools and processes to help identify IHEs at risk of closure, such as participating in OPE efforts to enhance information sharing between ED and an IHE's accreditor and creating an enforcement office responsible for investigating complaints made against IHEs. It appears that the enforcement office has since been largely disbanded. However, it is possible that subsequent steps may have been taken to strengthen monitoring and response practices. Ensuring IHEs compliance with Title IV requirements arguably addresses one of the HEA-specified functions of FSA as a PBO: ensuring integrity of the Title IV aid programs. It also arguably addresses FSA's strategic goal to " proactively manage the student aid portfolio and mitigate risk ," which FSA describes as aimed to "strengthen FSA's role in working to ensure protection of customers and holding stakeholders accountable for their actions." Under the two metrics FSA has identified as measures of its performance under this goal, FSA has had mixed success (see Table 4 ). However, neither metric seems to directly address IHE oversight and accountability in the Title IV aid programs. <7.1.2. Loan Servicer Oversight> FSA-contracted loan servicers are tasked with various day-to-day administrative tasks associated with federal student loans and some other forms of student aid. FSA's oversight of loan servicers generally consists of ensuring that the loan servicers are meeting federal requirements for student loans (e.g., ensuring that borrowers' interest rates are correctly calculated) and fulfilling the terms and conditions of their contracts with FSA and providing guidance to loan servicers to enable them to meet such standards. Oversight of contracted loan servicers can help FSA mitigate risks in the Title IV program and enable it to help ensure the provision of effective customer service to students and their families. In recent years, issues associated with federal student loan servicing have received considerable attention. For instance, some have alleged that some loan servicers have engaged in undesirable conduct, such as steering borrowers away from more beneficial loan repayment options or providing inaccurate or incomplete information to borrowers. Still others have detailed borrowers' experiencing problems when seeking to have loan servicers resolve servicing errors, identified issues with loan payment processing that may cause problems for borrowers seeking to repay their loans, and identified issues with respect to the implementation of specific loan terms and conditions such as the PSLF program. Concerns raised about loan servicing have focused in particular on whether FSA is sufficiently reviewing, monitoring, and holding loan servicers accountable. GAO has reported that FSA's monitoring of loan servicers' interaction with borrowers may be insufficient to ensure that servicers are providing accurate information and quality customer service to borrowers. For instance, GAO found that FSA primarily monitored inbound calls from borrowers to loan servicers, which constitute a small percentage of the calls loan servicers participate in. Thus, GAO opined that "FSA may not be focusing its call monitoring on the most frequent and critical types of calls." GAO also found that FSA's call monitoring was poorly documented and its tracking of borrower complaints was disjointed, with complaints being tracked across multiple systems. While some of these issues have seemingly been resolved, it is unclear whether others have been resolved. Without a systematic approach to reviewing loan servicer interactions with borrowers, it may be difficult for FSA to target oversight of its loan servicers and improve its services to student loan borrowers. More recently, ED's IG found that while FSA regularly identifies instances of servicer noncompliance with federal servicing requirements, FSA neither tracked instances of noncompliance that were remedied by loan servicers nor analyzed information relating to the noncompliance. Moreover, the IG found that FSA rarely used available tools to hold loan servicers accountable, nor did FSA incorporate a performance metric relating to servicer compliance into the otherwise performance-driven terms of its contracts with loan servicers. Finally, the IG found that FSA employees did not always follow internal policy when evaluating interactions between servicers' representatives and borrowers. These issues may make it difficult for FSA to identify recurring issues in loan servicing, mitigate the risk of potential harm to borrowers for loan servicer noncompliance, and hold loan servicers accountable for poor servicing. A difficulty loan servicers may face in complying with requirements for servicing federally held students loans is the fragmented and incomplete guidance for a complex student loan system provided to them from FSA. GAO has found that FSA may provide insufficient guidance to servicers regarding certain aspects of loan administration, such as how to apply borrower over- or under-payments to an account balance. Moreover, when FSA does provide guidance, it may not consistently share that information with all loan servicers or all relevant individuals. Such gaps in authoritative guidance to loan servicers may create a risk of inconsistent interpretations of law and procedures, which could lead to inefficiencies in federal student loan administration and could negatively affect borrowers' abilities to use the features of their loan terms and conditions. To help address these concerns, Treasury has recommended, and Congress has previously directed, FSA to publish a common loan servicing policies and procedures manual. However, it appears that FSA has not published such a manual. Another difficulty loan servicers face is that federal student loan terms and conditions have become increasingly more complex over the years. This may contribute to some of the problems loan servicers have in administering them. For example, FSA recently stated that it, along with its loan servicers, is working to enhance communications with borrowers regarding the PSLF program's requirements but acknowledged that the program is fundamentally complex and that FSA does not have the authority to change congressionally mandated PSLF eligibility requirements. Thus, while there are likely instances in which FSA oversight of loan servicers could be strengthened to ensure that borrowers receive the loan benefits to which they are entitled, there may also be inherent difficulties in administering the loan programs themselves, which might be addressed with policy changes to the programs. Ensuring loan servicer compliance with Title IV and contract requirements arguably addresses one of the HEA-specified functions of FSA as a PBO ensuring integrity of the Title IV aid programs and FSA's strategic goal to " proactively manage the student aid portfolio and mitigate risk ." Under the two metrics FSA has identified as measures of its performance under this goal, FSA has had mixed results (see Table 4 ). While some of the metrics FSA has identified under this performance goal seem intended to address loan servicing practices, the extent to which they may do so is unclear. For instance, it is unclear whether the metrics used to assess the efficacy of FSA directly gauge the accuracy and completeness of information provided by their contracted loan services. <7.1.3. Discussion of Issues in Oversight and the PBO Structure> In determining the desired level of oversight of IHEs and loan servicers, Congress might consider whether to specify desired outcomes and actions to be taken by FSA. While FSA is tasked with the day-to-day functions of administering the Title IV programs, Congress can guide and affect these efforts in a variety of ways, including amending the portions of the HEA that relate to FSA's functions, providing stipulations regarding the use of annual appropriations, exercising oversight of FSA through mechanisms such as congressional hearings, further emphasizing the importance of stakeholder input (discussed below in the section entitled "Stakeholder Accountability"), or statutorily specifying more goals and performance metrics for FSA. Some of these changes might involve tradeoffs between improving perceived oversight deficiencies and enabling FSA to operate independently and with flexibility to address difficult or novel issues. To the degree that additional statutorily specified direction might stipulate the way in which FSA is to conduct day-to-day operations, there may be potential for it to be in tension with the goal of accountability for results, as opposed to processes, that is key to the PBO model. Arguably, such action might also impair the agency's ability to make business-like operational decisions based on nonpolitical considerations rather than responsiveness to political leaders. The choice of the PBO model was predicated on the idea that ED's political leadership would retain policymaking functions and that the PBO's role would be limited to operational functions. Seemingly, ED and FSA have made organizational adjustments such as FSA's Office of Policy Liaison and Implementation Staff, which consults with the Secretary on the development and promulgation of Title IV student aid policies and regulations that allow for FSA input into the formal policymaking process that is at least nominally under the authority of ED. A different kind of policymaking that which occurs as a byproduct of implementation is a long noted facet of public administration that might prove more difficult to address. Issues around loan servicing illustrate how it may be difficult to completely remove policymaking from the operational functions delegated to FSA. For example, Congress sets the terms and conditions of federal student loans in general, and ED may add precision to them, while FSA designs and enforces contracts for loan servicers to administer the loan programs. However, a program's administration may shape how policies work in real life. For instance, some have observed that the payment structure of loan servicing contracts established by FSA may incentivize loan servicers to encourage borrowers to pursue one loan benefit (e.g., forbearance ) over another (e.g., income-based repayment), which may contradict ED's policy preferences. Although such policymaking through implementation probably can be reduced by limiting the scope of discretion in a delegated authority or by increasing oversight of the agency's activities, these steps might reduce agency efficiency and hinder the effectiveness of the PBO model. <7.2. Transparency> Numerous outside parties have a stake in the aid programs and rely on FSA to provide timely and accurate information about them. Criticisms have been raised that FSA may lack sufficient transparency regarding Title IV program operations. Congress and other entities with oversight responsibilities (e.g., the CFPB) sometimes seem to have incomplete or imperfect information on Title IV program performance and operations, which may make it difficult to make informed, well-honed policy or enforcement decisions. Many consumers are also seemingly have incomplete or imperfect consumer information on the Title IV programs and Title IV participation, which may make it difficult for them to make informed college-going and financial decisions. Some have called on FSA to publicly release a variety of data and to enhance communications regarding such information. It does not appear that FSA's PBO model would necessarily hinder transparency, nor would increasing transparency appear to be directly at odds with the model's design. However, there may be some tradeoffs between increasing transparency and maintaining the effectiveness of the PBO's business-like design, which was specifically intended to shield Title IV aid administration, at least in part, from political pressures and increase efficiency within the aid programs. Additionally, FSA must grapple with privacy requirements when contemplating the potential release of, and how to appropriately make available, many types of data in its possession. <7.2.1. Information for Policymakers and Stakeholders> Congress and other policymakers have an interest in understanding how the Title IV federal student aid programs operate and the outcomes associated with those programs, as the dollar amount of federal student aid awarded and number of aid recipients represents a large federal investment. In FY2019, FSA provided approximately $130.4 billion in Title IV aid to approximately 11.0 million students, and FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. Concerns have been raised that FSA may not provide access to information that may enable stakeholders to make informed policy recommendations and decisions. Some have noted that while FSA possesses large quantities of student-level records that measure grant and loan receipt, postsecondary education completion status, and loan repayment, FSA has "often been less than responsive to requests for data and research that would benefit the rest of the nation." Even when information on Title IV program performance is made available, some have found it to be insufficient. For example, ED's IG recently found that while FSA has provided, through its Data Center, information on the loan portfolio that was formerly unavailable, it does not include other potentially relevant information, such as more detailed information on costs to the federal government associated with the income-driven repayment plans and loan forgiveness programs two loan features that are increasingly being used by borrowers and garnering attention that could assist policymakers and the public understand the future impact of those loan terms. At least one federal entity has seemingly been unable to carry out some of its duties due to a perceived lack of transparency from FSA. The CFPB has indicated that recent FSA guidance to its contracted loan servicers regarding the release of certain student loan records may be hampering CFPB's ability to conduct supervisory examinations of them to ensure that they are in compliance with federal consumer protection law. The guidance prohibits loan servicers from responding directly to information requests by third parties, including regulators such as the CFPB, and specifies that, pursuant to the Privacy Act of 1974, third-party requests should be made directly to ED. Providing requested information to stakeholders arguably aligns with at least one of FSA's strategic goals: " Foster trust and collaboration among stakeholders ." Based on the three performance metrics FSA has identified as measures of its performance under this goal, FSA has seemingly generally succeeded in fulfilling this goal in recent years (see Table 4 ). However, generally speaking, the performance metrics do not appear to encompass the provision of timely and useful information to stakeholders. Moreover, it is unclear how some of the three performance metrics (e.g., collection rate) address the strategic goal in general. The metric " Ease of doing business with FSA " seems most relevant to the quality and timeliness of its efforts to meet the information needs of the stakeholders discussed here. However, it is not clear that this metric is constructed in a manner that would capture the extent to which FSA's efforts are successful in meeting the information needs of policymaking and oversight entities who presumably constitute high-priority stakeholders. <7.2.2. Information for Members of the Public> Members of the general public particularly those who need or may need student aid may have an interest in understanding how the Title IV programs operate and the outcomes associated with those programs. Their interests may relate to having access to information that allows them to make informed college-going and financial decisions and understanding potential financial risks associated with those decisions. Concerns have been raised that FSA may not be releasing some information relating to IHEs' performance in meeting Title IV institutional eligibility requirements that may be indicators of an IHE's educational quality or financial stability and may be of use to consumers when deciding in which IHEs to enroll. In one report, GAO found that while FSA publicly discloses information on some IHEs' financial composite scores (an indicator of an IHE's financial stability), it did not publicly disclose all IHEs' composite scores. Since the report's publication, FSA has taken some steps to enhance the availability and usefulness of publicly available composite score information. However, "without complete and transparent data on schools' financial conditions," which may include aspects other than an IHE's composite scores, "it may be difficult for students to make informed decisions as to whether a school is a safe investment of their time and money." Concerns have also been raised that FSA may not consistently provide information on federal student aid terms and conditions that may enable recipients to make sound financial decisions. GAO has found that while FSA makes available detailed information about loan terms and conditions, borrowers must often actively seek out the information. Moreover, FSA often relies on its loan servicers to communicate loan terms and conditions to borrowers, but there may be inconsistencies among loan servicers in the information they provide to borrowers. Communications about program requirements among borrowers, FSA, and loan servicers may also be imperfect. Inconsistent and/or imperfect information about program terms may lead to borrowers' being unaware of or confused about program requirements, which may put them at risk of making suboptimal financial decisions, some of which may lead to financial distress such as loan delinquency or default. FSA has taken steps to increase borrower awareness of some loan terms and conditions. However, all communication issues may not be fully resolved. In response to some of these concerns, Congress has on occasion directed FSA to perform customer outreach. Providing complete and accurate information to customers arguably addresses some of the HEA-specified purposes of FSA as a PBO: "to improve service to students and other participants in the student financial assistance programs authorized under title IV, including making those programs more understandable to students and their parents." It also arguably aligns with FSA's strategic goal of " i mprov[ing] quality of service for customers across the entire student aid life cycle ." Under the five metrics FSA has identified as measures of its performance under this goal, FSA has seemingly generally succeeded in fulfilling this goal in recent years (see Table 4 ). However, concerns over communications with customers remain. <7.2.3. Discussion of Issues in Transparency and the PBO Structure> Some have suggested that FSA's independence and leadership by non-political appointees enable it to be unresponsive to requests for information from Congress, political and career staff within ED, and outside stakeholders. They point out that the COO is accountable to the Secretary on the basis of measurable organizational and individual performance goals, arguably rendering removal by the Secretary or the President more difficult politically. With better access to information, it is argued, researchers and policymakers could more readily judge policies and federal investments. However, other factors, such as compliance with other federal statutes (e.g., ED's interpretation of its responsibilities under the Privacy Act of 1974), may hinder FSA's responsiveness to information requests. Increasing access to Title IV program performance and operations information might detract from or improve the effectiveness of the PBO's business-like design features. Sharing such information generally entails the ongoing development of information-sharing policies and procedures. Staff hours would be needed to carry out functions associated with the dissemination process, which could result in reduced economy and efficiency in addressing the PBO's statutory purposes which do not explicitly include data sharing. Furthermore, it could increase scrutiny and evaluation of the agency's operational processes rather than the results by which PBO performance is to be measured. On the other hand, the sharing of such information could improve the ability of stakeholders to assess the results of FSA's work, perhaps using different measures of performance, and hence address accountability for results beyond the specific targets identified by FSA. <7.3. Stakeholder Accountability> Section 141 of the HEA mandates that FSA develop five-year performance plans and annual reports. In doing so, FSA is to engage with relevant stakeholders, which may enable it to glean new information about program performance, leverage that information to create efficiencies, and provide a level of accountability to stakeholders in its operations. In addition, the COO and senior managers are to enter into annual performance agreements that set forth measurable organizational and individual goals. The awarding of annual performance bonuses is tied to meeting these goals. Each of these provisions is intended to provide a layer of accountability to stakeholders, including students, borrowers, IHEs, FFEL program lenders and guaranty agencies, contracted student loan servicers, Congress, and other parties that may have an interest in federal student aid. Concerns about accountability relate to whether FSA is fulfilling its statutory mandate to consult with such stakeholders in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make improvements. They also relate to whether FSA is sufficiently responsive to customer needs. Consideration might be given to whether improvement of performance agreements and measures and more meaningful use of stakeholder feedback may streamline operations at FSA and/or improve customer service to students and other aid participants two statutorily specified purposes of establishing FSA as a PBO. Criticisms in this area raise questions about the effectiveness of the PBO's statutory performance planning and measurement mechanisms. Consideration might be given to amending these provisions. At least one stakeholder organization, representing student aid administrators, has reported that while FSA may reach out to stakeholders for input in developing its performance plans and annual reports, the engagement may be only perfunctory in nature and may not provide stakeholders a meaningful opportunity to provide potentially useful feedback to FSA to enable it to fulfill its functions. The same stakeholder organization has also asserted that performance metrics developed by FSA and ED are vague or inappropriate. GAO has raised concerns regarding how FSA communicates with aid recipients and whether it leverages information from customer interactions to make program improvements. Assertions of a lack of engagement with stakeholders and meaningful assessment of FSA's performance raise concerns about whether statutory mandates are being adhered to and whether FSA is sufficiently attuned to outside views to effectively and efficiently administer a program in which many actors are engaged. They also raise concerns about whether FSA is sufficiently accountable to those stakeholders. The extent to which FSA engages with and leverages information from student aid recipients and organizations who represent them may affect students and their families. They may be limited in their ability to shop around for postsecondary financial assistance, as Title IV student aid makes up approximately half of the financial assistance available to postsecondary students. Moreover, student loan borrowers often have even fewer options regarding choosing loan products to finance their postsecondary education, as private lenders are often unwilling to provide loans to individuals who may have limited creditworthiness, whereas Title IV student loans are generally made without regard to creditworthiness. In those instances where private education loans are made, they often do not contain the same favorable terms and conditions (e.g., availability of loan forgiveness programs) as Title IV student loans. It might be argued that because FSA has no comparable competitors, it may have less motivation to seek or respond to customer feedback to improve services. Arguably, the criticisms of FSA discussed above expose a potential flaw in the PBO model as implemented under the HEA. The ED Secretary and the FSA COO have a joint responsibility to set (in consultation with stakeholders) and measure organizational performance. They each have an incentive (as leaders of ED and FSA, respectively) to show continuous improvement in FSA performance. This incentive might affect the degree to which stakeholder input is incorporated into the process as well as the specificity and nature of the goals and measures adopted. Vague goals and measures with seemingly perfunctory stakeholder feedback processes could mask performance problems that might exist. Some potential changes in this area could maintain FSA as a PBO but also modify statutory provisions related to accountability and stakeholder input. Improvement of performance agreements and measures would seemingly be in line with the PBO model's results orientation. For example, Congress might more specifically identify in statute the domains and metrics to be used in establishing annual performance plans and evaluating agency performance. Such provisions have been enacted in other contexts, such as the performance accountability system that was established by the Workforce Innovation and Opportunity Act. Similarly, more meaningful incorporation of certain types of stakeholder feedback into the performance plan and evaluation process would seemingly be consistent with the PBO model. Potential approaches to emphasizing the importance of stakeholder input during this planning and assessment might include specifying in statute a more formal input process. For example, Congress has directed state agencies to solicit written comments from the public and to respond to such comments in writing when establishing career and technical education performance standards. Appendix A. Selected Bibliography The following appendix provides a bibliography of selected reports authored by ED's OIG and GAO that address FSA and its operations and that have been published since January 1, 2014. Sources listed in the bibliography largely relate to FSA but may also include information and findings relating to other ED offices, such as OPE. In some instances, sources refer to ED and/or the Secretary of Education and not specifically to FSA and/or its COO. CRS is including these documents in this bibliography as, given FSA's functions, some of the information in these reports likely relate to FSA. For each category, reports are presented in reverse chronological order. U.S. Department of Education, Office of Inspector General Federal Student Aid's Oversight of Schools' Compliance with Satisfactory Academic Progress Regulations , July 17, 2019. Federal Student Aid's Process to Select Free Application for Federal Student Aid Data Elements and Students for Verification , April 26, 2019. Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans , February 12, 2019. Federal Student Aid: Efforts to Implement Enterprise Risk Management Have Not Included All Elements of Effective Risk Management , July 24, 2018. Federal Student Aid's Contractor Personnel Security Clearance Process , April 17, 2018. The Department's Communication Regarding the Costs of Income-Driven Repayment Plans and Loan Forgiveness Programs , January 31, 2018. Federal Student Aid's Borrower Defense to Repayment Loan Discharge Process , December 8, 2017. Federal Student Aid's Processes for Identifying At-Risk Title IV Schools and Mitigating Potential Harm to Students and Taxpayers , February 24, 2017. Misuse of FSA ID and the Personal Authentication Service , September 26, 2016. FSA Oversight of the Development and Enhancement of Information Technology Products, June 30, 2016. Kathleen Tighe, ED Inspector General, "Servicemembers Civil Relief Act," letter to Senators Patty Murray, Elizabeth Warren, and Richard Blumenthal, February 29, 2016. Functionality of the Debt Management Collection System 2 , November 5, 2015. Federal Student Aid's Oversight of Schools Participating in the Title IV Programs , September 29, 2015. Review of Debt Management Collection System 2 (DMCS2) Implementation , August 24, 2015. Audit of the Followup Process for External Audits in Federal Student Aid , June 17, 2015. Pell Grant Lifetime Eligibility Limit , March 31, 2015. Federal Student Aid's Oversight of Schools' Compliance with the Incentive Compensation Ban , March 24, 2015. The U.S. Department of Education's Administration of Student Loan Debt and Repayment , December 11, 2014. Oversight of Guaranty Agencies During the Phase-Out of the Federal Family Education Loan Program , September 29, 2014. Review of Federal Student Aid's Oversight and Monitoring of Private Collection Agency and Guaranty Agency Security Controls , September 22, 2014. Handling of Borrower Complaints Against Private Collection Agencies , July 11, 2014. Third-Party Servicer Use of Debit Cards to Deliver Title IV Funds , March 10, 2014. Review of Federal Student Aid's Plans for Schools Closures by a For-Profit Entity , February 28, 2014. Title IV of the Higher Education Act Programs: Additional Safeguards Are Needed to Help Mitigate the Risks That Are Unique to the Distance Education Environment , February 21, 2014. U.S. Government Accountability Office Public Service Loan Forgiveness: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion , GAO-19-595, September 5, 2019. Federal Student Loans: Education Needs to Verify Borrowers' Information for Income-Driven Repayment Plans , GAO-19-347, June 25, 2019. Priority Open Recommendations: Department of Education , April 9, 2019. Cybersecurity: Office of Federal Student Aid Should Take Additional Steps to Oversee Non-School Partners' Protection of Borrower Information , GAO-18-518, September 17, 2018. Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers , GAO-18-547, September 5, 2018. Federal Student Loans: Further Action Needed to Implement Recommendations on Oversight of Loan Servicers , GAO-18-587R, July 27, 2018. Federal Student Aid: Education's Postsecondary School Certification Process , GAO-18-481, July 17, 2018. Federal Student Loans: Actions Needed to Improve Oversight of Schools' Default Rates , GAO-18-163, April 26, 2018. Federal Student Aid: Better Program Management and Oversight of Postsecondary Schools Needed to Protect Student Information , GAO-18-121, November 27, 2017 (reissued December 4, 2017). Higher Education: Education Should Address Oversight and Communication Gaps in Its Monitoring of the Financial Condition of Schools , GAO-17-555, August 21, 2017. Student Loans: Oversight of Servicemembers' Interest Rate Cap Could be Strengthened , GAO-17-4, November 15, 2016. Federal Student Loans: Education could Improve Direct Loan Program Customer Service and Oversight , GAO-16-523, May 16, 2016. Federal Student Loans: Key Weaknesses Limit Education's Management of Contractors , GAO-16-196T, November 18, 2015. Federal Student Loans: Education Could Do More to Help Ensure Borrowers Are Aware of Repayment and Forgiveness Options , GAO-15-663, August 25, 2015. Higher Education: Better Management of Federal Grant and Loan Forgiveness Programs for Teachers Needed to Improve Participant Outcomes , GAO-15-314, February 24, 2015. Higher Education: Education Should Strengthen Oversight of Schools and Accreditors , GAO-15-59, December 22, 2014 (reissued January 22, 2015). Federal Student Loans: Better Oversight Could Improve Defaulted Loan Rehabilitation , GAO-14-256, March 6, 2014. Appendix B. Selected Acronyms Used in This Report

The Office of Federal Student Aid (FSA), within the U.S. Department of Education (ED), is established as a performance-based organization (PBO) pursuant to Section 141 of the Higher Education Act (HEA). FSA is a discrete management unit "responsible for managing the administrative and oversight functions supporting" the HEA Title IV federal student aid programs, including the Pell Grant and the Direct Loan programs. As such, it is the largest provider of postsecondary student financial aid in the nation. In FY2019, FSA oversaw the provision of approximately $130.4 billion in Title IV aid to approximately 11.0 million students attending approximately 6,000 participating institutions of higher education (IHEs). In addition, in FY2019, FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. Among other functions, FSA develops and maintains the Free Application for Federal Student Aid (FAFSA); obtains funds from the Department of the Treasury to make aid available to students; contracts with numerous third parties to provide goods and services related to Title IV administration, such as student loan servicing; provides oversight of the numerous third parties (e.g., contracted student loan servicers and IHEs) that play a role in administering the Title IV programs; and provides information to third-party stakeholders—such as students, the public, and Congress—regarding Title IV program operations and performance. Responsibility for developing and promulgating policy and regulations relating to the Title IV programs, however, remains with the Secretary of Education. Congress established FSA's PBO structure under the Higher Education Amendments of 1998 ( P.L. 105-244 ) in response to a belief in Congress and ED that the Title IV student aid programs were "severe[ly]" mismanaged and that ED was in need of restructuring to improve federal student aid delivery. In general, PBOs are intended to be business-like, results-driven organizations that have clear objectives and measureable goals designed to improve an agency's performance and transparency. PBO leaders are to be held professionally accountable for meeting organization goals, with continued tenure and a portion of compensation linked to these measures of success. In exchange, PBOs and their leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies. Specific to FSA's structure as a PBO, the HEA vests management of FSA in a chief operating officer (COO) who is appointed based on demonstrated ability and without regard to political affiliation. Each year, the COO and the Secretary must agree on and publicly make available a five-year performance plan for FSA that establishes measurable goals and objectives addressing a variety of statutory specifications, such as FSA's responsibilities in improving customer service to stakeholders and reducing costs of administering the Title IV student aid programs. The COO is required to annually submit to Congress a report on FSA's performance. In addition, each year the COO and the Secretary, and the COO and FSA senior managers, enter into performance agreements that set forth measurable organizational and individual goals. The COO and senior managers are eligible to receive bonus compensation based on an evaluation of work performed relative to the annual goals specified in their annual performance agreements. The HEA provides FSA with some flexibilities with regard to traditional federal rules around hiring, compensation, and procurement. Since FSA's creation as a PBO, it has experienced some notable successes, including the Title IV aid programs' removal from the Government Accountability Office's High Risk List in 2005, the transition to 100% direct lending under the Direct Loan program, and implementation of the Internal Revenue Service (IRS) Data Retrieval Tool. Since FSA's establishment, the programs it administers have grown substantially larger, and the federal student aid programs and benefits have become substantially more complex to administer (e.g., with the addition of numerous loan forgiveness and income-driven repayment plans). In recent years, particularly over the last decade, several issues have arisen related to FSA's Title IV program administration. In broad terms, they pertain to oversight of entities participating in and helping with administration of Title IV programs, transparency, and accountability to certain stakeholders and consumers (i.e., aid recipients). Oversight issues relate to FSA's oversight of IHEs participating in the Title IV loan programs. Criticisms have focused on FSA's assessment of the well-being of IHEs and ability to proactively mitigate risk in the Title IV programs. Other concerns relate to FSA's oversight of its contracted student loan services, including its monitoring of such entities and the accountability of servicers to FSA in certain areas of their performance. Concerns have also been raised about the shortage of operational guidance FSA has provided to loan servicers to enable them to ensure they are meeting Title IV statutory and regulatory requirements and to assist borrowers in navigating the aid programs. Transparency issues relate to the extent to which FSA makes available information about the Title IV programs' performance and operations to relevant parties. Congress, other entities with oversight responsibilities, and other federal agencies sometimes have imperfect information on Title IV program performance and operations, which can make it difficult to make informed, well-honed policy or enforcement decisions. In addition, consumers may be faced with incomplete information on the Title IV programs and the IHEs that participate in such programs, which may make it difficult to make informed college-going and financial decisions. Stakeholder and borrower accountability issues include the extent to which FSA is fulfilling its statutory mandate to consult with relevant stakeholders in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make program administration improvements. They also relate to whether FSA is sufficiently responsive to customer needs, especially given that FSA administers programs for which, arguably, there are no comparable competitors. As Congress contemplates the reauthorizations of the HEA, it might consider whether any adjustments should be made to address any of these issues and, if so, the extent to which any efforts to address issues might involve or affect FSA's PBO function and structure.

crs_R46288

crs_R46288_0

<1. Occupational Safety and Health Administration Standards> Section 6 of the Occupational Safety and Health Act of 1970 (OSH Act) grants the Occupational Safety and Health Administration (OSHA) of the Department of Labor (DOL) the authority to promulgate, modify, or revoke occupational safety and health standards that apply to private sector employers, the United States Postal Service, and the federal government as an employer. In addition, Section 5(a)(1) of the OSH Act, commonly referred to as the General Duty Clause, requires that all employers under OSHA's jurisdiction provide workplaces free of "recognized hazards that are causing or are likely to cause death or serious physical harm" to their employees. OSHA has the authority to enforce employer compliance with its standards and with the General Duty Clause through the issuance of abatement orders, citations, and civil monetary penalties. The OSH Act does not cover state or local government agencies or units. Thus, certain entities that may be affected by Coronavirus Disease 2019 (COVID-19), such as state and local government hospitals, local fire departments and emergency medical services, state prisons and county jails, and public schools, are not covered by the OSH Act or subject to OSHA regulation or enforcement. <1.1. State Plans> Section 18 of the OSH Act authorizes states to establish their own occupational safety and health plans and preempt standards established and enforced by OSHA. OSHA must approve state plans if they are "at least as effective" as OSHA's standards and enforcement. If a state adopts a state plan, it also must cover state and local government entities not covered by OSHA. Currently, 21 states and Puerto Rico have state plans that cover all employers, and 5 states and the U.S. Virgin Islands have state plans that cover only state and local government employers not covered by the OSH Act. In the remaining states, state and local government employers are not covered by OSHA standards or enforcement. State plans may incorporate OSHA standards by reference, or states may adopt their own standards that are at least as effective as OSHA's standards. <1.2. Promulgation of OSHA Standards> OSHA may promulgate occupational safety and health standards on its own initiative or in response to petitions submitted to the agency by various government agencies, the public, or employer and employee groups. OSHA is not required, however, to respond to a petition for a standard or to promulgate a standard in response to a petition. OSHA may also consult with one of the two statutory standing advisory committees the National Advisory Committee on Occupational Safety and Health (NACOSH) or the Advisory Committee on Construction Safety and Health (ACCSH) or an ad-hoc advisory committee for assistance in developing a standard. <1.2.1. Notice and Comment> OSHA's rulemaking process for the promulgation of standards is largely governed by the provisions of the Administrative Procedure Act (APA) and Section 6(b) of the OSH Act. Under the APA informal rulemaking process, federal agencies, including OSHA, are required to provide notice of proposed rules through the publication of a Notice of Proposed Rulemaking in the Federal Register and provide the public a period of time to provide comments on the proposed rules. Section 7(b) of the OSH Act mirrors the APA in that it requires notice and comment in the rulemaking process. After publishing a proposed standard, the public must be given a period of at least 30 days to provide comments. In addition, any person may submit written objections to the proposed standard and may request a public hearing on the standard. <1.2.1.1. Statement of Reasons> Section 6(e) of the OSH Act requires OSHA to publish in the Federal Register a statement of the reasons the agency is taking action whenever it promulgates a standard, conducts other rulemaking, or takes certain additional actions, including issuing an order, compromising on a penalty amount, or settling an issued penalty. <1.2.1.2. Other Relevant Laws and Executive Order 12866> In addition to the APA and OSH Act, other federal laws that generally apply to OSHA rulemaking include the Paperwork Reduction Act, Regulatory Flexibility Act, Congressional Review Act, Information Quality Act, and Small Business Regulatory Enforcement Fairness Act (SBREFA). Also, Executive Order 12866, issued by President Clinton in 1993, requires agencies to submit certain regulatory actions to the Office of Management and Budget (OMB) and Office of Information and Regulatory Affairs (OIRA) for review before promulgation. <1.2.2. OSHA Rulemaking Timeline> OSHA rulemaking for new standards has historically been a relatively time-consuming process. In 2012, at the request of Congress, the Government Accountability Office (GAO) reviewed 59 significant OSHA standards promulgated between 1981 (after the enactments of the Paperwork Reduction Act and Regulatory Flexibility Act) and 2010. For these standards, OSHA's average time between beginning formal consideration of the standard either through publishing a Request for Information or Advanced Notice of Proposed Rulemaking in the Federal Register or placing the rulemaking on its semiannual regulatory agenda and promulgation of the standard was 93 months (7 years, 9 months). Once the Notice of Proposed Rulemaking was published for these 59 standards, the average time until promulgation of the standard was 39 months (3 years, 3 months). In 2012, OSHA's Directorate of Standards and Guidance published a flowchart of the OSHA rulemaking process on the agency's website. This flowchart includes estimated duration ranges for a variety of rulemaking actions, beginning with pre-rule activities such as developing the idea for the standard and meeting with stakeholders and ending with promulgation of the standard. The flowchart also includes an estimated duration range for post-promulgation activities, such as judicial review. The estimated time from the start of preliminary rulemaking to the promulgation of a standard ranges from 52 months (4 years, 4 months) to 138 months (11 years, 6 months). After a Notice of Proposed Rulemaking is published in the Federal Register, the estimated length of time until the standard is promulgated ranges from 26 months (2 years, 2 months) to 63 months (5 years, 3 months). Table 1 provides OSHA's estimated timelines for six major pre-rulemaking and rulemaking activities leading to the promulgation of a standard. <1.3. Judicial Review> Both the APA and the OSH Act provide for judicial review of OSHA standards. Section 7(f) of the OSH Act provides that any person who is "adversely affected" by a standard may file, within 60 days of its promulgation, a petition challenging the standard with the U.S. Court of Appeals for the circuit in which the person lives or maintains his or her principal place of business. A petition for judicial review does not automatically stay the implementation or enforcement of the standard. However, the court may order such a stay. OSHA estimates that post-promulgation activities, including judicial review, can take between 4 and 12 months after the standard is promulgated. <1.4. Emergency Temporary Standards> Section 6(c) of the OSH Act provides the authority for OSHA to issue an Emergency Temporary Standard (ETS) without having to go through the normal rulemaking process. OSHA may promulgate an ETS without supplying any notice or opportunity for public comment or public hearings. An ETS is immediately effective upon publication in the Federal Register . Upon promulgation of an ETS, OSHA is required to begin the full rulemaking process for a permanent standard with the ETS serving as the proposed standard for this rulemaking. An ETS is valid until superseded by a permanent standard, which OSHA must promulgate within six months of publishing the ETS in the Federal Register . An ETS must include a statement of reasons for the action in the same manner as required for a permanent standard. State plans are required to adopt or adhere to an ETS, although the OSH Act is not clear on how quickly a state plan must come into compliance with an ETS. <1.4.1. ETS Requirements> Section 6(c)(1) of the OSH Act requires that both of the following determinations be made in order for OSHA to promulgate an ETS: that employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards, and that such emergency standard is necessary to protect employees from such danger. <1.4.1.1. Grave Danger Determination> The term grave danger , used in the first mandatory determination for an ETS, is not defined in statute or regulation. The legislative history demonstrates the intent of Congress that the ETS process "not be utilized to circumvent the regular standard-setting process," but the history is unclear as to how Congress intended the term grave danger to be defined. In addition, although the federal courts have ruled on challenges to previous ETS promulgations, the courts have provided no clear guidance as to what constitutes a grave danger. In 1984, the U.S. Court of Appeals for the Fifth Circuit in Asbestos Info. Ass'n v. OSHA issued a stay and invalidated OSHA's November 1983 ETS lowering the permissible exposure limit for asbestos in the workplace. In its decision, the court stated that "gravity of danger is a policy decision committed to OSHA, not to the courts." The court, however, ultimately rejected the ETS, in part on the grounds that OSHA did not provide sufficient support for its claim that 80 workers would ultimately die because of exposures to asbestos during the six-month life of the ETS. <1.4.1.2. Necessity Determination> In addition to addressing a grave danger to employees, an ETS must also be necessary to protect employees from that danger. In Asbestos Info. Ass'n , the court invalidated the asbestos ETS for the additional reason that OSHA had not demonstrated the necessity of the ETS. The court cited, among other factors, the duplication between the respirator requirements of the ETS and OSHA's existing standards requiring respirator use. The court dismissed OSHA's argument that the ETS was necessary because the agency felt that the existing respiratory standards were "unenforceable absent actual monitoring to show that ambient asbestos particles are so far above the permissible limit that respirators are necessary to bring employees' exposure within the PEL of 2.0 f/cc." The court determined that "fear of a successful judicial challenge to enforcement of OSHA's permanent standard regarding respirator use hardly justifies resort to the most dramatic weapon in OSHA's enforcement arsenal." Although OSHA has not promulgated an ETS since the 1983 asbestos standard, it has since determined the necessity of an ETS. In 2006, the agency considered a petition from the United Food and Commercial Workers (UFCW) and International Brotherhood of Teamsters (IBT) for an ETS on diacetyl. The UFCW and IBT petitioned OSHA for the ETS after the National Institute for Occupational Safety and Health (NIOSH) and other researchers found that airborne exposure to diacetyl, then commonly used as an artificial butter flavoring in microwave popcorn and a flavoring in other food and beverage products, was linked to the lung disease bronchiolitis obliterans , now commonly referred to as "popcorn lung." According to GAO's 2012 report on OSHA's standard-setting processes, OSHA informed GAO that although the agency may have been able to issue an ETS based on the grave danger posed by diacetyl, the actions taken by the food and beverage industries, including reducing or removing diacetyl from products, made it less likely that the necessity requirement could be met. <1.4.2. ETS Duration> Section 6(c)(2) of the OSH Act provides that an ETS is effective until superseded by a permanent standard promulgated pursuant to the normal rulemaking provisions of the OSH Act. Section 6(c)(3) of the OSH Act requires OSHA to promulgate a permanent standard within six months of promulgating the ETS. As shown earlier in this report, six months is well outside of historical and currently expected time frames for developing and promulgating a standard under the notice and comment provisions of the APA and OSH Act, as well as under other relevant federal laws and executive orders. This dichotomy between the statutory mandate to promulgate a standard and the timelines that, based on historical precedent, other provisions in the OSH Act might realistically require for such promulgation raises the question of whether or not OSHA could extend an ETS's duration without going through the normal rulemaking process. The statute and legislative history do not clearly address this question. OSHA has used its ETS authority sparingly in its history and not since the asbestos ETS promulgated in 1983. As shown in Table A-1 in the Appendix, of the nine times OSHA has issued an ETS, the courts have fully vacated or stayed the ETS in four cases and partially vacated the ETS in one case. Of the five cases that were not challenged or that were fully or partially upheld by the courts, OSHA issued a permanent standard either within the six months required by the statute or within several months of the six-month period and always within one year of the promulgation of the ETS. Each of these cases, however, occurred before 1980, when a combination of additional federal laws and court decisions added additional procedural requirements to the OSHA rulemaking process. OSHA did not attempt to extend the ETS's expiration date in any of these cases. Although the courts have not ruled directly on an attempt by OSHA to solely extend the life of an ETS, in 1974, the U.S. Court Appeals for the Fifth Circuit held in Florida Peach Growers Ass ' n v. United States Department of Labor that OSHA was within its authority to amend an ETS without going through the normal rulemaking process. The court stated that "it is inconceivable that Congress, having granted the Secretary the authority to react quickly in fast-breaking emergency situations, intended to limit his ability to react to developments subsequent to his initial response." The court also recognized the difficulty OSHA may have in promulgating a standard within six months due to the notice and comment requirements of the OSH Act, stating that in the case of OSHA seeking to amend an ETS to expand its focus, "adherence to subsection (b) procedures would not be in the best interest of employees, whom the Act is designed to protect. Such lengthy procedures could all too easily consume all of the temporary standard's six months life" <2. OSHA Standards Related to COVID-19> <2.1. Current OSHA Standards> Currently, no OSHA standard directly covers exposure to airborne or aerosol diseases in the workplace. As a result, OSHA is limited in its ability to enforce protections for healthcare and other workers who may be exposed to SARS-Cov-2, the virus that causes COVID-19. OSHA may enforce the General Duty Clause in the absence of a standard, if it can be determined that an employer has failed to provide a worksite free of "recognized hazards" that are "causing or are likely to cause death or serious physical harm" to workers. In addition, OSHA's standards for the use of personal protective equipment (PPE) may apply in cases in which workers require eye, face, hand, or respiratory protection against COVID-19 exposure. <2.2. OSHA Respiratory Protection Standard> <2.2.1. National Institute for Occupational Safety and Health Certification> The OSHA respiratory protection standard requires the use of respirators certified by NIOSH in cases in which engineering controls, such as ventilation or enclosure of hazards, are insufficient to protect workers from breathing contaminated air. Surgical masks, procedure masks, and dust masks are not considered respirators. NIOSH certifies respirators pursuant to federal regulations. For nonpowered respirators, such as filtering face piece respirators commonly used in healthcare and construction, NIOSH classifies respirators based on their efficiency at filtering airborne particles and their ability to protect against oil particles. Under the NIOSH classification system, the letter (N, R, or P) indicates the level of oil protection as follows: N no oil protection; R oil resistant; and P oil proof. The number following the letter indicates the efficiency rating of the respirator as follows: 95 filters 95% of airborne particles; 97 filters 97% of airborne particles; and 100 filters 99.7% of airborne particles. Thus an N95 respirator, the most common type, is one that does not protect against oil particles and filters out 95% of airborne particles. An R or P respirator can be used in place of an N respirator. A respirator that is past its manufacturer-designated shelf life is no longer considered to be certified by NIOSH. However, in response to potential shortages in respirators, NIOSH has tested and approved certain models of respirators for certified use beyond their manufacturer-designated shelf lives. Respirators designed for certain medical and surgical uses are subject to both certification by NIOSH (for oil protection and efficiency) and regulation by the Food and Drug Administration (FDA) as medical devices. In general, respirators with exhalation valves cannot be used in surgical and certain medical settings because, although the presence of an exhalation valve does not affect the respirator's protection afforded the user, it may allow unfiltered air from the user into a sterile field. On March 2, 2020, FDA issued an Emergency Use Authorization (EUA) to approve for use in medical settings certain NIOSH-certified respirators not previously regulated by FDA. <2.2.1.1. CDC Interim Guidance on Respiratory Protection> On March 10, 2020, the Centers for Disease Control and Prevention (CDC) updated its interim guidance for the protection of healthcare workers against exposure to COVID-19 to permit healthcare workers caring for known or suspected COVID-19 cases to use "facemasks" when respirators are not available or are in limited supply. This differs from the CDC's 2007 guidelines for control of infectious agents in healthcare settings, which required the use of respirators for treatment of known or suspected cases. CDC states that respirators should be prioritized for use in medical procedures likely to generate respiratory aerosols. Before this interim guidance was released, Representative Bobby Scott, Chairman of the House Committee on Education and Labor, and Representative Alma Adams, Chair of the Subcommittee on Workforce Protections, sent a letter to Secretary of Health and Human Services (HHS) Alex M. Azar II expressing their opposition to this change in the interim standard. <2.2.2. Medical Evaluation and Fit Testing> The OSHA respiratory protection standard requires that the employer provide a medical evaluation to the employee to determine if the employee is physiologically able to use a respirator. This medical evaluation must be completed before any fit testing. For respirators designed to fit tightly against the face, the specific type and model of respirator that an employee is to use must be fit tested in accordance with the procedures provided in Appendix A of the OSHA respiratory protection standard to ensure there is a complete seal around the respirator when worn. Once an employee has been fit tested for a respirator, he or she is required to be fit tested annually or whenever the model of respirator, but not the actual respirator itself, is changed. Each time an individual uses a respirator, he or she is required to perform a check of the seal of the respirator to his or her face in accordance with the procedures provided in Appendix B of the standard. On March 14, 2020, OSHA issued guidance permitting employers to suspend annual fit testing of respirators for employees that have already been fit tested on the same model respirator. <2.2.3. Temporary OSHA Enforcement Guidance on the Respiratory Protection Standard> In response to shortages of respirators and other PPE during the national response to the COVID-19 pandemic, OSHA has issued three sets of temporary enforcement guidance to permit the following exceptions to the respiratory protection standard: 1. Employers may suspend annual fit testing of respirators for employees that have already been fit tested on the same model respirator; 2. Employers may permit the use of expired respirators and the extended use or reuse of respirators, provided the respirator maintains its structural integrity and is not damaged, soiled, or contaminated (e.g., with blood, oil, or paint); and 3. Employers may permit the use of respirators not certified by NIOSH, but approved under standards used by the following countries or jurisdictions, in accordance with the protection equivalency tables provided in Appendices A and B of the enforcement guidance document: Australia, Brazil, European Union, Japan, Mexico, People's Republic of China, and Republic of Korea. <2.3. Cal/OSHA Aerosol Transmissible Disease Standard> Although no OSHA standard specifically covers aerosol or airborne disease transmission, the California Division of Occupational Safety and Health (Cal/OSHA), under its state plan, promulgated its aerosol transmissible disease (ATD) standard in 2009. The ATD standard covers most healthcare workers, laboratory workers, as well as workers in correctional facilities, homeless shelters, and drug treatment programs. Under the ATD standard, SARS-Cov-2, the virus that causes COVID-19, is classified as a disease or pathogen requiring airborne isolation. This classification subjects the virus to stricter control standards than diseases requiring only droplet precautions, such as seasonal influenza. The key requirements of the ATD standard include written ATD exposure control plan and procedures, training of all employees on COVID-19 exposure, use of PPE, and procedures if exposed to COVID-19, engineering and work practice controls to control COVID-19 exposure, including the use of airborne isolation rooms, provision of medical services to employees, including removal of exposed employees, specific requirements for laboratory workers, and PPE requirements. <2.3.1. Cal/OSHA Aerosol Transmissible Disease PPE Requirements> The Cal/OSHA ATD standard requires that employers provide employees PPE, including gloves, gowns or coveralls, eye protection, and respirators certified by NIOSH at least at the N95 level whenever workers enter or work in an airborne isolation room or area with a case or suspected case; are present during procedures or services on a case or suspected case; repair, replace, or maintain air systems or equipment that may contain pathogens; decontaminate an area that is or was occupied by a case or suspected case; are present during aerosol generating procedures on cadavers of cases or suspected cases; transport a case or suspected case within a facility or within a vehicle when the patient is not masked; and are working with a viable virus in the laboratory. In addition, a powered air purifying respirator (PAPR) with a high-efficiency particulate air (HEPA) filter must be used whenever a worker performs a high- hazard procedure on a known or suspected COVID-19 case. High-hazard procedures are those in which "the potential for being exposed to aerosol transmissible pathogens is increased due to the reasonably anticipated generation of aerosolized pathogens" they include intubation, airway suction, and caring for patients on positive pressure ventilation. Emergency medical services (EMS) workers may use N100, R100, or P100 respirators in place of PAPRs. <2.3.1.1. Cal/OSHA Interim Guidance on COVID-19> Cal/OSHA has issued interim guidance in response to shortages of respirators in the state due to the COVID-19 pandemic response. Under this interim guidance, if the supply of N95 respirators or PAPRs are insufficient to meet current or anticipated needs, surgical masks may be used for low-hazard patient contacts that would otherwise require the use of respirators, and respirators may be used for high-hazard procedures that would otherwise require the use of PAPRs. <2.3.2. OSHA Infectious Disease Standard Rulemaking> In 2010, OSHA published a Request for Information in the Federal Register seeking public comments on strategies to control exposure to infectious diseases in healthcare workplaces. After collecting public comments and holding public meetings, OSHA completed the SBREFA process in 2014. Since then, however, no public actions have occurred on this rulemaking; since spring 2017, this rulemaking has been listed as a "long-term action" in DOL's semiannual regulatory agenda. <3. Congressional Activity to Require an OSHA Emergency Temporary Standard on COVID-19> On March 5, 2020, Representative Scott, chairman of the House Committee on Education and Labor, and Representative Adams, chair of the Subcommittee on Workforce Protections, sent a letter to Secretary of Labor Eugene Scalia calling on OSHA to promulgate an ETS to address COVID-19 exposure among healthcare workers. This letter followed a January 2020 letter requesting that OSHA reopen its rulemaking on the infectious disease standard and begin to formulate for possible future promulgation an ETS to address COVID-19 exposure. Senator Patty Murray, ranking member of the Senate Committee on Health, Education, Labor, and Pensions and a group of Democratic Senators sent a similar letter to the Secretary of Labor calling for an OSHA ETS. In addition, in March 2020, David Michaels, who served as the Assistant Secretary of Labor for Occupational Safety and Health during the Obama Administration, wrote an op-ed in The Atlantic calling on OSHA to promulgate a COVID-19 ETS. On March 6, 2020, the AFL-CIO and 22 other unions petitioned OSHA for an ETS on COVID-19 that would cover all workers with potential exposures. National Nurses United submitted a similar petition requesting that OSHA promulgate an ETS based largely on the Cal/OSHA ATD standard. On May 4, 2020, the Center for Food Safety and Food Chain Workers Alliance submitted a petition requesting that OSHA promulgate an ETS to protect meat and poultry processing workers from COVID-19 exposure in the workplace. On May 18, 2020, the AFL-CIO petitioned the U.S. Court of Appeals for the D.C. Circuit for a writ of mandamus to compel OSHA to promulgate a COVID-19 ETS. <3.1. H.R. 6139, the COVID-19 Health Care Worker Protection Act of 2020> On March 9, 2020, Representative Scott introduced H.R. 6139 , the COVID-19 Health Care Worker Protection Act of 2020. This bill would require OSHA to promulgate a COVID-19 ETS within one month of enactment. The ETS would be required to cover healthcare workers and any workers in sectors determined by the CDC or OSHA to be at an elevated risk of COVID-19 exposure. The ETS would be required to include an exposure control plan provision and be, at a minimum, based on CDC's 2007 guidance and any updates to this guidance. The ETS would also be required to provide no less protection than any state standard on novel pathogens, thus requiring OSHA to include the elements of the Cal/OSHA ATD standard in this ETS. Title II of the bill would provide that hospitals and skilled nursing facilities that receive Medicare funding and that are owned by state or local government units and not subject to state plans would be required to comply with the ETS. <3.2. P.L. 116-127, the Families First Coronavirus Response Act> The provisions of H.R. 6139 were included as Division C of H.R. 6201 , the Families First Coronavirus Response Act, as introduced in the House. The American Hospital Association (AHA) issued an alert to its members expressing its opposition to the OSHA ETS provisions in the bill. Specifically, the AHA opposed the requirement that the ETS be based on the CDC's 2007 guidance. The AHA stated that unlike severe acute respiratory syndrome (SARS), which was transmitted through the air, COVID-19 transmission is through droplets and surface contacts. Thus, the requirement of the 2007 CDC guidance that N95 respirators, rather than surgical masks, be used for patient contact is not necessary to protect healthcare workers from COVID-19, and the use of surgical masks is consistent with World Health Organization guidance. The AHA also claimed that shortages of available respirators could reduce the capacity of hospitals to treat COVID-19 patients, due to a lack of respirators for staff. The OSHA ETS provisions were not included in the version of the legislation that was passed by the House and the Senate and signed into law as P.L. 116-127 . <3.3. H.R. 6379, the Take Responsibility for Workers and Families Act> Division D of H.R. 6379 , the Take Responsibility for Workers and Families Act, as introduced in the House on March 23, 2020, includes the requirement that OSHA promulgate an ETS on COVID-19 within seven days of enactment and a permanent COVID-19 standard within 24 months of enactment to cover healthcare workers, firefighters and emergency response workers, and workers in other occupations that CDC or OSHA determines to have an elevated risk of COVID-19 exposure. Division D of H.R. 6379 would amend the OSH Act, for the purposes of the ETS only, such that state and local government employers in states without state plans would be covered by the ETS. The provisions of Division D of H.R. 6379 were also included in S. 3584 , the COVID 19 Workers First Protection Act of 2020, as introduced in the Senate. This legislation would specifically provide that the ETS would remain in force until the permanent standard is promulgated and explicitly exempts the ETS from the Regulatory Flexibility Act, Paperwork Reduction Act, and Executive Order 12866. OSHA would be granted enforcement discretion in cases in which it is not feasible for an employer to fully comply with the ETS (such as a case in which PPE is unavailable) if the employer is exercising due diligence to comply and implementing alternative means to protect employees. Like the provisions in H.R. 6139 and the version of H.R. 6201 introduced in the House, this ETS and permanent standard would be required to include an exposure control plan and provide no less protection than any state standard on novel pathogens, thus requiring OSHA to include the elements of the Cal/OSHA ATD standard in this ETS and permanent standard. Although the ETS provisions in H.R. 6139 and H.R. 6201 required that the ETS be based on the 2007 CDC guidance, specific reference to the 2007 guidance is not included in this legislation. Rather, the ETS and permanent standard would have to incorporate, as appropriate, "guidelines issued by the Centers for Disease Control and Prevention, and the National Institute for Occupational Safety and Health, which are designed to prevent the transmission of infectious agents in healthcare settings" and scientific research on novel pathogens. States with occupational safety and health plans would be required to adopt the ETS, or their own ETSs at least as effective as the ETS, within 14 days of the legislation's enactment. <3.4. H.R. 6559, the COVID-19 Every Worker Protection Act of 2020> H.R. 6559 , the COVID-19 Every Worker Protection Act of 2020, was introduced in the House by Representative Scott on April 21, 2020. This legislation includes the ETS and permanent standard provisions of Division D of H.R. 6379 and S. 3584 and would require that these standards cover healthcare workers, emergency medical responders, and "other employees at occupational risk" of COVID-19 exposure. This legislation also adds two provisions that clarify the requirements for employers to record work-related COVID-19 infections and strengthen the protections against retaliation and discrimination offered to whistleblowers. <3.4.1. COVID-19 Recordkeeping> Sections 8(c) and 24(a) of the OSH Act require employers to maintain records of occupational injuries and illnesses in accordance with OSHA regulations. OSHA's reporting and recordkeeping regulations require that employers with 10 or more employees must keep records of work-related injuries and illnesses that result in lost work time for employees or that require medical care beyond first aid. Employers must also report to OSHA, within 8 hours, any workplace fatality, and within 24 hours, any injury or illness that results in in-patient hospitalization, amputation, or loss of an eye. Employers in certain industries determined by OSHA to have lower occupational safety and health hazards are listed in the regulations as being exempt from the recordkeeping requirements but not the requirement to report serious injuries, illnesses, and deaths to OSHA. Offices of physicians, dentists, other health practitioners, and outpatient medical clinics are included in the industries that are exempt from the recordkeeping requirements. OSHA regulations require the employer to determine if an employee's injury or illness is related to his or her work and thus subject to the recordkeeping requirements. The regulations provide a presumption that an injury or illness that occurs in the workplace is work-related and recordable, unless one of the exemptions provided in the regulations applies. One of the listed exemptions is as follows: The illness is the common cold or flu (Note: contagious diseases such as tuberculosis, brucellosis, hepatitis A, or plague are considered work-related if the employee is infected at work). Because of the nature of COVID-19 transmission, which can occur in the community as well as the workplace, it can be difficult to determine the exact source of any person's COVID-19 transmission. This may make it difficult for employers to determine if an employee's COVID-19 is subject to the recordkeeping requirements. On April 10, 2020, OSHA issued enforcement guidance on how cases of COVID-19 should be treated under the recordkeeping requirements. This guidance states that COVID-19 cases are recordable if they are work-related. Under this guidance, employers in the following industry groups must fully comply with the recordkeeping regulations, including the requirement to determine if COVID-19 cases are work-related: healthcare; emergency response, including firefighting, emergency medical services, and law enforcement; and correctional institutions. For all other employers, however, OSHA will only require employers to determine if COVID-19 cases are work-related and subject to the recordkeeping requirements if the following two conditions are met: 1. There is objective evidence that a COVID-19 case may be work-related. This could include, for example, a number of cases developing among workers who work closely together without an alternative explanation; and 2. The evidence of work-relatedness was reasonably available to the employer. For purposes of this guidance, examples of reasonably available evidence include information given to the employer by employees, as well as information that an employer learns regarding its employees' health and safety in the ordinary course of managing its business and employees. H.R. 6559 would require that the ETS and permanent standard established pursuant to the legislation include the requirement for the recording and reporting of all COVID-19 cases in accordance with OSHA regulations in place at the time of enactment. By referencing the regulations in place rather than the guidance, this provision would serve to supersede OSHA's guidance and apply the requirement to determine the work-relatedness of COVID-19 cases to all employers covered by the recordkeeping regulations. <3.4.2. Whistleblower Protections> Section 11(c) of the OSH Act prohibits any person from retaliating or discriminating against any employee who exercises certain rights provided by the OSH Act. Commonly referred to as the whistleblower protection provision, this provision protects any employee who takes any of the following actions: files a complaint with OSHA related to a violation of the OSH Act; causes an OSHA proceeding, such as an investigation, to be instituted; testifies or is about to testify in any OSHA proceeding; and exercises on his or her own behalf, or on behalf of others, any other rights afforded by the OSH Act. Other rights afforded by the OSH Act that are covered by the whistleblower protection provision include the right to inform the employer about unsafe work conditions; the right to access material safety data sheets or other information required to be made available by the employer; and the right to report a work-related injury, illness, or death to OSHA. In limited cases, the employee has the right to refuse to work if conditions reasonably present a risk of serious injury or death and there is not sufficient time to eliminate the danger through other means. H.R. 6559 would require that the ETS and permanent standard promulgated pursuant to the legislation expand the protections for whistleblowers. The following additional activities taken by employees would grant them protection from retaliation and discrimination from employers and agents of employers: reporting to the employer; a local, state, or federal agency; or the media; or on a social media platform; the following: a violation of the ETS or permanent standard promulgated pursuant to the legislation; a violation of the infectious disease control plan required by the ETS or permanent standard; or a good-faith concern about an infectious disease hazard in the workplace; seeking assistance from the employer or a local, state, or federal agency with such a report; and using personally supplied PPE with a higher level of protection than offered by the employer. <3.5. H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act)> The provisions of H.R. 6559 , including the provisions relating to recordkeeping and whistleblower protections, were included as Title III of Division L of H.R. 6800 , the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act). H.R. 6800 was passed by the House on May 1 5, 2020. <3.5.1. Appendix.>

The Occupational Safety and Health Administration (OSHA) does not currently have a specific standard that protects healthcare or other workers from airborne or aerosol transmission of disease or diseases transmitted by airborne droplets. Some in Congress, and some groups representing healthcare, meat and poultry processing, and other workers, are calling on OSHA to promulgate an emergency temporary standard (ETS) to protect workers from exposure to SARS-Cov-2, the virus that causes Coronavirus Disease 2019 (COVID-19). The Occupational Safety and Health Act of 1970 (OSH Act) gives OSHA the ability to promulgate an ETS that would remain in effect for up to six months without going through the normal review and comment process of rulemaking. OSHA, however, has rarely used this authority in the past—not since the courts struck down its ETS on asbestos in 1983. The California Division of Occupational Safety and Health (Cal/OSHA), which operates California's state occupational safety and health plan, has had an aerosol transmissible disease (ATD) standard since 2009. This standard includes, among other provisions, the requirement that employers provide covered employees with respirators, rather than surgical masks, when these workers interact with ATDs, such as known or suspected COVID-19 cases. Also, according to the Cal/OSHA ATD standard, certain procedures require the use of powered air purifying respirators (PAPR). Both OSHA and Cal/OSHA have issued enforcement guidance to address situations when the shortage of respirators may impede an employer's ability to comply with existing standards. H.R. 6139 , the COVID-19 Health Care Worker Protection Act of 2020, would require OSHA to promulgate an ETS on COVID-19 that incorporates both the Cal/OSHA ATD standard and the Centers for Disease Control and Prevention's (CDC's) 2007 guidelines on occupational exposure to infectious agents in healthcare settings. The CDC's 2007 guidelines generally require stricter controls than its interim guidance on COVID-19 exposure. The provisions of H.R. 6139 were incorporated into the version of H.R. 6201 , the Families First Coronavirus Response Act, as introduced in the House. However, the OSHA ETS provisions were not included in the version of legislation that passed the House and the Senate and was signed into law as P.L. 116-127 . H.R. 6379 , as introduced in the House, also includes a requirement for an OSHA ETS and permanent standard to address COVID-19 exposure, with similar provisions in S. 3584 . H.R. 6559 includes the requirements for an ETS and permanent standard, clarifies the requirement that employers must report work-related COVID-19 cases, and expands protections for whistleblowers. The provisions of H.R. 6559 were included in H.R. 6800 , the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) passed by the House on May 15, 2020. A group representing hospitals claims that because SARS-Cov-2 is primarily transmitted by airborne droplets and surface contacts, surgical masks are sufficient protection for workers coming into routine contact with COVID-19 cases, and that the shortage of respirators may adversely impact some hospitals' patient capacities if stricter requirements to provide personal protective equipment (PPE) to employees were to be enacted.

crs_R45931

crs_R45931_0

<1. Introduction> The William D. Ford Federal Direct Loan (Direct Loan) program makes several types of federal student loans available to individuals to assist them with financing postsecondary education expenses. It represents the single largest source of federal financial assistance to support students' postsecondary educational pursuits. The U.S. Department of Education (ED) estimates that in FY2020, 15.9 million new loans, averaging $6,299 each and totaling $100.2 billion, will be made through the Direct Loan pro gram to undergraduate and graduate students, and to the parents of undergraduate students. In addition, ED estimates that 755,000 Direct Consolidation Loans, averaging $61,433 each and totaling $46.4 billion, will be made to existing borrowers of federal student loans. As of the end of the second quarter of FY2019, $1.2 trillion in principal and interest on Direct Loan program loans, borrowed by or on behalf of 34.5 million individuals, remained outstanding. This report presents a comprehensive overview of the terms and conditions that apply to federal student loans made through the Direct Loan program. It begins by providing background information on the history of the Direct Loan program. This is followed by a brief description of the various types of loans that are offered through the program. The report then presents a thorough description of the terms and conditions for loans made through the Direct Loan program. In identifying and describing loan terms and conditions, it focuses on provisions applicable to loans that are currently being made or that have been made in recent years. Emphasis is placed on discussing Direct Loan program provisions that are related to borrower eligibility, amounts that may be borrowed, interest rates and fees, procedures for loan repayment, repayment relief, the availability of loan discharge and loan forgiveness benefits, and the consequences of defaulting. The final section of the report provides a summary of the methods that are used to ensure that borrowers are informed about the terms and conditions of the loans they obtain and their obligation to repay them. This report has been prepared as a resource for Members of Congress, congressional committees, and congressional staff to support them in their legislative, oversight, and representational roles related to federal student loan policy. It is intended to provide a thorough, but nonexhaustive, description of loan terms and conditions and borrower benefits. It is not intended to be relied upon by borrowers as a resource for validating individual eligibility for specific borrower benefits. Appendix A to this report contains a directory of resources from which additional information may be obtained about loans made available through the Direct Loan program. Appendix B consists of a glossary of terms. Appendix C contains a set of tables that present historical information on borrowing limits, interest rates, and fees that have applied to loans made through the Direct Loan program. <2. Background on the Direct Loan Program> The Direct Loan program is authorized under Title IV, Part D of the Higher Education Act of 1965 (HEA; P.L. 89-329, as amended). It was established by the Student Loan Reform Act of 1993 (SLRA), Title IV of the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). Federal student loans were first made through the Direct Loan program in 1994. In the Direct Loan program, loans are made by the government using federal capital (i.e., funds from the U.S. Treasury), and once made, outstanding loans constitute an asset of the federal government. Some important characteristics of loans made through the Direct Loan program are that the federal government assumes the risk for losses that may occur as a result of borrower default, and that it pays for the discharge of loans in cases of borrower death, total and permanent disability, and other limited instances. The federal government also assumes the cost of loans that are not required to be paid in full due to borrowers satisfying criteria that make them eligible to have a portion or all of the balance of their loans discharged under any of several loan forgiveness programs. For federal budgeting purposes, the program is classified as a direct loan program, which is a type of federal credit program for which mandatory spending authority is provided. ED's Office of Federal Student Aid (FSA) is the primary entity tasked with administering the Direct Loan program. The institutions of higher education (IHEs) that participate in the Direct Loan program originate loans to borrowers through FSA's Common Origination and Disbursement (COD) system. Contractors hired by ED service and collect on the program's loans. When the Direct Loan program was first established, it was intended gradually to expand and then ultimately fully replace the Federal Family Education Loan (FFEL) program, a guaranteed student loan program authorized under Title IV, Part B of the HEA, and through which most federal student loans were being made. The FFEL program had descended from the Guaranteed Student Loan (GSL) program, which was enacted under Title IV of the HEA in 1965 to enhance access to postsecondary education for students from low- and middle-income families by providing them access to low-interest federal student loans. In the FFEL program, loan capital was provided by private lenders who also originated and serviced loans. The federal government guaranteed lenders against loss due to factors such as borrower default, death, total and permanent disability, and in limited instances, bankruptcy. State and nonprofit guaranty agencies administered the federal guarantee. The federal government was also responsible for making several different types of payments to lenders and guaranty agencies to support the operation of the program. The FFEL program was administratively complex and the Direct Loan program was established with the aims of streamlining the federal student loan delivery system and achieving cost savings. Several years into the implementation of the Direct Loan program, statutory provisions specifying that it ultimately succeed the FFEL program were repealed by the Higher Education Amendments of 1998 ( P.L. 105-244 ). From 1994 to 2010, the Direct Loan program and the FFEL program operated side-by-side. During this period, IHEs could elect to participate in the program of their choice. As this decision was made at the institutional level, the program through which an individual could borrow federal student loans was dependent upon the program participation decisions made by the institution a student attended. During the period while loans were being made through both the FFEL and Direct Loan programs, from the perspective of the borrower the terms and conditions of loans offered through the programs were similar in most respects. However, the degree of similarity varied over time. Notable differences included certain characteristics of the repayment plans offered and, beginning in 2008, the availability of the Public Service Loan Forgiveness (PSLF) program only to borrowers of loans made through the Direct Loan program. The authority to make loans through the FFEL program was terminated, effective July 1, 2010, by the SAFRA Act, Title II of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152 ). While loans are no longer being made through the FFEL program, as of the end of the second quarter of FY2019, $271.6 billion in principal and interest on FFEL program loans, borrowed by or on behalf of 12.8 million students, remained outstanding and due to be repaid over the coming years. Over the history of the Direct Loan program, Congress has periodically made changes to loan terms and conditions. Such changes have often been made as part of comprehensive amendments to the HEA, which authorizes the Direct Loan program; as part of amendments contained in budget reconciliation measures; or as part of amendments included in annual appropriations measures. Congress may well contemplate making future changes to loan terms and conditions. <3. Direct Loan Types> The following types of loans are currently made available to borrowers through the Direct Loan program: Direct Subsidized Loans . These loans are available only to undergraduate students who demonstrate financial need. Direct Subsidized Loans are characterized by having an interest subsidy that applies during an in-school period when a borrower is enrolled in an eligible program on at least a half-time basis, during a six-month grace period, during periods of authorized deferment, and during certain other periods. The Direct Subsidized Loans currently being made have a fixed interest rate that remains constant for the duration of the loan. Direct Unsubsidized Loans . These loans are available to undergraduate students, graduate students, and professional students, without regard to the student's financial need. Direct Unsubsidized Loans generally do not have an interest subsidy. The Direct Unsubsidized Loans currently being made have a fixed interest rate that remains constant for the duration of the loan. The interest rate on loans made to graduate and professional students is higher than the rate on loans made to undergraduate students. Direct PLUS Loans . These loans are available to graduate and professional students, and to the parents of undergraduate students who are dependent upon them for financial support. They are made without regard to financial need and generally do not have an interest subsidy. The Direct PLUS Loans currently being made have a fixed interest rate, which remains constant for the duration of the loan; and the interest rate is higher than the rate on both Direct Subsidized Loans and Direct Unsubsidized Loans. Direct Consolidation Loans . These loans allow individuals who have at least one loan borrowed through either the Direct Loan program or the 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, including loans that are in default. Direct Consolidation Loans may be obtained without regard to financial need. The Direct Consolidation Loans currently being made have fixed interest rates, which are determined by calculating the weighted average of the interest rates on the loans that are consolidated, rounded up the result 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. A Direct Consolidation Loan may have a subsidized component 18 and an unsubsidized component . <4. Eligibility and Amounts That May Be Borrowed> Eligibility for an individual to borrow a loan through the Direct Loan program and the amount that he or she may borrow are governed by provisions in the HEA and by policies and procedures implemented by ED. All loan types except Direct PLUS Loans are made available without consideration of a borrower's ability to repay the loan. Eligibility to borrow a Direct PLUS Loan depends on an individual's creditworthiness. The section that follows identifies and describes factors that determine an individual's eligibility to borrow one or more types of loans made available through the Direct Loan program. This is followed by a section that describes policies and procedures for determining amounts that may be borrowed. <4.1. Factors Affecting Eligibility to Borrow> For an individual to be eligible to borrow a loan through the Direct Loan program, the student borrower, or the student on whose behalf a parent borrower would obtain a Direct PLUS Loan, must meet a number of eligibility requirements. A broad set of general eligibility criteria applies to students who may benefit from a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan. An additional set of requirements applies specifically to applicants seeking to borrow a Direct PLUS Loan. Still other requirements apply to applicants for Direct Consolidation Loans. Eligibility to borrow various types of loans is also affected by a student's dependency status, program level (e.g., undergraduate, graduate, or professional), undergraduate class level, financial need, cost of attendance (COA) of the academic program, estimated financial assistance (EFA) he or she expects to receive from other sources, and certain other factors. Factors that affect eligibility to borrow through the Direct Loan program are discussed below. <4.1.1. General Student-Based Eligibility Criteria> In general, for a student to be eligible to borrow a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan, or for a parent to borrow a Direct PLUS Loan on behalf of a student, the student must be enrolled on at least a half-time basis as a regular student in either an eligible program at a participating eligible IHE, a preparatory program necessary for enrollment in an eligible program (for up to one year), or a teacher certification program; not be incarcerated; be a U.S. citizen or national, U.S. permanent resident, or other eligible noncitizen; maintain satisfactory academic progress as defined by the school; not be in default on a federal student loan, nor owing a refund on a grant or loan made under HEA, Title IV without having made satisfactory repayment arrangements; have on file at the IHE attended a statement of educational purpose stating that the loan will be used solely for educational expenses; and meet applicable Selective Service System registration requirements. <4.1.2. Student Dependency Status> For purposes of awarding federal student aid, dependency status determines whether a student is deemed to be dependent upon his or her parents' financial support, or is independent of their support. Dependency status is determined by a student's responses to questions on the Free Application for Federal Student Aid (FAFSA), which he or she must complete and submit to ED when applying for federal student aid. A student is deemed to be an independent student if he or she is, or will be, 24 years of age or older before January 1 of the award year; is married at the time of completing the FAFSA; will be a graduate or professional student at the start of the award year; is currently serving on active duty in the Armed Forces for other than training purposes; is a veteran of the Armed Forces; has legal dependents other than a spouse; was an orphan, in foster care, or a ward of the court, at any time since age 13; is an emancipated minor or is in legal guardianship as determined by a court of competent jurisdiction in the individual's state of legal residence, or was when reaching the age of majority; is an unaccompanied youth who is homeless, or self-supporting and at risk of being homeless; or is a student for whom a financial aid administrator makes a documented determination of independence by reason of other unusual circumstances or based upon a documented determination of independence that was previously made by another financial aid administrator in the same award year. A student who does not satisfy any of the criteria to qualify as an independent student is classified as a dependent student . Dependency status determines the types of loans available to be borrowed by students and their families, which in turn affects the amounts that may be borrowed. Of particular importance with regard to undergraduate students is the fact that Direct PLUS Loans the loans with the most flexible borrowing limits are available to the parents of dependent students but not to the parents of independent students. However, independent undergraduate students are extended higher personal borrowing limits than are dependent students. These differential borrowing limits are predicated on the expectation that the postsecondary education expenses of dependent students will be financed by some combination of students and their parents, whereas the postsecondary education expenses of independent students will typically be financed without parental assistance. Dependency status also determines which individuals in a student's family will have their income and assets considered in need analysis calculations for the student (discussed below). Need analysis calculations for a dependent student are based on the income and assets of both the student and the student's parents, whereas need analysis calculations for an independent student are based on the income and assets of the student (and if applicable, the student's spouse). <4.1.3. Program Level> The academic level of the program in which a student is enrolled impacts both the types of loans that he or she may borrow and certain terms and conditions of such loans. <4.1.3.1. Undergraduate Studies> Undergraduate students may borrow Direct Subsidized Loans and Direct Unsubsidized Loans, and the parents of undergraduate students who are dependent upon them for financial support may borrow Direct PLUS Loans on the student's behalf. Direct PLUS Loans may not be borrowed by undergraduate students nor by parents on behalf of undergraduate independent students. <4.1.3.2. Graduate and Professional Studies> Graduate and professional students may borrow Direct Unsubsidized Loans and Direct PLUS Loans. To be eligible to borrow as a graduate or professional student, an individual must be enrolled in a program above the baccalaureate level or in one that leads to a first professional degree, must have completed at least the equivalent of three years of full-time study either prior to entering the program or as part of it, and must not be concurrently receiving Title IV aid as an undergraduate student. Graduate and professional students, all of whom are classified as independent students, are extended higher borrowing limits than undergraduate students. <4.1.4. Undergraduate Class Level> For undergraduates, a student's class level determines the maximum amount the student may borrow on an annual basis. A student's class level is based on his or her progression according to the academic standards of the school the student attends. For undergraduate students, progression to a higher grade level for purposes of awarding a loan through the Direct Loan program does not necessarily correspond to the start of a new academic year (AY). For instance, a student who continues to make satisfactory academic progress but does not progress to the next grade level due to having completed an insufficient number of credits could borrow a loan through the Direct Loan program more than once as a first-year student. Once the student accrues enough credits to progress to the next higher grade level, he or she would become eligible for the higher borrowing limits available to second-year students, and so on. <4.1.5. Financial Need> Direct Subsidized Loans are need-based and may only be borrowed by students who demonstrate having financial need according to federal need analysis procedures. Applicants seeking to borrow Direct Subsidized Loans must undergo a need test through which the expected family contribution (EFC) to be made by the student, and, if applicable, the student's family, toward paying the student's postsecondary education expenses is determined on the basis of the financial resources available to the student. According to federal student aid need analysis procedures, the sum of the student's EFC and the amount of estimated financial assistance (EFA) he or she expects to receive from sources other than programs authorized under Title IV of the HEA is subtracted from the estimated cost of attendance (COA) of the institution the student attends to determine the amount of need-based financial aid that he or she is eligible to receive. Additional procedures are followed to determine the composition of the student's federal student aid package. For instance, undergraduate students must receive a determination of their eligibility to receive a Federal Pell Grant (a form of need-based aid available only to undergraduates) prior to being certified by their school as being eligible to borrow a Direct Subsidized Loan. This procedure is designed to first provide maximum grant aid to needy students before they incur student loan debt. The amount a student may borrow with a Direct Subsidized Loan may not exceed the amount of the student's unmet financial need after other forms of need-based federal student aid available under HEA, Title IV have been awarded. (For additional information, see the section on " Limits on Borrowing Determined by Need Analysis and Packaging " below.) Since July 1, 2012, only undergraduate students have been eligible to borrow Direct Subsidized Loans. <4.1.6. Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers> Since July 1, 2013, a student who is a first-time borrower may only borrow Direct Subsidized Loans for a period that may not exceed 150% of the published length of the academic program in which he or she is currently enrolled. This is referred to as the Direct Subsidized Loan maximum eligibility period . For undergraduates subject to this provision, a student enrolled in a two-year associate degree program may receive Direct Subsidized Loans for a maximum eligibility period of no more than three years, while a student enrolled in a four-year bachelor's degree program may receive Direct Subsidized Loans for a maximum eligibility period of no more than six years. Subsidized usage periods are used to measure a borrower's progress toward the maximum eligibility period. They are the quotient of dividing the number of days in the borrower's loan period (e.g., semester, quarter) for a Direct Subsidized Loan by the number of days in the academic year for which the borrower receives the Direct Subsidized Loan, rounded to the nearest tenth of a year. Subsidized usage periods are prorated based on intensity of enrollment (i.e., multiplied by 0.75 or 0.50 for three-quarter or half-time enrollment, respectively). A borrower's remaining eligibility period is determined by subtracting a borrower's cumulative subsidized usage periods from the maximum eligibility period. This provision also limits a borrower's eligibility for the interest subsidy on Direct Subsidized Loans. If a Direct Subsidized Loan borrower subject to this provision remains enrolled in the same program for which the loan was obtained, or another undergraduate academic program of equal or shorter length, beyond the applicable maximum eligibility period, the borrower will lose the interest subsidy and will become responsible for paying the interest that accrues on his or her Direct Subsidized Loans after the date that the maximum eligibility period was exceeded. <4.1.7. Eligibility Requirements for Direct PLUS Loans> In addition to satisfying the general student-based eligibility criteria, an individual must meet certain other eligibility criteria specifically applicable to Direct PLUS loans. <4.1.7.1. Parent Borrower Eligibility Criteria> Direct PLUS Loans may be borrowed by one or both parents of an undergraduate dependent student who meets the general student-based eligibility criteria described above. Eligible parents include biological parents, adoptive parents, and stepparents (if the stepparent's income and assets are taken into account in determining a student's EFC). A legal guardian may not borrow a Direct PLUS Loan on behalf of a student as a parent borrower. Parent borrowers must also meet the same citizenship and residency requirements as student borrowers; may not be in default on a federal student loan, nor owe a refund on a grant or loan made under Title IV without having made satisfactory repayment arrangements; and may not be incarcerated. For a parent to be eligible to borrow a Direct PLUS Loan on behalf of an undergraduate dependent student, the student must have completed a FAFSA. There is no requirement that a parent borrower complete a separate FAFSA. The eligibility of a noncustodial parent to borrow a Direct PLUS Loan on behalf of his or her child is not impacted by that parent's financial information not appearing on the student's FAFSA. <4.1.7.2. Creditworthiness Requirements to Borrow Direct PLUS Loans> Eligibility for an individual to borrow a Direct PLUS Loan also depends on that individual's creditworthiness. Only individuals who do not have an adverse credit history, as determined according to procedures specified in regulations, may borrow Direct PLUS Loans. The creditworthiness criteria apply to both parent borrowers and to graduate and professional student borrowers. Creditworthiness is assessed on the basis of a credit report on the applicant obtained from at least one consumer reporting agency. An applicant is considered to have an adverse credit history if he or she either has one or more debts totaling more than $2,085 that are 90 days or more delinquent as of the date of the credit report, or that have been placed in collection or been charged off by the creditor as a loss within the two years prior to the credit report; or has been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a debt under HEA, Title IV within the five years prior to the credit report. An applicant who is determined to have an adverse credit history may not obtain a Direct PLUS Loan unless he or she either obtains an endorser or demonstrates that extenuating circumstances exist with regard to the applicant's credit history. Extenuating circumstances may include an updated credit report or a letter from a creditor stating that the applicant has made satisfactory repayment arrangements on a derogatory debt. In addition, to obtain a Direct PLUS Loan an applicant who has an adverse credit history must also complete credit counseling. (See the section on " PLUS Loan Credit Counseling For Borrowers with Adverse Credit .") An applicant may not, however, be rejected for a Direct PLUS Loan on the basis of having no credit history. A dependent undergraduate student whose parents are unable to obtain a Direct PLUS Loan due to their having an adverse credit history may borrow a larger amount in the form of a Direct Unsubsidized Loan. In such a case, the student may borrow up to the borrowing limit applicable to a similarly situated independent undergraduate student. (These amounts are discussed below in the section on " Amounts That May Be Borrowed .") <4.1.8. Eligibility Requirements for Direct Consolidation Loans> To be eligible to obtain a Direct Consolidation Loan, a borrower must have an outstanding principal balance on at least one loan that was made through either the Direct Loan program or the FFEL program. In addition, with respect to the loans being consolidated, the applicant must be (1) in the grace period prior to entering repayment; (2) in repayment status, but not in default; or (3) in default, but having made satisfactory repayment arrangements. For the purposes of including a defaulted loan in a Direct Consolidation Loan, making "satisfactory repayment arrangements" means that the defaulted borrower has made at least three consecutive voluntary full monthly payments within 20 days of the due date, or has agreed to repay according to one of the Income-Driven Repayment (IDR) plans (described below). A borrower of a defaulted loan who is subject to a court judgment or wage garnishment is ineligible to obtain a Direct Consolidation Loan. In general, a set of loans may be consolidated only once. However, in select circumstances a Direct Consolidation Loan may be used to repay a previously obtained Direct Consolidation Loan or a FFEL Consolidation Loan. Loans made to borrowers within 180 days prior to or after the date of obtaining a Direct Consolidation Loan may be added to that Direct Consolidation Loan. A borrower who has an existing Direct Consolidation Loan and also has other eligible loans that have not been consolidated, or who subsequently obtains other eligible loans, may consolidate those loans with his or her existing loans for purposes of obtaining a new Direct Consolidation Loan. A borrower who has an existing FFEL Consolidation Loan and whose loan is in default or has been referred to a guaranty agency for default aversion assistance may consolidate his or her loan into a Direct Consolidation Loan for purposes of repaying according to one of the IDR plans. Finally, a borrower who has an existing FFEL Consolidation Loan may consolidate that loan into a Direct Consolidation Loan for the purposes of applying for loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program or to receive the No Accrual of Interest on Loans of Certain Active Duty Servicemembers benefit that is only available to borrowers of loans made through the Direct Loan program. A Direct Consolidation Loan must consist of at least one eligible loan made through either the Direct Loan or FFEL programs, and may also contain other types of federal student loans. The eligible types of federal student loans made through the Direct Loan and FFEL programs include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Direct Consolidation Loans, FFEL Subsidized Stafford Loans, FFEL Unsubsidized Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. The eligible types of federal student loans made outside of the Direct Loan and FFEL programs are Federal Perkins Loans, Guaranteed Student Loans, Federal Insured Student Loans, National Direct Student Loans, National Defense Student Loans, Supplemental Loans for Students (SLS), Auxiliary Loans to Assist Students (ALAS), Health Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Loans for Disadvantaged Students (LDS), and Nursing Loans. <4.2. Amounts That May Be Borrowed> The maximum amounts that a student or a parent may borrow in loans made through the Direct Loan program are determined by the interaction of annual and aggregate borrowing limits and federal need analysis and packaging procedures. Limitations on borrowing vary by loan type, borrower characteristics, program level, and class level. <4.2.1. Annual Loan Limits> For undergraduate students, annual loan limits cap both the maximum amount that may be borrowed in Direct Subsidized Loans and the total combined amount that may be borrowed through Direct Subsidized Loans and Direct Unsubsidized Stafford Loans during a single academic year. Annual loan limits for Direct Subsidized Loans vary by undergraduate class level; however, at any particular class level these limits are the same for both undergraduate dependent students and undergraduate independent students. Annual loan limits for the total combined amount of Direct Subsidized Loans and Direct Unsubsidized Loans that may be borrowed by undergraduate students vary by both undergraduate class level and by student dependency status. For graduate and professional students, annual loan limits cap the maximum that may be borrowed in Direct Unsubsidized Loans, irrespective of class level. However, higher exceptional annual loan limits are extended to students enrolled in certain health professions programs. There is no specified limit to the amount that may be borrowed in Direct PLUS Loans by either parent borrowers or by graduate and professional students. The annual loan limits apply to the maximum principal amount that may be borrowed in an academic year. Any loan origination fees that the borrower is required to pay (see the " Loan Origination Fees " below) are included in the amount to be borrowed that is subject to these limits. Borrowing limits for a student who is enrolled for less than one year are prorated based on the fraction of the academic year for which the student is enrolled. An academic year is defined in statute as a minimum of 30 weeks of instruction for courses of study measured in credit hours, or 26 weeks for courses of study measured in clock hours and during which a full-time student is expected to complete a minimum of 24 semester or trimester hours, 36 quarter hours, or 900 clock hours. <4.2.2. Aggregate Loan Limits> Aggregate loan limits cap the total cumulative amount of outstanding loans that a student may borrow through certain loan types. One limit applies to the total amount that may be borrowed in Direct Subsidized Loans and another limit applies to the total combined amount that may be borrowed in Direct Subsidized Loans and Direct Unsubsidized Loans. No aggregate limits are placed on Direct PLUS Loan borrowing. The aggregate loan limits apply only to the aggregate outstanding principal balance (OPB) of the loans a student has borrowed. They do not apply to accrued or capitalized interest. Annual and aggregate limits that have applied to loans made through the Direct Loan program since July 1, 2012, are presented in Table 1 . A listing of the annual and aggregate loan limits that have applied throughout the history of the Direct Loan program is presented in Appendix C in Table C-1 . <4.2.3. Limits on Borrowing Determined by Need Analysis and Packaging> The process of awarding one or more forms of federal student aid to a student in accordance with federal student aid need analysis procedures and individual program rules is referred to as packaging . Financial aid administrators at IHEs are afforded a degree of discretion in determining how aid is packaged. The packaging of aid may affect the amounts that may be borrowed by a student or by a parent on behalf of a student through the various types of loans offered through the Direct Loan program. The process for packaging aid provided through the Direct Loan program is briefly described below. The following terms are instrumental in describing this process. Cost of A ttendance (COA). This is an institution-determined amount indicative of a student's educational expenses for a period of enrollment (e.g., an academic year) at the IHE. It is determined by the institution a student attends and may include tuition and fees, and allowances for room and board, books, supplies, transportation, loan fees, personal expenses, child or dependent care, etc. For the Direct Loan program, a student's COA represents an absolute limit on the maximum amount of aid he or she may receive during an academic year. Expected F amily C ontribution (EFC). This is the dollar amount a student and the student's family (e.g., parents or spouse) are expected to contribute toward his or her education expenses for a year. A student's EFC is calculated according to procedures specified in law using information supplied by the student on the FAFSA. The formula for calculating a student's EFC takes into account myriad factors including taxed and untaxed income, financial assets, certain benefits (e.g., Social Security, unemployment compensation), family size, and the number of family members to be enrolled in college during an academic year. Estimated F inancial A ssistance (EFA). This is the amount of aid anticipated to be made available to a student from federal, state, institutional, or other sources for a period of enrollment. It includes grant, scholarship, fellowship, loan, and need-based employment assistance. For purposes of need analysis and packaging, two variations of EFA are relevant: (1) EFA not received under HEA, Title IV programs, and (2) EFA from all sources. EFA does not include Iraq and Afghanistan Service Grants; federal veterans' education benefits; or, for purposes of awarding Direct Subsidized Loans, Segal AmeriCorps Education Awards. F inancial N eed. This is the amount determined by subtracting a student's EFC and EFA not received under HEA, Title IV from the student's COA. Unmet F inancial N eed. This is the amount determined by subtracting the sum of a student's EFC and EFA from the student's COA. When packaging Title IV aid, the total amount of need-based aid awarded to a student may not exceed the amount of the student's financial need. A common packaging strategy is to award need-based aid that is not required to be repaid (e.g., Federal Pell Grant, Federal Supplemental Educational Opportunity Grant [FSEOG] and Federal Work-Study [FSW] awards) before awarding loan aid, which must be repaid. With respect to loans made through the Direct Loan program, only Direct Subsidized Loans are need-based; however, Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans may all be awarded to satisfy a student's unmet financial need. Additionally, once a student's unmet financial need has been satisfied, non-need-based aid, such as Direct Unsubsidized Loans and Direct PLUS Loans, may be awarded to replace some or all of a student's EFC. Overall, when packaging Title IV aid the total amount awarded (including both need-based and non-need-based aid) may not exceed the student's COA, less EFA. Processes for determining the amount of aid that may be awarded through the various types of loans offered through the Direct Loan program are described below. <4.2.3.1. Direct Subsidized Loans> Direct Subsidized Loans are need-based. They may be awarded to satisfy a student's unmet financial need. The maximum Direct Subsidized Loan amount a student is eligible to borrow is determined by summing the student's EFC and EFA, and then subtracting that amount from the student's COA for the school attended. As discussed above, Direct Subsidized Loan borrowing is also capped by applicable annual loan limits. The calculation shown in the text box below is used to determine the amount that a student may borrow through a Direct Subsidized Loan. <4.2.3.2. Direct Unsubsidized Loans> Direct Unsubsidized Loans are non-need-based. Students are eligible to borrow Direct Unsubsidized Loans irrespective of the amount of their EFC, in amounts up to the lesser of (1) the result of subtracting the student's EFA (including, for undergraduate students, any amount borrowed through a Direct Subsidized Loan) from COA, or (2) the result of subtracting the amount borrowed through a Direct Subsidized Loan from the annual Direct Subsidized Loan and Direct Unsubsidized Loan combined borrowing limit applicable to the student's program level and class level. The calculation shown in the text box below is used to determine the amount that a student may borrow through a Direct Unsubsidized Loan. <4.2.3.3. Direct PLUS Loans> Direct PLUS Loans are non-need-based. Graduate and professional students and the parents of dependent undergraduate students may borrow Direct PLUS Loans irrespective of the student's EFC. The amount that may be borrowed through a Direct PLUS Loan is limited to the result of subtracting the EFA (including any amount borrowed through a Direct Subsidized Loan or a Direct Unsubsidized Loan) of the student on whose behalf the loan will be made from the COA of the institution attended. The calculation shown in the text box below is used to determine the amount that a student or a parent may borrow through a Direct PLUS Loan. With regard to parent borrowing, the total Direct PLUS Loan eligibility amount may be borrowed by one parent, or it may be divided among more than one parent (including noncustodial parents) and borrowed in separate amounts by each. <5. Interest on Direct Loan Program Loans> Interest is charged on loans made through the Direct Loan program. It constitutes a charge for the use of borrowed money over a specified period of time. In the Direct Loan program, interest is calculated based on rates that are set according to formulas specified in the HEA. Interest accrual is calculated using a simple daily interest formula. The federal government offers several types of interest subsidies that may limit the amount of interest that accrues on the outstanding principal balance of a loan. In certain circumstances, a borrower may be permitted to defer paying some or all of the interest that has accrued on his or her loan(s) until a later point in time. If a borrower does not pay the interest that has accrued, it may, in certain circumstances, be capitalized (i.e., added to the outstanding principal balance of the borrower's loan). <5.1. Interest Rates> Interest rates on loans made through the Direct Loan program are set according to procedures specified by statute. Since the inception of the Direct Loan program in 1994, a variety of different procedures have been used for setting student loan interest rates. The loans currently being made through the Direct Loan program have fixed interest rates that remain constant from the time a loan is made until it is paid in full. Since July 1, 2013, Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans, have been made with fixed interest rates that are indexed to the interest rates on 10-year U.S. Treasury notes that are auctioned just prior to the start of the academic year during which the loans are made. Since February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that are based on the weighted average of the interest rates on the loans that are included in the Direct Consolidation Loan. Previously, other procedures had been used for setting student loan interest rates, and a number of loans that had been made according to these prior procedures remain outstanding. <5.1.1. Procedures for Setting Student Loan Interest Rates> The various procedures that have been used for setting interest rates on loans made through the Direct Loan program can be broadly categorized as follows: (1) variable interest rates that are indexed to the interest rates on short-term U.S. Treasury securities that are auctioned just prior to the start of the academic year during which the rate will be in effect, (2) fixed interest rates that are set according to the weighted average of the interest rates of the loans included in a Direct Consolidation Loan, (3) fixed interest rates that are specified in statute, and (4) fixed interest rates that are indexed to the interest rates on long-term U.S. Treasury securities that are auctioned just prior to the start of the academic year during which the loans are made. Because loans with interest rates that have been set according to each of these categories still remain outstanding, each is briefly discussed below. Appendix C presents a detailed history of the various procedures that have been used to set the interest rates that apply to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans ( Table C-2 ); the procedures that have been used to set the interest rates that apply to Direct Consolidation Loans ( Table C-3 ); and the interest rates that have been in effect on these loans on a year-by-year basis ( Table C-4 ). <5.1.1.1. Variable Interest Rates Indexed to Short-Term U.S. Treasury Securities> At the inception of the Direct Loan program in 1994, all loan types were made with variable interest rates that would adjust once per year on July 1. On variable rate loans, the applicable interest rate is determined according to a formula specified in statute. For each 12-month period that extends from July 1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 91-day U.S. Treasury bills (or other short-term U.S. Treasury securities) auctioned at the final auction held prior to the preceding June 1. An interest rate add-on increases the rate above the rate of the index. Different interest rate add-ons may apply to loans depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the status of the loan (e.g., in school, grace, repayment), and when the loan was made. An interest rate cap of 8.25% applies to variable rate Direct Subsidized Loans and Direct Unsubsidized Loans and the portion of a variable rate Direct Consolidation Loan attributable to such loans. An interest rate cap of 9.0% applies to variable rate Direct PLUS Loans and the portion of a variable rate Direct Consolidation Loan attributable to a PLUS Loan. Direct Consolidation Loans were made with variable interest rates through January 31, 1999, while all other types of Direct Loan program loans continued to be made with variable interest rates through June 30, 2006. <5.1.1.2. Fixed Interest Rates on Direct Consolidation Loans> Since February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that remain in effect for the duration of the loan. The applicable interest rate on a Direct Consolidation Loan is determined by calculating the weighted average of the interest rates in effect on the loans being consolidated, and rounding the result up to the nearest higher one-eighth of 1%. If a borrower obtains a Direct Consolidation Loan to repay one or more loans having a variable interest rate, the weighted average of the interest rates in effect on the loans being consolidated will be used to set the fixed rate that will apply for the duration of the new Direct Consolidation Loan. For Direct Consolidation Loans made during the period from February 1, 1999, through June 30, 2013, the maximum interest rate was capped at 8.25%. There is no maximum interest rate for Direct Consolidation Loans made on or after July 1, 2013. <5.1.1.3. Fixed Interest Rates Specified in the HEA> During the period from July 1, 2006, through June 30, 2013, all loans made through the Direct Loan program, with the exception of Direct Consolidation Loans, were made with fixed interest rates that were determined by Congress and specified in statute. Different fixed interest rates applied depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the program level for which it was borrowed (e.g., undergraduate, graduate), and the academic year for which the first disbursement of the loan was made (e.g., AY2007-2008, AY2008-2009). For these loans, the interest rate that was in effect when the loan was made remains in effect for the duration of the loan. <5.1.1.4. Fixed Interest Rates Indexed to Long-Term U.S. Treasury Securities> With the exception of Direct Consolidation Loans, all loans made through the Direct Loan program on or after July 1, 2013, have market-indexed fixed interest rates. For these loans, the applicable interest rate is set according to a formula specified in statute and remains in effect for the duration of the loan. For new loans made during each 12-month period that extends from July 1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 10-year U.S. Treasury notes auctioned at the final auction held prior to the preceding June 1. An interest rate add-on increases the applicable borrower rate above the rate of the index. Different interest rate add-ons apply depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan) and the program level for which it was borrowed (e.g., undergraduate, graduate). An interest rate cap of 8.25% applies to Direct Subsidized Loans and to Direct Unsubsidized Loans made to undergraduate students; a cap of 9.5% applies to Direct Unsubsidized Loans made to graduate and professional students; and a cap of 10.5% applies to all Direct PLUS Loans. The interest rates applicable to loans being made through the Direct Loan program in AY2019-2020 are presented below in Table 2 . <5.2. Interest Accrual> Interest accrual is the process through which interest accumulates over time. In the Direct Loan program, the accrual of interest is calculated using a simple daily interest formula. With this formula, interest accrues only on the outstanding principal balance (OPB) of the loan. This is in contrast to a compound interest formula, in which interest accrues on both the OPB of the loan and any interest that has accrued during a prior period. In a limited set of circumstances, accrued interest that has not been paid by a borrower may be capitalized, or added to the OPB of the loan. This is discussed below in the " Interest Capitalization " section. According to the simple daily interest formula used in the Direct Loan program, the amount of interest that accrues over a certain period of time is the product of (1) the number of days of interest being calculated (e.g., days since the last payment was made), (2) the OPB of the loan, and (3) an interest rate factor. The interest rate factor is the quotient of the applicable interest rate of the loan divided by the number of days in a year (365.25). An example of the calculation of accrued interest over a 30-day period is provided in the text box below. For loans made through the Direct Loan program, interest begins to accrue on the OPB once the first installment of a loan is disbursed. Unless it is subsidized (see " Subsidized Interest "), interest accrues during the entirety of the period that a loan is in effect, irrespective of whether the borrower is expected to be making payments on it. <5.3. Subsidized Interest> In a limited set of circumstances, the federal government subsidizes some or all of the interest that would otherwise accrue on loans made through the Direct Loan program. During periods when an interest subsidy is provided, borrowers are relieved of the requirement to pay the interest that would accrue. The availability of an interest subsidy depends on factors such as the type of loan borrowed, Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers, eligibility for an authorized deferment, the repayment plan selected, and the borrower's status as a servicemember in the Armed Forces. Interest subsidies that may be available on loans made through the Direct Loan program are described below. <5.3.1. Interest Subsidy on Direct Subsidized Loans> On Direct Subsidized Loans, and on the subsidized component of Direct Consolidation Loans, interest is subsidized by the government (i.e., interest does not accrue) during 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, and during periods of authorized deferment. Due to amendments to the HEA made by the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), interest is not subsidized during the grace period on Direct Subsidized Loans disbursed between July 1, 2012, and June 30, 2014. <5.3.1.1. Limit on Direct Subsidized Loan Interest Subsidy if 150% of Published Academic Program Length is Exceeded> For a borrower to whom the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers applies, eligibility both to borrow a Direct Subsidized Loan and to receive the interest subsidy on Direct Subsidized Loans previously obtained is limited to a period that may not exceed 150% of the published length of the academic program in which the student is enrolled. If a Direct Subsidized Loan borrower subject to this provision remains enrolled beyond the applicable maximum eligibility period, the borrower will lose the interest subsidy and will become responsible for paying the interest that accrues on his or her Direct Subsidized Loans after the date that the maximum eligibility period is exceeded. <5.3.2. Interest Rate Reduction for Automatic Debit Repayment> The HEA authorizes the Secretary of Education (the Secretary) to offer borrowers of loans made through the Direct Loan program an interest rate reduction as an incentive for having loan payments automatically debited from a bank account. The Secretary currently offers a 0.25 percentage point interest rate reduction for automatic debit repayment. This option helps ensure that borrowers make their student loan payments on time. The interest rate reduction for automatic debit repayment does not apply during in-school, grace, deferment, or forbearance periods. <5.3.3. Interest Subsidies on Eligible Loans Repaid According to Certain Income-Driven Repayment (IDR) Plans During Negative Amortization> Interest subsidies are provided on certain types of loans repaid according to the Income-Based Repayment (IBR) plans, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan during periods when a borrower's loans are in negative amortization. (Details of these income-driven repayment plans are described below in " Loan Repayment Plans " section.) A common characteristic of these IDR plans is that an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans for a maximum of the first three consecutive years that the borrower repays according to the applicable IBR plan. In addition, in the REPAYE plan an extended, partial interest subsidy is provided on all eligible loan types. These IDR plan interest subsidies are described in greater detail below. <5.3.3.1. Three-Year Interest Subsidy on Direct Subsidized Loans Repaid According to Certain IDR Plans During Negative Amortization> The structure of the IBR, PAYE, and REPAYE plans provide that in certain instances, a borrower's required monthly payment amount may be insufficient to pay all of the interest that has accrued on the borrower's Direct Subsidized Loans, or on the subsidized component of a Direct Consolidation Loan. In such instances, the Secretary does not charge the borrower for the amount of the accrued interest that is in excess of the applicable monthly payment amount (referred to as the remaining accrued interest ) for a period of up to the first three years from the date the borrower began repaying according to the IDR plan. For borrowers who switch repayment plans and repay their loans sequentially according to more than one of the IDR plans under which a subsidized loan interest subsidy is provided, a cumulative three-year limit on receipt of the interest subsidy applies to periods of repayment made under any of the aforementioned IDR plans. Any periods during which the borrower receives an economic hardship deferment and during which an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans are excluded from the three-year eligibility limit. <5.3.3.2. 50% Interest Subsidy on All Eligible Loan Types Repaid According to the REPAYE Plan During Negative Amortization> In addition to the three-year interest subsidy of the remaining accrued interest on Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans described above, the REPAYE plan includes a 50% subsidy of the remaining accrued interest on all loans. Beyond the three-year period for Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans (described above), and during all periods of repayment on other eligible loans, in the instance that a borrower's required monthly payment amount is insufficient to pay all of the interest that has accrued on his or her loans, the Secretary charges the borrower for only 50% of the remaining accrued interest. There is no time limit on receipt of the REPAYE plan 50% interest subsidy. <5.3.4. No Accrual of Interest on Loans of Certain Active Duty Servicemembers> For all types of loans made through the Direct Loan program that were first disbursed on or after October 1, 2008, no interest accrues during a period of up to 60 months while the borrower is serving on active duty in the Armed Forces or is performing qualifying National Guard duty in an area of hostilities during a war or national emergency. For Direct Consolidation Loans, the no accrual of interest subsidy applies only to the portion of the loan that was used to repay other loans that were first disbursed on or after October 1, 2008. <5.3.5. SCRA 6% Interest Rate Cap on Loans of Borrowers Who Enter Military Service> The Servicemembers Civil Relief Act (SCRA) provides that for individuals who borrow loans after August 14, 2008, but prior to their entrance into military service, the interest rate on their loans must be capped at a rate of 6% for the duration of their military service. The federal government, as the creditor on loans made through the Direct Loan program, must forgive interest above the 6% rate and may not accelerate repayment of the loans. Loan servicers are required to regularly check with the U.S. Department of Defense Manpower Data Center (DMDC) to determine whether borrowers qualify for the SCRA 6% interest rate cap and to extend the benefit to borrowers. Borrowers also have the option of completing an SCRA Interest Rate Limitation Request and submitting it to their loan servicer to document their eligibility for the 6% interest rate cap. <5.3.5.1. SCRA 6% Interest Rate Cap and Direct Consolidation Loans> If a borrower repays one or more loans on which the interest rate has been reduced to 6% under the SCRA with a Direct Consolidation Loan, the 6% interest rate is required to be used as the applicable interest rate on those loans for purposes of determining the weighted average interest rate of the new Direct Consolidation Loan. In such an occurrence, because Direct Consolidation Loans are currently being made with fixed interest rates, the 6% rate would essentially be locked in and would remain in effect beyond the end of the borrower's period of military service. <5.3.6. Interest Subsidy on All Loan Types During Cancer Treatment Deferment> A Cancer Treatment Deferment is to be provided during periods while a borrower is receiving treatment for cancer and for the six months thereafter. During periods while a borrower receives this deferment, no interest accrues on his or her qualifying loans. The Cancer Treatment Deferment is available on all types of Direct Loan program loans that are either made on or after September 28, 2018, or that had entered repayment status on or before September 28, 2019. This benefit does not appear to be available for loans that were made prior to September 28, 2019, but had not yet entered repayment prior to that date. <5.4. Deferred Payment of Accrued Interest> In certain instances, the obligation of a borrower to pay the interest that accrues on the outstanding principal balance of loans made through the Direct Loan program may be deferred. For instance, during in-school, grace, deferment, and forbearance periods, borrowers are not required to make payments of either principal o r the interest that accrues on the OPB. Also, for a borrower whose loans are in repayment status and who is repaying according to an IDR plan, if the amount of his or her required monthly payment is less than the amount of interest that has accrued on the loans, the payment of any accrued interest owed that is in excess of the required monthly payment amount may be deferred. Nonetheless, except to the extent that a borrower is receiving an interest subsidy, interest continues to accrue on his or her loans during periods while repayment of accrued interest is deferred. <5.4.1. Negative Amortization> The term negative amortization describes the situation in which the amount of interest that accrues on a loan over a given period of time is greater than the amount of payments that are made on it. In a case of negative amortization, the accumulation of unpaid accrued interest leads to the outstanding balance of principal and interest on the loan increasing over time. The deferred payment of accrued interest during periods of repayment according to the IDR plans (see " Income-Driven Repayment (IDR) Plans ") may lead to negative amortization. <5.5. Interest Capitalization> On certain occasions, any interest that has accrued but not been paid by a borrower may be added to the outstanding principal balance of the borrower's loans. This is called interest capitalization. When interest is capitalized, it becomes part of the OPB and interest begins to accrue on that new, larger loan amount. Over time, interest capitalization increases the total amount a borrower is required to repay. Interest is capitalized in the following situations: Entering R epayment Status . Any unpaid interest that has accrued on a borrower's loans during the in-school and grace periods is capitalized at the time a borrower's loan enters repayment status. Loan Consolidation. Any interest that has accrued on a borrower's loan and remains unpaid when the borrower includes the loan in a Direct Consolidation Loan is capitalized upon consolidation. Annually, in ICR and Alternative Repayment Plans. Any unpaid interest that has accrued on a borrower's loan while the borrower is repaying according to the income-contingent repayment (ICR) plan or one of the alternative repayment plans is capitalized annually. End of Partial Financial Hardship . Any unpaid interest that has accrued on a borrower's loans during a period when he or she was repaying according to either of the IBR plans or the PAYE repayment plan and had a partial financial hardship is capitalized when the borrower is determined to no longer have a partial financial hardship. Exit from IBR, PAYE, or REPAYE Repayment Plan. Any unpaid interest that has accrued on a borrower's loan during a period when he or she was repaying according to the IBR, PAYE, or REPAYE repayment plans is capitalized at the time the borrower changes to a different repayment plan. End of Deferment or Forbearance. Any unpaid interest that has accrued on a borrower's loan during a period of deferment or forbearance is capitalized at the expiration of the respective period. However, if during the period of deferment or forbearance a borrower was repaying according to either of the IBR plans or the PAYE repayment plan and was experiencing a partial financial hardship, any interest that accrued during the period of deferment or forbearance will not be capitalized so long as the borrower continues to have a partial financial hardship. Default. Any unpaid interest that has accrued on a borrower's loan prior to the borrower defaulting (e.g., during periods of negative amortization, during delinquency) is capitalized at the time of default. <5.5.1. Limit on Interest Capitalization in the IDR and Alternative Repayment Plans> For borrowers who are repaying their loans according to some of the IDR plans or an alternative repayment plan, the amount of interest that may be capitalized is capped. For borrowers repaying their loans according to the ICR plan, the PAYE repayment plan, or the alternative repayment plans, interest may be capitalized until the outstanding principal balance reaches a maximum of 110% of the amount of the OPB owed at the time the borrower entered repayment. Once the limit is reached, interest will continue to accrue and accumulate, but it will no longer be capitalized as long as the borrower remains in the same repayment plan. <6. Loan Origination Fees> Loan origination fees are charged to borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. No fees are charged to borrowers of Direct Consolidation 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. The amount to be charged for loan origination fees is specified in statute. For Direct Subsidized Loans and Direct Unsubsidized Loans made on or after July 1, 2010, the HEA specifies a loan origination fee of 1%. (Higher loan origination fees were charged on loans made prior to July 1, 2010.) Since the inception of the Direct Loan program, the HEA has specified a loan origination fee of 4% for Direct PLUS Loans. During periods when a budget sequestration order that applies to direct (or mandatory) spending programs is in effect, such as for the Direct Loan program, special rules apply to loan origination fees. In instances where the first disbursement of a loan is made during a period that is subject to a sequestration order, the loan origination fee is required to be increased by the uniform percentage sequestration amount that is applicable to nondefense, mandatory spending programs. Loan origination fees that apply to loans made during FY2019 and FY2020 (periods of budget sequestration) are presented below in Table 3 . A history of loan origination fees that previously applied to loans made through the Direct Loan program is presented in Appendix C in Table C-5 . <7. Loan Repayment> Borrowers are required to make payments on loans made through the Direct Loan program during a repayment period that, depending on the loan type, commences either upon the loan being fully disbursed (Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006) or after a six-month grace period (Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loans). Borrowers are afforded the opportunity to choose from among a selection of numerous loan repayment plan options to repay their loans. The repayment plan selected is a determining factor in the duration of the repayment period. Borrowers may prepay all or any part of a loan made through the Direct Loan program at any time without being subject to a prepayment penalty. <7.1. Grace Period> A grace period is a six-month period beginning immediately after a borrower of a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a pre-July 1, 2006, Direct Consolidation Loan first ceases to be enrolled in an eligible program on at least a half-time basis. The grace period excludes any period of up to three years during which a borrower who is a member of a reserve component of the Armed Forces is called or ordered to active duty for a period of more than 30 days and thus ceases to be enrolled on at least a half-time basis, as well as any additional period necessary for such a borrower to resume enrollment at the next available regular enrollment period. The grace period is distinct from and not part of the repayment period. A loan on which a grace period is provided does not enter repayment status until the day after the grace period ends. If a borrower desires to enter repayment on loans that have a grace period immediately after completing school or ceasing to be enrolled on at least a half-time basis, he or she may consolidate those loans into a Direct Consolidation Loan during the grace period and enter repayment on the Direct Consolidation Loan upon its disbursement. <7.2. Loan Repayment Period> In the Direct Loan program, the repayment period is the period during which borrowers are obliged to repay their loans. The repayment period for Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loan begins the day after the grace period ends. Thus, for these types of loans the loan repayment period begins six months and one day after the borrower first ceases to be enrolled in an eligible program on at least a half-time basis. The repayment period for Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006, begins the day the loan is fully disbursed. (This would be the day of the last disbursement if the loan has multiple disbursements.) For all loan types, the first payment is due no later than 60 days after the start of the repayment period. In general, the repayment period excludes any periods of authorized deferment and forbearance; however, in certain instances of a borrower repaying a loan according to an IDR plan, periods during which the borrower is receiving an economic hardship deferment may be considered as part of the repayment period. In instances where a borrower has entered a period of deferment or forbearance, the next subsequent payment is due no later than 60 days after the end of the deferment or forbearance period. <7.3. Loan Repayment Plans> Borrowers may choose from among numerous loan repayment plan options to repay their loans. The available repayment plans fall into five broad categories: standard repayment plans, extended repayment plans, graduated repayment plans, income-driven repayment (IDR) plans, and alternative repayment plans. The particular repayment plans available to any individual borrower may depend on the type(s) of loans borrowed, the date of becoming a new borrower , or the date of entering repayment status. In general, all of a borrower's loans made through the Direct Loan program must be repaid together according to the same repayment plan. However, if a borrower seeking to repay according to one of the IDR plans has some types of loans that may be repaid according to an IDR plan and some that may not, the borrower may repay the eligible loans according to an IDR plan and the ineligible loans according to a non-IDR plan. If a borrower fails to actively select a repayment plan, he or she is placed into the standard repayment plan that is applicable to the loans. In general, a borrower may change from one plan to another eligible plan at any time and may not change to a repayment plan that has a maximum repayment period of fewer than the number of years that the borrower's loans have already been in repayment status. If a borrower changes plans to any of the standard repayment plans, graduated repayment plans, extended repayment plans, or alternative repayment plans, the beginning of the applicable repayment period will be measured from the date that the borrower's loan initially entered repayment status. If a borrower changes to one of the IDR plans, the beginning of the repayment period will be measured from the date the borrower satisfied certain plan-specific criteria, as described below, for the applicable IDR plans. Under the standard repayment plans, graduated repayment plans, extended repayment plans, and most alternative repayment plans, payment amounts may not be less than the amount of accrued interest that is due. Negative amortization is permitted in the IDR plans and as part of one alternative repayment plan option. Also, for loans with variable interest rates (which had been made prior to July 1, 2006), monthly payment amounts or the length of the repayment period may be adjusted under the standard repayment plans, graduate repayment plans, and extended repayment plans to take into account the effects of annual changes in the variable interest rate. Table 4 provides a summary of selected characteristics of the various loan repayment plans that are made generally available to borrowers. Following the table, the various repayment plans are described in detail. <7.3.1. Standard Repayment Plans> Standard repayment plans allow borrowers to make predictable, level payments on their loans over a defined period of time. Two standard repayment plans are offered. <7.3.1.1. Standard Repayment Plan with a Maximum 10-Year Term> All borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans, and borrowers of Direct Consolidation Loans that entered repayment prior to July 1, 2006, may select a standard repayment plan that has a maximum repayment period of 10 years. According to this plan, borrowers make fixed monthly payments of not less than $50 over a period of 10 years; however, loans with small balances may be repaid in a period that is shorter than 10 years. <7.3.1.2. Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms> Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a standard repayment plan that has a repayment period of between 10 and 30 years. Under this plan, borrowers make fixed monthly payments of not than less than $50. The duration of the repayment period is based on the combined balances of the Direct Consolidation Loan and all other federal and private education loans owed by the borrower. However, for purposes of determining the repayment period, the combined balance of the other education loans may not be greater than the balance of the Direct Consolidation Loan. Repayment periods for the Standard Repayment Plan for Direct Consolidation Loans are shown in Table 5 . (The repayment periods shown also apply to the Graduated Repayment Plan for Direct Consolidation Loans, which is discussed in a later section.) <7.3.2. Extended Repayment Plans> All borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans may elect to repay according to an extended repayment plan. The extended repayment plans afford borrowers with large total loan balances the opportunity to make lower monthly payments in return for extending the repayment of their loans for a longer duration. By extending the repayment term, interest accrues over a longer period of time; as a consequence, a larger amount of interest is paid under an extended repayment plan than would be paid according to a standard repayment plan with a 10-year term. There are three extended repayment plans. Eligibility to select an extended repayment plan is limited based on when a borrower's loans entered repayment and the total outstanding principal balance owed on loans made through the Direct Loan program. <7.3.2.1. Extended Fixed Repayment Plan with a Maximum 25-Year Term> This repayment plan is available to individuals who are new borrowers on or after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance of more than $30,000 on loans made through the Direct Loan program. The Extended Fixed Repayment Plan allows borrowers to make monthly payments in equal amounts over a period of 25 years from the date their loans entered repayment status. This results in monthly payment amounts being lower than they would be under a standard repayment plan with a 10-year term. <7.3.2.2. Extended Graduated Repayment Plan with a Maximum 25-Year Term> Like the above plan, this repayment plan is available to individuals who are new borrowers on or after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance of more than $30,000 on loans made through the Direct Loan program. The Extended Graduated Repayment Plan allows borrowers to make monthly payments that are initially low and increase in amount every two years over a repayment period of 25 years from the date the borrower's loans entered repayment status. Under this plan, monthly payment amounts increase from an initial payment amount that must be at least $50 to an amount that may not be greater than three times the initial monthly payment amount. <7.3.2.3. Extended Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)> This extended repayment plan is available to borrowers of loans made through the Direct Loan program who entered repayment prior to July 1, 2006. Under this plan, borrowers make monthly payments in equal amounts over a period that may range from 12 to 30 years from the date their loans entered repayment status. The minimum monthly payment amount is $50, and the duration of the repayment term is dependent upon the outstanding principal balance of the borrower's loans made through the Direct Loan program. The extension of the repayment term results in monthly payment amounts being lower than they would be under a standard repayment plan with a 10-year term. Repayment periods for the extended repayment plan, by loan amount, are shown below in Table 6 . (The repayment periods shown in this table also apply to the graduated repayment plan for borrowers who entered repayment prior to July 1, 2006, which is discussed in the next section.) <7.3.3. Graduated Repayment Plans> Loan repayment according to the graduated repayment plans is structured so that a borrower's monthly payment amount will periodically change over the course of the repayment period. In general, borrowers will be required to make smaller payments at first and larger payments later. Monthly payment amounts may be less than $50; however, in no instance may they be less than the amount of interest that accrues. There are three graduated repayment plans. A borrower's eligibility to select one of the graduated repayment plans depends on loan type and when the borrower's loans entered repayment. <7.3.3.1. Graduated Repayment Plan with a Maximum 10-Year Term> All borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans that entered repayment after July 1, 2006, may select a graduated repayment plan that has a maximum repayment period of 10 years. Under this plan, monthly payment amounts increase incrementally every two years from an initial amount that may be less than $50 to an amount that may not be greater than three times the initial monthly payment amount. <7.3.3.2. Graduated Repayment Plan for Direct Consolidation Loanswith 10-Year to 30-Year Terms> Borrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a graduated repayment plan that has a repayment period of between 10 and 30 years. Under this plan, monthly payment amounts increase incrementally every two years from an initial amount that may be less than $50 to an amount that may not be greater than three times the initial monthly payment amount. The duration of the repayment period is based on the combined balances of the Direct Consolidation Loan and all other federal and private education loans owed by the borrower. However, for purposes of determining the repayment period, the combined balance of the other education loans may not be greater than the balance of the Consolidation Loan. Repayment periods for the Graduated Repayment Plan for Direct Consolidation Loans are shown above in Table 5 . <7.3.3.3. Graduated Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)> Borrowers of loans made through the Direct Loan program who entered repayment prior to July 1, 2006, may repay their loans according to a graduated repayment plan with a term that can range from 12 to 30 years. Under this plan, monthly payment amounts increase incrementally every two years from an initial amount that may not be less than either $25 or 50% of the amount that would be required under the Standard Repayment Plan with a Maximum 10-Year Term to an amount that may be no more than 150% of the amount that would be required under the Standard Repayment Plan with a Maximum 10-Year Term. The duration of the repayment term is determined based on the total outstanding principal balance of the borrower's loans made through the Direct Loan program. Repayment periods for this graduated repayment plan vary by loan balance, and are shown above in Table 6 . <7.3.4. Income-Driven Repayment (IDR) Plans> Since its establishment, the Direct Loan program has included a requirement that a repayment plan be made available to borrowers (other than to parent borrowers of Direct PLUS Loans) under which monthly payment amounts would vary according to the income of the borrower. For the first 15 years that the Direct Loan program was in operation, an Income-Contingent Repayment (ICR) plan fulfilled this requirement. Over time, additional repayment plans that served this purpose became available. Collectively, these plans have come to be referred to as income-driven repayment (IDR) plans. Several IDR plans are currently available to borrowers: the Income-Contingent Repayment plan, the Income-Based Repayment (IBR) plan (one version of which is available to individuals who qualify as a new borrower on or after July 1, 2014, and another which is available to individuals who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan. The IDR plans afford borrowers the opportunity to make monthly payments in amounts that are capped at a specified share or proportion of their discretionary income over a repayment period that may not exceed a specified duration . Discretionary income is defined as the portion of a borrower's adjusted gross income (AGI) that is in excess of a specified multiple of the federal poverty guidelines applicable to the borrower's family size. In general, a borrower's family size includes the borrower, the borrower's spouse, and the borrower's children, and may include other individuals who both live with the borrower and receive more than half of their support from the borrower. The portion of a borrower's income that is below the federal poverty guideline multiple that is applicable to a particular IDR plan may be considered nondiscretionary income, or income that may be needed for purposes of meeting certain basic needs such as food and shelter. Multiples of the federal poverty guidelines that are applicable to the IDR plans are presented below in Table 7 for family sizes of one through eight persons. The various IDR plans are primarily distinguished by (1) the multiple (e.g., 100%, 150%) of the federal poverty guidelines used to define discretionary income, (2) the percentage of a borrower's discretionary income (e.g., 10%, 15%, 20%) that is assessed as being available for purposes of making student loan payments, and (3) the maximum duration of the repayment term (e.g., 20 years, 25 years). The IDR plans also share other common characteristics that include the following: Required certification of income and family size. The processes for determining IDR plan monthly payment amounts take into account a borrower's income and family size. Consequently, on an annual basis borrowers must provide documentation of their income and must certify their family size to become and remain eligible for IDR plan repayment. In addition, borrowers may update their income and family size at any time if either changes. Potential n egative amortization. IDR plan payment amounts are capped at no more than a certain proportion of a borrower's discretionary income. As a result, in some circumstances required payment amounts may be less than the amount of interest that accrues, which may lead to a borrower's loan(s) becoming negatively amortized. Potential availability of l oan forgiveness. All the IDR plans make available the prospect of eventual loan forgiveness if a borrower, after making payments according to one or more of the IDR plans, has been unable to fully repay his or her student loan debt by the end of the maximum repayment term. Payments made on defaulted loans repaid according to the IDR plans do not count toward a borrower's eligibility for loan forgiveness. Each of the IDR plans are described in detail below. <7.3.4.1. Income-Contingent Repayment (ICR) Plan> The Income-Contingent Repayment plan permits borrowers to make payments on eligible student loans in amounts that are determined according to procedures that take into account a borrower's adjusted gross income and family size. Any loan balance that remains unpaid after 25 years of repayment according to the ICR plan and other qualified plans will be forgiven. Specifications for the ICR plan are established by the Secretary and are codified in regulations. An income-contingent repayment plan has been available to borrowers since the establishment of the Direct Loan program in 1994. Eligibility. The ICR plan is available to all borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate and professional students, and Direct Consolidation Loans. Direct PLUS Loans made to parent borrowers are not eligible to be repaid according to the ICR plan; however, parent borrowers of Direct PLUS Loans may qualify to repay those loans according to the ICR plan by consolidating them into a Direct Consolidation Loan. There are no specific income restrictions that limit a borrower's eligibility to repay according to the ICR plan. Payment Amounts. Under the ICR plan, monthly payment amounts are calculated according to procedures that take into account factors including the outstanding loan balance at the time the borrower's loans enter repayment status, the interest rates applicable to those loans, the amount of any unpaid accrued interest, the borrower's adjusted gross income (AGI) and family size, and an income percentage factor. For a married borrower who files a joint federal tax return with his or her spouse, the AGI for both spouses is used; for a married borrower who files a separate federal tax return, only the AGI of the borrower is used. Consistent with these criteria, monthly payment amounts are the lesser of a monthly payment amount calculated according to a 12-year amortization schedule, multiplied by an income percentage factor that corresponds to the borrower's AGI and tax filing status; or one-twelfth of 20% of the amount by which the borrower's AGI exceeds 100% of the federal poverty guideline applicable to the borrower's family size (see Table 7 ). Monthly payment amounts may range from $0 for a borrower with an income at or below 100% of the federal poverty guideline to amounts more than sufficient to repay the borrower's loans in 12 years or less. For a borrower whose calculated monthly payment results in an amount that is greater than $0 but less than $5, a minimum monthly payment amount of $5 is required. Monthly payment amounts are recalculated annually to take into account changes (e.g., borrower AGI, the amount of any unpaid accrued interest) that may have occurred over the past year. Joint ICR Plan Repayment for Married Borrowers . Borrowers of loans made through the Direct Loan program who are married to each other may elect to repay their loans jointly. Married borrowers must file a joint federal tax return to qualify for Joint ICR plan repayment. Under this option, the sum of the outstanding loan balances of each borrower, as of the time they elect joint repayment, is used to determine their combined monthly payment amount according to the procedures described above for the ICR plan. Payments made by married borrowers repaying jointly are applied to each borrower's loans in proportion to each borrower's share of the combined outstanding balance. Subsidized Interest . No special interest subsidies are made available to borrowers as part of the ICR plan. Application of Payments. Payments made by borrowers under the ICR plan are first applied to any outstanding charges or collection costs, then to outstanding interest due on the loan, and then to principal. Under the ICR plan formula, it is possible that a borrower's monthly payment amount may be for less than the amount of interest that has accrued since the last payment. Should this occur, interest will continue to accrue on the outstanding principal balance and unpaid interest that has accumulated will be capitalized into the principal balance of the loan once per year. However, unpaid accrued interest may only be capitalized until the outstanding principal balance reaches 110% of the amount of the original principal balance as of when the borrower's loan(s) entered repayment. Once the OPB has reached 110% of the original principal balance, unpaid accrued interest may continue to accumulate but will no longer be capitalized. Failure to Certify Income and Family Size . To qualify and remain eligible to repay according to the ICR plan, borrowers must annually provide certification of their income and family size to ED. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, his or her monthly payment amount will be recalculated to equal the amount the borrower would have paid according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay according to the ICR plan. The repayment period based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year. Maximum Repayment Period and Loan Forgiveness . The ICR plan has a maximum repayment period of 25 years. If a borrower repays according to the ICR plan and obtains an additional loan that is eligible to be repaid according to the plan, a new, separate repayment period will begin for the new loan when it enters repayment. If after 25 years of having repaid a nondefaulted loan or loans according to the ICR plan or certain other repayment plans, or having qualified for and received an economic hardship deferment, a borrower still has an outstanding loan balance, the remaining unpaid balance will be discharged (i.e., forgiven). The maximum 25-year repayment period for the ICR plan, after which loan forgiveness may be granted, includes periods during which the borrower made monthly payments (including payments of $0) according to the ICR plan, made monthly payments (including payments of $0) according to an IBR plan while experiencing a partial financial hardship; made monthly payments, either as part of an IBR plan after no longer having a partial financial hardship or after leaving an IBR plan, in amounts calculated according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the outstanding balance as of when the borrower first began repaying according to an IBR plan; made monthly payments (including payments of $0) according to the PAYE repayment plan or the REPAYE repayment plan; made monthly payments according to the REPAYE Alternative Repayment plan prior to changing to an IBR plan; made monthly payments on a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan according to the Standard Repayment Plan with a Maximum 10-Year Term during the portion of the maximum 10-year repayment period that remains after the borrower ceases to repay according to an IBR plan; made payments on a Direct Consolidation Loan according to the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms or the Graduate Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms during the portion of the maximum 10-year to 30-year repayment period that remains after the borrower ceases to repay according to an IBR plan; made monthly payments according to the Standard Repayment Plan with a Maximum 10-Year Term; made monthly payments during periods after October 1, 2007, according to any repayment plan in amounts not less than the amount required under the Standard Repayment Plan with a Maximum 10-Year Term; only for borrowers who entered repayment prior to October 1, 2007, and only if the applicable repayment term is for not more than 12 years, made payments according to the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms, the Extended Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms, or the Graduated Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms (see Table 5 ); or received an economic hardship deferment. <7.3.4.2. Income-Based Repayment (IBR) Plans> The Income-Based Repayment plans permit borrowers to repay eligible student loans according to procedures that limit monthly payment amounts based on criteria that take into account a borrower's adjusted gross income, family size, and monthly payment amount as calculated according to a standard 10-year repayment period, based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time the borrower elects to repay according to the IBR plan. Any loan balance that remains after the maximum repayment period of the plan will be forgiven. There are two IBR plan versions that function similarly. They are differentiated by (1) the date used to delimit borrower eligibility (July 1, 2014), (2) the percentage of discretionary income used to determine borrower eligibility for the plan and monthly payment amounts (15% or 10%), and (3) the maximum repayment period (25 years or 20 years). The description that follows distinguishes between the two IBR plan versions as applicable. The initial version of the IBR plan was established under the College Cost Reduction and Access Act of 2008 (CCRAA; P.L. 110-84 ), and on July 1, 2009, it became available to borrowers of loans made through the Direct Loan program and the FFEL program, irrespective of when an individual had borrowed a loan through either program. (Hereinafter, this version is referred to as the Original IBR p lan .) Amendments to the IBR plan were enacted in 2010 under the SAFRA Act (Title II of the HCERA; P.L. 111-152 ), and a revised version of the IBR plan was made available to individuals who, on or after July 1, 2014, became new borrowers of loans made through the Direct Loan program. (Hereinafter, this version is referred to as the IBR Plan for Post-July 1, 2014, New Borrowers .) Eligibility. With certain exceptions, federal student loans made through both the Direct Loan program and the FFEL program are considered eligible loans for purposes of repayment according to the Original IBR plan, while only loans made through the Direct Loan program are eligible for repayment according to the IBR plan for Post-July 1, 2014, New Borrowers. In both cases, exceptions pertain to loans made to parent borrowers. Direct PLUS Loans and FFEL PLUS Loans that were made to a parent borrower and Direct Consolidation Loans and FFEL Consolidation Loans that that were used to repay either a Direct PLUS Loan or a FFEL PLUS Loan that was made to a parent borrower are ineligible to be repaid according to either of the IBR plans. These loans to parent borrowers are also excluded from being considered when determining a borrower's eligibility for IBR plan repayment. This discussion addresses the IBR plans available through the Direct Loan program. Partial Financial Hardship. To be eligible to begin repaying according to an IBR plan, a borrower must be determined to have a partial financial hardship . The criteria for determining whether a borrower has a partial financial hardship take into account the borrower's federal income tax filing status (e.g., single, married filing jointly), AGI, family size, multiples of the federal poverty guidelines applicable to the borrower's family size, and monthly payment amounts as calculated according to a standard 10-year repayment period based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time the borrower elects to repay according to the IBR plan. If a borrower is single, or is married and files an individual federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, are greater than the applicable percentage (15% or 10%) of his or her discretionary income. If a borrower is married and files a joint federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the eligible loans of the borrower and, if applicable, the eligible loans of the borrower's spouse, as calculated according to a standard 10-year repayment period, are greater than the applicable percentage of the combined discretionary income of the borrower and the borrower's spouse. Discretionary income is defined as the portion of a borrower's adjusted gross income that is in excess of 150% of the poverty guideline that is applicable to his or her family size. If the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, do not exceed 15% or 10% of his or her discretionary income, as applicable, the borrower is no longer considered as having a partial financial hardship. Payment Amounts. During periods while a borrower has a partial financial hardship and repays according to an IBR plan, monthly amounts due on his or her loans may range from $0, for a borrower with an AGI that is at or below 150% of the poverty guideline, to a maximum of one-twelfth of the specified percentage factor (15% or 10%) of a borrower's discretionary income. For example, based on the 2019 HHS Poverty Guidelines, 150% of the poverty guideline for a family of one in the 48 contiguous states and the District of Columbia is $18,735. (See Table 7 .) In the Original IBR plan, a single borrower with an adjusted gross income of $40,000 would have a partial financial hardship if his or her annual student loan payments were greater than $3,189.75, or $265.81 per month. ($3,189.75 is 15% of the result of subtracting $18,735 from $40,000.) In the IBR plan for post-July 1, 2014, New Borrowers, a single borrower with an adjusted gross income of $40,000 would have a partial financial hardship if his or her annual student loan payments were greater than $2,126.50, or $177.21 per month. ($2,126.50 is 10% of the result of subtracting $18,735 from $40,000.) For a borrower whose calculated monthly payment results in an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated monthly payment results in an amount that is less than $5, the monthly payment is set at $0. Monthly payment amounts are recalculated annually to take into account changes that may have occurred over the past year. If a borrower who is repaying according to an IBR plan no longer demonstrates having a partial financial hardship or no longer desires to make payments based on income, he or she may remain in the IBR plan; however, the borrower's maximum required monthly payment amount will no longer be calculated according the formula described above. Nonetheless, the required payment amount may not exceed the monthly amount due, as calculated according to a standard 10-year repayment period based on the borrower's loan balance at the time he or she elected to begin repaying according to the IBR plan. However, in such a case the duration of the repayment period may exceed 10 years. Joint IBR Plan Repayment for Married Borrowers. Since July 1, 2010, the IBR plan has provided for the joint repayment of loans by married borrowers who both have eligible loans and who file a joint federal tax return. Individual payment amounts are proportional to each spouse's share of the couple's combined loan balances and combined AGI. Subsidized Interest . As part of the IBR plans, an interest subsidy is available on subsidized loans during periods of negative amortization for a maximum of the first three years from the start of a borrower's repayment according to an IBR plan. If a borrower's required monthly payment is not sufficient to cover all of the interest that accrues on a Direct Subsidized Loan (or the subsidized component of a Direct Consolidation Loan), the portion of the accrued interest not covered by the borrower's monthly payment is subsidized, or paid by the Secretary. Any periods during which the borrower has received an interest subsidy under either the PAYE plan or the REPAYE plan are applied toward this three-year period. However, any periods during which a borrower has received an interest subsidy while qualifying for an economic hardship deferment (during which an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of a Direct Consolidation Loan) are excluded from the three-year period. Application of Payments. Payments made by borrowers repaying under an IBR plan are first applied to interest due on the loan, then to any fees, and then to principal. If a borrower's required monthly payment is for an amount that is less than the amount of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the three-year interest subsidy period described above, the unpaid accrued interest will accumulate, but not be capitalized, so long as the borrower remains in the IBR plan and continues to have a partial financial hardship. If a borrower's required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of principal due, then the payment of any principal due in excess of the monthly payment amount owed will be postponed until the borrower no longer has a partial financial hardship or leaves the IBR plan. Upon a borrower either no longer having a partial financial hardship or electing to no longer repay according to an IBR plan, any accumulated accrued interest that has not been paid will be capitalized. If a borrower chooses to leave an IBR plan, he or she must change to the Standard Repayment Plan that is applicable to the loans either the Standard Repayment Plan with a Maximum 10-Year Term or the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms. (The borrower may subsequently change to another repayment plan; however, he or she may not change to a repayment plan other than a different IDR plan that has maximum term that is less than the number of years the borrower's loans have already been in repayment. ) The monthly payment amount due on the borrower's loans must be calculated according to the applicable standard repayment plan based on the time remaining in the repayment period under such plan and the outstanding balance owed at the time the borrower ceased repaying according to the IBR plan. A borrower who changes from the IBR plan to a standard repayment plan must make at least one monthly payment according to the standard repayment plan before changing to another repayment plan for which the borrower may be eligible. Borrowers may request a forbearance that permits the making of a smaller payment amount than otherwise would be required for purposes of making that one required monthly payment according to the Standard Repayment Plan. Failure to Certify Income and Family Size . To qualify and remain eligible to repay according to the IBR plans, borrowers must annually provide certification of their income and family size to ED. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, any unpaid accrued interest will be capitalized and his or her monthly payment amount will be recalculated to equal the amount the borrower would have paid according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay according to the IBR plan. The repayment period based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year. Maximum Repayment Period and Loan Forgiveness . The maximum repayment period for the Original IBR plan is 25 years, whereas the maximum repayment period for the IBR plan for post-July 1, 2014, New Borrowers is 20 years. If after having repaid according to an IBR plan a borrower obtains additional loans that are eligible to be repaid according to that IBR plan, a new repayment period will begin for the new loans when they enter repayment. A borrower who has participated in one of the IBR plans and has satisfied any combination of the following conditions for the duration of the applicable repayment period becomes eligible to have any balance that remains at the end of the maximum repayment period forgiven: made reduced monthly payments (including payments of $0) according to an IBR plan while experiencing a partial financial hardship; made monthly payments in amounts calculated according to the Standard Repayment Plan with a Maximum 10-Year Term after no longer having a partial financial hardship; made monthly payments on Direct Subsidized Loans, Direct Unsubsidized Loans, or Direct PLUS Loans according to the Standard Repayment Plan with a Maximum 10-Year Term, or on Direct Consolidation Loans according to the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms, as applicable, after choosing to no longer repay according to an IBR plan; made monthly payments according to any repayment plan in amounts not less than the amount required under the Standard Repayment Plan with a Maximum 10-Year Term; made monthly payments according to the Standard Repayment Plan with a Maximum 10-Year Term based on the amount owed at the time the borrower initially selected an IBR plan; made monthly payments (including payments of $0) according to the ICR plan, the PAYE repayment plan, or the REPAYE repayment plan; made monthly payments according to the REPAYE Alternative Repayment Plan prior to changing to an IDR plan; or received an economic hardship deferment. <7.3.4.3. Pay As You Earn (PAYE) Repayment Plan> The Pay As You Earn (PAYE) repayment plan is substantially similar to the IBR plan for post-July 1, 2014, New Borrowers (see above). The plan permits borrowers to repay eligible loans according to procedures that limit monthly payment amounts based on criteria that take into account a borrower's AGI, family size, and monthly payment amount as calculated according to a standard 10-year repayment period based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time he or she elects to repay according to the PAYE plan. For borrowers who repay according to this plan, any loan balance that remains after 20 years of repayment will be forgiven. The plan became available to eligible borrowers on December 21, 2012. The PAYE repayment plan was established by the Obama Administration through the rulemaking process under authority provided in the HEA for the Secretary to establish an income-contingent repayment plan. With the establishment of the PAYE repayment plan, a set of benefits substantially similar to those that had been extended to a specific class of borrowers through the enactment of legislation (the IBR Plan for post-July 1, 2014, New Borrowers) was extended to a broader class of borrowers through the rulemaking process. Eligibility. The PAYE repayment plan is available to individuals who are new borrowers on or after October 1, 2007, and have received a disbursement on a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan to graduate and professional students on or after October 1, 2011, or a Direct Consolidation Loan based on an application received by ED on or after October 1, 2011, and who are identified as having a partial financial hardship. Eligible borrowers may use the plan to repay loans made through the Direct Loan program, with the exceptions of Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers. Partial Financial Hardship. A borrower is considered as having a partial financial hardship if the total of his or her annual payments on all eligible loans, as calculated according to a standard 10-year repayment period based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time he or she elects to repay according to the PAYE plan, is greater than 10% of the amount by which the borrower's AGI exceeds 150% of the poverty line applicable to his or her family size. If a borrower is single, or is married and files an individual federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, are greater than 10% of his or her discretionary income. If a borrower is married and files a joint federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the borrower's eligible loans and, if applicable, the borrower's spouse's eligible loans, as calculated according to a standard 10-year repayment period, are greater than 10% of the combined discretionary income of the borrower and his or her spouse. If the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, do not exceed 10% of his or her discretionary income, the borrower is no longer considered as having a partial financial hardship. Payment Amounts. While repaying according to the PAYE repayment plan, monthly amounts due on borrowers' loans may range from $0, for those with incomes at or below 150% of the poverty line, to a maximum of one-twelfth of 10% of any amount by which the borrower's AGI exceeds 150% of the poverty line. If a borrower who is repaying according to the plan no longer demonstrates having a partial financial hardship or no longer desires to make payments based on income, the monthly payment amount will be recalculated. In such a case, the maximum monthly payment amount may not exceed the amount due as calculated according to the Standard Repayment Plan with a Maximum 10-Year Term based on the borrower's loan balance at the time he or she elected to begin repaying according to the PAYE repayment plan. However, the duration of the repayment period may exceed 10 years. For a borrower whose calculated monthly payment results in an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated monthly payment results in an amount that is less than $5, the monthly payment is set at $0. Monthly payment amounts are recalculated annually to take into account changes that may have occurred over the past year. Joint PAYE Repayment for Married Borrowers. The PAYE repayment plan provides for the joint repayment of loans by married borrowers who both have eligible loans and who file a joint federal tax return. For married borrowers repaying jointly according to the plan, individual payment amounts are proportional to each spouse's share of the couple's combined loan balances and combined AGI. Subsidized Interest . An interest subsidy is available on subsidized loans during periods of negative amortization for a maximum of the first three years from the start of repayment according to the PAYE repayment plan. If a borrower's calculated monthly payment is insufficient to pay all of the interest that accrues on a Direct Subsidized Loan (or the subsidized component of a Direct Consolidation Loan), the portion of the accrued interest that is not covered by his or her monthly payment is subsidized for a period not to exceed three years. Periods during which a borrower is receiving an economic hardship deferment are excluded from the three-year eligibility period. In general, the terms of this interest subsidy for subsidized loans are the same as the terms that apply to the IBR plans (see above). Application of Payments. Payments made by borrowers repaying according to the PAYE repayment plan are credited first to interest due on the loan, then to any fees, and then to principal. If a borrower's required monthly payment is for an amount that is less than the amount of interest that accrues, the unpaid accrued interest will accumulate, but not be capitalized, so long as the borrower remains in the plan and continues to have a partial financial hardship. If a borrower's required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of principal due, then the payment of any principal due in excess of the monthly payment amount owed will be postponed until he or she no longer has a partial financial hardship or leaves the plan. If a borrower no longer has a partial financial hardship but remains in the PAYE repayment plan, accumulated accrued interest is capitalized into the principal balance of the loan. In such a case, the amount of accrued interest that may be capitalized is limited to 10% of the outstanding principal balance at the time the borrower began repaying according to the plan. Any accrued interest beyond the 10% limit will remain due but will not be capitalized as long as the borrower remains in the plan. If a borrower chooses to leave the PAYE repayment plan, he or she may change to any other repayment plan for which he or she is eligible, as long as the new repayment plan has a maximum term that is not less than the number of years the borrower's loans have already been in repayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to the PAYE repayment plan, any accumulated accrued interest that has not been paid will be capitalized. Failure to Certify Income and Family Size . To qualify and remain eligible to repay according to the PAYE repayment plan, borrowers must annually provide certification of their income and family size. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, any unpaid accrued interest will be capitalized and his or her monthly payment amount will be recalculated to equal the amount the borrower would have paid according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay according to the plan. The repayment period based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year. Maximum Repayment Period and Loan Forgiveness . In the PAYE repayment plan, the maximum repayment period is 20 years. A borrower who at any time participates in the plan becomes eligible to have any balance that remains on his or her eligible loans forgiven if during the 20-year repayment period the borrower meets the loan forgiveness eligibility criteria specified in regulations at 34 C.F.R. Section 685.209(a)(6). (These criteria are substantially similar to the provisions that are applicable to the IBR plan for post-July 1, 2014, New Borrowers, as described above.) If after having repaid according to the PAYE repayment plan a borrower obtains additional loans that are eligible to be repaid according to the plan, a new repayment period will begin for the new loans when they enter repayment. <7.3.4.4. Revised Pay As You Earn (REPAYE) Repayment Plan> The Revised Pay As You Earn (REPAYE) repayment plan permits borrowers to repay eligible loans made through the Direct Loan program according to procedures that limit monthly payment amounts based on criteria that take into account a borrower's AGI and family size. For borrowers whose student loan debt was obtained exclusively for undergraduate education, the maximum repayment period is 20 years; for borrowers whose student loan debt includes any amounts obtained for graduate education, the maximum repayment period is 25 years. Any loan balance that remains after the maximum repayment period will be forgiven. The REPAYE repayment plan became available to eligible borrowers on December 17, 2015. Like the PAYE repayment plan, the REPAYE repayment plan was established by the Obama Administration through the rulemaking process under authority provided in the HEA for the Secretary to establish an income-contingent repayment plan. The REPAY repayment plan has a number of characteristics that are similar to the other IDR plans. It also has an enhanced interest subsidy that is unique to the plan. Eligibility. The REPAYE repayment plan is available to borrowers of loans made through the Direct Loan program except for Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers. The plan is available to borrowers irrespective of when an individual became a new borrower. A borrower's eligibility to repay according to the REPAYE repayment plan is not limited based on factors that take into account the relationship between his or her student loan debt and discretionary income (i.e., borrowers need not demonstrate anything akin to having a partial financial hardship to repay according to the REPAYE repayment plan). P ayment Amounts. While repaying according to the REPAYE repayment plan, monthly amounts due on borrowers' loans may range from $0, for those with incomes at or below 150% of the poverty line, to a maximum of one-twelfth of 10% of any amount by which a borrower's AGI exceeds 150% of the poverty line. For a borrower whose calculated monthly payment results in an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated monthly payment results in an amount that is less than $5, the monthly payment is set at $0. Monthly payment amounts are recalculated annually to take into account changes that may have occurred over the past year. For purposes of calculating monthly payment amounts under the REPAYE repayment plan, if the borrower is unmarried his or her AGI is used. If the borrower is married, and unless certain exceptions apply, the AGI of both the borrower and his or her spouse is used irrespective of whether the borrower files a joint or separate federal tax return with his or her spouse. If a borrower is married and certifies that he or she is separated from his or her spouse, or is unable to access information on the income of his or her spouse, then the AGI of only the borrower is used. Joint REPAYE Repayment for Married Borrowers. The REPAYE repayment plan provides for the joint repayment of loans by married borrowers who both have eligible loans and who file a joint federal tax return. For married borrowers repaying jointly according to an IBR plan, individual payment amounts are proportional to each spouse's share of the couple's combined loan balances and combined AGI. Subsidized Interest . Under the REPAYE repayment plan, an interest subsidy is available on both subsidized loans and unsubsidized loans during periods of negative amortization. During the first three years from the start of repayment under the plan, for Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans, if a borrower's calculated monthly payment is not sufficient to pay all of the interest that accrues, 100% of the portion of the accrued interest that is not covered by his or her monthly payment is subsidized. Periods during which a borrower receives an interest subsidy during an economic hardship deferment are excluded from the consecutive three-year period. After the three-year period for subsidized loans, and during all periods for Direct Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized component of Direct Consolidation Loans, 50% of the portion of the accrued interest that is not covered by the borrower's monthly payment is subsidized. Graduate students who are borrowers of Direct PLUS Loans may be able to qualify for the 50% interest subsidy while they are in school in lieu of receiving an in-school deferment while interest accrues at the otherwise applicable interest rate. For Direct PLUS Loans, the repayment period begins the day the loan is fully disbursed. However, borrowers who are enrolled on at least a half-time basis qualify for and typically receive an in-school deferment during which they are not required to make payments, but during which interest accrues. Student borrowers are placed in an in-school deferment upon requesting such a deferment or the Secretary receiving notification from the borrower's school or the National Student Loan Data System (NSLDS) that the student is enrolled on at least a half-time basis. Nonetheless, borrowers who receive an in-school deferment have the option to cancel it. Borrowers whose AGI while in school is low enough that it would result in the calculation of a monthly payment amount according to the REPAYE repayment plan that would be insufficient to pay all of the interest that accrues on their loan may consider choosing to cancel receipt of an in-school deferment in favor of receiving a 50% interest subsidy on the portion of the interest that would not be covered by his or her monthly payment amount. Application of Payments. Payments made by borrowers repaying according to the REPAYE repayment plan are credited first to interest due on the loan, then to any fees, and then to principal. If a borrower's required monthly payment is for an amount that is less than the amount of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the three-year interest subsidy period described above, the unpaid accrued interest will accumulate, but not be capitalized, so long as the borrower remains in the plan. If a borrower's required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of principal due, then the payment of any principal due in excess of the monthly payment amount owed will be postponed. If a borrower chooses to leave the REPAYE repayment plan, he or she may change to any other repayment plan for which he or she is eligible, as long as the new repayment plan has a maximum term that is not less than the number of years the borrower's loans have already been in repayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to the REPAYE repayment plan, any accumulated accrued interest that has not been paid will be capitalized. Failure to Certify Income and Family Size . To qualify and remain eligible to repay according to the REPAYE repayment plan, borrowers must annually provide certification of their income and family size. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, any unpaid accrued interest will be capitalized and he or she will be placed in the REPAYE Alternative Repayment plan. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year. REPAYE Alternative Repayment Plan. Borrowers repaying according to the REPAYE repayment plan who fail to provide timely certification of their income are subject to being placed into the REPAYE Alternative Repayment plan. Under the REPAYE Alternative Repayment plan, monthly payment amounts are calculated to equal the amount necessary to repay the borrower's loans in full within the earlier of 10 years from placement into the REPAYE Alternative Repayment plan or the ending of the maximum repayment period of 20 years or 25 years, as applicable. Payments made during periods of repayment according to the REPAYE Alternative Repayment plan count as qualifying payments for loan forgiveness under the various IDR plans; however, they do not count as qualifying payments for the Public Service Loan Forgiveness program. Maximum Repayment Period and Loan Forgiveness . In the REPAYE repayment plan, the maximum repayment period is 20 years for borrowers whose student loan debt was obtained exclusively for undergraduate education; and 25 years for borrowers whose student loan debt includes any amounts obtained for graduate education. A borrower who at any time participates in the REPAYE repayment plan becomes eligible to have any balance that remains on his or her eligible loans forgiven if for 20 years or 25 years, as applicable, the borrower meets the loan forgiveness eligibility criteria specified in regulations at 34 C.F.R. Section 685.209(c)(5). (These criteria are substantially similar to the provisions that are applicable to the IBR plans, as described above.) If after having repaid according to the REPAYE repayment plan a borrower obtains additional loans that are eligible to be repaid according to the plan, a new repayment period will begin for the new loans when they enter repayment. Adjusted Payment Amounts for Borrowers Who Return to the REPAYE Repayment Plan. If a borrower seeks to return to the REPAYE repayment plan after having left and repaid according to any other repayment plan (including the REPAYE Alternative Repayment plan), he or she must provide documentation of income for the entire period that he or she repaid according to another plan. If it is determined that the borrower paid a lesser amount under the other repayment plan (or plans) than he or she would have been required to repay according to the REPAYE repayment plan, upon returning to the REPAYE repayment plan the borrower's monthly payment amounts will be adjusted upward to ensure that the difference between the two amounts will be paid before the end of the maximum repayment period of 20 or 25 years, as applicable. <7.3.5. Alternative Repayment Plans> Alternative repayment plans are available in more limited situations, on a case-by-case basis, to borrowers who demonstrate that due to exceptional circumstances they are unable to repay according to other available repayment plans. Loan servicers are provided with discretion in determining what constitutes "exceptional circumstances" for purposes of permitting individual borrowers to repay according to any of the alternative repayment plans. If a borrower is permitted to repay according to an alternative repayment plan, he or she is notified in writing of the terms of the plan and may either accept those terms or select one of the other available repayment plans discussed above. Four variations of alternative repayment plans are available: Alternative Fixed Payment Repayment, Alternative Fixed Term Repayment, Alternative Graduated Payment Repayment, and Alternative Negative Amortization Repayment. The alternative repayment plans are established in accordance with general guidelines specified in regulations. Details on specific provisions of these plans are communicated to eligible borrowers by loan servicers. A borrower may be provided up to a maximum of 30 years to repay according to an alternative repayment plan, not including periods of deferment and forbearance. There is a minimum monthly payment amount of $5 and payments cannot vary by more than three times the amount of the smallest payment. Under the Alternative Negative Amortization Repayment plan, a borrower may be permitted for one year to make monthly payments of less than the amount of the interest that accrues on the loan. In such a case, any unpaid interest will be capitalized; however, capitalization of unpaid interest may not result in the loan balance exceeding 110% of the original principal amount. If this occurs, any additional interest that accrues must be paid by the borrower. Payments made according to an alternative repayment plan do not count toward the periods of repayment that may qualify a borrower for loan forgiveness under the IDR plans or the PSLF program. <7.4. Prepayment> The portion of any payment that is in excess of the amount due is considered a prepayment . Borrowers of loans made through the Direct Loan program may prepay all or any part of their loans at any time without penalty. Borrowers may obtain information from their Direct Loan servicer on how to provide prepayment, with instructions regarding the application of overpayments. The procedures for applying prepayments to borrowers' accounts are specified in regulations issued by ED. The procedures that apply for crediting a prepayment to a borrower's loan balance depend on the size of the prepayment amount relative to the borrower's scheduled monthly payment. A borrower with more than one loan who wants a prepayment to be applied to a certain loan or loans (e.g., the loan with the highest interest rate) must specify such when making the prepayment; otherwise, the prepayment will be applied in accordance with HEA regulations and guidelines, which, among other provisions, generally require all of a borrower's loans to be repaid together and under the same repayment plan. In general, if the amount of a prepayment is less than the next scheduled monthly payment amount according to the borrower's repayment plan, the prepayment is applied in the following order: (1) to charges and collection costs, (2) to accrued interest, and then (3) to outstanding principal. However, if the amount of the prepayment is less than the next scheduled monthly payment amount and the borrower is repaying according to the IBR, PAYE, or REPAYE repayment plans and has a scheduled monthly payment of $0.00, the prepayment is applied in the following order: (1) to accrued interest, (2) to collection costs, (3) to late charges, and then (4) to outstanding principal. For example, consider a borrower whose next scheduled monthly payment was $200 in January and who was current on making payments. If at the time of making the January payment the borrower made a payment of $300, this would result in a prepayment of $100. The $100 prepayment would be applied toward reducing the outstanding principal balance on the borrower's loans, because he or she did not have any outstanding charges or accrued interest. The borrower's next scheduled monthly payment of $200 would remain due in February. If the amount of the prepayment is equal to or greater than the next scheduled monthly payment amount under the borrower's repayment plan, the prepayment is applied in the same order as described above, and, unless the borrower requests otherwise, the due date of the borrower's next payment is advanced and he or she is notified of the due date for the next payment. For example, consider again a borrower whose next monthly payment was $200 in January and who was current on making payments. If at the time of making the January payment the borrower made a payment of $600, this would result in a prepayment of $400. Because this borrower did not have any outstanding charges or accrued interest, the $400 prepayment would be applied toward the next two payments due (i.e., the February and March payments) and the due date of the borrower's next payment would be advanced to April. If the borrower instead wanted the $400 prepayment to be applied toward reducing the outstanding principal balance and the next scheduled payment to remain due in February, he or she would need to request this at the time of making the prepayment. <7.5. Application of Payments on Delinquent Loans> The loans of borrowers who fall behind on making payments are considered to be delinquent. In general, a federal student loan is considered delinquent when the full payment amount is not satisfied by the payment due date. A borrower may restore a delinquent loan to current status by making payments that are applied to past due amounts. When borrowers make payments on delinquent loans, their payments are generally credited first to the oldest past due amounts owed. An example of how a delinquent loan may be restored to current status is provided by ED in its contracts for its loan servicers. The example considers a borrower whose scheduled monthly payment amount of $225 is due on the 14 th of the month. If as of January 14 th , the borrower had paid only $200 for the January payment, the loan would become delinquent, as $25 would remain unpaid. However, if on February 14 th , the borrower paid $250, $25 would be applied to the past due amount for January and $225 would be applied to the amount due for February. This would restore the borrower's loan to current status. <8. Deferment and Forbearance> Periods of deferment and forbearance provide borrowers with temporary relief from the obligation to make monthly payments that would otherwise be due on their loans. In certain instances, interest subsidies may be provided during periods of deferment; however, interest subsidies are not available during periods of forbearance. In general, periods during which borrowers are in a deferment or forbearance are excluded from the repayment period. However, for borrowers who are repaying according to any of the IDR plans, periods of up to three years while in receipt of an economic hardship deferment are included as part of the repayment period. The various forms of deferment and forbearance that are available to borrowers of loans made through the Direct Loan program are described below. <8.1. Deferments> A deferment is a temporary period during which a borrower's obligation to make regular monthly payments of principal and interest is suspended, and during which an interest subsidy may be provided. Deferments are available during periods while a student is pursuing postsecondary education, participating in a graduate fellowship program or a training program, unemployed or experiencing an economic hardship, performing or has recently completed military service, or receiving treatment for cancer. Deferments are not available to borrowers whose loans are in default status. In most instances, a borrower must proactively apply for and request a deferment. To qualify for it, the borrower (or, in certain instances, the individual on whose behalf the loan was made for parent borrowers of Direct PLUS Loans) must satisfy certain eligibility criteria. Several deferment types have no maximum period of eligibility, while other types are initially granted for a limited period of time and may be subsequently renewed up to a maximum period of eligibility for the deferment type. Periods of eligibility for deferments are specific to the borrower, as opposed to the borrower's loans. Thus, for those deferment types that have a maximum period of eligibility, if a borrower exhausts his or her eligibility with one set of loans no eligibility would remain to qualify for the same type of deferment on any other loans for which he or she had not received the deferment. Unless an interest subsidy applies to a borrower's loans, interest will continue to accrue during a period of deferment. While in receipt of a deferment, borrowers have the option either to pay the interest as it accrues or pay it at a later time. In most instances, if the interest that accrues during a period of deferment is not paid as it accrues it will be capitalized at the end of the deferment period. However, if a borrower's deferment coincides with the individual having a partial financial hardship while repaying according to either of the IBR plans or the PAYE repayment plan, any interest that has accrued during the deferment will not be capitalized so long as the borrower continues to have a partial financial hardship. The following types of deferments are available to borrowers of loans made through the Direct Loan program. <8.1.1. In-School Deferment> A borrower is eligible to receive an in-school deferment for any period during which he or she is enrolled at an eligible institution on at least a half-time basis, as determined by the institution attended. Graduate student borrowers of Direct PLUS Loans first disbursed on or after July 1, 2008, (which enter repayment upon being fully dispersed) are also eligible to receive an in-school deferment while they are enrolled in school and during the six-month period after ceasing to be enrolled on at least a half-time basis. During an in-school deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. There is no maximum period of eligibility for an in-school deferment. Eligible borrowers are typically placed in an in-school deferment automatically on the basis of being enrolled in an eligible institution on at least a half-time basis. However, eligible borrowers may also proactively request an in-school deferment. Borrowers who have been automatically placed in an in-school deferment have the option to cancel it. If these borrowers wish to do so, they have the option to pay any principal and interest that had already been deferred or they may let the interest that had accrued on the deferred payments be capitalized upon cancellation of the deferment. <8.1.1.1. In-School Deferment for Parent Borrowers of Direct PLUS Loans> Parent borrowers of Direct PLUS Loans for which the first disbursement was made on or after July 1, 2008, are eligible for a deferment for any period during which the student on whose behalf the loan was made would qualify for an in-school deferment. This deferment is also available during the six-month grace period after the student on whose behalf the loan was made first ceases to be enrolled on at least a half-time basis. <8.1.2. Graduate Fellowship Deferment> A borrower may receive a deferment while pursuing a course of study in a graduate fellowship program. Eligibility requirements include that the borrower has earned a bachelor's degree, and that the program operates on a full-time basis, provides financial support for at least six months, and requires the applicant to submit a written statement of objectives and periodic progress reports. There is no maximum period of eligibility for this deferment. It is not available to borrowers who are serving in medical residency or internship programs, except for residency programs in dentistry. During a graduate fellowship deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. <8.1.3. Rehabilitation Training Program Deferment> A borrower may receive a deferment while pursuing a course of study in a rehabilitation training program for individuals with disabilities. For a borrower to be eligible, the rehabilitation training program must be licensed, approved, certified, or recognized by a state agency or the U.S. Department of Veterans Affairs. It also must provide services according to a written, individualized plan that specifies an expected completion date, and must require a substantial commitment by the borrower toward rehabilitation to the extent that it would normally prevent an individual from being employed full-time (i.e., 30 or more hours per week) for at least three months. There is no maximum period of eligibility for this deferment. During a rehabilitation training program deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. <8.1.4. Unemployment Deferment> A borrower who is seeking to obtain full-time employment and is either not employed or is employed less than full-time may be granted an unemployment deferment. To be eligible, a borrower must be either receiving unemployment benefits or must document that he or she has registered with a public or private employment agency (if one is available within 50 miles) and is diligently seeking to obtain full-time employment. A borrower may receive the deferment for a maximum cumulative period of three years, which may include one or more episodes of unemployment. He or she is not required to have been employed previously to qualify for it. A borrower may request that an unemployment deferment begin the date that he or she became unemployed or began working less than full-time, but that date may be no earlier than six months prior to requesting the deferment. The deferment may be granted for an initial period of six months and may be extended in six-month increments. During an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. <8.1.5. Economic Hardship Deferment> A borrower may qualify for a deferment during periods while he or she is experiencing an economic hardship or is serving as a volunteer in the Peace Corps. To qualify for this deferment on a loan made through the Direct Loan program, a borrower must satisfy at least one of the following criteria: the borrower has been granted an economic hardship deferment under the FFEL program or the Perkins Loan program for the same period of time for which the borrower requests an economic hardship deferment; the borrower is receiving payments under a federal or state public assistance program (e.g., Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), state general public assistance, other means-tested benefits); the borrower is working full-time and has a monthly income that does not exceed an amount equal to 150% of the poverty line applicable to the borrower's family size, (see Table 7 ) as calculated on a monthly basis; or the borrower is serving as a volunteer in the Peace Corps. The deferment may be granted for periods of up to one year at a time, and may be extended up to a cumulative maximum of three years. Periods of up to three years while a borrower qualifies for an economic hardship deferment may be counted as part of the repayment period for each of the IDR plans. During an economic hardship deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. <8.1.6. Military Service Deferment> A borrower may qualify for a military service deferment on the basis of serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency. The deferment is provided for the entire period of qualifying military service, and for an additional 180 days following the completion of military service for borrowers whose period of qualifying service includes or began after October 1, 2007. During a military service deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. <8.1.7. Post-Active Duty Student Deferment> A borrower may qualify for a post-active duty student deferment if he or she is a member of the National Guard or other reserve component of the Armed Forces (or is a member in retired status) and is called or ordered to active duty while he or she is enrolled on at least a half-time basis at an eligible institution, or within six months of being enrolled. To qualify, the borrower must have been required to perform at least 30 consecutive days of active duty service on or after October 1, 2007. The deferment is available for a period of up to the lesser of 13 months following the completion of active duty service or until the borrower re-enrolls in an eligible institution on at least a half-time basis. If a borrower qualifies for both the military service deferment and the post-active duty student deferment, the 180-day post-demobilization period and the 13-month post-active duty service period apply concurrently. During a post-active duty student deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. <8.1.8. Cancer Treatment Deferment> A borrower may receive a cancer treatment deferment on eligible loans during periods while he or she is receiving treatment for cancer and for the six months thereafter. To qualify for the deferment, the borrower must submit an application on which a physician who is a Doctor of Medicine (M.D.) or a Doctor of Osteopathy (D.O.) certifies that the borrower is receiving treatment for cancer under the physician's care. During periods while a borrower receives a cancer treatment deferment, no interest accrues on the qualifying loans. Qualifying loans include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans that were either made on or after September 28, 2018, or had entered repayment status on or before September 28, 2018. Loans made prior to September 28, 2018, but had not yet entered repayment as of that date due to the borrower being enrolled in school on at least a half-time basis or being in the grace period, are not eligible for this deferment. However, as Direct Consolidation Loans made on or after September 28, 2018, are eligible for the deferment, borrowers of ineligible loans may consider including them in a Direct Consolidation Loan for purposes of qualifying for the deferment. <8.2. Forbearance> Forbearance constitutes permission for a borrower to temporarily cease making monthly student loan payments, to make payments in reduced amounts, or to make payments over an extended period of time. During periods of forbearance, no interest subsidies are provided and borrowers ultimately remain responsible for paying all of the interest that accrues on their loans. Borrowers have the option of either paying the interest as it accrues during forbearance or letting it be capitalized into the principal balance at the end of the forbearance period. In most instances, borrowers must apply for forbearance; and for certain types of it, borrowers must provide supporting documentation to their loan servicer. Forbearance may be granted for an initial period of up to 12 months, and may be renewed upon the borrower's request. Certain types of forbearance are limited to a maximum of 36 months. Forbearance may be granted for a number of reasons. General or discretionary forbearance , may be granted at the discretion of the loan servicer to borrowers who are temporarily unable to make scheduled loan payments. Administrative forbearance is granted by the Secretary to borrowers during periods necessary to determine a borrower's eligibility for a number of borrower benefits and for certain other reasons. Certain types of forbearance, referred to as mandatory forbearance , are required to be granted to borrowers who satisfy applicable eligibility criteria. <8.2.1. General (Discretionary) Forbearance> A borrower may request a general forbearance on the basis of experiencing a temporary hardship due to financial difficulties, a change in employment, medical expenses, or other reasons. A general forbearance may be granted at the discretion of a borrower's loan servicer for an initial period of up to 12 months and may be extended in increments of 12 months. A borrower's loan servicer may limit the maximum duration of forbearance; however, there is no statutory or regulatory limit. <8.2.2. Administrative Forbearance> Administrative forbearance may be granted during periods necessary to process requests by a borrower for certain benefits or to determine his or her eligibility. It may be granted for up to 60 days for the processing of requests for deferment, forbearance, change of repayment plan, and loan consolidation. (Interest that accrues during administrative forbearance for these purposes is not capitalized.) Administrative forbearance is also granted during periods necessary to determine a borrower's eligibility for a student loan discharge (e.g., death or total and permanent disability, closed school, false certification, unauthorized payment, unpaid refund, bankruptcy, borrower defense to repayment) or for loan forgiveness through the Teacher Loan Forgiveness program. Administrative forbearance is provided to a borrower for up to three years if changes to variable interest rates preclude the borrower's ability to repay his or her loans in 10 years under the standard or graduated repayment plans. It may also be granted for short periods, such as when payments are overdue at the beginning of an authorized period of deferment or forbearance. The Secretary may also authorize administrative forbearance in response to a national military mobilization or a local or national emergency. <8.2.3. Medical or Dental Internship or Residency Forbearance> A borrower who is a medical or dental intern or resident and does not or no longer qualifies for a deferment may receive mandatory forbearance. To qualify, the borrower must have been accepted into a medical or dental internship or residency program that either leads to a degree or certificate that is awarded by an IHE, a hospital, or a health care facility that offers postgraduate training, or that must be completed before the borrower may begin professional practice or service. This type of forbearance may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's internship or residency. <8.2.4. AmeriCorps National Service Forbearance> A borrower who is serving in a national service position for which he or she receives a Segal AmeriCorps Education Award may receive mandatory forbearance. It may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's national service. Whereas borrowers are normally responsible for paying the interest that accrues during forbearance, the National Service Trust will pay all or a portion of the interest that accrues during forbearance for a borrower who has earned a Segal AmeriCorps Education Award. <8.2.5. Teacher Loan Forgiveness Program Forbearance> A borrower who is serving in a position that would qualify him or her for loan forgiveness under the Teacher Loan Forgiveness Program (described below) may receive mandatory forbearance. To be eligible, the borrower must be serving as a full-time teacher at an elementary school, secondary school, or educational service agency that serves low-income families. The borrower's outstanding loan balance is also considered in determining eligibility. This forbearance may be granted "only if the Secretary believes, at the time of the borrower's annual request, that the expected forgiveness amount [i.e., up to $5,000 or up to $17,500, as applicable] will satisfy the anticipated remaining outstanding balance on the borrower's loan at the time of the expected forgiveness." It may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the five consecutive years of teaching service required to qualify for loan forgiveness. <8.2.6. Student Loan Debt Burden Forbearance> A borrower may receive mandatory forbearance on the basis of having a federal student loan debt burden that equals or exceeds 20% of his or her monthly total income. To qualify, a borrower must demonstrate that his or her required monthly payments on federal student loans made under Title IV of the HEA (e.g., loans made under the Direct Loan program, the FFEL program, or the Perkins Loan program) equal or exceed 20% of his or her total monthly taxable income. This type of forbearance may be granted for an initial period of 12 months and may be extended in increments of 12 months for a maximum duration of 36 months. <8.2.7. National Guard Duty Forbearance> Mandatory forbearance is available to a borrower who is a member of the National Guard and qualifies for a Post-Active Duty Student Deferment but does not qualify for a Military Service Deferment or other deferment, and is engaged in active state duty service for 30 or more consecutive days. This type of forbearance may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's qualifying National Guard service. <8.2.8. Department of Defense Student Loan Repayment Program Forbearance> Mandatory forbearance is available during periods while a borrower is performing service that qualifies him or her for partial repayment under a U.S. Department of Defense student loan repayment program. Interest that accrues during this forbearance is not capitalized at the end of the forbearance period. It may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's qualifying service. <9. Loan Discharge and Loan Forgiveness> An important benefit to borrowers of federal student loans made through the Direct Loan program is that their obligation to repay these loans may be discharged or forgiven in a variety of circumstances. Several types of loan discharge and loan forgiveness benefits are available. These may be grouped into three broad categories: loan discharge for borrower hardship, loan forgiveness following IDR plan repayment, and loan forgiveness for public service. <9.1. Loan Discharge for Borrower Hardship> A borrower who experiences certain types of hardship may have his or her loan discharged. Types of hardship discharges available to borrowers of loans made through the Direct Loan program are described below. Administrative forbearance (see above) is granted during the period necessary to determine a borrower's eligibility for these types of discharge. <9.1.1. Discharge Due to Death> A borrower's obligation to repay a loan is discharged if he or she dies; and in the case of a Direct PLUS Loan made to a parent borrower, the obligation to repay is discharged if the student on whose behalf the loan was made dies. In the case of a Direct Consolidation Loan that repaid either a Direct PLUS Loan or a FFEL PLUS Loan that was borrowed by a parent on behalf of a student, if the student dies a proportionate share of the Direct Consolidation Loan attributable to the applicable Direct PLUS Loan or FFEL PLUS Loan is discharged. In the case of a Joint Direct Consolidation Loan borrowed by two married individuals, upon the death of one spouse a proportionate share of the loan attributable to the individual who died is discharged. <9.1.2. Total and Permanent Disability Discharge> A borrower's liability to repay a loan is discharged upon the individual being determined to have a total and permanent disability (TPD). A borrower may be determined to be have a total and permanent disability based on any of the following three criteria: 1. Physician's Certification. Certification by a physician (M.D. or D.O.) licensed to practice in the United States that the borrower is unable to engage in any substantial gainful activity due to a physical or mental impairment that can be expected to result in death, has lasted continuously for at least 60 months, or can be expected to last continuously for at least 60 months. 2. SSA Disability Determination . Documentation from the Social Security Administration (SSA) that the borrower is receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits and that his or her next scheduled disability review will be within five to seven years from the date of the individual's most recent SSA disability determination. 3. VA Service Connected Disability or Unemployability . Documentation from the Department of Veterans Affairs (VA) that the borrower has a service connected disability (or disabilities) that is 100% disabling or that he or she is totally disabled based on an individual unemployability rating. On a periodic basis, ED obtains information from SSA and VA on borrowers who might qualify for a TPD discharge on the basis of the second and third criteria, respectively, and contacts them to inform them of their potential eligibility. A borrower, or his or her authorized representative, may apply for a TPD discharge by submitting an application along with any required documentation of the borrower's disability. A borrower who has been identified as a veteran with a VA service-connected disability or unemployability determination will be granted a TPD discharge without needing to submit an application unless he or she decides to opt out of the process within 60 days of being notified by ED. If a borrower's TPD discharge application is approved, he or she will be considered totally and permanently disabled as of the date of the physician's certification, the date that ED received an SSA notice of award for SSDI or SSI benefits or Benefits Planning Query (BPQY), or the effective date of a VA service-connected disability or unemployability determination, as applicable. Upon the determination of a borrower being totally and permanently disabled, his or her obligation to make any further payments on the loans will be discharged and any loan payments that were made after the aforementioned dates will be returned. A TPD discharge approved on the basis of a physician's certification or an SSA disability determination is granted on a conditional basis for a three-year period that begins on the date of discharge. During the three-year period, a borrower who has been granted a TPD discharge according to either of these two criteria is subject to having his or her loans reinstated if the borrower (1) has annual earnings from employment in excess of 100% of the federal poverty guideline for a family of two (see Table 7 ), (2) obtains a new Direct Loan program loan or a TEACH Grant, (3) fails to return any Direct Loan or TEACH Grant disbursements made between the TPD discharge application date and the discharge date, or (4) receives a notice from SSA that he or she is no longer disabled or that his or her next scheduled disability review will be sooner than five to seven years from the date of the borrower's most recent SSA disability determination. After the three-year period, the TPD discharge becomes permanent. A TPD discharge granted on the basis of a VA service connected disability or unemployability is permanent upon being granted and is not subject to a post-discharge monitoring period. <9.1.3. Closed School Discharge> A borrower's liability to repay a loan is discharged if the borrower (or the student on whose behalf a Direct PLUS Loan is made to a parent borrower) does not complete the program of study for which the loan was made because the school he or she attended has closed. In the case of a Direct Consolidation Loan, the portion of the loan attributable to loans borrowed to finance the program of study at the closed school is discharged. With regard to loans made before July 1, 2020, to qualify for a closed school discharge, a borrower generally must submit an application and certify that the school attended closed either while the student was enrolled or within 120 days of the student withdrawing, and the student must not have completed the program of study for which the loan was obtained through a teach-out agreement at another school or by transferring credits earned at the closed school to another school. However, if based on information available to the Secretary, a borrower qualifies for a closed school discharge with respect to a school that closed on or after November 1, 2013, and before July 1, 2020, and the borrower did not subsequently re-enroll in any Title IV-eligible IHE within three years of the school having closed, the Secretary is to discharge the borrower's loan without the borrower needing to submit an application for a discharge. For loans made on or after July 1, 2020, to qualify for a closed school discharge, a borrower must submit an application and must certify that the school attended closed either while the student was enrolled or within 180 days of the student withdrawing, that he or she has not completed the program of study for which the loan was obtained through a teach-out agreement at another school or by transferring credits earned at the closed school to another school, and that he or she has not accepted the opportunity to complete the program of study or a comparable program at another school through either a teach-out plan performed by the closing school or a teach-out agreement at another school. Upon being granted a closed school discharge, a borrower is reimbursed for any amounts he or she had already repaid on the loan. If the borrower had previously defaulted on the loan, upon being granted a closed school discharge his or her eligibility to receive additional Title IV federal student aid will be restored and consumer reporting agencies will be instructed to delete any adverse credit history related to the loan. Any discharged loans do not count against the borrower's annual and aggregate loan limits, nor against his or her Subsidized Usage Period applicable under the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers. <9.1.4. False Certification and Unauthorized Payment Discharges> A borrower's liability to repay a loan is discharged if the eligibility of the borrower (or of the student in the case of a Direct PLUS Loan made to a parent borrower) to receive the proceeds of the loan was falsely certified by the IHE attended, or if the loan proceeds were disbursed without his or her authorization (e.g., unauthorized signature, identity theft). In the case of a Direct Consolidation Loan, a borrower's liability to repay the portion of the loan that is attributable to loans that were falsely certified by the IHE attended, or that were disbursed without his or her authorization, is discharged. Upon being granted a false certification or unauthorized payment discharge, the borrower is reimbursed for any amounts he or she had already repaid on the loan. If the borrower had previously defaulted on the loan, upon being granted a false certification or unauthorized payment discharge his or her eligibility to receive additional Title IV federal student aid will be restored and consumer reporting agencies will be instructed to delete any adverse credit history related to the loan. <9.1.5. Unpaid Refund Discharge> If a borrower is owed a refund by an IHE that has not been paid, his or her liability to repay an amount equal to the unpaid refund and any associated accrued interest and other charges is discharged. An unpaid refund discharge is only available in instances where a borrower is owed a refund by a school that has closed, or by an open IHE that the borrower (or the student on whose behalf a Direct PLUS Loan is made to a parent borrower) is no longer attending. <9.1.6. Borrower Defense to Repayment Discharge> A borrower's liability to repay a loan is discharged in whole or in part, and previous loan payments are refunded, if the borrower (or the student on whose behalf a Direct PLUS Loan was made to a parent borrower) successfully asserts a defense to repayment of the loan. A borrower may assert certain acts or omissions by the IHE for which the loan was borrowed that relates to the making of the loan as a defense to repayment. A borrower may assert a defense to repayment according to procedures specified in regulations that are specific to the period during which his or her loans were made. There are three distinct periods applicable to borrower defense claims. In the case of a Direct Consolidation Loan, the procedures to be used for adjudicating a defense to repayment claim depend on the types of loans that were repaid by it (e.g., loans made through the Direct Loan program, other types of eligible loans) and when it was made. For loans disbursed prior to July 1, 2017, a borrower defense to repayment "refers to any act or omission of the school attended ... that would give rise to a cause of action against the school under applicable state law." For loans disbursed on or after July 1, 2017, and before July 1, 2020, a borrower defense to repayment refers to a nondefault, contested judgment against the school; a breach of contract by the school; or a substantial misrepresentation by the school to the borrower that the borrower had relied on to his or her detriment when he or she decided to attend or continue attending the school, or decided to borrow a loan. For loans disbursed on or after July 1, 2020, a borrower defense to repayment refers to a misrepresentation of material fact made by the borrower's school about enrollment or the provision of educational services that the borrower relied upon in deciding to borrow a loan and from which he or she suffered financial harm. For loans disbursed on or after July 1, 2020, a borrower must assert a defense to repayment within three years of ceasing to be enrolled at the IHE. In the instance that a borrower had previously defaulted on a loan, upon being granted a defense to repayment discharge the borrower's eligibility to receive additional Title IV federal student aid will be restored and consumer reporting agencies will be instructed to delete any adverse credit history related to the loan. <9.1.7. Bankruptcy Discharge> Section 523(a)(8) of the Bankruptcy Code provides that student loans (e.g., loans made through the Direct Loan program) are presumed to be not dischargeable in bankruptcy proceedings, unless the debtor is able to demonstrate to the court that "excepting such debt from discharge ... would impose an undue hardship on the debtor and the debtor's dependents." In general, to discharge student loan debt in bankruptcy, the debtor must file a separate lawsuit against the holder of the debt and must prove by a preponderance of the evidence that repayment of the debt would impose an undue hardship. If a borrower's liability to repay a loan made through the Direct Loan program is discharged in bankruptcy, the Secretary will cease to require the borrower to make payments on the loan. <9.2. Loan Forgiveness Following IDR Plan Repayment> A borrower who has repaid a loan made through the Direct Loan program according to one or more of the Income-Driven Repayment (IDR) plans for the duration of the applicable maximum repayment period (including periods of repayment according to certain other eligible plans and periods while in receipt of an economic hardship deferment) is relieved of the obligation to repay any balance of principal and interest that remains outstanding. The applicable maximum repayment period varies by IDR repayment plan as follows: Income-Contingent Repayment Plan: 25 years; Original IBR Plan: 25 years; IBR Plan for Post-July 1, 2014, New Borrowers: 20 years; PAYE Repayment Plan: 20 years; REPAYE Repayment Plan for borrowers with debt only for undergraduate education: 20 years; and REPAYE Repayment Plan for borrowers with any debt for graduate education: 25 years. For detailed information on the requirements for a borrower to qualify for loan forgiveness following IDR plan repayment, see the descriptions of the maximum repayment period and loan forgiveness in the prior sections on each of the various IDR plans. <9.3. Loan Forgiveness for Public Service> The Direct Loan program makes loan forgiveness benefits available to borrowers who have engaged in certain types of public service for a specified period of time and meet program-specific requirements, as described below. <9.3.1. Teacher Loan Forgiveness Program> A borrower who has completed five consecutive complete academic years of teaching service in a low-income school or educational service agency (ESA) may be relieved of the obligation to repay up to $5,000 for service as a highly qualified teacher, or up to $17,500 for service as a highly qualified special education teacher or secondary school teacher of mathematics or science. Teacher Loan Forgiveness benefits are only available to borrowers who had no outstanding balance on any federal student loan made through the Direct Loan program (or the FFEL program) as of the date the borrower first obtained such a loan after October 1, 1998. Student loan debt attributable to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Consolidation Loans (to the extent that the Direct Consolidation Loan repaid a Direct Subsidized Loan, a Direct Unsubsidized Loan, a FFEL Subsidized Stafford Loan, or a FFEL Unsubsidized Stafford Loan) may be forgiven. Loans must have been obtained prior to the end of a borrower's fifth year of qualifying service and may not be in default, unless satisfactory repayment arrangements have been made. A borrower may receive Teacher Loan Forgiveness Program Forbearance during the five years of teaching service required to qualify for benefits. A borrower becomes eligible for loan forgiveness benefits upon completion of the fifth year of qualifying service. If a borrower's student loan debt exceeds the amount to be forgiven, unless otherwise requested by the borrower, loan forgiveness benefits are applied first to Direct Unsubsidized Loans, then to Direct Subsidized Loans, then to the unsubsidized component of Direct Consolidation Loans, and finally to the subsidized component of Direct Consolidation Loans. Loan forgiveness benefits may not be provided for the same service used to qualify for benefits under the Public Service Loan Forgiveness (PSLF) program, the Loan Forgiveness for Service in Areas of National Need Program, or a Segal AmeriCorps Education Award. <9.3.2. Public Service Loan Forgiveness (PSLF) Program> A borrower may be relieved of the obligation to repay the balance of principal and interest that remains outstanding on eligible loans upon having made 120 qualifying monthly payments on or after October 1, 2007, concurrent with the borrower being employed full-time by one or more public service organizations or serving full-time in an AmeriCorps or Peace Corps position. To qualify, a borrower must make 120 separate, full, on-time scheduled monthly payments on loans that are not in default. In general, qualifying payments are those made within 15 days of the due date according to certain repayment plans; however, borrowers using Segal AmeriCorps Education Award benefits, Peace Corps transition payments, or certain Department of Defense student loan repayment benefits may make lump sum payments. Qualifying payments include those made according to one or more of the following repayment plans: Income-Contingent Repayment (ICR) plan; Income-Based Repayment (IBR) plans; Pay As You Earn (PAYE) repayment plan; Revised Pay As You Earn (REPAYE) repayment plan; Standard Repayment Plan with a Maximum 10-Year Term; and any other of the loan repayment plans (except for the alternative repayment plans [discussed above]) if the monthly payment amount is not less than what would be paid under the Standard Repayment Plan with a Maximum 10-Year Term. A borrower must be employed by or serving full time with a public service organization at the time he or she makes each of the required 120 payments, applies for loan forgiveness benefits, and has forgiveness granted. Public service organizations are federal, state, local, or tribal government agencies, organizations, or entities; tribal colleges and universities; public child or family service agencies; nonprofit entities organized under Section 501(c)(3) of the Internal Revenue Code (IRC) that are tax-exempt under IRS Section 501(a); and certain other private nonprofit entities that are providers of public services. Public service organizations exclude labor unions, political organizations, and religious organizations (except to the extent that activities do not relate to religious instruction, worship services, or proselytizing). Eligible private nonprofit entities include providers of any of the following public services: emergency management, military service, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities and the elderly, public health, public education, public library services, and school library or other school-based services. Loan forgiveness benefits may not be provided for the same service used to qualify for benefits under the Teacher Loan Forgiveness Program, the Civil Legal Assistance Attorney Loan Repayment Program, or the Loan Forgiveness for Service in Areas of National Need Program. <9.3.2.1. Temporary Expanded Public Service Loan Forgiveness (TEPSLF) Program> The TEPSLF program was established in response to concerns that some borrowers were experiencing difficulty in deciphering and complying with the requirements for establishing eligibility for loan forgiveness through the PSLF program. A borrower who would qualify for loan forgiveness under the PSLF program except for the fact that, under certain circumstances, some or all of the required 120 monthly payments were nonqualifying may be relieved of the obligation to repay the balance of principal and interest that remains outstanding upon the borrower otherwise satisfying the requirements of the PSLF program as well as the following criteria: All of the borrower's nonqualifying monthly payments must have been made according to any of the Extended Repayment Plans or the Graduated Repayment Plans, but in an amount that was less than what would have been paid under the Standard Repayment Plan with a Maximum 10-Year Term. The amount of both the borrower's most recent monthly payment and the monthly payment made 12 months prior to application for relief through the TEPLSF program must equal or exceed the monthly payment amount that would have been calculated under one of the IDR plans for which the borrower would have otherwise qualified. (An exception to this criterion is provided to a borrower who would otherwise qualify for TEPSLF benefits but over the past five years demonstrates an "unusual fluctuation of income." ) Only a borrower whose applications for PSLF benefits was denied due to some or all of the required payments not being made according to a qualifying repayment plan may apply for TEPSLF benefits. Benefits are available on a first-come, first-served basis and are subject to the availability of funds. <9.4. Tax Treatment of Discharged and Forgiven Debt> The IRC provides that, in general, student loan debt (as well as other types of debt) that is discharged, forgiven, or repaid on a borrower's behalf is included as part of the individual's gross income for the purposes of federal income taxation. In certain instances, however, discharged or forgiven student loan debt may be excluded from an individual's gross income and, therefore, exempted from consideration in determining federal income tax liability. If loan discharge or loan forgiveness benefits are not specifically excluded from an individual's gross income, he or she may be responsible for paying any income tax liability associated with the benefits received. In the circumstances described below, discharged or forgiven student loan debt may be excluded from an individual's gross income: Discharge Due to Death. Student loan debt that is discharged due to the death of the borrower, or due to the death of the student on whose behalf a Direct PLUS Loan was made to a parent borrower, if the discharge occurs after December 31, 2017, and before January 1, 2026. Total and Permanent Disability Discharge . Student loan debt that is discharged due to the total and permanent disability of the borrower, if the discharge occurs after December 31, 2017, and before January 1, 2026. Closed School Discharge . Student loan debt that is discharged on the basis of the school attended having closed while the student was enrolled or within 120 days of the student withdrawing and the student also having not completed the program of study for which the loan was obtained through a teach-out plan at another school or by transferring credits earned at the closed school to another school. False Certification and Unauthorized Payment Discharges . Student loan debt that is discharged on the basis of the proceeds of the loan having been falsely certified by the IHE the borrower attended or having been disbursed without his or her authorization. Unpaid Refund Discharge . Student loan debt that is discharged on the basis of a school that has closed or that a borrower no longer attends having not refunded amounts owed to the borrower. Bankruptcy Discharge . Student loan debt that is discharged in bankruptcy proceedings. Insolvency. Student loan debt that is discharged while an individual is insolvent. Depending on an individual's unique circumstances, it may be possible for a borrower who receives Loan Forgiveness Following IDR Plan Repayment to be considered insolvent at the time of discharge. Loan Forgiveness for Public Service . Discharged or forgiven student loan debt may be excluded if a loan was made by certain types of lenders (e.g., the federal government), was borrowed to assist an individual in attending a qualified educational institution, and contains terms providing that some or all of the balance will be cancelled for work for a specified amount of time in certain professions or occupations and for any of a broad class of employers (e.g., public service organizations). Student loan debt that is discharged through the Teacher Loan Forgiveness program, the PSLF program, and the TEPSLF program may be excluded. <10. Loan Default, Its Consequences, and Resolution> A loan made through the Direct Loan program is considered to be in default once the borrower has failed to make payments when due or has otherwise not adhered to the terms of the promissory note for 270 days. Defaulting on a federal student loan can result in a number of adverse consequences for the borrower. Upon default, the borrower's obligation to repay the loan is accelerated (i.e., the entire unpaid balance of principal and accrued interest becomes due in full). In addition, upon defaulting a borrower loses eligibility for certain borrower benefits (e.g., deferment, forbearance, loan forgiveness), as well as eligibility to receive additional Title IV federal student aid. Defaulting may also result in other adverse effects for the borrower and may present a major obstacle to the borrower's future economic well-being. The Secretary will report defaulted loans to consumer reporting agencies and will take action to collect on them through one or more means. The borrower of a defaulted loan may be assessed a variety of charges for the costs of collecting on it. Several options are available to borrowers to bring defaulted loans back into good standing. A borrower may remove a loan from default status by rehabilitating the loan, consolidating the loan into a new Direct Consolidation Loan, or paying off the defaulted loan balance. <10.1. Consequences of Default for Borrowers> A borrower who defaults on a loan made through the Direct Loan program becomes subject to many consequences, which are briefly described below: Ineligibility for Federal Student Aid . The borrower becomes ineligible to receive federal student aid made under Title IV of the HEA. A defaulted borrower may regain eligibility by voluntarily making six consecutive, on-time, full monthly payments. A borrower may restore eligibility for Title IV aid though this method only once. Capitalization of Interest. Any unpaid interest that has accrued (e.g., during periods of negative amortization, during delinquency) may be capitalized into the principal balance of the loan. Acceleration. The entire unpaid balance owed on the borrower's loan becomes due in full. Transfer to Private Collection Agencies. Upon default, student loan accounts are initially transferred from the borrower's student loan servicer to the Office of Federal Student Aid's Default Management and Collection System (DMCS), which may then transfer defaulted loans to private collection agencies (PCAs) that are under contract with FSA for collections. A PCA will first contact the borrower before pursuing efforts to collect on the debt. The PCA may offer the borrower the opportunity to rehabilitate the loan or to enter into a voluntary repayment agreement. If the borrower accepts neither offer, or does not honor a voluntary repayment agreement, the PCA may seek to collect on the defaulted loans by means of administrative wage garnishment (AWG). The PCA may also refer defaulted loans to the Treasury Offset Program (TOP) for collection, or may recommend litigation. Assessment of Collection Charges. The borrower may be charged for the costs of collecting on the loan, including loan collection fees, TOP processing fees, court costs, and attorney's fees. Administrative Wage Garnishment . Up to 15% of the borrower's disposable pay may be garnished to repay the defaulted student loan. Disposable pay is defined as that part of a borrower's compensation that remains after deducting amounts required by law to be withheld. Defaulters must be given written notice of the intent to garnish wages; and they have rights to examine the debt record, have a hearing concerning the existence and amount of the debt or repayment terms, and establish a repayment schedule before garnishment begins. Federal Salary Offset. Similar to AWG, up to 15% of the disposable pay (including retirement pay) of a borrower who is a current or former federal employee may be offset to repay a defaulted student loan. Treasury Offset Program. Defaulters become subject to having their federal income tax returns, Social Security benefits, and certain other federal benefits offset through the Treasury Offset Program (TOP) as payment on their student loans. Up to 100% of federal tax refunds may be offset. Social Security benefits may be offset in an amount up to the lesser of 15% of the borrower's monthly benefit amount, or the amount that his or her monthly benefit exceeds $750. Special rules apply with regard to the offset of Social Security Disability Insurance (SSDI) benefits. If a recipient has a disability rating of medical improvement not expected (MINE), the offset of SSDI benefits will be suspended. However, if a recipient's disability benefits are converted to retirement benefits, the offset of Social Security benefits may resume. Civil Lawsuit . Litigation is employed as a last resort to collect on a defaulted loan. If this option is pursued, the U.S. Department of Justice may sue the defaulter, on behalf of the Office of Federal Student Aid, to compel repayment. Reporting to Consumer Reporting Agencies . Information on student loans, including amounts borrowed, amounts owed, and repayment status, is regularly exchanged with consumer reporting agencies. Upon default, information about it will also be shared. Consumer reporting agencies may report information on the status of a borrower's defaulted student loan for seven years from the date of the default. <10.2. Resolution of Default> A number of options are available to borrowers to get out of default. As noted above, a borrower may rehabilitate the defaulted loan, obtain a Direct Consolidation Loan and use the proceeds to pay off the defaulted loan, pay the amount owed on the defaulted loan in full, or, in limited circumstances, enter into a compromise agreement. Repaying a defaulted loan in full may be beyond the means of many borrowers. However, options to do so may include obtaining financing from outside the Direct Loan program to pay off the defaulted debt. A compromise agreement or debt settlement may permit a borrower to satisfy the debt by making a lump sum payment in an amount that is less than the full balance due. Compromise agreements and settlements are offered only after other repayment options have been exhausted. Loan rehabilitation and loan consolidation are more widely available to and used by borrowers. Each is described below. <10.2.1. Loan Rehabilitation> Loan rehabilitation offers borrowers who have defaulted on a student loan an opportunity to have their loan(s) reinstated as active and to have their borrower benefits and privileges restored. A defaulter must contact the PCA to whom the debt has been transferred to request loan rehabilitation. If during a period of 10 consecutive months a borrower voluntarily makes nine reasonable and affordable monthly payments on a defaulted loan within 20 days of the due date, the defaulted loan is rehabilitated. One of two methods may be used to determine what constitutes a reasonable and affordable payment amount for purposes of rehabilitating a defaulted loan. It is initially determined as being an amount equal to the greater of either one-twelfth of 15% of any portion of the borrower's AGI that is in excess of 150% of the poverty line applicable to the borrower's family size (see Table 7 ), or $5. However, a borrower is permitted to object to the initial determination and may instead elect to have the amount calculated according to an alternative formula that is based on an itemized accounting of his or her monthly income and expenses. In either case, the borrower is required to provide documentation of income and, as applicable, expenses for purposes of determining a reasonable and affordable payment amount. Only payments that are voluntarily made by a borrower may be counted as among the nine reasonable and affordable payments required for loan rehabilitation. Involuntary payments may continue to be collected (e.g., through administrative wage garnishment or the TOP) while a borrower pursues loan rehabilitation. Upon a loan being rehabilitated, the borrower again becomes eligible for full borrower privileges, such as deferments and loan forgiveness, and other means of collecting on the loan while it was in default will cease. The borrower's loan will then be transferred by DMCS to a nondefault loan servicer and he or she will be placed in one of the alternative repayment plans (discussed above) for a period of 90 days. The borrower may then apply for another repayment plan for which he or she is eligible; if the borrower does not apply for a repayment plan, he or she will be placed in a standard repayment plan. Consumer reporting agencies will also be instructed to remove any record of the default from the borrower's credit history; however, records of late or missed payments that led to the loan defaulting will not be removed. A defaulted loan may be rehabilitated only once. Defaulted loans upon which a court judgement has been obtained through a civil lawsuit are not eligible to be rehabilitated. <10.2.2. Loan Consolidation> A borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more defaulted loans. To become eligible to do so, a borrower must make what are considered satisfactory repayment arrangements. One approach is for the borrower, prior to consolidation, to make three voluntary, consecutive, on-time, full monthly payments that are considered reasonable and affordable, based on the borrower's total financial circumstances. These payments must be made within 20 days of the due date and may not be involuntary payments (e.g., payments collected through administrative wage garnishment or the TOP). A borrower who chooses this approach may repay the new Direct Consolidation Loan according to any available repayment plan. Another approach is for the borrower to agree to repay the new Direct Consolidation Loan according to one of the IDR plans for which the borrower is eligible. If the borrower obtains a Direct Consolidation Loan for purposes of repaying a Direct PLUS Loan or a FFEL PLUS Loan made to a parent borrower, he or she must repay the new loan according to the Income-Contingent Repayment plan, which is the only IDR plan available to borrowers of parent loans. Several restrictions limit the availability of loan consolidation as an option for borrowers to bring defaulted loans into good standing. If the borrower's loan was subject to AWG, this must first be lifted for the loan to be eligible for consolidation. A loan on which a court judgment has been secured through litigation is not eligible for loan consolidation. If the borrower's defaulted loan is a Direct Consolidation Loan, the borrower must include at least one other eligible loan in the new Direct Consolidation Loan. If the borrower's defaulted loan is a FFEL Consolidation Loan, the borrower may include the loan in a new Direct Consolidation Loan without including any other loans; however, the borrower must repay according to one of the IDR plans. If a borrower consolidates a loan out of default, collection fees will be assessed on the outstanding principal and interest of the defaulted loan, and these fees will be included as part of the original principal balance of the new Direct Consolidation Loan. Upon a defaulted loan being repaid by a Direct Consolidation Loan, the borrower regains eligibility for full borrower privileges, such as deferments and loan forgiveness, as well as eligibility for additional federal student aid. However, in contrast to loan rehabilitation, repaying a defaulted loan with a Direct Consolidation Loan will not remove the record of default from the borrower's credit history. <11. Loan Counseling and Disclosures> This report seeks to provide a comprehensive overview of the terms and conditions of federal student loans made through the Direct Loan program. These loan terms and conditions are voluminous and complex. For many individuals, the process of borrowing a federal student loan may be among their first experiences with making a major financial transaction; thus, it is imperative for borrowers to understand the terms and conditions of the loans they obtain and their associated rights and responsibilities as borrowers. As part of the process of obtaining a federal student loan, borrowers are required to undergo financial counseling that provides them with information about their loans and the obligations they assume as borrowers. First-time borrowers must be provided with entrance counseling, which provides them with comprehensive information on the loans they are about to obtain. Borrowers who have received an adverse credit determination but have been able to establish eligibility to borrow Direct PLUS Loans must receive PLUS Loan credit counseling. At the time of obtaining a loan, borrowers are required to sign a promissory note, which is a contract that establishes the borrower's legal obligation to repay. The promissory note is accompanied by a rights and responsibilities statement that uses plain language to disclose the terms and conditions of the loan. Prior to a borrower ceasing to be enrolled on at least a half-time basis, he or she must be provided with exit counseling. <11.1. Entrance Counseling> The institution attended by a first-time borrower of a Direct Subsidized Loan or a Direct Unsubsidized Loan, or by a first-time graduate or professional student borrower of a Direct PLUS Loan is required to ensure that he or she receives entrance counseling prior to the first installment of the loan being disbursed. Entrance counseling may be provided through an in-person counseling session, a written document provided to the borrower, or an online interactive medium. Irrespective of the means through which entrance counseling is provided, the institution must ensure that an individual who has expertise in federal student aid is available shortly after the session to respond to any questions a borrower might have. Entrance counseling is designed to provide a borrower with comprehensive information on both the terms and conditions of the loan and the borrower's rights and responsibilities with regard to the loan. Entrance counseling must satisfy the following requirements: explain the master promissory note; emphasize to the borrower the seriousness and importance of the obligation to repay the loan; describe the likely consequences of default, which include adverse credit reports, the collection of delinquent debt, and litigation; emphasize that the borrower is required to repay the loan in full, irrespective of whether he or she completes the program of study on time or at all, is unable to obtain employment, or is dissatisfied with the program; provide the borrower with sample monthly payment amounts based on either a range of amounts that might be borrowed or the average cumulative amount borrowed by other students in the same program; explain potential implications that accepting the loan might have on the borrower's eligibility to receive other forms of student aid; provide information on interest accrual and capitalization; inform the borrower of the option to pay the interest that accrues on Direct Unsubsidized Loans and Direct PLUS Loans while he or she is enrolled in school; explain the meaning of half-time enrollment and the consequences of not maintaining half-time enrollment; explain the importance of informing the school if the borrower chooses to withdraw so that exit counseling can be provided; provide information about, and how the borrower can access, the National Student Loan Data System (NSLDS); provide the name of and contact information for an individual the borrower may ask any questions about the terms and conditions of the loan and the borrower's rights and responsibilities with regard to the loan; explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct Subsidized Loans and its implications; and explain to first-time graduate student borrowers of a Direct PLUS Loan who have previously borrowed a Direct Subsidized Loan or a Direct Unsubsidized Loan the differences between these loan types with regard to interest rates, the accrual of interest, and the start of the repayment period. <11.2. PLUS Loan Credit Counseling For Borrowers with Adverse Credit> Any parent borrower or graduate or professional student borrower with an adverse credit determination who becomes eligible to borrow a Direct PLUS Loan, either by obtaining an endorser or by providing documentation of extenuating circumstances, must receive special PLUS Loan credit counseling. The counseling is also available on a voluntary basis to Direct PLUS Loan borrowers who have not received an adverse credit determination. This counseling includes information similar to what is currently provided in PLUS Loan entrance counseling. <11.3. Master Promissory Note and Plain Language Disclosure> The terms and conditions of federal student loans made through the Direct Loan program are specified in a promissory note, which is a contract that establishes the borrower's obligation to repay the loan. A master promissory note (MPN) is a type of promissory note under which loans may be made to a borrower for a single academic year or for multiple academic years. One type of MPN is used for making Direct Subsidized Loans and Direct Unsubsidized Loans and another type of MPN is used for making Direct PLUS Loans. A different type of promissory note is used for making Direct Consolidation Loans. The MPN must be read and signed by a student or parent borrower before loan funds may be disbursed. The IHE a student attends may choose to use a MPN with either a single-year or a multiyear feature. IHEs that use a single-year MPN may only make loans under the MPN for one academic year. IHEs that use the multiyear feature may make one or more loans under the same MPN for up to 10 academic years. IHEs that use a multiyear MPN must confirm a borrower's acceptance of a new loan for each subsequent year by either obtaining a borrower's written confirmation of acceptance (affirmative confirmation) or by not receiving a borrower's notification that he or she is specifically declining the loan in whole or in part (passive confirmation). Under current regulations, IHEs are encouraged, but not required, to obtain affirmative confirmation from the student that he or she accepts the loan before disbursing loan funds. Attached to the MPN is a Plain Language Disclosure (PLD) form that explains loan terms and conditions and the borrower's rights and responsibilities in simplified terms. The PLD is provided to borrowers prior to each disbursement of a loan made through the Direct Loan program, regardless of whether an IHE uses a single-year or multiyear MPN. <11.4. Exit Counseling> Prior to a student borrower ceasing to be enrolled on at least a half-time basis, the institution a borrower attends must provide him or her with exit counseling. It may be provided through an in-person counseling session, an audiovisual presentation, or an online interactive medium. Irrespective of the means through which exit counseling is provided, the institution must ensure that an individual who has expertise in federal student aid is available shortly after the session to respond to any questions a borrower might have. Exit counseling is designed to provide the borrower with comprehensive information on both the terms and conditions of the loan and the borrower's rights and responsibilities with regard to the obligation to repay the loan. Exit counseling must satisfy the following requirements: inform the borrower of the average anticipated monthly payment amount based on either the individual's actual student loan debt or the average cumulative amount borrowed by other students at the same school; provide a review of the repayment plan options available to the borrower, along with a description of the various features of each plan and sample information showing average anticipated monthly payment amounts and differences in interest and total payments under each plan; explain options to prepay a loan, to repay according to a shorter schedule, and to change repayment plans; provide information on loan consolidation and how it affects the length of repayment and total interest paid; how it affects borrower benefits, such as grace periods, loan forgiveness, loan cancellation, and deferment; and options to prepay a loan or change repayment plans; explain how to contact the borrower's loan servicer; explain the master promissory note; emphasize to the borrower the seriousness and importance of the obligation to repay the loan; emphasize that the borrower is required to repay the loan in full, irrespective of whether he or she completes the program of study on time or at all, is unable to obtain employment, or is dissatisfied with the program; describe the likely consequences of default, which include adverse credit reports, the collection of delinquent debt, and litigation; provide a general description of the terms and conditions under which a borrower may receive full or partial discharge or forgiveness of principal and interest, may defer repayment of principal or interest, or may be granted forbearance; and descriptions of federal student assistance programs and other information and ED publications as required by HEA Section 485(d); review information on the availability of the FSA Ombudsman Group; provide information about, and how the borrower can access, the NSLDS; explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct Subsidized Loans and its implications; provide a general description of tax benefits that may be available to borrowers; and require the borrower to provide current and expected future contact information, next of kin, and (if known) expected employer. <11.5. Additional Information on Loan Terms and Conditions> The loan counseling and disclosures described above are designed to ensure that borrowers are provided with information about the terms and conditions of their loans, as required by law. Appendix A presents a list of additional resources that may be accessed by policymakers and others who may be interested in obtaining more detailed information about borrowers' rights, responsibilities, and obligations with regard to Direct Loan program loans. Appendix A. Directory of Resources Directory of Resources Appendix B. Glossary of Terms Appendix C. Historical Tables on Selected Loan Terms and Conditions

The William D. Ford Federal Direct Loan (Direct Loan) program is the single largest source of federal financial assistance to support students' postsecondary educational pursuits. The U.S. Department of Education estimates that in FY2020, $100.2 billion in new loans will be made through the program. As of the end of the second quarter of FY2019, $1.2 trillion in principal and interest on Direct Loan program loans, borrowed by or on behalf of 34.5 million individuals, remained outstanding. For many individuals, borrowing a federal student loan through the Direct Loan program may be among their first experiences in incurring a major financial obligation. Upon obtaining a loan, a borrower assumes a contractual obligation to repay the debt over a period that may span a decade or more. Loans were first made through the Direct Loan program in 1994. Since then, Congress has periodically made changes to the program and the terms and conditions of loans. Changes have impacted program aspects such as the availability of loan types, interest rates, loan repayment, loan discharge and forgiveness, and the consequences of default. Over time, the accumulation of changes—many of which are differentially applicable to borrowers or loan types—has resulted in a set of loan terms and conditions that are voluminous and complex. Congress may contemplate making future changes to loan terms and conditions. This report has been prepared to provide Congress with a comprehensive description of the terms and conditions and borrower benefits that are applicable to loans made through the Direct Loan program. Emphasis is placed on discussing loan types, provisions related to borrower eligibility, amounts that may be borrowed, interest and fees, loan repayment, repayment relief, loan forgiveness benefits, the consequences of default, and the methods used to ensure borrowers are informed about the terms and conditions of their loans and their obligation to repay them. Direct Loan Types Four types of loans are available through the Direct Loan program. Direct Subsidized Loans are available only to undergraduate students with financial need. Direct Unsubsidized Loans are available both to undergraduate students and graduate students. Direct PLUS Loans may be borrowed by graduate students and by the parents of undergraduate students dependent upon them for financial support. Direct Consolidation Loans allow borrowers to combine debt from multiple existing federal student loans into a single new loan. Eligibility and Amounts That May Be Borrowed Whether an individual may borrow a loan and the amount he or she may borrow are determined by the interaction of many factors. Eligibility to borrow varies by loan type, borrower characteristics, program level, and class level. The amount an individual may borrow is subject to annual and aggregate borrowing limits, and federal need analysis and packaging procedures. Loans are made available in amounts constrained by program rules, but—with the exception of Direct PLUS Loans—without consideration of a borrower's ability to repay. Eligibility to borrow a Direct PLUS Loan depends on an individual's creditworthiness. Interest on Direct Loan Program Loans Procedures for calculating interest vary by loan type, repayment status, and the period during which a loan was made. In limited circumstances, the federal government subsidizes, or does not charge, interest that would otherwise accrue. Interest subsidies are mostly limited to Direct Subsidized Loans; however, certain interest subsidies may be provided on all loan types. Loan Repayment Plans Numerous repayment plans, each with different payment structures and maximum durations, are available. Among the various plans, income-driven repayment (IDR) plans cap monthly payments at a specific percentage of a borrower's discretionary income. For most repayment plans, monthly payments must cover the interest that accrues; however, the IDR plans allow for negative amortization, in which case monthly payments may be for less than the interest that accrues. Deferment and Forbearance Periods of deferment and forbearance offer a borrower temporary relief from the obligation to make monthly payments. In certain instances, interest subsidies may be provided during periods of deferment; however, interest subsidies are not available during periods of forbearance. Loan Discharge and Loan Forgiveness A borrower may be relieved of the obligation to repay his or her loans in certain circumstances. Student loan debt may be discharged on the basis of borrower hardship (e.g., death, total and permanent disability, school closure) or may be forgiven following an extended period of repayment according to an IDR plan or completion of a period of public service. Loan Default, Its Consequences, and Resolution If a borrower defaults, the loan becomes due in full and the borrower loses eligibility for many benefits, as well as access to other forms of federal student aid. The government also uses numerous means to collect on defaulted student loan debt. A limited set of options is available for a borrower to bring a defaulted loan back into good standing. Loan Counseling and Disclosures Student borrowers are required to undergo financial counseling, which is designed to provide them with comprehensive information on the terms and conditions of their loans as well as their rights and the responsibilities they assume as borrowers. Loan terms and conditions are specified in a promissory note, which is a contract that establishes the borrower's obligation to repay the loan, and in a plain language disclosure document that uses simplified terms to explain a loan's terms and conditions and the borrower's rights and responsibilities.

crs_R46332

crs_R46332_0

<1. Finance, Technology, and Recent Innovation> Finance and technological development have been inextricably linked throughout history. (Possibly, quite literally. The technology of writing in early civilization may have developed to record payments and debts. ) As a result, the term fintech is used to refer to a broad set of technologies being deployed across a variety of financial industries and activities. Although there is no consensus on which technologies qualify as new or innovative enough to be fintech, it is generally understood to mean recent innovations to the way a financial activity is performed that are made possible by rapid advances in digital information technology. Underlying, cross-cutting technological advancements that enable fintech include increasingly widespread, easy access to the internet and mobile technology; increased data generation and availability and use of Big Data and alternative data; increased use of cloud computing services; the development of algorithmic decisionmaking (and the related technological evolutions toward machine learning and artificial intelligence); and the coevolution of cyber threats and cybersecurity. The complementary use of these technologies to deliver financial services could potentially create benefits. Many technologies aim to create efficiencies in financing, which reduce costs for financial service providers. Certain cost savings may be passed along to consumers through reduced prices. With lower prices, some customers that previously found services too expensive could enter the market. In addition, some individuals and businesses that previously could not access financial services because of price or lack of available financial information could gain access at lower prices or through increased data availability and improved data analysis. Fintech also may allow businesses to reach new customers that were previously restricted by geographic remoteness or unfamiliarity with products and services. Increased accessibility may be especially beneficial to traditionally underserved groups, such as low-income, minority, and rural populations. However, fintech may also generate risks and result in undesirable outcomes. Predicting how an innovation with only a brief history of use will perform involves uncertainty, particularly without the experience of having gone through a recession. Thus, technologies may not ultimately allocate funds, assess risks, or otherwise function as efficiently and accurately as intended; they may instead generate unexpected losses. Some technologies aim to eliminate or replace a middle man, but in certain cases the middle man may in fact be useful or even necessary. For example, an experienced financial institution or professional may be able to explain and advise consumers on financial products and their risks. In addition, new fintech startups may be inexperienced in complying with consumer-protection laws. These characteristics may increase the likelihood that consumers using financial technology engage in a financial activity and take on risks that they do not fully understand and which unduly expose them to losses. Furthermore, some studies suggest that fintech's use can result in disparate impact on protected groups, and that the increasing use of high-speed internet and mobile devices in finance may be leaving behind groups that cannot afford those services and devices. As financial activity increasingly uses digital technology, sensitive data are generated. On the one hand, data can be used to assess risks and ensure customers receive the best products and services. On the other hand, data can be stolen and used inappropriately, and there are concerns over privacy. This raises questions over data ownership and control including consumers' rights and companies' responsibilities in accessing and using data and whether companies that use and collect data face appropriate cybersecurity requirements. Given that fintech may produce both positive and negative outcomes, Congress and other policymakers may consider whether existing laws and regulations appropriately foster the development and implementation of potentially beneficial technologies while adequately mitigating the risks those technologies may present. This report examines (1) underlying technological developments that are being used in financial services, (2) selected examples of financial activities affected by innovative technology, and (3) some approaches regulators have used to integrate new technologies or technology companies into the existing regulatory framework. Policy issues that may be of interest to Congress are examined throughout the report. Additional CRS products and resources also are identified throughout the report and in the Appendix . For a detailed examination of how fintech is regulated, see CRS Report R46333, Fintech: Overview of Financial Regulators and Recent Policy Approaches , by Andrew P. Scott. <2. Selected Underlying Technological Developments> Fintech is generally enabled by advances in general-use technologies that are used to perform financial activities. This section examines certain of these underlying technologies, including their potential benefits and risks, and identifies policy issues related to their use in finance that Congress is considering or may choose to consider. <2.1. Proliferation of Internet Access and Mobile Technology6> The proliferation of online financial services has a number of broad implications. One consideration is that online companies can often quickly grow to significant size shortly after entering a financial market. This could enable the rapid growth of small fintech startups, possibly through capturing market share from incumbent financial firms. Adopting information technology, however, may require significant investment, which could advantage existing firms if they have increased access to capital. Larger technology firms including Amazon, Apple, Facebook, and Google have started financial services operations, and thus may become competitors to or partners with traditional financial institutions. Some industry experts predict that platforms offering the ability to engage with different financial institutions from a single channel will likely become the dominant model for delivering financial services. These developments may raise concerns that offering finance through digital channels could drive industry concentration. Another consideration in this area involves consumer disclosures for financial products. In the past, voluntary or mandatory disclosures were designed to be delivered through paper. As firms move more of their processes online, they have begun to update these disclosures with electronic formats in mind. Consumers may interact differently with mobile or online disclosures than paper disclosures. Accordingly, firms may need to design online disclosures differently than paper disclosures to communicate the same level of information to consumers. <2.1.1. Possible Issues for Congress> The internet raises questions over what role geography-based financial regulations should play in the future. Many financial regulations are applied to companies and activities based on geographic considerations, as most areas of finance are subject to a dual federal-state regulatory system. For example, nonbank lenders and money transmitters are primarily regulated at the state level in each state in which they operate and are subject to those states' consumer-protection laws. Fintech proponents argue the internet facilitates the provision of products and services on a national scale, and 50 separate state regulatory regimes are inefficient when applied to internet-based businesses that are not constrained by geography. However, state regulators and consumer advocates assert state regulators' experience and local connection are best situated to regulate nonbank fintech companies. An Office of the Comptroller of the Currency (OCC) initiative to accept applications for special-purpose bank charters that would allow certain fintechs to enter the national bank regulator regime, and subsequent lawsuits filed by state regulators to block such charters, exemplify this policy debate. Another example is the debate over how a bank's geographic assessment area should be defined for the purposes of the Community Reinvestment Act ( P.L. 95-128 ) a law designed to encourage banks to meet the credit needs of the communities in which they operate when so many services are delivered over the internet instead of at a physical branch location. Another area in which the internet raises concerns is how effective disclosure requirements are if they are sent electronically and read on a screen, when many disclosure forms may have been designed to be delivered and read on paper. Thus, although electronic disclosures can eliminate costs of printing and physically delivering disclosures, they may hinder customers' ability to read and understand them. Currently, financial regulatory agencies are responsible for implementing consumer-disclosure laws. Often, these agencies create either mandatory or safe harbor form designs that firms use to comply with these laws. Some financial regulatory agencies are either required or choose to test new consumer disclosures themselves before implementing a new disclosure requirement on the entities they regulate. In the past, when most consumer credit origination occurred in person, this testing generally focused on paper delivery. As firms move more of their origination processes online, financial regulatory agencies might consider updating their consumer testing research with this format in mind. <2.2. Big Data16> Today, companies can easily collect, cheaply store, and quickly process data, regardless of its size, frequency, type, or location. Big Data commonly refers to the vast amounts and types of data an information technology (IT) system may handle. Big Data data sets share characteristics that require different hardware and software in IT systems to store, manage, and analyze those data. The four characteristics of Big Data are volume, velocity, variety, and variability. Volume refers to a data set's extensive size. Velocity refers to the rate of flow for the data coming into, being processed by, and exiting the IT system. Variety refers to the differing types of data in a data set, such as information entered by a company analyst, images, data from a partner database, and data scraped from a website. Variety can also refer to different types of devices and subsystems in an IT system handling the data. Variability refers to the recognition that Big Data data sets can change with regard to the first three attributes. A data set may grow or shrink in volume, data may flow at different velocities, and a data set may include a different variety of data from one point in time to another. Changes in data variability drive IT systems to have a scalable architecture in order to manage the data sets. Big Data is used to generate insights, support decisionmaking, and enable automation. Big Data allows extensive and complex information to be analyzed with new methods (e.g., cloud computing resources, which are discussed in more detail below), leading users to understand and use the data in novel ways. Loan underwriting (evaluating the likelihood that a loan applicant will make timely repayment) is an example from the financial services industry. Loan underwriting has relied on an in-person process, using only a few data sources that might have been months or years old. Big Data enables underwriting to be performed online using a greater variety of more current data sources, potentially allowing for greater speed, accuracy, and confidence in loan decisions, but raises concerns over privacy and questions over what information is appropriate to collect and use. In recent years, new technologies have led to the development of new products in the financial services sector. For example, as account information has become electronic, some products allow consumers to combine accounts with several financial services providers on a single software platform, sometimes in combination with financial advisory services. The underlying technology providers for these platforms are sometimes known as data aggregators, which refers to companies that compile information from multiple sources into a standardized, summarized form. One technology commonly used to collect account data is web scraping , a technique that scans websites and extracts data from them, and in general can be performed without a direct relationship with the website or financial firm maintaining the data. As an alternative to web scraping, the financial institution managing the account may provide customer account information through a structured data feed or application program interface (API). Advantages and disadvantages exist when accessing alternative data by API rather than web scraping. For example, in certain circumstances web scraping may be an easier way for companies to gather data because it does not rely on bilateral company agreements, but some industry observers assert that APIs are more secure in terms of cybersecurity and fraud risks. Using API banking standards to facilitate data sharing between financial firms is sometimes called open banking . New financial products that take advantage of data aggregation and open banking could provide benefits to consumers by enabling them to manage personal finances, automate or set goals for saving, receive personalized product recommendations, apply for loans, and perform other tasks. However, increasing access to these data may pose data security and privacy risks to consumers. <2.2.1. Possible Issues for Congress> Questions exist about how current laws and regulations should apply to Big Data. Typically, these questions relate to concerns about privacy and cybersecurity. One area of debate is whether data security standards should be prescriptive and government defined or flexible and outcome based. Some argue that a prescriptive approach can be inflexible and harm innovation, but others argue that an outcome-based approach might lead to institutions having to comply with a wide range of data standards. In addition, questions exist about whether relevant data security laws continue to cover all sensitive individual financial information, or whether the scope of these laws should be expanded. <2.3. Alternative Data26> Alternative data generally refers to types of data that are not traditionally used by the national consumer reporting agencies to calculate a credit score. It can include both financial and nonfinancial data. New technology makes it more feasible for financial institutions to gather alternative data from a variety of sources. For example, the Consumer Financial Protection Bureau (CFPB) included the following list of alternative data in a 2017 Request for Information: Data showing trends or patterns in traditional loan repayment data. Payment data relating to non-loan products requiring regular (typically monthly) payments, such as telecommunications, rent, insurance, or utilities. Checking account transaction and cashflow data and information about a consumer's assets, which could include the regularity of a consumer's cash inflows and outflows, or information about prior income or expense shocks. Data that some consider to be related to a consumer's stability, which might include information about the frequency of changes in residences, employment, phone numbers or email addresses. Data about a consumer's educational or occupational attainment, including information about schools attended, degrees obtained, and job positions held. Behavioral data about consumers, such as how consumers interact with a web interface or answer specific questions, or data about how they shop, browse, use devices, or move about their daily lives. Data about consumers' friends and associates, including data about connections on social media. Alternative data could potentially be used to expand access to credit for consumers, such as currently credit invisible or unscorable consumers, but also could create risks related to data security or consumer-protection violations. Financial institutions can mitigate some of these risks through data encryption and other robust data governance practices. Moreover, some prospective borrowers may be unaware that alternative data has been used in credit decisions, raising privacy and consumer-protection concerns. Additionally, alternative data may pose fair lending risks if alternative data elements are correlated with prohibited classes, such as race or ethnicity. Alternative data could potentially increase accuracy, visibility, and scorability in credit reporting by including additional information beyond that which is traditionally used. The ability to calculate scores for previously credit invisible or nonscoreable consumers could allow lenders to better determine their creditworthiness. Arguably, using alternative data would potentially increase access to and lower the cost of credit for some credit invisible or unscorable individuals by enabling lenders to find new creditworthy consumers. However, alternative data could potentially harm some consumers' existing credit scores if it includes negative or derogatory information. <2.3.1. Possible Issues for Congress> The main statute regulating the credit reporting industry is the Fair Credit Reporting Act (FCRA; P.L. 91-508), enacted in 1970. The FCRA requires "that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit ... in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information." Using alternative data for credit reporting raises FCRA compliance questions. For example, alternative data providers outside of the traditional consumer credit industry may find FCRA data-furnishing requirements burdensome. Some alternative data may have accuracy issues, and managing consumer disputes requires time and resources. These regulations may discourage some organizations from furnishing alternative data, even if the data could potentially help some consumers become scorable or increase their credit scores. In addition, consumers may not know what specific information alternative credit scoring systems use and how to improve the credit scores produced by these models. The CFPB and federal banking regulators have been monitoring alternative data developments in recent years, and in December 2019 they released a policy statement on the appropriate use of alternative data in the underwriting process. The release followed a February 2017 CFPB request for information from the public about the use of alternative data and modeling techniques in the credit process. Information from this request led the CFPB to outline principles for consumer-authorized financial data sharing and aggregation in October 2017. These nine principles include, among other things, consumer access and usability, consumer control and informed consent, and data security and accuracy. In addition, the CFPB issued its first (and, to date, only) no-a ction letter in 2017 to the Upstart Network, a company that uses alternative data, such as education and employment history, to make credit and pricing decisions. In 2018, the Treasury Department released a report about regulatory recommendations, with a chapter on consumer financial data, including data sharing, aggregation, and other technology issues. <2.4. Automated Decisionmaking and Artificial Intelligence45> Performing financial activities often involves making decisions about how to allocate resources (e.g., whether a particular borrower should be given a loan or whether shares of a particular stock should be purchased at the current price) based upon analysis of information (e.g., whether the borrower has successfully paid back loans in the past or how much profit the stock-issuing company made last year). Historically, these complex tasks could only be performed by a human. More recently, technological advances have enabled computers to perform these tasks. This development creates potential benefits and risks, and has a number of financial regulatory implications. Financial firms have used algorithms precoded sets of instructions and calculations executed automatically to enable computers to make decisions for a number of years, notably in the lending and investment management industries. Such automation may produce benefits if algorithmic analysis perhaps using Big Data and alternative data, discussed previously is better able to assess risks, predict outcomes, and allocate capital across the financial system than traditional human assessments. Eliminating inefficiencies through such automation could reduce the prices and increase the availability of and access to financial services, including for consumers, small businesses, and the underserved. Automation can also create certain concerns, particularly if automated programs may not perform as intended, possibly resulting in market instability or discrimination against protected groups. Algorithms can fail to perform as expected for reasons such as programmer error or unforeseen conditions, potentially producing unexpected losses. Because algorithms can execute actions so quickly and at large scale, those losses can be quite large. An illustrative event is the Flash Crash of May 6, 2010, in which the Dow Jones Industrial Average fell by roughly 1,000 points (and then rebounded) in intraday trading. The event was caused in part by an automated futures selling program that made sales more quickly than anticipated, resulting in tremendous market volatility. In addition, automated decisions may result in adverse impacts on certain protected groups in a discriminatory way. In lending, for example, these discriminatory outcomes may include higher rates of denial for minority loan applicants than for white applicants with similar incomes and financial histories. Such discrimination can occur for a number of reasons, even if algorithm developers did not intend to discriminate. For example, the data set used to train the lending program is likely historical data of past loan recipients, and minorities may be underrepresented in that sample. By using these data to learn, the algorithm may similarly make fewer loans to underrepresented groups. <2.4.1. Possible Issues for Congress> Programs enabled with artificial intelligence or machine-learning capabilities (i.e., automated programs that are able to change themselves with little or no human input) raise a number of policy concerns. The programs' complexity and the lack of human input needed to change their decisionmaking processes can make it exceedingly difficult for human programmers to predict what these programs will do and explain why they did it. Under these circumstances, the ability of regulators or other outside parties to understand what a program did, and why, may be limited or nonexistent. This poses a significant challenge for companies using AI programs to ensure they will produce outcomes that comply with applicable laws and regulations, and for regulators to effectively carry out their oversight duties. In order to address this black box problem, some observers assert that regulators should set standards for how AI programs are developed, tested, and monitored. If Congress decided such standards were necessary, it could encourage or direct financial regulatory agencies to develop them. In addition, it could direct the agencies to implement rules regarding the development and use of AI programs. <2.5. Cloud Computing52> Some have jokingly referred to cloud computing as "someone else's computer." Although this is a facetious characterization, it succinctly describes the technology's core tenet. Cloud computing users transfer their information from a resource (e.g., hard drives, servers, and networks) that they own to one that they lease. Cloud computing alleviates users from having to buy, develop, and maintain technical resources and recruit and retain the staff to manage those resources. Instead, cloud computing users pay providers who specialize in building and managing such resource infrastructures. Cloud and high-performance computing architectures are better suited to processing Big Data than desktop computing. For many, this makes Big Data and cloud computing inextricably linked, and many commenters may refer to them interchangeably. Although this may be common practice, it is not technically accurate. Cloud computing refers to the computing resource (e.g., servers, applications, and service), whereas Big Data refers to the data a computing resource may use. Cloud computing is used extensively by financial institutions, including banks, insurers, and securities firms. Most financial firms store and process large amounts of data related to customer accounts and transactions. Typically, they also provide internet-based access to accounts and services through websites and mobile device apps and attract customers with these services. Meeting these business needs requires significant IT infrastructures and capabilities. For some financial companies, it may be less costly to pay a cloud service provider than to do everything in-house. Cloud computing introduces certain information security considerations and risks. Because data are not physically under the user's direct control (i.e., the data are no longer on a local, owned or controlled data server), the risk that access to those data may spread beyond intended users may be higher. Cloud providers counter that although they have physical access to the data, they do not necessarily have logical access to the data, nor do they own the data. In other words, they argue that although the data are hosted on their servers, they are encrypted or otherwise segmented from the provider's ability to access them. Another related potential risk is commonly referred to as the insider threat the risk that a trusted insider may purposely harm an employer or clients. Although users may limit unauthorized access to their data through encryption, an insider may be able to manipulate the encrypted files in such a manner that the information is kept confidential, but is no longer available. Users would then depend on the provider to restore a functioning backup of the data to resume data access. Or, the provider may offer encryption and key-management services to the user. In doing so, providers keep the data in their servers confidential between clients, but in a way that continues to afford that provider access to the user's data through encryption and decryption protocol maintenance. It should be noted that financial institutions that keep IT operations in-house also face the insider threat. However, migrating to cloud computing adds the cloud service provider's employees to the set of people that could pose an insider threat. In addition, a portion of the risk shifts from being internally managed by the financial institution to being externally managed by the cloud service provider. How well a financial institution manages these changing risk exposures depends on the quality of its policies, programs, and relationship with its cloud provider. <2.5.1. Possible Issues for Congress> Policymakers may examine whether the existing regulatory framework and rules appropriately balance the goals of guarding against the risks cloud computing presents to individual financial institutions and systemic stability, while not hindering beneficial innovations. Firms face operational risk (including legal and compliance risks) whether they operate and maintain IT in-house or outsource to a cloud provider. Arguably, the risk of system disruptions and failures can be reduced by using a cloud provider with technical specialization in operating, maintaining, and protecting IT systems. Nevertheless, the nature of operational risk exposure changes when an institution adopts cloud computing. This dynamic potentially raises friction between banks, cloud providers, and regulators regarding how banks' relationships with cloud providers should be regulated. The Bank Services Company Act (BSCA; P.L. 87-856) requires regulators to subject activities performed by bank service providers to the same regulatory requirements as if they were performed by the bank itself. This could place substantial regulatory burden on banks and cloud services providers that see potential benefit to working together. The BSCA gives bank regulators supervisory authority over service providers. Exercising this authority over cloud service providers, however, may raise challenges. At least initially, bank regulators may be unfamiliar with the cloud service industry, and cloud service providers may not be familiar with what is expected during bank-like examinations. The Federal Reserve's April 2019 examination of Amazon Websites Services (AWS; a cloud provider with bank clients) anecdotally illustrates the frictions in this area. Reportedly, AWS was wary of the process, and when examiners asked for additional documents and information, "the company balked, demanding to first see details about how its [AWS's] data would be stored and used, and who would have access and for how long." The cloud computing industry could pose risk to broader financial system stability in addition to risk at individual financial firms. Cloud computing resources are pooled, meaning cloud service providers build their resources to service many users simultaneously. This means many financial institutions could be using the same cloud provider, and are likely doing so because the cloud computing industry is highly concentrated at a small number of large providers (as discussed in more detail in the next section). Before cloud computing was available, successful cyberattacks or other technological disruptions would occur in individual institutions' systems. With cloud computing, an incident at one of the main cloud service providers could affect several firms simultaneously, thus affecting large portions of the entire financial system. Large, systemically important banks are reportedly moving significant portions of their operations onto cloud services, which could exacerbate the effects of a disruption at a cloud service provider. Certain financial regulators have mandates to ensure financial stability, so policymakers may choose to consider whether their authorities to regulate cloud service providers are appropriately calibrated. <2.6. Data Security63> Cybersecurity is a major concern of financial institutions and federal regulators. In many ways, it is an important extension of physical security. For example, banks are concerned about both physical and electronic theft of money and other assets, and they do not want their businesses shut down by weather events or denial-of-service attacks. Maintaining the confidentiality, security, and integrity of physical records and electronic data held by banks is critical to sustaining the level of trust that allows businesses and consumers to rely on the banking industry to supply services on which they depend. Enormous amounts of data about individuals' personal and financial information are now generated and stored across numerous financial institutions. This could create additional opportunities for criminals to commit fraud and theft at a scale not previously possible. Instead of stealing credit cards one wallet at a time, someone hacking into a payment system can steal thousands of credit cards at once, and the internet allows stolen credit cards to be sold and used many times. For example, the 2013 Target data breach compromised approximately 70 million credit cards. Whereas a traditional criminal method might involve stealing tax refund checks from individual mail boxes, the IRS announced in May 2015 that its computer system was hacked, allowing unknown persons to file up to 15,000 fraudulent tax returns worth up to $50 million total. The Equifax breach that occurred between May and July 2017 potentially jeopardized almost 148 million U.S. consumers' identifying information. <2.6.1. Possible Issues for Congress> To mitigate cybersecurity risks, financial institutions are subject to an array of laws and regulations. The basic authority that federal regulators use to establish cybersecurity standards emanates from the organic legislation that established the agencies and delineated the scope of their authority and functions. In addition, certain state and federal laws including the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203 ), the Gramm-Leach-Bliley Act of 1999 (GLBA; P.L. 106-102 ), and the Sarbanes-Oxley Act of 2002 ( P.L. 107-204 ) have provisions related to the cybersecurity of financial services that are often performed by banks. In addition, regulators issue guidance in a variety of forms designed to help banks evaluate their risks and comply with cybersecurity regulations. The existing framework was implemented before certain developments in financial technology, and risks related to cybersecurity arguably have increased with digitization's proliferation in finance. Successful hacks of financial institutions, such as those mentioned above, highlight the importance of financial services cybersecurity oversight. The framework governing financial services cybersecurity reflects a complex and sometimes overlapping array of state and federal laws, regulators, regulations, and guidance. However, whether this framework is effective and efficient, resulting in adequate protection against cyberattacks without imposing undue cost burdens on banks, is an open question. Concerns about data security aside, generating and analyzing data also raises privacy concerns. Individuals' transactions are increasingly recorded and analyzed by financial institutions. Debates over how financial institutions should be allowed to use or share consumer data between institutions remain unresolved. For more information on these issues, see CRS Report R44429, Financial Services and Cybersecurity: The Federal Role , by N. Eric Weiss and M. Maureen Murphy; CRS In Focus IF10559, Cybersecurity: An Introduction , by Chris Jaikaran; and CRS Report R45631, Data Protection Law: An Overview , by Stephen P. Mulligan, Wilson C. Freeman, and Chris D. Linebaugh. <3. Selected Technological Innovations in Finance> When innovative financial technology is developed for a specific financial market, activity, or product, it might raise questions over the degree to which existing applicable laws and regulations foster the potential benefits and protects against potential risks. This section examines certain fintech innovations, including their potential benefits and risks, and identifies related policy issues that Congress is considering or may choose to consider. <3.1. Lending71> Traditionally, consumer and small business lenders worked in person with prospective borrowers applying for a new loan. These lenders employed human underwriters to assess prospective borrowers' creditworthiness, determining whether the lender would extend credit to an applicant and under what terms. The underwriting process can be relatively laborious, time consuming, and costly. Dating back to at least 1989, with the debut of a general-purpose credit score called FICO, automation has increasingly become a part of the underwriting process. In general, automation in underwriting relies on algorithms precoded sets of instructions and calculations executed by a computer to determine whether to extend credit to an applicant and under what terms. In contrast, human underwriting relies on a person to use knowledge, experience, and judgement (perhaps informed by a numerical credit score) to make assessments. More recently, with the proliferation of internet access and data availability, some new lenders often referred to as marketplace lenders or fintech lenders rely entirely or almost entirely on online platforms and algorithmic underwriting. In addition, the abundance of alternative data about prospective borrowers now available to lenders either publicly accessible or accessed with the borrower's permission means lenders can incorporate additional information beyond traditional data provided in credit reports and credit scores into assessments of whether a particular borrower is a credit risk. Potentially, more data about a borrower could allow a lender to accurately assess and thus extend credit to prospective borrowers for whom traditional information is lacking (e.g., people with thin credit histories) or insufficient to make a determination about creditworthiness (e.g., small businesses). However, such practices raise questions about what kind of data should be accessible and used in credit decisions and whether its use could result in disparate impacts or other consumer-protection violations. Although fintech lending remains a small part of the consumer lending market, it has been growing quickly in recent years. According to the GAO, "in 2017, personal loans provided by these lenders totaled about $17.7 billion, up from about $2.5 billion in 2013." <3.1.1. Possible Issues for Congress> A general issue underlying many of the policy questions involving fintech in lending is whether the current regulatory framework appropriately fosters these technologies' potential benefits while mitigating the risks they may present. Some commentators argue that current regulation is unnecessarily burdensome or inefficient. Often these criticisms are based largely or in part on the argument that the state-by-state regulatory framework facing nonbank lenders is ill-suited to an internet-based (and hence borderless) industry. Opponents of this view assert that state-level licensing and consumer-protection laws, including usury laws (laws that target lending at unreasonably high interest rates), are important safeguards that should not be circumvented. Additional policy questions arise in cases where banks and nonbanks have partnered with each other to issue loans, such as in an arrangement depicted in Figure 1 . Fintech companies and banks enter into a variety of such arrangements in which one or the other may build the online, algorithmic platform; do the underwriting on the loan; secure the funding to make the loan; originate it; and hold it on its own balance sheet or sell it to investors. These arrangements generally require a bank to closely examine its compliance obligations related to vendor relationship requirements, discussed in more detail in this report's " Banks and Third-Party Vendor Relationships " section. In addition, certain arrangements have raised legal questions concerning federal preemption of state usury laws specifically, whether federal laws that allow banks to export their home states' maximum interest rates apply to loans that are originated by banks but later purchased by nonbank entities. Whether applicable laws and regulations governing these arrangements are appropriately calibrated to ensure availability of needed and beneficial credit or expose consumers to potential harm through the preemption of important consumer protections is a matter of debate. Another area of debate is how consumers will be affected by fintech in lending. Fintech lending proponents argue that, because financial technologies increasingly use quantitative analysis of new data sources, the technologies may expand credit availability to individuals and small businesses in a fair, safe, and less costly way. Thus, these proponents argue that overly burdensome regulation of these technologies could cut off a beneficial credit source to individuals who may have previously lacked sufficient credit access. However, some consumer advocates argue that inexperienced fintech lenders with a relative lack of federal regulatory supervision could inadvertently violate consumer-protection regulations. For example, these lenders may make loan decisions that unintentionally have a disparate impact on protected groups, violating fair lending laws. Also, when lenders deny a loan application they generally must send a notice to the applicant explaining the reason for the denial, called an adverse action notice . Some commentators question how well lenders will understand and thus be able to explain the reasons for an adverse action resulting from a decision made by algorithm. For more detailed examination of these topics, see CRS Report R44614, Marketplace Lending: Fintech in Consumer and Small-Business Lending , by David W. Perkins; and CRS Report R45726, Federal Preemption in the Dual Banking System: An Overview and Issues for the 116th Congress , by Jay B. Sykes. <3.2. Banks and Third-Party Vendor Relationships87> As more banking transactions are delivered through digital channels, insured depository institutions (i.e., banks and credit unions) that lack the in-house expertise to set up and maintain these technologies are increasingly relying on third-party vendors, specifically technology service providers (TSPs), to provide software and technical support. In light of banks' growing reliance on TSPs, regulators are scrutinizing how banks manage their operational risks , the risks of loss related to failed internal controls, people, and systems, or from external events. Rising operational risks specifically cyber risks (e.g., data breaches, insufficient customer data backups, and operating system hijackings) have compelled regulators to scrutinize banks' security programs aimed at mitigating operational risk. Regulators require an institution that chooses to use a TSP to ensure that the TSP performs in a safe and sound manner, and activities performed by a TSP for a bank must meet the same regulatory requirements as if they were performed by the bank itself. The Bank Service Company Act (BSCA; P.L. 87-856) and the Gramm-Leach-Bliley Act (GLBA; P.L. 106-102 ) give insured depository institution regulators a broad set of authorities to supervise TSPs that have contractual relationships with banks. The BSCA directs the federal depository institution regulators to treat all activities performed by contract as if they were performed by the bank and grants them the authority to examine and regulate third-party vendors that provide services to banks, including check and deposit sorting and posting, statement preparation, notices, bookkeeping, and accounting. Section 501 of GLBA requires federal agencies to establish appropriate standards for financial institutions to ensure the security and confidentiality of customer information. Hence, the prudential depository regulators issued interagency guidelines in 2001 that require banks to establish information security programs. Among other things, banks must regularly assess the risks to consumer information (in paper, electronic, or other form) and implement appropriate policies, procedures, testing, and training to mitigate risks that could cause substantial harm and inconvenience to customers. The guidance requires banks to provide continuous oversight of third-party vendors such as TSPs to ensure that they maintain appropriate security measures. The regulators periodically update and have since released additional guidance pertaining to third-party vendors. <3.2.1. Possible Issues for Congress> Regulation aimed at banks' relationships with third-party vendors such as TSPs has benefits in mitigating operational risks but imposes costs on banks that want to utilize available technologies. Banks, particularly community banks and small credit unions, may find it difficult to comply with regulator standards applicable to third-party vendors. For example, certain institutions may lack sufficient expertise to conduct appropriate diligence when selecting TSPs or to structure contracts that adequately protect against the risks TSPs may present. Some banks may also lack the resources to monitor whether the TSPs are adhering to GLBA and other regulatory or contract requirements. In addition, regulatory compliance costs are sometimes cited as a factor in banking industry consolidation, because compliance costs may be subject to economies of scale that incentivize small banks to merge with larger banks or other small banks to combine their resources to meet their compliance obligations. For more detailed examination of this issue, see CRS In Focus IF10935, Technology Service Providers for Banks , by Darryl E. Getter. <3.3. Consumer Electronic Payments92> Consumers have several options to make electronic, noncash transactions, as shown in Figure 2 . For instance, consumers can make purchases by swiping, inserting, or tapping a card to a payment terminal; they can store their preferred payment information in a digital wallet; or they can use an app to scan a barcode on a mobile phone that links to a payment of their choice. Merchants also enjoy electronic payments innovations that allow them to accept a range of payment types while limiting the need to manage cash. Despite the technology surrounding noncash payments, electronic payment networks eventually run through the banking system. Accessing these systems typically involves paying fees, which may be burdensome on certain groups. For instance, while most Americans have a bank account, a 2017 survey found that almost a third of those who left the banking system did so because of fees associated with their account. While some services, such as prepaid cards, allow individuals to make electronic payments without bank accounts, these options also often involve fees. As a result, cash payments may be the most affordable payment option for certain groups. <3.3.1. Possible Issues for Congress> If electronic payment methods significantly displace cash as a commonly accepted form of payment, that evolution could have both positive and negative outcomes. Proponents of reducing cash use argue that doing so will generate important benefits, such as reducing the costs associated with producing, transporting, and protecting cash. Conversely, opponents of reducing cash usage and acceptance argue that doing so would further marginalize people with limited access to the financial system. Although consumers tend to prefer using debit cards and credit cards, cash maintains an important role in retail payments and person-to-person (P2P) transfers, especially for smaller transactions and lower-income households. Electronic payments and cash displacement have various implications for the security and privacy of consumers and merchants. For example, not having cash on store premises can reduce the risk of theft while increasing fees paid to payment card processors. Similarly, consumers may be denied services if they only use cash, but if they transition to electronic payments, the privacy offered by cash transactions' anonymous nature is eroded. Further, as more transactions occur over electronic payment systems, the data processed in these transactions are exposed to cybersecurity attacks. Policymakers may examine whether they should encourage or discourage an evolution away from cash based on their assessments of such a change's benefits and costs. For more information on this topic, see CRS Report R45716, The Potential Decline of Cash Usage and Related Implications , by David W. Perkins. <3.4. Real-Time Payments97> There are several steps in the process of completing a payment, involving multiple systems run by various actors. End user payment services accessed by consumers and retailers are only run by the private sector. On the other hand, bank-to-bank payment messaging, clearing, and settlement can currently be executed through systems run privately or by the Federal Reserve. The processing of these bank-to-bank electronic payments currently results in payment settlement occurring hours later or on the next business day after a payment is initiated. However, advances in technology have made systems featuring real-time payments (RTP) payments that settle almost instantaneously possible. The Federal Reserve 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." FedNow is to be available to all financial institutions with a reserve account at the Federal Reserve. It will require banks using FedNow to make funds transferred over it available to their customers immediately after being notified of settlement. 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), which is jointly owned by its members (a consortium of large banks), 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." <3.4.1. Possible Issues for Congress> According to Federal Reserve 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. A faster payment system may provide certain other benefits 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 they are in the current system, which could be harmful to some households. The main policy issue regarding the Federal Reserve and RTP is whether Federal Reserve entry in this market is desirable. Some stakeholders question whether the Federal Reserve can justify creating a RTP system in the presence of competing private systems. They 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 Federal Reserve 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). 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 Federal Reserve and the private sector also has mixed implications for other policy goals, including innovation, ubiquity, interoperability, equity, and security. For more information on this topic, see CRS Report R45927, U.S. Payment System Policy Issues: Faster Payments and Innovation , by Cheryl R. Cooper, Marc Labonte, and David W. Perkins. <3.5. Cryptocurrency114> Cryptocurrencies are digital money in electronic payment systems that generally do not require government backing or the involvement of an intermediary, such as a bank. Instead, system users validate payments using public ledgers that are protected from invalid changes by certain cryptographic protocols. In these systems, individuals establish an account identified by a string of numbers and characters (often called an address or public key ) that is paired with a password or private key known only to the account holder. A transaction occurs when two parties agree to transfer digital currency (perhaps in payment for a good or service) from one account to another. The buying party will unlock the currency used as payment with her private key, allowing some amount to be transferred from her account to the seller's. The seller then locks the currency in her account using her own private key. From the perspective of the individuals using the system, the mechanics are similar to authorizing payment on any website that requires an individual to enter a username and password. In addition, companies offer applications or interfaces that users can download onto a device to make transacting in cryptocurrencies more user-friendly. Individuals can purchase cryptocurrencies on exchanges for traditional government-issued money like the U.S. dollar (see Figure 3 ) or other cryptocurrencies, or they can earn them by doing work for the cryptocurrency platform. Many digital currency platforms use blockchain technology to validate changes to the ledgers. In a blockchain-enabled system, payments are validated on a public or distributed ledger by a decentralized network of system users and cryptographic protocols. In these systems, parties that otherwise do not know each other can exchange something of value (i.e., a digital currency) because they trust the platform and its protocols to prevent invalid changes to the ledger. Cryptocurrency advocates assert that a decentralized payment system operated through the internet could be faster and less costly than traditional payment systems and existing infrastructures. Whether such efficiencies can or will be achieved remains an open question. However, the potential for increased payment efficiency from these systems is promising enough that certain central banks have investigated the possibility of issuing government-backed, electronic-only currencies called central bank digital currencies (CBDCs) in such a way that the benefits of certain alternative payment systems could be realized with appropriately mitigated risk. How CBDCs would be created and function are still matters of speculation at this time, and the possibility of their introduction raises questions about central banks' appropriate role in the financial system and the economy. <3.5.1. Possible Issues for Congress> Whether cryptocurrencies are appropriately regulated is an open question. Cryptocurrency proponents argue that regulation should not stifle the development of a potentially beneficial payment system, while opponents argue that regulation should protect against criminals using cryptocurrency to evade or hide their activities from authorities, or consumers potentially suffering losses from an untested technology. For anti-money laundering purposes, cryptocurrency regulation occurs at the exchanges that allow people to buy and sell cryptocurrencies either for government-backed fiat currencies or other cryptocurrencies. Generally, these exchanges must register as money transmitters at the state level and must report to the U.S. Treasury's Financial Crimes Enforcement Network as money services businesses at the federal level, and are subject to the applicable anti-money laundering requirements those types of companies face. However, cryptocurrency critics warn that their pseudonymous, decentralized nature nevertheless provides a new avenue for criminals to launder money, evade taxes, or sidestep financial sanctions. Consumer groups and other commentators are also concerned that digital currency users are inadequately protected against unfair, deceptive, and abusive acts and practices. The way cryptocurrencies are sold, exchanged, or marketed can subject cryptocurrency exchanges or other cryptocurrency-related businesses to generally applicable consumer-protection laws, and certain state laws and regulations are being applied to cryptocurrency-related businesses. However, other laws and regulations aimed at protecting consumers engaged in electronic financial transactions may not apply. For example, the Electronic Fund Transfer Act of 1978 (EFTA; P.L. 95-630 ) requires traditional financial institutions engaging in electronic fund transfers to make certain disclosures about fees, correct errors when identified by the consumer, and limit consumer liability in the event of unauthorized transfers. Because no bank or other centralized financial institution is involved in digital currency transactions, EFTA generally has not been applied to these transactions. Finally, some central bankers and other experts and observers have speculated that widespread cryptocurrency adoption could affect the ability of the Federal Reserve and other central banks to implement and transmit monetary policy, if one or more additional currencies that were not subject to government supply controls were also prevalent and viable payment options. For more information on these issues, see CRS Report R45427, Cryptocurrency: The Economics of Money and Selected Policy Issues , by David W. Perkins; CRS Report R45116, Blockchain: Background and Policy Issues , by Chris Jaikaran; and CRS Report R45664, Virtual Currencies and Money Laundering: Legal Background, Enforcement Actions, and Legislative Proposals , by Jay B. Sykes and Nicole Vanatko. <3.6. Capital Formation: Crowdfunding and ICOs125> Financial innovation in capital markets has generated new forms of fundraising for firms, including crowdfunding and initial coin offerings . Crowdfunding involves raising funds by soliciting investment or contributions from a large number of individuals, generally through the internet. Initial coin offerings (ICO) raise funds by selling digital coins or tokens generally created and transferred using blockchain technology to investors; the coins or tokens allow investors to access, make purchases from, or otherwise participate in the issuing company's platform, software, or other project. In cases where crowdfunding and ICOs meet the legal definition of a securities offering, they are subject to securities law and regulation by the Securities and Exchange Commission (SEC). Four kinds of crowdfunding exist: (1) donation crowdfunding, where contributors give money to a fundraising campaign and receive in return, at most, an acknowledgment; (2) reward crowdfunding, where contributors give to a campaign and receive in return a product or a service; (3) peer-to-peer lending crowdfunding, where investors offer a loan to a campaign and receive in return their capital plus interest; and (4) equity crowdfunding, where investors buy stakes in a company and receive in return company stocks. Donation and reward crowdfunding are relatively lightly regulated because contributors are in effect giving without expectation of gaining anything of monetary value in return or preordering a product, respectively. Equity crowdfunding may meet the criteria of a securities offering, and in such cases it is subject to SEC regulation, as are certain peer-to-peer lending arrangements in which a security is issued. ICOs are a relatively new approach to raising capital. A typical ICO transaction involves the issuer selling new digital coins or tokens also referred to as digital assets or, in cases in which they qualify as securities, digital asset securities to individual or institutional investors. Investors can often pay in traditional fiat currencies (e.g., U.S. dollars) or cryptocurrencies (e.g., Bitcoin, Ethereum) pursuant to the terms of each individual ICO. ICOs are often compared with the traditional financial world's initial public offerings (IPOs) because both are methods companies use to acquire funding. The main difference is that IPO investors receive an equity stake representing company ownership, rather than a digital asset. Coin or token purchasers can generally redeem the coins for goods or services from the issuing enterprise, or hold them as investments in the hope that their value will increase if the company is successful. Although every ICO is different, issuers are generally able to make transfers without an intermediary or any geographic limitation. <3.6.1. Possible Issues for Congress> Policymakers are now considering whether these new innovations fit well within the existing regulatory framework, or whether the framework should be adapted to address the risks and benefits that they pose. In general, policymakers and regulators have attempted to provide regulatory clarity and investor protection without hindering financial innovation and technological advancements. Currently, equity crowdfunding debates typically involve questions over how broadly crowdfunding exemptions from certain SEC registration requirements should be applied. Generally, public equity offerings, such as stock issuances, involve a number of costs, including paying an investment bank to price the stock and find investors. In addition, the offering must be registered with the SEC and the company must disclose certain information to investors. Crowdfunding may be less costly than traditional public offerings in certain respects and thus might present a new avenue for small businesses without the resources or expertise to complete a traditional IPO to raise funds. In 2012, Title III of the Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106 ) created an exemption from registration for internet-based securities that made offerings of up to $1 million (inflation-adjusted) over a 12-month period. Certain companies that are still relatively small by some measures may nevertheless not qualify for the exemption, and certain of those companies may find the costs of raising funds through an equity issuance prohibitively high. Title III includes certain investor protection provisions, including limitations on investors' investment amounts and issuer disclosure requirements. However, exempting an issuer from registration may weaken investor protections. Thus, what the appropriate criteria should be to allow an equity crowdfunding issuer to forego registration requirements is a matter of debate. Regarding ICOs, issuers and investors face varying degrees of uncertainty when determining how or if securities laws and regulations apply to them. It may not always be clear whether a digital asset is a security subject to SEC regulation. Meanwhile, ICO and digital asset investors which may include less-sophisticated retail investors, who may not be positioned to comprehend or tolerate high risks may be especially vulnerable to new types of fraud and manipulation, leading to questions about whether investor protections in this area are adequate. There appear to be high levels of ICO scams and business failures. For example, one 2018 study from the ICO advisory firm Satis Group found that 81% of ICOs are scams and another 11% fail for operational reasons. Digital assets may be an attractive method for scammers since transactions in digital assets do not have the same protections as traditional transactions. For example, banks can delay, halt, or reverse suspicious transactions and link transactions with user identity, while many digital asset transactions are generally irreversible. The SEC has taken initiatives to address some of these issues. In September 2017, the SEC established a new Cyber Unit and increased its monitoring of and enforcement actions against entities engaged in digital asset transactions. Since that time, the SEC has increased the frequency of enforcement actions against issuers the end recipients of ICO funding as well as market intermediaries (i.e., broker-dealers and investment managers). In addition to the enforcement activities against entities for noncompliance with securities regulations, the SEC has obtained court orders to halt allegedly fraudulent ICOs. For more information on these issues, see CRS Report R46208, Digital Assets and SEC Regulation , by Eva Su; CRS Report R45221, Capital Markets, Securities Offerings, and Related Policy Issues , by Eva Su; and CRS Report R45301, Securities Regulation and Initial Coin Offerings: A Legal Primer , by Jay B. Sykes. <3.7. High-Frequency Securities and Derivatives Trading153> Although, there is no universal legal or regulatory definition of high-frequency trading (HFT), the term generally refers to a subset of algorithmic trading in financial instruments, such as equity securities, derivatives, and cryptocurrencies, that is conducted by supercomputers executing trades within microseconds or milliseconds. It has grown substantially over the past 15 years and currently accounts for roughly 50% to 60% of the trading volume in domestic equity markets. Depending on trading strategy and market conditions, evidence suggests that HFT in some cases can have either certain positive effects on market quality (e.g., increased liquidity, smaller spreads, decreased short-term volatility, and improved price discovery) or certain negative effects (e.g., decreased liquidity, higher volatility, and higher transaction costs for certain investors). Generally, traders who employ HFT strategies are attempting to earn a small profit per trade on a huge number of trades. This is achieved through automated trading by computers programmed to execute certain kind of trades in response to specific market data and involves rapid order placement. Broadly speaking, these strategies can be categorized as passive or aggressive strategies. Passive strategies include arbitrage trading attempts to profit from price differentials for the same stocks or their derivatives traded on different trading venues; and passive market making , in which profits are generated by spreads between the difference or the spread between the prices at which securities are bought and sold. Aggressive strategies include those known as order anticipation or momentum ignition strategies. Regulators have been scrutinizing HFT practices for years. The SEC oversees HFT and other trading in the securities markets and the more limited securities-related derivatives markets that it regulates. The CFTC oversees any HFT, along with other types of trading, in the derivatives markets it regulates. These markets include futures, swaps, and options on commodities and most financial instruments or indices, such as interest rates. <3.7.1. Possible Issues for Congress> HFT's supporters argue that by quickly executing many trades, often in response to a perceived price inefficiency, HFT improves market quality in a number of ways. Surveys of empirical research suggest that in both equity and foreign exchange markets, HFT appears to have narrowed bid-ask spreads, bolstered market liquidity, reduced some measures of price volatility, and improved the price discovery process. Some commentators argue that HFT is just the latest technological innovation in a financial activity that has a long history of coevolution with technology, and that market participants and regulators are well practiced at incorporating such innovations. Some studies suggest, however, that aggressive HFT strategies should be a matter of public policy concern. Such strategies arguably share similarities to practices such as front-running (when an entity conducts a securities trade while knowing of a future transaction that will have an effect on the price of the securities being traded) and spoofing (offering to buy or sell securities with an intent to cancel the bid or offer before execution), both of which can be illegal. In addition, regulators have expressed concerns over whether certain aggressive HFT strategies may be associated with increased market fragility and volatility, such as that demonstrated in the Flash Crash of May 6, 2010, in which the Dow Jones Industrial Average (DJIA) fell by roughly 1,000 points (and then rebounded) in intraday trading. Arguably the most ambitious market surveillance project in SEC history, the ongoing implementation of Consolidated Audit Trail (CAT) is a direct response to the perceived dearth of market data available during the regulatory analysis of the Flash Crash's causes and the role HFT traders played during that event. First approved by the SEC in 2012, CAT is planned as a single data repository that will consolidate trade orders, trade quotes (the most recent prices at which a trade on a particular stock was executed), and general trade data across domestic equities and options markets. According to then-SEC Chair Mary Jo White, by virtue of CAT "[R]egulators will have more timely access to a comprehensive set of trading data, enabling us to more efficiently and effectively conduct research, reconstruct market events, monitor market behavior, and identify and investigate misconduct." The system, which has raised some cybersecurity concerns, has also earned prospective praise as a tool that will make HFT more transparent, broadening what the SEC will be able to see as it surveils such trades. CAT phase-in began in late 2019, and it is projected to be fully operational in 2022. Policymakers have taken a number of other actions in recent years to address concerns related to HFT. Whether these strike the appropriate balance between fostering HFT's potential benefits while appropriately mitigating risks associated with it is an open question. For example, the SEC and CFTC have either approved or not opposed requests by several securities exchanges (including the NYSE American, the IEX, and the gold and silver futures markets at ICE Futures U.S.) to adopt trading delay mechanisms aimed at removing HFT traders' speed advantages. For more information on these issues, see CRS Report R44443, High Frequency Trading: Overview of Recent Developments , by Rena S. Miller and Gary Shorter; and CRS Report R43608, High-Frequency Trading: Background, Concerns, and Regulatory Developments , by Gary Shorter and Rena S. Miller. <3.8. Asset Management167> Asset management companies pool money from various individual or institutional investor clients and invest the funds on their behalf for financial returns. The SEC is the asset management industry's primary regulator. The asset management industry is increasingly using fintech to conduct investment research, perform trading, and enhance its client services. A prominent example is the proliferation of robo - advisor services, in which automated programs give investment advice to clients. There is also potential to apply artificial intelligence and machine learning within asset management, both in robo-advisory services and other functions such as risk management, regulatory compliance, and trading and portfolio management. Another notable development in the industry is that some large, prominent technology companies have begun to offer asset management services and partner with incumbent asset managers. The term robo adviser generally refers to an automated digital investment advisory program offering asset management services to clients through online algorithmic-based platforms, such as websites or mobile applications. The main differences between human and robo advisers are the amount of human interaction available to investors and the reliance on algorithmic-based platforms for providing financial advice. The potential benefit of this technology is that robo advisers may be able to serve more customers at lower costs than human advisors, thus potentially enabling more affordable consumer access to investment advisory services. Robo advising is a fast-growing segment of the investment management industry. According to one report, direct-to-consumer robo-advisory platforms reached $257 billion in size at the end of 2018 and are projected to have $1.26 trillion in assets under management by 2023. As mentioned above, big tech firms like Amazon, Facebook, Google, and Apple have started financial services operations as potential competitors and partners to the asset management industry. These types of companies could provide investment management through their widely used platforms, potentially disrupting the asset management industry. The potential of big tech asset management platforms has already been realized in certain overseas markets. For example, Ant Financial, an affiliate of Alibaba Group, now manages the world's largest money market mutual fund of $168 billion as of year-end 2018, with a third of the Chinese population, or 588 million Alipay users, already invested in the fund. <3.8.1. Possible Issues for Congress> In general, robo advisers present similar policy issues as all asset managers do related to striking the right balance between protecting investors and mitigating risks while allowing for innovation, appropriately informed risk taking, and financial returns. However, robo advising could also present additional policy considerations. Some observers have expressed concerns that robo advisers may cause risks and excess volatility if they result in herding , in which very large numbers of investors are all directed to the same investments at the same time. AI- or machine learning-enabled robo advising could also be subject to policy concerns related to black box algorithm-based decisionmaking, wherein it is not entirely clear how computer programs have assessed risks or arrived at decisions, and so are effectively unexplainable and unauditable. Some observers are also concerned about the assignment of responsibilities when large losses in an AI-recommended investment occur. For example, questions surround how to assign blame if an investment loss occurred through an AI-based system should the designer of the AI system or the investment manager incorporating its use bare the blame and penalty? If asset management continues to become increasingly automated, policymakers may weigh these risks and concerns against possible benefits, such as reduced cost and increased access. <3.9. Insurance178> Fintech's application to insurance offers a similar potential transformation in the insurance industry as in other aspects of financial services. Fintech could affect insurance throughout the business, including insurance products, underwriting, claims, and marketing, and across all lines of insurance (life, health, and property and casualty [P&C]). Potential aspects of insurtech include peer-to-peer insurance, Big Data, artificial intelligence, blockchain, mobile technology, and insurance on demand. Specific examples could include life or health insurers offering discounts for people wearing devices that track activity and fitness; auto insurers offering discounts for cars that include telematics devices tracking drivers' behavior; and insurers scanning social media as an underwriting tool or to detect fraud. In 2017, the fastest-growing P&C insurer by direct premiums written was an auto insurer, Metromile Insurance, offering per-mile insurance with a telematics tracker. In 2018, the fastest-growing P&C insurer was Root Insurance, also a telematics-based auto insurer, and the second-fastest growing was Lemonade Insurance, a homeowners and renters insurer using technology like chatbots and AI to sell and service policies. Unlike banks or securities firms, the primary regulators for insurers are the individual states. An insurer is required to obtain a charter or license in every state in which it operates. The states coordinate insurance regulatory policies through the National Association of Insurance Commissioners (NAIC) and have been active in addressing issues raised by technology. In 2017, NAIC created an NAIC Insurance and Technology task force and adopted a model law relating to insurer data security. A U.S. Department of the Treasury report specifically encouraged states to adopt the model law and, as of August 4, 2019, seven states had adopted the model with another state considering adoption. All 50 state insurance regulators have identified a specific point of contact for "InsurTech, Innovation & Technology" in order to introduce the regulatory process for new entrants. <3.9.1. Possible Issues for Congress> The state regulatory system for insurance originated following a Supreme Court decision in 1868, but since a further decision in 1944, its foundation has been statutory, not constitutional. The 1945 McCarran-Ferguson Act generally provides for a state-based system, but Congress can enact laws overriding the states and has done so on a number of occasions. Congress has also conducted oversight on specific aspects of the insurance regulatory system and encouraged the states to act on issues without enacting specific statutes at the federal level. Given the breadth of technology's potential impact on insurance, Congress might question numerous aspects of the states' approach to the new technology, including the impact on consumers and the potential for regulatory arbitrage between the federal regulatory approach for banks and securities firms and the state regulatory approach for insurers. <3.10. Risk Management and Regtech187> Risk-management and compliance functions in financial firms frequently rely on data analysis to assess the risk of bad outcomes, such as wrongdoing or financial losses. For example, in anti-money laundering compliance, financial firms are required to file suspicious activity reports (SARs) when transactions by a customer appear potentially to be tied to illicit crime, fraud, money laundering, terrorist financing, or other transgressions. In addition, banks may also be subject to requirements involving stress testing, modeling risks, forecasting, and monitoring employees and internal risk (e.g., the probability that a risky trade under consideration could imperil a bank's capital or liquidity positions). Regulators also must monitor for certain risks or unfolding events (e.g., securities markets regulators trying to detect illegal trading practices). Companies are increasingly using innovative technology in these risk management and regulatory compliance activities. Sometimes in the latter case, the technology is referred to as regtech . Algorithms are especially well suited to sifting through, analyzing, and identifying patterns in large data sets, and so potentially could be used in these risk assessment and compliance functions. Algorithms' increased sophistication and the development of machine learning and artificial intelligence have fueled strong interest in the financial industry in further using these technologies to automate risk-management and compliance functions. For example, FINRA predicts that such tools will help with anti-money laundering processes; surveilling internal firm employees involved in placing trades on a firm's behalf; broker-dealer trade execution for customers; ensuring customer data privacy and preventing security risks; and centralizing supervisory control systems for additional risk management. In large part, the goal of cost savings is driving the development and adoption of automation in compliance. Some financial firms argue that because they are relatively more regulated than firms in other industries, they must deploy automation wherever possible to reduce compliance costs and remain profitable and competitive. Certain industry observers predict that the cost of processes that involve prediction will drop in coming years and the accuracy of automated prediction processes will continue to increase. However, exactly how these technologies will develop and be deployed in regulatory compliance, and what outcomes they will produce if deployed, remains to be seen. <3.10.1. Possible Issues for Congress> The possibility that automation's ability to identify risks and suspect behaviors may surpass that of humans in certain cases raises questions over the role and power existing human compliance officials should have in deciding whether to take actions against individuals or institutions. While automation could more efficiently collect and act on information, individuals may be uncomfortable that their transactions and private information could be instantly reported to the government or their financial situation affected through a process that involved no human judgement or oversight. For example, should a human have to file a SAR about a customer to the Treasury Department, or should the filing of such reports be completely automated? To take this example a step further, should the decision to close a customer's account be fully automated as well? Regtech tools also raise similar privacy and cybersecurity risks as the other technologies discussed in this report. After all, certain regtech programs involve the automated monitoring of individuals' and private companies' financial transactions, flagging some of those transactions as suspicious, and reporting those transactions to government agencies. Policymakers may consider under what circumstances certain regtech processes inappropriately impinge on people's privacy. To the extent that certain processes or functions can be automated to achieve greater regulatory efficiency or effectiveness, questions exist concerning whether regulators need to be more active in deploying compliance technologies themselves and allowing the institutions they regulate to do so. For example, the American Bankers Association lists "regulator buy-in" as one of the challenges to such adoption. <4. Potential Regulatory Approaches192> Given that most of the federal financial regulatory framework was created prior to the development and deployment of many recent technologies, fintech companies often face uncertainty over how or whether existing federal laws and regulations may apply to them or their products. Thus, policymakers may consider ways to reduce regulatory uncertainty and integrate fintech into the regulatory framework. This often involves balancing efforts to encourage innovation while protecting consumers and the financial system from excessive risk. Many still-evolving terms are used to describe different programs regulators have implemented or proposed to address fintech uncertainty. Such programs are often informally called sandboxes or greenhouses . Generally, such programs use at least one of a variety of approaches. One such approach involves fostering communication between fintech firms and regulators. Communication can help these firms better understand how regulators view a developing technology and potential regulatory concerns. Communication also helps make regulators aware of new fintech innovations when developing new or interpreting existing regulations. As discussed below, certain regulators have established offices within their organizations to conduct outreach to fintechs including maintaining outreach websites, participating in fintech conferences, and organizing office hours with fintech firms. In another approach, some regulators have announced research collaborations with fintech firms to improve their understanding of new products and technologies. Such initiatives could include jointly designing a research trial or fintech firms sharing data about their product performance with regulators. Another potential approach policymakers may use if they determine that particular regulations are unnecessarily burdensome or otherwise ill-suited to a particular technology is to exempt companies or products that meet certain criteria from such regulations. Similarly, a regulator could issue a no-a ction letter an official communication stating a regulator does not expect to take enforcement actions in certain situations. Regulators will often only provide such special regulatory treatment to companies that first demonstrate that consumers will not be exposed to undue harm or meet other conditions, like agreeing to share data with regulators for research purposes. Regulatory uncertainty can be resolved if regulators offer or require certain fintech firms to enter a regulatory regime with well-defined permissions, restrictions, and responsibilities. For example, a regulator could offer or require a specific charter or license for certain firms. Financial regulators have begun to implement some of these approaches through a number of rulemakings and by establishing programs and offices and taskforces within agencies. For a detailed examination of these initiatives, see CRS Report R46333, Fintech: Overview of Financial Regulators and Recent Policy Approaches , by Andrew P. Scott. <4.1. Possible Issues for Congress> The regulatory approaches described above could be supported or opposed by various stakeholders depending on how they are designed and implemented and which firms or products are affected. For example, while fintech firms may want to reduce regulatory uncertainty and operate under one set of rules nationally (rather than different rules in each state), they may also oppose new or additional data-reporting requirements. Incumbent financial institutions may argue that regulatory tailoring and exemptions for fintech firms would put incumbents at a competitive disadvantage. State regulators and consumer advocates may oppose any federal charter that would preempt state consumer-protection laws. Congress or financial regulators may consider various regulatory approaches. Policymakers choosing to tailor regulation for fintechs could apply a different regulatory treatment either to companies or to products. If the goal is to provide new, inexperienced firms an opportunity to learn how they and their products would be regulated, institution-based regulation for firms meeting criteria associated with start-up companies may be the better option. But if the goal is to integrate a new technology regardless of the size or sophistication of the firm offering it, the differentiated regulatory treatment could apply to the product rather than the firm. Policymakers could also choose to tailor regulation for fintechs meeting certain objective criteria. Alternatively, regulators could use discretion in determining which fintech companies or products would qualify for such tailoring, potentially based on authorities or directions enacted in legislation. Policymakers may also consider how long to apply a particular regulatory treatment to a fintech company or product. For example, a specific charter could last indefinitely, while an exemption or no-action letter might last for only a finite period. For more information on these issues, see CRS Report R46333, Fintech: Overview of Financial Regulators and Recent Policy Approaches , by Andrew P. Scott; and CRS In Focus IF11195, Financial Innovation: Reducing Fintech Regulatory Uncertainty , by David W. Perkins, Cheryl R. Cooper, and Eva Su. <4.1.1. Appendix. CRS Fintech Products> Cybersecurity CRS Report R44429, Financial Services and Cybersecurity: The Federal Role , by N. Eric Weiss and M. Maureen Murphy. CRS Report R45631, Data Protection Law: An Overview , by Stephen P. Mulligan, Wilson C. Freeman, and Chris D. Linebaugh. CRS In Focus IF10559, Cybersecurity: An Introduction , by Chris Jaikaran. Lending CRS Report R44614, Marketplace Lending: Fintech in Consumer and Small-Business Lending , by David W. Perkins. CRS Report R45726, Federal Preemption in the Dual Banking System: An Overview and Issues for the 116th Congress , by Jay B. Sykes. Payments CRS Report R45927, U.S. Payment System Policy Issues: Faster Payments and Innovation , by Cheryl R. Cooper, Marc Labonte, and David W. Perkins. CRS Report R45716, The Potential Decline of Cash Usage and Related Implications , by David W. Perkins. Banks and Third-Party Vendor Relationships CRS In Focus IF10935, Technology Service Providers for Banks , by Darryl E. Getter. Cryptocurrency and Blockchain-Based Payment Systems CRS Report R45427, Cryptocurrency: The Economics of Money and Selected Policy Issues , by David W. Perkins. CRS Report R45116, Blockchain: Background and Policy Issues , by Chris Jaikaran. CRS Report R45664, Virtual Currencies and Money Laundering: Legal Background, Enforcement Actions, and Legislative Proposals , by Jay B. Sykes and Nicole Vanatko. CRS In Focus IF10824, Financial Innovation: "Cryptocurrencies" , by David W. Perkins, Financial Innovation: "Cryptocurrencies", by David W. Perkins. Digital Assets and Capital Formation CRS Report R46208, Digital Assets and SEC Regulation , by Eva Su. CRS Report R45221, Capital Markets, Securities Offerings, and Related Policy Issues , by Eva Su. CRS Report R45301, Securities Regulation and Initial Coin Offerings: A Legal Primer , by Jay B. Sykes. CRS In Focus IF11004, Financial Innovation: Digital Assets and Initial Coin Offerings , by Eva Su. High-Frequency Securities and Derivatives Trading CRS Report R44443, High Frequency Trading: Overview of Recent Developments , by Rena S. Miller and Gary Shorter. CRS Report R43608, High-Frequency Trading: Background, Concerns, and Regulatory Developments , by Gary Shorter and Rena S. Miller. Regulatory Approaches and Issues for Congress CRS Report R46333, Fintech: Overview of Financial Regulators and Recent Policy Approaches , by Andrew P. Scott. CRS In Focus IF11195, Financial Innovation: Reducing Fintech Regulatory Uncertainty , by David W. Perkins, Cheryl R. Cooper, and Eva Su.

Advances in technology allow for innovation in the ways businesses and individuals perform financial activities. The development of financial technology—commonly referred to as finte c h —is the subject of great interest for the public and policymakers. Fintech innovations could potentially improve the efficiency of the financial system and financial outcomes for businesses and consumers. However, the new technology could pose certain risks, potentially leading to unanticipated financial losses or other harmful outcomes. Policymakers designed many of the financial laws and regulations intended to foster innovation and mitigate risks before the most recent technological changes. This raises questions concerning whether the existing legal and regulatory frameworks, when applied to fintech, effectively protect against harm without unduly hindering beneficial technologies' development. The underlying, cross-cutting technologies that enable much of fintech are subject to such policy trade-offs. The increased availability and use of the internet and mobile devices could offer greater convenience and access to financial services, but raises questions over how geography-based regulations and disclosure requirements can and should be applied. Rapid growth in the generation, storage, and analysis of data—and the subsequent use of Big Data and alternative data—could allow for more accurate risk assessment, but raises concerns over privacy and whether individuals' data will be used fairly. Automated decisionmaking (and the related technologies of machine learning and artificial intelligence) could result in faster and more accurate assessments, but could behave in unintended or unanticipated ways that cause market instability or discriminatory outcomes. Increased adoption of cloud computing allows specialized companies to handle technology-related functions for financial institutions, including providing cybersecurity measures, but this may concentrate financial cyber risks at a relatively small number of nonfinancial companies who may not be entirely comfortable with their regulatory obligations as financial institution service providers. Concerns over cyber risks and whether adherence to cybersecurity regulations ensure appropriate safeguards against those risks permeate all fintech developments. Fintech deployment in specific financial industries also raises policy questions. The growth of nonbank, internet lenders could expand access to credit, but industry observers debate the degree to which the existing state-by-state regulatory regime is overly burdensome or provides important consumer protections. As banks have increasingly come to rely on third-party service providers to meet their technological needs, observers have debated the degree to which the regulations applicable to those relationships are unnecessarily onerous or ensure important safeguards and cybersecurity. New consumer point-of-sale systems and real-time-payments systems are being developed and increasingly used, and while these systems are potentially more convenient and efficient, there are concerns about the market power of the companies providing the services and the effects on people with limited access to these systems. Meanwhile, cryptocurrencies allow individuals to make payments entirely outside traditional financial systems, which may increase privacy and efficiency but creates concerns over money laundering and consumer protection. Fintech is providing new avenues to raise capital—including through crowdfunding and initial coin offerings—and changing the way companies trade securities and manage investments and may increase the ability to raise funds but present investor protection challenges. Under statute passed by Congress, insurance is primarily regulated at the state level where agencies are considering the implications to efficiency and risk that fintech poses in that industry, including peer-to-peer insurance and insurance on demand. Finally, firms across industries are using fintech to help them comply with regulations and manage risk, which raises questions about what role finetch should play in these systems. Regulators and policymakers have undertaken a number of initiatives to integrate fintech in existing frameworks more smoothly. They have made efforts to increase communication between fintech firms and regulators to help firms better understand how regulators view a developing technology, and certain regulators have established offices within their organizations to conduct outreach. In another approach, some regulators have announced research collaborations with fintech firms to improve their understanding of new products and technologies. If policymakers determine that particular regulations are unnecessarily burdensome or otherwise ill-suited to a particular technology, they might tailor the regulations, or exempt companies or products that meet certain criteria from such regulations. In some cases, regulators can do so under existing authority, but others might require congressional action.

crs_R46234

crs_R46234_0

<1. Background> The child nutrition programs (listed in Table 1 ) support meals and snacks served to children in schools, child care, summer programs, and other institutional settings in all 50 states, the District of Columbia, and the U.S. territories. The programs are administered by the U.S. Department of Agriculture's (USDA's) Food and Nutrition Service (FNS), which provides federal aid to state agencies (often state departments of education) for distribution to school districts and other participating institutions. In general, the largest subsidies are provided for free and reduced-price meals served to eligible children. The institutional nature of child nutrition programs distinguishes them from other federal nutrition assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provide benefits directly to households. WIC is typically reauthorized with the child nutrition programs but is not considered a child nutrition program and is not discussed in this report. The federal child nutrition programs date back to the National School Lunch Act of 1946, which created NSLP. The act formalized federal support for school lunches following early federal aid beginning in the 1930s. Other child nutrition programs were added in the decades to follow as policymakers expanded feeding programs beyond the school setting. The Child Nutrition Act of 1966 formalized SMP and created SBP as a pilot program. Soon after, a program for child care and summer meals was piloted in 1968 and separated into the Child Care Food Program (now CACFP) and SFSP in 1975. More recently, FFVP was piloted in 2002 and expanded to all states in 2008. (See the Appendix for a brief legislative history of child nutrition programs.) Historically, the child nutrition programs have been aimed at both improving children's nutrition and supporting U.S. agriculture, with the dual missions "to safeguard the health and well-being of the Nation's children and to encourage the domestic consumption of nutritious agricultural commodities and other food." The child nutrition programs are currently authorized under the Richard B. Russell National School Lunch Act (NSLA) and the Child Nutrition Act of 1966. Section 32 of the Act of August 24, 1935, also provides a portion of child nutrition funding. Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee, the House Education and Labor Committee, and, to a limited extent (relating to Section 32), the House Agriculture Committee. Congress periodically amends the child nutrition programs' authorizing laws and reauthorizes expiring authorities. The child nutrition programs were most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ). Some of the authorities created or extended in the HHFKA expired on September 30, 2015; however, these expirations have had a minimal impact on program operations. The 114 th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant reauthorization activity in the 115 th Congress. In the 116 th Congress, leadership on the committees of jurisdiction have announced plans to work on child nutrition reauthorization. This report starts with an overview of child nutrition programs' funding and then provides detail on each program, including a discussion of how the programs are administered at the federal, state, and local levels; eligibility rules for institutions and participants; nutritional and other program requirements; and recent policy changes. <2. Child Nutrition Funding> <2.1. Federal Funding> Most funding for child nutrition programs is considered mandatory spending. However, unlike some mandatory programs, child nutrition programs require an appropriation of funding. This is because the programs' authorizing laws include benefit and eligibility criteria that create the requirement for a certain level of spending, but the statute does not provide the funding directly. Such programs are sometimes referred to as "appropriated entitlements" or "appropriated mandatories." If the necessary funds are not appropriated, entitled recipients (e.g., states, institutions, and participants) may have legal recourse. The benefit and eligibility criteria that governs much of the appropriated mandatory spending for child nutrition programs is open-ended. Because there is no specified limit on the number of beneficiaries or the total amount of benefits that will be paid, spending will fluctuate based on the number of meals and snacks served in the programs, as well as statutorily set, annually adjusted per-meal reimbursement rates. Congress typically considers USDA's forecast for program needs in its appropriations decisions. Appropriated mandatory funding in child nutrition programs is generally for per-meal cash reimbursements, commodity assistance, and administrative funds. The programs also have a smaller amount of discretionary funding (provided in annual appropriations acts) and mandatory funding directly provided in the authorizing law (not provided in annual appropriations acts). These funding streams are discussed in further detail below. Child nutrition appropriations totaled $23.6 billion in FY2020 ( P.L. 116-94 ). Close to $13.5 billion of these funds were transferred to the child nutrition programs from Section 32 of the Act of August 24, 1935. Table 2 lists FY2020 child nutrition funding by program and activity. Child nutrition appropriations may not match expenditures because most child nutrition funds carry over (they are available for two fiscal years) and because spending fluctuates with the number of meals served. <2.1.1. Per-Meal Cash Reimbursements> The majority of federal funding in child nutrition programs (including in NSLP, SBP, CACFP, SFSP, and SMP) takes the form of per-meal cash reimbursements. These rates are specified in the programs' authorizing laws with an annual inflation adjustment. Although all (including full-price) meals/snacks served by participating providers are subsidized, those served for free or at a reduced price to lower-income children earn higher rates. Meals must meet federal nutritional requirements in order for the school or institution to receive reimbursement. Reimbursement rates differ by program based on different criteria. For example, in SBP, schools in high-poverty areas receive an extra 36 cents per meal. Differences in reimbursement rates are highlighted within the subsequent discussions of each program. In general, FNS distributes per-meal reimbursements to state agencies, which distribute them to participating schools and institutions. Schools and institutions must record daily counts of meals in each category and report monthly counts to the state agency in order to receive reimbursement. Once they receive federal funds, participating institutions are allowed to spend these funds on most aspects of their food service operations. Table 3 provides an example of the per-lunch reimbursement rate for schools and the per-child benefit in NSLP. Reimbursement rates for each child nutrition program are listed in the sections to follow. <2.1.2. Commodity Assistance> Federal support for child nutrition programs is also provided in the form of USDA-purchased commodity foods ("USDA Foods") and some cash in lieu of commodities. USDA Foods are foods purchased by USDA for distribution to federal nutrition assistance programs, including child nutrition programs. States, schools, and other institutions are entitled to a certain amount of commodity assistance under the law, referred to as "entitlement commodity" assistance. In NSLP and CACFP, statute provides a per-meal commodity reimbursement (an inflation-adjusted rate of 23.75 cents per meal in school year 2019-2020). (Note: Commodity assistance is not a formal part of SBP funding; however, commodities distributed through NSLP may be used for school breakfasts.) A smaller amount of commodity assistance is also provided to certain types of institutions participating in SFSP. Schools and institutions use entitlement commodity funds to select commodities from a USDA Foods catalog. USDA then purchases the commodities and works with a state distribution agency to distribute the foods to schools. Schools/institutions and state agencies can elect to receive a certain amount of commodity assistance in the form of cash, as the majority of CACFP centers do. According to statute, entitlement commodity assistance must equal at least 12% of the total funding provided for lunch reimbursements and child nutrition commodities. Child nutrition entitlement commodity expenditures totaled nearly $1.5 billion in FY2019. Most of this assistance was for NSLP. The child nutrition programs can also receive "bonus commodities," which are commodities that are purchased at USDA's discretion throughout the year to support the agricultural economy using separate budget authority. In recent years, there have been few bonus commodities distributed to the child nutrition programs; however, there was an uptick in FY2019. <2.1.3. Administrative Funds> State agencies receive federal funds for expenses related to the administration of child nutrition programs. According to statute, federal funding for states' administrative expenses must equal at least 1.5% of federal expenditures on NSLP, SBP, CACFP, and SMP in the second preceding fiscal year. The majority of these funds are allocated to states based on their share of spending on the four programs. Any remaining funds are allocated by the Secretary of Agriculture on a discretionary basis; per program regulations, states receive additional amounts for CACFP, commodity distribution, and administrative reviews of schools/institutions. Once states receive administrative funds, they can apportion them among child nutrition programs and activities as they see fit. In addition, states receive separate administrative payments through SFSP that equal at least 2.5% of their summer meal aid. States may also retain a portion of FFVP aid for their administrative expenses. At the local level, schools and institutions may use per-meal reimbursements to cover their administrative costs. In CACFP, institutions that oversee day care homes receive separate monthly payments for administrative expenses based on the number of day care homes under their jurisdiction. <2.1.4. Other Federal Funding> A few child nutrition programs and activities have mandatory funding provided directly in the authorizing law. For example, FFVP receives mandatory funding from Section 32 and the Farm to School Grant Program receives mandatory funding under the NSLA. There are also a few child nutrition activities that are funded on a discretionary basis, including the Summer EBT demonstration, the Team Nutrition initiative, and school meals equipment grants. <2.2. Nonfederal Funding> Federal subsidies do not necessarily cover the full cost of meals and snacks prepared by schools and institutions. Child nutrition programs may also receive funds from participants, states, school districts, local governments, and other entities. NSLP is the only child nutrition program with a cost sharing requirement for states, which amounts to a contribution of roughly $200 million from all states combined annually. Some states provide additional funding for NSLP and other child nutrition programs beyond the required amount, including some states that provide their own per-meal reimbursements. An FNS study of the school meals programs in school year 2014-2015 found that 63% of school food service revenues came from federal funds, 30% came from student payments for paid and reduced-price meals and other school foods, and 6% came from state and local funds. <3. National School Lunch Program (NSLP) and School Breakfast Program (SBP)> The National School Lunch Program (NSLP) and School Breakfast Program (SBP) (the "school meals programs") provide federal support for meals served in approximately 94,300 public and private elementary and secondary schools nationwide in FY2019. They also support meals in a smaller number of residential child care institutions. Schools receive federal aid in the form of cash reimbursements for every meal they serve that meets federal nutritional requirements (limited to one breakfast and lunch per child daily). The largest subsidies are provided for free and reduced-price meals served to eligible students based on income eligibility and categorical eligibility rules. Schools also receive a certain amount of commodity assistance per lunch served (discussed previously). Schools participating in NSLP have the option of providing afterschool snacks through the program, and schools participating in NSLP or SBP have the option of providing summer meals and snacks through the Seamless Summer Option (discussed in the " After-School Meals and Snacks " and " Seamless Summer Option " sections). Schools are not required by federal law to participate in NSLP or SBP; however, some states require schools to have a school lunch and/or breakfast program, and some states require schools to do so through NSLP and/or SBP. Some states also provide state funding for the school meals programs. Approximately 91% of public schools participate in NSLP. Schools that do not participate in the federal school meals programs may still operate locally funded meal programs. The Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made several changes to the school meals programs. Among those changes was a requirement that USDA update the nutrition standards for school meals and create new nutritional requirements for foods sold in NSLP and SBP schools within a certain timeframe. The law also created the Community Eligibility Provision, through which eligible schools can provide free meals to all students. These changes are discussed further within this section. NSLP and SBP are two separate programs, and schools can choose to operate one and not the other. The programs are discussed together in this report because they share many of the same requirements. Differences between the programs are noted where applicable. Figure 1 displays average daily participation in NSLP and SBP in participating schools. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal before school starts. <3.1. Administration> Locally, the school meals programs are usually administered by school districts. Statute and regulations designate "school food authorities" as the local authorities in charge of operating the school meal programs; typically, these are food service departments within school districts. Local educational agencies the broader school district or school board also play a role in administering the school meal programs. This report sometimes uses the term "school district" to refer to the local administrative body of the school meals programs. In general, school food authorities handle food service and accounting responsibilities, such as food preparation and tracking meals for reimbursement, while local educational agencies handle administrative duties, such as processing applications and certifying children for free and reduced-price school meals. At the state level, the school meals programs are most often administered by state departments of education. State administrative agencies are responsible for distributing federal reimbursements to school food authorities and overseeing school districts' administration of the school meal programs, including by conducting administrative reviews of school districts. At the federal level, FNS provides ongoing guidance and technical assistance to state agencies and school food authorities through seven regional offices. FNS also provides oversight of state agencies, including by conducting management evaluations. Figure 2 depicts the federal, state, and local roles in administering the school meals programs. <3.2. Eligibility and Reimbursement> The school meals programs do not exclusively serve low-income children. Any student in an NSLP or SBP participating school may purchase a school meal; however, children must meet program eligibility rules in order to receive a free or reduced-price meal. In most schools (excluding schools that participate in the Community Eligibility Provision or other special options), children are certified for free or reduced-price school meals through one of two pathways: (1) income eligibility for free and reduced-price meals (information typically collected via household application) and (2) categorical eligibility for free meals (information collected via household application or direct certification). Each year, schools must verify a sample of household applications for accuracy. The pathways through which children are certified for free or reduced-price school meals are shown in Figure 3 . If children are certified for free meals, the school food authority (through the state agency) receives the free meal reimbursement for those meals. If children are certified for reduced-price meals, the school food authority receives a slightly lower reimbursement. School food authorities also receive a much smaller paid-rate reimbursement for meals served to children who pay for "full price" meals. School food authorities must follow federal guidelines in setting the price of paid meals. Certain schools follow different eligibility and reimbursement procedures because they participate in the Community Eligibility Provision (CEP) or other special options (discussed below in the " Special Options " section). <3.2.1. Income Eligibility> Children are eligible for free or reduced-price meals if their household's income falls within the following ranges: Free meals: household income at or below 130% of the federal poverty guidelines. Reduced-price meals (charges of no more than 40 cents per lunch and 30 cents per breakfast): household income above 130% and less than or equal to 185% of the federal poverty guidelines. These thresholds are based on the annual federal poverty guidelines established by the U.S. Department of Health and Human Services, and are updated annually for inflation. FNS publishes the corresponding income limits by household size for free and reduced-price meals in the Federal Register on an annual basis. Table 4 provides an example of the income limits for free and reduced-price meals in school year 2019-2020 for a household of four. To become income eligible for school meals, a parent or guardian must complete a paper or online application that includes the income of each household member, the household size, and other information. Households only need to fill out one application if they have multiple children in the same school district. School district officials then determine if children in the household are eligible for free meals, reduced-price meals, or neither. <3.2.2. Categorical Eligibility> As an alternative to income eligibility, children can become eligible for free school meals if they fall into a certain category ("categorical eligibility"). Per statute, children are automatically eligible for free lunches and breakfasts (without consideration of household income) if they are in a household receiving benefits through the following programs: SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations); or TANF (Temporary Assistance for Needy Families); enrolled in Head Start; in foster care; a migrant; a runaway; or homeless. Categorical eligibility for free meals may be determined via a household application (households provide a case number on the application) or through direct certification (discussed in the next section). As of school year 2014-2015, the vast majority of categorically eligible children were certified for free meals through direct certification. Categorical eligibility for free school meals with SNAP and TANF began in the 1980s (then, the Food Stamp and Aid to Families with Dependent Children programs, respectively). Categorical eligibility enabled schools to make use of other programs' more in-depth certification processes and reduced the number of applications that families had to fill out. Other programs and categories were added over time. <3.2.2.1. Direct Certification> Direct certification is a process through which state agencies and school districts automatically certify children for free meals based on documentation of the child's status in a program or category without the need for a household application. States are required to conduct direct certification for SNAP and have the option of conducting direct certification for the other programs and categories that convey categorical eligibility. For SNAP and other federal programs, the direct certification process typically involves state agencies (e.g., state SNAP and state educational agencies) cross-checking program rolls. A list of matched children is sent to the school district, which certifies children for free meals without the need for a household application. For foster, homeless, migrant, and runaway children, direct certification typically involves school district communication with a local or state official who can provide documentation of the child's status in one of these categories. The 2004 child nutrition reauthorization act ( P.L. 108-265 ) required states to conduct direct certification with SNAP, with nationwide implementation taking effect in school year 2008-2009. As of school year 2016-2017, USDA reported that 92% of children in SNAP households were directly certified for free school meals. The HHFKA made further policy changes to expand direct certification. One of those changes was the initiation of a demonstration project to test direct certification with Medicaid (see text box). The law also funded performance incentive grants for high-performing states and authorized corrective action plans for low-performing states in direct certification activities. <3.2.3. Verification of Eligibility> Each fall, districts are required to verify a sample of approved household applications on file, with a focus on applications close to the eligibility threshold ("error-prone" applications). School districts may also conduct verification of questionable applications. Verification is not required for children who are directly certified for free or reduced-price meals. (Note that districts participating in " Provisions 1, 2, and 3 " must meet verification requirements for the years in which they administer household applications.) Many districts employ "direct verification" (matching data from other low-income programs) to conduct their verification activities, but if data cannot be verified in this way, schools must contact households to verify the information provided on the application. A child's eligibility status may stay the same or change (e.g., from free meals to reduced-price meals or loss of eligibility) as a result of verification of household income, or if the household does not respond to verification outreach (in which case eligibility would be lost, though that decision can be appealed). <3.2.4. Reimbursement> School food authorities must keep track of the daily number of meals they serve in each category (free, reduced-price, and paid) that meet federal nutrition requirements. School food authorities then submit claims for reimbursement to the state agency, which submits the claims to FNS. Approved reimbursements are distributed to school food authorities by the state agency, usually on a monthly basis. Per statute, reimbursement rates are adjusted for inflation annually. Table 5 shows NSLP and SBP reimbursement rates in school year 2019-2020. (Note that school food authorities also receive a per-lunch commodity reimbursement, discussed previously.) The law provides a higher reimbursement for meals meeting certain criteria. For example, school food authorities that are compliant with the updated federal nutrition standards for school meals receive an additional 7 cents per lunch. School food authorities also receive an additional 2 cents per lunch if they serve 60% or more of their lunches at a free or reduced price. For breakfasts, school food authorities receive higher reimbursements if they serve 40% or more lunches at a free or reduced price (referred to as "severe need" schools). Once school food authorities receive the cash reimbursements, they can be used to support almost any aspect of the school food service operation. However, federal cash reimbursements must go into a nonprofit school food service account that is subject to federal regulations. Payments for non-program foods (e.g., vending machine sales) must also accrue to the nonprofit school food service account. FNS periodically studies the costs of producing a reimbursable meal. In April 2019, FNS released a School Nutrition and Meal Cost Study , which found that the average reported cost of producing a reimbursable lunch was $3.81 in school year 2014-2015 (reported costs were defined as those charged to the school food service account). This exceeded the average federal cash reimbursement ($3.32) for lunches in school year 2014-2015. When unreported costs were included (costs outside of the food service account; for example, labor costs associated with processing applications), the cost of producing the average reimbursable lunch was $6.02. As noted previously, children's payments and state and local funds may also cover meal costs. <3.3. Special Options> <3.3.1. Community Eligibility Provision (CEP)> The HHFKA authorized the Community Eligibility Provision (CEP), an option that allows eligible schools, groups of schools, and school districts to offer free meals to all enrolled students. To participate in CEP, the school(s) must have an identified student percentage (ISP) of at least 40%. The ISP is the percentage of students in the school(s) who are certified for free meals without a household application (i.e., who are directly certified for free meals through SNAP or another program/category). In addition, the school(s) must operate both NSLP and SBP in order to participate in CEP, and they must opt-in to CEP. Based on the statutory parameters, FNS piloted CEP in various states over three school years, and expanded the option nationwide in school year 2014-2015. Eligible schools, groups of schools, and entire school districts may participate; if participation is as a group, the ISP is calculated on a group basis. Local educational agencies have until June 30 of each year to notify USDA of the schools in their jurisdiction that will participate in CEP. According to a database maintained by the Food Research and Action Center, nearly 28,500 schools participated in CEP in school year 2018-2019, up from 18,220 schools in school year 2015-2016. Though CEP schools serve free meals to all students, they are not reimbursed at the free rate for every meal served. Instead, the law provides a funding formula: the ISP is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free-meal rate, with the remainder reimbursed at the much lower paid-meal rate. For example, if a CEP school has an ISP of 40%, then 64% of its meals served would be reimbursed at the free-meal rate and 36% would be reimbursed at the paid-meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free-meal reimbursement for all meals served (62.5% multiplied by 1.6 equals 100%). Figure 4 provides a visual representation of the CEP eligibility criteria and reimbursement formula. CEP participating schools must recalculate their ISP at least once every four years, but they can choose to do so more frequently if desired. While eligibility determinations occur every four years, schools can drop out of CEP at any time. CEP is intended to reduce paperwork for families and schools and enable schools to provide more free meals. However, the option may or may not be financially beneficial for schools depending on their proportion of identified students. <3.3.2. Provisions 1, 2, and 3> Schools, groups of schools, and school districts can also use Provisions 1, 2, and 3 to establish alternative certification and reimbursement procedures. These options are intended to reduce paperwork for school administrators and families. The options predate CEP, and unlike CEP, they still require some household applications. A school's decision to participate in a special option may depend on financial considerations. Provision 1 allows schools with high proportions (80% or more) of students eligible for free and reduced-price meals to make free meal eligibility determinations that remain in effect for two school years. This reduces the number of applications they have to process (though they still have to process reduced-price meal applications annually). Provision 2 and Provision 3 are open to all schools. Similar to CEP, schools, groups of schools, or school districts must agree to provide free meals (lunches or lunches/breakfasts) to all students in order to participate in Provision 2 or Provision 3. Under Provision 2, schools are reimbursed over a four-year period using the proportion of meals served at a free/reduced-price/paid rate during the first year. Eligibility determinations in the first year are based on direct certification and household applications (a difference from CEP). Under Provision 3, schools are similarly required to make eligibility determinations in the first year of a four-year period. However, in this case, schools receive the same level of federal assistance over the next three years, which is adjusted for enrollment and inflation (there are no separate payments for free/reduced-price/paid meals). <3.4. Nutrition Standards and Food Service> <3.4.1. Nutrition Standards for School Meals> Nutritional requirements for school meals have changed throughout the history of the school meal programs. The most recent child nutrition reauthorization, the HHFKA in 2010, required USDA to update the nutrition standards for school meals within 18 months of the law's enactment based on recommendations from the Food and Nutrition Board at the National Academies of Sciences, Engineering, and Medicine. The law also provided a "performance-based" bonus reimbursement of 6 cents per lunch (adjusted annually for inflation) for schools certified as compliant with the updated standards (the rate was 7 cents in school year 2019-2020). USDA published the updated nutrition standards for school meals in 2012. They were based on the 2010 Dietary Guidelines for Americans (per an existing statutory requirement) as well as the recommendations from the National Academies of Sciences, Engineering, and Medicine. The standards required increased servings of fruits, vegetables, whole grains, and meats/meat alternates in lunches and breakfasts. They also restricted milk to unflavored low-fat (1%) and flavored and unflavored fat-free varieties, set limits on calories and sodium in school meals, and prohibited trans fats in school meals, among other changes. Separate from the final rule, USDA also implemented a requirement in the HHFKA that schools make water available to children during meal service in the cafeteria. The revised nutrition standards largely took effect in school year 2012-2013 for lunches and in school year 2013-2014 for breakfasts. A few requirements phased in over multiple school years. Some schools experienced difficulty implementing the new standards, and subsequent changes to the whole grain, sodium, and milk requirements were made through appropriations acts and USDA rulemaking. For school year 2019-2020 and onwards, schools are operating under the regulations as amended by a final rule published by FNS on December 12, 2018, which allows flavored 1% milk, requires at least 50% of grains offered weekly in school meals to be whole grain-rich, and delays the implementation of stricter sodium limits for school meals. Table 6 provides an overview of the nutrition standards for school lunches as of September 2019. States and school districts are allowed to implement additional nutritional requirements for school meals, as long as they meet the federal standards. <3.4.2. Nutrition Standards for Competitive Foods> The HHFKA also required USDA to develop nutrition standards for other foods sold in NSLP- and SBP-participating schools on campus during the school day. These foods are known as "competitive foods" (i.e., foods sold in competition with school meals). Competitive foods include foods and drinks sold in vending machines, a la carte lines, snack bars and concession stands, and school fundraisers. These foods do not receive a federal reimbursement. The HHFKA required USDA to publish proposed nutrition standards for competitive foods within one year of the law's enactment and align the standards with the most recent Dietary Guidelines for Americans. Relying on recommendations made by the National Academies of Sciences, Engineering, and Medicine, FNS promulgated a proposed rule in April 2013 and then an interim final rule in June 2013, which went into effect in school year 2014-2015. The interim final rule created nutrition standards for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published in July 2016, maintained the interim final rules with minor changes. Under the final standards, competitive foods must have certain primary ingredients, meet whole-grain requirements, and comply with calorie, sugar, sodium, and fat limits, among other criteria. Schools are also limited to a list of zero- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). Fundraisers held outside of the school day and fundraisers in which the food sold is clearly not intended for consumption on campus during the school day are not subject to the competitive food nutrition standards. In addition, the law and the final rule provided states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards. The rule did not limit foods brought from home only foods sold at school during the school day. The federal standards are minimum standards, and states and school districts are permitted to issue more stringent policies. Many districts already had local competitive food standards in place prior to the HHFKA because of the 2004 child nutrition reauthorization law ( P.L. 108-265 ), which required local educational agencies to implement local school wellness policies that included nutritional guidelines for foods sold in schools (local school wellness policies are discussed in the " Other Child Nutrition Activities " section). <3.4.3. Local School Wellness Policies> Local educational agencies participating in the school meals programs are required to have a local school wellness policy, which sets nutrition and health-related goals and guidelines for schools within the jurisdiction. Local school wellness policies must include goals related to nutrition and physical activity, nutrition standards for school foods that meet or exceed federal nutrition standards (discussed previously), and an implementation plan, among other content. Local educational agencies must provide opportunities for input from parents, students, school nutrition professionals, physical education teachers, school health professionals, school administrators, and the general public in developing and updating local school wellness policies. <3.4.4. Other Food Service Topics> This section discusses food procurement and service topics specific to the school meals programs. Other food service topics relevant to child nutrition programs more broadly, including NSLP and SBP (e.g., the farm to school initiative), are discussed in the " Other Child Nutrition Activities " section. <3.4.4.1. Food Procurement and Preparation> The majority of foods used in the school meal programs are purchased by school food authorities using federal cash reimbursements or other school district funds. School food authorities also receive USDA Foods (as discussed previously). School food authorities must comply with federal procurement rules when purchasing foods for the school meals programs. In addition, there is a "Buy American" requirement in statute that requires schools participating in the school meal programs to purchase domestic commodities and products "to the maximum extent practicable." Purchases may include local foods, as long as they comply with federal, state, and local procurement regulations. Many school food authorities purchase and prepare their own meals, either at a centralized district kitchen or onsite at individual schools. Alternatively, school food authorities may contract with a private food service management company to contract out procurement and/or meal preparation. The contracted company must comply with all school meal regulations and the school food authority must retain general control over the operation of the school meals programs, including financial oversight and compliance with nutrition standards. <3.4.4.2. Food Safety> Foods served in any child nutrition program must comply with state or local health, safety, and sanitation standards for food storage, preparation, and service. Schools participating in the school meals programs must obtain food safety inspections by a state or local government agency at least twice a year. There are also food safety inspections for USDA Foods. School food authorities may allow children to place leftover whole food or beverage items on a "share table" in schools operating NSLP and other child nutrition programs, as long as such sharing complies with food safety standards. <3.4.4.3. Meal Time and Setting> In general, lunches and breakfasts are intended to be consumed onsite during the school day. Surveys have found that schools typically provide roughly 20 minutes for breakfast and 25-30 minutes for lunch. Under SBP, students were traditionally required to arrive early for breakfast and eat it in the cafeteria. However, in recent years, schools and states have increasingly adopted alternative models of breakfast service such as breakfast in the classroom, grab-and-go carts, and breakfast during morning breaks. Anti-hunger advocacy groups have encouraged the adoption of new models of breakfast service as a way to increase SBP participation. According to a 2018 survey by the School Nutrition Association (SNA), a member and advocacy organization, more than half of surveyed school districts offered both a traditional cafeteria line and alternative modes of breakfast service, while 43% of schools offered a cafeteria line only. Common alternatives were grab-and-go stations (particularly in middle and high schools) and breakfast in the classroom (particularly in elementary schools). <4. Child and Adult Care Food Program (CACFP)> CACFP provides federal reimbursements for meals and snacks served in nearly 156,500 child care centers, day care homes, and adult day care centers nationwide in FY2019 (see Table 7 for participation by type of institution). In these settings, reimbursements are limited to meals and snacks served to children ages 12 and under, children of any age with disabilities, and chronically disabled and elderly adults. CACFP also supports free meals and snacks for children ages 18 and under in emergency shelters and afterschool programs in low-income areas (discussed in the " After-School Meals and Snacks " section). In general, CACFP provides cash reimbursements for up to two meals and one snack or one meal and two snacks per participant daily (a meal may be a breakfast, lunch, or supper). A smaller share of federal aid takes the form of commodity assistance or cash in lieu of commodities and funds for administrative costs (discussed previously). The eligibility and funding rules of CACFP differ for centers (facilities or institutions) and day care homes (private homes). Day care homes must be overseen by sponsoring organizations, which handle the financial and administrative functions of the program for a number of local providers. Centers have the option of operating independently or under a sponsor. Both centers and day care homes must comply with government-established standards for other child care programs and meet federal CACFP nutrition standards. <4.1. Administration> At the local level, sponsor organizations administer CACFP for all participating day care homes and centers that elect to have a sponsor. Sponsors are responsible for conducting audits of providers, distributing federal reimbursements, and in some instances, preparing and distributing meals. They can be public or nonprofit institutions or, in some cases, for-profit institutions. Centers that choose to handle their own administrative responsibilities are referred to as independent centers. Unlike centers, day care homes are required to have a sponsor organization. Sponsors receive monthly federal administrative payments based on the number of homes for which they are responsible (sponsors, on average, have more than 100 day care homes under their supervision). They may also receive a portion of the per-meal reimbursement if they have an agreement with the day care home to prepare meals. If a center opts to have a sponsor, the sponsor may retain a portion of the per-meal reimbursements for its administrative expenses. In CACFP, the state administering agency is typically the state department of education or department of health and/or human services. The state agency distributes federal funds and conducts reviews of CACFP sponsor organizations and independent centers. Similar to the school meals programs, FNS provides oversight of state agencies and issues guidance and regulations to states and providers. <4.2. Eligibility and Reimbursement> <4.2.1. CACFP Centers> The following institutions are eligible to participate as centers in CACFP: public or private nonprofit (tax exempt) organizations providing nonresidential child care or adult day care (including school food authorities and Head Start centers), private for-profit organizations providing nonresidential child care or adult day care that enroll a certain proportion of low-income participants, and emergency shelters for homeless families. Adult day care centers and outside school hour centers fall under the first two categories, but they are subject to specific federal regulations. Income eligibility rules for CACFP centers are the same as the school meals programs: participants in households at or below 130% of the poverty line qualify for free meals and snacks and those between 130% and 185% of the poverty line qualify for reduced-price meals and snacks (a charge of no more than 40 cents for a lunch or supper, 30 cents for a breakfast, and 15 cents for a snack). CACFP centers also use similar categorical eligibility criteria, including participation in Head Start, foster child status, and household participation in SNAP, FDPIR, or TANF assistance. Adults are categorically eligible if they participate in SNAP, FDPIR, Supplemental Security Income (SSI), or Medicaid. Eligibility is determined through paper applications or, in some states, direct certification-like processes. For CACFP centers, the reimbursement rates for breakfasts and lunches/suppers are the same as the SBP breakfast reimbursement rate and NSLP lunch reimbursement rate, respectively. The largest subsidies are provided for free and reduced-price meals and snacks, while paid meals receive a lower reimbursement. Unlike the school meals programs, CACFP allows centers certain flexibilities for tracking meal counts and submitting claims for reimbursement. Compared to school meals, CACFP centers are also less likely to collect meal payments from participants and more likely to incorporate meal costs into tuition. Centers are not required to adjust tuition and fees to account for CACFP funding. Centers are also allowed to charge families separately for meals and snacks, as long as there are no charges for children who qualify for free meals and limited charges for those who qualify for reduced-price meals. <4.2.2. CACFP Day Care Homes> Day care homes are private homes that provide nonresidential child care services. In general, any day care home that meets local, state, or federal child care standards may participate in CACFP. Unlike centers, day care homes generally do not make eligibility determinations and receive the same reimbursement rate for every meal served. Day care homes located in a low-income area or with a low-income provider receive a higher, Tier I reimbursement rate (shown in Table 8 ). To receive the Tier I rate, the home must be located in an area in which at least 50% of children are eligible for free or reduced-price meals or be operated by a provider whose household income level meets the free or reduced-price income standards. Day care homes that do not qualify for Tier I rates receive Tier II (lower) rates. However, Tier II providers may seek the higher Tier I subsidies for individual low-income children for whom household income information is collected and verified. Like centers, day care homes may incorporate meal costs into tuition. Unlike centers, federal rules prohibit any separate meal charges. <4.3. Nutrition Standards and Food Service> <4.3.1. Nutrition Standards> In addition to nutrition standards for school foods, the HHFKA required the Secretary of Agriculture to update CACFP's meal patterns. USDA's final rule, effective October 1, 2017, revised the meal patterns for meals and snacks served in centers and day care homes. It also aligned nutrition standards for meals served to preschool-aged children through NSLP and SBP. For infants (under 12 months of age), the new meal patterns eliminated juice, encouraged breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older and adult participants, the new meal patterns increased whole grains, fruits, and vegetables, limited milk to unflavored 1% and unflavored or flavored fat-free varieties, limited sugar in cereals and yogurts, and prohibited deep-fried foods. They also required that potable water be available to children throughout the day. Subsequent rulemaking by USDA allowed flavored 1% milk to be served to children ages six and older in CACFP in school year 2018-2019 and forward. <4.3.2. Procurement and Meal Service> CACFP institutions may purchase their own foods and prepare their own meals, or they may contract with a school or a food service management company that prepares meals for them. In either case, institutions must comply with federal, state, and local procurement regulations. As noted previously, CACFP institutions also receive a certain amount of USDA Foods. Meals must comply with state or local health, safety, and sanitation requirements for storing, preparing, and serving food, and institutions must acquire annual food safety inspections. Family-style meal service is encouraged in CACFP. <5. Summer Meals> The Summer Food Service Program (SFSP) and the Seamless Summer Option provide federal reimbursements for summer meals. SFSP is open to school food authorities, local public agencies, and private nonprofit organizations, while the Seamless Summer Option is specifically for school food authorities, allowing them to continue operating under certain NSLP/SBP requirements into the summer. Both programs require children to consume meals onsite (known as the "congregate feeding" requirement). In recent years, the federal government has tested alternatives to congregate feeding through the Summer Electronic Benefits Transfer for Children (Summer EBT) demonstration in select states. <5.1. Summer Food Service Program (SFSP)> The Summer Food Service Program (SFSP) provides federal aid to school food authorities and other local public and nonprofit organizations that serve meals and snacks to children during the summer months. Federal aid is provided in the form of per-meal cash reimbursements and a smaller amount of commodity foods and administrative funds (discussed previously). The program serves roughly 2.7 million children annually at nearly 46,600 meal sites. Similar to CACFP, SFSP is administered at the local level by sponsor organizations that operate the program at one or more meal sites (the physical location where food is served and eaten). All SFSP meal sites are required to have a sponsor. Sponsors may operate meal sites at a variety of locations, including schools, recreation centers, parks, churches, and public libraries. Unlike the other child nutrition programs, SFSP participation is generally limited (with the exception of camps) to meal sites that serve children from "areas in which poor economic conditions exist" defined as areas or sites in which at least 50% of children are eligible for free and reduced-price school meals (discussed further below). <5.1.1. Administration> The following public and private nonprofit institutions are eligible to participate in SFSP as sponsors: nonprofit organizations, school food authorities, state and local governments (including tribal governments), public or nonprofit summer camps (overnight and day camps), and public or nonprofit colleges and universities participating in the National Youth Sports Program. Eligible sponsors must also provide year-round services to the community, with limited exceptions. According to statute, when selecting sponsors, states must give priority to school food authorities, public and nonprofit organizations that have demonstrated successful program performance in a prior year, new public sponsors, and new nonprofit sponsors (in that order). States must also prioritize sponsors located in rural areas. Sponsors are responsible for selecting meal sites, distributing meals to sites, and monitoring sites. Officials at meal sites are responsible for distributing meals to children, monitoring the food service, and keeping track of meals served for reimbursement. At times, a sponsor may also be a site (for example, camps are both sponsors and meal sites). An FNS analysis of a nationally representative sample of SFSP sponsors and meal sites in summer 2015 found that the majority of sponsors were school food authorities and nonprofit organizations, and common meal sites included schools, recreation centers, and parks/playgrounds. State administering agencies (often state departments of education) approve sponsors, distribute federal funds, and conduct reviews of sponsors and sites. State agencies receive SFSP funds for administrative costs in addition to general child nutrition program administrative funds (discussed previously in the " Administrative Funds " section). FNS distributes funds and commodities to state agencies, oversees states' implementation of SFSP, and provides guidance and technical assistance to states and participating institutions. <5.1.2. Eligibility and Reimbursement> According to statute, all sponsors except camps must "conduct a regularly scheduled food service for children from areas in which poor economic conditions exist." SFSP regulations establish different eligibility rules for different types of meal sites. Open sites are meal sites that are open to all children in the community. In order to participate in SFSP, open sites must be located in an area in which at least 50% of the children would be eligible for free or reduced-price school meals as demonstrated through school data, Census data, or other approved data sources. Meals must be served free to all children at these sites, and the sponsor of the site receives reimbursement for every meal served (up to two meals or one meal and one snack per child daily). Closed enrolled sites are meal sites (other than camps) that only serve enrolled children. In order for the site to participate in SFSP, at least 50% of the enrolled children must qualify for free or reduced-price school meals based on the submission of a household application or other documentation. Like open sites, meals are served free to all children and the sponsor receives reimbursement for every meal served (up to two meals or one meal and one snack per child daily). Camps include residential and day camps that provide organized programs for enrolled children. Unlike open and closed enrolled sites, camps do not have to demonstrate that a certain percentage of children meet the free and reduced-price eligibility standards in order to participate in SFSP. Instead, eligibility works like NSLP and SBP: camps make eligibility determinations using similar income and categorical eligibility criteria for free and reduced-price meals. However, unlike the school meals programs, camps receive the same reimbursement rate for free and reduced-price meals. Camps may receive reimbursement for up to three meals or two meals and one snack per eligible child daily. Camps are not required to serve meals for free to all children, and there is no paid reimbursement provided for full-price meals. National Youth Sports Program (NYSP) sites , run by the National Collegiate Athletic Association, are enrolled sites; however, like open sites, they qualify for SFSP based on area eligibility data showing that at least half of the children in the area would qualify for free or reduced-price school meals. Sponsors of NYSP sites serve meals free to all enrolled children and receive reimbursement for all meals served (up to two meals or one meal and one snack per child daily). Migrant sites must demonstrate that they predominantly serve migrant children as certified by a migrant organization or a sponsor. They follow the same eligibility and reimbursement rules as open sites, except that they may receive reimbursement for up to three meals or two meals and one snack per child daily. According to the FNS study of SFSP sites, in summer 2015 the majority (59%) of sites were open sites, 29% were closed enrolled sites, 9% were camps, and 4% were another type of site. The SFSP reimbursement rate (the total rate displayed in Table 9 ) is composed of two parts: an operating cost (food, storage, labor) reimbursement and an administrative cost (planning, organizing, and managing) reimbursement. While operating and administrative rates are calculated separately, once sponsors receive the funds they can use them for any allowable program cost. Higher administrative reimbursements are provided for sponsors of rural meal sites and "self-preparation" sites (meal sites in which a sponsor rather than vendor prepares food). <5.1.3. Nutrition Standards> Meals and snacks served through SFSP must meet federal nutrition standards. In contrast to the child nutrition programs discussed thus far, SFSP's nutrition standards are not required to align with the Dietary Guidelines for Americans, but are "prescribed by the Secretary on the basis of tested nutritional research." Program regulations outline the nutrition standards for breakfasts, lunches/suppers, and snacks. The standards prescribe minimum servings of fruits and vegetables, meats/meat alternatives, breads/bread alternatives, and milk. Unlike school meals and CACFP, there are no limits on calories, saturated and trans fats, and milk varieties in SFSP. Participating school food authorities may choose instead to use the NSLP and/or SBP nutrition standards for SFSP. <5.1.4. Procurement and Meal Service> As noted, children are required to consume meals onsite in SFSP. There are also requirements around the timing of meals in SFSP: there must be at least three hours between meal or snack services and four hours between lunch and dinner if there is no snack served. Like the other child nutrition programs, SFSP sponsors must comply with local or state health and sanitation requirements. <5.2. Seamless Summer Option> School food authorities may participate in SFSP, or they can choose to offer summer meals through the Seamless Summer Option. The Seamless Summer Option allows school food authorities to continue operating under certain NSLP/SBP requirements into the summer. For example, it allows them to use the school meals programs' nutrition standards, administrative review process, and reimbursement rates (see Table 5 for NSLP/SBP reimbursement rates). Other requirements are the same as SFSP, including site eligibility rules. School food authorities are the only eligible sponsor in the Seamless Summer Option, but they can operate the program at a variety of meal sites (e.g., parks, recreation centers, libraries). The school lunch and breakfast reimbursement rates used in the Seamless Summer Option are slightly lower than SFSP's reimbursement rates. However, school food authorities participating in the Seamless Summer Option also receive the NSLP commodity reimbursement (discussed in the " Commodity Assistance " section). School food authorities may also have a reduced administrative burden under the Seamless Summer Option. <5.3. Summer EBT and Other Demonstration Projects> Beginning in summer 2011 and each summer since (as of the date of this report), USDA has operated Summer Electronic Benefit Transfer for Children (Summer EBT) demonstration projects in a limited number of states and Indian Tribal Organizations. The project provides electronic food benefits to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided on an EBT card. States and jurisdictions may apply to administer the project through SNAP or WIC. Participants in jurisdictions providing benefits through SNAP can redeem benefits for SNAP-eligible foods at any SNAP-authorized retailer, while participants in the WIC EBT jurisdictions are limited to a smaller set of eligible foods at WIC-authorized retailers. Summer meal demonstration projects were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of approaches were tested, findings from Summer EBT were among the most promising, showing significant impacts on reducing food insecurity and improving nutrient intake. Summer EBT grantees in prior years include Connecticut, the Cherokee and Chickasaw nations, Delaware, Michigan, Missouri, Nevada, Oregon, Tennessee, Texas, Virginia, and Washington. In October 2018, FNS announced a new strategy for determining grant recipients in FY2019 that prioritized states that had not participated before, statewide projects, and projects that could operate in the summers of 2019 through 2021. Other summer demonstrations projects have included food backpacks, food boxes, and meal delivery for children in rural areas. In addition, since summer 2015 there has been a demonstration project to provide exemptions from the congregate feeding requirement to SFSP and Seamless Summer Option outdoor meal sites experiencing excessive heat. <6. Special Milk Program (SMP)> The Special Milk Program (SMP) subsidized milk in approximately 3,000 schools, child care institutions, summer camps, and other institutions in FY2019. Generally, schools and other participating institutions may not participate in another child nutrition meal service program along with SMP. However, schools may administer SMP for pre-kindergartners and kindergartners who are in part-day sessions and do not have access to the school meals programs. In SMP, participating institutions provide milk to children for free and/or at a subsidized paid price. Institutions are reimbursed differently based on whether they decide to provide milk for free to all children, sell milk to all children, or combine these options (providing free milk to eligible children and selling milk to other children) (see Table 10 ). If institutions choose the combined option, they must establish eligibility rules for free milk. USDA updated the nutritional requirements for milk served in SMP alongside changes to the CACFP nutrition standards. The final rule, which took effect on October 1, 2017, required unflavored whole milk for one-year-olds, unflavored low-fat (1%) or unflavored fat-free milk for children ages 2-5, and unflavored low-fat (1%) or flavored/unflavored fat-free milk for children ages six and older. The regulations also allowed for reimbursement of non-dairy milk substitutes in cases of medical or special dietary needs. In 2017, USDA changed the milk requirements for six-year-olds in SMP alongside corresponding changes to milk in school meals programs and CACFP. The change allowed the option of flavored low fat (1%) milk for children ages six and older in SMP for school year 2018-2019 forward. <7. After-School Meals and Snacks> CACFP and NSLP both provide federal support for snacks and meals served during after-school programs. The CACFP At-Risk Afterschool component provides reimbursement for up to one snack and one meal (usually supper) per child daily, whereas the NSLP Afterschool Snack option provides reimbursement for snacks only. Reimbursement rates for CACFP At-Risk Afterschool meals/snacks and NSLP afterschool snacks are the same as CACFP reimbursement rates (listed in Table 8 ). <7.1. CACFP At-Risk Afterschool Meals and Snacks> The CACFP At-Risk Afterschool component was authorized as a demonstration project in 1994 ( P.L. 103-448 ), expanded over time, and made available to all states by the HHFKA. The institutional eligibility rules are the same for At-Risk Afterschool providers as CACFP centers (see the " CACFP Centers " section); additionally, CACFP At-Risk Afterschool providers must be located in areas where at least 50% of children in the community are eligible for free or reduced-price school meals. The afterschool program must have "an educational or enrichment purpose." Participating institutions receive reimbursement for up to one snack and one meal (e.g., supper) per child daily, and meals and snacks are provided for free to all children. Meals and snacks must meet federal nutrition standards. Institutions may operate the At-Risk Afterschool program in the after-school hours and on weekends, holidays, and breaks during the school year. Unlike the traditional CACFP, which is only available to children ages 12 and under, the At-Risk Afterschool component allows participation through age 18. In FY2019, the CACFP At-Risk Afterschool component served a daily average of 2.2 million children. <7.2. NSLP Afterschool Snacks> The NSLP Afterschool Snack option was authorized in the 1998 child nutrition reauthorization act ( P.L. 105-336 ). It allows NSLP-participating schools to receive federal reimbursement for one snack per child daily in eligible afterschool programs during the school year. According to USDA guidance, eligible afterschool programs must provide "organized, regularly scheduled activities in a structured and supervised environment," including an educational or enrichment activity. Schools that choose to operate the NSLP Afterschool Snack component may do so in one of two ways: (1) like the CACFP At-Risk Afterschool component, if at least 50% of children are eligible for free and reduced-price meals, the schools may provide free snacks to all children, or (2) if this criterion is not met, the schools may offer free, reduced-price, or full price snacks, based on household income eligibility (like the school meals programs). The vast majority of snacks provided through this program represent the first option. Snacks served through the NSLP Afterschool Snack component must comply with federal nutrition standards. In FY2019, the NSLP Afterschool Snack component served a daily average of 1.2 million children. <8. Fresh Fruit and Vegetable Program (FFVP)> The Fresh Fruit and Vegetable Program (FFVP) provides formula grants to states to fund fresh fruit and vegetable snacks in selected elementary schools. Under a statutory formula, about half the funding is distributed equally to each state and the remainder is allocated by state population. States must prioritize funding for schools with high proportions of students who are eligible for free or reduced-price meals. Schools must participate in NSLP in order to receive a FFVP grant. States set annual per-student grant amounts (between $50 and $75). Schools may provide fresh fruit and vegetable snacks to students at any time of day outside of the breakfast or lunch service. Schools offer snacks to all children in attendance (regardless of family income). As noted previously, FFVP's funding structure differs from the other child nutrition programs. FFVP is funded by a mandatory transfer of funds from Section 32. The authorizing law provided $150 million for school year 2011-2012, which is adjusted annually for inflation. In FY2019, FNS allocated approximately $171.5 million in FFVP funds to states. FFVP has been amended over time by both farm bills and child nutrition reauthorization bills. FFVP was created by the 2002 farm bill ( P.L. 107-171 ) as a pilot project. The 2004 child nutrition reauthorization act ( P.L. 108-265 ) made the program permanent and provided funding for a limited number of states and Indian reservations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding through Section 32 and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to FFVP but provided $5 million for a demonstration project to test offering frozen, canned, and dried fruits and vegetables in the program. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in school year 2014-2015 and an evaluation was published in 2017. <9. Other Child Nutrition Activities> Federal child nutrition laws authorize and child nutrition funding supports several additional initiatives and activities, such as studies and evaluations, training and technical assistance, technology improvements, and food safety initiatives. Selected initiatives and activities are discussed below. <9.1. Farm to School Program> The farm to school program, which includes the Farm to School Grant Program, was authorized by the HHFKA. It expanded upon FNS's existing farm to school efforts, defined broadly as "efforts that bring regionally and locally produced foods into school cafeterias," with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education. One component of the farm to school program is farm to school grants, which have annual mandatory funding of $5 million. The grants are awarded by FNS on a competitive basis to schools, nonprofit entities, and agricultural producers/processors for the purpose of establishing programs that improve schools' access to locally produced foods. They may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, nutrition education, developing partnerships, and other activities. <9.2. Institute of Child Nutrition> The Institute of Child Nutrition provides technical assistance, instruction, and materials for nutrition and food service professionals and other local administrators of child nutrition programs on a variety of topics. The institute receives $5 million a year in mandatory funding appropriated in statute. The institute is currently located at the University of Mississippi. <9.3. Team Nutrition> The Team Nutrition initiative supports federally and state-developed nutrition education and promotion initiatives. This includes grants for state agencies to develop programs to improve school meal quality, such as by training school nutrition professionals. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge, which was a voluntary certification initiative designed to recognize schools that create a healthy school environment through the promotion of nutrition and physical activity. <10. Further Information> CRS reports: CRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking Child Nutrition Reauthorization in the 114th Congress: An Overview CRS Report R45743, USDA Domestic Food Assistance Programs: FY2019 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program CRS Report RL33299, Child Nutrition and WIC Legislation in the 108th and 109th Congresses (summarizes the Child Nutrition and WIC Reauthorization Act of 2004) Other resources: USDA FNS website, https://www.fns.usda.gov/ USDA FNS Healthy, Hunger-Free Kids Act page, http://www.fns.usda.gov/school-meals/healthy-hunger-free-kids-act The FNS page of the Federal Register , https://www.federalregister.gov/agencies/food-and-nutrition-service USDA FNS Congressional Budget Justifications, https://www.obpa.usda.gov/explan_notes.html <10.1. Appendix. A Brief History of Federal Child Nutrition Programs> The Emergence of School Lunches and the National School Lunch Program When the first federal aid for school lunches was provided in the 1930s, local school lunch programs were already operational in many cities and localities across the U.S. Many of these early lunch programs were started by charitable women's organizations at the turn of the century in an effort to feed hungry children. Over time, they transitioned to school boards and school districts. These programs received a combination of private, local, and state funding. The federal government became involved in school lunch programs during the Great Depression both as a way to feed hungry children and support the farm economy. Initially, federal aid was provided in the form of cafeteria equipment and labor. In 1932, the Reconstruction Finance Corporation began providing loans to states and school districts to cover the cost of cafeteria space and equipment for school lunch programs. In 1935, the Works Progress Administration, a New Deal agency, began sponsoring women's employment in school lunchrooms. Federal food support for school lunches began that same year, when Section 32 of the Act of August 24, 1935 (P.L. 74-320) was enacted. The act provided 30% of customs receipts to USDA to purchase surplus commodities from farmers impacted by the depression. These commodities were donated through various outlets for domestic consumption, including school lunch programs. With commodity aid came the first federal regulations for school lunch programs. USDA required recipient organizations, through their agreements with state agencies, to operate school lunch programs on a nonprofit basis, maintain any existing local funding for school lunches, keep records of foods received, serve meals free to poor children, and ensure that such children would not be identified to their peers, among other requirements. The availability of federal aid contributed to a rapid increase in the number of school lunch programs. However, in 1943, federal commodity aid declined as Section 32 surplus commodities were diverted to feed U.S. armed forces in World War II. In addition, federal support for lunchroom labor disappeared with the elimination of the Works Progress Administration. In the midst of declining aid, Congress provided the first cash assistance $50 million in Section 32 funds for "a school milk and lunch program" in the 1944 Department of Agriculture Appropriation Act (P.L. 78-129). The introduction of cash assistance marked a shift in the lunch program. For the first time, schools could purchase their own foods in addition to receiving federally purchased commodities. Annual appropriations acts continued cash support for school lunches until 1946, when the National School Lunch Act (P.L. 79-396) was enacted. Signed into law on June 4, 1946, by President Truman, the National School Lunch Act permanently authorized appropriations of "such sums as may be necessary" for the National School Lunch Program. (The act would later be renamed the "Richard B. Russell National School Lunch Act," recognizing Senator Russell's role in the passage of the legislation and his earlier support for the school lunch program within New Deal programs and during his tenure as the Chairman of the Agriculture Appropriations subcommittee. ) The law required participating schools to serve lunches for free or at a reduced price to students who were deemed by local school authorities as unable to pay the full cost of a lunch. Funds were to be distributed to states based on the number of school-aged children in the state and the state's need, as measured by per-capita income, and states were to match federal funds dollar-for-dollar. States were to distribute funding on a monthly basis to schools based on the number of meals served that met "minimum nutritional requirements prescribed by the Secretary on the basis of tested, nutritional research" (P.L. 79-396). Cash assistance could not be used for cafeteria equipment, and separate funds were authorized for this purpose ($10 million annually); however, Congress subsequently prohibited appropriations for equipment assistance from FY1948 to FY1967. NSLP remained relatively unchanged from 1946 to 1960. However, during this timeframe, concerns emerged over the funding formula. One concern was that the formula prioritized funding for schools with large numbers of school-aged children rather than actual participants in the program. There was also concern that schools with high proportions of needy children received the same amount of aid as those with wealthier families, even though they had to serve a larger number of meals for free or at a reduced-price. In 1962, P.L. 87-823 changed the funding formula to be based on the number of school lunches served in the state in the preceding school year instead of the number of school-aged children. The law also authorized additional "special assistance" for state-selected schools in poor economic areas (however, special assistance was not funded until 1966). Other notable changes to NSLP occurred in the 1970s. In 1970, P.L. 91-248 extended special assistance to all schools participating in NSLP. The law also reduced the state matching requirement and established the first national eligibility guidelines for free and reduced-price meals at 100% of the federal poverty level (later in the decade increased to 125% for free lunches and 195% for reduced-price lunches). In 1971, another significant change occurred with the enactment of P.L. 92-153, which guaranteed states a certain level of federal cash assistance by specifying average per-meal reimbursement rates for free, reduced-price, and paid lunches. The Addition of Other Child Nutrition Programs In the 1960s, federal child nutrition efforts expanded beyond school lunches. On October 11, 1966, the Child Nutrition Act of 1966 (P.L. 89-642) was enacted. It formally authorized the Special Milk Program (SMP) and authorized the School Breakfast Program (SBP) as a pilot program. The SMP was based on predecessor USDA school milk programs that had operated since the 1940s. SBP was a newer concept that USDA had piloted in the 1965-1966 school year. In a House Agriculture Committee hearing on the Child Nutrition Act, then-Secretary of Agriculture Orville L. Freeman testified that These proposals will permit us to begin a comprehensive effort to broaden child nutrition programs in this country. They are based on what we have learned in 20 years of administration of the National School Lunch Act, and they reflect a careful assessment of gaps which now exist in the nutritional needs of children in this country. The SMP provided reimbursements for milk in schools, nonprofit child care centers, summer camps, and other nonprofit institutions. At the time, schools and institutions could participate in both SMP and NSLP. Meanwhile, SBP was authorized for two fiscal years and required states to prioritize funds for "schools drawing attendance from areas in which poor economic conditions exist and to those schools to which a substantial proportion of the children enrolled must travel long distances daily" (P.L. 89-642). (Congress later expanded priority to include "schools in which there is a special need for improving the nutrition and dietary practices of children of working mothers and children from low-income families" (P.L. 92-32).) The Child Nutrition Act of 1966 also gave the Secretary the authority to provide higher reimbursements to schools with "severe need." Like NSLP, the law specified that breakfasts "meet minimum nutritional requirements prescribed by the Secretary on the basis of tested nutritional research," and be served for free or at a reduced price to children unable to pay the full price of a meal, as determined by local school authorities (P.L. 89-642). In 1968, child nutrition efforts were further expanded with the authorization of the Special Food Service Program for Children (SFSPC), a pilot program to fund meals in summer and child care settings (P.L. 90-302). SFSPC provided the first federal assistance for summer meals for children and the first dedicated assistance for meals served in child care settings. Similar to SBP, SFSPC was targeted to areas with poor economic conditions and a high number of working mothers. In 1975, the program was split into the separate Child Care Food Program (CCFP) and the Summer Food Service Program (SFSP) ( P.L. 94-105 ). CCFP was open to public and nonprofit institutions that met child care licensing or other official child care standards, while SFSP retained a focus on institutions in low-income areas. Meals were provided for free to all children at SFSP sites, whereas CCFP conducted free and reduced-price eligibility determinations like NSLP. Recent History (1980 to 2010) The longstanding growth of child nutrition programs was contrasted with budget cuts in the early 1980s, which were part of larger efforts to reduce federal domestic spending. The Omnibus Reconciliation Act of 1980 ( P.L. 96-499 ) reduced FY1981 funding for child nutrition programs by approximately $400 million (9%) of the child nutrition budget. The law achieved savings by lowering reimbursement rates in the programs and eliminating commodity assistance for breakfast, among other changes. Larger spending cuts followed with the Omnibus Reconciliation Act of 1981, which made changes that collectively cut $1.4 billion (25%) of the child nutrition budget (Title VIII of P.L. 97-35 ). Many of the policy changes made by the law remain in place today. For example, the law restricted eligibility from 195% of poverty to 185% of poverty for reduced-price meals and set eligibility at 130% for free meals in the NSLP, SBP, and CCFP. It also raised allowable charges for reduced-price lunches from 20 cents to 40 cents and for reduced-price breakfasts from 10 cents to 30 cents. In a major change to SMP, the law excluded schools/institutions that participated in another child nutrition meals program from participating in SMP cutting SMP's budget by 77 percent. In CCFP, the law restricted participation from children ages 18 and under to children ages 12 and under, and reduced the maximum number of reimbursable meals from three meals and two snacks per child daily to two meals and one snack per child daily. The law also eliminated equipment assistance for school meals. Child nutrition programs were subsequently excluded from budget deficit reduction measures in the late 1980s and 1990s, and new policies led to the expansion of the programs during this timeframe. For example, amendments to the programs in these years authorized start-up grants for school breakfast programs, expanded CCFP to adult day care centers (and renamed the Child and Adult Care Food Program, or CACFP), and provided new funding for afterschool snacks through NSLP and CACFP. But what had potentially the longest-term impact on expansion was a policy change intended to reduce paperwork in the school meals programs: automatic (categorical) eligibility for free meals for children in food stamp (now SNAP) and Aid to Families with Dependent Children (now TANF) households, which was enacted in 1986 and direct certification of such children for free meals without household applications, which was enacted in 1989. Other policies in the late 1980s and 1990s focused on improving program integrity. The 1989 child nutrition reauthorization ( P.L. 101-147 ) required USDA to create a standardized process through which states would review school food authorities' administration of NSLP and SBP (known as administrative reviews). In CACFP, following USDA Office of the Inspector General (OIG) audits in the 1990s that found instances of abuse and mismanagement, the Agricultural Risk Protection Act of 2000 ( P.L. 106-224 ) made a number of changes aimed at improving program integrity in CACFP. The act required CACFP sponsors to conduct more frequent and unannounced site visits of sponsored centers and homes, restricted nonprofit institutions' eligibility to those with tax-exempt status, and excluded institutions deemed ineligible to participate in any other public program based on violations of program requirements. Other legislation was aimed at improving program integrity in the school meals programs. Program integrity continued to be a focus in the 2004 child nutrition reauthorization ( P.L. 108-265 ), which made changes to school food authorities' verification of household applications for free and reduced-price meals. Specifically, the law set a sample size of applications that schools must review, established a focus on "error-prone" applications (applications near the income eligibility thresholds), and authorized direct (automatic) household application verification processes. In addition, the law required states to conduct additional administrative reviews of school food authorities with a high level of administrative error or risk of error. The 2004 child nutrition reauthorization also continued the expansion of free school meals to new categories of children. Specifically, the law extended categorical eligibility and direct certification for free school meals to homeless children, migrant children, and children served under the Runaway and Homeless Youth Act. The most recent child nutrition reauthorization as of the date of this report was the Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ). The HHFKA continued the expansion of school meals in a few ways. It made foster children categorically eligible for free school meals, and allowed direct certification of such children. It also included a pilot project for direct certification (but not categorical eligibility) of children in Medicaid households for free and reduced-price meals based on an income test. In addition, the HHFKA created the Community Eligibility Provision (CEP), through which eligible schools can provide free meals to all students. As discussed in this report, the HHFKA also made changes to nutritional requirements in the school meals programs and CACFP. Specifically, the law required USDA to update the nutrition standards for school meals within a certain timeframe and align the standards with the Dietary Guidelines for Americans (per an existing statutory requirement). The law also required USDA to issue new nutrition standards regulating all foods sold on school campuses during the school day ("competitive foods"). (Previous standards applied only to competitive foods sold during meal service.) In addition, the HHFKA required USDA to update the nutrition standards for CACFP meals and snacks within a certain timeframe and align them with the Dietary Guidelines for Americans. USDA and Congress have made subsequent changes to the nutrition standards for school meals and CACFP meals and snacks, and the standards remain a source of debate in the programs.

The federal government has a long history of investing in programs for feeding children, starting with federal aid for school lunch programs in the 1930s. Today, federal child nutrition programs support food served to children in schools and a variety of other institutional settings. Administered by the U.S. Department of Agriculture's (USDA's) Food and Nutrition Service (FNS), child nutrition programs include the National School Lunch Program (NSLP), School Breakfast Program (SBP), Child and Adult Care Food Program (CACFP), Summer Food Service Program (SFSP), Fresh Fruit and Vegetable Program (FFVP), and Special Milk Program (SMP). The child nutrition programs vary in terms of size and target populations. The largest programs are NSLP and SBP (the "school meals programs"), which subsidize meals for nearly 30 million children in approximately 94,300 elementary and secondary schools nationwide. The other child nutrition programs serve fewer children. CACFP supports meals served to children in child care, day care, and afterschool settings; SFSP provides funding for summer meals; FFVP sponsors fruit and vegetable snacks in elementary schools; and SMP subsidizes milk in schools and institutions that do not participate in other child nutrition programs. In general, the largest subsidies are provided for free or reduced-price meals and snacks served to children in low-income households. Federal spending on child nutrition programs and activities totaled approximately $23 billion in FY2019, the majority of which was mandatory spending. Most child nutrition programs are considered "appropriated entitlements," meaning that their authorizing statutes establish a legal obligation to make payments, but that obligation is fulfilled through funding that is provided in annual appropriations acts. Most of the funding is provided in the form of per-meal cash reimbursements that states distribute to schools and institutions. A smaller amount of federal funding is provided in the form of federally purchased commodity foods and cash for states' administrative expenses. The child nutrition programs are primarily governed by two statutes: the Richard B. Russell National School Lunch Act and the Child Nutrition Act of 1966 as amended. These laws were most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ), which made several changes to the child nutrition programs. For example, the act created the Community Eligibility Provision, an option for eligible schools to provide free meals to all students. It also required USDA to update nutrition standards in the school meals programs and CACFP within a certain timeframe. Certain provisions of the HHFKA expired at the end of FY2015. However, these expirations have had a minimal impact on program operations, which continue with annual appropriations. The 114 th Congress began but did not complete a reauthorization of child nutrition programs. In the 115 th Congress, there was no significant reauthorization activity. As of the date of this report, leadership on both committees of jurisdiction (the Senate Agriculture, Nutrition, and Forestry Committee and the House Committee on Education and Labor) have announced plans to work on reauthorization in the 116 th Congress. Selected legislative issues are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues .

crs_R45763

crs_R45763_0

<1. Overview> On March 11, 2019, the Trump Administration proposed its FY2020 budget for the Department of State, Foreign Operations, and Related Programs (SFOPS) accounts, which fund U.S. diplomatic activities, cultural exchanges, development and security assistance, and U.S. participation in multilateral organizations, among other international activities. The SFOPS budget includes most international affairs (function 150) funding, as well as funding for international commissions in the function 300 budget. Additional emergency funds were requested by the Administration on March 17, 2020, to respond to Coronavirus Disease 2019 (COVID-19). The total request, including these emergency supplemental funds, was $42.94 billion in discretionary funds ($43.10 billion when $158.9 million in mandatory retirement funds are included), which was 3% higher than the FY2019 request but 21% below the FY2019 enacted SFOPS funding level (after rescissions). It was lower than any SFOPS funding level in the last decade ( Figure 1 ), and represented about 3% of the total discretionary budget authority (an estimated $1.313 trillion) requested for federal programs in FY2020. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), signed into law on December 20, 2019, included $54.84 billion for SFOPS accounts in FY2020, a nearly 1% increase from the FY2019-enacted level and approximately 28% more than the Administration's request. Supplemental funds to address the COVID-19 outbreak, requested and enacted in March 2020, added $2.37 billion to SFOPS accounts, bringing the FY2020 total to $57.21 billion. Of that enacted total, $8.0 billion was designated as Overseas Contingency Operations (OCO) and $2.37 billion (the COVID-19 funds) was designated as emergency funding. In SFOPS, there is often disparity between requested and enacted appropriations. During the Obama Administration, Congress typically provided less SFOPS funding than was requested, though the gap narrowed over time. Thus far in the Trump Administration, Congress has enacted significantly more SFOPS funding than the amount requested, both because the requested amounts have represented large cuts and because enacted funding levels have been high relative to most recent years ( Table 1 ). The FY2020 budget request continued this pattern. <1.1. The Budget Control Act and Overseas Contingency Operations> Since FY2012, the appropriations process has been shaped by the discretionary spending caps put in place by the Budget Control Act of FY2011 (BCA; P.L. 112-25 ). Congress has repeatedly amended the BCA to raise the caps, most recently by the Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37 ). The BBA 2019 raised discretionary spending limits set by the BCA for FY2020 and FY2021, the final two years the caps are in effect. In addition to raising the caps, another way that Congress has managed the constraints imposed by the BCA budget caps is through the use of Overseas Contingency Operations funding, which is excluded from the BCA discretionary budget caps. Congress began appropriating OCO in the SFOPS budget in FY2012, having previously provided OCO funds for the Department of Defense. Originally used to support shorter-term, temporary contingency-related programming in Afghanistan, Iraq, and Pakistan that was not part of the "base" or "core" budget, the use of OCO has expanded considerably over the years. In FY2019, OCO funds were used to support 11 different SFOPS accounts, from USAID operating expenses and the Office of Inspector General to International Disaster Assistance and Foreign Military Financing. When Congress raised the BCA caps for FY2019, the Administration chose not to request OCO funding for FY2019 SFOPS. Congress nevertheless designated $8 billion of FY2019 SFOPS funding as OCO, a 33% reduction in OCO spending compared to FY2018 and the second year in a row that SFOPS OCO levels declined significantly. While the FY2020 SFOPS request did not include OCO funding, the Administration's FY2020 defense budget request included an unprecedented amount of OCO funding, widely viewed as a means of increasing defense spending without amending the BCA's defense discretionary spending cap. Through BBA 2019, Congress established OCO funding targets for both defense and nondefense discretionary spending. For foreign affairs OCO, Congress designated $8 billion for FY2020 and FY2021, indicating its intent to continue to use OCO in SFOPS appropriation measures for the next two fiscal years. Congress adhered to that target, and remained consistent with FY2019 funding, in the final FY2020 SFOPS appropriation, providing $8 billion in OCO, representing nearly 14% of the total SFOPS funding ( Figure 2 ). <2. Congressional Action> House SFOPS Legislation. On May 16, 2019, FY2020 SFOPS legislation ( H.R. 2839 , with accompanying report H.Rept. 116-78 ) was introduced and approved by the full House Appropriations Committee. The legislation included total SFOPS funding of $56.54 billion, 0.4% higher than FY2019 enacted funding and 32% more than requested. Of that total, $48.54 billion was base funding the 302(b) allocation level approved by the House committee and $8 billion was designated as OCO. On June 19, 2019, the House passed the FY2020 SFOPS legislation in a "minibus" measure that included three other appropriations bills Labor, Health and Human Services, Education; Defense; and Energy and Water Development ( H.R. 2740 ). While the topline funding level remained the same, some monies were shifted among the various accounts due to adopted amendments. Senate SFOPS Legislation . On September 26, 2019, the Senate Appropriations Committee approved an SFOPS measure for FY2020, S. 2583 (with accompanying report S.Rept. 116-126 ), that would have provided $55.16 billion in total new funding. This represented an increase of 0.1% from FY2019-enacted funding and a 27% increase from the requested level. Of that total, $47.16 was base funding and $8 billion was designated as OCO. The measure did not reach the Senate floor for consideration. Continuing Resolutio ns . On September 26, 2019, the Senate approved H.R. 4378 , the Continuing Appropriations Act, 2020 (approved by the House on September 19 th ), which continued funding for most federal agencies and accounts at the FY2019 funding level through November 21, 2019. The legislation was signed by the President on September 27. On November 21, 2019, the Senate approved a second continuing resolution H.R. 3055 , the Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019 (approved by the House on November 19 th ). The legislation, which funded federal operations at the FY2019 funding level through December 20, 2019, was signed by the President on November 21, 2019. Enacted Legislation. On December 20, 2019, the President signed into law P.L. 116-94 , a full-year appropriation that included $54.84 billion in total SFOPS funding (Division G). This enacted level represented a nearly 1% increase from the FY2019-enacted funding level and was approximately 28% more than the Administration's FY2020 request. Of that total, $16.72 billion was for State Department and related agencies operations, and $38.70 billion was for foreign operations accounts. Nearly 15%, or $8.0 billion of the total SFOPS appropriation was designated as OCO. COVID- 19 Supplemental s . On March 17, the Trump Administration requested $220 million in supplemental SFOPS funds as part of a larger supplemental FY2020 appropriations request to address the COVID-19 pandemic. Also in March 2020, Congress enacted multiple supplemental appropriations, including the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 , signed into law March 6) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136 , signed into law March 27). P.L. 116-123 included $1.25 billion for SFOPS accounts, including Diplomatic Programs ($264 million), USAID Inspector General ($1 million), Global Health Programs-USAID ($435 million), International Disaster Assistance ($300 million), and Economic Support Fund ($250 million). P.L. 116-136 included $1.115 billion for SFOPS accounts, including Diplomatic Programs ($324 million), USAID Operating Expenses ($95 million), International Disaster Assistance ($258 million), Migration and Refugee Assistance ($350 million), and the Peace Corps ($88 million).With these supplemental funds, enacted SFOPS funding for FY2020 totaled $57.208 billion, a 5.2% increase over the FY2019-enacted level and about 33% more than the Administration's request. <3. State Department Operations and Related Agency Highlights> For FY2020, the Administration sought to cut funding for the Department of State and Related Agency appropriations accounts from the $16.46 billion Congress enacted for FY2019 to $13.98 billion (including the supplemental request), a 15% reduction. The Administration's FY2020 request exceeded its FY2019 request for these accounts, which totaled $13.26 billion, by around 5.4%. The Administration's priorities to be funded through Department of State and Related Agency accounts included sustaining the global diplomatic workforce and operations; protecting U.S. government personnel and overseas missions; and preserving strategic participation in international organizations to achieve outcomes favorable to the United States and its allies. Conversely, the House bill and the Senate committee bill both sought to increase funding for these accounts. The House bill would have raised funding to $17.35 billion, or 5.4% above the FY2019 funding level. The Senate committee bill, if enacted, would have boosted funding to $16.53 billion, or 0.4% more than the FY2019 funding level. The FY2020 initial enacted appropriation ( P.L. 116-94 ) provided $16.72 billion for the Department of State and Related Agency accounts, which is about 1.6% above the FY2019-enacted level. This funding level exceeded that of the Senate committee bill by 1.1% and was approximately 3.6% less than the amount included in the House bill. The Administration requested an additional $115 million in the Diplomatic Programs account for COVID-19 response activities in March 2020. P.L. 116-123 , the COVID-19 supplemental appropriation, provided an additional $264 million for the Diplomatic Programs account, and P.L. 116-136 provided an addition $324 million for Diplomatic Programs, bringing the total enacted funding for Department of State and Related Agency accounts to $17.31 billion, or 5.2% more than the FY2019 funding level. Table 3 provides detailed information regarding the extent of the Administration's proposed cuts to these accounts, the House and Senate committee bill funding levels, and the appropriations provided in P.L. 116-94 and P.L. 116-123 . <3.1. Proposed New Account> The Worldwide Security Protection (WSP) sub-account within the Diplomatic Programs account has been used to fund programs that the State Department's Bureau of Diplomatic Security (DS) and other bureaus implement to protect the department's staff, property, and information. As part of its FY2020 request, the Administration asked Congress to create a new WSP standalone account and authorize the transfer of all unobligated WSP funds into this account by no later than the onset of FY2021 (October 1, 2020). The Administration maintained that creating this account would increase the transparency of WSP expenditures through more clearly indicating distinctions between funding for diplomatic programs and security-related activities. For its FY2021 budget request, the State Department reportedly intends to request WSP funding in this new account. To date, no legislation has been introduced in Congress that would create a new WSP account. <3.2. Selected Key Programs and Priorities> As in previous years, the majority of both the funding the Administration requested and the budget authority Congress provided for the Department of State and Related Agency appropriations accounts was for diplomatic programs, diplomatic security and embassy construction, and contributions to international organizations and international peacekeeping activities. For FY2020, such programs accounted for approximately 88% of the Administration's request and 84% of the funds Congress appropriated for these accounts. Some of the Administration's priorities within these areas, as identified by the Department of State in its Congressional Budget Justification and other materials provided to Congress, are detailed below. <3.2.1. Diplomatic Programs> The Diplomatic Programs account is the State Department's principal operating appropriation and serves as the source of funding for several key functions. These include domestic and overseas State Department personnel salaries; the operations of the department's strategic and managerial units, such as the Office of the Secretary and the Bureaus of Administration, Budget and Planning, Information Resource Management, and Legislative Affairs; and foreign policy programs administered by the Bureaus of African Affairs, Conflict and Stabilization Operations, and others. The Administration's initial FY2020 request for Diplomatic Programs totaled $8.42 billion, an 8% reduction from the $9.17 billion Congress enacted for this account in FY2019. The House bill and Senate committee bill would have appropriated $9.25 billion and $8.89 billion, respectively, for this account. P.L. 116-94 , the FY2020-enacted appropriation, provided $9.13 billion for Diplomatic Programs, or 0.5% less than the FY2019 funding level and 8% more than the Administration's request The Administration maintained that its request was consistent with past congressional guidance regarding appropriate State Department on-board personnel volumes and would sustain the Foreign Service and Civil Service workforces at their end-of-2017 levels. Both the House bill and Senate committee bill included oversight provisions pertaining to Foreign Service and Civil Service personnel levels. The enacted legislation provided funding for not less than 12,870 permanent Civil Service staff and 13,031 permanent Foreign Service Officers, which the joint explanatory statement accompanying the law maintained was consistent with the State Department's current hiring targets and would restore State Department personnel to pre-hiring-freeze levels in place during FY2016. Among other priorities funded by the Diplomatic Programs account, the joint explanatory statement provided an additional $500,000 apiece to the Bureau of Democracy, Human Rights, and Labor and the Bureau of Economic and Business Affairs for implementation of the Global Magnitsky Human Rights Accountability Act (Subtitle F, Title XII, Division A of P.L. 114-328 ). The Senate committee report accompanying its bill, which also sought to provide this increased funding, stated that it was necessary for the hiring of additional staff to strengthen implementation of the law. The Senate committee report also expressed concern with what it characterized as the lack of information sharing between the Departments of State and the Treasury necessary for sanctioning foreign individuals for direct or indirect involvement in significant corruption or gross violations of human rights under this law. The committee report included a reporting requirement, which was made part of the enacted appropriations law, requiring the Secretary of State to submit a plan to Congress aimed at improving coordination with the Department of the Treasury on such efforts. An additional $115 million was requested for Diplomatic Programs in March 2020 to help the State Department prevent, prepare for, and respond to the coronavirus epidemic, including maintaining consular operations, reimbursement of evacuation expenses, and emergency preparedness. Congress appropriated an additional $588 million in FY2020 supplemental Diplomatic Programs funds for this purpose, including $264 million in P.L. 116-123 and $324 million in P.L. 116-136 . These supplemental funds brought FY2020-enacted funding for this account to a total of $9.71 billion, or 5.9% above the FY2019-enacted level. <3.2.2. Diplomatic Security> The Administration's FY2020 budget request sought to provide approximately $5.41 billion for the department's key diplomatic security accounts: $3.78 billion for the Worldwide Security Protection (WSP) allocation within the Diplomatic Programs account and $1.63 billion for the Embassy Security, Construction, and Maintenance (ESCM) account. The WSP allocation supports the Bureau of Diplomatic Security (DS), which is responsible for implementing security programs to protect U.S. embassies and other overseas posts, diplomatic residences, and domestic State Department offices. The ESCM account supports the Bureau of Overseas Buildings Operations (OBO); provides the State Department's share of costs involved with the planning, design, construction, and maintenance of U.S. overseas posts around the world; and funds "brick and mortar" security measures at these posts. As illustrated in Table 4 , enactment of the Administration's request would have marked a decline of 8% for WSP and 18% for ESCM relative to the FY2019 enacted figures. Among the priorities the Administration sought to fund through its request were the construction of new embassy compounds in Qatar, Brazil, and Malawi and new U.S. consulates in Italy and Indonesia. Proposed cuts included a $50 million reduction in DS operations in Iraq due to the suspension of operations at the U.S. Consulate General in Basrah. The enacted legislation, P.L. 116-94 , appropriated $4.10 billion for WSP and $1.98 billion for ESCM, for a total of approximately $6.08 billion in diplomatic security funding. This funding totals around 12% more than the Administration's request, 7% more than the Senate committee bill would have provided, and 0.2% less than the appropriated funds included in the House bill. The aggregate appropriation for diplomatic security is nearly identical to that provided in FY2019. However, P.L. 116-94 appropriated around $7.4 million more for Worldwide Security Upgrades, a sub-item within ESCM that includes the State Department's share of the costs to plan, design, and build new embassies and other facilities abroad, while providing an equivalent lesser amount for the operations and repair and construction programs funded through ESCM. The enacted appropriations law also carried over notification requirements from previous years that Congress applies to conduct oversight of diplomatic construction projects abroad, including ongoing embassy construction projects in Lebanon, Indonesia, Mexico, and India. With respect to the U.S. Consulate General in Basrah, the law requires that any change to the status of operations there is subject to consultation with and notification to Congress. Over the past several years, Congress provided no-year appropriations for both WSP and ESCM, thereby authorizing the State Department to indefinitely retain appropriated funds beyond the fiscal year for which they were appropriated. As a result, the department has carried over large balances of unexpired, unobligated WSP and ESCM funds each year that it is authorized to obligate for purposes including multiyear construction projects and unexpected security contingencies. For example, for FY2019, the State Department carried over more than $7.2 billion in previously appropriated funds for ESCM. In this context, P.L. 116-94 included a rescission of $242.5 million in unobligated ESCM funds previously appropriated pursuant to the Security Assistance Appropriations Act, 2017 (division B of P.L. 114-254 ) for embassy construction projects in high-threat countries that were subsequently postponed indefinitely. <3.2.3. Assessments to International Organizations and Peacekeeping Missions> Through the Contributions to International Organizations (CIO) account, the United States pays its assessed contributions (membership dues) to the United Nations (U.N.), the U.N. system of organizations (including, for example, the International Atomic Energy Agency), inter-American organizations such as the Organization of American States, and other international organizations. Additional funding is provided to international organizations through the various multilateral assistance accounts, as described in the Foreign Operations section of this report. Separately, the United States pays its assessed contributions to U.N. peacekeeping missions through the Contributions for International Peacekeeping Operations (CIPA) account. Recent funding levels for both accounts are detailed in Table 5 . The Administration's CIO account request noted that it prioritized funding for international organizations "whose missions substantially advance U.S. foreign policy interests" while cutting contributions to organizations whose work either does not directly affect U.S. national security interests or renders unclear results. While the request sought to fund the North Atlantic Treaty Organization (NATO) and the International Atomic Energy Agency near recent levels, it looked to cut funding for the World Health Organization (WHO) and the Food and Agriculture Organization (FAO) by approximately 50% each. The Administration's request specifically noted that these cuts owed to "these entities' less direct linkages to U.S. national security and economic prosperity." With regard to CIPA, the Administration's request assumed that the State Department would make progress in efforts to negotiate reductions in the overall budgets of peacekeeping missions or the closure of certain missions altogether. The U.S. assessment for U.N. peacekeeping (last negotiated in 2018) is 27.89%; however, Congress has capped the U.S. contribution at 25%. If the Administration's request was enacted, it would have provided 58% of total U.S. assessed dues owed for FY2020. The remainder of these dues would have been compounded into arrears. The State Department estimated that the United States accumulated about $725 million in peacekeeping arrears from FY2017 to FY2019 as a result of the U.S. cap. The FY2020 appropriations law provided a combined total of $3 billion for CIO and CIPA, which marked an increase of 40% relative to the Administration's request, and was 17% and 2% less, respectively, than the House and Senate committee funding levels. The joint explanatory statement explicitly provided that not less than $67.4 million of the CIO appropriation was for the FY2020 U.S. contribution to NATO, which totaled approximately 9% more than the U.S. contribution to the alliance in FY2018. The joint explanatory statement further noted that no funds were included in the law to withdraw the United States from NATO. Information provided to Congress by the Department of State indicates that the department intends to fund the WHO and FAO through this account near recent-year levels. With regard to CIPA, the joint explanatory statement maintained that sufficient funds were appropriated for the United States to continue providing contributions at the statutory level of 25% rather than the assessed rate of 27.89%. Both the House and Senate committee reports made note of compounding U.S. peacekeeping arrears. The House committee report recommended applying a share of the FY2020 CIPA appropriation for the payment of arrears accumulated in FY2017 and FY2018 however, this may not be possible as the final FY2020 CIPA appropriation provided in P.L. 116-94 was around $600 million less than the level included in the House bill. The Senate committee report encouraged the State Department to alleviate the issue of compounding arrears through reviewing peacekeeping missions for potential cost savings while ensuring mission effectiveness. <4. Foreign Operations Highlights> The foreign operations accounts in the SFOPS appropriation, together with the Food for Peace and McGovern-Dole food aid programs funded through the agriculture appropriation, comprise the foreign assistance component of the international affairs budget. The Administration's initial FY2020 foreign operations request totaled $29.01 billion, about 1.5% more than the Administration requested for these accounts for FY2019 and 23% less than Congress enacted for FY2019. Total foreign aid, including the food aid programs in the agriculture appropriation, would have been cut by 27%. The foreign aid request outlined four general priorities: Supporting U.S. friends and allies Winning the great power competition Promoting a "journey to self-reliance" for developing countries Sharing the burden of international security and development with more partners Under the President's proposal, assistance levels would have been cut across all aid types and sectors. The House legislation, H.R. 2740 , included $39.2 billion for foreign operations, a slight increase compared to FY2019, and about 34% more than the Administration requested. The Senate committee bill, S. 2583 , included $38.95 billion for foreign operations accounts, almost level with the House recommendation. The omnibus appropriation, P.L. 116-94 , included $38.70 billion for foreign operations accounts, a 1.2% increase over FY2019 funding and 33% more than requested. In response to the COVID-19 pandemic, the Administration requested an additional $105 million in the USAID Operating Expenses and Peace Corps accounts for FY2020. Congress in turn enacted $1.777 billion in additional foreign operations funds in COVID-19 supplemental appropriations legislation, primarily in the Global Health Programs, International Disaster Assistance, Migration and Refugee Assistance, and Economic Support Fund accounts, bringing total enacted foreign operations funding to $40.48 billion ( Table 6 ). <4.1. Proposed Account Consolidations and Restructuring> In the FY2020 request, the Administration proposed to consolidate accounts in two areas: Most non-health development assistance accounts Development Assistance; Economic Support Fund; Assistance to Europe, Eurasia and Central Asia; and the Democracy Fund would have been combined into a single new Economic Support and Development Fund (ESDF). The Administration made a similar request for both FY2018 and FY2019, but Congress did not enact the proposed account restructuring. For the first time, the Administration proposed to consolidate the four humanitarian assistance accounts International Disaster Assistance (IDA), Migration and Refugee Assistance (MRA), Food for Peace, Title II and Emergency Refugee and Migration Assistance (ERMA) into a single International Humanitarian Assistance (IHA) account. Budget documents stated that the consolidated account would be managed by USAID under the policy authority of the State Department (see Humanitarian Assistance section below). The Administration suggested that consolidation of these accounts would streamline management to allow more efficient deployment of resources. The House passed legislation, H.R. 2740 , did not adopt the account structure proposed by the Administration. However, it did move the Economic Support Fund account from Title III (bilateral economic assistance) of the bill to Title IV (security assistance), making comparisons of the two titles to the request or to prior appropriations potentially misleading. The committee report notes that ESF funds "are provided to advance United States interests by helping countries meet political and security needs," and may be provided in countries that also receive Development Assistance funds, seemingly clarifying the purpose for distinct accounts rather than a combined ESDF. The Senate committee bill did not adopt the account structure changes proposed by the Administration or the House bill. It did, however, add a "restructured debt" account line under the Treasury Programs heading, with $20 million in recommended funding, that was included in neither the Administration request nor the House bill. P.L. 116-94 , like the Senate bill, maintained the development and humanitarian assistance account structure used in the FY2019 legislation, but added a $15 million line item for debt restructuring under Treasury Programs. <4.2. Independent Agencies> Under the original FY2020 request, funding for independent SFOPS agencies would have been reduced by 12% overall from FY2019 levels. Requested Peace Corps funding was $396.2 million (a 3.5% reduction from FY2019) and for the Millennium Challenge Corporation (MCC), $800 million (an 11.6% reduction). As in the FY2019 budget request, the FY2020 request proposed elimination of two independent development agencies the Inter-American Foundation (IAF) and the U.S. Africa Development Foundation (USADF) and incorporation of their staff and small grant activities into USAID's Western Hemisphere and Africa bureaus, respectively. The request specified that funding was included for 40 staff positions to enable this transition, as well as $20 million in ESDF to support small grants. H.R. 2740 , as passed, would have maintained funding for the MCC and USADF at FY2019 levels while increasing funding for the Peace Corps (3.5% increase) and IAF (44%, with the increase to be used to support the Central America Strategy, the Caribbean Basin Strategy, and for programs in Colombia). The committee report made clear that the committee did not assume the proposed consolidation of IAF and USADF into USAID. S. 2583 , the committee-passed bill, would have provided overall funding for independent agencies at much the same level recommended by the House bill, but would have maintained Peace Corps and MCC funding at the FY2019 level. USADF funding would have increased by 10% and IAF by 67% compared to FY2019, with the committee specifying that the funds were not for close-out costs. The enacted legislation adopted the Senate funding levels for all the independent agencies, a 1.3% increase, in total, over FY2019 funding. In March 2020, The Administration requested an additional $73 million for the Peace Corps to fund the emergency evacuation of volunteers during the COVID-19 pandemic. Congress enacted $88 million for this purpose in P.L. 116-136 . Including this funding, FY2020 appropriations for independent agencies to date total $1.474 billion. <4.3. Multilateral Assistance> The various multilateral assistance accounts, through which the United States contributes to multilateral development banks and international organizations that pool funding from multiple donors to finance development activities, would have been cut by about 18% from FY2019, to $1.52 billion, under the request. As in the FY2018 and FY2019 requests, the Administration included no funding in the FY2020 request for the International Organizations and Programs (IO&P) account, which funds U.S. voluntary contributions to international organizations, primarily United Nations entities such as UNICEF. Congress appropriated $339 million for IO&P in FY2019. The Administration also requested no funding for the Global Environment Facility (GEF), describing the FY2019 appropriation as sufficient to cover FY2019 and FY2020. The House legislation, H.R. 2740 , would have increased total funding for international organizations by nearly 26%, to $2.34 billion. This included a 91% increase compared to FY2019 for the IO&P account, with report language allocating funds for core contributions to specific agencies, including $147.5 million for UNICEF and $55.5 million for the U.N. Population Fund. The IO&P allocation also included $170.5 million for the U.N. Relief and Work Agency (UNRWA, which works in Palestinian territories) and report language specified that $226.6 million of multilateral assistance should support humanitarian and development efforts in the West Bank and Gaza. The bill also included $139.6 million for the GEF and $30 million for the International Fund for Agricultural Development. The Senate committee bill, S. 2583 , included $2.07 billion for multilateral aid accounts, an 11.5% increase over FY2019 funding. The increase was driven by a 12% IO&P funding increase and inclusion of $206.5 million in International Bank of Reconstruction and Development funding that was in the Administration request but not the House bill or the FY2019-enacted appropriation. The enacted legislation included a total of $2.082 billion for multilateral assistance, a 12% increase over FY2019 funding. Within that total, IO&P funding was increased by 15% to $390.5 million, offset in part by the lack of a contribution to the African Development Bank ($32 million in FY2019). All other multilateral accounts were funded at the same level as FY2019. <4.4. Export Promotion Assistance/International Development Finance Corporation (IDFC)> Export promotion activities in FY2020, as in all recent years, are expected in total to return more to the Treasury through offsetting collections (such as fees and loan interest payments) of the Export-Import Bank and the Overseas Private Investment Corporation (OPIC) than is appropriated for these programs. In 2019, OPIC was dissolved and replaced by the new U.S. International Development Finance Corporation (DFC), which also incorporates USAID's Development Credit Authority (DCA). The request included increased administrative funding to support this transition ($98 million, compared to $80 million for OPIC administration and $10 million for DCA administration in FY2019). The FY2020 request also included $200 million in program funds to support DFC credit subsidies, technical assistance and feasibility studies. As in FY2018 and FY2019, the Administration's export promotion request called for the elimination of the U.S. Trade and Development Agency (TDA), seeking $12.1 million for an orderly shutdown. Congress appropriated $79.5 million for TDA in both FY2018 and FY2019. H.R. 2740 , as passed, did not include funding for OPIC, anticipating its termination under the BUILD Act, and instead provided funds for the DFC, including $164 million for the capital account (45% less than requested), to include $101 million for administrative expenses. It also set an $80 million limit on transfers to the DFC to support direct and guaranteed loans and included several reporting requirements for the new agency. The bill also included $75 million for TDA, a 5.7% cut from current year funding. The Senate committee bill, S. 2583 , would have funded the DFC through several specific budget allocations: $98 million for administrative expenses, $150 million for an equity fund, $50 million (by transfer from the Development Assistance account) for a program accounts, and $2 million for the Inspector General. Like the House bill, the Senate committee bill anticipated offsetting collections to exceed DFC appropriations in FY2020. S. 2583 also included $79.5 million for TDA. P.L. 116-94 provided $299 million for a DFC corporate capital account (including $119 million for administrative expenses, $150 million for equity investments, and $30 million for other programs), $80 million for the cost of direct and guaranteed loans through a program account, and $2 million for the Inspector General. Like the House and Senate bills, the enacted legislation assumes that offsetting collections will make appropriations for the DFC unnecessary. The bill also included $79.5 million for TDA. <4.5. Key Sectors> As in previous years, the bulk of aid requested for FY2020 was for global health, humanitarian, and security assistance programs. <4.5.1. Global Health> The total request for the Global Health Programs (GHP) account for FY2020 was $6.34 billion, a 28% cut from the FY2019 enacted funding level. Global health sub-accounts would have been cut across the board under the request, with reductions ranging from 11% for malaria programs to nearly 55% for family planning and reproductive health programs ( Table 7 ). HIV/AIDS program funding would have been cut by nearly 30% from FY2019 funding levels, though the Administration asserted that the requested funding would be sufficient to maintain treatment for all current recipients. The Administration proposed limiting U.S. Global Fund contributions to 25% of all donations, rather than the 33% that the United States has provided since the George W. Bush Administration. The House legislation, H.R. 2740 , included nearly $9.30 billion for GHP, which would have increased GHP funding by 5% over FY2019 levels and was 47% more than requested. Sub-sector allocations specified in the accompanying report would have maintained level funding or slight increases for most health subsectors compared to FY2019 levels, with the exception of family planning and reproductive health funding, which would have increased by 30%. The bill included $1.56 billion for the Global Fund, retaining the U.S. contribution limit at 33% of the total, and directed the Administration to fully obligate the funds for the first installment of the new replenishment round. In addition, the House committee bill included a provision that would have prohibited funds appropriated in the act, or prior SFOPS Acts, from being used to implement the Administration's expansion of the "Mexico City Policy," which prohibits all global health funding (expanded from family planning funding) to foreign NGOs engaged in voluntary abortion activities, even if such activities are conducted with non-U.S. funds. S. 2583 would have provided $9.12 billion for GHP in total, about 3% more than the FY2019 funding, with slight increases in all health subsectors compared to the FY2019 subsector allocations, as specified in the accompanying report. Compared to the House bill, the Senate committee bill included significantly less funding for family planning and reproductive health programs (-22%) and more for malaria programs (+4.5%). The bill would have provided $1.56 billion for the Global Fund, the same as the House bill. P.L. 116-94 included a total of $9.09 billion for GHP, 2.9% more than the FY2019 funding level and 43% more than the Administration's request. The increase over FY2019 funding was driven by modest increases across all global health subcategories, as detailed in the explanatory statement, with the exception of family planning and reproductive health, which was maintained at the FY2019 funding level. The biggest increases were to HIV/AIDS (+3.5%) and nutrition (+3.4%) activities. Like the House and Senate bills, the enacted appropriation allocated $1.56 billion for the Global Fund. P.L. 116-123 , the first COVID-19 supplemental bill, included an additional $435 million for Global Health Programs, to be administered by USAID, "for necessary expenses to prevent, prepare for and respond to coronavirus." This funding brought the GHP total for FY2020 to $9.53 billion, or nearly 8% more than the FY2019-enacted funding. <4.5.2. Humanitarian Assistance> The initial FY2020 budget request for humanitarian assistance was $5.97 billion, a 37% decrease from the FY2019 appropriation (including funds for Food for Peace in the Agriculture appropriation). The request continued a long-standing trend of humanitarian budget requests being significantly smaller than prior-year enacted funding levels, at times reflecting the fact that humanitarian assistance funds may be carried over from year to year and unobligated balances from prior years may still be available ( Figure 3 ). The Administration's budget justification asserted that "when combined with all available resources, average funding available for 2019 and 2020 roughly matches the highest-ever level of U.S. overseas humanitarian programming, and is sufficient to address needs for Syria, Yemen, and other crisis areas." For FY2020, as noted earlier, the budget proposed to fund all humanitarian assistance through a new, single global International Humanitarian Assistance (IHA) account. IHA 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 proposal would have effectively moved the administration of refugee and migration assistance funding from State to USAID. The State Department would have retained approximately 10% of MRA funding to support refugee diplomacy and administrative expenses, costs associated with resettlement of refugees in the United States, and support for refugee resettlement in Israel. Within USAID, the proposal would also have eliminated the Food for Peace Act, Title II funding currently appropriated through the agriculture appropriation but administered by USAID. The Administration previously proposed this in FY2018 and FY2019, citing inefficiency and the ability to provide food assistance through other accounts. Under the proposed plan, emergency food assistance would also have been funded through the IHA account. H.R. 2740 , as passed, would have provided $7.97 billion in foreign operations humanitarian assistance, a 2% increase over FY2019 funding and about 26% more than requested. Funding was provided through the traditional accounts (IDA, MRA and ERMA) rather than the proposed IHA account. An additional $1.85 billion was included in the Senate committee-passed agriculture appropriation, H.R. 3164 , for Food for Peace. S. 2583 included $7.82 billion for foreign operations through the traditional account structure. The Senate committee-passed agriculture appropriation, S. 2522 , included $1.716 billion for Food for Peace, for a humanitarian aid total of $9.53 billion, almost level with FY2019-enacted funding. The enacted omnibus legislation maintained both the account structure and funding levels for humanitarian assistance. P.L. 116-94 included a total of $9.55 billion for humanitarian assistance in the SFOPS ($7.83 billion) and Agriculture ($1.725 billion) divisions, a 0.2% increase over FY2019 funding, with slight increases to the IDA and Food for Peace accounts. COVID-19 supplemental appropriations enacted in March 2020 made additional humanitarian assistance available to prevent, prepare for and respond to the pandemic. P.L. 116-123 added $300 million to the IDA account and P.L. 116-136 added an additional $258 million for IDA and $350 million for MRA, bringing the enacted humanitarian assistance total to $10.46 billion ($8.74 billion in SFOPS), or about 10% more than the enacted FY2019 funding. <4.5.3. Security Assistance> The FY2020 request for military and security assistance was $7.415 billion, a 19% cut from FY2019 enacted levels. Reductions were proposed for every account ( Figure 4 ). As is typical, the bulk of security assistance requested by the Administration (67%) would have been Foreign Military Financing (FMF) aid to Israel ($3.3 billion), Egypt ($1.3 billion), and Jordan ($350 million). As in FY2018 and FY2019, the Administration's FY2020 request sought authority to provide FMF assistance through a combination of grants and loans, including loan guarantees, rather than the current use of FMF on an almost exclusive grant basis. The Administration asserted that loan authority would enable partners to purchase more U.S.-made defense equipment and promote burden sharing in security cooperation activities. FY2020 International Narcotics Control and Law Enforcement (INCLE) funding would have decreased by 37%, with a notable increase requested for Colombia ($209 million from $143 million in FY2018) and decrease for Afghanistan ($95 million, down from $160 million in FY2018). The House legislation, H.R. 2740 , included $11.21 billion for security assistance, an almost 23% increase over the FY2019 funding level and a more than 50% increase over the Administration request. The difference was almost entirely due to the House bill including the Economic Support Fund account under security assistance rather than bilateral economic assistance. Excluding ESF funds, security assistance in the bill would have been reduced about 1% from FY2019 funding. The Senate committee bill, S. 2483 , included the traditional accounts under the security assistance heading and provided a total of $9.11 billion, on par with FY2019 funding. However, within that total INCLE funding would have decreased by 9% and NADR funding would have increased by 11% compared to FY2019. P.L. 116-96 provided $9.014 billion in security assistance accounts, a reduction of about 1.5% from FY2019 funding, keeping the FY2019 account structure. Funding was reduced from the FY2019 level for the INCLE, PKO and FMF accounts (-7.1%, -6.4%, and -0.6%, respectively), while NADR and IMET funding increased (+3.6% and +1.9%, respectively). <4.5.4. Other Foreign Assistance Sectors> In addition to proposed cuts to global health and humanitarian assistance, the FY2020 budget request would have reduced funding from the previous year's enacted levels for almost all development sectors. Programs to counter trafficking in persons would have been cut the least, 25%, while activities related to environmental protection, microenterprise, water and sanitation, and education would have been cut by more than 60%. Democracy promotion and food security funding would have been reduced by about half. One exception to the proposed sector cuts was gender equality funding, which would have increased by about 80%, driven by the Women's Global Development and Prosperity Initiative (WGDP), rolled out by Ivanka Trump in February 2019, for which the budget request included $100 million ( Table 8 ). The House legislation, H.R. 2740 , recommended development sector allocations similar to those enacted for FY2019, with the exception of environment programs, for which the allocation would have increased by 77%. In addition to the funding allocation, the environmental programs section also specified that funding may be used to support the U.N. Framework Convention on Climate Change (Paris Agreement) and that none of the funds in the act, or in prior SFOPS appropriations acts, may be used to withdraw from the Paris Agreement. The report accompanying the legislation ( H.Rept. 116-78 ) called for the USAID Administrator to provide a detailed implementation plan of the WGDP to Congress, including focus countries and planned metrics, within 90 days of enactment. Sector allocations in the Senate committee bill, S. 2483 , would have increased funding for democracy and environment programs relative to the FY2019 funding (+17% and +90%) and the House bill (+17% and +7%, respectively), while providing fewer funds for education and gender equality programs than both the FY2019 legislation (-28% and -25%) and the House bill (-30% and -35%). Senate committee allocation in all sectors, with the exception of gender equality (-59%), would have been higher than the Administration requested for FY2020. P.L. 116-94 included sector allocations more similar to the FY2019 legislation than to the Administration's request. As in the House and Senate bills, the enacted legislation significantly increased environment sector funding compared to FY2019 (+81%). Funding for education (+7.2%), water and sanitation (+3.4%) and gender equality (+53.5%) also increased compared to FY2019, though the gender equality funding total included "up to" $100 million for the WGDP, creating potential for a significantly lower allocation. <4.6. Country and Regional Aid Allocations> Top aid recipients under the request, consistent with recent years, would have been allies in the Near East who receive the bulk of military aid, including Israel and Egypt; strategically significant development partners such as Jordan and Afghanistan; and several global health focus countries in Africa ( Table 9 ). Notable reductions in aid were proposed for South Africa (-171%) and West Bank/Gaza (-43%). The Near East and Africa would have continued to be the top regional aid recipients under the request, together comprising more than 75% of aid allocated by country or region ( Figure 5 ).The FY2020 request emphasized large increases for the Indo-Pacific and Europe and Eurasia regions relative to the FY2019 request, as part of the emphasis on countering Chinese and Russian influence. However, the requested funding for East Asia and the Pacific was 14% less, and the South and Central Asia request almost 17% less, than the FY2018 allocations for those regions (FY2019 country and regional allocations are not yet available). Aid to Europe and Eurasia would have been reduced by 54%, and aid to sub-Saharan Africa by 35%. Aid to the Western Hemisphere would decrease by 30%, though the FY2020 budget request sought authority to transfer $500 million in aid from unspecified accounts as necessary to meet needs related to the crisis in Venezuela. The MENA region would have seen the smallest proportionate cuts under the request, about 8%, and increased its share of regionally allocated aid from 36% to 44%. These country and regional allocations do not include the nearly $6 billion requested for humanitarian assistance. Humanitarian assistance is not requested by country and could significantly change country and regional aid totals once allocated. Nor do they include nonhumanitarian supplemental funds appropriated for COVID-19 response, which were not appropriated by country or region. The House legislation and report, H.R. 2740 / H.Rept. 116-78 , did not provide comprehensive country and regional allocations, but did specify aid levels for several countries and regions, including $3.305 billion for Israel, $1.403 billion for Egypt, $1.525 billion for Jordan, $457 million for Colombia, $160 million to support the Indo-Pacific Strategy, $541 million designated for Central America as a region, and $280 million for the Countering Russian Influence Fund. S. 2583 / S. 126 also did not provide comprehensive allocations by country, but did specify many such aid levels, including $3.305 billion for Israel, $1.432 billion for Egypt, $1.650 billion for Jordan, $448 million for Ukraine, $403 million for Colombia, $322 million for Afghanistan, and $453.6 million for Iraq. The bill and report also included a total of $515 million for Central America as a region, $285 million for the Countering Russian Influence Fund, $375 million for a new Countering Chinese Influence Fund, and $200 million for the Relief and Recovery Fund to assist areas formerly controlled by ISIS. P.L. 116-94 and the accompanying explanatory statement include detailed funding directives for many countries and regional programs. Among the largest allocations are $3.305 billion for Israel, $1.525 billion for Jordan, $1.432 billion for Egypt, $448 million each for Ukraine and Colombia, and $452 million for Iraq. Major allocations for regional activities include $1.482 billion to support the Indo-Pacific Strategy and the Asia Reassurance Initiative Act of 2018 ( P.L. 115-409 ), $300 million for the Countering Chinese Influence Fund, $520 million for Central America (and a directive that funds appropriated for Central America in FY2019 be made available), and $290 million to carry out the purposes of the Countering Russian Influence Fund. Appendix A. SFOPS Funding, by Account Appendix B. International Affairs Budget The International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs appropriation: foreign food aid programs (P.L. 480 Title II Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations. In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account. Appendix C. SFOPS Organization Chart

Each year, Congress considers 12 distinct appropriations measures, including one for the Department of State, Foreign Operations, and Related Programs (SFOPS), which includes funding for U.S. diplomatic activities, cultural exchanges, development and security assistance, and U.S. participation in multilateral organizations, among other international activities. On March 11, 2019, the Trump Administration submitted to Congress its SFOPS budget proposal for FY2020, which totaled $42.72 billion in discretionary funds ($42.88 billion when $158.9 million in mandatory retirement funds are included), reflecting adherence to discretionary funding caps, as determined by the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The initial FY2020 request would have represented a 2.5% increase in SFOPS when compared to the FY2019 request but a 21% decrease in SFOPS funding when compared to the FY2019 enacted funding levels. Within these totals, Department of State and Related Agency funding would have been reduced by 15.7%, with the greatest cuts to the Educational and Cultural Exchange Programs (56%), International Organizations (26%), and the U.S. Agency for Global Media (22%) accounts. The Foreign Operations accounts would have seen a reduction of 23.5%, with the greatest cuts to the non-health development assistance (39%), humanitarian assistance (34%), and global health (28%) sectors. On May 16, 2019 the House Appropriations Committee agreed to its SFOPS measure ( H.R. 2839 ) that would have provided $56.54 billion in total spending ($56.39 billion in discretionary spending). The bill included either level or increased funding in nearly all accounts compared to FY2019. It did not include the President's proposal to consolidate spending into the proposed Economic Support and Development Fund (ESDF) and International Humanitarian Assistance (IHA) accounts, and moved the Economic Support Fund (ESF) account from Title III (Bilateral Economic Assistance) into Title IV (International Security Assistance) to make clear the committee's desire to keep ESF distinct from the Development Assistance (DA) account. Finally, the bill would have provided funds to make operational the new U.S. International Development Finance Corporation (pursuant to the BUILD Act of 2018; P.L. 115-254 ). On June 19, 2019, the House passed the FY2020 SFOPS legislation in a "minibus" measure that included three other appropriations bills—Labor, Health and Human Services, Education; Defense; and Energy and Water Development ( H.R. 2740 ). While the topline funding level remained the same, some monies were shifted among the various accounts due to adopted amendments. On September 26, 2019, the Senate Appropriations Committee approved its SFOPS measure for FY2020, S. 2583 , which would have provided $55.16 billion in total new funding ($54.377 billion net, after proposed rescission of $316 million of prior-year funds). Much like the House measure, the bill included level or increased funding for most accounts compared to FY2019 and did not include the President's proposals to consolidate spending into the ESDF and IHA accounts. However, unlike the House bill, the Senate committee measure kept ESF in Title III (Bilateral Economic Assistance), consistent with prior year appropriations. FY2020 began with all appropriations bills unfinished. Congress and the President approved two continuing resolutions to fund federal agencies through November 21, 2019 ( P.L. 116-59 ) and December 20, 2019 ( P.L. 116-69 ), respectively, at the FY2019 funding level. On December 20, 2019, Congress passed, and the President later signed, two consolidated appropriations bills ( P.L. 116-93 and P.L. 116-94 ). SFOPS funding was included as Division G of P.L. 116-94 , Further Consolidated Appropriations Act, 2020. The measure included $54.84 billion for SFOPS accounts in FY2020, a nearly 1% increase from the FY2019-enacted level and approximately 28% more than the Administration's request. Of that enacted total, $8.0 billion, or approximately 15% was designated as Overseas Contingency Operations (OCO). In March 2020, in response to the global spread of a novel coronavirus, COVID-19, Congress enacted three supplemental appropriations acts: the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 , signed into law March 6), the Family First Coronavirus Response Act ( P.L. 116-126 , signed into law March 18), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 , signed into law March 27). P.L. 116-123 included $1.25 billion in SFOPS accounts to prevent, prepare for, and respond to the virus, and the CARES Act added an additional $1.115 billion in SFOPS funds for this purpose. P.L. 116-127 did not include funds for SFOPS accounts. The Administration also amended its FY2020 budget request in a March 17 letter to Congress, requesting an additional $220 million in emergency SFOPS funds for COVID-19 response. With supplemental funds, total enacted SFOPS funding for FY2020 was $57.21 billion (after rescissions), a 5.2% increase over the FY2019-enacted level. This report provides an account-by-account comparison of the FY2020 SFOPS request (including the supplemental request), House and Senate SFOPS legislation, and the final FY2020 SFOPS appropriation (including supplemental appropriations) to FY2019 funding in Appendix A . The International Affairs (function 150) budget in Appendix B provides a similar comparison. This report will not be updated further unless there is renewed congressional activity on FY2020 appropriations.

crs_R45889

crs_R45889_0

<1. Federal-State UC Program and Drug Testing> The joint federal-state Unemployment Compensation (UC) program, created by the Social Security Act of 1935, provides unemployment benefits to eligible individuals who become involuntarily unemployed and meet state-established eligibility rules. Federal laws and regulations provide some broad guidelines on UC benefit coverage, eligibility, and benefit determination. However, state laws determine the specific parameters, resulting in essentially 53 different UC programs. States administer UC benefits with oversight from the U.S. Department of Labor (DOL). The main objectives of UC are to (1) offer workers income maintenance during periods of unemployment due to lack of work, providing partial wage replacement as an entitlement; (2) help maintain purchasing power and to stabilize the economy; and (3) help prevent dispersal of the employer's trained labor force, skill loss, and the breakdown of labor standards during temporary high levels of unemployment. The UC program attempts to meet these objectives in a number of ways. For example, individuals who receive UC are required to register with the Employment Service and to be able, available and searching for suitable work. Under federal law, all states currently have the option to disqualify individuals for UC benefits if they lost their job because of illegal drug use. In addition, there has been recent and sustained congressional interest in prohibiting individuals who are engaged in unlawful use of controlled substances (whether or not such use was the cause of unemployment) from receiving UC benefits. In the 112 th Congress, states were given the option to require drug testing for UC applicants under specific and limited circumstances. A portion of these circumstances required that DOL issue a rule listing occupations that regularly require drug testing. On October 4, 2019, the new rule was finalized after a previous, promulgated rule was repealed using the Congressional Review Act. This new final rule is effective November 4, 2019. Thus, after this date, nothing in federal UC law would prohibit states from drug testing UC applicants who are searching for employment solely in those occupations listed in this final rule. The issue of drug testing in the UC program may be viewed in the context of two larger policy trends. First, some state legislatures have expressed interest in drug testing individuals receiving public assistance benefits. Although UC is generally considered to be social insurance (rather than public assistance), drug testing UC beneficiaries could be interpreted as a potential extension of this state-level interest. Second, there has been sustained congressional interest in UC program integrity generally, and this has included drug testing certain applicants or beneficiaries. For instance, during the period from 2011 to 2015 Congress passed three laws ( P.L. 112-40 , P.L. 112-96 , and P.L. 113-67 ) that either added or clarified state administrative responsibilities to decrease UC benefit overpayments, and one of those laws ( P.L. 112-96 ) also imposed new restrictions on UC eligibility. Furthermore, P.L. 112-96 clarified that drug testing may be included among UC program integrity measures to ensure that benefits are not distributed to individuals who are involved in illegal drug use, presuming that this behavior may impede prospects for future employment. This report provides general background on issues related to UC benefits and illegal drug use; discusses recent developments related to the expansion of UC drug testing under state and federal laws as well as federal regulation; and analyzes selected policy considerations relevant to UC drug testing, including arguments for and against expanded drug testing, potential legal concerns, and administrative considerations. <1.1. UC Eligibility and Disqualification> The UC program generally does not provide UC benefits to the self-employed, individuals who are unable to work, or individuals who do not have a recent earnings history. Eligibility for UC benefits is based on attaining qualified wages and employment in covered work over a 12-month period (called a base period) prior to unemployment. To receive UC benefits, claimants must be able, available, and actively searching for work. UC claimants generally may not refuse suitable work, as defined under state laws, and maintain their UC eligibility. In addition, states may disqualify claimants who lost their jobs because of inability to work, voluntarily quit without good cause, were discharged for job-related misconduct, or refused suitable work without good cause. The methods states use to determine monetary eligibility (based on an individual's previous earnings history) and nonmonetary eligibility (based on other characteristics related to an individual's unemployment status) vary across state UC programs. An ineligible individual is prohibited from receiving UC benefits under a state's laws until the condition serving as the basis for ineligibility no longer exists. UC eligibility is generally determined on a weekly basis. State UC programs may also disqualify individuals who apply for UC benefits. In this situation, which is distinct from ineligibility, an individual has no rights to UC benefits until she or he requalifies under a state's laws, usually by serving a predetermined disqualification period or obtaining new employment. In some situations, UC benefits may be reduced or wage credits may be cancelled for disqualified individuals. <1.2. Disqualification for Unemployment Due to Illegal Drug Use> Virtually all states currently disqualify individuals for UC benefits if they lost their jobs because of illegal drug use; it may be considered a "discharge for misconduct connected with the work." In addition, 20 states have UC laws that specifically address other circumstances under which alcohol misuse, illegal drug use, and related occurrences, including refusing to undergo a drug test or testing positive for drugs or alcohol, may be disqualifying. Table 1 reproduces DOL's recent summary information on the 20 states with UC drug provisions. <2. UC Drug Testing: Recent Developments> DOL's current interpretation of federal law requires states to determine UC entitlement based only on facts or causes related to the individual's unemployment status, subject to specific exceptions. Current state laws and regulations that disqualify individuals based upon illegal drug use (as discussed above) have been tailored to fit this DOL interpretation. Recent federal legislative and regulatory developments, however, have expanded states' authority to prospectively drug test UC applicants and beneficiaries. These recent developments include the enactment of a federal law permitting two new types of drug testing, the issuance of guidance and regulations to support the implementation of the law, the overturning of these regulations, and the issuing of a new final rule. <2.1. New Allowable Drug Testing Under P.L. 112-96> Section 2105 of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ; enacted on February 22, 2012) amended federal law to allow (but not require) states to conduct two types of drug testing. First, it expanded the long-standing state option to disqualify UC applicants who were discharged from employment with their most recent employer (as defined under state law) for unlawful drug use by allowing states to drug test these applicants to determine UC benefit eligibility or disqualification. Second, it allowed states to drug test UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing, with such occupations to be determined under new regulations required to be issued by the Secretary of Labor. <2.1.1. 2014 DOL Program Guidance: State Drug Testing Based upon Losing Employment Due to Illegal Use of Controlled Substances> On October 9, 2014, DOL released guidance on disqualifying UC applicants based upon certain "for cause" discharges. This guidance (which remains in effect at this time) provided states with direction on how to conduct drug testing of UC applicants who are discharged from employment with their most recent employer for illegal use of controlled substances. States are permitted to deny benefits to individuals under these circumstances. <2.1.2. 2016 DOL Rule: State Drug Testing Based upon Job Search in an Occupation that Regularly Conducts Drug Testing (Repealed)> On August 1, 2016, DOL issued 20 C.F.R. Part 620, implementing the provisions of P.L. 112-96 related to the drug testing of UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing (as determined under regulations issued by DOL). The rule provided a list of the applicable occupations (20 C.F.R. Part 620.3) for which drug testing is regularly conducted. Significantly, the section of the regulations following this list (20 C.F.R. Part 620.4) limited a state's ability to conduct a drug test on UC applicants to those individuals who are only available for work in an occupation that regularly conducts drug testing under 20 C.F.R. Part 620.3. Thus, although an individual's previous occupation may have been listed in 20 C.F.R. Part 620.3, as long as she or he was currently able to work, available to work, and searching for work in at least one occupation not listed in 20 C.F.R. 620.3, the individual could not be subject to drug testing to determine eligibility for UC (unless she or he had been discharged for a drug-related reason). Various stakeholders raised concerns about the UC drug testing provisions enacted under P.L. 112-96 and the 2016 DOL rule finalized under 20 C . F . R . Part 620 . For example, advocates for UC beneficiaries claimed that drug testing applicants did not address any policy problem. On the other hand, a state administration stakeholder group and some Members of Congress contended that states needed more flexibility in implementing drug testing than was offered under the DOL rule. As the 115 th Congress met, the DOL rule was unpopular with some M embers , who considered DOL's interpretation too narrow . <2.2. Disapproval of 2016 DOL Rule Using Congressional Review Act> Shortly after DOL released the final 2016 rule related to establishing state UC program occupations that regularly conduct drug testing, policymakers used the Congressional Review Act (CRA) to overturn 20 C.F.R. 620. On January 1, 2017, Representative Kevin Brady introduced a CRA resolution ( H.J.Res. 42 ) to nullify DOL's 2016 rule. H.J.Res. 42 was passed by the House on February 15, 2017, and passed by the Senate on March 14, 2017. President Trump signed H.J.Res. 42 into law as P.L. 115-17 on March 31, 2017. Because the list of occupations that require regular drug testing no longer exists within the Code of Federal Regulations (as a result of P.L. 115-17 ), the ability to prospectively test UC claimants based upon occupation became no longer available to states. Without this rule, states could drug test UC claimants only if they were discharged from employment because of unlawful drug use or for refusing a drug test. In the Congressional Record for H.J.Res. 42 , several Members provided justifications for their support or opposition of the measure. Representative Kevin Brady, a supporter of the measure, argued that although the intent of the UC drug testing provisions in P.L. 112-96 was to provide states the ability to determine how to best implement drug testing programs, the final regulation narrowed the law to circumstances in which testing is legally required (rather than the broader definition of generally required by employer) and removed state discretion in conducting drug testing in their UC programs. Representative Richard E. Neal, an opponent of the measure, argued there was no evidence that unemployed workers have higher rates of drug abuse than the general population. He also noted that it appeared that some states may be trying to limit the number of workers who collect UC benefits. In addition, in the Congressional Record for S.J.Res. 23 , the Senate companion bill to H.J.Res. 42 , Senator Cruz stated his reasons for support of the Disapproving Rule: The wording of the 2012 job creation act clearly demonstrated that Congress intended to provide States the ability to determine how to best implement these plans.... However, years after the law's passage, the Obama Department of Labor substantially narrowed the law beyond congressional intent to circumstances where testing is legally required, not where it is merely permitted. That narrow definition undermined congressional intent and it undermined the flexibility of the States to conduct drug testing in their programs, as permitted by Congress. This regulation is overly prescriptive. It removes State discretion regarding implementation, and it ignores years of congressional concern on both sides of the aisle. <2.3. 2019 DOL Reissued Rule32> On November 5, 2018, DOL published a Notice of Proposed Rulemaking (NPRM) to reissue the rule identifying occupations that regularly conduct drug testing for purposes of Section 2105 of P.L. 112-96 . It was subsequently issued, with no substantive changes, as a new final rule on October 4, 2019. Because the 2016 regulation on this issue was repealed using the Congressional Review Act, this new rule is subject to the reissue requirements of the CRA. The CRA prohibits an agency from reissuing the rule in "substantially the same form" or issuing a "new rule that is substantially the same" as the disapproved rule, "unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule." According to the front matter of the 2018 NPRM, DOL addressed the reissue requirements of the CRA by asserting that the new rule represents: a substantially different and more flexible approach to the statutory requirements than the 2016 Rule, enabling States to enact legislation to require drug testing for a far larger group of UC applicants than the previous Rule permitted. This flexibility is intended to respect the diversity of States' economies and the different roles played by employment drug testing in those economies. Table 2 compares the list of occupations for which states were permitted to drug test UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing provided in 20 C.F.R. Section 620.3 in the 2016 DOL rule and the 2019 DOL reissued final rule. The 2019 reissued final rule includes the same occupations listed in the repealed 2016 rule (20 C.F.R. 620.3(a)-(h)) and also provides for two additional types of occupations: those identified by state laws as requiring drug testing (20 C.F.R. 620.3(i)); and those for which states have a "factual basis for finding that employers hiring employees in that occupation conduct pre- or post-hire drug testing as a standard eligibility requirement for obtaining or maintaining employment in that occupation" (20 C.F.R. 620.3(j)). DOL developed the list of occupations set out under 20 C.F.R. Section 620.3(a)-(h) in both the 2016 rule and the reissued 2018 proposed/2019 final rule in consultation with federal agencies that have expertise in drug testing: the Substance Abuse and Mental Health Services Administration (SAMHSA) of the U.S. Department of Health and Human Services; the U.S. Department of Transportation; the U.S. Department of Defense; the U.S. Department of Homeland Security; DOL's Bureau of Labor Statistics (BLS); and DOL's Occupational Safety and Health Administration (OSHA). In the NPRM 2018, DOL justified the additional types of occupations that are included in the 2019 reissued rule (20 C.F.R. 620.3(i) and (j)) by highlighting the flexibility that these categories provide, such as their responsiveness to heterogeneity across states in labor market conditions and policy preferences: Employers exercise a variety of approaches and practices in conducting drug testing of employees. Some States have laws that impose very minimal restrictions on employer drug testing of employees while other States have very detailed and proscriptive requirements about what actions the employer can take. That diversity of State treatment also renders an exhaustive list of such occupations impractical. The proposed Rule therefore lays out a flexible standard that States can individually meet under the facts of their specific economies and practices. <3. UC Drug Testing: Arguments For and Against> In the context of recent legislative and regulatory developments, stakeholders have made a number of arguments in support of and in opposition to expanded UC drug testing. This section provides a discussion of these arguments, including comments on the proposed 2018 UC drug testing rule, which contribute additional context for this issue. Policymakers may also consider several types of administrative issues raised by expanded UC drug testing, including program establishment, funding considerations, and the provision of drug treatment services. These are discussed in this section as well. In addition to the expanded UC drug testing authorized under P.L. 112-96 , recent Congresses have considered two alternative approaches to the drug testing of UC applicants and beneficiaries: adding a new federal UC drug testing requirement (i.e., rather than a state option to drug test) or using some type of risk-assessment tool to guide the drug testing of UC claimants. Appendix A provides a discussion of legislation introduced in recent Congresses that would have used these alternative approaches to expanding UC drug testing. None of these bills advanced out of the committees to which they were referred. <3.1. Arguments in Favor of Expanded UC Drug Testing> Proponents of prospective drug testing assert this new UC program function is warranted by program integrity concerns. Additionally, they argue that in today's job market, the ability to pass a drug test is required to be "job ready." Finally, proponents contend that allowing a state to determine the jobs requiring drug testing for itself reflects the UC system's general approach of allowing states flexibility to shape their own UC programs. <3.1.1. Program Integrity> The Office of Management and Budget (OMB) has designated the UC program as one of 19 "high-error" programs. In FY2017, the UC improper payment rate was 12.5%, with a total of $4.1 billion in improper payments. Thus, expanded UC drug testing may be viewed as one type of program integrity measure. The authority for the expanded UC drug testing under Section 2105 of P.L. 112-96 was enacted along with several other program integrity measures (authorized under Sections 2103 and 2104 of P.L. 112-96 ) to ensure that UC benefits are not distributed to individuals involved in illegal drug use, presuming that this behavior may impede prospects for future employment. <3.1.2. Job Readiness> More specifically, expanded UC drug testing has been described by supporters as a type of program integrity activity that promotes "job readiness." Because federal law requires that UC claimants be able to work, available to work, and actively searching for work as a condition of eligibility, drug testing may be viewed as a measure that helps to verify an ability and availability to work; the logic being that individuals with substance abuse problems would not meet this UC eligibility requirement. For example, Representative Kevin Brady's statements at a September 7, 2016, House Ways and Means Human Resources Subcommittee hearing on "Unemployment Insurance: An Overview of the Challenges and Strengths of Today's System," provide an example of this argument: In a world where more and more industries and careers require workers who are drug free, especially in security-sensitive professions with many directed, by the way, by Federal law, this important reform signed by President Obama made sound policy since then and continues to today. If you have lost a job due to drug use, you have established you are not fully able to work. If you can't take a new job because you can't pass a required basic routine drug test, you are not really available for work either. In both cases, you have forfeited your eligibility to receive unemployment payments subsidized by employers. Additionally, in a letter supportive of H.J.Res. 42 , which nullified DOL's 2016-finalized rule related to establishing state UC program occupations that regularly conduct drug testing, the UWC Strategic Services on Unemployment & Workers' Compensation (UWC) presented a similar argument: Drug testing is a critical requirement of employment in many industries and generally in determining whether a prospective employee will be able to perform the responsibilities of work for which the individual has applied. The results of drug tests are also indications of whether an individual is able to work and available to work so as to be eligible to be paid unemployment compensation. <3.1.3. State Flexibility> Supporters of expanded UC drug testing also make the argument that states ought to have the option to prospectively drug test UC claimants as an extension of general state discretion in UC eligibility and administration. Although there are broad requirements under federal law regarding UC benefits, much of the specifics of eligibility are set out under each state's laws. In this way, expanded drug testing, at the option of states, fits with the joint federal-state nature of the UC system. <3.2. Arguments Against Expanded UC Drug Testing> Opponents of the prospective drug testing of UC claimants raise a number of concerns: increased administrative costs, conflicts with the goals of the UC program to provide timely income replacement, and potential legal concerns (see the " Potential Legal Concerns " section). <3.2.1. Increased Administrative Costs> Some of the organizations that provided comments on DOL's 2018 proposed rule cite the increased costs of expanded UC drug testing. Details of UC administrative funding are discussed in more detail below in the section on " Funding a State Drug Testing Program ." But briefly, the addition of new administrative functions performed by state UC programs without additional administrative funding amounts and/or funding sources is of concern to some stakeholders. For example, in its letter to DOL commenting on the 2018 proposed rule, the Michigan Employment Lawyers Association claims: It is well documented that states don't have adequate funding to truly run their UI programs in a fully efficient and effective manner. As states are experiencing record low administrative funding which is based on unemployment levels, which are historically low, they can scarcely afford additional administrative burdens. Because federal law prohibits assigning this cost to claimants, states would have to absorb the full cost of drug testing thousands of unemployed workers. At a time when they are already struggling to administer their UI programs because of reductions in federal administrative funding, this is a cost they can ill-afford. <3.2.2. Conflicts with Fundamental Goals of UC Program> Opponents of expanded UC drug testing also make the argument that it does not serve, and could even undermine, the fundamental goals of the UC program, which include the timely provision of income replacement to individuals who lost a job through no fault of their own. For instance, advocates for UC beneficiaries claim that drug testing applicants does not address any policy problem. Some stakeholders also worry that expanded UC drug testing could create barriers to UC benefit receipt among eligible individuals (e.g., by discouraging UC claims filing). The comment from Southeastern Ohio Legal Services on DOL's 2018 proposed rule includes the following claims: "There is no evidence that unemployed workers have higher rates of drug abuse than the general population. Requiring this testing would also add just one more barrier to UI applicants trying to meet the cost of living." Similarly, in their comment on the 2018 proposed rule, Senator Ron Wyden and Representative Danny K. Davis asserted: Not only is UI recipiency near a record low, but numerous states in recent years have shortened the number of weeks of UI benefits available to workers. On top of that, more than half of states have insufficient UI trust fund balances, meaning they could only pay unemployment benefits for a short time if a recession hits. The Department of Labor should focus on protecting workers and addressing these challenges to the UI system before the next recession, not proposing regulations to further undermine access to earned benefits. <4. Potential Legal Concerns55> Stakeholders have also raised at least two legal concerns with DOL's 2019 final rule. First, some commenters have argued that UC drug testing programs implemented in accordance with the final rule may violate the Fourth Amendment of the U.S. Constitution. Second, some commenters argue that the rule improperly delegates authority to the states to identify occupations that regularly conduct drug testing. These issues are analyzed in turn. <4.1. Constitutional Considerations in Drug Testing UC Beneficiaries58> Congress amended Section 303 of the Social Security Act in 2012 to clarify that nothing in federal law prevents states from testing two groups of UC applicants for illicit drug use: (1) those terminated from their previous positions because of drug use (hereinafter referred to as the "previously terminated" group), and (2) those who are suited to work "in an occupation that regularly conducts drug testing" (hereinafter referred to as the "regularly tested occupation" group). As discussed above, DOL issued regulations to guide states on how to design and implement drug testing programs in accordance with Section 303 of the Social Security Act. Constitutional considerations, including protections against unreasonable government searches, may inform the implementation of government-mandated drug testing programs. This section begins with a general overview of the Fourth Amendment and then reviews three Supreme Court opinions addressing the constitutionality of drug testing programs in the employment context, as well as two lower court cases involving similar state laws that conditioned the receipt of federal benefits on passing drug tests. The section concludes with an assessment of factors that might affect the constitutionality of a UC drug testing program in light of the Fourth Amendment. <4.1.1. Fourth Amendment Overview> The Fourth Amendment protects the "right of the people" to be free from "unreasonable searches and seizures" by the federal government. Although Fourth Amendment protections do not extend to purely private action, the Supreme Court has held that its protections extend to state and local action through the Due Process Clause of the Fourteenth Amendment. Governmental conduct generally has been found to constitute a "search" for Fourth Amendment purposes where it infringes "an expectation of privacy that society is prepared to consider reasonable." The Court has held on a number of occasions that government-administered drug tests are searches under the Fourth Amendment. Therefore, the constitutionality of a law that requires an individual to pass a drug test to receive UC likely would turn on whether the drug test is reasonable under the circumstances. Whether a search is reasonable depends on the nature of the search and its underlying governmental purpose. Reasonableness under the Fourth Amendment generally requires individualized suspicion, which often, particularly in the criminal law enforcement context, takes the form of a court-issued warrant based on probable cause that a legal violation has occurred. The purpose of a warrant is to ensure that government-conducted searches are legally authorized, rather than "random or arbitrary acts of government actors." However, the Court has held that a warrant is not "essential" under all circumstances to make a search reasonable, particularly when "the burden of obtaining a warrant is likely to frustrate the governmental purpose behind the search." The Court has noted, for instance, that "the probable-cause standard ... may be unsuited to determining the reasonableness of administrative searches" that are conducted for purposes unrelated to criminal investigations. For these noncriminal, administrative searches, courts typically employ a reasonable suspicion standard, which is "a lesser standard than probable cause." The Court has "deliberately avoided reducing [the reasonable suspicion standard] to a neat set of legal rules," but at a minimum, the standard requires that, in light of the "totality of the circumstances," there is a "particularized and objective basis," beyond "a mere hunch," that a search would uncover wrongdoing. Additionally, while a search generally must be based on "some quantum of individualized suspicion" to be reasonable under the Fourth Amendment, the Court has held that "a showing of individualized suspicion is not a constitutional floor." "In limited circumstances," when a search imposes a minor intrusion on an individual's privacy interests, while furthering an "important government interest" that would be undermined by requiring individualized suspicion, "a search may be reasonable despite the absence of such suspicion." The Court has recognized an exception to the typical individualized suspicion requirement "when special needs, beyond the normal need for law enforcement, make the warrant and probable-cause requirement impracticable," and the government's needs outweigh privacy interests invaded by a search. The Court noted that "[o]ur precedents establish that the proffered special need for drug testing must be substantial important enough to override the individual's acknowledged privacy interest." The Court has recognized two categories of "special needs" substantial enough to justify suspicionless drug testing: in the employment context, where individuals perform activities involving matters of public safety, and the public school setting, involving children in the government's care. In instances where the government argues that "drug tests 'fall within the closely guarded category of constitutionally permissible suspicionless searches'," courts determine whether such searches are reasonable under the circumstances by balancing the competing interests of the government conducting the search and the private individuals who are subject to the search. Thus, even if special needs exist, government-mandated searches could still run afoul of the Fourth Amendment if they are excessively intrusive or otherwise significantly invade the privacy interests of affected individuals. The Court has assessed the constitutionality of governmental drug testing programs in a number of contexts. Three opinions in the employment context seem especially relevant to the question of whether a mandatory, suspicionless drug test for the receipt of UC would be considered an unreasonable search in violation of the Fourth Amendment. Additionally, two lower court cases, in which state laws that established mandatory, suspicionless drug testing programs as a condition to receiving Temporary Assistance for Needy Families (TANF) (formerly welfare) benefits were successfully challenged on Fourth Amendment grounds, could provide relevant insight into how future courts might assess the constitutionality of a UC drug testing program. These five cases are assessed in turn. <4.1.2. Supreme Court Drug Testing Precedent> In Skinner v. Railway Labor Executives Association , the Court upheld as reasonable under the Fourth Amendment Federal Railroad Administration (FRA) regulations that required breath, blood, and urine tests of railroad workers involved in train accidents. The Court held that the "special needs" of railroad safety for "the traveling public and the employees themselves" made traditional Fourth Amendment requirements of a warrant and probable cause "impracticable" in this context. According to the Court, covered rail employees had "expectations of privacy" as to their own physical condition that were "diminished by reasons of their participation in an industry that is regulated pervasively to ensure safety," and the testing procedures utilized "pose[d] only limited threats to the justifiable expectations of privacy of covered employees." In these circumstances, the majority held, it was reasonable to conduct the tests, even in the absence of a warrant or reasonable suspicion that any employee may be impaired. In National Treasury Employees Union v. Von Raab , which was handed down on the same day as Skinner , the Court upheld suspicionless drug testing of U.S. Customs Service personnel who sought transfer or promotion to certain "sensitive" positions i.e., those that require carrying guns or are associated with drug interdiction. The Court concluded that covered employees had "a diminished expectation of privacy interests" due to the nature of their job duties. Additionally, the applicable testing procedures were minimally invasive on privacy interests because employees were provided advanced notice of testing procedures; urine samples were only tested for specified drugs and were not used for any other purposes; urine samples were provided in private stalls; employees were not required to share personal medical information except to licensed medical professionals, and only if tests were positive; and the testing procedures were "highly accurate." Therefore, the Court held that the suspicionless drug testing program was reasonable under the Fourth Amendment. In contrast, the Court in Chandler v. Miller struck down a Georgia statute requiring candidates for certain elective offices be tested for illicit drug use. The majority opinion noted several factors distinguishing the Georgia law from drug testing requirements upheld in earlier cases. First, there was no "fear or suspicion" of generalized illicit drug use by state elected officials. The Court noted that, while not a necessary constitutional prerequisite, evidence of historical drug abuse by the group targeted for testing might "shore up an assertion of special need for a suspicionless general search program." In addition, the law did not serve as a "credible means" to detect or deter drug abuse by public officials because the timing of the test was largely controlled by the candidate rather than the state and legal compliance could be achieved by a mere temporary abstinence. Finally, the "relentless scrutiny" to which candidates for public office are subjected made suspicionless testing less necessary than in the case of safety-sensitive positions beyond the public view. The Chandler Court went on to stress that searches conducted without individualized suspicion generally must be linked to a degree of public safety "important enough to override the individual's acknowledged privacy interest" to be reasonable. At least outside the context of drug testing related to children in the government's care, the Chandler Court seemed to indicate that "where ... public safety is not genuinely in jeopardy, the Fourth Amendment precludes the suspicionless search, no matter how conveniently arranged." <4.1.3. Lower Court Cases Involving TANF Drug Testing> The federal district court ruling in Marchwinski v. Howard , which was affirmed by the U.S. Court of Appeals for the Sixth Circuit as a result of an evenly divided en banc panel, involved a state program requiring the suspicionless drug testing of TANF applicants. The district court in Marchwinski stated that "the Chandler Court made clear that suspicionless drug testing is unconstitutional if there is no showing of a special need [] that ... [is] grounded in public safety." According to the Marchwinski court, the state's "primary justification ... for instituting mandatory drug testing is to move more families from welfare to work." This legislative objective, however, is not "a special need grounded in public safety" that would justify a suspicionless search, in the court's view. The court also noted that allowing the state to conduct suspicionless drug tests in this context would provide a justification for conducting suspicionless drug tests of all parents of children who receive governmental benefits of any kind, such as student loans and a public education, which "would set a dangerous precedent." Thus, the court granted the plaintiffs' motion for a preliminary injunction, concluding that the "Plaintiffs have established a strong likelihood of succeeding on the merits of their Fourth Amendment claim." The state subsequently agreed to halt suspicionless drug testing. In another TANF case, Lebron v. Secretary, Florida Department of Children and Families , a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit unanimously affirmed a district court's ruling that a mandatory drug testing law applicable to TANF beneficiaries in Florida was unconstitutional. While "viewing all facts in the light most favorable to the State," the panel concluded that "the State has not demonstrated a substantial special need to carry out the suspicionless search." The panel also determined that the state had not provided evidence to support the notion that drug use by TANF recipients was any different than that of the Florida population at-large, and even if it had, this "drug-testing program is not well designed to identify or deter applicants whose drug use will affect employability, endanger children, or drain public funds." The state did not seek en banc review or appeal the panel decision to the Supreme Court. <4.1.4. Applicability of Case Law to UC Drug Testing> Whether a government drug testing program comports with the Fourth Amendment may depend largely on the program's purpose and scope. Supreme Court precedent indicates that drug testing programs, unrelated to criminal law enforcement, that only authorize testing based on an individualized, reasonable suspicion of drug use such as through direct observation of an individual's drug impairment by trained personnel at a UC application site are more likely to comport with the Fourth Amendment. In the absence of suspicion, the Court has held that governmental drug tests must promote "special needs" compelling enough to outweigh the privacy interests of the individuals subject to the test. Under current precedent, the Court has only recognized two contexts where "special needs" have justified suspicionless drug tests when balanced against the subjects' competing privacy interests: in cases where individuals were employed in occupations involving public safety concerns; and the public school setting , where the government is responsible for the health and safety of children. Although not dispositive, Supreme Court case law also suggests that suspicionless drug testing programs imposed on a subset of the population that has a "demonstrated problem of drug abuse" may help tilt the balancing test in the government's favor, especially if the testing program is designed to effectively address the problem. Moreover, drug testing programs that require results to be kept confidential to all but a small group of nonlaw enforcement officials, are not conducted for criminal law enforcement purposes, and only minimally affect an individual's life are more likely to be considered reasonable. On the other hand, programs that allow drug test results to be shared, especially with law enforcement, or that otherwise have the potential to negatively impact multiple or significant aspects of an individual's life, may be less likely to be considered reasonable. Given this case law, the constitutionality of a UC drug testing program will likely depend on how the program is structured. Additionally, the constitutional analysis might vary as it applies to each of the two categories of UC applicants that states are permitted to test under Section 303 of the Social Security Act i.e., the "regularly tested occupation" and "previously terminated" categories. Specifically, questions of whether individualized suspicion might justify testing appears potentially relevant to certain "previously terminated" UC applicants. Additionally, "special needs" analysis could be relevant to UC applicants who fall in DOL's proposed "regularly tested occupation" category. The remainder of this section addresses these potentially constitutionally significant characteristics of any UC drug testing program, in turn. <4.1.4.1. Individualized Suspicion and "Previously Terminated" Applicants> The reasons why an individual falls into the "previously terminated" category could be relevant to a reasonable suspicion analysis, but, as discussed below, whether or not there is reasonable suspicion to support testing a particular applicant will likely depend on how the category is defined and the facts and circumstances associated with that applicant's employment termination. For example, the strength of the evidence tying an individual's termination to illicit drug use might be relevant. If a UC applicant was terminated from his or her previous position because of a criminal drug conviction or because of a failed employer-mandated drug test, there might be more compelling evidence for a reasonable suspicion analysis than if an at-will employee was fired for a number of reasons unrelated to drugs but also, in part, because he or she was rumored to have used illicit drugs outside of work. If a termination was based on the results of an employer-administered drug test, the relative strength of the test results on a reasonable suspicion analysis might be affected by the reliability of the drug test's results, whether or not the test was conducted pursuant to procedures sufficient to ensure urine or blood samples had not been tampered with, and whether or not those who performed the test were adequately trained. A reasonable suspicion analysis might also be affected by the time lapse between the termination and the UC drug test. A court might conclude, for instance, that a UC drug test is less likely to uncover illicit drug use if many months have passed since a UC applicant was fired, than if the termination and test happened within a few days of each other. <4.1.4.2. Special Needs and the "Regularly Tested Occupation" Group> A special needs analysis could be relevant to mandatory drug testing of UC applicants who fall in the "regularly tested occupation" cohort. The relative strength of a special needs legal defense of such a suspicionless drug testing program would likely depend on how the "regularly tested occupation" group is defined by implementing states. Additionally, there are notable differences between (1) individuals applying for UC benefits while searching for jobs in a "regularly tested occupation" and who are tested for illicit drugs by UC administrators and (2) individuals who are currently performing or in the final stages of being hired to perform safety-sensitive duties and who are drug tested by an employer. As discussed below, whether a reviewing court would consider these distinctions to be constitutionally significant is unclear. The remainder of this section first analyzes potentially relevant factors associated with how states might define the "regularly tested occupation" category, and then assesses the potentially constitutionally relevant distinctions between employer-mandated and UC administrator-mandated drug testing. In the absence of individualized suspicion, the Supreme Court has cautioned that "where ... public safety is not genuinely in jeopardy, the Fourth Amendment precludes the suspicionless search, no matter how conveniently arranged." Absent a court recognizing a new category of special needs that may outweigh an individual's privacy interests, states, at a constitutional minimum, would likely need to define the "regularly tested occupation" group to encompass only occupations that involve matters of public safety in accordance with the Supreme Court special needs precedent. The "regularly tested occupations" category in DOL's 2019 regulation delineates a number of occupations that appear to be in line with those previously upheld under special needs precedent. These include an occupation that requires the employee to carry a firearm and an occupation that is subject to drug testing under Federal Railway Administration, Federal Motor Carrier Safety Administration, Federal Aviation Administration, or Federal Transit Administration regulations. However, the regulations also do not prohibit states from testing for "[a]n occupation where the State has a factual basis for finding that employers hiring employees in that occupation conduct pre- or post-hire drug testing as a standard eligibility requirement for obtaining or maintaining employment in the occupation." As described below, it might be possible for an occupation to fall within the latter category but not comport with current Fourth Amendment precedent. Because the Fourth Amendment's protections against unreasonable searches and seizures only apply to governmental action, drug testing imposed by private employers "not acting as an agent of the Government or with the participation or knowledge of any governmental official " are completely "unguarded by Fourth Amendment constraints." Consequently, private employers might regularly impose suspicionless drug tests in some occupations that do not involve safety-sensitive special needs because they are not constrained by the Fourth Amendment. However, Fourth Amendment protections would apply to drug tests imposed on the same individuals to the extent they are mandated by a state as part of a UC program. As a result, state programs that require suspicionless drug tests of UC applicants who are suitably employed in occupations that are regularly subject to drug testing by private employers but, nevertheless, are not related to public safety functions in accordance with Supreme Court precedent could potentially run afoul of the Fourth Amendment. However, even if a state's "regularly tested occupation" drug testing program is limited to individuals whose suitable work is grounded in public safety in line with the Supreme Court's special needs jurisprudence, the program might still raise constitutional concerns. UC beneficiaries, unlike the plaintiffs in Skinner and Von Raab , are not actively performing or directly being considered for employment to perform duties grounded in public safety by the governmental entity that would be administering drug tests tied to the UC program. To the contrary, these individuals would merely be applying for or receiving unemployment benefits while agreeing not to turn down "suitable work" as defined by state law. A reviewing court might find this distinction constitutionally significant and, consequently, consider a UC drug testing program as more akin to the TANF drug testing programs addressed by the Marchwinski and Lebron courts than the testing programs upheld in Skinner and Von Raab . Under this line of reasoning, a reviewing court could conclude that, regardless of how it is structured, the underlying purpose of a UC drug testing program is primarily designed "to promote work ... and conserve resources" and, consequently, not sufficiently tied to public safety concerns that would warrant a special needs exception to the Fourth Amendment's protection against unreasonable searches. <4.1.4.3. Other Potentially Relevant Factors> Additional factors that a reviewing court might weigh when balancing the government's interest in conducting a drug test and the individual's competing privacy interests include the prevalence of illicit drug use in the cohort of UC applicants who are subject to suspicionless drug testing; how effectively the drug testing program is designed to identify and eliminate illicit drug use; whether procedural safeguards are in place to ensure that sufficiently trained personnel conduct the test, testing samples are protected from contamination, test results are accurate, and the test subject's medical and other personal information are protected; and the extent to which drug test results are shared beyond the UC program and could negatively affect other aspects of an individual's life. Regarding the latter factor, laws that authorize drug test results to be shared with law enforcement personnel, in particular, might raise heightened Fourth Amendment concerns. <4.2. Subdelegation of DOL's Authority150> Section 303( l )(1)(A)(ii) of the Social Security Act permits a state to adopt legislation for the drug testing of UC applicants when the only suitable work for such applicants is in occupations that regularly conduct drug testing. The section provides that these occupations will be determined "under regulations issued by the Secretary of Labor." DOL's 2019 final regulations identify eight occupations that regularly conduct drug testing, including certain aviation and motor carrier occupations described in existing Federal Aviation Administration and Federal Motor Carrier Safety Administration regulations. In addition, the regulations identify two more occupations with reference to a state's involvement in the determination: (1) An occupation specifically identified in the State law of that State as requiring an employee to be tested for controlled substances; and (2) An occupation where the State has a factual basis for finding that employers hiring employees in that occupation conduct pre- or post-hire drug testing as a standard eligibility requirement for obtaining or maintaining employment in the occupation. Because these two additional occupations would seem to be determined by the state, some have contended that DOL is improperly subdelegating the authority it was provided by Section 303( l )(1)(A)(ii) to the state. Commenting on the 2018 reproposed regulations, the National Employment Law Project maintained: Congress mandated that occupations that regularly drug test are to be "determined under regulations issued by the Secretary of Labor." In violation of that explicit directive, DOL has issued an NPRM that simply hands that power to the States, and provides little to no guidance concerning how that determination is to be made. When a statute delegates authority to a federal officer or agency, subdelegation to an outside party other than a subordinate federal officer or agency is generally assumed to be improper absent an affirmative showing of congressional authorization. In U.S. Telecom Association v. Federal Communications Commission , the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) explained that subdelegations to outside parties are problematic because "lines of accountability may blur, undermining an important democratic check on government decision-making." The D.C. Circuit further observed that subdelegation increases the risk that an outside party may pursue policy goals that are inconsistent with those of the agency and the underlying statute. While subdelegation by a federal agency to an outside party is generally prohibited, courts have permitted some outside party input into an agency's decisionmaking. In U.S. Telecom , the D.C. Circuit concluded that outside party input is permissible when it acts as a reasonable condition for granting federal approval, such as the need to obtain a local license or permit; when the outside party is simply providing factual information to a federal agency; and when the outside party is providing advice or policy recommendations to a federal agency that retains final decisionmaking authority. In Fund for Animals v. Kempthorne , the U.S. Court of Appeals for the Second Circuit determined that the U.S. Fish and Wildlife Service (FWS) did not improperly subdelegate its authority when it issued an order permitting state fish and wildlife agencies to kill certain migratory birds without a permit to prevent depredations of wildlife and plants. Pursuant to the Migratory Bird Treaty Act, the FWS is authorized to make certain determinations involving migratory birds, including when to allow for their hunting, capture, or killing. The plaintiffs in Fund for Animals , a group of individuals and environmental organizations, challenged the depredation order, arguing that the killing of the relevant birds could only be authorized by the FWS and not a state fish and wildlife agency. The Second Circuit contended that the depredation order operated as a "grant of permission" that was conditioned on a state fish and wildlife agency's determination that a depredation would occur if action were not taken. Citing U.S. Telecom , the court viewed this kind of determination as permissible outside party input. The court maintained that the depredation order did not represent a delegation of authority, but was an exercise of FWS's permitting authority that incorporated relevant local concerns. In light of Fund for Animals , it seems possible to argue that a state's role in identifying "occupations that regularly conduct drug testing" should be viewed like the state fish and wildlife agency's role in making determinations about depredations. One might contend that DOL's 2019 regulations are not a delegation of authority to the states, but instead provide for an incorporation of local concerns to identify the relevant occupations. Like the FWS, DOL would arguably be conditioning the drug testing of unemployment compensation applicants, at least for some individuals, on the state's identification of certain occupations. Ultimately, a legal challenge of the final regulations seems possible. Opponents of the state's role in identifying "occupations that regularly conduct drug testing" would likely maintain that the regulations provide more than a condition for identifying when the drug testing of UC applicants is appropriate, but are a delegation to an outside party without the explicit authorization of Congress. Proponents might insist, however, that the regulations simply provide the state an opportunity to identify a condition for such drug testing. <5. UC Drug Testing: Administrative Considerations> In order for a state to begin actively drug testing individuals applying for UC benefits under the authority provided by P.L. 112-96 and the newly reissued final DOL rule required by Section 2105, it must consider several policy issues related to designing, financing, and implementing a program. States must establish drug testing programs and, according to DOL, three states (Mississippi, Texas, and Wisconsin) have already enacted laws to do so. States may also consider the issue of providing and funding drug treatment services for UC claimants. <5.1. Establishing a State Drug Testing Program> States that enact laws to drug test UC applicants under the authority provided them by P.L. 112-96 must establish their own drug testing programs. According to DOL guidance, states may enter into a contract with an entity to conduct the drug tests on behalf of the state. When conducting tests for illegal use of controlled substances, the state must use a test that meets or exceeds the standards of the Mandatory Guidelines for Federal Workplace Drug Testing Programs, published by the Substance Abuse and Mental Health Services Administration (SAMHSA), or the U.S. Department of Transportation (DOT) procedures. Tests that do not meet or exceed (i.e., have more rigorous standards for sample collection, chain of custody, and other procedural requirements) SAMHSA guidelines or DOT procedures may not be used to determine an individual's eligibility for UC. <5.2. Funding a State Drug Testing Program> Funding for the additional costs associated with DOL-approved drug testing programs would come from the same state administrative grants that states use to run their UC programs generally; states would be prohibited from requiring UC claimants to pay for any drug testing costs. Administrative costs for state UC programs are financed through the Federal Unemployment Tax Act (FUTA), one of two types of payroll taxes on employers. The 0.6% effective net FUTA tax paid by employers on the first $7,000 of each employee's earnings (no more than $42 per worker per year) funds federal and state administrative costs, loans to insolvent state UC accounts, the federal share (50%) of Extended Benefit (EB) payments, and state employment services. In FY2018, an estimated $6.3 billion was collected in federal FUTA taxes, whereas an estimated $37.1 billion was collected in State Unemployment Tax Acts (SUTA) taxes to finance UC benefits. As discussed above in the section on " Arguments Against Expanded UC Drug Testing ," some opponents of expanded UC drug testing are concerned about the adequacy of the existing stream of FUTA revenue for the new administrative function of drug testing UC applicants. <5.3. States with New Drug Testing Laws Under P.L. 112-96> According to DOL, three states Mississippi, Texas, and Wisconsin have enacted laws under the UC drug testing authority provided by P.L. 112-96 . For summary information on these state laws, see Appendix B . The implementation of these laws is subject to applicable federal law, including the final DOL rule required by Section 2105 of P.L. 112-96 . Thus, in the absence of a final rule and until the issuance of the new rule, the three states had not implemented their programs. <5.4. Providing Drug and Alcohol Treatment Services> One of the underlying goals of the UC program is to provide income security after an individual becomes unemployed so that she or he may find suitable work. At least one state (Wisconsin) has a program addressing the underlying barriers of illicit drug use preventing work-readiness. In this program, if an employer voluntarily reports that a claimant failed a pre-employment drug test (without a valid prescription) and the claimant has not established that she or he had good cause, the claimant is to be offered the option to attend a drug treatment program and complete a skills assessment. If the claimant agrees to undergo drug treatment and complete a skills assessment, and does so in the required timeframe, the individual may continue to collect UC benefits. The Wisconsin UC program is to furnish the claimant with referrals and instructions in order to complete the assessment and access treatment directly. The claimant must also continue to meet all other UC program requirements. The program includes a budget of $500,000 to fund and administer a statewide substance abuse program. <5.4.1. Funding Drug Treatment Services for UC Claimants> Currently, no funding streams exist within the UC program dedicated to financing drug treatment services. Federal law sets limits on the permissible uses of SUTA funds. Section 3304(a)(4) of the Internal Revenue Code (IRC) and Section 303(a)(5) of the SSA set out the "withdrawal standard" for how states may use SUTA funds deposited within their state account in the Unemployment Trust Fund (UTF). Neither Section 3304(a) of the IRC nor Section 303(a)(5) of the SSA includes drug treatment services as a permissible use of SUTA funds. Additionally, grants to states for administrative expenses, which are financed by FUTA revenue, are limited under current law. Section 901(c)(1)(A) of the SSA sets out the authorized uses of these FUTA funds, which do not include drug treatment services. Nothing in federal UC law, however, prohibits states from using funding from non-FUTA or non-SUTA sources to finance drug treatment services for UC claimants. For instance, many states collect additional taxes for administrative purposes, including job training, employment service administration, or technology improvements. According to DOL, in 2019 there were 30 states with additional taxes for administrative purposes. It appears that none of these taxes have been collected for the purposes of funding drug treatment services. Appendix A. Additional Recent Legislative Approaches to UC Drug Testing In addition to the recent statutory and regulatory developments in UC drug testing related to P.L. 112-96 , legislation introduced in recent Congresses has proposed using other approaches to drug test UC applicants and beneficiaries. These approaches have generally either proposed a new federal UC drug testing requirement or some type of risk-assessment tool to guide the drug testing of UC claimants. New Federal Requirement to Drug Test One legislative option would be to add a new federal requirement to drug test UC applicants and beneficiaries. This type of approach differs from allowing states to expand UC drug testing (as under P.L. 112-96 ). There have been some proposals calling for this approach in recent Congresses. For example, H.R. 2001 (112 th Congress) would have created a new federal requirement that individuals be deemed ineligible for UC benefits based on previous employment from which they were separated due to an employment-related drug or alcohol offense. This proposal would have required states to amend their state UC laws. H.R. 1172 (113 th Congress) also would have created a new federal requirement that individuals be deemed ineligible for UC benefits based on previous employment from which they were separated due to an employment-related drug or alcohol offense. It would have denied benefits to anyone who (1) was discharged from employment for alcohol or drug use, (2) was in possession of controlled substance at a place of employment, (3) refused the employer's drug test, or (4) tested positive on the employer's drug test for illegal or controlled substances. This proposal would have required states to amend their state UC laws. Another proposal, the Accountability in Unemployment Act ( H.R. 3615 in the 112 th Congress, H.R. 1277 in the 113 th Congress, and H.R. 1136 in the 114 th Congress), would have created a new federal requirement for states to drug test all UC claimants as a condition of benefit eligibility. Under this proposal, if an individual tested positive for certain controlled substances (in the absence of a valid prescription or other authorization under a state's laws), he or she would have been required to retake a drug test after a 30-day period and test negative in order to be eligible for UC benefits. This proposal would have made individuals ineligible for UC benefits for five years after a third positive drug test. Risk Assessment-Based Drug Testing Another policy approach toward UC drug testing proposed in recent Congresses involves using a substance abuse risk assessment tool to screen UC applicants and beneficiaries and then drug test those individuals determined likely to be engaged in the unlawful use of controlled substances. In this way, such an approach attempts to avoid suspicionless drug testing. This type of proposal was introduced in the Ensuring Quality in the Unemployment Insurance Program (EQUIP) Act in the 112 th Congress ( H.R. 3601 ) , 113 th Congress ( H.R. 3454 ) , 114 th Congress ( H.R. 2148 ) , 115 th Congress ( H.R. 3330 ) , and the 116 th Congress ( H.R. 1121 ) . The EQUIP Act would have added a new federal requirement that individuals undergo a substance abuse risk assessment for each benefit year as a condition of eligibility for UC in all states. This new federal requirement would also have required individuals deemed to be at high risk for substance abuse based on the assessment results to test negative for controlled substances within one week after the assessment to qualify for UC benefits. Under this proposal, the screening assessment tool would have had to have been approved by the director of the National Institutes of Health and been "designed to determine whether an individuals has a high risk of substance abuse." Appendix B. Enacted State UC Laws Subsequent to P.L. 112-96 According to DOL's 2018 Comparison of State Unemployment Compensation Laws , three states have enacted laws under the authority provided by P.L. 112-96 (with "implementation subject to applicable Federal law"): Mississippi, Texas, and Wisconsin. Mississippi Section 40 of SB2604, Regular Session 2012 (Chapter 515; signed by Governor on May 1, 2012) added drug testing provisions to state UC eligibility requirements under Mississippi state law. This 2012 Mississippi law permits drug testing on individuals as a condition of eligibility for benefits if the individual was discharged because of unlawful drug use or if s/he is seeking suitable work only in an occupation that requires drug testing. Individuals may be denied benefits based on the results of these drug tests, but may end the disqualification period early by submitting acceptable proof of a negative drug test from an approved testing facility. Texas In Texas, SB21 (Chapter 1141, enacted July 14, 2013; effective September 1, 2013) added drug testing provisions to state UC eligibility requirements under state law. This 2013 Texas law permits drug testing, as a condition of eligibility of benefits, on individuals for whom suitable work is available only in an occupation that regularly conducts pre-employment drug testing. Wisconsin Section 3115 of 2015 Wisconsin Act 55 (2015 Senate Bill 21, enacted July 12, 2015) added drug testing provisions to state UC eligibility requirements under Wisconsin state law. This 2015 Wisconsin law require[s] the establishment of rules for a drug testing program for controlled substances, including rules identifying occupations for which drug testing is regularly conducted in the State.

Recent interest in Unemployment Compensation (UC) drug testing has grown at both the federal and state levels. The policy interest in mandatory drug testing of individuals who are applying for or receiving UC benefits parallels two larger policy trends. First, some state legislatures have considered drug testing individuals receiving public assistance benefits. While UC is generally considered social insurance (rather than public assistance), the concept of drug testing UC recipients (who are receiving state-financed benefits from a program authorized under state laws) could be interpreted as a potential extension of this state-level interest. Second, over recent years, Congress has considered issues related to UC pro gram integrity, including drug testing, which may be viewed as addressing UC program integrity concerns. Under the current interpretation of federal law, and subject to specific exceptions, the U.S. Department of Labor (DOL) requires states to determine entitlement to benefits under their UC programs based only on facts or causes related to the individual's state of unemployment. Under this reasoning, individuals may be disqualified for UC benefits if they lost their previous job because of illegal drug use. Until recently, the prospective drug testing of UC applicants or beneficiaries has been generally prohibited. However, P.L. 112-96 expanded the breadth of allowable UC drug testing to include prospective drug testing based upon job searches for suitable work in an occupation that regularly conducts drug testing. On October 4, 2019, DOL issued a new final rule on this type of prospective testing after a previous, promulgated rule was repealed using the Congressional Review Act. This new final rule is effective November 4, 2019. Stakeholders have made a variety of arguments for and against expanded UC drug testing. Proponents of prospective drug testing cite not only program integrity concerns, but also the importance of job readiness for UC claimants as well as state discretion in matters of UC eligibility and administration. Opponents of the prospective drug testing of UC claimants argue that it would impose additional costs and undermine the fundamental goals of the UC program, which include the timely provision of income replacement to individuals who lost a job through no fault of their own. Some stakeholders also expressed concern that expanded UC drug testing could create barriers to UC benefit receipt among eligible individuals and discourage UC claims filing. Stakeholders have also raised at least two legal concerns with the new final UC drug testing rule: (1) some commenters have argued that the new final rule may violate the Fourth Amendment of the U.S. Constitution, and (2) some commenters have argued that the new final rule improperly delegates authority to the states to identify occupations that regularly conduct drug testing. Other policy issues to consider related to expanding UC drug testing include administrative concerns, such as state establishment of a drug testing program for UC claimants as well as the potential provision of and funding for drug treatment services. For a shorter summary of recent events related to UC drug testing, see CRS Insight IN10909, Recent Legislative and Regulatory Developments in States' Ability to Drug Test Unemployment Compensation Applicants and Beneficiaries . For additional information on the federal-state UC system generally, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits . For additional insights on reissuing a rule that had been repealed under the Congressional Review Act, see CRS Insight IN10996, Reissued Labor Department Rule Tests Congressional Review Act Ban on Promulgating "Substantially the Same" Rules .

crs_R45790

crs_R45790_0

Over the last several years, the public and lawmakers in the United States have been alarmed over the increasing number of drug overdose deaths , most of which have involved opioids. Congress has responded to the issue through legislative activity , oversight, and funding, while the Administration has sought to reduce the supply and demand of illicit drugs through enforcement, prevention, and treatment. This FAQ report answers questions about the opioid epidemic and federal efforts to control the supply of opioids. It does not provide a comprehensive overview of opioid abuse and the criminal justice response. Instead, it answers common questions that have arisen due to rising drug overdose deaths and the availability of illicit opioids in the United States. <1. Overview of the Opioid Epidemic in the United States> This section answers questions on the nature of the opioid epidemic in the United States. The answers provide background on the types of opioids that are being abused, the associated harm to the abusers of these substances, and the extent of the abuse. <1.1. What is an opioid?> An opioid is a type of drug that, when ingested, binds to opioid receptors in the body many of which control a person's pain . While opioids are medically used to alleviate pain, some are abused by being used in a way other than prescribed (e.g., in greater quantity) or taken without a doctor's prescription. Many prescription pain medications, such as hydrocodone and fentanyl, are opioids, as are some illicit drugs, such as heroin. <1.2. How many Americans abuse opioids?> In its annual National Survey on Drug Use and Health (NSDUH), the Substance Abuse and Mental Health Services Administration (SAMHSA) does not ask questions about "opioids" specifically; rather, it asks respondents about their use of heroin and misuse of prescription pain relievers in two separate questions. In 2017, SAMHSA estimated that 11.4 million people misused an opioid at least once in the past year this includes 11.1 million prescription pain reliever "misusers" and 886,000 heroin users. In 2017, SAMHSA also estimated that 3.2 million Americans ages 12 and older (1.2% of the population 12 and older) were current "misusers" of prescription pain relievers, and approximately 494,000 Americans ages 12 and older (0.2% of the population 12 and older) were current users of heroin. The University of Michigan administers an annual Monitoring the Future Survey , which measures drug use behaviors among 8 th , 10 th , and 12 th graders; college students; and young adults. In 2018, 3.4% of surveyed 12 th graders were current users of "narcotics other than heroin", and 0.1% of surveyed 8 th , 10 th , and 12 th graders were current users of heroin. <1.3. What is the physical harm associated with opioid abuse?> For chronic and severe pain, opioids can improve the functioning of legitimate pain patients; however, there are short- and long-term physical risks of abusing opioids. For example, nonfatal overdoses have been associated with a number of health issues, including brain injury, pulmonary and respiratory problems, hypothermia, kidney and liver failure, seizures, and others. The most severe physical harm associated with opioid abuse is death due to overdose. Drug overdose deaths have increased four-fold from 16,849 in 1999 to 70,237 in 2017. Of the 70,237 overdose deaths, 47,600 (67.8%) involved opioids. The main driver of drug overdose deaths overall is synthetic opioids. Reports indicate that recent increases in overdose deaths are most likely driven by illicitly manufactured fentanyl. Aside from the harm associated with fatal and nonfatal opioid overdoses, addiction is a primary harm associated with opioids. Licit and illicit opioids are highly addictive. Addiction and general misuse of opioids have contributed to a series of public health, welfare, and social problems that have been widely discussed in public forums. <1.4. Which states are experiencing a high number and/or rate of overdose deaths?> The numbers and rates of drug overdose deaths vary by state and region of the United States. Table 1 shows the number of deaths and age-adjusted overdose death rates for each state and the national totals for 2017. As illustrated in Figure 1 , the states east of the Mississippi River have comparatively higher rates of drug overdose deaths than states west of the Mississippi River, although New Mexico, Arizona, and Utah all rank in the top half of states for age-adjusted rates of drug overdose deaths. The Drug Enforcement Administration (DEA) and the Centers for Disease Control and Prevention (CDC) have indicated that overdose deaths have increased in states also reporting large increases in fentanyl seizures. In addition, there is reportedly a "strong relationship" between the number of synthetic opioid deaths and the number of fentanyl reports in the National Forensic Laboratory Information System (NFLIS). The National Institute on Drug Abuse (NIDA) reports that the number of fentanyl-related deaths is likely underestimated because some medical examiners do not test for fentanyl and some death certificates do not list specific drugs. <2. Overview of the Opioid Supply> Heroin, fentanyl, and prescription opioids are significant drug threats in the United States in 2017, approximately 44% of domestic local law enforcement agencies responding to the National Drug Threat Survey (NDTS) reported heroin as the greatest drug threat in their area. While the percentage of NDTS respondents reporting high availability of controlled prescription drugs (CPDs), which include some opioids, has declined over the last several years (75% of NDTS respondents reported high availability in 2014, compared to 52% in 2017), the reported availability of heroin has increased (30% reported high availability in 2014, compared to 49% in 2017). Further, there has been a rise in the availability of illicit fentanyl the primary synthetic opioid available in the United States. <2.1. What is the recent history of the opioid supply in the United States?> While opioids have been available in the United States since the 1800s, the market for these drugs shifted significantly beginning in the 1990s. This section focuses on this latter period (see Figure 2 ). <2.1.1. Prescription Opioid Supply> In the 1990s, the availability and abuse of prescription opioids, such as hydrocodone and oxycodone, increased as the legitimate production, and the subsequent diversion of some of these drugs, increased sharply. This continued into the early 2000s, as illegitimate prescription opioid users turned to family and friends, "doctor shopping," bad-acting physicians, pill mills, the internet, pharmaceutical theft, and prescription fraud to obtain prescription opioids. The federal government has used varied approaches to reduce the unlawful prescription drug supply and prescription drug abuse, including diversion control through grants for state prescription drug monitoring programs ; a crackdown on pill mills; increased regulation of internet pharmacies ; the reformulation of a commonly abused prescription opioid, OxyContin (oxycodone hydrochloride controlled-release) ; and the rescheduling of hydrocodone. Some experts have highlighted a connection between the crackdown on the unlawful supply of prescription drugs and the subsequent rise in the availability and abuse of heroin (discussed in the next section). Heroin is a cheaper alternative to prescription opioids, and may be accessible to some who are seeking an opioid high. Notably, while most users of prescription drugs will not go on to use heroin, accessibility and price are central factors cited by patients with opioid dependence who decide to turn to heroin. In October 2018, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act; P.L. 115-271 ) imposed tighter oversight of opioid production and distribution, required additional reporting and safeguards to address fraud, and limited Medicare coverage of prescription opioids. Also in 2018, the DEA proposed a "significant" reduction in opioid manufacturing for 2019. In its final order setting the aggregate production quota for certain controlled substances in 2019, the DEA noted that it "has observed a decline in the number of prescriptions written for schedule II opioids since 2014 and will continue to set aggregate production quotas to meet the medical needs of the United States while combating the opioid crisis." <2.1.2. Heroin Supply> The trajectory of the heroin supply over the last several decades is much different than that of prescription opioids, but their stories are connected. In the late 1990s and early 2000s, white powder heroin produced in South America dominated the market east of the Mississippi River, and black tar and brown powder heroin produced in Mexico dominated the market west of the Mississippi. Most of the heroin found in the United States at that time came from South America, while smaller percentages came from Mexico and Southwest Asia. In the 1990s, the purity and price of retail-level heroin varied considerably by region. The average retail-level purity of South American heroin was around 46%, which was considerably higher than that of Mexican, Southeast Asian, or Southwest Asian heroin. Mexican heroin was around 27% pure, while Southeast Asian and Southwest Asian heroin were around 24% and 30% pure, respectively. Retail prices for heroin fell dramatically throughout the 1990s it was 55% to 65% less expensive in 1999 than in 1989. Through 2017, retail-level heroin prices continued to decline (although they increased slightly from 2015 to 2016), while purity, in particular that of Mexican heroin, has increased (although purity also dipped slightly from 2015 to 2016). The availability of Mexican heroin has increased. In 2016, nearly 90% of the heroin seized and tested in the United States was determined to have come from Mexico, while a much smaller portion was from South America. Mexican-sourced heroin dominates the U.S. heroin market, in part, because of its proximity and its established transportation and distribution infrastructure. In addition, increases in Mexican production have ensured a reliable supply of low-cost heroin, even as demand for the drug has increased. Mexican transnational criminal organizations have particularly increased their production of white powder heroin as they have expanded their retail presence into the eastern part of the United States (where the primary form of heroin consumed has been white powder) and they have diversified the heroin sold in western states. Of further concern is the increasing amount of heroin seizures containing fentanyl and/or fentanyl-related substances. <2.1.3. Fentanyl Supply> Exacerbating the current opioid problem is the rise of illicit nonpharmaceutical fentanyl available on the black market. Diverted pharmaceutical fentanyl represents only a small portion of the fentanyl market. Illicit nonpharmaceutical fentanyl largely comes from China, and it is often mixed with or sold as heroin. It is 50 to 100 times more potent than heroin, and over the last several years, reported prices ranged between $30,000 and $38,000 per kilogram. The increased potency of illicit nonpharmaceutical fentanyl compounds, such as "gray death," is even more dangerous. Law enforcement expects that illicit fentanyl distributors will continue to create new fentanyl products to circumvent new U.S., Chinese, and Mexican laws and regulations. <2.2. Where are illicit opioids produced?> Illicit opioids include those from plant-based and synthetic sources. While some opium poppy crops are legally cultivated to meet global demand for scientific and medicinal purposes, the United Nations (U.N.) estimates that approximately 345,800 hectares of opium poppy crops were illicitly cultivated around the world in 2018 a 16.6% decrease from the estimated 414,500 hectares in 2017. The vast majority of illicit opium poppy is grown in Afghanistan, which cultivated approximately 263,000 hectares in 2018. Most heroin consumed in the United States is derived from illicit opium poppy crops cultivated in Mexico. According to U.S. government estimates, approximately 44,100 hectares of illicit opium poppy was cultivated in Mexico in 2017 (up from 28,000 hectares cultivated in 2015). Illicit cultivation of opium poppy has also been reported in Burma (37,300 hectares in 2018), Laos (5,700 hectares in 2015), and Colombia (282 hectares in 2017). Several dozen other countries have reported comparatively smaller seizures of opium poppy plants and eradication of opium poppy crops. Synthetic opioids may enter the illicit drug market through diversion from legitimate pharmaceutical manufacturing operations or through the clandestine production of counterfeit medicines and/or of psychoactive substances intended for recreational consumption. Illicit synthetic opioids consumed in the United States are mostly foreign-sourced. According to the State Department, "China's large chemical and pharmaceutical industries provide an ideal environment for the illicit production and export of [synthetic drugs]." The State Department also reports that India's pharmaceutical and chemical industries are particularly susceptible to criminal exploitation; India legally produces opium for pharmaceutical uses and manufactures synthetic opiate pharmaceuticals, in addition to numerous precursor chemicals that could be diverted and used as ingredients in the production of illicit opioids. Clandestine laboratories illicitly producing fentanyl have been discovered in Mexico, Canada, the Dominican Republic, the United States, and other countries. <2.3. How do illicit opioids enter the country?> <2.3.1. Prescription Opioids> The active and inactive ingredients in prescription opioids may come from various countries around the world. Prescription drugs may be manufactured domestically or abroad. Current law and regulations allow for the importation of certain prescription drugs that are manufactured outside the country. Prescription drugs in the United States, regardless of where they were manufactured, flow through a regulated supply chain involving manufacturers, processers, packagers, importers, and distributors until they are ultimately dispensed to end users. The majority of misused prescription opioids available in the United States have been prescribed for a legitimate use and then diverted. Counterfeit prescription opioids are also available; in these cases, substances have often been pressed into pills in the United States, or abroad and then transported into the country, and sold. The DEA has indicated that one of the reasons traffickers may be disguising other opioids as CPDs could be that they are attempting to "gain access to new users." <2.3.2. Heroin58> Mexican transnational criminal organizations (TCOs) are the major suppliers and key producers of most illegal drugs smuggled into the United States, and they have been increasing their share of the U.S. heroin market. The 2018 National Drug Threat Assessment notes that most illicit heroin flows into the United States over the Southwest border. It is primarily moved through legal ports of entry (POEs) in passenger vehicles or tractor trailers where it can be co-mingled with legal goods; a smaller amount of heroin is seized from individuals carrying the drugs on their person or in backpacks. Data from U.S. Customs and Border Protection (CBP) indicate that in FY2018, 5,205 pounds of heroin were seized at POEs, and 568 pounds were seized between POEs. <2.3.3. Illicitly Produced Fentanyl62> The DEA notes that "[f]entanyl continues to be smuggled into the United States primarily in powder or counterfeit pill form, indicating illicitly produced fentanyl as opposed to pharmaceutical fentanyl from the countries of origin." Fentanyl is smuggled into the United States directly from China through the mail, from China through Canada, or across the Southwest border from Mexico. Smaller quantities of fentanyl with relatively high purity (some over 90%) are smuggled from China, and larger quantities of fentanyl with relatively low purity (often less than 10%) are transported from Mexico. The DEA notes that Mexican traffickers often get fentanyl precursor chemicals from China. In addition, these traffickers may receive fentanyl from China, adulterate it, and smuggle it into the United States. Data from CBP indicate that in FY2018, 1,785 pounds of fentanyl were seized at POEs, and 388 pounds were seized between POEs. The DEA reports that the San Diego border sector has been the primary entry point for fentanyl coming into the United States across the Southwest border (85% of the fentanyl seized coming across the Southwest border in 2017 flowed through the San Diego sector, and 14% came through the Tucson sector). Most commonly, the fentanyl seized coming through Southwest border POEs was smuggled in personally operated vehicles. <3. Opioids and Domestic Supply Control Policy> <3.1. How does the federal government counter illicit opioid trafficking in the United States?69> There are a number of federal departments and agencies involved in countering illicit opioid trafficking in the United States. <3.1.1. Office of National Drug Control Policy (ONDCP)> ONDCP is responsible for creating, implementing, and evaluating U.S. drug control policies to reduce the use, manufacturing, and trafficking of illicit drugs as well as drug-related health consequences, crime, and violence. The ONDCP director is required to develop a National Drug Control Strategy (Strategy) to direct the nation's anti-drug efforts and a National Drug Control Budget (Budget) designed to implement the Strategy. The director also is required to coordinate implementation of the policies, goals, objectives, and priorities established by the Administration by agencies contributing to the Federal Drug Control Program. In addition, ONDCP manages several grant programs, including the High Intensity Drug Trafficking Areas (HIDTA) program. While ONDCP is not focused solely on countering opioid-related threats, it is a major priority of the office. <3.1.1.1. HIDTA> The HIDTA program provides assistance to law enforcement agencies at the federal, state, local, and tribal levels that are operating in regions of the United States that have been deemed critical drug trafficking areas. There are 29 designated HIDTAs throughout the United States and its territories. The program aims to reduce drug production and trafficking through four means: promoting coordination and information sharing between federal, state, local, and tribal law enforcement; bolstering intelligence sharing between federal, state, local, and tribal law enforcement; providing reliable intelligence to law enforcement agencies such that they may be better equipped to design effective enforcement operations and strategies; and promoting coordinated law enforcement strategies that rely upon available resources to reduce illegal drug supplies, not only in a given area but throughout the country. HIDTA funds can be used to support the most pressing drug trafficking threats in the region. As such, when heroin trafficking is found to be a top priority in a HIDTA region, funds may be used to support initiatives targeting it. In addition, in 2015 ONDCP launched the Heroin Response Strategy (HRS), "a multi-HIDTA, cross-disciplinary approach that develops partnerships among public safety and public health agencies at the Federal, state, and local levels to reduce drug overdose fatalities and disrupt trafficking in illicit opioids." Within the HRS, a Public Health and Public Safety Network coordinates teams of public health analysts and drug intelligence officers in each state. The HRS not only provides information to these participating entities on drug trafficking and use, but it has "developed and disseminated prevention activities, including a parent helpline and online materials." <3.1.1.2. Other ONDCP Supply Control Initiatives> ONDCP has been involved in various other counter-trafficking operations since its creation in 1988. Recently, it collaborated with the U.S. Department of Homeland Security's Science and Technology Directorate (as well as CBP and the U.S. Postal Inspection Service) to launch the Opioid Detection Challenge a $1.55 million global prize competition to seek new solutions to detect opioids in international mail. <3.1.2. Department of Justice (DOJ)> DOJ controls the opioid supply through law enforcement; regulation of manufacturers, distributors, and dispensers; and grants to state and local agencies. U.S. efforts to target opioid trafficking have centered on law enforcement initiatives. There are a number of DOJ law enforcement agencies involved in countering opioid trafficking. Within these agencies, there are a range of activities aimed at (or that may be tailored to) curbing opioid trafficking. <3.1.2.1. Organized Crime Drug Enforcement Task Force (OCDETF) Program> The OCDETF program targets with the intent to disrupt and dismantle major drug trafficking and money laundering organizations. Federal agencies that participate in the OCDETF program include the DEA; Federal Bureau of Investigation (FBI); Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); U.S. Marshals; Internal Revenue Service (IRS); U.S. Immigration and Customs Enforcement (ICE); U.S. Coast Guard; Offices of the U.S. Attorneys; and the Department of Justice's (DOJ's) Criminal Division. These federal agencies also collaborate with state and local law enforcement on task forces. There are 14 OCDETF strike forces around the country and an OCDETF Fusion Center that gathers and analyzes intelligence and information to support OCDETF operations. The OCDETFs target those organizations that have been identified on the Consolidated Priority Organization Targets (CPOT) List, the "most wanted" list for leaders of drug trafficking and money laundering organizations. During FY2018, 52% of active OCDETF investigations involved heroin. According to DOJ, "OCDETF has adjusted its resources to target these investigations in an attempt to reduce the [heroin] supply." <3.1.2.2. Drug Enforcement Administration (DEA)> The DEA enforces federal controlled substances laws in all states and territories. The agency has developed a 360 Strategy aimed at "tackling the cycle of violence and addiction generated by the link between drug cartels, violent gangs, and the rising problem of prescription opioid and heroin abuse." The 360 Strategy leverages federal, state, and local law enforcement, diversion control, and community outreach organizations to achieve its goals. Additionally, the DEA routinely uses community-based enforcement strategies as well as multijurisdictional task forces to address opioid trafficking. The DEA also operates a heroin signature program (HSP) and a heroin domestic monitor program (HDMP) to identify the geographic sources of heroin seized in the United States. The HSP analyzes wholesale-level samples of "heroin seized at U.S. ports of entry (POEs), all non-POE heroin exhibits weighing more than one kilogram, randomly chosen samples, and special requests for analysis." The HDMP samples retail-level heroin seized in selected cities across the country. Chemical analysis of a given heroin sample can identify its "signature," which indicates a particular heroin production process that has been linked to a specific geographic region. In addition, the DEA has started a Fentanyl Signature Profiling Program (FSPP), analyzing samples from fentanyl seizures to help "identify the international and domestic trafficking networks responsible for many of the drugs fueling the opioid crisis." <3.1.2.3. Federal Bureau of Investigation (FBI)> The FBI investigates opioid trafficking as part of its efforts to counter transnational organized crime and gangs, cybercriminals, fraudsters, and other malicious actors. The FBI participates in investigations that range from targeting drug distribution networks bringing opioids across the Southwest border to prioritizing illicit opioid distributors leveraging the Dark Web to sell their drugs. <3.1.2.4. Other DOJ Agencies> Other DOJ agencies have key roles in combatting the opioid epidemic. The Offices of the U.S. Attorneys are responsible for the prosecution of federal criminal and civil cases, which include cases against prescribers, pharmaceutical companies, and pharmacies involved in unlawful manufacturing, distribution, and dispensing of opioids as well as illicit opioid traffickers. Other enforcement agencies such as the ATF and U.S. Marshals may also be involved in seizing illicit opioids in the course of carrying out their official duties. The Office of Justice Programs (OJP) administers grant programs to address opioid supply and demand (some of which are discussed below in " Which DOJ grant programs may be used to address the opioid epidemic? "). <3.1.3. U.S. Department of Homeland Security (DHS)> <3.1.3.1. U.S. Customs and Border Protection (CBP)> CBP works to counter the trafficking of illicit opioids (among other drugs) along the U.S. borders as well as via mail curriers. To help detect and interdict these substances, CBP employs tools such as nonintrusive inspection equipment (including x-ray and imaging systems), canines, and laboratory testing of suspicious substances. The agency also uses information and screening systems to help detect illicit drugs, targeting precursor chemicals, equipment, and the drugs themselves. CBP, through the Office of Field Operations (OFO) and the U.S. Border Patrol, seizes illicit drugs coming into the United States at and between POEs. CBP data indicate that 90% of the heroin seized by CBP in FY2018 was seized by OFO at POEs, and 10% was seized by the Border Patrol between POEs. In addition, these data indicate that 82% of the fentanyl seized in FY2018 was seized by OFO at POEs, and 18% was seized by the Border Patrol between POEs. <3.1.3.2. U.S. Coast Guard (USCG)> Drug interdiction is part of the Coast Guard's law enforcement mission. The agency is responsible for interdicting noncommercial maritime flows of illegal drugs. Cocaine is the primary illicit drug encountered by the Coast Guard, as it is the most common drug moved via noncommercial vessels. While the Coast Guard encounters other illicit drugs, including opioids, the agency notes that those drugs are more commonly moved on land or in commercial maritime vessels that are regulated by other enforcement agencies. The Coast Guard also participates in multi-agency counterdrug task forces, including OCDETF. <3.1.4. U.S. Postal Inspection Service (USPIS)> USPIS is the law enforcement arm of the U.S. Postal Service. It shares responsibility for international mail security with other federal agencies, and as a result of the opioid epidemic, it has dedicated more resources to investigating prohibited substances in the mail. From FY2016 through FY2018, USPIS had a "1,000% increase in international parcel seizures and a 750% increase in domestic parcel seizures related to opioids." In FY2018, USPIS and its law enforcement partners seized over 96,000 pounds of drugs in the mail, including marijuana, methamphetamine, synthetic opioids, and others, but their publicly available data does not describe what portion of these drugs were opioids. <3.2. What is the DEA's role in preventing the diversion of prescription opioids?> The DEA has a key regulatory function in drug control. While it conducts traditional law enforcement activities such as investigating drug trafficking (including trafficking of heroin and other illicit opioids), it also regulates the flow of controlled substances in the United States. The Controlled Substances Act (CSA) requires the DEA to establish and maintain a closed system of distribution for controlled substances; this involves the regulation of anyone who handles controlled substances, including exporters, importers, manufacturers, distributors, health care professionals, pharmacists, and researchers. Unless specifically exempted by the CSA, these individuals must register with the DEA. Registrants must keep records of all transactions involving controlled substances, maintain detailed inventories of the substances in their possession, and periodically file reports with the DEA, as well as ensure that controlled substances are securely stored and safeguarded. The DEA regulates over 1.5 million registrants. The DEA uses its criminal, civil, and administrative authorities to maintain a closed system of distribution and prevent diversion of drugs, such as prescription opioids, from legitimate purposes. Actions include inspections, order form requirements, education, and establishing quotas for Schedule I and II controlled substances. More severe administrative actions include immediate suspension orders and orders to show cause for registrations. As noted previously, in 2018 the DEA significantly lowered the aggregate production quota for opioids in 2019. <3.3. Which DOJ grant programs may be used to address the opioid epidemic?> Discussed below are grant programs that have a direct or possible avenue to address the opioid epidemic. This discussion provides examples of such programs, and should not be considered exhaustive. Many DOJ grant programs have broad purpose areas for which funds can be used. While some focus on broad crime reduction strategies that might include efforts to combat drug-related crime, others including the selected programs have purpose areas that are more specifically focused on drug threats. Of note, these programs do not solely address illicit drug supply control; some also address demand as well as other criminal justice issues. They are included because they are administered by DOJ agencies. <3.3.1. Comprehensive Opioid Abuse Grant Program (COAP)> COAP is a recently created DOJ grant program (administered by BJA) for states, units of local government, and Indian tribes (34 U.S.C. 10701 et seq.). This grant program supports projects primarily relating to opioid abuse, including (1) diversion and alternatives to incarceration projects; (2) collaboration between criminal justice, social service, and substance abuse agencies; (3) overdose outreach projects, including law enforcement training related to overdoses; (4) strategies to support those with a history of opioid misuse, including justice-involved individuals; (5) prescription drug monitoring programs; (6) development of interventions based on a public health and public safety understanding of opioid abuse; and (7) planning and implementation of comprehensive strategies in response to the growing opioid epidemic. The Harold Rogers Prescription Drug Monitoring Program (PDMP) was incorporated into COAP. The Harold Rogers PDMP is a competitive grant program that was created to help law enforcement, regulatory entities, and public health officials collect and analyze data on prescriptions for controlled substances. Law enforcement uses of PDMP data include (but are not limited to) investigations of physicians who prescribe controlled substances for drug dealers or abusers, pharmacists who falsify records in order to sell controlled substances, and people who forge prescriptions. <3.3.2. COPS Anti-Heroin Task Force Program> The Community Oriented Policing Services (COPS) Office's Anti-Heroin Task Force (AHTF) Program provides funding assistance on a competitive basis to state law enforcement agencies to investigate illicit activities related to the trafficking or distribution of heroin or diverted prescription opioids. Funds are distributed to states with high rates of primary treatment admissions for heroin and other opioids. Further, the program focuses its funding on state law enforcement agencies with multi-jurisdictional reach and interdisciplinary team structures such as task forces. <3.3.3. Drug Courts108> <3.3.3.1. The Drug Court Discretionary Grant Program> The Drug Court Discretionary Grant program (Drug Courts Program) is meant to enhance drug court services, coordination, and substance abuse treatment and recovery support services. It is a BJA-administered, competitive grant program that provides resources to state, local, and tribal courts and governments to enhance drug court programs for nonviolent substance-abusing offenders. Drug courts are designed to help reduce recidivism and substance abuse among participants and increase an offender's likelihood of successful rehabilitation through early, continuous, and intense judicially supervised treatment; mandatory periodic drug testing; community supervision; appropriate sanctions; and other rehabilitation services. The Drug Courts Program is not focused on opioid abusers, but drug-involved offenders, including opioids abusers, may be processed through drug courts. <3.3.3.2. Veterans Treatment Courts> BJA administers the Veterans Treatment Court Program through the Drug Courts Program using funds specifically appropriated for this purpose. The purpose of the Veterans Treatment Court Program is "to serve veterans struggling with addiction, serious mental illness, and/or co-occurring disorders." Grants are awarded to state, local, and tribal governments to fund the establishment and development of veterans treatment courts. While veterans treatment court grants have been part of the OJP's Drug Courts Program for several years, the Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198 ) authorized DOJ to award grants to state, local, and tribal governments to establish or expand programs for qualified veterans, including veterans treatment courts; peer-to-peer services; and treatment, rehabilitation, legal, or transitional services for incarcerated veterans. <3.3.3.3. Juvenile and Family Drug Treatment Courts> The Office of Juvenile Justice and Delinquency Prevention (OJJDP) supports juvenile and family drug court programs through its Drug Treatment Courts Program. This program supports the implementation or enhancement of state, local, and tribal drug court programs that focus on juveniles and parents with substance abuse issues. One of its specific goals is to help those with substance abuse problems related to opioid abuse or co-occurring mental health disorders who are involved with the court system. <3.3.4. The Edward Byrne Memorial Justice Assistance Grant (JAG) Program> Administered by BJA, the JAG program provides funding to state, local, and tribal governments for state and local initiatives, technical assistance, training, personnel, equipment, supplies, contractual support, and criminal justice information systems in eight program purpose areas: (1) law enforcement programs; (2) prosecution and court programs; (3) prevention and education programs; (4) corrections and community corrections programs; (5) drug treatment and enforcement programs; (6) planning, evaluation, and technology improvement programs; (7) crime victim and witness programs (other than compensation); and (8) mental health and related law enforcement and corrections programs, including behavioral programs and crisis intervention teams. Given the breadth of the program, funds could be used for opioid abuse programs, but state and local governments that receive JAG funds are not required to use their funding for this purpose. <3.3.5. Justice and Mental Health Collaboration Program (JMHCP)> Also administered by BJA, the JMHCP supports collaborative criminal justice and mental health systems efforts to assist individuals with mental illnesses or co-occurring mental health and substance abuse disorders who come into contact with the justice system. It encourages early intervention for these individuals; supports training for justice and treatment professionals; and facilitates collaborative support services among justice professionals, treatment and related service providers, and governmental partners. Three types of grants are supported under this program: (1) Collaborative County Approaches to Reducing the Prevalence of Individuals with Mental Disorders in Jail, (2) Planning and Implementation, and (3) Expansion. <3.3.6. Juvenile Justice Program Grants> <3.3.6.1. Juvenile Justice and Delinquency Prevention Act (JJDPA) Formula Grant Program> The JJDPA authorizes OJJDP to make formula grants to states that can be used to fund the planning, establishment, operation, coordination, and evaluation of projects for the development of more-effective juvenile delinquency programs and improved juvenile justice systems. Funds provided to the state may be used for a wide array of juvenile justice related programs, such as substance abuse prevention and treatment programs. None of the program purpose areas deal specifically with combating opioid abuse, but they are broad enough that the grants made under this program could be used for this purpose. <3.3.6.2. JJDPA Title V Incentive Grants Program> The JJDPA authorizes OJJDP to make discretionary grants to the states that are then transmitted to units of local government in order to carry out delinquency prevention programs for juveniles who have come into contact, or are likely to come into contact, with the juvenile justice system. Purpose areas include (but are not limited to) alcohol and substance abuse prevention services, educational programs, and child and adolescent health (as well as mental health) services. None of the program purpose areas deal specifically with combating opioid abuse, but they are broad enough that they could be used for this purpose. <3.3.6.3. Opioid Affected Youth Initiative> The Opioid Affected Youth Initiative is a competitive grant program administered by OJJDP that funds state, local, and tribal government efforts to "develop a data-driven coordinated response to identify and address challenges resulting from opioid abuse that are impacting youth and community safety." The program supports recipients in implementing strategies and programs to identify areas of concern, collect and interpret data to help develop youth strategies and programming, and implement services to assist children, youth, and families affected by opioid abuse. <3.3.7. Residential Substance Abuse Treatment (RSAT) for State Prisoners Program> The RSAT Program is a formula grant program administered by BJA that supports state, local, and tribal governments in developing and implementing substance abuse treatment programs in correctional and detention facilities. Funds may also be used to support reintegration services for offenders as they reenter the community after a period of incarceration. Beginning in FY2018, BJA requires potential grantees to explain "how funded programs will address the addition of opioid abuse reduction treatment and services." <3.3.8. Tribal Resources Grant Program> The COPS Office administers the Tribal Resources Grant Program. It generally supports tribal law enforcement needs, and specifically aims to enhance tribal law enforcement's capacity to engage in anti-opioid activities, among other objectives. <3.4. Where can DOJ opioid-related grant funding information be found?> For state-specific information on grants and funding from OJP, see the OJP Award Data web page and search by location or by grant solicitation. In FY2018, the Department of Justice released a document entitled, Fact Sheet: Justice Department is Awarding Almost $320 Million to Combat Opioid Crisis , which provides a list of FY2018 grantees. <4. Opioids and Foreign Supply Control Policy> <4.1. How does the United States respond to international illicit opioid trafficking?> The United States has taken a multipronged foreign policy approach to addressing foreign flows of illicit opioids destined for the United States. To date, this approach has included multilateral diplomacy, bilateral efforts, and unilateral action. On the multilateral front, the U.S. government, primarily working through the U.S. Department of State, engages international organizations and entities involved in addressing drug control issues, including opioids. This includes diplomatic engagement with United Nations (U.N.) entities such as the Commission on Narcotic Drugs (CND), the primary U.N. counternarcotics policy decisionmaking body; the International Narcotics Control Board (INCB), which monitors how member states implement treaty commitments related to drug control; and the U.N. Office of Drugs and Crime (UNODC), mandated to provide technical cooperation and research and analytical projects that support member states' implementation of counternarcotics policies. The United States also addresses opioid trafficking through the Organization of American States' (OAS') Inter-American Drug Abuse Control Commission (CICAD). Through such organizations, the United States supports efforts to promote cross-border information sharing. One objective of U.S. efforts at the U.N. is to accelerate the rate at which new drugs and related precursor chemicals are incorporated into the U.N. international drug control regime. For example, U.S. diplomats advocated for the international control of two of the key chemical precursors used in the production of fentanyl: N-phenethyl-4-piperidone (NPP) and 4-anilino-N-phenethyl-4-piperidone (ANPP). The CND subsequently added NPP and ANPP to the U.N.'s list of drugs and chemicals under international control, effective October 2017. Until recently, the United States had also engaged the Universal Postal Union (UPU) on the issue of opioid trafficking through international mail. Through the UPU, the United States had, for example, supported the exchange of advance electronic data (AED) for international mail items specifically to improve global efforts to detect and interdict synthetic drugs shipped through the mail. In October 2018, however, the Trump Administration announced that it would begin a one-year withdrawal process from the UPU, potentially affecting how the United States and the UPU engage on opioid matters. Bilateral cooperation on opioids has included focused efforts in China, Mexico, and Canada, among other countries. Such engagement has variously taken the form of structured diplomatic dialogues, bilateral law enforcement cooperation, and foreign assistance programming. With respect to China, bilateral cooperation on counternarcotics matters is a top diplomatic priority for the United States. As with China, U.S. officials pursue bilateral cooperation with Mexico on counternarcotics matters through meetings, including through the cabinet-level U.S.-Mexico Strategic Dialogue on Disrupting Transnational Criminal Organizations, sub-cabinet level U.S.-Mexico Security Cooperation Group, U.S.-Mexico Bilateral Drug Policy Working Group, and National Fentanyl Conference for Forensic Chemists. Trilaterally, the United States, Mexico, and Canada have met several times through the North American Drug Dialogue to address heroin and fentanyl issues. In addition to structured dialogues, U.S. federal law enforcement agencies also engage regularly with their counterparts on ongoing investigations through their representatives based at U.S. embassies and consulates abroad; formal law enforcement cooperation is also facilitated through mutual legal assistance mechanisms. The United States also funds and conducts programming with China and Mexico to address opioids. In China, INL funding supports drug-related information exchanges, training for Chinese counterparts on specialized topics related to synthetic opioids, and efforts to promote effective drug demand reduction. INL also funds a Resident Legal Advisor, a DOJ prosecutor who is based at the U.S. Embassy in Beijing; a key project has been to conduct outreach to Chinese counterparts involved in amending China's legal and regulatory framework to place the entire fentanyl class of substances under drug control. In Mexico, current efforts to address illicit opioids fit within a broader context of longstanding U.S.-Mexico cooperation to disrupt drug production, dismantle drug distribution networks, prosecute drug traffickers, and deny transnational criminal organizations access to illicit revenue. In such efforts, U.S. support has included programming to address illicit opium poppy cultivation and eradication, drug production and trafficking, border security, and criminal justice judicial institution reform. In addition, the U.S. government has taken domestic action to address foreign sources and traffickers of opioids through the U.S. criminal justice system and through the application of financial sanctions against specially designated foreign nationals. Recent DOJ indictments have involved Chinese nationals allegedly involved in fentanyl production. Further targeting one of the Chinese nationals under indictment, Jian Zhang, the U.S. Department of the Treasury designated Zhang, four of his associates, and an entity used as a front for the trafficking of fentanyl and fentanyl analogues for sanction, pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). The Treasury and DOJ have taken similar action against Mexican individuals and entities involved in trafficking heroin and fentanyl to the United States. <4.2. What has Mexico done to interrupt the flow of illicit opioids into the United States?> The government of Mexico cooperates with the United States on counternarcotics matters, including opioid supply reduction. The government eradicates opium poppy; tracks, seizes, and interdicts opioids and precursor chemicals; dismantles clandestine drug laboratories; and carries out operations against transnational organized crime groups engaged in opioid trafficking and other related crimes. The Mexican government also participates in international efforts to control precursor chemicals, including fentanyl precursors NPP and ANPP. In 2018, the government of Mexico increased its budget for public security and justice (including antidrug efforts) by 6.2% as compared to 2017, and formed an Office of National Drug Policy within the Attorney General's Office to coordinate federal drug policy. Inaugurated to a six-year term in December 2018, President Andr s Manuel L pez Obrador has continued cooperation on drug control with the United States. Observers maintain that both governments could find a common interest in combating fentanyl smuggling, but predict that the L pez Obrador government's proposal to regulate opium cultivation for medicinal purposes could cause friction in bilateral relations. The Mexican military leads efforts to eradicate illicit drug crops in Mexico, including a reported 29,692 hectares of opium poppy in 2017. Mexican authorities reportedly seized approximately 766.9 kilograms of opium gum in 2017, up from 235 kilograms in 2016. The United States has provided specialized training and equipment to Mexican authorities that contributed to increased fentanyl seizures in 2017 and 2018. Various Mexican agencies have identified and seized fentanyl and fentanyl-laced counterfeit pills with U.S.-funded nonintrusive inspection equipment and canine teams. In September 2018, Mexican law enforcement discovered a production mill used to produce carfentanil (an analogue 100 times more potent than fentanyl). <4.3. What has China done to interrupt the flow of illicit opioids into the United States?> As discussed, China is a primary source of illicit fentanyl destined for the United States. As of December 1, 2018, China had imposed controls on 170 new psychoactive substances, including 25 fentanyl analogues. It had also imposed controls on two fentanyl precursor chemicals. According to the DEA, U.S. seizure data show that China's implementation of controls on fentanyl analogues has had "an immediate effect on the availability of these drugs in the United States." President Xi Jinping said China was willing to go further and control the entire class of fentanyl substances, a move supported by President Trump. In April 2019, three Chinese government agencies jointly announced that effective May 1, 2019, all fentanyl-related substances will be added to China's "Supplementary List of Controlled Narcotic Drugs and Psychotropic Substances with Non-Medical Use." Li Yuejin, Deputy Director of China's National Narcotics Control Commission, outlined a series of follow-on steps that he said China would take. He said China would issue "guidance on applicable laws for handling criminal cases related to fentanyl substances" and protocols for filing and prosecuting similar cases. Other actions he said China would take include the following: investigating suspected illicit fentanyl manufacturing bases; scrubbing drug-related content from the Internet; "cut[ting] off online communication and transaction channels for criminals"; pressuring parcel delivery services to require that senders register their real names; stepping up inspections of international parcels; setting up special teams to conduct criminal investigations focused on manufacturing and trafficking of fentanyl substances and other drugs; strengthening information-sharing and case cooperation with "relevant countries," including the United States, with the goal of dismantling transnational drug smuggling networks; and stepping up development of technology for examining and identifying controlled substances. The DEA welcomed the Chinese government's announcement, saying, "[t]his significant development will eliminate Chinese drug traffickers' ability to alter fentanyl compounds to get around the law." ONDCP noted that China's scheduling decision does not cover all the precursor chemicals used to make fentanyl substances, meaning that they might continue to flow to Mexico where traffickers use them to make fentanyl destined for the United States. China's postal service, China Post, has an existing agreement with the USPS to provide advanced electronic data (AED) on parcels mailed to the United States. China's government has also cracked down on illicit fentanyl rings in China and assisted DOJ investigations of Chinese nationals suspected of illicit fentanyl manufacturing and distributing. <5. Recent Congressional Action on the Opioid Epidemic> <5.1. What federal laws have been enacted recently that address the opioid epidemic?> Congress largely has taken a public health approach (i.e., focusing on prevention and treatment) toward addressing the nation's opioid crisis, but recently enacted laws have addressed supply control and other criminal justice issues as well. Three major laws were enacted in the 114 th and 115 th Congresses that address the opioid epidemic the Comprehensive Addiction and Recovery Act (CARA, P.L. 114-198 ); the 21 st Century Cures Act (Cures Act; P.L. 114-255 ); and the SUPPORT for Patients and Communities Act (SUPPORT Act; P.L. 115-271 ). CARA focused primarily on opioids but also addressed broader drug abuse issues. The Cures Act authorized state opioid grants (in Division A) and included more general substance abuse provisions (in Division B) as part of a larger effort to address health research and treatment. The SUPPORT Act broadly addressed substance use disorder prevention and treatment as well as diversion control through extensive provisions involving law enforcement, public health, and health care financing and coverage. Further, Congress and the Administration provided funds to specifically address opioid abuse in FY2017-FY2019 appropriations. <5.2. How much FY2019 funding has Congress provided DHS, DOJ, and ONDCP to address the opioid epidemic?> Many questions surround the amount of opioid funding appropriated each year. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), provided $347.0 million for "comprehensive opioid abuse reduction activities, including as authorized by CARA, and for programs, which shall address opioid abuse reduction consistent with underlying program authorities" (which includes many of the programs cited above in " Which DOJ grant programs may be used to address the opioid epidemic? "). In FY2019, the DEA received an increase of $77.8 million over FY2018 funding "to help fight drug trafficking, including heroin and fentanyl." The additional DEA funding will also go toward the addition of "at least four new heroin enforcement teams and DEA 360 Strategy programming." Other opioid-specific funding in FY2019 DOJ, DHS, and ONDCP appropriations includes $9.0 million for the Opioid-Affected Youth Initiative; $27.0 million for the COPS Program for improving tribal law enforcement, including anti-opioid activities among other purposes (the Tribal Resources Grant Program); $32.0 million for anti-heroin task forces (composed of state law enforcement agencies) in areas with high rates of opioid treatment admissions to be used for counter-opioid drug enforcement; $24.4 million for CBP for laboratory personnel, port of entry technology, canine personnel, and support staff for opioid detection; $44.0 million for Homeland Security Investigations (HSI) for additional personnel (criminal investigators, special agents, intelligence analysts, and support personnel) for domestic and international opioid/fentanyl-related investigations; $8.5 million for DHS research and development related to opioids/fentanyl; and $3.0 million for ONDCP for Section 103 of CARA - Community-based Coalition Enhancement Grants to Address Local Drug Crises. <5.3. Is there an estimate for how much DOJ and other departments spend on the opioid epidemic?> It is problematic, for many reasons, to identify and sum opioid funding. The amounts listed in the section above represent instances where Congress provided opioid-specific funding for agencies and programs within DOJ, DHS, and ONDCP only. It does not include funding for some broader drug programs, such as HIDTA, unless there was a specific appropriation for opioid-related activity. Some programs that can be used for opioid-related purposes such as the JAG program, which is used for wide-ranging criminal justice purpose areas are not included in the list. For some programs for which Congress specified opioid-related purposes, the amount appropriated for the program is not necessarily, and often is not, entirely for opioid-related issues. <6. The Opioid Epidemic and State Criminal Justice Policies> <6.1. How have different states adapted their justice systems to deal with the opioid crisis?> Across the country, states have adapted elements of their criminal justice responses including police, court, and correctional responses in a variety of ways due to the opioid epidemic. While this section does not provide a state-by-state analysis, it highlights several examples of how states' justice systems have responded to the opioid crisis. These examples were selected because they are some of the more common state policy approaches to confronting the opioid epidemic. Many states are increasing law enforcement officer access to naloxone, an opioid overdose reversal drug, in an effort to reduce the number of overdose deaths. Officers receive training on how to identify an opioid overdose and administer naloxone, and they carry the drug so they can respond immediately and effectively to an overdose. As of November 2018, over 2,400 police departments in 42 states reported that they had officers that carry naloxone this figure more than doubled over two years. In addition, most states that have expanded access to naloxone have also provided immunity to those who possess, dispense, or administer the drug. Generally, immunity entails legal protections (for civilians) from arrest or prosecution and/or civil lawsuits for those who prescribe or dispense naloxone in good faith. State and local law enforcement coordinate special operations and task forces to combat fentanyl and heroin trafficking in their jurisdictions. In addition to participation in federal initiatives, state and local police and district attorneys lead operations to dismantle trafficking networks in areas plagued by high numbers of opioid overdoses. For example, in southeast Massachusetts the Bristol County District Attorney recently announced the conclusion of a year-long investigation of a "highly organized and complex" fentanyl network that resulted in 11 arrests. This investigation was led by the Bristol Country District Attorney's office and involved several local police agencies, the Massachusetts State Police, and the U.S. Department of Homeland Security. Another criminal justice adaptation is the enactment of what are known as "Good Samaritan" laws to encourage individuals to seek medical attention (for themselves or others) related to an overdose without fear of arrest or prosecution. In general, these laws prevent criminal prosecution for illegal possession of a controlled substance under specified circumstances. While the laws vary by state as to what offenses and violations are covered, as of June 2017, 40 states and the District of Columbia have some form of Good Samaritan overdose immunity law. Most states have drug diversion or drug court programs for criminal defendants and offenders with substance abuse issues, including opioid abuse. Some states view drug courts as a tool to address rising opioid abuse and have moved to expand drug court options in the wake of the opioid epidemic. Over the last several years, the National Governors Association has sponsored various activities to assist states in combatting the opioid epidemic, including learning labs to develop best practices for dealing with opioid abuse treatment for justice-involved populations such as the expansion of opioid addiction treatment in drug courts. In November 2017, the President's Commission on Combating Drug Addiction and the Opioid Crisis stated that DOJ should urge states to establish drug courts in every county. In recent years, several states have also enacted legislation increasing access to medication-assisted treatment (MAT) for drug-addicted offenders who are incarcerated or have recently been released. In March 2019, SAMHSA released guidance to state governments on increasing the availability of MAT in criminal justice settings.

Over the last several years, lawmakers in the United States have responded to rising drug overdose deaths, which increased four-fold from 1999 to 2017, with a variety of legislation, hearings, and oversight activities. In 2017, more than 70,000 people died from drug overdoses, and approximately 68% of those deaths involved an opioid. Many federal agencies are involved in domestic and foreign efforts to combat opioid abuse and the continuing increase in opioid related overdose deaths. A subset of those agencies confront the supply side (some may also confront the demand side) of the opioid epidemic. The primary federal agency involved in drug enforcement, including prescription opioids diversion control, is the Drug Enforcement Administration (DEA). Other federal agencies that address the illicit opioid supply include, but are not limited to, the Federal Bureau of Investigation, Offices of the U.S. Attorneys, Office of Justice Programs, U.S. Customs and Border Protection, U.S. Department of State, U.S. Postal Inspection Service, and Office of National Drug Control Policy. This report focuses on efforts from these departments and agencies only. Lawmakers have addressed opioid abuse as both a public health and a criminal justice issue, and Congress enacted several new laws in the 114 th and 115 th Congresses. These include the Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198 ), the 21 st Century Cures Act (Cures Act; P.L. 114-255 ), and most recently the SUPPORT for Patients and Communities Act (SUPPORT Act; P.L. 115-271 ). Congress also provided funds specifically to address the opioid epidemic in FY2017-FY2019 appropriations. This report answers common supply and criminal justice-related questions that have arisen as drug overdose deaths in the United States continue to increase. It does not provide a comprehensive overview of opioid abuse as a criminal justice issue. The report is divided into the following sections: Overview of the Opioid Epidemic in the United States; Overview of the Opioid Supply; Opioids and Domestic Supply Control Policy; Opioids and Foreign Supply Control Policy; Recent Congressional Action on the Opioid Epidemic; and The Opioid Epidemic and State Criminal Justice Policies.

crs_R46061

crs_R46061_0

<1. Introduction> In recent presidential Administrations, there have been several high-profile disputes between Congress and the White House regarding access to executive branch officials. This has included attempts by Congress to enforce subpoenas issued to Harriet Miers, White House Counsel to President George W. Bush; Eric Holder, Attorney General to President Barack Obama; and Wilbur Ross and William Barr, Secretary of Commerce and Attorney General to President Donald Trump, respectively. Such disagreements can draw significant attention, but they are relatively uncommon. Most interactions between Congress and the executive branch are voluntary. There is a regular flow of communication between the branches. Principals and staff frequently interact with their counterparts. They share data; discuss operations, policy, and projects; and share subject matter expertise. Understanding why voluntary cooperation is a common practice is crucial to understanding Congress's relationship with the executive branch and may help clarify the cases in which the executive branch chooses not to cooperate with Congress. This report focuses on one facet of inter-branch interaction: testimony before congressional committees. The report outlines the origins of voluntary testimony by the executive branch, identifies some notable incentives for voluntary participation, and covers some key dimensions of the practice of voluntary participation. Two important caveats limit the scope of this report. First, by design, this report does not engage directly with those occasions when the executive branch refuses to comply with congressional requests and subpoenas. Second, it should also be noted that all responses are not created equal. The mere fact of voluntary compliance does not ensure that the testimony offered will be candid, complete, or correct. This report does not speak to that potential issue. <2. Background> Agency leaders, program managers, and subject matter experts routinely testify before congressional committees and subcommittees. In addition to participating in oversight and budget hearings by providing testimony and responding to questions on agency operations, agency officials frequently appear at informational hearings and when committees are considering possible legislative actions. The practice of voluntary compliance with congressional requests was established from the first investigation of the executive branch by Congress. That investigation focused on a failed 1791 military campaign against Native American tribes in the Northwest Territory by General Arthur St. Clair. President George Washington and his cabinet faced the novel question of how to respond to a request for information from Congress. Aware that their decision was likely to establish precedent, they decided, in the words of Secretary of State Thomas Jefferson, that the executive branch should "communicate such papers as the public good would permit & ought to refuse those the disclosure of which would injure the public." Washington's cabinet reviewed the matter and decided that the executive branch should comply fully with Congress's request. The Administration then provided Congress with documents and officials offered testimony for the investigation. While President Washington determined that it was appropriate for executive branch activities to remain secret when disclosure would "injure the public" (thus providing the earliest articulation of the concept of executive privilege in American government), he also concluded that compliance with congressional requests should be the default. Despite changes in the operations of the presidency and Congress, and broader public access to the hearings themselves over television and the internet, this default compliance rule of thumb has generally held over time and across subsequent Administrations. <3. Incentives for Voluntary Participation in Congressional Hearings> There are a number of reasons that Administrations acquiesce to requests from Congress. Some of the most broadly applicable incentives are outlined below. <3.1. The Power of the Purse> Control over the appropriations of departments and agencies is arguably one of Congress's most effective tools to ensure that those departments and agencies are responsive to requests for testimony. Because the budget process occurs annually, agency leaders are continually dependent upon Congress for funding and understand that a poor working relationship with Congress may adversely affect their appropriation. Adverse budget actions for uncooperative agencies have occurred in the past. One of the best examples of such an action occurred during the 97 th Congress. As part of the deliberations over the FY1982 budget, the director of the Office of Policy Development in the Executive Office of the President, Martin Anderson, refused to appear before the House Appropriations Subcommittee on Treasury, Postal Service and General Government. Anderson argued that he could not appear because he was a senior adviser to the President and it would undermine his ability to provide candid advice to the President. The subcommittee disagreed and noted that prior directors of the same office had appeared without incident. The House Appropriations Committee then zeroed out the budget for the office and stated that "until the legal basis for refusing to appear is presented, [the subcommittee] has no choice but to deny the budget request for this Office." While further discussion and negotiations with Senate appropriators led to a partial restoration, the appropriation was still reduced from the requested $2.9 million to $2.5 million. In a more recent example, as part of the FY2005 appropriations process, the House Committee on Appropriations directed the U.S. Coast Guard to submit quarterly reports to the committee on the maintenance of its legacy vessels and aircraft. By the next year, the committee was dissatisfied with the agency's responses and said the following in its report on the agency's FY2006 appropriation: The Committee is extremely frustrated in the Coast Guard's apparent disregard for Congressional direction and has reduced funding for headquarters directorates by $5,000,000 accordingly . The Committee cannot adequately oversee Coast Guard programs when the agency fails to answer basic questions or fails to provide timely and complete information. In this case, the concerns raised by Congress extended to all of the agency's reporting to Congress, both oral and written, but illustrates the potential budget ramifications for agencies that fail to meet Congress's reporting expectations. <3.2. Congressional Control Over Agency Operations> Congress's legislative power extends beyond appropriations into the organization, operations, and jurisdiction of executive branch agencies. Congress may specify in statute the duties, reporting requirements, and independence of executive branch agencies, among other powers. Furthermore, some researchers have observed that Congress often closely monitors how agencies execute the laws it passes. Congress has developed a variety of tools to control how agencies operate, such as the Administrative Procedure Act. In addition, the regular engagement of Congress in how agencies conduct business may encourage those agencies to work with committees or risk statutory changes that impact their jurisdiction and the rules under which they operate. The organization of the executive branch and the network of statutes, guidelines, and practices that govern agency operations is complex and evolving. In this context, voluntary cooperation with congressional stakeholders can affect congressional decisions on organization and operations. For instance, one reason for Congress's decision to pass the Homeland Security Act of 2002 and create the Department of Homeland Security was to address a concern about access to officials. After the September 11 attacks, President George W. Bush created the Office of Homeland Security within the Executive Office of the President and appointed Tom Ridge to lead it. In March 2002, the Senate Committee on Appropriations invited Ridge to testify about the office's activities, but Ridge declined to appear on the grounds that he was a close adviser to the President. Given the control Ridge exercised over a large portion of the national security bureaucracy, the committee disagreed with Ridge's position, and the two sides eventually agreed that Ridge would provide an "informal briefing" to the Committee. Through the ensuing establishment of the Department of Homeland Security, Congress asserted its authority to oversee executive branch activity and limited the possibility that Ridge and his successors could attempt to assert privilege as presidential advisers in order to resist congressional requests. <3.3. Navigating Congress's Power to Investigate> In addition to the legislative power, the courts have established that Congress has broad authority to investigate the activities of the executive branch. While Administrations have sometimes resisted cooperation with specific investigations, they have generally accepted this oversight role of Congress, and a large body of practices and expectations have developed. The acceptance of Congress's authority is such that Presidents have repeatedly allowed personal advisers to testify when credible allegations of malfeasance arise in the Executive Office of the President, despite claiming broad immunity for those advisers in other circumstances. Presidents have often followed this practice, even on matters of great political controversy, in order to better manage the visibility and impact when Congress conducts investigations. One of the better studied examples of this strategy is the Reagan Administration's management of the Iran-Contra affair. This incident arose following a decision by Congress to legally bar the government from providing support to the Contras, an insurgent group acting against the government of Nicaragua. Previously, the Central Intelligence Agency (CIA) had, with congressional approval, provided support to the Contras. Despite the congressional ban, the Reagan Administration and the CIA continued to provide support to the Contras and funded that aid with the proceeds of undisclosed CIA arms sales to the government of Iran. Early in the congressional investigation into these activities, a number of Reagan Administration officials were later shown to have lied to or misled congressional investigators. Ultimately, however, with the political fallout from the investigation growing, President Reagan directed the executive branch to cooperate fully with Congress, including an explicit decision not to attempt to assert executive privilege, even regarding direct communications between Reagan and his senior advisors. <3.4. Achieving the Administration's Agenda> An Administration might also determine that it will benefit politically from building a constructive relationship with Congress. Given the broad control Congress exercises over lawmaking and the government, a good working relationship may better position an Administration to implement its agenda, while a poor relationship may make Congress more likely to oppose its policies and restrict its operations. For President Jimmy Carter, a constructive working relationship with Congress was an explicit campaign promise. In his memoirs, the former President discussed this strategy and why he believed it facilitated his agenda. As President-elect, Carter began lobbying for the authority to reorganize the executive branch another campaign commitment. While Congress ultimately passed the Reorganization Act of 1977, Carter initially faced resistance from the House Committee on Government Operations Chairman Jack Brooks. He summarized the experience as follows: I learned one lasting lesson from this hair-raising experience: it was better to have Jack Brooks on my side than against me. I found him to be an excellent legislator, and went out of my way to work closely with him in the future. We soon became good friends and allies. I consulted with him on all my subsequent reorganization bills; largely because of his support, ten of eleven bills submitted passed Congress. <4. Voluntary Testimony in Practice> Committees can request that executive branch officials appear before them to discuss any matter within the jurisdiction of the committee. Any executive branch official, including the President, may testify before Congress under most circumstances. In practice, invitations are usually formal and may lead to negotiations on the logistics, format, and scope of the testimony. Committees have some discretion to define how they will receive testimony and accept or reject accommodations sought by the executive branch. The remainder of this report highlights a few important facets of current practice for each branch. <4.1. Budget Testimony> As part of the annual appropriations process, agency leaders are expected to appear before appropriations subcommittees to justify their agencies' budget requests. This means that the heads of Cabinet departments and other agencies are likely to testify before Congress at least once per year. The statutory process for submission of the executive branch's budget request, as established by Congress, makes the President the primary actor in the executive branch budget process and gives the President significant control over the final executive branch budget request submitted to Congress each year. Using this statutory authority, the Office of Management and Budget (OMB) has established procedures for agency communications with Congress on the budget that are included in OMB Circular A-11 . These guidelines provide for the confidentiality of budget deliberations within the executive branch and require that agencies submit testimony to OMB for review in advance of budget hearings. Outside those limitations, when communicating with Congress, the guidance states that agencies are to "give frank and complete answers to all questions." As discussed earlier, agencies may face repercussions if a committee decides they have not been sufficiently forthright. <4.2. Legislation and OMB> OMB also has a formal procedure for monitoring and clearing other communications to Congress from executive branch agencies. This guidance is outlined in OMB Circular A-19 . All legislative proposals originating within agencies subject to Circular A-19 , as well as other communications to Congress on pending legislation and formal Statements of Administration Policy, are first submitted to OMB for clearance. In a February 2017 memorandum, OMB Director Mick Mulvaney described the goals for the clearance process as follows: "agencies' legislative communications with Congress are consistent with the President's policies and objectives;" and "the Administration 'speaks with one voice' regarding legislation." <4.3. The Confirmation Process> The Senate may also use the confirmation process to attempt to ensure future access to agency leaders. As a general matter, the Senate may choose to reject a nominee if the body believes that he or she would not cooperate with Congress after being confirmed. It has become common practice to address this issue directly during confirmation hearings. Frequently, a Senator has asked the nominee appearing before the committee to agree to respond to future congressional requests if they are confirmed. While these commitments may not be binding on these officials, this process allows the Senate to explicitly establish expectations and put the nominee on the record consenting to this condition. This January 2017 confirmation hearing exchange between Department of Energy Secretary-designee Rick Perry and Senate Committee on Energy and National Resources Chairman Lisa Murkowski is an example of this practice: The CHAIRMAN. You may go ahead and be seated. Before you begin your statement, I am going to ask you three questions addressed to each nominee before this committee. The first is will you be available to appear before this committee and other congressional committees to represent departmental positions and respond to issues of concern to the Congress? Mr. PERRY. I will, Senator. <4.4. Areas of Potential Friction> While this report is focused on the avenues of formal communication between the branches in hearings, there are circumstances in which the executive branch is less likely to provide public testimony to Congress. While each situation is unique, there are at least three types of information that are more likely to cause such tension: national security and intelligence matters, law enforcement investigations, and executive branch deliberations. In all of these areas, Administrations have sometimes refused to appear before committees or sought to limit public testimony. The legal and prudential reasons for limiting disclosure of information in each of these areas may, depending on the circumstances, have particular merit. From the perspective of an executive branch official, the costs of voluntary compliance may outweigh the benefits in some cases, and they may decline to testify. Congress is under no obligation to accept such conclusions and may seek to compel those officials to testify. However, committees may choose to take these concerns into account. For instance, a committee may agree to limit the scope of a request, allow a witness to decline to testify on specific matters, or conduct a closed door session. This occurred, for example, during former special counsel Robert Mueller's testimony before the House Committee on the Judiciary and the House Permanent Select Committee on Intelligence. Over the course of his testimony on July 24, 2019, both committees allowed Mueller to decline to answer specific questions for all three of the above reasons. In this case, the committees accepted the limits put forward by Mueller, and they were able to hold the hearings.

Executive branch officials testify regularly before congressional committees on both legislative and oversight matters. Most committee requests for testimony are accepted, and the officials appear voluntarily without the need to issue subpoenas or use the other tools available to Congress to compel appearance. Congress's authority under the Constitution to legislate and investigate, along with its practices in exercising these powers, provide strong incentives for the executive branch to work voluntarily with Congress. Congress's control over appropriations and the organization and operations of the executive branch may encourage agency leaders to accommodate its requests rather than risk adverse actions toward their agencies. In addition, there are incentives for the executive branch to work with Congress in order to increase the likelihood of success for the Administration's policy agenda and to manage investigations with the potential to damage the Administration's public standing. These incentives are often sufficient to ensure that the executive branch is responsive to requests from the legislative branch. Many of these interactions are routine, and both Congress and the executive branch have developed formal procedures to promote appropriate engagement. This is particularly apparent in the procedures developed by the Office of Management and Budget in Circular A-11 and Circular A-19 to coordinate and control agency statements to Congress on the budget and pending legislation. There are situations, however, in which the incentives for compliance have been less effective in securing voluntary testimony. While each circumstance is unique, there are three identifiable areas in which executive branch officials may be more likely to conclude that the drawbacks of disclosure to Congress outweigh the incentives discussed in this report: national security and intelligence matters, ongoing law enforcement actions, and executive branch deliberations. Understanding the general incentives that support voluntary testimony, the practices that have developed around its delivery, and when executive branch officials are more likely to object to appearing before Congress may potentially help Congress navigate difficult cases.

crs_R46270

crs_R46270_0

<1. Overview> The World Health Organization (WHO) first declared COVID-19 a world health emergency in January 2020. Since the virus was first diagnosed in Wuhan, China, it has been detected in over 190 countries and all U.S. states. In early March, the focal point of infections shifted from China to Europe, especially Italy, but by April 2020, the focus shifted to the United States, where the number of infections was accelerating. The infection has sickened more than 4.5 million people, about one-third in the United States, with thousands of fatalities. More than 80 countries have closed their borders to arrivals from countries with infections, ordered businesses to close, instructed their populations to self-quarantine, and closed schools to an estimated 1.5 billion children. Over the eight-week period from mid-March to mid-May 2020, more than 36.5 million Americans filed for unemployment insurance. On May 8, 2020, the Bureau of Labor Statistics (BLS) reported that 20 million Americans lost their jobs in April 2020, pushing the total number of unemployed Americans to 23 million, out of a total civilian labor force of 156 million. The increase pushed the national unemployment rate to 14.7%, the highest since the Great Depression of the 1930s. Preliminary data also indicate that U.S. GDP fell by 4.8% in the first quarter of 2020, the largest quarterly decline in GDP since the fourth quarter of 2008 during the global financial crisis. In Europe, over 30 million people in Germany, France, the UK, Spain, and Italy have applied for state support of their wages, while first quarter 2020 data indicate that the Eurozone economy contracted by 3.8% at an annual rate, the largest quarterly decline since the series started in 1995. The European Commission released its economic forecast on May 6, 2020, which projects that EU economic growth in 2020 will contract by 7.4% and only partially recover in 2021. Foreign investors have pulled an estimated $26 billion out of developing Asian economies and more than $16 billion out of India, increasing concerns of a major economic recession in Asia. Some estimates indicate that 29 million people in Latin America could fall into poverty, reversing a decade of efforts to narrow income inequality. The pandemic crisis is challenging governments to implement monetary and fiscal policies that support credit markets and sustain economic activity, while they are implementing policies to develop vaccines and safeguard their citizens. In doing so, however, differences in policy approaches are straining relations between countries that promote nationalism and those that argue for a coordinated international response. Differences in policies are also straining relations between developed and developing economies and between northern and southern members of the Eurozone, challenging alliances, and raising questions about the future of global leadership. After a delayed response, central banks and monetary authorities are engaging in an ongoing series of interventions in financial markets and national governments are announcing fiscal policy initiatives to stimulate their economies. International organizations are also taking steps to provide loans and other financial assistance to countries in need. These and other actions have been labeled "unprecedented," a term that has been used frequently to describe the pandemic and the policy responses. As one measure of the global fiscal and monetary responses, the International Monetary Fund (IMF) estimated that government spending and revenue measures to sustain economic activity adopted through mid-April 2020 amounted to $3.3 trillion and that loans, equity injections and guarantees totaled an additional $4.5 trillion. The IMF also estimates that the increase in borrowing by governments globally will rise from 3.7% of global gross domestic product (GDP) in 2019 to 9.9% in 2020, as indicated in Figure 1 . Among developed economies, the fiscal balance to GDP ratio is projected to rise from 3.0% in 2019 to 10.7% in 2020; the ratio for the United States is projected to rise from 5.8% to 15.7%. According to the IMF, France, Germany, Italy, Japan, and the United Kingdom have each announced public sector support measures totaling more than 10% of their annual GDP. For developing economies, the fiscal balance to GDP ratio is projected to rise from 4.8% to 9.1%, significantly increasing their debt burden and raising prospects of defaults or debt rescheduling. According to some estimates, the most fiscally vulnerable countries are: Argentina, Venezuela, Lebanon, Jordan, Iran, Zambia, Zimbabwe, and South Africa. Among central banks, the Federal Reserve has taken extraordinary steps not experienced since the 2008-2009 global financial crisis to address the growing economic effects of COVID-19. The U.S. Congress also has approved historic fiscal spending packages. In other countries, central banks have lowered interest rates and reserve requirements, announced new financing facilities, relaxed capital buffers and, in some cases, countercyclical capital buffers, adopted after the 2008-2009 financial crisis, potentially freeing up an estimated $5 trillion in funds. Capital buffers were raised after the financial crisis to assist banks in absorbing losses and staying solvent during financial crises. In some cases, governments have directed banks to freeze dividend payments and halt pay bonuses. On March 11, the WHO announced that the outbreak was officially a pandemic, the highest level of health emergency. A growing list of economic indicators makes it clear that the outbreak is negatively affecting global economic growth on a scale that has not been experienced since at least the global financial crisis of 2008-2009. Global trade and GDP are forecast to decline sharply at least through the first half of 2020. The global pandemic is affecting a broad swath of international economic and trade activities, from services generally to tourism and hospitality, medical supplies and other global value chains, consumer electronics, and financial markets to energy, transportation, food, and a range of social activities, to name a few. The health and economic crises could have a particularly negative impact on the economies of developing countries that are constrained by limited financial resources and where health systems could quickly become overloaded. Without a clear understanding of when the global health and economic effects may peak and a greater understanding of the impact on economies, forecasts must necessarily be considered preliminary. Similarly, estimates of when any recovery might begin and the speed of the recovery are speculative. Efforts to reduce social interaction to contain the spread of the virus are disrupting the daily lives of most Americans and adding to the economic costs. Increasing rates of unemployment are raising the prospects of wide-spread social unrest and demonstrations in developed economies where lost incomes and health insurance are threatening living standards and in developing economies where populations reportedly are growing concerned over access to basic necessities and the prospects of rising levels of poverty. U.N. Secretary General Antonio Guterres argued in a video conference before the U.N. Security Council on April 10, 2020, that the pandemic also poses a significant threat to the maintenance of international peace and security potentially leading to an increase in social unrest and violence that would greatly undermine our ability to fight the disease. <2. Economic Forecasts> <2.1. Global Growth> The economic situation remains highly fluid. Uncertainty about the length and depth of the health crisis-related economic effects are fueling perceptions of risk and volatility in financial markets and corporate decision-making. In addition, uncertainties concerning the global pandemic and the effectiveness of public policies intended to curtail its spread are adding to market volatility. In a growing number of cases, corporations are postponing investment decisions, laying off workers who previously had been furloughed, and in some cases filing for bankruptcy. Compounding the economic situation is a historic drop in the price of crude oil that reflects the global decline in economic activity and prospects for disinflation, while also contributing to the decline of the global economy through various channels. On April 29, 2020, Federal Reserve Chairman Jay Powell stated that the Federal Reserve would use its "full range of tools" to support economic activity as the U.S. economic growth rate dropped 4.8% at an annual rate in the first quarter of 2020. In assessing the state of the U.S. economy, the Federal Open Market Committee released a statement indicating that, "The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term." The Organization for Economic Cooperation and Development (OECD) on March 2, 2020, lowered its forecast of global economic growth by 0.5% for 2020 from 2.9% to 2.4%, based on the assumption that the economic effects of the virus would peak in the first quarter of 2020 (see Table 1 ). However, the OECD estimated that if the economic effects of the virus did not peak in the first quarter, which is now apparent that it did not, global economic growth would increase by 1.5% in 2020. That forecast now seems to have been highly optimistic. On March 23, 2020, OECD Secretary General Angel Gurria stated that The sheer magnitude of the current shock introduces an unprecedented complexity to economic forecasting. The OECD Interim Economic Outlook, released on March 2, 2020, made a first attempt to take stock of the likely impact of COVID-19 on global growth, but it now looks like we have already moved well beyond even the more severe scenario envisaged then . [T]he pandemic has also set in motion a major economic crisis that will burden our societies for years to come. On March 26, 2020, the OECD revised its global economic forecast based on the mounting effects of the pandemic and measures governments have adopted to contain the spread of the virus. According to the updated estimate, the current containment measures could reduce global GDP by 2.0% per month, or an annualized rate of 24%, approaching the level of economic contraction not experienced since the Great Depression of the 1930s. The OECD estimates in Table 1 will be revised when the OECD releases updated country-specific data. Labeling the projected decline in global economic activity as the "Great Lockdown," the IMF released an updated forecast on April 14, 2020. The IMF concluded that the global economy would experience its "worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago." In addition, the IMF estimated that the global economy could decline by 3.0% in 2020, before growing by 5.8% in 2021; global trade is projected to fall in 2020 by 11.0% and oil prices are projected to fall by 42%, also shown in Table 1 . This forecast assumes that the pandemic fades in the second half of 2020 and that the containment measures can be reversed quickly. The IMF also stated that many countries are facing a multi-layered crisis that includes a health crisis, a domestic economic crisis, falling external demand, capital outflows, and a collapse in commodity prices. In combination, these various effects are interacting in ways that make forecasting difficult. Advanced economies as a group are forecast to experience an economic contraction in 2020 of 7.8% of GDP, with the U.S. economy projected by the IMF to decline by 5.9%, about twice the rate of decline experienced in 2009 during the financial crisis, as indicated in Figure 2 . The rate of economic growth in the Euro area is projected to decline by 7.5% of GDP. Most developing and emerging economies are projected to experience a decline in the rate of economic growth of 2.0%, reflecting tightening global financial conditions and falling global trade and commodity prices. In contrast, China, India, and Indonesia are projected to experience small, but positive rates of economic growth in 2020. The IMF also argues that recovery of the global economy could be weaker than projected as a result of: lingering uncertainty about possible contagion, lack of confidence, and permanent closure of businesses and shifts in the behavior of firms and households. As a result of the various challenges, the IMF qualified its forecast by arguing that A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely. This would follow if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment. Before the COVID-19 outbreak, the global economy was struggling to regain a broad-based recovery as a result of the lingering impact of growing trade protectionism, trade disputes among major trading partners, falling commodity and energy prices, and economic uncertainties in Europe over the impact of the UK withdrawal from the European Union. Individually, each of these issues presented a solvable challenge for the global economy. Collectively, however, the issues weakened the global economy and reduced the available policy flexibility of many national leaders, especially among the leading developed economies. In this environment, COVID-19 could have an outsized impact. While the level of economic effects will eventually become clearer, the response to the pandemic could have a significant and enduring impact on the way businesses organize their work forces, global supply chains, and how governments respond to a global health crisis. The OECD estimates that increased direct and indirect economic costs through global supply chains, reduced demand for goods and services, and declines in tourism and business travel mean that, "the adverse consequences of these developments for other countries (non-OECD) are significant." Global trade, measured by trade volumes, slowed in the last quarter of 2019 and had been expected to decline further in 2020, as a result of weaker global economic activity associated with the pandemic, which is negatively affecting economic activity in various sectors, including airlines, hospitality, ports, and the shipping industry. According to the OECD's updated forecast The greatest impact of the containment restrictions will be on retail and wholesale trade, and in professional and real estate services, although there are notable differences between countries. Business closures could reduce economic output in advanced and major emerging economies by 15% or more; other emerging economies could experience a decline in output of 25%. Countries dependent on tourism could be affected more severely, while countries with large agricultural and mining sectors could experience less severe effects. Economic effects likely will vary across countries reflecting differences in the timing and degree of containment measures. In addition, the OECD argues that China's emergence as a global economic actor marks a significant departure from previous global health episodes. China's growth, in combination with globalization and the interconnected nature of economies through capital flows, supply chains, and foreign investment, magnify the cost of containing the spread of the virus through quarantines and restrictions on labor mobility and travel. China's global economic role and globalization mean that trade is playing a role in spreading the economic effects of COVID-19. More broadly, the economic effects of the pandemic are being spread through three trade channels: (1) directly through supply chains as reduced economic activity is spread from intermediate goods producers to finished goods producers; (2) as a result of a drop overall in economic activity, which reduces demand for goods in general, including imports; and (3) through reduced trade with commodity exporters that supply producers, which, in turn, reduces their imports and negatively affects trade and economic activity of exporters. <2.2. Global Trade> According to an April 8, 2020, forecast by the World Trade Organization (WTO), global trade volumes are projected to decline between 13% and 32% in 2020 as a result of the economic impact of COVID-19, as indicated in Table 2 . The WTO argues that the wide range in the forecast represents the high degree of uncertainty concerning the length and economic impact of the pandemic and that the actual economic outcome could be outside this range, either higher or lower. The WTO's more optimistic scenario assumes that trade volumes recover quickly in the second half of 2020 to their pre-pandemic trend, or that the global economy experiences a V-shaped recovery. The more pessimistic scenario assumes a partial recovery that lasts into 2021, or that global economic activity experiences more of a U-shaped recovery. The WTO concludes, however, that the impact on global trade volumes could exceed the drop in global trade during the height of the 2008-2009 financial crisis. The estimates indicate that all geographic regions will experience a double-digit drop in trade volumes, except for "other regions," which consists of Africa, the Middle East, and the Commonwealth of Independent States. North America and Asia could experience the steepest declines in export volumes. The forecast also projects that sectors with extensive value chains, such as automobile products and electronics, could experience the steepest declines. Although services are not included in the WTO forecast, this segment of the economy could experience the largest disruption as a consequence of restrictions on travel and transport and the closure of retail and hospitality establishments. Such services as information technology, however, are growing to satisfy the demand of employees who are working from home. <3. Economic Policy Challenges> The challenge for policymakers has been one of implementing targeted policies that address what had been expected to be short-term problems without creating distortions in economies that can outlast the impact of the virus itself. Policymakers, however, are being overwhelmed by the quickly changing nature of the global health crisis that appears to be turning into a global trade and economic crisis whose effects on the global economy are escalating. As the economic effects of the pandemic grow, policymakers are giving more weight to policies that address the immediate economic effects at the expense of longer-term considerations such as debt accumulation. Initially, many policymakers had felt constrained in their ability to respond to the crisis as a result of limited flexibility for monetary and fiscal support within conventional standards, given the broad-based synchronized slowdown in global economic growth, especially in manufacturing and trade that had developed prior to the viral outbreak. The pandemic is also affecting global politics as world leaders are cancelling international meetings, competing for medical supplies, and some nations reportedly are stoking conspiracy theories that shift blame to other countries. Initially, the economic effects of the virus were expected to be short-term supply issues as factory output fell because workers were quarantined to reduce the spread of the virus through social interaction. The drop in economic activity, initially in China, has had international repercussions as firms experienced delays in supplies of intermediate and finished goods through supply chains. Concerns are growing, however, that virus-related supply shocks are creating more prolonged and wide-ranging demand shocks as reduced activity by consumers and businesses leads to a lower rate of economic growth. As demand shocks unfold, businesses experience reduced activity and profits and potentially escalating and binding credit and liquidity constraints. While manufacturing firms are experiencing supply chain shocks, reduced consumer activity through social distancing is affecting the services sector of the economy, which accounts for two-thirds of annual U.S. economic output. In this environment, manufacturing and service firms have tended to hoard cash, which affects market liquidity. In response, central banks have lowered interest rates where possible and expanded lending facilities to provide liquidity to financial markets and to firms potentially facing insolvency. The longer the economic effects persist, the greater the economic impacts are likely to be as the effects are spread through trade and financial linkages to an ever-broadening group of countries, firms and households. These growing economic effects potentially increase liquidity constraints and credit market tightening in global financial markets as firms hoard cash, with negative fallout effects on economic growth. At the same time, financial markets are factoring in an increase in government bond issuance in the United States, Europe, and elsewhere as government debt levels are set to rise to meet spending obligations during an expected economic recession and increased fiscal spending to fight the effects of COVID-19. Unlike the 2008-2009 financial crisis, reduced demand by consumers, labor market issues, and a reduced level of activity among businesses, rather than risky trading by global banks, has led to corporate credit issues and potential insolvency. These market dynamics have led some observers to question if these events mark the beginning of a full-scale global financial crisis. Liquidity and credit market issues present policymakers with a different set of challenges than addressing supply-side constraints. As a result, the focus of government policy has expanded from a health crisis to macroeconomic and financial market issues that are being addressed through a combination of monetary, fiscal, and other policies, including border closures, quarantines, and restrictions on social interactions. Essentially, while businesses are attempting to address worker and output issues at the firm level, national leaders are attempting to implement fiscal policies to prevent economic growth from falling sharply by assisting workers and businesses that are facing financial strains, and central bankers are adjusting monetary policies to address mounting credit market issues. In the initial stages of the health crisis, households did not experience the same kind of wealth losses they saw during the 2008-2009 financial crisis when the value of their primary residence dropped sharply. However, with unemployment numbers rising rapidly, job losses could result in defaults on mortgages and delinquencies on rent payments, unless financial institutions provide loan forbearance or there is a mechanism to provide financial assistance. In turn, mortgage defaults could negatively affect the market for mortgage-backed securities, the availability of funds for mortgages, and negatively affect the overall rate of economic growth. Losses in the value of most equity markets in the U.S., Asia, and Europe could also affect household wealth, especially that of retirees living on a fixed income and others who own equities. Investors that trade in mortgage-backed securities reportedly have been reducing their holdings while the Federal Reserve has been attempting to support the market. In the current environment, even traditional policy tools, such as monetary accommodation, apparently have not been processed by markets in a traditional manner, with equity market indices displaying heightened, rather than lower, levels of uncertainty following the Federal Reserve's cut in interest rates. Such volatility is adding to uncertainties about what governments can do to address weaknesses in the global economy. <4. Economic Developments> Between late February and early May, 2020, financial markets from the United States to Asia and Europe have been whipsawed as investors have grown concerned that COVID-19 would create a global economic and financial crisis with few metrics to indicate how prolonged and extensive the economic effects may be. Investors have searched for safe-haven investments, such as the benchmark U.S. Treasury 10-year security, which experienced a historic drop in yield to below 1% on March 3, 2020. In response to concerns that the global economy was in a freefall, the Federal Reserve lowered key interest rates on March 3, 2020, to shore up economic activity, while the Bank of Japan engaged in asset purchases to provide short-term liquidity to Japanese banks; Japan's government indicated it would also assist workers with wage subsidies. The Bank of Canada also lowered its key interest rate. The International Monetary Fund (IMF) announced that it was making about $50 billion available through emergency financing facilities for low-income and emerging market countries and through funds available in its Catastrophe Containment and Relief Trust (CCRT). Reflecting investors' uncertainties, the Dow Jones Industrial Average (DJIA) lost about one-third of its value between February 14, 2020, and March 23, 2020, as indicated in Figure 3 . Expectations that the U.S. Congress would adopt a $2.0 trillion spending package moved the DJIA up by more than 11% on March 24, 2020. From March 23 to April 15, the DJIA moved higher by18%, paring its initial losses by half. Since then, the DJIA has moved erratically as investors have weighed news about the human cost and economic impact of the pandemic and the prospects of various medical treatments. For some policymakers, the drop in equity prices has raised concerns that foreign investors might attempt to exploit the situation by increasing their purchases of firms in sectors considered important to national security. For instance, Ursula von der Leyen, president of the European Commission, urged EU members to better screen foreign investments, especially in areas such as health, medical research, and critical infrastructure. Similar to the 2008-2009 global financial crisis, central banks have implemented a series of monetary operations to provide liquidity to their economies. These actions, however, initially were not viewed entirely positively by all financial market participants who questioned the use of policy tools by central banks that are similar to those employed during the 2008-2009 financial crisis, despite the fact that the current and previous crisis are fundamentally different in origin. During the previous financial crisis, central banks intervened to restart credit and spending by banks that had engaged in risky assets. In the current environment, central banks are attempting to address financial market volatility and prevent large-scale corporate insolvencies that reflect the underlying economic uncertainty caused by the pandemic. Similar to conditions during the 2008-2009 financial crisis, the dollar has emerged as the preferred currency by investors, reinforcing its role as the dominant global reserve currency. As indicated in Figure 4 , the dollar appreciated more than 3.0% during the period between March 3 and March 13, 2020, reflecting increased international demand for the dollar and dollar-denominated assets. Since the highs reached on March 23, the dollar has given up some of its value against other currencies, but has remained about 10% higher than it was at the beginning of the year. According to a recent survey by the Bank for International Settlements (BIS), the dollar accounts for 88% of global foreign exchange market turnover and is key in funding an array of financial transactions, including serving as an invoicing currency to facilitate international trade. It also accounts for two-thirds of central bank foreign exchange holdings, half of non-U.S. banks foreign currency deposits, and two-thirds of non-U.S. corporate borrowings from banks and the corporate bond market. As a result, disruptions in the smooth functioning of the global dollar market can have wide-ranging repercussions on international trade and financial transactions. The international role of the dollar also increases pressure on the Federal Reserve essentially to assume the lead role as the global lender of last resort. Reminiscent of the financial crisis, the global economy has experienced a period of dollar shortage, requiring the Federal Reserve to take numerous steps to ensure the supply of dollars to the U.S. and global economies, including activating existing currency swap arrangements, establishing such arrangements with additional central banks, and creating new financial facilities to provide liquidity to central banks and monetary authorities. Typically, banks lend long-term and borrow short-term and can only borrow from their home central bank. In turn, central banks can only provide liquidity in their own currency. Consequently, a bank can become illiquid in a panic, meaning it cannot borrow in private markets to meet short-term cash flow needs. Swap lines are designed to allow foreign central banks the funds necessary to provide needed liquidity to their country's banks in dollars. <4.1. March 2020> The yield on U.S. Treasury securities dropped to historic levels on March 6, 2020, and March 9, 2020, as investors continued to move out of stocks and into Treasury securities and other sovereign bonds, including UK and German bonds, due in part to concerns over the impact the pandemic would have on economic growth and expectations the Federal Reserve and other central banks would lower short-term interest rates. On March 5, the U.S. Congress passed a $8 billion spending bill to provide assistance for health care, sick leave, small business loans, and international assistance. At the same time, commodity prices dropped sharply as a result of reduced economic activity and disagreements among oil producers over production cuts in crude oil and lower global demand for commodities, including crude oil. The drop in some commodity prices raised concerns about corporate profits and led some investors to sell equities and buy sovereign bonds. In overnight trading in various sessions between March 8, and March 24, U.S. stock market indexes moved sharply (both higher and lower), triggering automatic circuit breakers designed to halt trading if the indexes rise or fall by more than 5% when markets are closed and 7% when markets are open. By early April, the global mining industry had reduced production by an estimated 20% in response to falling demand and labor quarantines and as a strategy for raising prices. Ahead of a March 12, 2020, scheduled meeting of the European Central Bank (ECB), the German central bank (Deutsche Bundesbank) announced a package of measures to provide liquidity support to German businesses and financial support for public infrastructure projects. At the same time, the Fed announced that it was expanding its repo market transactions (in the repurchase market, investors borrow cash for short periods in exchange for high-quality collateral like Treasury securities) after stock market indexes fell sharply, government bond yields fell to record lows (reflecting increased demand), and demand for corporate bonds fell. Together these developments raised concerns for some analysts that instability in stock markets could threaten global financial conditions. On March 11, as the WHO designated COVID-19 a pandemic, governments and central banks adopted additional monetary and fiscal policies to address the growing economic impact. European Central Bank (ECB) President-designate Christine Lagarde in a conference call to EU leaders warned that without coordinated action, Europe could face a recession similar to the 2008-2009 financial crisis. The Bank of England lowered its key interest rate, reduced capital buffers for UK banks, and provided a funding program for small and medium businesses. The UK Chancellor of the Exchequer also proposed a budget that would appropriate 30 billion (about $35 billion) for fiscal stimulus spending, including funds for sick pay for workers, guarantees for loans to small businesses, and cuts in business taxes. The European Commission announced a 25 billion (about $28 billion) investment fund to assist EU countries and the Federal Reserve announced that it would expand its repo market purchases to provide larger and longer-term funding to provide added liquidity to financial markets. President Trump imposed restrictions on travel from Europe to the United States on March 12, 2020, surprising European leaders and adding to financial market volatility. At its March 12 meeting, the ECB announced 27 billion (about $30 billion) in stimulus funding, combining measures to expand low-cost loans to Eurozone banks and small and medium-sized businesses and implement an asset purchase program to provide liquidity to firms. Germany indicated that it would provide tax breaks for businesses and "unlimited" loans to affected businesses. The ECB's Largarde roiled markets by stating that it was not the ECB's job to "close the spread" between Italian and German government bond yields (a key risk indicator for Italy), a comment reportedly interpreted as an indicator the ECB was preparing to abandon its support for Italy, a notion that was denied by the ECB. The Fed also announced that it would further increase its lending in the repo market and its purchases of Treasury securities to provide liquidity. As a result of tight market conditions for corporate bonds, firms turned to their revolving lines of credit with banks to build up their cash reserves. The price of bank shares fell, reflecting sales by investors who reportedly had grown concerned that banks would experience a rise in loan defaults. Despite the various actions, the DJIA fell by nearly 10% on March 12, recording the worst one-day drop since 1987. Between February 14 and March 12, the DJIA fell by more than 8,000 points, or 28% of its value. Credit rating agencies began reassessing corporate credit risk, including the risk of firms that had been considered stable. On March 13, President Trump declared a national emergency, potentially releasing $50 billion in disaster relief funds to state and local governments. The announcement moved financial markets sharply higher, with the DJIA rising 10%. Financial markets also reportedly moved higher on expectations the Fed would lower interest rates. House Democrats and President Trump agreed to a $2 trillion spending package to provide paid sick leave, unemployment insurance, food stamps, support for small businesses, and other measures. The EU indicated that it would relax budget rules that restrict deficit spending by EU members. In other actions, the People's Bank of China cut its reserve requirements for Chinese banks, potentially easing borrowing costs for firms and adding $79 billion in funds to stimulate the Chinese economy; Norway's central bank reduced its key interest rate; the Bank of Japan acquired billions of dollars of government securities (thereby increasing liquidity); and the Reserve Bank of Australia injected nearly $6 billion into its financial system. The Bank of Canada also lowered its overnight bank lending rate. The Federal Reserve lowered its key interest rate to near zero on March 15, 2020, arguing that the pandemic had "harmed communities and disrupted economic activity in many countries, including the United States" and that it was prepared to use its "full range of tools." It also announced an additional $700 billion in asset purchases, including Treasury securities and mortgage-backed securities, expanded repurchase operations, activated dollar swap lines with Canada, Japan, Europe, the UK, and Switzerland, opened its discount window to commercial banks to ease household and business lending, and urged banks to use their capital and liquidity buffers to support lending. Despite the Fed's actions the previous day to lower interest rates, interest rates in the U.S. commercial paper market, where corporations raise cash by selling short-term debt, rose on March 16, 2020, to their highest levels since the 2008-2009 financial crisis, prompting investors to call on the Federal Reserve to intervene. The DJIA dropped nearly 3,000 points, or about 13%. Most automobile manufacturers announced major declines in sales and production; similarly, most airlines reported they faced major cutbacks in flights and employee layoffs due to diminished economic activity. Economic data from China indicated the economy would slow markedly in the first quarter of 2020, potentially greater than that experienced during the global financial crisis. The Bank of Japan announced that it would double its purchases of exchange traded funds and the G-7 countries issued a joint statement promising "a strongly coordinated international approach," although no specific actions were mentioned. The IMF issued a statement indicating its support for additional fiscal and monetary actions by governments and that the IMF "stands ready to mobilize its $1 trillion lending capacity to help its membership." The World Bank also promised an additional $14 billion to assist governments and companies address the pandemic. Following the drop in equity market indexes the previous day, the Federal Reserve unveiled a number of facilities on March 17, 2020, in some cases reviving actions it had not taken since the financial crisis. It announced that it would allow the 24 primary dealers in Treasury securities to borrow cash collateralized against some stocks, municipal debt, and higher-rated corporate bonds; revive a facility to buy commercial paper; and provide additional funding for the overnight repo market. The UK government proposed government-backed loans to support business; a three-month moratorium on mortgage payments for homeowners; a new lending facility with the Bank of England to provide low-cost commercial paper to support lending; and loans for businesses. In an emergency session on March 18, the ECB announced a temporary, non-standard asset purchase program, the Pandemic Emergency Purchase Program (PEPP), to acquire an additional 750 billion (over $820 billion) in public and private sector bonds to counter the risks posed by the pandemic crisis (as of May 5, the ECB had purchased about $180 billion in securities). The ECB also broadened the types of assets it would accept as collateral to include non-financial commercial paper, eased collateral standards for banks, and waived restrictions on acquiring Greek government debt. The program was expected to end no later than yearend 2020. The Federal Reserve broadened its central bank dollar swap lines to include Brazil, Mexico, Australia, Denmark, Norway, and Sweden. Automobile manufacturers announced they were suspending production at an estimated 100 plants across North America, following similar plant closures in Europe. Major U.S. banks announced a moratorium on share repurchases, or stock buy-backs, denying equity markets a major source of support and potentially amplifying market volatility. During the week, more than 22 central banks in emerging economies, including Brazil, Turkey, and Vietnam, lowered their key interest rates. By March 19, 2020, investors were selling sovereign and other bonds as firms and other financial institutions attempted to increase their cash holdings, although actions central banks took during the week appeared to calm financial markets. Compared to previous financial market dislocations in which stock market values declined while bond prices rose, stock and bond values fell at the same time in March 2020 as investors reportedly adopted a "sell everything" mentality to build up cash reserves. Senate Republicans introduced the Coronavirus Aid, Relief, and Economic Security Act to provide $2 trillion in spending to support the U.S. economy. By the close of trading on March 20, the DJIA index had fallen by 17% from March 13. At the same time, the dollar continued to gain in value against other major currencies and the price of Brent crude oil dropped close to $20 per barrel on March 20, as indicated in Figure 5 . The Federal Reserve announced that it would expand a facility to support the municipal bond market. Britain's Finance Minister announced an "unprecedented" fiscal package to pay up to 80% of an employee's wages and deferring value added taxes by businesses. The ECB's Largarde justified actions by the Bank during the week to provide liquidity by arguing that the "coronavirus pandemic is a public health emergency unprecedented in recent history." Market indexes fell again on March 23 as the Senate debated the parameters of a new spending bill to support the economy. Oil prices also continued to fall as oil producers appeared to be in a standoff over cuts to production. Financial markets continued to fall on March 23, 2020, as market indexes reached their lowest point since the start of the pandemic crisis. The Federal Reserve announced a number of new facilities to provide an unlimited expansion in bond buying programs. The measures included additional purchases of Treasury and mortgage-backed securities; additional funding for employers, consumers, and businesses; establishing the Primary Market Corporate Credit Facility (PMCCF) to support issuing new bonds and loans and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds; establishing the Term Asset-Backed Securities Loan Facility (TALF), to support credit to consumers and businesses; expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to provide credit to municipalities; and expanding the Commercial Paper Funding Facility (CPFF) to facilitate the flow of credit to municipalities. The OECD released a statement encouraging its members to support "immediate, large-scale and coordinated actions." These actions included (1) more international cooperation to address the health crisis; (2) coordinated government actions to increase spending to support health care, individuals, and firms; (3) coordinated central bank action to supervise and regulate financial markets; and (4) policies directed at restoring confidence. Reacting to the Fed's announcement, the DJIA closed up 11% on March 24, marking one of the sharpest reversals in the market index since February 2020. European markets, however, did not follow U.S. market indexes as various indicators signaled a decline in business activity in the Eurozone that was greater than that during the financial crisis and indicated the growing potential for a severe economic recession. U.S. financial markets were buoyed on March 25 and 26 over passage in Congress of a $2.2 trillion economic stimulus package. On March 27, leaders of the G-20 countries announced through a video conference they had agreed to inject $5 trillion into the global economy and to do "whatever it takes to overcome the pandemic." Also at the meeting, the OECD offered an updated forecast of the viral infection, which projected that the global economy could shrink by as much as 2% a month. Nine Eurozone countries, including France, Italy, and Spain called on the ECB to consider issuing "coronabonds," a common European debt instrument to assist Eurozone countries in fighting COVID-19. The ECB announced that it was removing self-imposed limits that it had followed in previous asset purchase programs that restricted its purchases of any one country's bonds. Japan announced that it would adopt an emergency spending package worth $238 billion, or equivalent to 10% of the country's annual GDP. Despite the various actions, global financial markets turned down March 27 (the DJIA dropped by 900 points) reportedly over volatility in oil markets and concerns that the economic effects of the COVID-19 pandemic were worsening. By March 30, central banks in developing countries from Poland, Columbia, South Africa, the Philippines, Brazil, and the Czech Republic reportedly had begun adopting monetary policies similar to that of the Federal Reserve to stimulate their economies. In commodity markets, Brent crude oil prices continued to fall, reaching a low of $22.76. Strong global demand for dollars continued to put upward pressure on the international value of the dollar. In response, the Federal Reserve introduced a new temporary facility that would work with its swap lines to allow central banks and international monetary authorities to enter into repurchase agreements with the Fed. From mid-March to mid-April, U.S. workers' claims for unemployment benefits reached over 17 million as firms faced a collapse in demand and requirements for employees to self-quarantine caused them to begin furloughing or laying off employees. Financial markets began to recover somewhat in early April in response to the accumulated monetary and fiscal policy initiatives, but remained volatile as a result of uncertainty over efforts to reach an output agreement among oil producers and the continued impact of the viral health effects. <4.2. April 2020> The Federal Reserve announced on April 8 that it was establishing a facility to fund small businesses through the Paycheck Protection Program. Japan also announced that it was preparing to declare areas around Tokyo to be in a state of emergency and that it would adopt a $989 billion funding package. On April 9, OPEC and Russia reportedly agreed to cut oil production by 10 million barrels per day. On April 15, G-20 finance ministers and central bank governors announced their support for the proposed agreement by Saudi Arabia and Russia to reduce oil production. They also announced an agreement to freeze government loan payments until the end of the year to help low-income developing countries address the pandemic and asked international financial institutions to do likewise. G-7 finance ministers and central bank governors agreed to support the G-20 proposal to suspend debt payments by developing countries. Eurozone finance ministers announced a 500 billion (about $550 billion) emergency spending package to support governments, businesses, and workers. Reportedly, the measure will provide funds to the European Stability Mechanism, the European Investment Bank, and for unemployment insurance. In other policy areas, the IMF announced that it was doubling its emergency lending capability to $100 billion, in response to requests from more than 90 countries for assistance. The Bank of England announced that it would take the unprecedented move of temporarily directly financing UK government emergency spending needs through monetary measures rather than through the typical method of issuing securities to fight the effects of COVID-19. Secretary-General of the United Nations Guterres declared on April 9, 2020, before the United Nations Security Council that the pandemic poses a significant threat to the maintenance of international peace and security and outlined eight specific risks, including the erosion of trust in public institutions, increased risks from terrorism and bioterrorism, and worsening existing human rights abuses. Federal Reserve Chairman Jerome Powell, stating that the U.S. economy was deteriorating "with alarming speed," announced on April 10 that the Fed would provide an additional $2.3 trillion in loans, including a new financial facility to assist firms by acquiring shares in exchange traded funds that own the debt of lower-rated, riskier firms that are among the most exposed to deteriorating economic conditions associated with COVID-19 and low oil prices. On April 16, the U.S. Labor Department reported that 5.2 million Americans filed for unemployment insurance during the previous week, raising the total claims since mid-March to over 22 million. According to Chinese official statistics, the Chinese economy shrank by 6.8% on an annual basis during the first quarter of 2020, reportedly the first such contraction in 40 years. Financial market indicators rose on April 17, reportedly on an upbeat sentiment that actions taken by the Federal Reserve and other central banks would stabilize conditions in the corporate credit market. The price of futures contracts for oil delivery in May 2020 for the U.S. West Texas Intermediate (WTI) fell to $18 per barrel, the lowest it had been since 2002, reportedly reflecting rising inventories and low global demand. Leaders of emerging economies in Latin America and Africa argued that the G-20 call for suspension of interest payments fell short of what is needed. National leaders from Columbia, Brazil, Mexico, and Chile encouraged the World Bank, the InterAmerican Development Bank and the IMF to double their net lending to Latin America, arguing that, "The Covid-19 pandemic is a shock of unprecedented magnitude, uncertain duration and catastrophic consequences that, if not properly addressed, could lead to one of the most tragic episodes in the history of Latin America and the Caribbean." On April 19, 2020, the price of oil fell to its lowest level in two decades, reportedly reflecting a significant drop in global demand for energy and rising inventories. Some Eurozone members reportedly argued for the ECB to create a Eurozone "bad bank" to remove billions of euros in non-performing debts from banks' balance sheets to provide more capacity for Eurozone banks at a potentially critical time when banks could see an increase in non-performing loans. The World Bank confirmed that its "pandemic bonds" would pay out $133 billion to the poorest countries affected by the pandemic. On April 21, 2020, Agricultural Ministers of the G-20 countries released a joint statement that supported measures to "ensure the health, safety, welfare, and mobility of workers in agriculture and throughout the food supply chain." The joint statement also indicated that the G-20 countries would adopt measures that are "targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global food supply chains." The statement also indicated that the G-20 would, "guard against any unjustified restrictive measures that could lead to excessive food price volatility in international markets and threaten the food security and nutrition of large proportions of the world population, especially the most vulnerable living in environments of low food security." On April 23, 2020, the House passed H.R. 266 ( P.L. 116-139 ), the Paycheck Protection Program and Health Care Enhancement Act, following similar actions by the Senate the previous day. The measure will provide $484 billion for small business loans, health care providers, and COVID-19 testing. The U.S. Labor Department reported that 4.4 million Americans filed for unemployment insurance in the previous week, raising the total that have applied to over 26 million. Indicators of manufacturing and services activity in Europe dropped to their lowest level since 1990, reflecting the impact of the pandemic on the European economy. The Bank of England indicated that it would quadruple its borrowing over the second quarter of 2020, reflecting a contraction in the UK economy, lower tax revenues, and increased financial demands to support fiscal policy measures to fight the pandemic. The Saudi Presidency of the G-20 called on international organizations on April 24, 2020, to fund an emergency response to the pandemic. The Bank of Japan announced on April 27, 2020, that it would purchase unlimited amounts of government bonds and quadruple its purchases of corporate debt to keep interest rates low and stimulate the Japanese economy. At its April 29, 2020, scheduled meeting, the U.S. Federal Open Market Committee left its main interest rates unchanged, but reiterated its commitment to use "its full range of tools to support the U.S. economy." The policy statement concluded that, "The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term." The Federal Reserve also announced a change in its eligibility requirements for a $500 billion lending program for municipalities. The statement followed the release of the preliminary estimate of U.S. first quarter GDP, which indicated that the economy had contracted by an annualized rate of 4.8%. On April 30, 2020, the Department of Labor released its weekly data on applications for unemployment insurance, which indicated that an additional 3.8 million people had filed for unemployment insurance during the week, raising the total number who have applied to 30 million. The Federal Reserve also announced an expansion in its medium-size business loan program by allowing firms with up to 15,000 employees or with revenues up to $5 billion to access a new $600 billion program. In addition, the Fed lowered the minimum loan amount for small businesses and announced a loan program to assist riskier businesses. At the same time, the ECB expanded a record low-interest rate loan program for Eurozone banks to support economic activity, while warning that the Eurozone economy could contract between 5% and 12% in 2020 as it faces, "an economic contraction of a magnitude and speed that are unprecedented in peacetime." The ECB also announced a new non-targeted low-interest rate pandemic emergency longer-term refinancing operation (PELTROs) to complement its Pandemic Emergency Refinance Operations announced in March. House Speaker Pelosi stated that House Democrats were considering a $1 trillion spending bill to support state and local governments. In a development that seemed incongruous with the broader economic situation, between April 1, 2020, and April 30, 2020, the DJIA rose more than 3,400 points, or 16%, marking the strongest monthly increase since 1987. <4.3. May 2020> On May 5, 2020, Germany's Constitutional court issued a ruling that could prevent the German central bank, the Bundesbank, from making additional bond purchases under the Pandemic Emergency Purchase Program (PEPP). The ECB's program is intended to ease borrowing costs across the Eurozone to stimulate economic growth. The U.S. Census Bureau reported on May 5 that U.S. exports and import fell in March; exports fell by a greater amount than imports, thereby increasing the monthly U.S. goods and services trade deficit. The trade balance for March was -$44.5 billion, an increase of about $4.6 billion over the trade deficit in February. The decline in export and import values reflected lower imports and exports of both goods and services. On May 6, 2020, the European Commission released its economic forecast, which indicated that economic activity in the EU would decline by 7.4% in 2020 as a result of measures to contain the pandemic. The Commission forecast that economic growth would advance by 6.0% in 2021, assuming the containment measures can be lifted gradually, the viral effects remain contained, and that the fiscal and monetary measures implemented by the EU members are effective in blunting the negative effects on economies. On May 7, the Labor Department announced that 3.2 million Americans had filed for unemployment insurance during the week, raising the total that had filed over the previous seven weeks to 33 million. On May 8, the U.S. Department of Labor announced that 20.5 million Americans had lost their jobs in April, pushing the national unemployment rate to 14.5%. Despite the rise in the unemployment rate, the DJIA rose by 2.0%, reportedly based on optimism that the monetary policy actions the Federal Reserve, the ECB, and the Bank of Japan have taken to support financial markets and optimism that the health crisis is ebbing. On May 12, House Democrats proposed a $3 trillion supplemental spending bill to provide additional financial resources to state and local governments and for other purposes. On May 13, the UK Office of National Statistics reported that UK GDP contracted by 2.0% in the first quarter, the largest decline in the UK's GDP since 2008 with all major economic sector affected. On May 14, the U.S. Department of Labor announced that an additional 3.0 million Americans had filed for unemployment insurance during the previous week, increasing the total number filing for unemployment insurance over the previous eight weeks to 36 million. <5. Policy Responses> In response to growing concerns over the global economic impact of the pandemic, G-7 finance ministers and central bankers released a statement on March 3, 2020, indicating they will "use all appropriate policy tools" to sustain economic growth. The Finance Ministers also pledged fiscal support to ensure health systems can sustain efforts to fight the outbreak. In most cases, however, countries have pursued their own divergent strategies, in some cases including banning exports of medical equipment. Following the G-7 statement, the U.S. Federal Reserve (Fed) lowered its federal funds rate by 50 basis points, or 0.5%, to a range of 1.0% to 1.25% due to concerns about the "evolving risks to economic activity of the COVID-19." At the time, the cut was the largest one-time reduction in the interest rate by the Fed since the global financial crisis. After a delayed response, other central banks have begun to follow the actions of the G-7 countries. Most central banks have lowered interest rates and acted to increase liquidity in their financial systems through a combination of measures, including lowering capital buffers and reserve requirements, creating temporary lending facilities for banks and businesses, and easing loan terms. In addition, national governments have adopted various fiscal measures to sustain economic activity. In general, these measures include making payments directly to households, temporarily deferring tax payments, extending unemployment insurance, and increasing guarantees and loans to businesses. See the Appendix to this report for detailed information about the policy actions by individual governments. <5.1. The United States> Recognizing the growing impact the pandemic is having on financial markets and economic growth, the Federal Reserve (Fed) has taken a number of steps to promote economic and financial stability involving the Fed's monetary policy and "lender of last resort" roles. Some of these actions are intended to stimulate economic activity by reducing interest rates and others are intended to provide liquidity to financial markets so that firms have access to needed funding. In announcing its decisions, the Fed indicated that "[t]he COVID-19 outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected. " On March 31, 2020, the Trump Administration announced that it was suspending for 90 days tariffs it had placed on imports of apparel and light trucks from China, but not on other consumer goods and metals. In a speech on May 13, Federal Reserve Chairman Jerome Powell stated that the Federal Reserve's analysis indicated that of individuals working in February, "almost 40 percent of those in households making less than $40,000 a year had lost a job in March." Chairman Powell also indicated that given the extraordinary nature of the current economic downturn that the Fed would, "continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way." In characterizing the current challenges, Powell stated The overall policy response to date has provided a measure of relief and stability, and will provide some support to the recovery when it comes. But the coronavirus crisis raises longer-term concerns as well. The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy. Avoidable household and business insolvencies can weigh on growth for years to come. Long stretches of unemployment can damage or end workers' careers as their skills lose value and professional networks dry up, and leave families in greater debt. The loss of thousands of small- and medium-sized businesses across the country would destroy the life's work and family legacy of many business and community leaders and limit the strength of the recovery when it comes. These businesses are a principal source of job creation something we will sorely need as people seek to return to work. A prolonged recession and weak recovery could also discourage business investment and expansion, further limiting the resurgence of jobs as well as the growth of capital stock and the pace of technological advancement. The result could be an extended period of low productivity growth and stagnant incomes. On April 29, the Bureau of Economic Analysis released first quarter U.S. GDP data indicating that the U.S. economy had contracted by 4.8% at an annual rate, as indicated in Figure 6 . A decline in economic activity of 30% or more was recorded in motor vehicles and parts, recreation, food services and accommodation and transportation sectors, reflecting the quarantine measures adopted across the country. In contrast to the other sectors of the economy, food and beverage consumption increased by 25% as a result of the switch by individuals from eating at restaurants and other commercial food service establishments to preparing and eating food at home. On May 5, 2020, the U.S. Census Bureau reported an increase in the overall U.S. trade deficit on a month-to-month basis of $4.5 billion, reflecting lower amounts of exports and imports of both goods and services. Exports and imports of both goods and services fell from the previous month, although the deficit in goods trade imports increased from $61 billion in February to $65.6 billion in March; the surplus in services trade fell from $21.23 billion to $21.18 billion. On May 8, the Department of Labor reported that the U.S. non-farm unemployment rate in April increased by 20 million, raising the total number of unemployed Americans to 23 million, or an unemployment rate of 14% of a total civilian labor force of 156 million. The unemployment rate does not include approximately 10 million workers who are involuntarily working part-time and another 9 million individuals seeking employment. As indicated in Figure 7 , the number of unemployed individuals increased the most in the leisure and hospitality sector, reflecting national quarantining policies to reduce the spread of COVID-19 through social contact. The employment losses were widely spread across the economy, affecting every non-farm sector and all labor groups. <5.1.1. Monetary Policy124> <5.1.1.1. Forward Guidance> Forward guidance refers to Fed public communications on its future plans for short-term interest rates, and it took many forms following the 2008 financial crisis. As monetary policy returned to normal in recent years, forward guidance was phased out. It is being used again today. For example, when the Fed reduced short-term rates to zero on March 15, it announced that it "expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals." <5.1.1.2. Quantitative Easing> Large-scale asset purchases, popularly referred to as quantitative easing or QE , were also used during the financial crisis. Under QE, the Fed expanded its balance sheet by purchasing securities. Three rounds of QE from 2009 to 2014 increased the Fed's securities holdings by $3.7 trillion. On March 23, the Fed announced that it would increase its purchases of Treasury securities and mortgage-backed securities (MBS) including commercial MBS issued by government agencies or government-sponsored enterprises to "the amounts needed to support smooth market functioning and effective transmission of monetary policy.... " These would be undertaken at the unprecedented rate of up to $125 billion daily during the week of March 23. As a result, the value of the Fed's balance sheet is projected to exceed its post-financial crisis peak of $4.5 trillion. One notable difference from previous rounds of QE is that the Fed is purchasing securities of different maturities, so the effect likely will not be concentrated on long-term rates. <5.1.1.3. Actions to Provide Liquidity> <5.1.1.4. Reserve Requirements> On March 15, the Fed announced that it was reducing reserve requirements the amount of vault cash or deposits at the Fed that banks must hold against deposits to zero for the first time ever. As the Fed noted in its announcement, because bank reserves are currently so abundant, reserve requirements "do not play a significant role" in monetary policy. <5.1.1.5. Term Repos> The Fed can temporarily provide liquidity to financial markets by lending cash through repurchase agreements (repos) with primary dealers (i.e., large government securities dealers who are market makers). Before the financial crisis, this was the Fed's routine method for targeting the federal funds rate. Following the financial crisis, the Fed's large balance sheet meant that repos were no longer needed, until they were revived in September 2019. On March 12, the Fed announced it would offer a three-month repo of $500 billion and a one-month repo of $500 billion on a weekly basis through the end of the month in addition to the shorter-term repos it had already been offering. These repos would be larger and longer than those offered since September. On March 31, the Fed announced the Foreign and International Monetary Authorities (FIMA) Repo Facility, which works like the foreign repo pool in reverse. This facility allows foreign central banks to convert their U.S. Treasury holdings into U.S. dollars on an overnight basis. The Fed will charge a (typically) above market interest rate of 0.25 percentage points above the interest rate paid on bank reserves. The facility is intended to work in tandem with currency swap lines to provide additional dollars to meet global demand and is available to a broader group of central banks than the swap lines. <5.1.1.6. Discount Window> In its March 15 announcement, the Fed encouraged banks (insured depository institutions) to borrow from the Fed's discount window to meet their liquidity needs. This is the Fed's traditional tool in its "lender of last resort" function. The Fed also encouraged banks to use intraday credit available through the Fed's payment systems as a source of liquidity. <5.1.1.7. Foreign Central Bank Swap Lines> Both domestic and foreign commercial banks rely on short-term borrowing markets to access U.S. dollars needed to fund their operations and meet their cash flow needs. But in an environment of strained liquidity, only banks operating in the United States can access the discount window. Therefore, the Fed has standing "swap lines" with major foreign central banks to provide central banks with U.S. dollar funding that they can in turn lend to private banks in their jurisdictions. On March 15, the Fed reduced the cost of using those swap lines and on March 19 it extended swap lines to nine more central banks. On March 31, 2020, the Fed set up a new temporary facility to work in tandem with the swap lines to provide additional dollars to meet global demand. The new facility allows central banks and international monetary authorities to exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can then be made available to institutions in their jurisdictions. <5.1.1.8. Emergency Credit Facilities for the Nonbank Financial System> In 2008, the Fed created a series of emergency credit facilities to support liquidity in the nonbank financial system. This extended the Fed's traditional role as lender of last resort from the banking system to the overall financial system for the first time since the Great Depression. To create these facilities, the Fed relied on its emergency lending authority (Section 13(3) of the Federal Reserve Act). To date, the Fed has created six facilities some new, and some reviving 2008 facilities in response to COVID-19. On March 17, the Fed revived the commercial paper funding facility to purchase commercial paper, which is an important source of short-term funding for financial firms, nonfinancial firms, and asset-backed securities (ABS). Like banks, primary dealers are heavily reliant on short-term lending markets in their role as securities market makers. Unlike banks, they cannot access the discount window. On March 17, the Fed revived the primary dealer credit facility, which is akin to a discount window for primary dealers. Like the discount window, it provides short-term, fully collateralized loans to primary dealers. On March 19, the Fed created the Money Market Mutual Fund Liquidity Facility (MMLF), similar to a facility created during the 2008 financial crisis. The MMLF makes loans to financial institutions to purchase assets that money market funds are selling to meet redemptions. On March 23, the Fed created two facilities to support corporate bond markets the Primary Market Corporate Credit Facility to purchase newly issued corporate debt and the Secondary Market Corporate Credit Facility to purchase existing corporate debt on secondary markets. On March 23, the Fed revived the Term Asset-Backed Securities Loan Facility to make nonrecourse loans to private investors to purchase ABS backed by various nonmortgage consumer loans. On April 6, the Fed announced the Payroll Protection Program Lending Facility (PPPLF) to provide credit to depository institutions (e.g., banks) making loans under the CARES Act ( H.R. 748 / P.L. 116-136 ) Payroll Protection Program . Because banks are not required to hold capital against these loans, this facility increases lending capacity for banks facing high demand to originate these loans. The PPP provides low-cost loans to small businesses to pay employees. These loans do not pose credit risk to the Fed because they are guaranteed by the Small Business Administration. On April 9, the Fed announced the Main Street Lending Program (MSLP), which purchases loans from depository institutions 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. On April 9, the Fed announced the Municipal Liquidity Facility (MLF) to purchase state and municipal debt in response to higher yields and reduced liquidity in that market. The facility will only purchase debt of larger counties and cities. Many of these facilities are structured as special purpose vehicles controlled by the Fed because of restrictions on the types of securities that the Fed can purchase. Although there were no losses from these facilities during the financial crisis, assets of the Treasury's Exchange Stabilization Fund have been pledged to backstop any losses on several of the facilities today. <5.1.2. Fiscal Policy> In terms of a fiscal stimulus, Congress adopted H.R. 6074 on March 5, 2020 ( P.L. 116-123 ), to appropriate $8.3 billion in emergency funding to support efforts to fight COVID-19; President Trump signed the measure on March 6, 2020. President Trump also signed on March 18, H.R. 6201 ( P.L. 116-127 ), the Families First COVID-19 Response Act, that provides paid sick leave and free COVID-19 testing, expands food assistance and unemployment benefits, and requires employers to provide additional protections for health care workers. Other countries have indicated they will also provide assistance to workers and to some businesses. Congress also is considering other possible measures, including contingency plans for agencies to implement offsite telework for employees, financial assistance to the shale oil industry, a reduction in the payroll tax, and extended of the tax filing deadline. President Trump has taken additional actions, including Announcing on March 11, 2020, restrictions on all travel from Europe to the United States for 30 days, directing the Small Business Administration (SBA) to offer low-interest loans to small businesses, and directing the Treasury Department to defer tax payments penalty-free for affected businesses. Declaring on March 13, a state of emergency that frees up disaster relief funding to assist state and local governments to address the effects of the pandemic. The President also announced additional testing for the virus, a website to help individuals identify symptoms, increased oil purchases for the Strategic Oil Reserve, and a waiver on interest payments on student loans. Invoking on March 18, 2020, the Defense Production Act (DPA) that gives him the authority to require some U.S. businesses to increase production of medical equipment and supplies that are in short supply. On March 25, 2020, the Senate adopted the COVID-19 Aid, Relief, and Economic Security Act ( S. 3548 ) to formally implement President Trump's proposal by providing direct payments to taxpayers, loans and guarantees to airlines and other industries, and assistance for small businesses, actions similar to those of various foreign governments. The House adopted the measure as H.R. 748 on March 27, and President Trump signed the measure ( P.L. 116-136 ) on March 27. The law Provides funding for $1,200 tax rebates to individuals, with additional $500 payments per qualifying child. The rebate begins phasing out when incomes exceed $75,000 (or $150,000 for joint filers). Assists small businesses by providing funding for, forgivable bridge loans; and additional funding for grants and technical assistance; authorizes emergency loans to distressed businesses, including air carriers, and suspends certain aviation excise taxes. Creates a $367 billion loan program for small businesses, establishes a $500 billion lending fund for industries, cities and states, a $150 billion for state and local stimulus funds, and $130 billion for hospitals. Increases unemployment insurance benefits, expands eligibility and offer workers an additional $600 a week for four month, in addition to state unemployment programs. Establishes special rules for certain tax-favored withdrawals from retirement plans; delays due dates for employer payroll taxes and estimated tax payments for corporations; and revises other provisions, including those related to losses, charitable deductions, and business interest. Provides additional funding for the prevention, diagnosis, and treatment of COVID-19; limits liability for volunteer health care professionals; prioritizes Food and Drug Administration (FDA) review of certain drugs; allows emergency use of certain diagnostic tests that are not approved by the FDA; expands health-insurance coverage for diagnostic testing and requires coverage for preventative services and vaccines; and revises other provisions, including those regarding the medical supply chain, the national stockpile, the health care workforce, the Healthy Start program, telehealth services, nutrition services, Medicare, and Medicaid. Temporarily suspends payments for federal student loans and revises provisions related to campus-based aid, supplemental educational-opportunity grants, federal work-study, subsidized loans, Pell grants, and foreign institutions. Authorizes the Department of the Treasury temporarily to guarantee money-market funds. On April 23, 2020, the House passed H.R. 266 ( P.L. 116-139 ), the Paycheck Protection Program and Health Care Enhancement Act, following similar actions by the Senate the previous day. The measure provides $484 billion for small business loans, health care providers, and COVID-19 testing. In particular, the law Provides additional lending authority for certain Small Business Administration (SBA) programs in response to COVID-19 increases the authority for (1) the Paycheck Protection Program, under which the SBA may guarantee certain loans to small businesses during the COVID-19 pandemic; and (2) advances on emergency economic injury disaster loans made in response to COVID-19. The division also expands eligibility for such disaster loans and advances to include agricultural enterprises. Provides $100 billion in FY2020 supplemental appropriations to HHS for the Public Health and Social Services Emergency Fund, including $75 billion to reimburse health care providers for health care related expenses or lost revenues that are attributable to the coronavirus outbreak; and $25 billion for expenses to research, develop, validate, manufacture, purchase, administer, and expand capacity for COVID-19 tests to effectively monitor and suppress COVID-19. Allocates specified portions of the $25 billion for COVID-19 testing to states, localities, territories, and tribes; the Centers for Diseases Control and Prevention; the National Institutes of Health; the Biomedical Advanced Research and Development Authority; the Food and Drug Administration; community health centers; rural health clinics; and testing for the uninsured. On May 12, House Democrats proposed a $3 trillion supplemental spending bill to provide additional financial resources to state and local governments. The bill reportedly would also Appropriate $200 billion in hazard pay to essential workers. Extend additional payments to individuals, for nutrition and housing assistance, and provide funding for additional testing and contact tracing. Restore the tax deduction for state and local taxes. For additional information about the impact of COVID-19 on the U.S. economy see CRS Insight IN11235, COVID-19: Potential Economic Effects . <5.2. Europe> To date, European countries have not displayed a synchronized policy response similar to the one they developed during the 2008-2009 global financial crisis. Instead, they have used a combination of national fiscal policies and bond buying by the ECB to address the economic impact of the pandemic. Individual countries have adopted quarantines and required business closures, travel and border restrictions, tax holidays for businesses, extensions of certain payments and loan guarantees, and subsidies for workers and businesses. The European Commission has advocated for greater coordination among the EU members in developing and implementing monetary and fiscal policies to address the economic fallout from the viral pandemic. In its May 2020 economic forecast, the European Commission forecasted that EU GDP in 2020 would fall by 7.4% and the unemployment rate would rise to 9.0%, as indicated in Table 3 . The Commission stated that, "Given the severity of this unprecedented worldwide shock, it is now quite clear that the EU has entered the deepest economic recession in its history." In addition, the Commission forecasted that EU GDP would rise rapidly in 2021, although not fast enough to erase all the 2020 decline, but would exhibit a distinct "V" shaped recession and recovery. Greece, Spain, France, and Italy are forecasted to experience the largest declines in GDP in 2020 as a result of their dependence on tourism, which is expected to experience a slow economic recovery. Germany and other Northern European countries are projected to experience a more modest decline in economic activity. Some analysts argue that this disparity in economic effects may complicate efforts to coordinate economic policies. To address the crisis, the Commission argued that, "[t]he risk .is that the crisis will lead to severe distortions within the Single Market and to entrenched economic, financial and social divergences between euro area Member States that could ultimately threaten the stability of the Economic and Monetary Union." Pandemic-related economic effects reportedly are having a significant impact on business activity in Europe, with some indexes falling farther then they had during the height of the financial crisis and others indicating that Europe may well experience a deep economic recession in 2020. France, Germany, Italy, Spain, and the UK reported steep drops in industrial activity in March 2020. EU countries have issued travel warnings, banning all but essential travel across borders, raising concerns that even much-needed medical supplies could stall at borders affected by traffic backups. The travel bans and border closures reportedly are causing shortages of farm laborers in Germany, the UK, and Spain, which has caused growers to attempt to recruit students and workers laid off because of the pandemic. In previous actions, the European Commission had announced that it was relaxing rules on government debt to allow countries more flexibility in using fiscal policies. Also, the European Central Bank (ECB) announced that it was ready to take "appropriate and targeted measures," if needed. France, Italy, Spain and six other Eurozone countries have argued for creating a "coronabond," a joint common European debt instrument. Similar attempts to create a common Eurozone-wide debt instrument have been opposed by Germany and the Netherland, among other Eurozone members. With interest rates already low, however, it indicated that it would expand its program of providing loans to EU banks, or buying debt from EU firms, and possibly lowering its deposit rate further into negative territory in an attempt to shore up the Euro's exchange rate. ECB President-designate Christine Lagarde called on EU leaders to take more urgent action to avoid the spread of COVID-19 from triggering a serious economic slowdown. The European Commission indicated that it was creating a $30 billion investment fund to address COVID-19 issues. In other actions On March 12, 2020, the ECB decided to (1) expand its longer-term refinance operations (LTRO) to provide low-cost loans to Eurozone banks to increase bank liquidity; (2) extend targeted longer-term refinance operations (TLTRO) to provide loans at below-market rates to businesses, especially small and medium-sized businesses, directly affected by COVID-19; (3) provide an additional 120 billion (about $130 billion) for the Bank's asset purchase program to provide liquidity to firms that was in addition to 20 billion a month it previously had committed to purchasing. On March 13, 2020, financial market regulators in the UK, Italy, and Spain intervened in stock and bond markets to stabilize prices after historic swings in indexes on March 12, 2020. In addition, the ECB announced that it would do more to assist financial markets in distress, including altering self-imposed rules on purchases of sovereign debt. Germany's Economic Minister announced on March 13, 2020, that Germany would provide unlimited loans to businesses experiencing negative economic activity (initially providing $555 billion), tax breaks for businesses, and export credits and guarantees. On March 18, the ECB indicated that it would: create a 750 billion (about $800 billion) Pandemic Emergency Purchase Program to purchase public and private securities; expand the securities it will purchase to include nonfinancial commercial paper; and ease some collateral standards. In announcing the program, President-designate Lagarde indicated that the ECB would, "do everything necessary." In creating the program, the ECB removed or significantly loosened almost all constraints that applied to previous asset-purchase programs, including a self-imposed limit of buying no more than one-third of any one country's eligible bonds, a move that was expected to benefit Italy. The ECB also indicated that it would make available up to 3 trillion in liquidity through refinancing operations. Britain ($400 billion) and France ($50 billion) also announced plans to increase spending to blunt the economic effects of the virus. Recent forecasts indicate that the economic effect of COVID-19 could push the Eurozone into an economic recession in 2020. On March 23, 2020, Germany announced that it would adopt a 750 billion (over $800 billion) package in economic stimulus funding. On April 15, Eurozone finance ministers announced a 500 billion (about $550 billion) emergency spending package to support governments, businesses, and workers and will provide funds to the European Stability Mechanism, the European Investment Bank, and for unemployment insurance. On May 5, 2020, Germany's Constitutional Court issued a ruling challenging the legality of a bond-buying program conducted by the ECB since 2015, the Public Sector Purchase Program (PSPP). In its ruling, the court directed the German government to request clarification from the ECB about various aspects of the PSPP program that the court argued might exceed the ECB's legal mandate. The German government has not yet indicated how it will formally respond to the ruling, but many analysts contend that the ruling and the challenge to the authority of the ECB and the European Court of Justice could have far-reaching implications for future ECB activities. This could potentially include challenges to the ECB's Pandemic Emergency Purchase Program (PEPP) initiated in March. The PEPP is a temporary program that authorizes the ECB to acquire up to 750 billion (about $820 billion) in private and public sector securities to address the economic effects of the pandemic crisis. The German court's ruling has heightened tensions between the court and the European Court of Justice. Following the 2008-2009 financial crisis and the subsequent Eurozone financial crisis, the ECB launched four asset purchase programs in 2014 to provide assistance to financially strapped Eurozone governments and to sustain financial liquidity in Eurozone banks. Those programs included the Corporate Sector Purchase Program (CSPP), the Public Sector Purchase Program (PSPP), the Asset-Backed Securities Purchase Program (ABSPP), and the Third Covered Bond Purchase Program (CBPP3). The programs operated from 2014 to 2018; the PSPP was restarted in November 2019. As of May 8, the PSPP program held 2.2 trillion (about $2.5 trillion) with another 600 billion (about $700 billion) held under other asset purchase programs. Various groups in Germany challenged the legality of the ECB bond-buying programs before the German Constitutional Court arguing that the programs exceeded the ECB's legal mandate. In turn, the German court referred the case to the European Court of Justice, which ruled in December 2019 that the ECB's actions were fully within the ECB's authority. In the German Constitutional Court's May 5 ruling, the German judges characterized the ECJ's ruling as "incomprehensible," and directly challenged the ECB and the European Court of Justice and the primacy of the European Court of Justice ruling over national law. The German justices argued that the ECB had exceeded its authority by not fully evaluating the economic costs and benefits of previous bond-buying activities, including the impact on national budgets, property values, stock markets, life insurance and other economic effects. The German court also argued that the ECB's lack of a strategy for reducing its holdings of sovereign debt of Eurozone members increased risks for national governments that back up the ECB, and it challenged the ECB's strategy for reducing its holdings of sovereign debt. <5.3. The United Kingdom> The United Kingdom has taken a number of steps to support economic activity. These steps are expected to limit the damage to the UK economy. The Bank of England (BOE) forecasted in May 2020 that the UK economy would contract by 30% in the first half of 2020, but then rebound sharply in the second half of the year, exhibiting a "V" shaped recovery. The Bank of England has announced a number of policy initiatives including On March 11, the BOE adopted a package of four measures to deal with any economic disruptions associated with COVID-19. The measures included an unscheduled cut in the benchmark interest rate by 50 basis points (0.5%) to a historic low of 0.25%; the reintroduction of the Term Funding Scheme for Small and Medium-sized Enterprises (TFSME) that provides banks with over $110 billion for loans at low interest rates; a lowering of banks' countercyclical capital buffer from 1% to zero, which is estimated to support over $200 billion of bank lending to businesses; and a freeze in banks' dividend payments. On March 15, the BOE reinstituted U.S. dollar swap lines with the Federal Reserve. On March 17, the BOE and the UK Treasury introduced the COVID Corporate Financing Facility (CCFF) to provide assistance to UK firms to bridge through Covid-19-related disruptions to their cash flow. On March 19, during a Special Monetary Policy Meeting, the Bank of England reduced its main interest rate to 0.1%, increased the size of its TFSME fund, and increased the stock of asset purchases by 200 billion to a total of 645 billion financed by issuing UK government bonds and some additional non-financial investment-grade corporate bonds. On March 20, the BOE participated in an internationally coordinated central bank expansion of liquidity through U.S. standing dollar liquidity swap line arrangements. On March, the BOE activated the Contingent Term Repo Facility (CTRF). On April 6, announced the activation of the TFSME ahead of schedule. On April 23, the Bank of England indicated it would quadruple its borrowing over the second quarter of 2020, reflecting a contraction in the UK economy, lower tax revenues, and increased financial demands to support fiscal policy measures. In terms of fiscal policy, UK Chancellor of the Exchequer Rishi Sunak proposed a national budget on March 11, 2020, that included nearly $3.5 billion in fiscal spending to counter adverse economic effects of the pandemic and increased in statutory sick leave by about $2.5 billion in funds to small and medium businesses to provide up to 14 days of sick leave for affected employees. The plan provides affected workers up to 80% of their salary, or up to 2,500 a month (about $2,800) if they are laid off. Some estimates indicate that UK spending to support its economy could rise to about $60 billion in 2020. Identified as the Coronavirus Job Retention Scheme (CJRS), the program was backdated to start on March 1 and had been expected to run through May, but was extended to expire the end of June 2020. Prime Minister Johnson also announced that all pubs, caf s, restaurants, theatres, cinemas, nightclubs, gyms and leisure centers would be closed. Part of the fiscal spending package includes open-ended funding for the National Health Service (NHS), $6 billion in emergency funds to the NHS, $600 million hardship fund to assist vulnerable people, and tax cuts and tax holidays for small businesses in certain affected sectors. <5.4. Japan> The Bank of Japan, with already-low interest rates, injected $4.6 billion in liquidity into Japanese banks to provide short-term loans for purchases of corporate bonds and commercial paper and twice that amount into exchange traded funds to aid Japanese businesses. The Japanese government also pledged to provide wage subsidies for parents forced to take time off due to school closures. On March 24, 2020, Japan announced that the Summer Olympics set to take place in Tokyo would be postponed by a year, delaying an expected boost to the Japanese economy that was expected from the event. Japan reportedly is considering an emergency fiscal package of about $515 billion, roughly equivalent to 10% of Japan's annual gross domestic product (GDP). On April 27, 2020, the Bank of Japan announced it would purchase unlimited amounts of government bonds and quadruple its purchases of corporate debt to keep interest rates low and stimulate the Japanese economy. <5.5. China> According to a recent CRS In Focus, China's economic growth could go negative in the first quarter of 2020 and fall below 5% for the year, with more serious effects if the outbreak continues. In early February, China's central bank pumped $57 billion into the banking system, capped banks' interest rates on loans for major firms, and extended deadlines for banks to curb shadow lending. The central bank has been setting the reference rate for China's currency stronger than its official close rate to keep it stable. On March 13, 2020, The People's Bank of China announced that it would provide $78.8 billion in funding, primarily to small businesses, by reducing bank's reserve requirements. The International Monetary Fund (IMF) is providing funding to poor and emerging market economies that are short on financial resources. If the economic effects of the virus persist, countries may need to be proactive in coordinating fiscal and monetary policy responses, similar to actions taken by of the G-20 following the 2008-2009 global financial crisis. <6. Multilateral Response> <6.1. International Monetary Fund> The IMF initially announced that it was making available about $50 billion for the global crisis response. Following a G20 ministerial call on March 23, IMF Managing Director Kristalina Georgieva announced that the Fund is ready to deploy all of its $1 trillion capacity. The Fund is also exploring options to quickly raise financing foremost of which is finalizing agreement on a 2019 agreement to renew and augment the IMF's New Arrangements to Borrow (NAB), a credit line that augments IMF quota resources. Other options to increase IMF resources include a new allocation of special drawing rights (SDRs), sale of IMF gold holdings, selling IMF bonds, developing an expanded network of central bank swap arrangements centered at the IMF. For low-income countries, the IMF is providing rapid-disbursing emergency financing of up to $10 billion (50% of quota of eligible members) that can be accessed without a full-fledged IMF program. Other IMF members can access emergency financing through the Fund's Rapid Financing Instrument (RFI). This facility could provide about $40 billion for emerging markets facing fiscal pressures from COVID-19. Separate from these resources, the IMF has a Catastrophe Containment and Relief Trust (CCRT), which provides eligible countries with up-front grants for relief on IMF debt service falling due. The CCRT was used during the 2014 Ebola outbreak, but is now underfunded, according to IMF Managing Director Georgieva with just over $200 million available against possible needs of over $1 billion. On March 11, 2020, the United Kingdom announced that it will contribute 150 million (about $170 million) to the CCRT. To date, the United States has not contributed to the CCRT. <6.2. World Bank and Regional Development Banks> The World Bank announced on March 2 that it is making up to $12 billion in financing ($8 billion of which is new) immediately available to help impacted developing countries. This support comprises up to $2.7 billion in new financing from the International Bank for Reconstruction and Development (IBRD), the World Bank's market-rate lending facility for middle-income developing countries, and $1.3 billion from the International Development Association (IDA), the World Bank's concessional facility for low-income countries. In addition, the Bank is reprioritizing $2 billion of the Bank's existing portfolio. The International Finance Corporation (IFC), the Bank's private-sector lending arm is making available up to $6 billion. According to the Bank, support will cover a wide range of activities, including strengthening health services and primary health care, bolstering disease monitoring and reporting, training front line health workers, encouraging community engagement to maintain public trust, and improving access to treatment for the poorest patients. Several years ago, the World Bank introduced pandemic bonds, a novel form of catastrophe financing. The Bank sold two classes of bonds worth $320 million in a program designed to provide financing to developing countries facing an acute epidemic crisis if certain triggers are met. Once these conditions are met, bondholders no longer receive interest payments on their investments, the money is no longer repaid in full, and funds are used to support the particular crisis. In the case of COVID-19, for the bonds to be triggered, the epidemic must be continuing to grow 12 weeks after the first day of the outbreak. Critics have raised a range of concerns about the bonds, arguing that the terms are too restrictive and that the length of time needs to be shortened before triggering the bonds. Others stress that the proposal remains valid shifting the cost of pandemic assistance from governments to the private sector, especially in light of the failure of past efforts to rally donor support to establish multilateral pandemic funds. The Asian Development Bank (ADB) has approved a total of $4 million to help developing countries in Asia and the Pacific. Of the total, $2 million is for improving the immediate response capacity in Cambodia, China, Laos, Myanmar, Thailand, and Vietnam; $2 million will be available to all ADB developing member countries in updating and implementing their pandemic response plans. The ADB also provided a private sector loan of up to $18.6 million to Wuhan-based Jointown Pharmaceutical Group Co. Ltd. to enhance the distribution and supply of essential medicines and protective equipment. <6.3. International Economic Cooperation> On March 16, 2020, the leaders of the G-7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) held an emergency summit by teleconference to discuss and coordinate their policy responses to the economic fallout from the global spread of COVID-19. In the joint statement released by the G-7 leaders after the emergency teleconference summit, the leaders stressed they are committed to doing "whatever is necessary to ensure a strong global response through closer cooperation and enhanced cooperation of efforts." The countries pledged to coordinate research efforts, increase the availability of medical equipment; mobilize "the full range" of policy instruments, including monetary and fiscal measures as well as targeted actions, to support workers, companies, and sectors most affected by the spread of COVID-19; task the finance ministers to coordinate on a weekly basis, and direct the IMF and the World Bank Group, as well as other international organizations, to support countries worldwide as part of a coordinated global response. Saudi Arabia, the 2020 chair of the G-20, called an emergency G-20 summit on March 25 to discuss a response to the pandemic. The G-20 is a broader group of economies, including the G-7 countries and several major emerging markets. During the global financial crisis, world leaders decided that henceforth the G-20 would be the premiere forum for international economic cooperation. Some analysts have been surprised that the G-7 has been in front of the G-20 in responding to COVID-19, while other analysts have questioned whether the larger size and diversity of economies in the G-20 can make coordination more difficult. Analysts are hopeful that the recent G-7 summit, and a G-20 summit, will mark a shift towards greater international cooperation at the highest (leader) levels in combatting the economic fallout from the spread of COVID-19. An emergency meeting of G-7 finance ministers on March 3, 2020, fell short of the aggressive and concrete coordinated action that investors and economists had been hoping for, and U.S. and European stock markets fell after the meeting. More generally, governments have been divided over the appropriate response and in some cases have acted unilaterally, particularly when closing borders and imposing export restrictions on medical equipment and medicine. Some experts argue that a large, early, and coordinated response is needed to address the economic fallout from COVID-19, but several concerns loom about the G-20's ability to deliver. Their concerns focus on the Trump Administration's prioritization of an "America First" foreign policy over one committed to multilateralism; the 2020 chair of the G-20, Saudi Arabia, is embroiled in its own domestic political issues and oil price war; and U.S.-China tensions make G-20 consensus more difficult. Meanwhile, international organizations including the IMF and multilateral development banks, have tried to forge ahead with economic support given their current resources. Additionally, the Financial Stability Board (FSB), an international body including the United States that monitors the global financial system and makes regulations to ensure stability, released a statement on March 20, 2020, that its members are actively cooperating to maintain financial stability during market stress related to COVID-19. The FSB is encouraging governments to use flexibility within existing international standards to provide continued access to funding for market participants and for businesses and households facing temporary difficulties from COVID-19, while noting that many FSB members have already taken action to release available capital and liquidity buffers. <7. Estimated Effects on Developed and Major Economies> Among most developed and major developing economies, economic growth at the beginning of 2020 was tepid, but still was estimated to be positive. Countries highly dependent on trade Canada, Germany, Italy, Japan, Mexico, and South Korea and commodity exporters are now projected to be the most negatively affected by the slowdown in economic activity associated with the virus. In addition, travel bans and quarantines are taking a heavy economic toll on a broad range of countries. The OECD notes that production declines in China have spillover effects around the world given China's role in producing computers, electronics, pharmaceuticals and transport equipment, and as a primary source of demand for many commodities. Across Asia, some forecasters argue that recent data indicate that Japan, South Korea, Thailand, the Philippines, Indonesia, Malaysia, and Vietnam could experience an economic recession in 2020. In early January 2020, before the COVID-19 outbreak, economic growth in developing economies as a whole was projected by the International Monetary Fund (IMF) to be slightly more positive than in 2019. This outlook was based on progress being made in U.S.-China trade talks that were expected to roll back some tariffs and an increase in India's rate of growth. Growth rates in Latin America and the Middle East were also projected to be positive in 2020. These projections likely will be revised downward due to the slowdown in global trade associated with COVID-19, lower energy and commodity prices, an increase in the foreign exchange value of the dollar, and other secondary effects that could curtail growth. Commodity exporting countries, in particular, likely will experience a greater slowdown in growth than forecasted in earlier projections as a result of a slowdown on trade with China and lower commodity prices. <8. Emerging Markets> The combined impact of COVID-19, an increase in the value of the dollar, and an oil price war between Saudi Arabia and Russia are hitting developing and emerging economies hard. Not all of these countries have the resources or policy flexibility to respond effectively. According to figures compiled by the Institute for International Finance (IIF), cumulative capital outflows from developing countries since January 2020 are double the level experienced during the 2008/2009 crisis and substantially higher than recent market events ( Figure 8 ). The impact of the price war and lower energy demand associated with a COVID-19-related economic slowdown is especially hard on oil and gas exporters, some of whose currencies are at record lows ( Figure 9 ). Oil importers, such as South Africa and Turkey, have also been hit hard; South Africa's rand has fallen 18% against the dollar since the beginning of 2020 and the Turkish lira has lost 8.5%. Some economists are concerned that the depreciation in currencies could lead to rising rates of inflation by pushing up the prices of imports and negatively economic growth rates in 2020. Depending on individual levels of foreign exchange reserves and the duration of the capital flow slowdown, some countries may have sufficient buffers to weather the slowdown, while others will likely need to make some form of current account adjustment (reduce spending, raise taxes, etc.). Several countries, such as Iran and Venezuela, have already asked the IMF for financial assistance and others are likely to follow. (Venezuela's request was quickly rebuffed due to disagreement among the IMF membership over who is recognized as Venezuela's legitimate leader: Nicol s Maduro or Juan Guaid . ) <9. International Economic Cooperation> Initial efforts at coordinating the economic response to the COVID-19 pandemic across countries have been uneven. Governments are divided over the appropriate response and in some cases have acted unilaterally, particularly when closing borders and imposing export restrictions on medical equipment and medicine. An emergency meeting of G-7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) finance ministers on March 3, 2020, fell short of the aggressive and concrete coordinated action that investors and economists had been hoping for, and U.S. and European stock markets fell sharply after the meeting. However, on March 16, 2020, the leaders of the G-7 countries held an emergency summit by teleconference to discuss and coordinate their policy responses to the economic fallout from the global spread of COVID-19. In the joint statement released by the G-7 leaders after the emergency teleconference summit, the leaders stressed they are committed to doing "whatever is necessary to ensure a strong global response through closer cooperation and enhanced cooperation of efforts." The countries pledged to coordinate research efforts, increase the availability of medical equipment; mobilize "the full range" of policy instruments, including monetary and fiscal measures, as well as targeted actions to support workers, companies, and sectors most affected by the spread of COVID-19; task the finance ministers to coordinate on a weekly basis, and direct the IMF and the World Bank Group, as well as other international organizations, to support countries worldwide as part of a coordinated global response. G-7 coordination has not been without problems, however, including disagreement among G-7 foreign affairs ministers about how to refer to the virus (coronavirus or the "Wuhan virus") and concerns about collaboration on vaccine research. The G-20, which has a broader membership of major advanced and emerging-market economies representing 85% of world GDP, was slower to respond to the pandemic. Even though G-20 coordination is widely viewed as critical in the response to the global financial crisis of 2008-2009, several factors may have complicated G-20 coordination in the current context: the Trump Administration's prioritization of an "America First" foreign policy over one committed to multilateralism; the 2020 chair of the G-20, Saudi Arabia, is embroiled in its own domestic political issues and oil price war; and U.S.-China tensions make G-20 consensus more difficult. The G-20 held a summit by teleconference on March 26, 2020, but the resulting communique was criticized for failing to include concrete action items beyond what national governments were already doing. However, G-20 coordination appears to be gaining momentum, most notably with the G-20 agreement on debt relief for low-income countries (see " Looming Debt Crises and Debt Relief Efforts "). Meanwhile, international organizations including the IMF and multilateral development banks, have tried to forge ahead with economic support given their current resources. Additionally, the Financial Stability Board (FSB), an international body including the United States that monitors the global financial system and makes regulations to ensure stability, released a statement on March 20, 2020, that its members are actively cooperating to maintain financial stability during market stress related to COVID-19. The FSB is encouraging governments to use flexibility within existing international standards to provide continued access to funding for market participants and for businesses and households facing temporary difficulties from COVID-19, while noting that many FSB members have already taken action to release available capital and liquidity buffers. <10. Looming Debt Crises and Debt Relief Efforts> COVID-19 could trigger a wave of defaults around the world. In Q3 2019 before the outbreak of COVID-19 global debt levels reached an all-time high of nearly $253 trillion, about 320% of global GDP. About 70% of global debt is held by advanced economies and about 30% is held by emerging markets. Globally, most debt is held by nonfinancial corporations (29%), governments (27%) and financial corporations (24%), followed by households (19%). Debt in emerging markets has nearly doubled since 2010, primarily driven by borrowing from state-owned enterprises. High debt levels make borrowers vulnerable to shocks that disrupt revenue and inflows of new financing. The disruption in economic activity associated with COVID-19 is a wide-scale exogenous shock that will make it significantly more difficult for many private borrowers (corporations and households) and public borrowers (governments) around the world to repay their debts. COVID-19 has hit the revenue of corporations in a range of industries: factories are ceasing production, brick-and-mortar retail stores and restaurants are closing, commodity prices have plunged (Bloomberg commodity price index a basket of oil, metals, and food prices has dropped 27% since the start of the year and is now at its lowest level since 1986), and overseas and in some cases domestic travel is being curtailed. Households are facing a rapid increase in unemployment and, in many developing countries, a decline in remittances. With fewer resources, corporations and households may default on their debts, absent government intervention. These defaults will result in a decline in bank assets, making it difficult for banks to extend new loans during the crisis or, more severely, creating solvency problems for banks. Meanwhile, many governments are dramatically increasing spending to combat the pandemic, and are likely to face sharp reductions in revenue, putting pressure on public finances and raising the likelihood of sovereign (government) defaults. Debt dynamics are particularly problematic in emerging economies, where debt obligations denominated in foreign currencies (usually U.S. dollars). Many emerging market currencies have depreciated since the outbreak of the pandemic, raising the value of their debts in terms of local currency. Governments will face difficult choices if there is a widespread wave of defaults. Most governments have signaled a commitment to or already implemented policies to support those economically impacted by the pandemic. These governments face decisions about the type of assistance to provide (loans versus direct payments), the amount of assistance to provide, how to allocate rescue funds, and what conditions if any to attach to funds. Governments have undertaken extraordinary fiscal and monetary measures to combat the crisis. However, developing countries that are constrained by limited financial resources and where health systems could quickly become overloaded are particularly vulnerable. In terms of defaults by governments (sovereign defaults), emergency assistance is generally provided by the IMF, and sometimes paired with additional rescue funds from other governments on a bilateral basis. The IMF and other potential donor countries will need to consider whether the IMF has adequate resources to respond to the crisis, how to allocate funding if the demand for funding exceeds the amount available, what conditions should be attached to rescue funding, and whether IMF programs should be paired with a restructuring of the government's debt ("burden sharing" with private investors). International efforts are underway to help the most vulnerable developing countries grapple with debt pressures. In mid-April 2020, the IMF tapped its Catastrophe Containment and Relief Trust (CRRT), funded by donor countries, to provide grants to cover the debt payments of 25 poor and vulnerable countries to the IMF for six months. The IMF hopes that additional donor contributions will allow this debt service relief to be extended for two years. Additionally, the G-20 finance ministers agreed to suspend debt service payments for the world's poorest countries through the end of 2020. The Institute for International Economics, which represents 450 banks, hedge funds, and other global financial funds, also announced that private creditors will join the debt relief effort on a voluntary basis. This debt standstill will free up more than $20 billion for these countries to spend on improving their health systems and fighting the pandemic. Private sector commitments were critical for official creditors, so that developing countries could redirect funds to improving health systems rather than repaying private creditors. <11. Other Affected Sectors> Public concerns over the spread of the virus have led to self-quarantines, reductions in airline and cruise liner travel, the closing of such institutions as the Louvre, and the rescheduling of theatrical releases of movies, including the sequel in the iconic James Bond series (titled, "No Time to Die"). School closures are affecting 1.5 billion children worldwide, challenging parental leave policies. Other countries are limiting the size of public gatherings. Some businesses are considering new approaches to managing their workforces and work methods. These techniques build on, or in some places replace, such standard techniques as self-quarantines and travel bans. Some firms are adopting an open-leave policy to ensure employees receive sick pay if they are, or suspect they are, infected. Other firms are adopting paid sick leave policies to encourage sick employees to stay home and are adopting remote working policies. Microsoft and Amazon have instructed all of their Seattle-based employees to work from home until the end of March 2020. The drop in business and tourist travel is causing a sharp drop in scheduled airline flights by as much as 10%; airlines are estimating they could lose $113 billion in 2020 (an estimate that could prove optimistic given the Trump Administration's announced restrictions on flights from Europe to the United States and the growing list of countries that are similarly restricting flights), while airports in Europe estimate they could lose $4.3 billion in revenue due to fewer flights. Industry experts estimate that many airlines will be in bankruptcy by May 2020 under current conditions as a result of travel restrictions imposed by a growing number of countries. The loss of Chinese tourists is another economic blow to countries in Asia and elsewhere that have benefitted from the growing market for Chinese tourists and the stimulus such tourism has provided. The decline in industrial activity has reduced demand for energy products such as crude oil, causing prices to drop sharply, which negatively affects energy producers, renewable energy producers, and electric vehicle manufacturers, but generally is positive for consumers and businesses. Saudi Arabia is pushing other OPEC (Organization of the Petroleum Exporting Countries) members collectively to reduce output by 1.5 million barrels a day to raise market prices. U.S. shale oil producers, who are not represented by OPEC, support the move to raise prices. An unwillingness by Russia to agree to output reductions added to other downward pressures on oil prices and caused Saudi Arabia to engage in a price war with Russia that has driven oil prices below $25 per barrel at times, half the estimated $50 per barrel break-even point for most oil producing countries. Rising oil supplies and falling demand are combining to create an estimated surplus of 25 million barrels a day and could soon overwhelm storage capacity and challenge the viability of U.S. shale oil production. In 2019, low energy prices combined with high debt levels reportedly caused U.S. energy producers to reduce their spending on capital equipment, reduced their profits and, in some cases, led to bankruptcies. Reportedly, in late 2019 and early 2020, bond and equity investors, as well as banks, reduced their lending to shale oil producers and other energy producers that typically use oil and gas reserves as collateral. Disruptions to industrial activity in China reportedly are causing delays in shipments of computers, cell phones, toys, and medical equipment. Factory output in China, the United States, Japan, and South Korea all declined in the first months of 2020. Reduced Chinese agricultural exports, including to Japan, are leading to shortages in some commodities. In addition, numerous auto producers are facing shortages in parts and other supplies that have been sourced in China. Reductions in international trade have also affected ocean freight prices. Some freight companies argue that they could be forced to shutter if prices do not rebound quickly. Disruptions in the movements of goods and people reportedly are causing some companies to reassess how international they want their supply chains to be. According to some estimates, nearly every member of the Fortune 1000 is being affected by disruptions in production in China. <12. Conclusions> The quickly evolving nature of the COVID-19 crisis creates a number of issues that make it difficult to estimate the full cost to global economic activity. These issues include, but are not limited to How long will the crisis last? How many workers will be affected both temporarily and permanently? How many countries will be infected and how much economic activity will be reduced? When will the economic effects peak? How much economic activity will be lost as a result of the viral outbreak? What are the most effective monetary and fiscal policies at the national and global level to address the crisis? What temporary and permanent effects will the crisis have on how businesses organize their work forces? Many of the public health measures taken by countries such as Italy, Taiwan, South Korea, Hong Kong, and China have sharply impacted their economies (with plant closures, travel restrictions, and so forth). How are the tradeoffs between public health and the economic impact of policies to contain the spread of the virus being weighed? <12.1. Appendix. Table A-1. Select Measures Implemented and Announced by Major Economies in Response to COVID-19> <13. International Economic Cooperation> Initial efforts at coordinating the economic response to the COVID-19 pandemic across countries have been uneven. Governments are divided over the appropriate response and in some cases have acted unilaterally, particularly when closing borders and imposing export restrictions on medical equipment and medicine. An emergency meeting of G-7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) finance ministers on March 3, 2020, fell short of the aggressive and concrete coordinated action that investors and economists had been hoping for, and U.S. and European stock markets fell sharply after the meeting. However, on March 16, 2020, the leaders of the G-7 countries held an emergency summit by teleconference to discuss and coordinate their policy responses to the economic fallout from the global spread of COVID-19. In the joint statement released by the G-7 leaders after the emergency teleconference summit, the leaders stressed they are committed to doing "whatever is necessary to ensure a strong global response through closer cooperation and enhanced cooperation of efforts." The countries pledged to coordinate research efforts, increase the availability of medical equipment; mobilize "the full range" of policy instruments, including monetary and fiscal measures, as well as targeted actions to support workers, companies, and sectors most affected by the spread of COVID-19; task the finance ministers to coordinate on a weekly basis, and direct the IMF and the World Bank Group, as well as other international organizations, to support countries worldwide as part of a coordinated global response. G-7 coordination has not been without problems, however, including disagreement among G-7 foreign affairs ministers about how to refer to the virus (coronavirus or the "Wuhan virus") and concerns about collaboration on vaccine research. The G-20, which has a broader membership of major advanced and emerging-market economies representing 85% of world GDP, was slower to respond to the pandemic. Even though G-20 coordination is widely viewed as critical in the response to the global financial crisis of 2008-2009, several factors may have complicated G-20 coordination in the current context: the Trump Administration's prioritization of an "America First" foreign policy over one committed to multilateralism; the 2020 chair of the G-20, Saudi Arabia, is embroiled in its own domestic political issues and oil price war; and U.S.-China tensions make G-20 consensus more difficult. The G-20 held a summit by teleconference on March 26, 2020, but the resulting communique was criticized for failing to include concrete action items beyond what national governments were already doing. However, G-20 coordination appears to be gaining momentum, most notably with the G-20 agreement on debt relief for low-income countries (see " Looming Debt Crises and Debt Relief Efforts "). Meanwhile, international organizations including the IMF and multilateral development banks, have tried to forge ahead with economic support given their current resources. Additionally, the Financial Stability Board (FSB), an international body including the United States that monitors the global financial system and makes regulations to ensure stability, released a statement on March 20, 2020, that its members are actively cooperating to maintain financial stability during market stress related to COVID-19. The FSB is encouraging governments to use flexibility within existing international standards to provide continued access to funding for market participants and for businesses and households facing temporary difficulties from COVID-19, while noting that many FSB members have already taken action to release available capital and liquidity buffers. <14. Looming Debt Crises and Debt Relief Efforts> COVID-19 could trigger a wave of defaults around the world. In Q3 2019 before the outbreak of COVID-19 global debt levels reached an all-time high of nearly $253 trillion, about 320% of global GDP. About 70% of global debt is held by advanced economies and about 30% is held by emerging markets. Globally, most debt is held by nonfinancial corporations (29%), governments (27%) and financial corporations (24%), followed by households (19%). Debt in emerging markets has nearly doubled since 2010, primarily driven by borrowing from state-owned enterprises. High debt levels make borrowers vulnerable to shocks that disrupt revenue and inflows of new financing. The disruption in economic activity associated with COVID-19 is a wide-scale exogenous shock that will make it significantly more difficult for many private borrowers (corporations and households) and public borrowers (governments) around the world to repay their debts. COVID-19 has hit the revenue of corporations in a range of industries: factories are ceasing production, brick-and-mortar retail stores and restaurants are closing, commodity prices have plunged (Bloomberg commodity price index a basket of oil, metals, and food prices has dropped 27% since the start of the year and is now at its lowest level since 1986), and overseas and in some cases domestic travel is being curtailed. Households are facing a rapid increase in unemployment and, in many developing countries, a decline in remittances. With fewer resources, corporations and households may default on their debts, absent government intervention. These defaults will result in a decline in bank assets, making it difficult for banks to extend new loans during the crisis or, more severely, creating solvency problems for banks. Meanwhile, many governments are dramatically increasing spending to combat the pandemic, and are likely to face sharp reductions in revenue, putting pressure on public finances and raising the likelihood of sovereign (government) defaults. Debt dynamics are particularly problematic in emerging economies, where debt obligations denominated in foreign currencies (usually U.S. dollars). Many emerging market currencies have depreciated since the outbreak of the pandemic, raising the value of their debts in terms of local currency. Governments will face difficult choices if there is a widespread wave of defaults. Most governments have signaled a commitment to or already implemented policies to support those economically impacted by the pandemic. These governments face decisions about the type of assistance to provide (loans versus direct payments), the amount of assistance to provide, how to allocate rescue funds, and what conditions if any to attach to funds. Governments have undertaken extraordinary fiscal and monetary measures to combat the crisis. However, developing countries that are constrained by limited financial resources and where health systems could quickly become overloaded are particularly vulnerable. In terms of defaults by governments (sovereign defaults), emergency assistance is generally provided by the IMF, and sometimes paired with additional rescue funds from other governments on a bilateral basis. The IMF and other potential donor countries will need to consider whether the IMF has adequate resources to respond to the crisis, how to allocate funding if the demand for funding exceeds the amount available, what conditions should be attached to rescue funding, and whether IMF programs should be paired with a restructuring of the government's debt ("burden sharing" with private investors). International efforts are underway to help the most vulnerable developing countries grapple with debt pressures. In mid-April 2020, the IMF tapped its Catastrophe Containment and Relief Trust (CRRT), funded by donor countries, to provide grants to cover the debt payments of 25 poor and vulnerable countries to the IMF for six months. The IMF hopes that additional donor contributions will allow this debt service relief to be extended for two years. Additionally, the G-20 finance ministers agreed to suspend debt service payments for the world's poorest countries through the end of 2020. The Institute for International Economics, which represents 450 banks, hedge funds, and other global financial funds, also announced that private creditors will join the debt relief effort on a voluntary basis. This debt standstill will free up more than $20 billion for these countries to spend on improving their health systems and fighting the pandemic. Private sector commitments were critical for official creditors, so that developing countries could redirect funds to improving health systems rather than repaying private creditors.

Since the COVID-19 outbreak was first diagnosed, it has spread to over 190 countries and all U.S. states. The pandemic is having a noticeable impact on global economic growth. Estimates so far indicate the virus could trim global economic growth by as much as 2.0% per month if current conditions persist and raise the risks of a global economic recession similar in magnitude to that experienced during the Great Depression of the 1930s. Global trade could also fall by 13% to 32%, depending on the depth and extent of the global economic downturn. The full impact will not be known until the effects of the pandemic peak. This report provides an overview of the global economic costs to date and the response by governments and international institutions to address these effects.

crs_R46307

crs_R46307_0

<1. Introduction> The digital divide a gap between those who use or have access to telecommunications and information technologies and those who do not affects every region of the United States. Since the internet became publicly available in the 1990s, an increasing amount of information that individuals access for work, school, and entertainment is digital and hosted online. Members of Congress have expressed continuing interest in ensuring that their constituents have access to broadband internet, and in the 116 th Congress, they have introduced legislation (see the Appendix to this report) and held hearings on opportunities to expand broadband deployment and close the digital divide. Although Congress has provided federal funding for multiple broadband infrastructure initiatives, the gap between those who can access broadband and those who do not still persists. Ensuring access to broadband is not the only barrier to closing the digital divide. Other challenges include increasing the adoption of broadband (where it is available) and training for digital literacy. According to the National Digital Inclusion Alliance: We do need to address the lack of broadband infrastructure in rural areas. It is a serious problem. But, it is just one barrier to individuals and communities being able to fully participate in society today. The other common barriers, no matter where one lives, are the costs of internet service and devices, plus digital literacy skills. Simplistically equating "the digital divide" with just one of these barriers increases the division in our country. Broadband infrastructure initiatives funded under the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) have concluded, but the Federal Communications Commission (FCC) and Rural Utilities Service (RUS, within the U.S. Department of Agriculture) continue to have active programs that provide federal funding for broadband. There are few current federal funding initiatives to address other aspects of the digital divide, however, such as digital literacy and digital inclusion and the homework gap. States are playing a crucial role in efforts to expand broadband access, encouraging broadband investment, and helping to bring more of their residents online. Each state approaches broadband access and deployment differently, and state efforts may provide models for any future federal initiatives. This report analyzes selected state-level and local initiatives that have used different approaches. It does not attempt to include broadband initiatives from all 50 states. Rather, it highlights selected examples to illustrate programs that could serve as templates for potential federal initiatives. <2. Broadband Technologies> The term broadband commonly refers to high-speed internet access that is faster than dial-up access and is immediately accessible. In 2015, the FCC defined broadband as 25/3 megabits per second (Mbps), i.e., 25 Mbps (download rate) and 3 Mbps (upload rate). About 21.3 million Americans currently lack access to broadband at those speeds. Broadband includes several high-speed transmission technologies, such as: digital subscriber line (DSL); cable modem; fiber; wireless; satellite; and broadband over powerlines (BPL). <3. The Digital Divide> The term digital divide refers to a gap between those who use or have access to telecommunications and information technologies and those who do not. Many areas of the United States particularly rural areas have either limited or no access to broadband infrastructure. Several factors contribute to the digital divide, including terrain, population density, demography, and market factors. Additionally, there are citizens in areas with high broadband penetration who are unable to access it due to socioeconomic factors. Ensuring access to broadband is not the only barrier to closing the digital divide. Other challenges include increasing the adoption of broadband (where it is available) and training for digital literacy. Although strides have been made in the deployment of broadband, the digital divide persists prompting a variety of federal broadband initiatives to address barriers and push communities across the digital divide. <4. Federal Broadband Programs and Initiatives> <4.1. Federal Communications Commission> The FCC has several broadband programs aimed at bridging the digital divide and expanding universal service principles. <4.1.1. Universal Service Fund> The concept of universal service the principle that all Americans should have access to communications services at reasonable rates underpins a category of FCC programs that aim to bring broadband and voice services to parts of the country that may otherwise have difficulty getting connected. The universal service concept was conceived in the Communications Act of 1934 to apply to voice telephone service, but in more recent years it has expanded to include high-speed internet. The Universal Service Fund encompasses four programs: The High Cost/Connect America Fund provides support for high-cost (typically rural) areas. The Low Income (Lifeline) program provides support to help eligible low-income consumers gain access to and remain on a broadband network. The Schools and Libraries (E-rate) program provides support for eligible elementary and secondary schools and classrooms, as well as libraries, for internet access, internal connections, and telecommunications services. The Rural Health Care program provides support to eligible rural health care providers for telecommunications and broadband services . Although the Universal Service Fund programs are federal programs, their funding is not appropriated by Congress. Rather, it comes from mandatory contributions by interstate telecommunications providers, in amounts based on their end-user interstate and international revenues. The telecommunications providers may, but are not required to, pass these charges directly to their subscribers, typically in the form of a fee for example, on a wireless phone bill. <4.1.2. Rural Digital Opportunity Fund> On January 30, 2020, the FCC adopted the Rural Digital Opportunity Fund, which directs $20.4 billion over 10 years to fund the deployment of high-speed broadband networks in rural America through a two-phase reverse auction (i.e., the lowest bidder wins). Phase I of the Rural Digital Opportunity Fund is scheduled to begin in October 2020 and is to target census blocks that are wholly unserved with fixed broadband at speeds of at least 25/3 Mbps. This phase is to provide up to $16 billion in overall funding to census blocks to solicit bids for fixed broadband buildout where existing data shows there is no such service available. Phase II of the program is to make at least $4.4 billion available to target partially served areas, i.e., census blocks where only some locations lack access to 25/3 Mbps broadband, as well as census blocks that do not receive bids in the first phase. <4.1.3. 5G Fund for Rural America> In December 2019, the FCC announced the proposed 5G Fund for Rural America. The proposed fund would make up to $9 billion available to carriers to deploy advanced 5G (fifth generation) mobile wireless services in rural America. Similar to the Rural Digital Opportunity Fund, monies from the 5G Fund would be allocated through a reverse auction and would target areas that are remote or challenging to reach. The 5G Fund would replace the planned Mobility Fund Phase II, which has come under some scrutiny. In August 2018, the FCC published initial eligibility maps for Mobility Fund Phase II, which were to be used in allocating up to $4.53 billion for rural wireless broadband expansion in areas lacking 4G service. In December 2018, the FCC announced it would launch an investigation into whether one or more major carriers violated the Mobility Fund reverse auction's mapping rules and submitted incorrect coverage maps. In a report released on December 4, 2019, the FCC found that the 4G Long Term Evolution (LTE) coverage data submitted by providers is not sufficiently reliable for the purpose of moving forward with Mobility Fund Phase II; it terminated that fund and replaced it with the 5G Fund. Proposed details of the 5G Fund are still forthcoming from the FCC. <4.2. Rural Utilities Service> The Rural Utilities Service (RUS), in the U.S. Department of Agriculture (USDA), has multiple broadband connectivity programs: The Rural Broadband Access Loan and Loan Guarantee program funds the costs of construction, improvement, or acquisition of facilities and equipment needed to provide service in eligible rural areas. The Community Connect Grants program funds broadband deployment to rural communities where it is not yet economically viable for private sector providers to deliver service. The Telecommunications Infrastructure Loans and Loan Guarantees program funds the construction, maintenance, improvement, and expansion of telephone service and broadband in extremely rural areas with a population of 5,000 or less. The Distance Learning and Telemedicine program principally funds end-user equipment to help rural communities use telecommunications to link teachers and medical service providers in one area to students and patients in another. The ReConnect program furnishes loans and grants to provide funds for the costs of construction, improvement, or acquisition of facilities and equipment needed to provide broadband service in eligible rural areas. Congress authorizes RUS programs and provides funding for them in annual appropriations bills. Eligibility requirements vary by program. For example, the Community Connect program defines an eligible area as a rural area that lacks any existing broadband speed of at least 10 Mbps download and 1 Mbps upload, which was the FCC's broadband speed benchmark previous to 25/3 Mbps. Community Connect grant funds may be used to build, acquire, or lease facilities, spectrum, land, or buildings used to deploy broadband for residential and business customers, as well as critical community facilities (e.g., public schools, fire stations, or public libraries). The Telecommunications Infrastructure Loans and Loan Guarantees program defines an eligible area as a rural area or town with a population of 5,000 or fewer without telecommunications facilities. Funds from this program can be used to finance broadband-capable telecommunications services. The RUS also managed the Broadband Initiatives Program (BIP) under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). Approximately $2.5 billion was allocated as loan, grant, and loan/grant combinations to deploy infrastructure in rural areas, with an emphasis on infrastructure projects to provide service directly to end users. The RUS required all BIP projects to be completed by June 2015. <4.3. National Telecommunications and Information Administration> <4.3.1. American Recovery and Reinvestment Act of 2009> Funded by the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), the Broadband Technology Opportunities Program (BTOP) was an approximately $4 billion grant program administered by NTIA to help bridge the digital divide. Projects funded by BTOP deployed broadband infrastructure, enhanced and expanded computer centers, and encouraged the sustainable adoption of broadband. The BTOP program no longer has funding available; out of 233 funded projects, two remain active. <4.3.2. BroadbandUSA> As the BTOP program came to a close in 2015, NTIA launched BroadbandUSA to respond to demand from communities seeking to ensure that their citizens have the broadband capacity they need to attract employers, create jobs, improve healthcare, advance development, and increase public safety. Although BroadbandUSA does not provide funding, it provides broadband technical assistance to communities, as well as a funding program guide, broadband resources such as information on permitting and monthly Practical Broadband Conversations webinars and a National Broadband Availability Map. Funding for BroadbandUSA is appropriated annually. <5. Selected State and Local Broadband Initiatives: Common Approaches and Prototypes> Increasingly, state governments have taken action to ensure that all residents, regardless of where they live or socioeconomic factors that may inhibit adoption, have access to broadband. While many state broadband initiatives focus on broadband infrastructure deployment, some address other aspects, such as adoption, mapping, feasibility, digital equity and digital inclusion, gigabit broadband initiatives, and the homework gap. This section describes selected state and local broadband initiatives, using the selected programs as examples to illustrate common approaches. The states and programs described are not intended to be a comprehensive list. <5.1. Broadband Infrastructure Deployment> Broadband infrastructure deployment programs, targeting areas that do not currently have broadband service, are the most common type of state broadband initiative. State broadband infrastructure projects typically allow applicants to apply grant funds toward building infrastructure assets, such as conduits, fiber-optic cable, and wireless towers. State programs also typically require that applicants provide last-mile broadband access to households that are unserved. Some state programs stipulate speed requirements usually, but not always, 25/3 Mbps in alignment with the FCC definition of broadband. <5.1.1. Example: New York> In 2015, New York Governor Andrew M. Cuomo established the $500 million New York Broadband Program. The program provides state grant funding through a reverse auction similar to the method the FCC plans to use for the Rural Digital Opportunity Fund. The program's intent is to support projects that deliver high-speed internet access to unserved and underserved areas of New York State at speeds of 100 Mbps in most areas and 25 Mbps in the most remote areas. Nearly 90% of this program's funding has been awarded to projects that will address unserved areas of the state, connecting these locations for the first time. <5.2. Public-Private Partnerships for Broadband Buildout> Building out broadband infrastructure in some areas of the United States may prove challenging for broadband providers, due to aspects such as terrain, cost, or lack of density, which have a negative impact on return on investment. This may leave some communities with limited or, in some cases, no options to subscribe to broadband. In such areas, some states have sought out alternatives, such as entering into public-private partnerships, to help expand broadband to their communities. According to the North Carolina Broadband Infrastructure Office, "a partnership means that the county or municipality builds community support, identifies its needs, and offers its resources to the broadband provider to make broadband deployment more financially attractive to the provider. In return, the broadband provider brings its technical expertise, innovation, equipment, and capital investment into under- or unserved areas in the community. In the end, both partners share the risks and costs of broadband deployment." The North Carolina Broadband Infrastructure Office offers several examples of potential public-private partnerships: For example, a city or county may offer a cost-sharing opportunity to broadband providers, in which the municipality contributes an agreed upon portion of the costs of broadband expansion to an under- or unserved region. A community anchor tenant, such as a school system, community college, hospital or a public safety system, might offer a stable starting point for the network and a gathering place for residents seeking wireless broadband access before the network is built or expanded.... [T]he town, city or county can choose to lease rights of way at no or reduced cost for the installation of broadband infrastructure. Further, the municipality can make its vertical assets tall buildings, water towers, etc. available to broadband providers at no or reduced charges, for the installation of fixed wireless internet equipment. The municipality has several policies available that can encourage forming public-private partnerships, and expand broadband access. <5.2.1. Example: New Mexico> In February 2020, the New Mexico Department of Information Technology announced a new public-private partnership aimed at building out broadband in the southeastern portion of the state. The partnership, between ExxonMobil, the state of New Mexico, and Plateau Communications, is to develop a $5 million fiber network offering advanced broadband to businesses along a 107-mile route, with completion scheduled for August 2020. <5.3. Leveraging Existing Infrastructure Assets> It can be difficult to build out new broadband infrastructure in certain areas especially in suburban or rural areas due to terrain or other hindrances, such as limited or prohibited access to land that is publicly or privately owned. One option to address this challenge could be to leverage existing infrastructure via a rights-of-way or permitting process. A rights-of-way grant is an authorization to use a specific piece of public land for a specific project, such as electric transmission lines, communication sites, roads, trails, fiber optic lines, canals, flumes, pipelines, or reservoirs. Federal assets such as tower facilities, buildings, and land can also be made available via permits that allow their use in deploying broadband infrastructure to lower the cost of broadband buildouts and encourage private-sector companies to expand broadband infrastructure. Through the American Broadband Initiative a comprehensive effort to stimulate increased private sector investment in broadband the NTIA has been working with other federal agencies, such as the Department of the Interior and the Department of Homeland Security, to streamline the federal permitting process and make it easier for network builders to access federal assets and rights-of-way. <5.3.1. Example: Arizona> Arizona's Smart Highway Corridor Program intends to leverage the highway system as a route for broadband infrastructure. On January 13, 2020, Arizona Governor Doug Ducey announced nearly $50 million in funding to enable the Arizona Department of Transportation to install more than 500 miles of broadband conduit and fiber optic cable along designated highway segments in rural areas of the state. The new corridors will enable future broadband capacity in Arizona's rural and tribal areas. <5.4. Broadband Adoption> While broadband accessibility across the United States especially in rural areas has been a continuing challenge, another challenge facing communities is that of barriers to broadband adoption, even where service is available. Broadband adoption can be defined as residential subscribership to high-speed internet access. Barriers that may prevent consumers and businesses from adopting broadband include the affordability of broadband subscriptions, a lack of awareness of the benefits broadband can bring, age, unfamiliarity with digital devices and digital skills, and a lack of training in how to use such devices and the services they enable. <5.4.1. Example: California> California's Broadband Adoption Fund is a $20 million program created in 2017 through Assembly Bill 1665. The Fund's purpose is to assist communities with limited broadband adoption by providing grants to increase publicly available or after-school broadband access and digital inclusion, such as grants for digital literacy training programs and public education. The California Public Utilities Commission gives preference to programs and projects in communities with demonstrated low broadband access, including low-income communities, senior citizen communities, and communities facing socioeconomic barriers to broadband adoption. <5.5. Broadband Mapping> Pinpointing where broadband is and is not available in the United States has been an ongoing challenge. Current data on national broadband availability is provided by private telecommunications providers, collected by the FCC, and displayed on the FCC's Fixed Broadband Deployment Map. Difficulty in accurately mapping broadband availability has been attributed to a number of factors, including the adequacy of census block data, the lack of independent data validation outside the FCC, and the absence of a challenge process for consumers and others who believe that the Fixed Broadband Deployment Map may overstate availability in their area. In early 2019, it came to the FCC's attention that inaccuracies in the Fixed Broadband Deployment Map's data may cause broadband deployment to be overstated. The Fixed Broadband Deployment Map may indicate that areas have access to broadband when in reality, they do not. Inaccurate data on broadband deployment could lead to overbuilding in areas that currently have broadband, while leaving other areas underserved or unserved. The FCC has taken steps to address broadband mapping issues in the forthcoming Digital Opportunity Data Collection, but it may be several years before a more accurate and granular national broadband map is realized. In the interim, states have been developing their own broadband maps to determine the actuality of broadband availability in their communities. <5.5.1. Example: Georgia> In 2018, the Georgia legislature passed the Achieving Connectivity Everywhere (ACE) Act, which seeks to obtain an accurate representation of where broadband connectivity is lacking within the state. To achieve this, the Georgia Broadband Deployment Initiative developed a database of all premises located within three targeted pilot counties: Elbert, Lumpkin, and Tift. Information was obtained from county and municipal officials to identify which premises were commercial, single-family, or multi-dwelling units. Next, the State of Georgia developed specific agreements to obtain data on locations that receive service from the seven companies providing broadband in the pilot counties. Georgia's pilot program differs from the FCC's approach because it surveys whether individual locations have access to broadband rather than collecting data only by census block. The three-county pilot showed that the FCC maps misidentified about half of the locations without broadband. A statewide map for Georgia is expected to be completed in June 2020. <5.6. Broadband Feasibility> One of the first steps in laying the foundation for broadband access may be to determine broadband needs that are unique to a state or community. This analysis can lead to a long-term vision and goals, help with the maximization of resources, and lay a framework for a state or community feasibility study. A feasibility study can aid the state or community in determining how best to invest in broadband, evaluating ways to deploy new broadband networks, and defining the pros and cons of a proposed approach. Questions that may be considered include What problem or problems are you are trying to solve? Are you trying to bring broadband to parts of your community that are unserved, underserved, or both? Do you have a digital equity and utilization problem? Are consumers in your community dissatisfied with their current internet provider? <5.6.1. Example: Vermont> In Vermont, the Department of Public Service's Broadband Innovation Grant program is designed to help communities conduct feasibility studies and create business plans related to the deployment of broadband in rural, unserved, and underserved areas within the state. The Vermont state legislature approved $700,000 in grant funding to the Department in Act 79 ( H.R. 513 ) of 2019. The program awards up to $60,000 per grant to eligible grantees, which include -profit organizations, for-profit businesses, cooperatives, distribution utilities, communications union districts, and other government entities. Grantees are to deliver a feasibility study that proposes new broadband systems with minimum speeds of 25/3 Mbps in unserved or underserved areas. If a study indicates that a project could become cash-flow positive within three years, the Department is to request an actionable business plan from the grantee. Studies are to conclude within six months of receipt of the award and findings are to be reported to the Commissioner of Public Service. <5.7. Digital Equity and Digital Inclusion> According to the National Digital Inclusion Alliance (NDIA), a nonprofit community engagement organization, digital equity is a condition in which all individuals and communities have the information technology capacity needed for full participation in society, democracy, and the economy. Steps taken to achieve this are known as digital inclusion, which NDIA defines as including access to affordable, robust broadband internet service; internet-enabled devices that meet the needs of the user; digital literacy training; quality technical support; and applications and online content designed to enable and encourage self-sufficiency, participation, and collaboration. Digital equity issues vary by region, and, as a result, so too does the work that state and local governments are doing to address them. <5.7.1. Example: Michigan> The Detroit Department of Innovation and Technology, a department within the City of Detroit government, envisions making its efforts a national model for digital inclusion. According to Joshua Edmonds, Detroit Director of Digital Inclusion The recipe for successful digital inclusion in every city boils down to four things: partnerships, funding, engaged residents, and political will. I believe Detroit has every one of those points in excess. I'm excited to build relationships and do something bold. The Director of Digital Inclusion is to work with the Detroit Department of Innovation and Technology to develop a citywide strategy to expand computer and internet access to Detroiters who lack it, as well as develop methods to track and evaluate progress. The Director is to also work with the city's Office of Development and Grants to identify possible funding. According to the City of Detroit, action items include a three-pronged approach to bring change to the city by providing internet access, devices, and digital skills to residents (see Table 1 ). <5.8. Gigabit Broadband Initiatives> The FCC's definition of broadband is 25/3 Mbps, which is sufficient for activities such as telecommuting and streaming high definition video. However, higher speeds such as gigabit speeds may allow for multiple devices to simultaneously access data-intensive online content through a single network access point. A gigabit connection transmits data at one billion bits per second, which translates to lower latency (i.e., less lag time) when streaming video, video gaming, or using immersive media such as virtual reality. <5.8.1. Example: North Dakota> The state of North Dakota is using a state-run network to provide gigabit access. According to North Dakota Governor Doug Burgum's office, in July 2019, North Dakota became the first state in the nation to deliver one-gigabit service to all K-12 schools within the state. This was the result of an effort announced in March 2018 by the governor for a 100-gigabit upgrade to STAGEnet, which is the state government's closed broadband network. This upgrade allowed for one-gigabit connectivity to all K-12 schools, higher education institutions, and government agencies state-wide. The upgrade was completed in collaboration with the North Dakota Information Technology Department (ITD) and Dakota Carrier Network's 14 owner companies. <5.9. Homework Gap> Many schools assign students homework online; however, some students have a difficult time completing these assignments because of lack of access to broadband at home. The cost of broadband service and gaps in its availability create obstacles in urban areas and rural communities alike. As K-12 officials in many state close schools and shift classes and assignments online due to the spread of the new coronavirus (COVID-19) , they confront the reality that some students do not have reliable access to the internet at home particularly those who are from lower-income households. FCC Commissioner Jessica Rosenworcel stated I have heard from students in Texas who do homework at fast food restaurants with fries just to get a free Wi-Fi signal. I have heard from students in Pennsylvania who make elaborate plans every day to head to the homes of friends and relatives just to be able to get online. I have heard from high school football players in rural New Mexico who linger in the school parking lot after games with devices in the pitch-black dark because it is the only place they can get a reliable connection. These kids have grit. But it shouldn't be this hard. Because today no child can be left offline developing digital skills is flat-out essential for education and participation in the modern economy. <5.9.1. Example: North Carolina> To help address the homework gap, Caldwell County, NC, has piloted the first program in Western North Carolina to place Wi-Fi access on school buses. The Caldwell Education Foundation, along with Google, spearheaded and funded the program. In addition to Wi-Fi on buses, Chromebooks are available free of charge for any students to use while riding. The school bus initiative allows students in rural areas with long travel times to and from school to do online homework and computer exercises while commuting. Additionally, there are plans to park the Wi-Fi-equipped school buses in key areas, when they are not transporting students, to create Wi-Fi hot spots to enable local resident access to the internet. <6. Options for Congress> Should Congress choose to consider state broadband initiatives, a variety of potential options would be available. <6.1. Hold Hearings on State Broadband Initiatives> Congress has implemented multiple broadband programs at the federal level to help expand broadband access, but state broadband initiatives could provide templates for any future federal broadband programs. Congress may choose to expand aspects of current federal broadband initiatives to incorporate themes states have addressed, or Congress may choose to develop new broadband initiatives. As there is no single broadband initiative that solves the digital divide issue, Congress may hold hearings on state initiatives to examine their successes and challenges and to consider possible approaches to adopt at the federal level. Additionally, Congress may consider enabling a universal method for states and localities to share ideas with Congress or federal agencies. <6.2. Establish Pilot Federal Broadband Initiatives> As state experiences demonstrate, broadband needs can vary, and so can initiatives to address them. Congress may seek to develop one or more pilot broadband initiatives to test the feasibility of different approaches before developing and funding a nationwide program. These pilot initiatives might tie funding to specific goals such as adoption or digital inclusion in contrast to federal programs that currently mostly fund broadband deployment. <6.3. Increase the Sustainability of State Broadband Initiatives> Congress may consider providing federal funding and resources for broadband initiatives directly to the states. An infusion of federal funding and resources directed toward state initiatives could result in the expansion and sustainability of state efforts. Attaching federal funding to state broadband initiatives, as well as conducting federal oversight, could aid states in maximizing their potential. As expressed by the Director of Digital Inclusion for the City of Detroit: These are examples of how local leadership has called on industry to fill in where the federal government is silent. In Detroit, we have developed public-private partnerships without any government funding, but it's an unsustainable model. We need federal resources to continue our work. If we were to receive additional funding, we could do more robust outreach, and incentivize more localized funding from philanthropic organizations. <6.4. Address Duplicative Funding> Although continuing funding from some source would be necessary to build out broadband infrastructure and implement broadband initiatives, concerns have been expressed that some areas may receive duplicative funding from multiple broadband programs potentially resulting in overbuild in some areas while other areas remain unserved. This challenge is highlighted by the implementation of the FCC's Rural Digital Opportunity Fund (RDOF), when the Commission sought to exclude from RDOF any area that the Commission "know[s] to be awarded funding through the U.S. Department of Agriculture's ReConnect Program or other similar federal or state broadband subsidy programs, or those subject to enforceable broadband deployment obligations." As stated by Harold Feld, Senior Vice President at Public Knowledge Read broadly, this surprise last-minute change impacts almost every state in the Union. Nearly every state either has its own broadband subsidy program, receives funds under the Department of Agriculture ReConnect program, or receives other federal funding for broadband. Even read narrowly, this would appear to cut off millions of unconnected rural Americans from a program designed explicitly to help them. According to a Pew Report published in December 2019, 35 states have funds that directly subsidize broadband. Numerous other states have funds that might qualify as a 'subsidy' or 'enforceable broadband deployment obligations,' depending on how the FCC Order defines these terms. Another aspect of the debate regarding duplication of funds and potential overbuild is targeting funding to areas that are truly unserved by broadband, versus directing funds to areas already served by an existing provider. FCC Commissioner Michael O'Rielly stated I have been closely following all federal broadband funding programs, including the ReConnect's grant and loan disbursements, to ensure that funds are distributed as efficiently as possible and directed foremost to those communities lacking any broadband service, rather than those areas already served by an existing provider. To that end, I have voiced concerns to the Rural Utilities Service (RUS) over the use of scarce ReConnect Program funding to overbuild existing networks, whether built through private investment or via government subsidies. Rather than targeting scarce federal dollars to the truly unserved, the new 90 percent [unserved] threshold will likely lead to subsidized overbuilding and leave the most remote areas without service. There is a risk that provisions in federal broadband programs that seek to address duplication may unintentionally exclude unserved or underserved communities. In considering policies for future broadband programs, Congress may consider possible conflicts between ensuring that funding is not duplicated and avoiding the exclusion of areas that remain unserved. <7. Concluding Observations> States have been attempting to bridge the digital divide through their own broadband initiatives. While the majority of federal funding addresses network deployment, state broadband initiatives may demonstrate that other approaches can be complementary. Whether Congress decides to enact new broadband funding or initiatives remains to be seen; however, there appears to be an opportunity for states to share lessons learned from their approaches with Congress and/or federal agencies. Leveraging the wide variety of state policies and initiatives as potential models for federal broadband initiatives could have the potential to help close the digital divide. <7.1. Appendix. Legislation in the 116th Congress> Aside from annual appropriations legislation, the following are selected bills introduced in the 116 th Congress relating to the state broadband issues discussed in this report. H.R. 1328 (Tonko), introduced on February 25, 2019, as the Advancing Critical Connectivity Expands Service, Small Business Resources, Opportunities, Access, and Data Based on Assessed Need and Demand Act (ACCESS BROADBAND Act), would establish the Office of Internet Connectivity and Growth within NTIA at the Department of Commerce. The Office would provide outreach to communities seeking improved broadband connectivity and digital inclusion; track federal broadband dollars; and facilitate streamlined and standardized applications for federal broadband programs. Referred to the Committee on Energy and Commerce. Passed by the House on May 8, 2019. H.R. 1508 (Blumenauer), introduced on March 5, 2019, as the Move America Act of 2019, would amend the Internal Revenue Code of 1986 to provide for bonds and credits to finance infrastructure, including rural broadband service infrastructure. Referred to the Committee on Ways and Means. H.R. 1586 (Butterfield), introduced on March 7, 2019, as the Building Resources Into Digital Growth and Education Act of 2019 (BRIDGE Act of 2019), would establish a digital network technology program within NTIA which would award grants, cooperative agreements, and contracts to eligible institutions to assist such institutions in acquiring, and augmenting use by such institutions of, broadband internet access service to improve the quality and delivery of educational services provided by such institutions. Referred to the Referred to the Subcommittee on Communications and Technology. H.R. 1693 (Luj n), introduced on March 12, 2019, would require the FCC to make the provision of Wi-Fi access on school buses eligible for E-rate support. Referred to the Subcommittee on Communications and Technology. H.R. 2601 (Peterson), introduced on May 8, 2019, as the Office of Rural Telecommunications Act, would direct the FCC to establish the Office of Rural Telecommunications, which would coordinate with RUS, NTIA, and other federal broadband programs. Referred to the Subcommittee on Communications and Technology. H.R. 2661 (Tipton), introduced on May 10, 2019, as the Reprioritizing Unserved Rural Areas and Locations for Broadband Act of 2019 (RURAL Broadband Act of 2019), would amend the Rural Electrification Act of 1936 to restrict the use of RUS grants or loans to deploy broadband infrastructure that would overbuild or otherwise duplicate existing broadband networks. Referred to the Subcommittee on Commodity Exchanges, Energy, and Credit. H.R. 2921 (Kilmer), introduced on May 22, 2019, as the Broadband for All Act, would amend the Internal Revenue Code of 1986 to provide a tax credit to consumers to reimburse a portion of the cost of broadband infrastructure serving limited-broadband districts. Referred to the Committee on Ways and Means. H.R. 4127 (Luj n), introduced on July 30, 2019, as the Broadband Infrastructure Finance and Innovation Act of 2019, would establish a broadband infrastructure finance and innovation program to make available loans, loan guarantees, and lines of credit for the construction and deployment of broadband infrastructure. Referred to the Subcommittee on Communications and Technology. H.R. 4283 (Pence), introduced on September 11, 2019, as the Broadband Interagency Coordination Act of 2019, would require federal agencies with jurisdiction over broadband deployment to enter into an interagency agreement related to certain types of funding for broadband deployment. Referred to the Subcommittee on Commodity Exchanges, Energy, and Credit. H.R. 5243 (Meng), introduced on November 21, 2019, as the Closing the Homework Gap Through Mobile Hotspots Act, would establish a mobile hotspot grant program to provide grants to eligible institutions. A grant provided to an eligible institution would be used to provide a hotspot device to an enrolled student, or the family or guardian of an enrolled student, which would be portable and not contain a data limitation. Referred to the Subcommittee on Communications and Technology. S. 146 (Hoeven), introduced on January 16, 2019, as the Move America Act of 2019, would amend the Internal Revenue Code of 1986 to provide for bonds and credits to finance infrastructure, including rural broadband service infrastructure. Referred to the Committee on Finance. S. 454 (Cramer), introduced on February 12, 2019, as the Office of Rural Broadband Act, would establish an Office of Rural Broadband within the FCC that would coordinate with RUS, NTIA, and other FCC broadband-related activities. Referred to the Committee on Commerce, Science, and Transportation. S. 738 (Udall), introduced on March 12, 2019, would require the FCC to make the provision of Wi-Fi access on school buses eligible for E-rate support. Referred to the Committee on Commerce, Science, and Transportation. S. 1046 (Cortez Masto), introduced on April 4, 2019, as the Advancing Critical Connectivity Expands Service, Small Business Resources, Opportunities, Access, and Data Based on Assessed Need and Demand (ACCESS BROADBAND Act), would establish the Office of Internet Connectivity and Growth within NTIA at the Department of Commerce. The Office would provide outreach to communities seeking improved broadband connectivity and digital inclusion, track federal broadband dollars, and facilitate streamlined and standardized applications for federal broadband programs. Referred to the Committee on Commerce, Science, and Transportation. S. 1167 (Murray), introduced April 11, 2019, as the Digital Equity Act of 2019, would establish an NTIA state-based and competitive grant programs to support national digital inclusion, digital equity, and broadband adoption programs. Referred to the Committee on Commerce, Science, and Transportation. S. 1294 (Wicker), introduced on May 2, 2019, as the Broadband Interagency Coordination Act of 2019, would require federal agencies with jurisdiction over broadband deployment to enter into an interagency agreement related to certain types of funding for broadband deployment. Placed on Senate Legislative Calendar under General Orders. S. 2018 (Collins), introduced on June 27, 2019, as the American Broadband Buildout Act of 2019, would provide federal matching funding for state-level broadband programs. Referred to the Committee on Commerce, Science, and Transportation. S. 2344 (Peters), introduced on July 30, 2019, as the Broadband Infrastructure Finance and Innovation Act of 2019, would establish a broadband infrastructure finance and innovation program to make available loans, loan guarantees, and lines of credit for the construction and deployment of broadband infrastructure. Referred to the Committee on Commerce, Science, and Transportation. S. 2385 (Wyden), introduced on July 31, 2019, as the Broadband Internet for Small Ports Act, would amend the Rural Electrification Act of 1936 to improve access to broadband telecommunications services in rural areas, including by encouraging the provision of broadband loans and grants. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3094 (Merkley), introduced on December 18, 2019, as the Community Broadband Mapping Act, would authorize the Rural Utilities Service to make grants to government or telecommunications entities that serve a rural area (with less than 25,000 population) to foster data collection about where broadband infrastructure is located and which homes have non-satellite broadband service. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3362 (Van Hollen), introduced on February 27, 2020, as the Homework Gap Trust Fund Act, would establish the Homework Gap Trust Fund, administered by the Federal Communications Commission (FCC), to provide funding for measures to close the digital divide and promote digital equality with respect to school-aged children. Referred to the Committee on Commerce, Science, and Transportation.

Access to high-speed internet, known as broadband, is becoming increasingly essential to daily life as more applications and activities move online. This has become particularly apparent during the coronavirus (COVID-19) pandemic, as employers in some sectors transitioned their workers from on-site work to telework and schools migrated their students from classrooms to distance learning. These shifts may seem clear-cut, but many areas of the United States—particularly rural areas—have either limited or no access to broadband infrastructure. Additionally there are citizens in areas with high broadband penetration who are unable to access it due to socioeconomic factors. The gap between those who have access to broadband and those who do not is referred to as the digital divide. While there is broadband penetration in many areas of the United States, 21.3 million Americans lack access to a connection that enables a download rate of at least 25 megabits per second (Mbps) and an upload rate of 3 Mbps, according to the Federal Communications Commission's (FCC's) 2019 Broadband Deployment Report . Federal agencies such as the FCC, the National Telecommunications and Information Administration (NTIA, in the Department of Commerce), and the Rural Utilities Service (RUS, in the U.S. Department of Agriculture) have directed resources to help bridge the digital divide—chiefly for broadband infrastructure buildout. While broadband infrastructure addresses a large component of the digital divide by increasing availability, there are additional geographic, social, and economic factors that affect broadband adoption, even where it is available. Major examples of such factors include the cost of internet service and devices and digital literacy skills. To further assist in closing the digital divide, states have been developing their own broadband programs and initiatives. Although many state broadband initiatives focus on building out broadband infrastructure, states have also been considering other factors. As each state approaches broadband access and deployment differently, this report analyzes selected state-level and local initiatives that have tried different approaches—approaches that may serve as models for future federal broadband initiatives. These include initiatives that address broadband mapping, broadband feasibility, digital equity and digital inclusion, gigabit broadband initiatives, and the homework gap. Among the options Congress may consider are holding hearings with state officials involved in state broadband initiatives to hear their stories, successes, and lessons learned; developing pilot broadband initiatives to evaluate the feasibility of different approaches; providing additional funding and oversight for state initiatives to help improve their sustainability; and finding ways to address duplicative funding while not unintentionally exacerbating the exclusion of unserved and underserved communities. Whether Congress decides to enact new broadband funding or initiatives remains to be seen; however, there appears to be an opportunity for states to share lessons learned from their approaches to closing the digital divide. Numerous bills addressing aspects of the digital divide other than broadband infrastructure have been introduced in the 116 th Congress, including the Homework Gap Trust Fund Act ( S. 3362 ) introduced on February 27, 2020, and the Closing the Homework Gap Through Mobile Hotspots Act ( H.R. 5243 ), introduced on November 21, 2019. Bills addressing the coordination of federal agencies and tracking of federal funding for broadband include Broadband Interagency Coordination Act of 2019 ( H.R. 4283 ) introduced on September 11, 2019, and the Advancing Critical Connectivity Expands Service, Small Business Resources, Opportunities, Access, and Data Based on Assessed Need and Demand Act ( H.R. 1328 ), passed by the House on May 8, 2019.

crs_R46342

crs_R46342_0

<1. Introduction> The COVID-19 pandemic is a complex and devastating shock to the global economy. The virus has spread to around the world and combatting the pandemic has shut down large portions of the economy. The pandemic has roiled stock markets, upended oil and other commodity markets, created mass unemployment, disrupted trade, resulted in shortages of food and medical supplies, and threatened the solvency of businesses and governments around the world. The World Food Program warns that the number of people suffering acute hunger could almost double by the end of the year without swift international action. In April 2020, the International Monetary Fund (IMF) cautioned that COVID-19 will likely be the worst recession since the Great Depression, far worse than the recession following the global financial crisis of 2008-2009. Governments have undertaken extraordinary fiscal and monetary measures to combat the crisis. However, low- and middle-income countries that are constrained by limited financial resources and weak health systems are particularly vulnerable. In April 2020, the IMF forecast that developing and emerging-market countries could contract by at least 1% in 2020; six months earlier the projection was 4.5% growth ( Figure 1 ). Additionally, the COVID-19 pandemic has triggered capital flight from emerging markets on an unprecedented scale, exacerbating the fiscal challenges facing these governments ( Figure 1 ). Many developing countries are turning to the international financial institutions (IFIs), including the IMF, the World Bank, and the regional multilateral development banks (MDBs), for financial support, and the IFIs are working quickly to mobilize their existing financial resources. The IMF has pledged to use its current $1 trillion lending capacity if necessary, and the MDBs have pledged to mobilize $240 billion over the next 15 months. In March 2020, Congress accelerated authorizations under consideration in the FY2021 budget request to increase funding to the IMF, two World Bank lending facilities, and two African Development Bank lending facilities ( P.L. 116-136 ). Multilateral discussions are underway to increase further the IFI's ability to support countries responding to the pandemic. Further congressional action would be required to implement some of the proposals under consideration. The IMF and the World Bank have called for a debt standstill for low-income countries, during which those countries could suspend debt service payments and instead devote their funds to the exigencies of the pandemic. On April 15, 2020, the G-20 donor countries in conjunction with the private sector agreed to a debt standstill through the end of 2020. Some policy experts and policymakers in developing countries are calling for additional debt relief given the severity of the crisis for low-income countries. No legislation is required to implement the April 15 agreement, but congressional action would be required for any permanent U.S. debt relief or contributions to finance debt relief provided by the World Bank or other MDBs. <2. Mobilization of IFI Resources> <2.1. International Monetary Fund7> Created in the aftermath of World War II, the IMF's fundamental mission is to promote international monetary stability. To advance this goal, one of the key functions of the IMF is providing emergency loans to countries facing economic crises. The COVID-19 pandemic has resulted in an unprecedented demand for IMF financial assistance. Previously, the highest number of IMF programs approved in a single year was 34 (in 1994), and on average the IMF has approved 18 programs a year ( Figure 2 ). Today, more than 100 of the IMF's 189 member countries have requested IMF programs. IMF Managing Director Kristalina Georgieva has stated that the IMF stands ready to deploy the entirety of its current lending capacity approximately $1 trillion in response to the pandemic and resulting economic crises. Edwin Truman at the Peterson Institute for International Economics estimates the IMF's maximum lending capacity is currently around $787 billion, and that more IMF resources will be needed. The levels of IMF financial assistance under discussion would be unprecedented; previously, the highest cumulative IMF program funding approved in a single year was about $165 billion (in nominal terms), extended in 2010 during the height of the Eurozone crisis ( Figure 2 ). The IMF has several financing options for deploying resources in response to the COVID-19 pandemic. The IMF can provide rapid one-off assistance to countries responding to a health disaster, grant debt relief for the poorest and most vulnerable countries to help address public health disasters, increase the size of current IMF loans, and approve new IMF loans. The IMF has also been working to increase its flexibility in responding to the crisis. For example, the IMF Executive Board has adopted proposals to accelerate Board consideration of member financing requests for emergency financing and doubled (to about $100 billion) access to IMF emergency assistance. Most IMF loans are generally conditioned on economic reforms, including austerity measures (government spending cuts and tax increases) and structural reforms (measures that increase the competitiveness of the economy). Some policy experts have raised questions about whether conditionality should be applied to governments seeking assistance for addressing economic crises caused not by irresponsible economic policies but from exogenous shocks prompted by the pandemic. Further, some argue that structural reforms may provide benefits in the longer-term, and austerity measures may exacerbate economic crises in the short-term. Additionally, negotiations over conditionality and good governance safeguards take time, raising questions about how quickly IMF funds can and should be disbursed to affected countries. The IMF has already approved several COVID-related programs, including for Bolivia, Chad, the Democratic Republic of Congo, Kyrgyz Republic, Nigeria, Niger, Rwanda, Madagascar, Mozambique, Pakistan, and Togo, among others. Usually, governments do not disclose their requests for an IMF program until the deal is finalized, due to concerns about further undermining investor confidence. Iran and Venezuela, whose access to capital markets is already restricted by U.S. sanctions, have publicized their requests, which are controversial for U.S. policymakers (see text box ). Sudan, whose transitional government is seeking improved relations with the international community, is also seeking emergency support from the IFIs, as the pandemic threatens to exacerbate a pre-existing economic and humanitarian crisis. The country is not able to access most IFI financing mechanisms because of large arrears to the institutions, however. While many in Congress and the Administration have expressed support for Sudan's new government, U.S. Executive Directors at the IFIs would be required to vote against new financing as a result of Sudan's designation under the former regime as a State Sponsor of Terrorism (SST). Additionally, in April 2020, the IMF Executive Board approved debt service relief to 25 of the IMF's low-income member countries, and later expanded this debt service relief to reach 29 countries. The IMF was able to tap its Catastrophe Containment and Relief Trust (CCRT), revamped to address the COVID-19 pandemic, to provide these countries with grants to cover their debt payments to the IMF for six months. The CCRT can currently provide $500 million in grants to low-income countries and is funded by donor countries, including the UK, Japan, Germany, the Netherlands, Singapore, and China. The IMF is seeking to increase this fund by $1.4 billion to provide additional debt service relief. The IMF is also looking to triple the size of its Poverty Reduction and Growth Trust Fund (PRGT) to $17 billion. It has $11.7 billion in commitments from Japan, France, the United Kingdom, Canada, and Australia. Also in April 2020, the IMF Executive Board approved the creation of a new Short-term Liquidity Line. It is a revolving and renewable backstop for member countries with very strong economic policies in need of short-term and moderate financial support, and intends to support a country's liquidity buffers. Some policy experts have questioned its utility, arguing its scope may be too small, it continues to carry the stigma of borrowing from the IMF, and it is unlikely to be processed fast enough be effective. <2.2. World Bank25> The World Bank, which finances economic development projects in middle- and low-income countries, among other activities, is mobilizing its resources to support developing countries during the COVID-19 pandemic. At the end of April 2020, the World Bank had approved, or was in the process of approving, 94 COVID-19 projects, totaling $9 billion, in 78 countries. Examples of approved projects include $47 million for the Democratic Republic of Congo to support containment strategies, train medical staff, and provide equipment for diagnostic testing to ensure rapid case detection; $11.3 million for Tajikistan to expand intensive care capacity; $20 million for Haiti to support diagnostic testing, rapid response teams, and outbreak containment; and $1 billion for India to support screening, contract tracing, and laboratory diagnostics, procure personal protective equipment, and set up new isolation wards, among other projects. Over the next 15 months, the World Bank Group estimates it could deploy as much as $160 billion to respond to the COVID-19 pandemic, more than double the amount it committed in FY2019 ( Figure 3 ). From official World Bank statements, it is unclear whether the $160 billion commitment is additional financing, an acceleration of its normal lending, or a combination. It is also unclear to what extent the funds will be concessional financing (grants and low-cost loans) for the world's poorest countries or nonconcessional financing (market-rate loans) for middle income countries. According to the World Bank, the $160 billion commitment is to include: $50 billion in net transfers to low-income countries those that are eligible for the World Bank's International Development Association (IDA) concessional lending and grant facility; $8 billion in financial support provided through the World Bank's private-sector lending facility, the International Finance Corporation (IFC), for private companies and their employees hurt by the economic downturn caused by the spread of COVID-19; and a new $6.5 billion facility to support private sector investors and lenders in tackling the COVID-19 pandemic, administered by the World Bank's Multilateral Investment Guarantee Agency (MIGA). On April 17, 2020, the World Bank announced its plans to establish a new multi-donor trust fund to help countries prepare for disease outbreaks, the Health Emergency Preparedness and Response Multi-Donor Fund (HEPRF). The new fund is to complement, and augment, the $160 billion of financing provided by the World Bank. Japan was the first country to pledge to be a founding donor to the new trust fund, which will aim to spur critical health security investments in the context of the current pandemic as well as in the future. For example, the fund is to provide incentives to IDA-eligible countries to increase investments in health emergency preparedness and enable low-income countries to quickly and effectively respond to major disease outbreaks at an early stage. <2.3. Specialized Multilateral Development Banks> In addition to the World Bank, which has a near-global membership and operates in many sectors in developing countries worldwide, a number of smaller and more specialized MDBs are also mobilizing resources in response to the COVID-19 pandemic. The United States helped create and belongs to four MDBs focused on promoting economic development in specific regions: the Asian Development Bank, the African Development Bank, the Inter-American Development Bank, and the European Bank for Reconstruction and Development. Together with the World Bank, these organizations are the five major MDBs. There are also smaller MDBs, however. The United States also belongs to the International Fund for Agricultural Development, which works to address poverty and hunger in rural areas of developing countries, but it does not belong to two MDBs recently created and led by emerging markets. These include the Asian Infrastructure Investment Bank, spearheaded by China, and the New Development Bank created by the BRICS countries (Brazil, Russia, India, China, and South Africa). Nor does the United States belong to the European Investment Bank, the lending arm of the European Union, or the Islamic Development Bank, led by Saudi Arabia and created in the 1970s. Specialized MDBs are launching a robust response to the crisis, including reprogramming existing projects, establishing and funding with existing resources lending facilities dedicated to the COVID-19 response, and streamlining approval procedures. According to the President of the World Bank, other multilateral development banks have committed roughly $80 billion over the next 15 months to respond to COVID-19. It is not entirely clear which other MDBs are included in this total, or the amounts committed by each MDB. Estimates based on MDB press releases are provided in Figure 4 . Together with the World Bank's commitment of $160 billion, $240 billion in financing is to be made available to developing countries from the MDBs during this time period. Details of on specific MDB responses measures are provided in the Appendix ( Table A-1 ). <3. Debt Service Relief for Low-income Countries> The path to the suspension of debt payments for IDA countries took some time to gain momentum. Most donors prefer to coordinate debt relief efforts so the resources made available from debt relief can be used to benefit the developing country rather than be used to repay other creditors. Debt relief by donor governments has traditionally been organized by the Paris Club, an informal group of creditor countries, including the United States, whose origins can be traced back to the 1950s. The Paris Club does not include China, which has in recent years emerged as a major creditor to developing countries and whose lending terms are opaque. China has resisted international efforts to increase debt transparency through the IMF and the World Bank, and has been reluctant to set a precedent for widespread debt forgiveness. At their first emergency teleconference summit on March 26, the G-20 leaders stopped short of providing the requested debt relief, but pledged to "continue to address risks of debt vulnerabilities in low-income countries due to the pandemic." Negotiations continued and on April 15, 2020, the G-20 finance ministers announced the Debt Service Suspension Initiative (DSSI), a temporary suspension of debt payments until the end of the year for the world's poorest countries (those eligible for IDA assistance). The Institute of International Finance (IIF), a group that represents about 450 banks, hedge funds, and other global financial funds, concurrently announced that private creditors will join the debt relief effort on a voluntary basis. This debt standstill potentially frees up more than $20 billion for these countries to spend on improving their health systems and fighting the pandemic, including $12 billion in payments to official creditors (governments) and $8 billion in payments to private creditors. The standstill is to run from May 1, 2020 through December 31, 2020. Repayment schedules are to be net present value neutral, meaning that no debt is actually written off, but rather rescheduled to be paid later. The G-20 decided that the DSSI would apply to the 76 countries designated by the World Bank as eligible for IDA assistance, as well as Angola, which is not eligible for IDA assistance but is designated by the United Nations as one of the world's least developed countries (LDC). According to estimates by IIF, total external debt in DSSI countries exceeds $750 billion. This number may actually be much higher, however, since China and many other creditors do not publicly disclose the scale and scope of their external lending. Debt owed to the United States by DSSI countries is approximately $7.7 billion ( Figure 5 ). Since the current proposal only provides debt rescheduling and not debt cancellation, it does not require U.S. legislation. Some advocates, however, are calling for debt forgiveness, which has been provided in the past. In this case, authorizations and appropriations would be necessary. The procedure for budgeting and accounting for any U.S. debt relief is based on the method used to value U.S. loans and guarantees provided in the Federal Credit Reform Act of 1990. Since passage of the act, U.S. government agencies are required to value U.S. loans, such as bilateral debt owed to the United States, on a net present value basis rather than at their face value, and an appropriation by Congress of the estimated amount of debt relief is required in advance of any debt relief taking place. Prior to the passage of the act, neither budget authority nor appropriations were required for official debt relief. Bilateral debt (and other federal commitments) were accounted for on a cash-flow basis, which credits income as it is received and expenses as they are paid. <4. Proposals for Additional Actions> For FY2021, the Administration had requested authorizations to increase funding for several IFIs. In March 2020, Congress enacted these authorizations in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ). The authorizations include: $38 billion for a supplemental fund at the IMF (the New Arrangements to Borrow, or NAB); $3 billion for the nineteenth replenishment of World Bank's IDA resources; $7.3 billion for the seventh capital increase at the African Development Bank; and $513.9 million for the fifteenth replenishment of resources at the African Development Bank's concessional lending facility, the African Development Fund. Given the size and scope of the financing needs faced by developing and emerging economies, policy experts and policymakers considering several unusual policy options to further bolster the IFI response. These options, including stretching MDB lending using current resources, IMF gold sales, IMF policies to bolster global liquidity, and further multilateral debt relief, are discussed in greater detail below, as well as any legislation that would be required for U.S. participation in such efforts. <4.1. Stretch MDB Lending using Existing Resources> Some analysts argue that the MDBs have the financial capacity to lend substantially larger amounts than they have already committed. Traditionally, the MDBs have been exceedingly conservative in their approach to capital adequacy. Christopher Humphrey of the London-based Overseas Development Institute (ODI) points out that the five main MDBs (AfDB, ADB, IDB, EBRD, and IBRD [World Bank]) carry an equity-to-loan ratio of between 20% and 60%, compared to 10 to 15% for commercial banks. According to these calculations, the major MDBs can expand lending by at least $750 billion (160% above current levels), while maintaining an AAA rating, or as much as $1.3 trillion (nearly triple current levels) if they are willing to risk a rating downgrade to AA+. A key reason for these potentially higher lending levels, is that when MDBs calculate their capital adequacy, they do not include "callable capital" that member countries have committed to the institutions. The capital that the United States and other shareholders contribute to the MDBs usually comes in two forms: (1) "paid-in capital," which requires the transfer of funds to the MDBs; and (2) "callable capital," which are funds that shareholders agree to provide, but only when necessary to avoid a default on a borrowing by the MDB itself. (A member country defaulting on a World Bank loan would not cause the Bank to draw on its callable capital.) No MDB has ever had to draw on its callable capital. When MDBs calculate their capital adequacy, they include only paid-in capital and accumulated reserves. By contrast, the major rating agencies include callable capital when calculating potential MDB lending headroom and have noted that the MDBs could lend higher amounts without threatening their rating. According to Humphrey, "[callable] capital is considered financially sound by the ratings agencies, but is effectively ignored by the MDBs." While the U.S. government provides oversight of MDB operational decisions, no congressional legislation would be needed for the MDBs to change their capital adequacy rules. <4.2. IMF Gold Sales> Advocates have also proposed that the IMF sell a portion of its gold reserves to finance debt relief for the poorest countries. According to Oxfam's Nadia Daar, "With gold prices hitting a seven-year high, the IMF should use the windfall profits from gold sales for debt cancellation to avert catastrophic loss of life in developing countries." The IMF holds 90.5 million ounces of gold in reserves, valued at around $153 billion at current market prices. The IMF's total gold holdings are valued on its balance sheet at about $4.9 billion (SDR 3.2 billion) on the basis of historical cost. The IMF acquired virtually all of this gold through four types of transactions. In 1978, IMF members adopted an amendment to the Articles of Agreement allowing each country to determine its own exchange rate system. The amendment officially severed the link between currency and gold. IMF member countries were prohibited from defining the value of their currency in terms of gold and the IMF was prohibited from lending gold or defining its assets in terms of gold. Countries could use any exchange rate system (other than using gold as a base) for defining the value of their currencies. Since the 1978 amendment, the use of gold in the IMF's operations has been severely limited. In recent decades, IMF members have supported the limited sale of IMF gold holdings. As with other major IMF policy decisions, gold sales require an 85% majority vote of the total voting power. U.S. voting power at the IMF is 16.51% and thus U.S. support is required for IMF gold sales. In 2000, IMF gold sales were used to fund debt relief for several of the poorest developing countries. In September 2009, the IMF's Executive Board approved the total sale of 403.3 metric tons of gold as a key step in strengthening the IMF's finances. A portion of the profits from gold sales in 2009 and 2010 were used to support concessional lending to low-income countries. Under U.S. law, congressional authorization is required for the United States to support IMF gold sales. In 1999, Congress enacted legislation in the FY2000 Consolidated Appropriations Act ( P.L. 106-113 ) that authorized the United States to vote at the IMF in favor of a limited sale of IMF gold to fund the IMF's participation in poor country debt cancellation. The legislation required the explicit consent of Congress before the executive branch could support any future gold sales. All subsequent gold sales have been explicitly authorized by Congress. <4.3. IMF Policies to Augment Foreign Reserves> As part of the U.S. response to COVID-19, the U.S. Federal Reserve (Fed) has taken steps to ensure that major central banks have uninterrupted access to U.S. dollars. First, the Fed established emergency swap lines, or temporary reciprocal currency arrangements, with major central banks and lowered the interest rate it charges on the swap lines. Swap lines allow foreign central banks to temporarily exchange their currency for dollars with the Fed. Second, the Fed created a foreign central bank (FIMA) repurchase (repo) facility. The facility, which also charges interest, allows a broader range of emerging market central banks to temporarily exchange their U.S. Treasury securities for U.S. dollars. While these Fed efforts have been critical, access to their facilities has been relatively limited to advanced economies and some emerging market countries. Less-developed economies and most low-income countries are unable to access Fed facilities, and their limited foreign exchange reserves are rapidly depleting. One option widely discussed is providing a global allocation of IMF special drawing rights (SDRs). The First Amendment to the IMF Articles of Agreement, which went into effect in 1969, authorized the IMF to create a new international reserve asset that could be used to supplement its member country's foreign exchange reserves. This asset, known as SDRs, is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs may be exchanged for hard convertible currency among IMF member nations. IMF rules govern how a country may exercise its claim and convert its share of SDRs into another country's hard currency. SDRs are created by fiat, and are not "paid for" by any foreign contributions or backed by any national currency. IMF member countries are allocated a number of SDRs based on their IMF quota. In light of the COVID-19 pandemic, some policy advocates have proposed an SDR increase of at least $500 billion to provide additional resources to the least developed countries to help them cope with sharp capital outflows and current low commodity prices. For example, on April 21, 2020, Representative Jesus Garcia along with several colleagues introduced the Robust International Response to Pandemic Act ( H.R. 6581 ) that would, among other things, instruct the U.S. Treasury to support an allocation of $3 trillion SDRs. Support for a new SDR creation is not universal. The foremost policy concern with a new SDR increase is their relative inefficiency. Since SDRs are allocated based on IMF quota holdings, the majority of them would be allocated to advanced economies, which are unlikely to ever use their SDRs. These countries could buy and sell SDRs among themselves in order to get useable foreign exchange, but they can do this already and much more easily through central bank swaps and other such mechanisms. An additional concern for many U.S. policymakers is that all IMF members, including countries under U.S. sanctions such as Iran and Venezuela, would be included in a general SDR allocation. Reportedly, opposition to providing SDRs to certain countries was a key factor in the U.S. Treasury opposing a broad SDR allocation when it was discussed during the spring 2020 IMF-World Bank annual meetings, even as the it supported a number of other IMF policy responses. U.S. support would be required for an SDR allocation of any size. Article XXVIII of the Fund's Articles of Agreement indicates that the creation and allocation of SDRs requires support from at least 85% of the total voting power of the IMF's membership. Due to the size of U.S. voting power at the IMF (16.41%), the United States has veto power over SDR allocations. Additionally, if the size of the SDR increase is equal to or larger than the U.S. share of total IMF quota, congressional support is also required. The Special Drawing Rights Act of 1968 ( P.L. 90-349 ) gave the Executive Branch authority to vote for the First Amendment to the IMF's Articles of Agreement creating the SDR, and set forth the guidelines for U.S. participation in the SDR Department. However, the Act also says that if the U.S. share of a new allocation of SDRs is less than the size of the U.S. quota, the United States can support an SDR allocation as long as the Department of the Treasury consults with leaders of the House and Senate authorizing committees at least 90 days in prior to the vote. U.S. quota is currently about $113.3 billion. Since the U.S. share of IMF quota is currently 17.45%, the Administration could support a SDR allocation of less than about $649 billion without legislation as long as the consultation requirements are met. <4.4. Additional Debt Relief> As noted above, calls are mounting for the G-20 DSSI to go further. Former Nigerian finance minister Ngozi Okonjo-Iweala, one of the four special envoys of the African Union soliciting G-20 support for Africa in dealing with COVID-19, is calling for the debt service relief period to be extended to two years. The DSSI does not lower the debt for many low-income countries, and many analysts suggest that, during the debt service payment freeze, official and private sector creditors should work with low-income countries to restructure debts. The United Nations Conference on Trade and Development (UNCTAD) is calling for around $1 trillion in debts owed by developing countries to be canceled. Debt restructuring, which could entail some combination of lengthening maturities, lowering interest rates, and writing-off principle, would lower the debt burden facing developing countries. However, debt restructurings are complex and can take years to negotiate. Divisions between western creditor governments and China over debt relief further complicate negotiations. Many developing countries, including low-income and middle-income countries, faced with a severe economic contraction and pressing health needs, may be forced into default before restructurings can be completed. Low-income and middle-income countries, faced with a severe economic contraction and pressing health needs, may be forced into default before restructurings could be completed. Many African countries reportedly are already requesting debt relief from China in exchange for collateral, including in some cases strategic state assets. Additionally, the DSSI does not address the $12 billion in payments due by low-income countries to multilateral lenders, including the IMF and the World Bank, through the end of the year. The handling of these debts is reportedly still under discussion. For much of their history, the IFIs have served as lenders of last resort to countries suffering from financial crisis. Thus, the IFIs argued that since they provided assistance to countries unable to borrow from anyone else, they should receive preferred creditor status. This means that the World Bank and the IMF would be paid first in the event that borrowers ran into financial difficulties, and that debts owed to them would not be reduced under any circumstances. However, there have been some occasions in the recent past when IMF and MDB debts were reduced. In 2005 for the Multilateral Debt Relief Initiative (MDRI) led by the G-8, the MDBs received new money from creditor nations to offset their debt reductions while the IMF absorbed the cost of debt relief using internal resources and the proceeds of gold sales. As discussed earlier in this report, if the international community agrees to seek a new multilateral debt relief agreement, congressional action would likely be required. <5. Policy Questions for Congress> The IFIs are mobilizing resources on an unprecedented scale to respond to the COVID-19 pandemic and ensuing economic crisis. To respond to what the IMF is projecting as the largest economic downturn since the Great Depression, multilateral efforts for debt relief are also underway. Some policy experts and policymakers are calling for additional policies to bolster the IFI response, as well as for further multilateral coordination on debt relief for low-income countries. The role of the IFIs in responding to the COVID-19 pandemic raises a number of potential policy questions for Congress. These include the following. Do the IFIs have sufficient resources to respond to the COVID-19 pandemic? Does the United States support mobilization of additional resources, and if so, through what mechanisms? Developing countries face a variety of financing needs, including funding the immediate public health response, broad budgetary support, and liquidity support. How should the IFIs prioritize their financial assistance? How should IFI assistance be allocated across countries? How might coordination and coherence of COVID-19 responses among IFIs and donor governments be handled? Many IFIs are focused on the rapid disbursement of financial assistance. What is the trade-off between streamlining approval processes and maintaining due diligence to protect IFI resources? Is there oversight of how the resources from debt relief are used? Do the IFIs have sufficient staffing to process high volumes of financial assistance? China has emerged as a major creditor in recent years, but the terms of its lending are opaque. Do the IFIs have sufficient access to the information needed to assess the financing needs of developing countries and emerging markets? Would any IFI assistance be used to pay off China debt in certain countries? While the current focus is on getting resources quickly to the poor and least developed countries, the IMF is drawing attention to large project increases in debt/GDP ratios for many countries. What is the Administration's position on a new round of multilateral debt forgiveness? How is the Administration engaging on developing-country debt with official institutions and the private sector? What is the Administration's plan for debt relief negotiations with creditor governments outside of the Paris Club group of creditors? What is the appropriate balance between IFI financing and debt relief in the COVID-19 response? In what context is one policy more useful? How might the disbursement of IFI financial assistance be impacted by an inability to reach multilateral agreement on debt relief? Developing and emerging economies are facing immediate financing needs to grapple with the spread of COVID-19, and economic recovery from the pandemic may take years. How should the IFIs assess the capacity of countries to repay IFI loans given the short-, medium-, and long-term impacts of the COVID-19 pandemic? <5.1. Appendix.>

The international financial institutions (IFIs), including the International Monetary Fund (IMF), the World Bank, and regional and specialized multilateral development banks, are mobilizing unprecedented levels of financial resources to support countries responding to the health and economic consequences of the COVID-19 pandemic. More than half of the IMF's membership has requested IMF support, and the IMF has announced it is ready to tap its total lending capacity, about $1 trillion, to support governments responding to COVID-19. The World Bank has committed to mobilizing $160 billion over the next 15 months, and other multilateral development banks have committed to providing $80 billion during that time period. At the urging of the IMF and the World Bank, the G-20 countries in coordination with private creditors have agreed to suspend debt payments for low-income countries through the end of 2020. Policymakers are discussing a number of policy actions to further bolster the IFI response to the COVID-19 pandemic. Examples include changing IFI policies to allow more flexibility in providing financial assistance, pursuing policies at the IMF to increase member states' foreign reserves, and providing debt relief to low-income countries. Congressional Role Congress exercises oversight of U.S. participation of the IFIs and authorizes and appropriates U.S. financial contributions to the IFIs. In response to the overwhelming demand for IFI resources, in March 2020 Congress accelerated authorizations that were under consideration in the FY2021 budget request to increase funding for the IMF, two World Bank lending facilities, and two African Development Bank lending facilities ( P.L. 116-136 ). Some of the policy actions under discussion to bolster the IFI response to the COVID-19 pandemic, such as IMF gold sales, IMF policies to bolster foreign reserves, and additional debt relief for low-income countries, would require congressional legislation. Some Members of Congress may seek to shape or exercise broader oversight of U.S. policy towards IFI policy changes as well as new IFI programs that could exceed $1 trillion.

crs_R45969

crs_R45969_0

The September 11 th Victim Compensation Fund (VCF) provides cash benefits to certain persons whose health may have been affected by the aftermath of the September 11, 2001 terrorist attacks on the Pentagon, the World Trade Center, and the terrorist-related aircraft crash at Shanksville, PA. The VCF was most recently reauthorized on July 29, 2019, with the enactment of the Never Forget the Heroes: James Zadroga, Ray Pfeifer, and Luis Alvarez Permanent Authorization of the September 11 th Victim Compensation Fund Act ( P.L. 116-34 ). All VCF claims must be filed by October 1, 2090. There is no cap on total benefits that may be paid. This report provides an overview of the VCF, including its history, current law, and appropriations. It also provides an Appendix of current VCF program statistics. <1. History of the VCF> On September 22, 2001, the Air Transportation Safety and System Stabilization Act (ATSSA; P.L. 107-42 ) was enacted into law. Quickly passed by Congress in the wake of the September 11, 2001 terrorist attacks, this legislation provided various forms of relief to the American airline industry and affirmed Congress's commitment to improving airline safety. Title IV of the ATSSA also established the VCF to compensate persons injured or the representatives of persons killed in the attacks or their immediate aftermath. The VCF originally closed in 2003 but was reopened and expanded in 2011 to provide compensation to the 2001 terrorist attacks' responders and others, such as certain New York City residents, who may have suffered health effects in the aftermath of the attacks. The VCF was reauthorized in December 2015 and July 2019 and is currently authorized through the end of FY2092 with an October 1, 2090 deadline for VCF claims. <1.1. Original VCF (2001)> The original VCF, created by Title IV of the ATSSA, provided cash benefits to two groups of persons who suffered physical injury or death as a result of the terrorist attacks of September 11, 2001: persons who were present at the World Trade Center, Pentagon, or aircraft crash site in Shanksville, PA, at the time of or in the immediate aftermath of the aircraft crashes at those sites on September 11, 2001; and passengers and crew of any aircraft that crashed on September 11, 2001, as a result of terrorist activity. The Attorney General appointed a special master to determine the benefit amount for each claimant. The benefit amount payable to each claimant was based on the individual's economic losses (such as loss of future earnings) and noneconomic losses (such as pain and suffering). The VCF statute specifically prohibited any payments for punitive damages. Benefits were reduced by certain collateral source payments, such as life insurance benefits, available to the claimant. There was no cap on the amount of benefits that any one person could receive or on total benefits paid. By filing a VCF claim, a person waived his or her right to file a civil action or be a party to such an action in any federal or state court for damages related to the September 11, 2001 terrorist-related aircraft crashes. This provision established the VCF as an alternate and expedited route to compensation for victims while providing some protection against lawsuits for damages that may have been brought by victims against the air carriers; airframe manufacturers; the Port Authority of New York and New Jersey, who owned the World Trade Center; or any other entity. Congress provided funding for the VCF through an appropriation of "such sums as may be necessary" for benefit payment and administration. The VCF's special master was required to promulgate regulations to govern the program within 90 days of the law's enactment, and all claims had to be filed within two years of the regulations' promulgation, at which time the VCF would close. The original VCF received 7,403 claims and made awards totaling $7.049 billion to 5,560 claimants. <1.2. Reopened VCF (2011)> The original VCF closed to new claims in December 2003. However, concerns about injuries and illnesses incurred by persons involved in emergency response, recovery, and debris removal operations at the September 11 th aircraft crash sites led Congress to reopen the VCF with the enactment of Title II of the James Zadroga 9/11 Health and Compensation Act of 2010 (Zadroga Act; P.L. 111-347 ). The reopened VCF extended eligibility for cash benefits to persons who suffered physical injuries or illnesses as a result of rescue, recovery, or debris removal work at or near the September 11 th aircraft crash sites during the from September 11, 2001 to May 30, 2002, as well as for certain persons who lived, worked, or were near the World Trade Center on September 11, 2001. The VCF was initially reopened for new claims through October 3, 2016. Total benefits and administrative costs were limited to $2.775 billion, unlike in the original VCF, which had no cap on total funding for benefits, allowing the special master to award benefits without considering the benefits' total cost. Under the reopened VCF, attorney fees were limited to 10% of the VCF award. <1.3. VCF Reauthorizations> <1.3.1. 2015 Reauthorization> The VCF was first reauthorized on December 18, 2015, which extended the claim period for five years, with the enactment of Title IV of Division O of the Consolidated Appropriations Act, 2016 (Zadroga Reauthorization Act of 2015; P.L. 114-113 ). Under this reauthorization, claims approved before the reauthorization date were considered Group A claims, which were subject to the same rules as claims under the reopened VCF and to the $2.775 billion cap on total benefit payments. All other claims filed before the December 18, 2020 deadline were considered Group B claims subject to additional rules and funding caps established by the reauthorization legislation including a $4.6 billion cap on benefits. The 2015 reauthorization created a total funding cap of $7.375 billion for Groups A and B benefits. <1.3.2. 2019 Reauthorization> The VCF was reauthorized again in 2019 with the enactment of the Never Forget the Heroes: James Zadroga, Ray Pfeifer, and Luis Alvarez Permanent Authorization of the September 11 th Victim Compensation Fund Act ( P.L. 116-34 ). Under this legislation, the VCF is authorized through the end of FY2092, with an October 1, 2090 deadline for all VCF claim filings. The 2019 reauthorization appropriates "such sums as may be necessary" for VCF benefit payments and administrative expenses for each fiscal year through the end of FY2092. <2. Overview of the VCF Under Current Law> <2.1. VCF Eligibility> To be eligible for VCF benefits, a person must have died as a passenger or crew member on one of the aircraft hijacked on September 11, 2001; died as a direct result of the terrorist-related aircraft crashes or rescue, recovery, or debris removal in the immediate aftermath of the September 11, 2001 terrorist attacks; or been present at a September 11 th crash site in the immediate aftermath of the September 11, 2001 terrorist attacks and suffered physical harm as a direct result of the crashes or the rescue, recovery, and debris removal efforts. <2.1.1. Physical Harm> To be eligible for the VCF, survivors (individuals who did not die as passengers or crew members of the hijacked aircraft or as a direct result of the September 11 th terrorist attacks, including rescue, recovery, and debris removal), must have suffered physical harm as a result of the attacks. Physical harm is demonstrated by the presence of a World Trade Center (WTC)-related physical health condition as defined for the purposes of the World Trade Center Health Program (WTCHP). <2.1.1.1. WTC-Related Physical Health Condition> A WTC-related physical health condition is a physical health condition covered by the WTCHP. These conditions are those provided in statute at Sections 3312(a) and 3322(b) of the Public Health Service Act (PHSA) and those added through rulemaking by the WTCHP administrator. Per Section 3312(a) of the PHSA, to be covered by the WTCHP and thus compensable under the VCF, a condition must be on the list of WTCHP-covered conditions and it must be determined that exposure in the aftermath of the September 11, 2001 terrorist attacks "is substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." In most cases, the VCF requires that a person's condition be WTCHP certified for that condition to be compensable. The WTCHP provides standardized guidance to determine whether a person's condition was caused by exposure in the aftermath of the September 11, 2001 terrorist attacks. This determination is based on a combination of the amount of time a person was physically present at a site and the specific activities such as search and rescue, sleeping in a home in Lower Manhattan, or just passing through a site in which the person engaged. For example, a person who was engaged in search and rescue activities at the WTC site between September 11 and September 14, 2001, must have been present for at least 4 hours for the WTCHP to certify his or her condition and thus compensable by the VCF, whereas a person whose only activity was passing through Lower Manhattan during the same period, and who was not caught in the actual dust cloud resulting from the buildings' collapse, would have to have been in the area for at least 20 hours to be eligible for compensation. The WTCHP evaluates conditions that do not meet the minimum exposure criteria on a case-by-case basis using "professional judgement" and "any relevant medical and/or scientific information." WTCHP-covered mental health conditions may not be used to establish VCF eligibility, as the VCF does not include any provisions for benefit payments for mental health conditions. <2.1.1.2. Cancer as a WTC-Related Physical Health Condition> The WTCHP statute does not include any type of cancer in the list of WTC-related health conditions. However, the statute does require the WTCHP administrator to periodically review the available scientific evidence to determine if any type of cancer should be covered by the WTCHP and, by extension, the VCF. If the WTCHP administrator is petitioned to add conditions to the WTC-related health conditions' list, the administrator is required, within 90 days, to either request a recommendation on action from the WTC Scientific/Technical Advisory Committee (STAC) or make a determination on adding the health condition. If the administrator requests a recommendation from the STAC, that recommendation must be made within 90 days of its receipt and the WTCHP administrator must act on that request within an additional 90 days. On September 7, 2011, Representatives Carolyn B. Maloney, Jerrold Nadler, Peter King, Charles B. Rangel, Nydia M. Velazquez, Michael G. Grimm, and Yvette Clarke and Senators Charles E. Schumer and Kirsten E. Gillibrand filed a petition, in the form of a letter to the WTCHP administrator, requesting that the administrator "conduct an immediate review of new medical evidence showing increased cancer rates among firefighters who served at ground zero" and that the administrator "consider adding coverage for cancer under the Zadroga Act." In response to this petition, the WTC administrator requested that the STAC "review the available information on cancer outcomes associated with the exposures resulting from the September 11, 2001 terrorist attacks, and provide advice on whether to add cancer, or a certain type of cancer, to the List specified in the Zadroga Act." On September 12, 2012, based on the STAC's recommendations, the WTCHP administrator added more than 60 types of cancer, covering nearly every body system and including any cancers in persons less than 20 years of age and any rare cancers, to the list of WTC-related health conditions, thus making these conditions compensable under the VCF. In a review of the decision to add cancers to the list of WTC-related health conditions, the Government Accountability Office (GAO) found that the WTCHP administrator used a hazards-based approach to evaluate cancers. This approach evaluated whether exposures in the aftermath of the September 11, 2001 terrorist attacks were associated with types of cancer but did not evaluate the probability of developing cancer based on a given exposure. A GAO-convened scientific panel indicated that the hazards-based approach the WTCHP administrator used was reasonable given data constraints and the fact that there is a certification process to determine if a cancer or other condition on the WTC-related health list meets the statutory requirement of being "substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." The panel also indicated that this approach could have benefited from an independent peer review process. The WTCHP administrator stated that peer review was not possible given the statutory time constraints to act on the petition and the STAC's recommendation. One year later, the WTCHP administrator added prostate cancer to the list of WTC-related health conditions. In addition, the WTCHP administrator established minimum latency periods for certain types of cancer and maximum onset periods for certain types of aerodigestive disorders. <2.2. VCF Operations> The Civil Division of the Department of Justice administers the VCF. The Attorney General appoints the VCF special master and up to two deputies, who serve at the pleasure of the Attorney General. The VCF special master, currently Rupa Bhattacharyya, decides VCF eligibility and benefits. A claimant dissatisfied with the special master's decision on his or her claim may file an appeal and request a hearing before a VCF-appointed hearing officer. There is no further right of appeal or judicial review of VCF decisions. However, a claimant may amend his or her claim after a decision has been made if the claimant has new material relevant to the claim. <2.2.1. Registration and Claim Deadlines> All claims for VCF benefits must be filed by October 1, 2090. Before filing a claim, a potential claimant must have registered with the VCF by one of the following applicable deadlines: October 3, 2013, if the claimant knew, or reasonably should have known, that he or she suffered a physical harm or died as a result of the September 11 th attacks or rescue, recovery, or debris removal efforts, and that he or she was eligible for the VCF on or before October 3, 2011; or within two years of the date the claimant knew, or reasonably should have known, that he or she has a WTC-related physical health condition or died as a result of the September 11 th attacks and is eligible for the VCF. If a claimant has a condition that is later added to the list of WTCHP-covered conditions, then the two-year period begins on the later of the dates when a government entity, such as the WTCHP or a state workers' compensation agency, determines that the condition is related to the September 11 th attacks, or when a claimant's condition is added to the WTCHP-covered list of conditions. <2.3. VCF Benefits> Under current law, there is no cap on the total VCF benefit amount that may be paid, but there are limits on individual benefit amounts. The special master determines VCF benefits based on the claimant's economic and noneconomic losses. For noneconomic losses, there is a cap of $250,000 for cancer claims and $90,000 for all other claims. For cases in which a WTC-related health condition causes death, the presumed award provided in the VCF regulations for noneconomic loss is $250,000 plus an additional $100,000 for the person's spouse and each dependent. In addition, the special master may exceed the noneconomic loss limits if the Special Master determines that the claim presents "special circumstances." When calculating economic losses, the special master is permitted to consider only the first $200,000 in annual income when determining losses to past earnings and future earning capacity, which limits the amount of economic losses that can be paid. The special master is required to periodically adjust this amount to account for inflation. VCF benefits are reduced by certain collateral source payments available to claimants, such as life insurance benefits, workers' compensation payments, and government benefits related to the person's injury or death, including Social Security Disability Insurance and the Public Safety Officers' Benefits program. The 2019 reauthorization provides that any benefit award that the special master had previously reduced due to insufficient funding to pay all VCF awards is to be paid in full. <2.4. Exclusivity of Remedy> Congress established the VCF to be an "administrative alternative to litigation for the victims of the [September 11, 2001] terrorist attacks." As such, to receive a VCF award, a person must forfeit his or her right to bring any lawsuit in any state or federal court against any entity, such as the airlines, airframe manufacturers, or building owners, for damages related to the attacks or their aftermath and must withdraw any pending legal claims. However, a person may maintain his or her eligibility for the VCF and bring a lawsuit against "any person who is a knowing participant in any conspiracy to hijack any aircraft or commit any terrorist act," or bring a lawsuit to recover collateral source obligations such as life insurance benefits owed to the victim. In addition, the VCF statute grants the United States District Court for the Southern District of New York exclusive jurisdiction over any lawsuits related to the September 11, 2001 terrorist attacks and establishes liability limits for the airlines, airframe manufacturers, airports, City of New York, and any person with property interest in the World Trade Center such as the Port Authority of New York and New Jersey. The VCF statute caps attorney fees for claimant assistance at 10% of the VCF award amount. The special master has the authority to reduce any attorney fees it deems excessive for services rendered. Under provisions of the Justice for United States Victims of State Sponsored Terrorism Act, a person who receives a VCF award is barred from receiving any additional compensation from the United States Victims of State Sponsored Terrorism Fund. <3. VCF Appropriations> The 2019 VCF reauthorization appropriates "such sums as may be necessary" for FY2019 and each fiscal year through FY2092 for the payment of VCF awards, with all funds to remain available until expended. Thus, funding for the VCF will not require annual appropriations or be subject to the annual appropriations process. <3.1. Appendix. VCF Award Data>

The September 11 th Victim Compensation Fund (VCF) provides cash benefits to certain persons whose health may have been affected by exposure to debris or toxic substances in the aftermath of the September 11, 2001 terrorist attacks on the Pentagon, the World Trade Center, and the terrorist-related aircraft crash at Shanksville, PA. Congress created the original VCF shortly after the 2001 terrorist attacks to provide compensation to persons injured and the families of persons killed in the attacks and their immediate aftermath. The original VCF closed in 2003. In 2011, Congress reopened the VCF to provide benefits to persons who responded to the terrorist attack sites, were involved in the cleanup of these sites, or lived in lower Manhattan during the attacks. The reopened VCF was authorized through October 3, 2016. However, the VCF was reauthorized in December 2015 ( P.L. 114-113 ) and July 2019 ( P.L. 116-34 ). All VCF claims must be filed by October 1, 2090. Since its reopening, the VCF has awarded more than $5.5 billion to more than 23,000 claimants. There is no cap on the total VCF award amount, but there are limits on the amounts of individual awards for economic and noneconomic losses claimants suffered. The 2019 reauthorization legislation provides all necessary appropriations for VCF awards and administrative expenses through the end of FY2092.

crs_R46322

crs_R46322_0

<1. Introduction> The Small Business Administration's (SBA's) Women-Owned Small Business (WOSB) Federal Contracting Program is one of several contracting programs Congress has approved to provide greater opportunities for small businesses to win federal contracts. Congress's interest in promoting small business contracting dates back to World War II and the outbreak of fighting in Korea. At that time, Congress found that thousands of small business concerns were being threatened by war-induced shortages of materials coupled with an inability to obtain defense contracts or financial assistance. In 1953, concerned that many small businesses might fail without government assistance, Congress passed, and President Dwight Eisenhower signed into law, the Small Business Act (P.L. 83-163). The act authorized the SBA. The Small Business Act specifies that it is Congress's declared policy to promote the interests of small businesses to "preserve free competitive enterprise." Congress indicated that one of the ways to preserve free competitive enterprise was to increase market competition by insuring that small businesses received a "fair proportion" of federal contracts and subcontracts. Since 1953, Congress has used its broad authority to impose requirements on the federal procurement process to help small businesses receive a fair proportion of federal contracts and subcontracts, primarily through the establishment of federal procurement goals and various contracting preferences including restricted competitions (set-asides), sole source awards, and price evaluation adjustment/preference in unrestricted competitions for small businesses. Congress has also authorized the following: government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to small businesses generally and to specific types of small businesses, including at least 5% to WOSBs; an annual Small Business Goaling Report to measure progress in meeting these goals; a general requirement for federal agencies to reserve (set aside) contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000) but not greater than the simplified acquisition threshold (currently $250,000); and, under specified conditions, contracts that have an anticipated value greater than the simplified acquisition threshold exclusively for small businesses. A set-aside is a commonly used term to refer to a contract competition in which only small businesses, or specific types of small businesses, may compete; federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances); federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g., Minority Small Business and Capital Ownership Development Program (known as the 8(a) program) small businesses, Historically Underutilized Business Zone (HUBZone) small businesses, WOSBs, and service-disabled veteran-owned small businesses (SDVOSBs)); and the SBA and other federal procurement officers to review and restructure proposed procurements to maximize opportunities for small business participation. Additional requirements are in place to maximize small business participation as prime contractors, subcontractors, and suppliers. For example, prior to issuing a solicitation, federal contracting officers must do the following, among other requirements: divide proposed acquisitions of supplies and services (except construction) into reasonably small lots to permit offers on quantities less than the total requirement; plan acquisitions such that, if practicable, more than one small business concern may perform the work, if the work exceeds the amount for which a surety may be guaranteed by the SBA against loss under 15 U.S.C. 694b [generally $6.5 million, or $10 million if the contracting officer certifies that the higher amount is necessary]; encourage prime contractors to subcontract with small business concerns, primarily through the agency's role in negotiating an acceptable small business subcontracting plan with prime contractors on contracts anticipated to exceed $700,000 or $1.5 million for construction contracts; and under specified circumstances, provide a copy of the proposed acquisition package to an SBA procurement center representative (PCR) for his or her review, comment, and recommendation at least 30 days prior to the issuance of the solicitation. If the contracting officer rejects the PCR's recommendation, he or she must document the basis for the rejection and notify the PCR, who may appeal the rejection to the chief of the contracting office and, ultimately, to the agency head. This report focuses on the SBA's WOSB Federal Contracting Program, authorized by H.R. 5654 , the Small Business Reauthorization Act of 2000, and incorporated by reference in P.L. 106-554 , the Consolidated Appropriations Act, 2001. The WOSB program is designed to help federal agencies achieve their statutory goal of awarding at least 5% of their federal contracting dollars to WOSBs (established by P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994 (FASA)) by allowing federal contracting officers to set aside acquisitions exceeding the micro-purchase threshold (currently $10,000) for bidding by WOSBs (including economically disadvantaged WOSBs (EDWOSBs)) exclusively in industries in which WOSBs are substantially underrepresented, and set aside contracts for bidding by EDWOSBs exclusively in industries in which WOSBs are underrepresented. Congressional interest in the WOSB program has increased in recent years because the federal government has met the 5% procurement goal for WOSBs only once in FY2015 since the goal was authorized in 1994, and implemented in FY1996 (see Table 1 ). The data on WOSB federal contract awards suggest that federal procurement officers are using the WOSB program more often than in the past, but the amount of WOSB awarded contracts account for a relatively small portion of the total amount of contracts awarded to WOSBs. Most of the federal contracts awarded to WOSBs are awarded in full and open competition with other firms or with another small business preference, such as an 8(a) or HUBZone program preference. Relatively few federal contracts are awarded through the WOSB program (see Table 1 ). In addition, the Government Accountability Office (GAO) and the SBA's Office of Inspector General (OIG) have noted deficiencies in the SBA's implementation and oversight of the program. For example, the WOSB program was authorized on December 21, 2000. The SBA took nearly 10 years to issue a final rule for the program (on October 7, 2010) and another four months before the program actually went into effect (on February 4, 2011). The SBA attributed the delay primarily to its difficulty in identifying an appropriate methodology to determine "the industries in which WOSBs are underrepresented with respect to federal procurement contracting." P.L. 113-291 , the Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015 (NDAA 2015), enacted on December 19, 2014, removed the ability of small businesses to self-certify their eligibility for the WOSB program as a means to ensure that the program's contracts are awarded only to intended recipients. NDAA 2015 also required the SBA to implement its own WOSB certification process. The SBA issued an Advance Notice of Proposed Rulemaking in the Federal Register on December 18, 2015, to solicit public comments on drafting a proposed rule to meet these requirements. The SBA did not issue the proposed rule until May 14, 2019. Comments on the proposed rule were to be submitted by July 15, 2019. The final rule implementing the certification program and removing the self-certification option was issued on May 11, 2020. The effective date for the new WOSB certification process is October 15, 2020, nearly six years after these requirements were enacted on December 19, 2014. <2. The WOSB Program's Origins> The following sections provide an overview of the history of small business contracting preferences, focusing on executive, legislative, and judicial actions that led to the creation of the WOSB program and influenced its structure. <2.1. Federal Agency Small Business Procurement Goals and Executive Order 12138: A National Program for Women's Business Enterprise> Since 1978, federal agency heads have been required to establish federal procurement goals, in consultation with the SBA, "that realistically reflect the potential of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals" to participate in federal procurement. These reports are submitted to Congress and are presently made available to the public on the General Services Administration's (GSA's) website. Initially, WOSB goals were not included. On May 18, 1979, President Jimmy Carter issued Executive Order 12138, which established a national policy to promote women-owned business enterprises. Among other provisions, the executive order required federal agencies "to take appropriate affirmative action in support of women's business enterprise," including promoting procurement opportunities and providing financial assistance and business-related management and training assistance. Under authority provided by Executive Order 12138, the SBA added WOSB procurement goals to the list of small business contracting goals it negotiated with federal agencies. At that time, WOSBs received about 0.2% of all federal contracts. By 1988, this percentage had grown, but to only 1% of all federal contracts. WOSB advocates argued that additional action was needed to help WOSBs win federal contracts because women-owned businesses are subject to "age-old prejudice, discrimination, and exploitation," the "promotion of women's business enterprise is simply not a high priority" for federal agencies, and federal "agency efforts in support of women's business enterprise have been weak and have produced little, if any measurable results." Their efforts led to P.L. 100-533 , the Women's Business Ownership Act of 1988. P.L. 100-533 provided the SBA statutory authorization to establish WOSB annual procurement goals with federal agencies. The act also extended the goaling requirement to include subcontracts, as well as prime contracts, and added WOSBs to the list of small business concerns to be identified in required small business subcontracting plans (at that time, small business subcontracting plans were required for prime contracts exceeding $500,000, or $1 million for the construction of any public facility). <2.2. Government-Wide Small Business Procurement Goals> In a related development, P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, authorized the President to annually establish government-wide minimum procurement goals for small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals (SDBs). Congress required the government-wide minimum goal for small businesses to be "not less than 20% [increased to 23% in 1997] of the total value of all prime contract awards for each fiscal year" and "not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year" for SDBs. Advocates for a WOSB government-wide procurement goal argued that women owned approximately one third of the nation's businesses but received "a mere 1.3% of federal contracting dollars ... in FY1990." Their efforts led to P.L. 103-355 , FASA. FASA created a 5% procurement goal for WOSBs each fiscal year. The 5% goal was implemented by regulations effective in FY1996. The conferees indicated in FASA's conference agreement that they did "not intend to create a new set aside or program of restricted competition for a specific designated group, but rather to establish a target that will result in greater opportunities for women to compete for federal contracts." The conferees added that "given the slow progress to date in reaching the current award levels, the conferees recognize that this goal may take some time to be reached." Subsequently, 3% procurement goals were created for HUBZone small businesses ( P.L. 105-135 , the HUBZone Act of 1997; Title VI of the Small Business Reauthorization Act of 1997) and SDVOSBs ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). Figure 1 shows the percentage of small business-eligible federal contracts awarded to small businesses, SDBs, WOSBs, SDVOSBs, and HUBZone small businesses from FY2005 through FY2018. As detailed in the figure's notes, the small business-eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement. About 15% to 18% of all federal contracts are excluded in any given fiscal year. The federal government has had difficulty meeting the WOSB and HUBZone small business procurement goals. As mentioned in Figure 1 's notes, the 5% procurement goal for WOSBs was achieved in only 1 of the 14 fiscal years (FY2015) reported in the figure. The 3% procurement goal for HUBZone small businesses was not achieved in any of the 14 fiscal years. In contrast, the 23% procurement goal for all types of small businesses was achieved in 8 of the 14 fiscal years reported in the figure (FY2005, FY2008, and FY2013-FY2018), including the past 6 fiscal years. The 5% procurement goal for SDBs was achieved in each of the 14 fiscal years. The 3% procurement goal for SDVOSBs was achieved in 7 of the 14 fiscal years (FY2012-FY2018), including the last 7 fiscal years. <2.3. WOSB Set-Asides> As shown in Table 1 , FASA conferees' prediction that it may take some time to reach the 5% goal was confirmed. The amount and percentage of federal contracts awarded to WOSBs increased slowly following the establishment of the 5% goal (implemented in FY1996). Frustrated by the relatively slow progress toward meeting the 5% goal, WOSB advocates began to lobby for additional actions, including the establishment of a federal contracting set-aside program for WOSBs. As mentioned, a set-aside is a commonly used term to refer to a contract competition in which only small businesses, or specific types of small businesses, may compete. WOSB advocates noted that other small businesses were provided contracting preferences. For example, at that time, SDBs were eligible for contract set-asides and a price evaluation adjustment of up to 10% in full and open competition in specified federal agencies, including the Department of Defense (DOD); participants in the SBA's 8(a) program were (and still are) eligible for both contract set-asides and sole source awards; and HUBZone small businesses were (and still are) eligible for contract set-asides, sole source awards, and a price evaluation adjustment of up to 10% in full and open competition above the simplified acquisition threshold. As a first step toward the enactment of a WOSB set-aside contracting program, P.L. 106-165 , the Women's Business Centers Sustainability Act of 1999, required GAO to review the federal government's efforts to meet the 5% goal for WOSBs and to identify any measures that could improve the federal government's performance in increasing WOSB contracting opportunities. GAO issued its report on February 16, 2001: Among the government contracting officials with whom we spoke, there was general agreement on several suggestions for improving the environment for contracting with WOSBs and increasing federal contracting with WOSBs. They suggested creating a contract program targeting WOSBs, focusing and coordinating federal agencies' WOSB outreach activities, promoting contracting with WOSBs through agency incentive and recognition programs, including WOSBs in agency mentor-prot g programs, providing more information to WOSBs about participation in teaming arrangements, and providing expanded contract financing. By the time the GAO report was published, legislation had been enacted ( H.R. 5654 , the Small Business Reauthorization Act of 2000, incorporated by reference in P.L. 106-554 , the Consolidated Appropriations Act, 2001) to authorize the WOSB program. As mentioned, the WOSB program provides greater access to federal contracting opportunities for WOSBs by providing federal contracting officers authority to set aside contracts for WOSBs (including EDWOSBs) exclusively in industries in which WOSBs are substantially underrepresented, and to set aside contracts for EDWOSBs exclusively in industries in which WOSBs are underrepresented. <2.4. A Targeted Approach to Avoid Legal Challenges> Congressional efforts to promote WOSB set-asides were complicated by Supreme Court decisions on legal challenges of contracting preferences for minority contractors, including City of Richmond v. J.A. Croson Co . (1989) (finding unconstitutional a municipal ordinance that required the city's prime contractors to award at least 30% of the value of each contract to minority subcontractors) and Adarand Constructors, Inc. v. Pena (1995) (finding that all racial classifications, whether imposed by federal, state, or local authorities, must pass strict scrutiny review). The Adarand Constructors, Inc. v. Pena case involved a challenge to federal subcontracting preferences for SDBs. The plaintiff claimed that contracting preferences based on race violate the equal protection component of the Fifth Amendment's Due Process Clause. The Supreme Court ruled that all racial classifications, whether imposed by federal, state, or local authorities, must pass strict scrutiny review (i.e., they must serve a compelling government interest and must be narrowly tailored to further that interest). Following the Adarand decision, the federal government reexamined how it implemented "affirmative action" programs, including certain procurement preference programs. When developing the WOSB set-aside program, its advocates were aware that the WOSB program would be subject to a heightened standard of judicial review given the Supreme Court's ruling that all racial classifications must serve a compelling government interest and be narrowly tailored. In the House report accompanying H.R. 4897 , the Equity in Contracting for Women Act of 2000 (which was incorporated into H.R. 5654 , the Small Business Reauthorization Act of 2000), advocates argued that a set aside program was needed (compelling interest) because of the slow progress in meeting the 5% procurement goal for WOSBs. The report noted that "the drive for efficiency in procurement often places Congressionally-mandated contracting goals for small businesses in general, and women-owned small businesses in particular, in jeopardy." The report also noted that contract bundling (the consolidation of smaller contract requirements into larger contracts) and the increased use of the Federal Supply Schedules increase "the efficiency of government procurements ... [but] also may perpetuate the use of well-known firms that are not women-owned businesses." As a result, the Committee believes that the goals expressed in FASA and reaffirmed in the Executive Order [Executive Order 13,157, issued on May 23, 2000 by President Clinton, reaffirming the Administration's support for increasing contracting opportunities for WOSBs] will not be achieved without the use of some mandatory tool which enables contracting officers to identify WOSBs and establish competition among those businesses for the provision of goods and services. The House report also argued that the bill was narrowly tailored because it did not establish sole source authority for WOSBs and limited WOSB set-asides to industries in which WOSBs are underrepresented in obtaining federal contracts. <3. WOSB Program Requirements> The Consolidated Appropriations Act, 2001 ( P.L. 106-554 ) specified that federal contracting officers could not set aside contracts for WOSBs or EDWOSBs unless (1) they had a reasonable expectation that two or more eligible business concerns would submit offers for the contract, (2) the anticipated award price of the contract (including options) does not exceed $5 million for manufacturing contracts and $3 million for all other contracts, and (3) the contract award can be made at a fair and reasonable price. In 2011, the set-aside award caps were increased to $6.5 million for manufacturing contracts and $4 million for all other contracts to account for inflation. In 2013, P.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013, removed the caps. <3.1. Eligibility Requirements> The Consolidated Appropriations Act, 2001 ( P.L. 106-554 ) also specified recipient eligibility requirements (see below) and required the SBA to conduct a study to identify industries in which WOSBs are underrepresented (and, by inference, substantially underrepresented) with respect to federal procurement contracting. In addition, the SBA had to develop criteria to define an EDWOSB because the act did not define economic disadvantage. The WOSB program could not begin until those determinations were made. To participate in the program, the act specified that WOSBs must be a small business (as defined by the SBA); be at least 51% unconditionally and directly owned and controlled by one or more women who are U.S. citizens; have women manage day-to-day operations and make long-term decisions; and be certified by a federal agency, a state government, the SBA, or a national certifying entity approved by the SBA or self-certify their eligibility to the federal contracting officer with adequate documentation according to standards established by the SBA. <3.2. Certification> As mentioned, P.L. 113-291 (NDAA 2015), among other provisions, removed the ability of small businesses to self-certify their eligibility for the WOSB program as a means to ensure that the program's contracts are awarded only to intended recipients. The act also required the SBA to implement its own certification process for WOSBs. The SBA announced in the Federal Register that it will implement its own certification process for the WOSB program and remove the ability of small businesses to self-certify their eligibility for the WOSB program on October 15, 2020. In the meantime, WOSBs and EDWOSBs must be either self-certified or third-party certified to participate in the WOSB program. Self-certification requires the business to provide certification information annually through the SBA's certification web page (certify.SBA.gov) and have an up-to-date profile on the System for Award Management (SAM) website (sam.gov) indicating that the business is small and is interested in participating in the WOSB program. Self-certification is free. In addition, in 2011, the SBA approved four organizations to provide third-party certification (typically involving a fee): El Paso Hispanic Chamber of Commerce, National Women Business Owners Corporation, U.S. Women's Chamber of Commerce, and Women's Business Enterprise National Council. Third-party certification will continue to be an option. Effective October 15, 2020, WOSBs and EDWOSBS that are not certified will not be eligible to participate in the WOSB program. Other women-owned small businesses may continue to self-certify their status as a WOSB, receive contract awards outside of the WOSB program, and count toward an agency's 5% procurement goal. <3.3. Defining Economic Disadvantage> EDWOSBs must meet all WOSB contracting program requirements and be economically disadvantaged, which, as presently defined by the SBA, means that they must be owned and controlled by one or more women, each with a personal net worth less than $750,000; owned and controlled by one or more women, each with $350,000 or less in adjusted gross income averaged over the previous three years; and owned and controlled by one or more women, each with $6 million or less in personal assets. The SBA defined economic disadvantage using its experience with the 8(a) program as a guide (i.e., reviewing the owner's income, personal net worth, and the fair market value of her total assets). As of May 11, 2020, there were 65,903 WOSBs and 24,370 EDWOSBs registered in the SBA's online database. <4. The 10-Year Delay in WOSB's Implementation> As mentioned, the WOSB program's implementation was delayed for over 10 years, primarily due to the SBA's difficulty in identifying an appropriate methodology to determine "the industries in which WOSBs are underrepresented (and, by inference, substantially underrepresented) with respect to federal procurement contracting." The SBA completed a draft of the legislatively mandated study of underrepresented (and, by inference, substantially underrepresented) NAICS industrial codes in September 2001, using internal resources. The SBA then submitted proposed regulations to implement the WOSB program to the Office of Management and Budget (OMB), which is required by law to review all draft regulations before publication within 90 days of their submission to OMB. However, the SBA withdrew the regulations on April 24, 2002, before the review was complete "because the SBA Administrator had concerns about the content and constitutionality of its draft industry study and believed that it needed to contract with the National Academy of Science (NAS) to review the draft industry study and recommend any changes the NAS believed were necessary." The SBA awarded a contract to NAS in late 2003 to conduct the study. NAS completed its analysis and issued a report on the SBA's study on March 11, 2005. The report indicated that the SBA asked NAS to conduct the review "because of the history of legal challenges to race- and gender-conscious contracting programs at the federal and local levels." NAS concluded that the SBA's study was "problematic in several respects, including that the documentation of data sources and estimation methods is inadequate for evaluation purposes." NAS made several recommendations for a new study, including that the SBA use more current data, different industry classifications, and consistent monetary and numeric utilization measures to provide more complete documentation of data and methods. The SBA later characterized NAS's analysis as indicating that the SBA study was "fatally flawed." In response to that finding, the SBA issued a solicitation in October 2005, seeking a private contractor to perform a revised study. In February 2006, a contract was awarded to the Kaufman-RAND Institute for Entrepreneurship Public Policy (RAND). The RAND study was published in April 2007. The RAND report noted that underrepresentation is typically referred to as a disparity ratio, a measure comparing the use of firms of a particular type (in this case, WOSBs) in a particular NAICS code to their availability for such contracts in that NAICS code. A disparity of 1.0 suggests that firms of a particular type are awarded contracts in the same proportion as their representation in that industry (there is no disparity). A disparity ratio less than 1.0 suggests that the firms are underrepresented in federal contracting in that NAICS code. A ratio greater than 1.0 suggests that the firms are overrepresented. RAND identified 28 different approaches to determine underrepresentation and substantial underrepresentation of WOSBs in federal procurement, each of which yielded a different result. After examining each approach's benefits and deficiencies, the SBA defined underrepresentation as industries having a disparity ratio between 0.5 and 0.8, where the ratio represents the WOSB share of federal prime contract dollars divided by the WOSB share of total business receipts within a given NAICS code. Substantial underrepresentation was defined as industries with a disparity ratio between 0.0 and 0.5. Using that methodology, the SBA identified 83 four-digit NAICS industry groups in its final rule implementing the WOSB program (October 7, 2010, effective February 4, 2011): 45 four-digit NAICS industry groups in which WOSBs are underrepresented (225 out of the 1,057 six-digit NAICS industry codes at that time were made eligible for EDWOSB set-asides only), and 38 four-digit NAICS industry groups in which WOSBs are substantially underrepresented (171 out of the 1,057 six-digit NAICS industry codes at that time were made eligible for WOSB (including EDWOSB) set-asides). <5. Mandated Updates of Underrepresented and Substantially Underrepresented NAICS Codes> In 2014, Congress passed legislation ( P.L. 113-291 ) requiring the SBA to update the list of underrepresented and substantially underrepresented NAICS codes by January 2, 2016, and then conduct a new study and update the NAICS codes every five years thereafter. The SBA asked the Department of Commerce's Office of the Chief Economist (OCE) for assistance in conducting a new study. The OCE examined the odds of women-owned businesses winning a federal prime contract relative to otherwise similar firms in FY2013 and FY2014 in each of the four-digit NAICS code industry groups, controlling for the firm's size and age, legal form of organization, level of government security clearance, past federal prime contracting performance ratings, and membership in various categories of firms having federal government-wide procurement goals. OCE found that women-owned businesses were less likely to win federal contracts in 254 of the 304 industry groups in the study, and women-owned businesses in 109 of the 304 industry groups had statistically significant lower odds of winning federal contracts than otherwise similar businesses not owned by women at the 95% confidence level. Based on the OCE study, the SBA increased the number of underrepresented and substantially underrepresented four-digit NAICS codes from 83 to 113, effective March 3, 2016 (21 in which WOSBs are underrepresented (EDWOSB set-asides only) and 92 in which WOSBs are substantially underrepresented (WOSB and EDWOSB set-asides). OMB updates the NAICS every five years. In response to OMB's release of NAICS 2017, which replaced NAICS 2012, the SBA reduced the number of underrepresented and substantially underrepresented four-digit NAICS codes from 113 to 112, effective October 1, 2017. The reduction took place because NAICS 2017 merged two four-digit NAICS industry groups that affected the WOSB program. The merger also resulted in the number of four-digit NAICS industry groups in which WOSBs are substantially underrepresented (WOSB and EDWOSB set-asides) to fall from 92 to 91. Overall, WOSB set-asides may be provided to WOSBs (including EDWOSBs) in 364 (out of 1,023) six-digit NAICS industry codes and to EDWOSBs exclusively in 80 (out of 1,023) six-digit NAICS industry codes. <6. Sole Source Award Authority> P.L. 113-291 (NDAA 2015), enacted in 2014, provides federal agencies authority to award sole source contracts to WOSBs (including EDWOSBs) eligible under the WOSB program if the contract is assigned a NAICS code in which the SBA has determined that WOSBs are substantially underrepresented in federal procurement; the contracting officer does not have a reasonable expectation that offers would be received from two or more WOSBs (including EDWOSBs); and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). NDAA 2015 also provides federal agencies authority to award sole source contracts exclusively to EDWOSBs eligible under the WOSB program if the contract is assigned a NAICS code in which SBA has determined that WOSB concerns are underrepresented in federal procurement; the contracting officer does not have a reasonable expectation that offers would be received from two or more EDWOSB concerns; and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). Expanding the WOSB program to include sole source contracts was designed, along with WOSB set-asides, to help federal agencies achieve their statutory goal of awarding at least 5% of their federal contracting dollars to WOSBs. The SBA published a final rule expanding the WOSB program to include sole source awards on September 14, 2015 (effective October 14, 2015). <7. Current Administrative Issues> Both GAO and the SBA's OIG have issued reports and audits of the WOSB program that have been critical of the SBA's implementation and oversight of the program. For example, GAO has criticized the SBA for delays in implementing the WOSB program and, in 2019, reported that the SBA had not fully addressed WOSB program oversight deficiencies, first identified by GAO in 2014, related to third-party certifiers, the procedures used to conduct annual eligibility examinations of WOSBs, and "reviews of individual businesses found to be ineligible to better understand the cause of the high rate of ineligibility in annual reviews and determine what actions are needed to address the causes." GAO argued that the deficiencies in SBA's oversight of the WOSB program limit SBA's ability to identify potential fraud risks and develop any additional control activities to address these risks. As a result, the program continues to be exposed to the risks of ineligible businesses receiving set-aside contracts. In addition, GAO noted that, from April 2011 through June 2018, about 3.5% of WOSB set-aside contracts were awarded for ineligible goods or services [NAICS codes]. In 2015, the SBA's OIG analyzed 34 WOSB program awards made between October 1, 2013, and June 30, 2014, (17 WOSB set-aside awards totaling $6.6 million and 17 EDWOSB set-aside awards totaling $7.9 million) and found "15 of the 34 set-aside awards were made without meeting the WOSB program's requirements," and these awards totaled approximately $7.1 million. Specifically, 10 of the 34 WOSB program set-aside awards were made "for work that was not eligible to be set aside for the program" and 9 of the 34 awards went to firms that did not have any documentation in the WOSB program's repository, including 7 of the 17 WOSB set-aside awards, or 41%, and 2 of the 17 EDWOSB set-aside awards, or 12%." The SBA OIG found that "this occurred because agencies' contracting officers did not comply with the regulations prior to awarding these awards and SBA did not provide enough outreach or training to adequately inform them of their responsibilities and the program's requirements." In a related development, in 2018, the SBA's OIG analyzed 56 WOSB sole source contracts awarded between January 1, 2016, and April 30, 2017, and found that 50 of the 56 contracts, totaling approximately $52.2 million, were made "without having the necessary documentation to determine eligibility" of the award recipients. Examples of missing documentation included WOSB and EDWOSB self-certifications, articles of incorporation, birth certificates, and financial information. <8. Current Oversight and Legislative Issues> The SBA's WOSB program is likely to be of continued interest to Congress during the remainder of the 116 th Congress. Issues of particular interest to Congress may include congressional oversight of the SBA's implementation of the WOSB program's certification procedures; congressional oversight of the SBA's training of federal procurement officers to ensure that WOSB awards are made only to eligible firms in eligible industries; the performance of federal agencies in achieving the 5% procurement goal for WOSBs; and the WOSB program's efficacy in helping to meet the 5% goal. As shown in Table 1 , federal procurement officers' use of the WOSB program has increased from about $21 million in FY2011 to $893 million in FY2018, with most of that increase resulting from rising use of WOSB set-asides (from $15 million in FY2011 to $742 million in FY2018). Although WOSB program usage is increasing, WOSB set-asides and sole source awards continue to account for a relatively small portion of the federal contracts awarded to WOSBs. Although the WOSB program has been operational since 2011, many federal agencies have little experience with the program. For example, in FY2018, about 63% of the federal contracts awarded to WOSBs were awarded in full and open competition with other firms, about 33% were awarded with another small business preference (such as the 8(a) and HUBZone programs), and about 4% were awarded with a WOSB preference. Also, GAO found that from the third quarter of FY2011 through the third quarter of FY2018, six federal agencies accounted for nearly 83% of the contract amount awarded under the WOSB program: DOD (48.6%), Department of Homeland Security (DHS) (12.4%), Department of Commerce (8.0%), Department of Agriculture (6.3%), Department of Health and Human Services (4.0%), and GSA (4.0%). All other federal agencies accounted for 16.8%. GAO conducted an audit of the WOSB program from October 2017 to March 2019. As part of the audit, GAO interviewed 14 stakeholder groups (staff from DHS, DOD, and GSA, eight contracting officers within these agencies, and three WOSB third-party certifiers) to obtain their views on WOSB program usage. The stakeholder groups identified several positive aspects about the WOSB program, including that it provided WOSBs greater opportunities to win federal contracts, and that the SBA had several initiatives underway to help improve collaboration between federal agencies and the small business community. The stakeholders also identified several impediments that limited the WOSB program's use by federal contracting officers, including the following: Sole S ource A uthority R ules . Executing sole source authority under the WOSB program is difficult for contracting officers because rules for sole source authority under the WOSB program are different from those under SBA programs.... For example, the FAR's [Federal Acquisition Regulation] requirement that contracting officers must justify, in writing, why they do not expect other WOSBs or EDWOSBs to submit offers on a contract is stricter under the WOSB program that it is for the 8(a) program. Industry Restrict i ons . 13 of the 14 stakeholder groups ... commented on the requirement that WOSB program set-asides be awarded within certain industries, represented by NAICS codes. For example, two third-party certifiers ... recommended that the NAICS codes be expanded or eliminated to provide greater opportunities for WOSBs to win contracts under the program. Eligibility Documentation Requirements . 7 of the 14 stakeholder groups discussed the requirement for the contracting officer to review program eligibility documentation and how this requirement affects their decision to use the program. For example, staff from one contracting office said that using the 8(a) or HUBZone programs is easier because 8(a) and HUBZone applicants are already certified by the SBA; therefore, the additional step to verify documentation for eligibility is not needed.... GSA officials noted that eliminating the need for contracting officers to take additional steps to review eligibility documentation for WOSB-program set-asides could create more opportunities for WOSBs by reducing burdens on contracting officers. Need for A dditional G uidance . 13 of the 14 stakeholder groups discussed guidance available to federal contracting officers under the WOSB program. For example, two third-party certifiers identified the need for additional training and guidance for federal contracting officers, and staff from two federal contracting offices said that the last time that they had received training on the WOSB program was in 2011, when the program was first implemented. In a related development, the House passed legislation ( H.R. 190 , the Expanding Contracting Opportunities for Small Businesses Act of 2019) which would, among other provisions, eliminate the inclusion of option periods in the award price for sole source contracts awarded to qualified HUBZone small businesses, SDBs, SDVOSBs, and WOSBs (including EDWOSBs). This provision would increase the number of contracts available for sole source awards to these recipients because the option years would not count toward the statutory caps on sole source awards (the WOSB caps are currently $6.5 million for manufacturing contracts and $4 million for other contracts). The bill would also increase the WOSB sole source cap to $7 million for manufacturing contracts to align them with the $7 million cap for the HUBZone and 8(a) program small businesses. Also, some WOSB advocates have suggested that the WOSB program should be amended to (1) eliminate the distinction and disparate treatment of WOSBs and EDWOSBs when awarding contracts, and/or (2) allow set-asides and sole source awards to WOSBs (including EDWOSBs) in all NAICS industry codes regardless of WOSB representation, as is the case for other small business preference programs. Both legislative options could lead to an increase in the amount of contracts awarded to WOSBs. In the first instance, WOSBs would be eligible for set-asides and sole source awards in both underrepresented and substantially underrepresented NAICS codes, instead of just substantially underrepresented NAICS codes. In the latter instance, WOSBs and EDWOSBs would be eligible for set-asides and sole source awards in all NAICS industry codes, not just underrepresented or substantially underrepresented NAICS industry codes. As mentioned in the "A Targeted Approach to Avoid Legal Challenges" section, one of the reasons the WOSB program provides disparate treatment to WOSBs and EDWOSBs, and makes distinctions among underrepresented, substantially underrepresented, and other NAICS industry codes was to address the heightened level of legal scrutiny related to contracting preferences following the Supreme Court's decision in Adarand Constructors, Inc. v. Pena . The Supreme Court ruled that all racial classifications, whether imposed by federal, state, or local authorities, must pass strict scrutiny review (i.e., they must serve a compelling government interest and must be narrowly tailored to further that interest). Although the WOSB program is not based on racial classifications, it was expected to receive a heightened level of judicial scrutiny. As such, it lead the WOSB program's advocates to create these distinctions in an effort to shield it from legal challenges. <9. Concluding Observations> As mentioned in the " Introduction ," the WOSB program is one of several contracting programs that Congress has approved to provide greater opportunities for small businesses to win federal contracts. Its legislative history is a bit more complicated than others, primarily due to the distinctions between WOSBs and EDWOSBs and among underrepresented, substantially underrepresented, and other NAICS codes. These distinctions, and the SBA's difficulty in defining them, led to the 10-year delay in the program's implementation and may also help to explain why the SBA's implementation of the SBA's certification program was delayed nearly six years. The SBA's implementation of the WOSB program is likely to remain a priority for congressional oversight during the 116 th Congress, as is federal agency use of the program. As mentioned, the federal government has met the 5% procurement goal for WOSBs only once (in FY2015) since the goal was authorized in 1994, and implemented in FY1996. Also, the data on WOSB federal contract awards suggest that federal procurement officers are using the WOSB program more often than in the past, but the program accounts for a relatively small portion of WOSB contracts. Most of the federal contracts awarded to WOSBs are awarded in full and open competition with other firms or with another small business preference program (such as the 8(a) and HUBZone programs). Relatively few federal contracts are awarded through the WOSB program. Determining why this is the case, and if anything can, or should be done to address this, is likely to be of continuing congressional interest.

The Small Business Administration's (SBA's) Women-Owned Small Business (WOSB) Federal Contracting Program is designed to provide greater access to federal contracting opportunities for WOSBs and economically disadvantaged women-owned small businesses (EDWOSBs). By doing so, the program aims to help federal agencies achieve their statutory goal of awarding 5% of their federal contracting dollars to WOSBs. Under this program, federal contracting officers may set aside federal contracts (or orders) for WOSBs (including EDWOSBs) in industries in which the SBA determines WOSBs are substantially underrepresented in federal procurement and for EDWOSBs exclusively in industries in which the SBA determines WOSBs are underrepresented in federal procurement. The SBA has identified 364 six-digit North American Industry Classification System (NAICS) industry codes (out of 1,023) in which federal agencies may set aside federal contracts exclusively for WOSBs (including EDWOSBs) and 80 six-digit NAICS industry codes (out of 1,023) that may be set aside exclusively for EDWOSBs. Federal agencies may also award sole source contracts to WOSBs and EDWOSBs in eligible industries under the following conditions: the contracting officer does not have a reasonable expectation that offers would be received by two or more eligible WOSBs and EDWOSBs; the award can be made at a fair and reasonable price; and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). To participate in the program, WOSBs must be a small business (as defined by the SBA); be at least 51% unconditionally and directly owned and controlled by one or more women who are U.S. citizens; have women manage day-to-day operations and make long-term decisions; and be certified by a federal agency, a state government, the SBA, or a national certifying entity approved by the SBA. EDWOSBs must meet all the requirements of the WOSB contracting program; be owned and controlled by one or more women, each with a personal net worth less than $750,000; be owned and controlled by one or more women, each with $350,000 or less in adjusted gross income averaged over the previous three years; and be owned and controlled by one or more women, each having $6 million or less in personal assets (including business value and primary residence). The WOSB program's legislative history is a bit more complicated than other small business contracting programs, primarily due to the distinctions between WOSBs and EDWOSBs and among underrepresented, substantially underrepresented, and other NAICS codes. These distinctions were designed to shield the WOSB program from legal challenges related to the heightened level of legal scrutiny applied to contracting preferences after the Supreme Court's decision in Adarand Constructors, Inc. v. Pena (1995), which involved contracting preferences for small disadvantaged businesses. The Court found in that case that all racial classifications, whether imposed by federal, state, or local authorities, must pass strict scrutiny review. An unintended consequence of these distinctions has been the SBA's difficulty in defining these terms, which contributed to a 10-year delay in the program's implementation and may help to explain why it has taken the SBA nearly six years to implement its own WOSB certification process as required by P.L. 113-291 , the Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015. That act also prohibited small businesses from self-certifying their eligibility for the WOSB program to ensure the program's contracts are awarded only to intended recipients. The SBA issued an Advance Notice of Proposed Rulemaking in the Federal Register on December 18, 2015, to solicit public comments on drafting a proposed rule to meet these requirements. The proposed rule was issued on May 14, 2019, and the final rule implementing the certification program and removing the self-certification option was issued on May 11, 2020. The final rule's effective date for the new WOSB certification process is October 15, 2020, nearly six years after these requirements were enacted on December 19, 2014.

crs_R46296

crs_R46296_0

<1. Introduction> In general, the rules of the World Trade Organization (WTO), of which the United States is a member, require each member to apply tariffs and duties equally to all other members. This principle, known as unconditional most-favored-nation (MFN) treatment, has been central to the rules-based global trading system since 1947 and part of U.S. law and foreign policy since 1922. The WTO agreements allow exceptions to this treatment in certain circumstances, including to remedy unfair trade practices and to help domestic industries adjust to sudden surges of fairly traded goods. The three most frequently applied U.S. trade remedy laws permit the imposition of antidumping duties, countervailing duties, and safeguards. These laws are enforced through administrative investigations and actions of two U.S. government agencies: the International Trade Administration of the Department of Commerce (ITA) and the U.S. International Trade Commission (USITC). The most commonly used of these remedies are antidumping (AD) laws. AD laws provide relief to domestic industries that have been, or are threatened with, material injury caused by imports sold in the U.S. market at prices that are shown to be less than fair value. The relief provided is an additional import duty, calculated by the ITA and placed on the dumped imports. Antidumping orders are the most frequently used and the most controversial trade remedy. <2. Background> <2.1. Dumping Defined> In general, dumping occurs when manufacturers export goods for less than they sell similar goods in their domestic market. The controlling international agreement in the World Trade Organization (WTO) the Antidumping Agreement (ADA) defines dumping as the introduction of a product "into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country." U.S. law similarly defines dumping as the "sale or likely sale of goods [in the United States] at less than fair value," with the fair value defined as "the price at which the foreign like product is first sold for consumption in the exporting country." Simply put, dumping is the sale of goods abroad for less than the price the goods would have commanded in the home market. <2.2. The Origins of Dumping and Antidumping> Economists have long written about the practice of selling exports for a lower price than in the home market. In 1776, Adam Smith noted the practice by manufacturers to export some of their surplus goods for sale at a loss for the purpose of "[doubling] the price of their goods in the home market." Several years later, Alexander Hamilton expressed concern with the practice and its potential to stymie the development of domestic industry. However, such mentions were sporadic and generally isolated to economic treatises. As more countries industrialized in the late-nineteenth century, exporting goods for a price below the price that could be commanded in the domestic market (whether at a loss or not) became an economic strategy used to maintain domestic prices while establishing footholds in foreign markets. The expansion of these practices resulted in more sustained scholarly and political attention not all negative. In 1880, for example, the U.S. Secretary of State encouraged cotton manufacturers to "sacrifice profits for a time, if necessary, to secure trade-standing in several markets." Twenty-five years later, the U.S. Department of Commerce and Labor was still dispensing similar advice to manufacturers. Because of this strategic deployment of dumping, and the reemergence of state-directed trade policies at the turn of the twentieth century, politicians and the public (if not always the economists) began to argue that the practice was unfair. Accusations of using foreign markets as "dumping-grounds" became frequent and the term "dumping" to describe the practice of selling surplus goods abroad at a lower price began to be used more frequently. British industrialists protested dumping from German and French manufacturers, while Canadian millers grumbled about the dumping of American steel. While accusations of dumping were common, the actual prevalence of the practice is hard to calculate, in part because there was no administrative apparatus to investigate such complaints. Nevertheless, experts generally agree that there was, in fact, at least a modest increase in the practice. There were several possible causes for whatever dumping existed at the time. First, higher tariffs in general encouraged the practice. As a leading scholar of antidumping has argued, "These tariffs provided national firms the opportunity to price monopolistically at home and at the same time protected them from reimports of goods they sold competitively abroad." Other observers have noted that dumping was, in some respects, a natural development of trade in industrially advanced countries as large manufacturers attempted to offset changes in domestic demand by selling large surpluses abroad. During the first decades of the twentieth century, countries began to take action to prevent dumping or, at least, protect their domestic industries from dumping. In 1904, Canada enacted the world's first modern antidumping (AD) law. By 1921, Australia, New Zealand, South Africa, France, Japan, the United States, and Britain had proposed or enacted AD statutes or other legislation giving administrative officials discretion to alter tariffs in response to influxes of goods at abnormally low prices. Many of the statutes, including the American, were modeled on the Canadian law. The Economic and Financial Section of the League of Nations Secretariat (the precursor to the United Nations) also commissioned studies on the issue to survey AD legislation and see if there was a need for international regulation. U.S. AD law had precursors in late-nineteenth-century antitrust legislation. Some early observers argued that dumping was a strategy used to injure or hinder development and maintain monopolistic dominance over foreign countries. In 1916, Congress passed the Antidumping Act, which imposed criminal and civil penalties on any person importing and selling articles in the United States "at a price substantially less than the actual market value or wholesale price of such articles" so long as they had the intent of injuring or preventing the establishment of an industry in the United States. The law was rarely applied, in part because it was difficult to prove such an intent. U.S. antidumping law took its modern form with the passage of the Antidumping Act of 1921, which adopted a more globally common administrative (rather than judicial) procedure that enabled the imposition of additional duties on imports rather than civil or criminal penalties (as the antitrust branch of legislation had). The Antidumping Act of 1921 became the textual basis for Article VI of the General Agreement on Tariffs and Trade (GATT) in 1947, the multilateral trade agreement that established the post-World War II rules-based trading system and which was later incorporated into the World Trade Organization (WTO) agreements. As such, the U.S. model of antidumping has become the global standard. Since 1921, Congress has amended and adjusted U.S. antidumping law many times, but has maintained the basic administrative framework and Article VI was clarified and amended by the ADA as part of the establishment of the WTO in 1995. <3. Present Day Antidumping Laws and Investigations> <3.1. U.S. Statutes> Statutory authority for AD investigations and remedial actions is found in Subtitle B of Title VII of the Tariff Act of 1930, as amended (codified, as amended, at 19 U.S.C. 1673 et seq .). The law requires the imposition of an antidumping duty if (1) the International Trade Administration of the Department of Commerce (ITA) determines that imported merchandise is being, or likely to be, sold in the United States at less than fair value; and (2) the U.S. International Trade Commission (USITC) determines that an industry in the United States is materially injured or is threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise. The statute requires that the AD duty equal the amount by which the normal value (a calculation of the fair value) of the merchandise exceeds the export price of the merchandise. <3.2. U.S. International Obligations> The United States is a party to several international agreements that govern the use of AD laws, including Article VI of the General Agreement on Tariffs and Trade (GATT), which was incorporated into the agreements establishing the WTO, and the WTO's Antidumping Agreement (ADA). Both of these agreements were based upon U.S. AD law and practice and the United States was a proponent of both agreements. All WTO members are subject to the terms of Article VI of the GATT and the Antidumping Agreement. Article VI of GATT allows the imposition of antidumping duties in cases where dumping "causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry." The ADA elaborates on the basic principles established in Article VI of the GATT by providing more detail on several issues, including how WTO members may determine whether dumping is occurring, how they determine whether there has been an injury to a domestic industry, what kinds of evidence can be used, and other issues. WTO members whose antidumping laws or practices violate the terms of the ADA may be subject to WTO dispute settlement proceedings. <3.3. Antidumping Investigations and Measures42> <3.3.1. Initiation> The ITA initiates antidumping investigations either on its own initiative or in response to a petition filed by a representative of a domestic industry with the USITC and the ITA. If the ITA receives a petition, it must normally initiate an investigation within 20 days after it receives a petition and determines that the petition contains the necessary elements for imposing a duty. <3.3.2. Preliminary Determinations> The USITC begins the investigation. The central question of its investigation is whether there is a reasonable indication of an injury or likely injury to a domestic industry. If the USITC's preliminary determination is negative or the USITC determines that imports of the subject merchandise are negligible, then proceedings end. In most circumstances, the USITC must make a preliminary determination no later than 45 days after the start of the investigation. If the USITC's preliminary determination is affirmative, then the ITA begins its preliminary investigation to determine whether dumping exists. The ITA must make its determination within 140 days, or within 190 days at the petitioner's request or if the case is extraordinarily complicated. If the ITA's preliminary determination is affirmative, then ITA also estimates a weighted-average dumping margin for each exporter or producer individually investigated and an "all-others rate" for all other exporters. The ITA publishes its preliminary results in the Federal Register and orders U.S. Customs and Border Protection (CBP) to delay the final computation of all duties on imports of the targeted merchandise ("suspend liquidation") until the case is resolved and to require the posting of cash deposits, bonds, or other appropriate securities to cover the duties (plus the estimated dumping margin) for each subsequent entry into the U.S. market. If the ITA's determination is negative, the ITA continues the investigation to the final stage (without ordering a suspension of liquidation) and the USITC continues its investigation as well. Because this is a preliminary determination, agencies may not have obtained all possible evidence, and this allows interested parties a final opportunity to put information and evidence before the two bodies. <3.3.3. Final Determinations> Generally, the ITA must make its final determination within 75 days of the preliminary determination. Before issuing a final determination, the ITA must hold a hearing upon request of any party to the proceeding. If the ITA's final determination is negative, the proceedings end, and any suspension of liquidation is terminated, bonds and other securities are released, and deposits are refunded. If the ITA's final determination is affirmative, it orders the suspension of liquidation if it has not already done so. The ITA will publish the order in the Federal Register and direct CBP to continue or resume (if provisional measures expired) suspension of liquidation and collection of cash deposits at the rate determined in the ITA's final determination. <3.3.4. Critical Circumstances> Congress enacted the critical circumstances provision in order "to provide prompt relief to domestic industries suffering from large volumes, or a surge over a short period, of imports and to deter exporters whose merchandise is subject to an investigation from circumventing the intent of the law by increasing their exports to the United States during the period between initiation of an investigation and a preliminary determination by the [ITA]." If a petitioner alleges that critical circumstances exist in an antidumping case (which would impose additional retroactive AD duties that one would not normally obtain), then the ITA determines whether: (1)(a) there is a reasonable basis to suspect that there is a history of dumping (combined with material injury due to the imports), or (b) that the importer knew or should have known that the exporter was selling the merchandise at less than fair value, and also knew that there was likely to be material injury due to the sales; and (2) whether massive imports of the merchandise have occurred over a relatively short period. If the ITA makes an affirmative critical circumstances finding, it extends the suspension of liquidation of any unliquidated entries of merchandise (entries for which estimated AD duties have not been paid) into the United States retroactively to 90 days before the suspension of liquidation was first ordered or the date on which notice of the determination to initiate the investigation is published in the Federal Register, whichever is later. Whether or not the ITA's initial critical circumstances determination is affirmative, if its final determination on subsidies or dumping is affirmative, the ITA must also include a final determination on critical circumstances. If the final determination on critical circumstances is affirmative, retroactive duties, if not yet ordered, are ordered on unliquidated entries at this time. If the critical circumstances determination is negative, all retroactive suspension of liquidation is terminated, and bonds, securities, or cash deposits related to the retroactive action are released. If the ITA makes an affirmative determination of critical circumstances, the USITC's final determination must include a finding as to whether the subject imports are likely to undermine seriously the remedial effect of the AD order. If both the USITC and the ITA make affirmative critical circumstances determinations, any AD duty order applies to the goods for which the retroactive suspension of liquidation was ordered. If the final critical circumstances determination of either agency is negative, any retroactive suspension of liquidation is terminated, bonds and securities are released, and any cash deposits are refunded. <3.3.5. Termination of Investigation and Suspension Agreements> The ITA or the USITC may terminate an investigation if the petitioner withdraws the petition or of its own accord if the ITA self-initiated the investigation. Additionally, the ITA may, in certain circumstances, suspend an antidumping investigation in favor of an agreement with foreign exporters (known as "suspension agreements") that either eliminates the sales of less than fair value or the injurious effect. One example of such an agreement is the recent suspension agreement between the various Mexican growers associations and the United States with respect to fresh tomatoes. The United States agreed to suspend its antidumping investigation in exchange for a promise by various Mexican growers associations accounting for substantially all imports of fresh tomatoes from Mexico not to sell fresh tomatoes in the United States at a price less than an established reference price. <3.3.6. Administrative and Sunset Reviews> <3.3.6.1. Periodic Review> Each year, during the anniversary month of the publication of a final AD order, any interested party may request an administrative review of the order. The ITA may also self-initiate a review. During the review process, the ITA recalculates the dumping margin and may adjust the amount of AD duties on the subject merchandise. Suspension agreements are also monitored for compliance and reviewed in a similar fashion. The ITA must make a preliminary determination within 245 days after the last day of the anniversary month of the order or suspension agreement under review, and must make a final determination within 120 days after the publication date of a preliminary determination. New exporters, who were not part of the original review, may also request an expedited review. <3.3.6.2. Changed Circumstances Review> An interested party may also request a "changed circumstances" review from the ITA or the USITC at any time. Under current regulations, upon receipt of such a request, the ITA must determine within 45 days whether to conduct the review. If the ITA decides that there is good cause to conduct the review, the results must be issued within 270 days of initiation, or within 45 days of initiation if all interested parties agree to the outcome of the review. <3.3.6.3. Sunset Reviews> Sunset reviews must be conducted on each AD order no later than once every five years after its publication. In such a review, the ITA determines whether dumping would likely continue or resume if an order were to be revoked or a suspension agreement terminated, and the USITC conducts a similar review to determine whether injury to the domestic industry would be likely to continue or resume. If both determinations are affirmative, the duty or suspension agreement remains in place. If either determination is negative, the order is revoked, or the suspension agreement is terminated. <4. Trends> <4.1. Historical Trends (1947-1995)> During the first two decades of the GATT, countries infrequently imposed antidumping measures. Only four parties the United States, the European Union (EU), Canada, and Australia made use of the practice, and even that was infrequent. Scholars have given several non-exclusive explanations for the relative dearth of antidumping measures in this period in both the international and U.S. contexts. In the international context, ambiguity within Article VI of the GATT may have discouraged GATT members from making use of the antidumping provisions. Specifically, Article VI does not specify a methodology for deciding whether a product is dumped nor does it set out procedures for AD investigations. Additionally, tariff rates among GATT members were still relatively high, which may have dampened the need for industries to petition for protection through antidumping measures. Likewise, in the United States, the Antidumping Act of 1921 was enacted during a period when tariff rates were relatively high, which may have limited the usefulness of AD duties as a form of protection. Administrative exigencies may have also been a factor. For example, one historian has noted that the Carter Administration shifted responsibility for making the less than fair value determination from the Treasury Department to the Department of Commerce because the "perceived indifference of Treasury to the plight of petitioning firms" may have led to fewer findings of dumping and thus fewer measures. Finally, countries, particularly those who were not GATT signatories, had higher average tariff rates and were able to impose other non-tariff barriers to trade to reduce importation of allegedly dumped products, which made resorting to AD measures unnecessary. Over the subsequent decades, dozens of developing countries entered the rules-based trading order, which restricted the use of many non-tariff barriers to trade and encouraged the reduction of tariffs. The reduction of tariffs may have led to an increase in the use of AD measures as an alternative form of protection. <4.2. Global Antidumping Trends, 1995-2018> <4.2.1. The Growth of Antidumping Investigations and Measures> AD investigations and actions were uncommon in the decades following the establishment of the GATT. Before the 1990s, the United States, the European Union, Canada, and Australia were responsible for more than 95% of AD actions. Many developing countries did not even have AD laws and procedures. Beginning in the 1990s, however, the number of countries with AD laws multiplied; approximately half of all AD laws in effect today were implemented after 1990. With the increase in the number of countries with AD laws, the major users of AD measures have changed dramatically. In 1994, for instance, India had zero AD measures in force. Twenty-five years later, in 2019, India had 275 AD measures in force, ranking second behind the United States. Between 2008 and 2018, India ranked first in terms of the number of AD measures imposed per year, followed by the United States, Brazil, China, and Argentina. Of the top five users of AD measures prior to 1995, only the United States remains in that top five (see Table 2 ). However, if adjusted for per-dollar imports, both the United States and the EU are relatively light users of AD measures. As more countries have begun to use AD measures, the total number of AD measures in force has increased by more than 600%, jumping from 264 measures in force in 1994 to 1,860 in 2018. <4.2.2. Current Users and Targets of Antidumping Investigations and Measures> Many of the largest users of AD investigations and measures are also among the top targets of AD investigations and measures. China, the United States, and India, are among the top users of AD investigations and measures and are, likewise, the top targets of AD investigations and measures. AD measures are imposed primarily on heavy industrial products from the base-metal and chemical industries. Figure 4 . <4.2.3. The Cause of the Growth in Antidumping Investigations and Measures> The adoption of AD laws and the imposition of measures generally occur following moments of increased market integration and trade liberalization, which may explain their expanded use. In effect, AD measures blunt the impact of new imports. For example, many developing countries reduced their tariffs significantly following the Uruguay Round of trade negotiations, which created the WTO. With significantly lower tariffs and fewer other means available to restrict trade, developing countries (like their developed counterparts before them) may have turned to AD laws and AD measures as a preferred means of protecting select domestic industries during their adjustment to the lower average tariff rate. For example, since their entry into the WTO, India, Brazil, China, and Argentina have collectively reduced their tariffs by an average of 63% from a 17.6% applied weighted mean for all products to 6.5%. In that same time, those four countries increased their use of AD measures dramatically. In 1995, those countries had 13 measures in force. By 2018, they had a total of 646 measures in force, an increase of more than 4,800%. Figure 5 . As for AD measures being used rather than some other trade remedy, at least one scholar has argued that AD measures are the most attractive alternative legal form of contingent protection. In general, AD measures are easier to impose. <4.3. U.S. Antidumping Trends, 1995-2018> <4.3.1. The United States and Antidumping Investigations and Measures> As of February 2020, the United States has 384 AD orders in place affecting imports from 53 countries. The oldest order, which places AD duties on pressure sensitive tape from Italy, has been in place continually since 1977. Seventy-five of the orders have been in place since before the turn of the millennium. The United States is alone among the original four users of AD measures (U.S., EU, Canada, and Australia) in significantly increasing its use of AD measures over the past two decades. The U.S. currently has the highest number of AD measures in force in its history. In comparison, the other three original users have kept the number of measures in force at or below levels reached around the millennium. <4.3.2. The United States as the Target of Antidumping Investigations and Measures> The United States has been a frequent target of AD investigations initiated by other countries. Between 1995 and 2017, the United States was the target of 296 investigations, 181 (61%) of which led to the imposition of AD measures. The largest user of AD measures against the United States is China (37), with India (30), Brazil (24), Mexico (23), and Canada (12) rounding out the rest of the top five. The reasons for the targeting of the United States are uncertain. They may, however, relate to the use of AD measures as a form of protection during a period of trade liberalization or be viewed as retaliation for the United States' heavy use of AD measures against these countries. <5. Issues for Congress> <5.1. The Economics of Antidumping> Some argue that antidumping measures constitute "the first and best line of defense for the U.S. economy against companies and countries that resort to predatory and mercantilist tactics to make trade gains." Most empirical research, however, has found such predatory pricing is rare. Furthermore, most academic analysts are highly critical of U.S. AD law and practice. Economic analysts in particular note that AD policy is trade distorting. For example, AD duties deflect trade, by causing exporters to seek out markets where their goods are not subject to AD duties. As one pair of economists noted, the suspension agreement on fresh tomatoes from Mexico caused Mexico to make more tomato paste to ship to the United States and to ship more fresh tomatoes to Canada, which in turn shipped more fresh tomatoes to the United States. Many scholars also conclude that AD duties depress consumer activity by raising costs for consumers and propping up unproductive businesses. According to one survey, AD policies globally affect somewhere between 3% and 8% of a country's total imports, making them one of the most costly commercial policies. There is also a general consensus that AD duties, when analyzed economically without consideration of their political benefits for encouraging trade liberalization, depress overall trade. Congress has generally been supportive of AD duties, and reform efforts have been limited despite the generally negative view of the practice held by many economists. Phillip Swagel, the now-director of the Congressional Budget Office and former Assistant Secretary of the Treasury for Economic Policy, recently referred to antidumping as the "third rail of trade policy," arguing that "few politicians of either party [are] willing to point out its broadly negative impact." While many argue that AD laws are economically inefficient if evaluated on their face, some of those critics have conceded "that even if AD is the largest and most frequently used contingent trade remedy (and the most costly single commercial policy), AD may nevertheless be a desirable policy as it serves an important role in promoting overall trade liberalization by acting as a pressure release valve." As Congress considers its overall goals with respect to trade policy, it might weigh dumping's economic costs against its potential role in supporting trade liberalization. Congress could, for example, encourage (in committee hearings) or direct (through legislation) Commerce to change the de minimis thresholds for finding that dumping has taken place or that the dumped goods have caused an injury. Such changes could reduce or encourage the use of the policy. <5.2. Antidumping, Zeroing, and the WTO Appellate Body> During the negotiations over the establishment of the WTO, the United States persistently advocated for the establishment of robust dispute settlement provisions and Congress required the President to ensure that dispute resolution provisions were included in the final agreement. As a result, the agreements establishing the WTO included the Dispute Settlement Understanding (DSU), which provides for an enforceable means by which members can resolve disputes over WTO commitments and obligations. In recent years, however, several administrations have been critical of the WTO's dispute settlement system in general and with the role of the Appellate Body (AB) in particular. In December, the AB ceased to function as the United States continued to block the appointment of new AB members to replace those whose terms had expired. U.S. AD policies have been at the center of that dispute and Congress might consider reevaluating those policies or renegotiating the agreement underlying the WTO DSU and ADA if it wishes to maintain a functional dispute settlement system at the WTO. The United States has generally been successful in DSU proceedings with the exception of one area trade remedies. Indeed, trade remedy cases in general make up the largest portion of the WTO's dispute settlement docket, with AD being the most frequently disputed policy. Time and time again dispute settlement (DS) Panels and the AB have found U.S. AD policy to conflict with its international commitments. The United States is not alone. Other WTO members have also been unsuccessful in defending challenges to their implementation of the ADA. The AD policy that has been at the center of many (although not all) of these disputes is a calculation method referred to as "zeroing." In general, when calculating the dumping margin to determine whether the imposition of antidumping measures on exporters of a product is justified, the ITA will usually average together numerous comparisons between sales in the United States (the export prices) and sales in the home market (the normal value). The ITA will aggregate hundreds or even thousands of individual transactions together in this process. The amount by which the normal value exceeds the export price of a given product is the dumping margin. However, if the export price exceeds the normal value (that is, if the price in the United States is greater than the domestic price) and thus produces a negative result, the United States, in certain circumstances, will adjust the negative values to zero. As an economist at the Department of Justice put it, "The use of 'zeroing' will almost always increase the level of any antidumping duty, and will sometimes create a duty where none would have been imposed, had the methodology not been used." Consider the following simplified example: the average home market price and export price for a product for the entire month were both $100. As such, the dumping margin and weighted average dumping margin when averaged without zeroing were both zero because the transaction on September 7, for example, was offset by the transaction on September 25. However, when zeroing is applied, the September 25 transaction is set to zero. When this is applied across all values, the aggregate dumping margin is $55 leading to a weighted average dumping margin of 7.85%. One pair of economists determined in 2010 that if the United States were to stop zeroing, "then perhaps as much as half of all U.S. AD measures would be removed and the duties in the other cases would fall significantly." The U.S. Trade Representative (USTR) asserts that this method allows the United States to "focus on those transactions in which dumping occurs." Under the relevant WTO agreements, the USTR argues, "Members may calculate a margin of dumping on a transaction-by-transaction basis, and, thus, collect duties only on dumped imports, while collecting no duties on non-dumped imports. There is no requirement to offset dumped transactions with transactions in which dumping did not occur." The U.S. Trade Representative has asserted that this is a common-sense method of calculating the extent of dumping that is injuring a domestic industry" and that the elimination of zeroing "artificially reduces the margin of dumping," Opponents of zeroing argue that its effect is to artificially increase dumping margins and increase the likelihood that AD measures will be imposed. Specific concerns include that "zeroing makes it extremely difficult for a firm to avoid dumping" because the reasons for price variation, such as seasonality, exchange rates, and variations in shipping costs, are not taken into account. As a result, products subject to greater price variation will be more frequently subject to AD duties. As the United States is the only country to actively zero, it seems unlikely that zeroing is strictly necessary to ensure that AD policy is effective at preventing dumping. One economist estimated in 2008 that "zeroing could add perhaps 3-4 % to the typical U.S. antidumping duty with a cost to the U.S. of around $150 million per year when all existing U.S. antidumping orders were determined by zeroing." Since 1995, more than 30 Panel and Appellate Body (AB) decisions have found the use of zeroing in specific AD investigations to be inconsistent with the ADA; the AB has held more than a dozen times that zeroing in one form or another cannot be used. In all but two cases involving zeroing, the United States has been the respondent. In two early cases, the EU was the respondent, but it changed its practices after the AB found its implementation of the practice to be inconsistent with the terms of the ADA. The United States has been a respondent in more than 150 disputes before the WTO. Fifty-six of those involved the ADA and many of those cases involved zeroing. In all the finalized cases, the United States lost or settled. Indeed, CRS analysis has found that nearly half of all cases where the WTO found a U.S. practice to not be in compliance with WTO obligations involved dumping. Much of the U.S. criticism levied at the WTO's AB over the past decade, some have argued, has been primarily the result of cases involving U.S. implementation of the ADA. In a recent report listing U.S. concerns about the AB, the USTR identified six areas of "Appellate Body errors in interpreting WTO agreements" that it argues have "raised substantive concerns and undermine the WTO." Five of the six concerned trade remedies, including dumping. Indeed, "dump" was the most common trade-related verb in the report. With respect to zeroing, the USTR argues, "The Appellate Body's invention of a prohibition on the use of "zeroing" to determine dumping margins has diminished the ability of WTO members to address dumped imports that cause or threaten injury to a domestic industry." The WTO AB's approach to trade remedies in general, and antidumping in particular, have been central in USTR's critique of the AB and thus has likely played a significant role in its decision to block appointments to the AB. However, WTO DSB debates are not over. The USTR has approvingly cited a recent DSB decision that upheld the use of zeroing in certain limited circumstances. As Congress considers the future U.S. relationship with the WTO and the multilateral rules-based trading order, it might address the role that antidumping has played in straining that relationship. For example, Trade Promotion Authority (TPA) expires in 2021. Should Congress decide to reauthorize TPA, it may choose to direct the President to seek revisions to the WTO's DSU of the ADA to address some of these issues. Alternatively, Congress could encourage or direct Commerce to address some of the WTO members' and Appellate Body's concerns. For example, the EU and Canada once employed zeroing in antidumping investigations, but no longer do so.

The U.S. Constitution grants to Congress the power to regulate trade with foreign nations and levy tariffs. Since 1922, U.S. law and foreign policy have favored applying tariffs and duties equally to all trading partners. This principle, known as most-favored-nation (MFN) treatment, has been central to the rules-based global trading system since 1947. One of the most frequently invoked exceptions to MFN treatment are three "trade remedy" laws. These laws are enforced primarily through administrative investigations of two U.S. government agencies: the International Trade Administration of the Department of Commerce (ITA) and the U.S. International Trade Commission (USITC). Trade remedy laws enable the United States to impose additional duties aimed at specific producers or countries to remedy unfair trade practices and to help domestic industries adjust to sudden surges of fairly traded goods. The three types of laws traditionally classified as "trade remedies" are: Antidumping (AD) laws provide relief to domestic industries that have been, or are threatened with, material injury caused by imported goods sold in the U.S. market at prices that are shown to be less than fair market value. The relief provided is an additional import duty placed on the dumped imports based upon calculations made by the ITA. Antidumping orders are the most frequently used and the most controversial trade remedy. Countervailing duty (CVD) laws give a similar kind of relief to domestic industries that have been, or are threatened with, material injury caused by imported goods that have been found to have received WTO-inconsistent government subsidies, and can therefore be sold at lower prices than similar goods produced in the United States. The relief provided is an additional import duty placed on the subsidized imports. Safeguard (also referred to as escape clause) laws give domestic industries relief from surges of imported goods that are fairly traded if serious injury is found or is threatened to the domestic industry. The most frequently applied safeguard law, Section 201 of the Trade Act of 1974, is designed to give domestic industry the opportunity to adjust to the new competition and remain competitive. The relief provided is generally an additional temporary import duty, a temporary import quota, or a combination of both. Safeguard laws also require presidential action in order for relief to be put into effect. Economists have generally seen antidumping laws and policies as economically inefficient. Some, however, have acknowledged the role that these economically inefficient policies have played in making trade liberalization more politically feasible by providing protection for industries that might otherwise oppose such measures. In recent years, U.S. exports have increasingly become a target of AD measures by several major emerging economies, including India and China. Antidumping laws and policies have also been at the center of dozens of trade disputes between the United States and its trading partners in the WTO. Reports issued by the WTO's Appellate Body (AB) on the subject have been one of the primary targets of the U.S. Trade Representative's criticisms of the AB mechanism in the broader WTO dispute settlement system. If Congress wishes to maintain a functional dispute settlement system at the WTO it may consider either directing the President to seek amendments to underlying WTO agreements such that U.S. practices are internationally compliant or direct the ITA to bring its AD policies into conformity with the AB's interpretation of the WTO's Antidumping Agreement.

crs_R45898

crs_R45898_0

<1. Introduction> The United States and the People's Republic of China (PRC or China) are involved in a prolonged stand-off over trade, and in competition that is spilling from political and military areas into a growing number of other spheres, including technology, finance, and education, severely straining ties on the 40 th anniversary of the two countries' establishment of diplomatic relations. The two countries lead the world in the size of their economies, their defense budgets, and their global greenhouse gas emissions. Both countries are permanent members of the United Nations (U.N.) Security Council. In 2018, they were each other's largest trading partners. Trump Administration strategy documents have set the tone for U.S. policy toward China. The December 2017 National Security Strategy (NSS) describes both China and Russia as seeking to "challenge American power, influence, and interests, attempting to erode American security and prosperity." An unclassified summary of the January 2018 U.S. National Defense Strategy describes China as a "strategic competitor" and charges that it is pursuing a military modernization program that "seeks Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence in the future." The Department of Defense's (DOD's) June 2019 Indo-Pacific Strategy Report identifies "the primary concern for U.S. national security" as "inter-state strategic competition, defined by geopolitical rivalry between free and repressive world order visions." The Trump Administration has leveled its strongest criticism at China's economic practices. In a major October 4, 2018, address on China policy, Vice President Mike Pence charged that China has used "an arsenal of policies inconsistent with free and fair trade" to build its manufacturing base, "at the expense of its competitors especially the United States of America." In their public statements on the United States, China's top leaders have generally refrained from direct criticism. In July 2019, PRC Vice President Wang Qishan stated that "profound shifts are taking place in the relations between major countries," noting "mounting protectionism and populist ideologies" and "intensifying geopolitical rivalry and regional turbulence." PRC Vice Foreign Minister Le Yucheng, speaking at the same forum, addressed U.S.-China relations directly. The bilateral relationship, Le asserted, is "now going through the most complex and sensitive period since diplomatic relations were formalized four decades ago." Le called for "a China-US relationship based on coordination, cooperation and stability," and pushed back at the idea that China is responsible for U.S. "challenges." The wars in Afghanistan and Iraq "sapped [U.S.] strategic strength," Le asserted, and the global financial crisis "exposed the deep-seated imbalances in the U.S. economy and society." The United States should not make China "a scapegoat," Le argued, for "[p]roblems such as economic disparity, widening wealth gap and aging infrastructure." U.S.-China tensions predated the Trump Administration. Frictions over such issues as Taiwan, trade, and China's human rights record have been long-standing, as have been U.S. concerns about the intentions behind China's ambitious military modernization efforts. United States Trade Representative (USTR) reports to Congress going back to the last years of the George W. Bush Administration document mounting U.S. frustrations with China's failure to implement market-opening commitments it made when it acceded to the World Trade Organization (WTO) in December 2001. Previous Administrations concluded, however, that a modus vivendi with China was necessary for a broad array of U.S. policy objectives in the world, and they thus sought to balance competition and cooperation in the U.S.-China relationship. During the Trump Administration, competition has dominated the relationship and areas of cooperation have shrunk. To pressure China to change its economic practices, the United States has imposed tariffs on hundreds of billions of dollars of U.S. imports from China, with almost all imports from China scheduled to be subject to additional tariffs by December 15, 2019. U.S. tariffs and China's retaliatory tariffs have reordered global supply chains and hit U.S. farmers and manufacturers particularly hard. Twelve rounds of negotiations have not resolved the dispute. On August 5, 2019, the U.S. Treasury Department labeled China a currency manipulator for the first time in a quarter century. The Administration has placed restrictions on the ability of U.S. firms to supply PRC telecommunications giant Huawei. The United States has also sought to warn other nations away from business dealings with Huawei and from cooperation with China on infrastructure projects under the framework of China's Belt and Road Initiative (BRI). Feeding a persistent narrative that the Administration seeks to "decouple" the U.S. and Chinese economies, on August 23, 2019, President Trump wrote on Twitter, "Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA." As his authority for such an order, the President cited the International Emergency Economic Powers Act ( P.L. 95-223 ), though he said on August 25, 2019, that he had "no plan right now" to trigger the law. Many analysts ascribe the rising friction in the relationship today not only to the arguably more confrontational inclinations of the Trump Administration, but also to more assertive behavior by China under President Xi Jinping. Xi assumed the top posts in the Communist Party of China in November 2012 and added the state presidency in March 2013. Later in 2013, China began building military outposts in the South China Sea and Xi launched BRI, an ambitious effort to boost economic connectivity and China's influence across the globe. In 2015, China began enacting a suite of national security legislation that shrank the space for independent thought and civil society, subjected ordinary citizens to stepped-up surveillance, and imposed onerous conditions on foreign firms operating in China. The same year, China launched its "Made in China 2025" plan, seeking to reduce China's reliance on foreign technology and directing the considerable resources of the state toward supporting the development of "national champion" Chinese firms in 10 strategic industries. In 2017, at the end of his first five-year term in his Party posts, Xi tasked China's military with turning itself into a "world-class" force by mid-century. That year, his government also began forcing more than 1 million of his Turkic Muslim fellow citizens in the northwest region of Xinjiang into reeducation camps. In March 2018, China's Communist Party-controlled legislature amended the state constitution to remove presidential term-limits, opening the way for Xi to stay in office indefinitely. Increasingly, the United States and China appear to be seeking to draw other countries into competing camps those who agree to sign (often vague) BRI cooperation agreements with China (some 125 countries as of April 2019, by China's count), and those who, at the U.S. government's behest, do not; those who do business with Huawei, and those who, similarly at the U.S. government's behest, do not; those who publicly censure China for its actions in Xinjiang, and those who offer support. U.S. allies are sometimes in China's "camp." China represents "a new kind of challenge," Secretary of State Michael R. Pompeo has suggested, because, "It's an authoritarian regime that's integrated economically into the West in ways the Soviet Union never was." Important areas of remaining U.S.-China cooperation include maintaining pressure on North Korea to curb its nuclear weapons and missile programs; supporting the Afghanistan peace process; managing international public health challenges, from tuberculosis to influenza; and stemming the flow into the United States of China-produced fentanyl, a class of deadly synthetic opioids. Many of the Trump Administration's critics share the Administration's concerns about PRC policies and actions, but disagree with the Administration's framing of the relationship and with specific Administration policies. Signatories to an open letter on China addressed to the President and Members of Congress and published in The Washington Post on July 3, 2019, acknowledge "troubling behavior" by China. They argue, nonetheless, that China is not "an economic enemy or an existential national security threat that must be confronted in every sphere; nor is China a monolith, or the views of its leaders set in stone." They warn, "If the U.S. presses its allies to treat China as an economic and political enemy, it will weaken its relations with those allies and could end up isolating itself rather than Beijing." Former Obama Administration officials Kurt M. Campbell and Jake Sullivan argue that, "The basic mistake of engagement was to assume that it could bring about fundamental changes to China's political system, economy, and foreign policy." They warn that, "Washington risks making a similar mistake today, by assuming that competition can succeed in transforming China where engagement failed this time forcing capitulation or even collapse." Campbell and Sullivan call for "a steady state of clear-eyed coexistence on terms favorable to U.S. interests and values," with elements of competition and cooperation in four domains: military, economic, political, and global governance. Peter Varghese, a former senior diplomat for Australia, a U.S. ally, asserts that, "it would be a mistake for the US to cling to primacy by thwarting China. Those of us who value US leadership want the US to retain it by lifting its game, not spoiling China's." Many analysts fault the Trump Administration for giving up leverage against China by withdrawing from international agreements and institutions, by allegedly paying insufficient attention to maintaining strong relationships with allies, and by engaging in inconsistent messaging around trade, human rights, and other issues. In January 2017, the Administration notified the 11 other signatories to the Trans-Pacific Partnership (TPP), a proposed free trade agreement (FTA) of Asia-Pacific countries (not including China), that it would not be ratifying the agreement. In June 2018, the Administration announced its withdrawal from the U.N. Human Rights Council. Signatories of another high-profile open letter addressed to the President urge him, however, to "stay the course on your path of countering Communist China." The letter states that supporters of engagement with China told American policymakers "that the PRC would become a 'responsible stakeholder' once a sufficient level of economic modernization was achieved." The letter argues, "This did not happen and cannot so long as the CCP [Chinese Communist Party] rules China." The letter assures the President, "We welcome the measures you have taken to confront Xi's government and selectively to decouple the U.S. economy from China's insidious efforts to weaken it." <2. Basic Facts About the People's Republic of China> The Communist Party of China (CPC) established the PRC 70 years ago, on October 1, 1949, after winning a civil war against the Nationalist (also known as Kuomintang or KMT) forces of the Republic of China (ROC) led by Chiang Kai-shek. Today, China is the world's most populous nation (with a population of 1.39 billion), the world's largest emitter of greenhouse gases (responsible for approximately 30% of global energy-related carbon dioxide emissions in 2016), the world's second-largest economic power (in nominal terms, with a gross domestic product or GDP of $13.6 trillion), and the only Communist Party-led state in the G-20 grouping of major economies. With the United States, France, Russia, and the United Kingdom, China is also one of five permanent members of the U.N. Security Council. <2.1. Leadership> Since 2012, Xi Jinping (his family name, Xi, is pronounced "shee") has been China's top leader. He holds a troika of top positions: Communist Party General Secretary, Chairman of the Party's Central Military Commission, and State President. In 2018, China's unicameral legislature, the National People's Congress (NPC), amended the PRC constitution to include a reference to "Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era," putting Xi's guiding philosophy on a par with the philosophies of two powerful predecessors, Mao Zedong and Deng Xiaoping. Another constitutional amendment removed term limits for the state presidency, opening the way for Xi to stay in the position indefinitely after the conclusion of his second five-year term in 2023. Xi is the top official in China's most senior decisionmaking body, the seven-man Communist Party's Politburo Standing Committee (see Figure 1 ), which is drawn from the larger 25-person Politburo. Xi personally chairs multiple Communist Party policy committees, including those on foreign affairs, Taiwan, "deepening overall reform," financial and economic affairs, cyberspace, and "comprehensive rule of law." Some foreign observers refer to him as "chairman of everything." Other members of the Politburo Standing Committee concurrently lead China's other major political institutions, including the State Council, China's cabinet; the NPC; and a political advisory body, the Chinese People's Political Consultative Conference (CPPCC). The arrangement ensures that the Communist Party maintains firm control over all the country's political institutions. Xi has repeatedly reminded his countrymen that, "The Party exercises overall leadership over all areas of endeavor in every part of the country." <2.2. Provinces> China presents itself as comprised of 34 provincial-level administrative units (see Figure 2 ). They include 23 provinces; five geographic entities that China calls "autonomous regions," all of which have significant ethnic minority populations (Guangxi, Inner Mongolia, Ningxia, Tibet, and Xinjiang); four municipalities that report directly to the central government (Beijing, Chongqing, Shanghai, and Tianjin); and the two special administrative regions of Hong Kong and Macau, which were returned to China in the 1990s by the governments of the United Kingdom and Portugal respectively. The PRC's count of 23 provinces includes Taiwan, an island democracy of 23 million people that the PRC has never controlled, but over which it claims sovereignty. Taiwan calls itself the Republic of China. Provinces have their own revenue streams, and governments at the provincial level and below are responsible for the lion's share of the country's public expenditure, including almost all public spending on education, health, unemployment insurance, social security, and welfare. Provinces also have the right to pass their own laws and regulations, which may extend national laws and regulations, but not conflict with them. Beijing gives provinces considerable leeway in adopting policies to boost economic growth and encourages provinces to undertake approved policy experiments. Provinces do not have their own constitutions, however, and do not have the power to appoint their own leaders. <2.3. Signature Policies of China's President Xi> President Xi has sought to rally China's citizens around a " China Dream of Great Rejuvenation of the Chinese Nation ." The China Dream incorporates a pledge to build "a moderately prosperous society in all respects" by 2021, the centenary of the Party's founding, in part by doubling China's 2010 GDP and per capita income for both urban and rural residents. It also includes a pledge to make China, "a modern socialist country that is prosperous, strong, democratic, culturally advanced, and harmonious" by 2049, the centenary of the founding of the People's Republic of China. (The term "democratic" refers to Chinese-style "socialist democracy" under uncontested Communist Party rule.) The "China Dream" includes a "dream of a strong military." Externally, Xi has promoted his vision of a " community with a shared future for mankind " (also translated as "community of common destiny for mankind"). In a January 2017 speech at the U.N. office in Geneva, Xi described the "community with a shared future" as an effort to "establish a fair and equitable international order." In such an order, he said, there should be no interference in countries' internal affairs, and all countries should "have the right to independently choose their social system and development path," an implicit rejection of U.S.-led democracy-promotion efforts around the world. Appearing to address the United States directly, he stated, "Big countries should treat smaller ones as equals instead of acting as a hegemon imposing their will on others. No country should open the Pandora's box by willfully waging wars or undermining the international rule of law." At the CPC's 19 th Congress in late 2017, the CPC incorporated the "community with a shared future for mankind" into its charter. Xi boasted of "a further rise in China's international influence, ability to inspire, and power to shape" and said China was "moving closer to center stage." In March 2018, China incorporated the "community with a shared future for mankind" into the state constitution. Later that year, Xi pledged that China would play "an active part in leading the reform of the global governance system, and build a more complete network of global partnerships." <3. Brief History of U.S.-PRC Relations> After the Communist Party took power in China in 1949, the United States continued to recognize Chiang Kai-shek's ROC government on Taiwan as the legitimate government of all China. A year later, the United States and China found themselves on opposite sides of the Korean War, a conflict that killed 36,547 U.S. military personnel and at least 180,000 Chinese military personnel. China's name for the conflict is the "War to Resist U.S. Aggression and Aid Korea." Early in the conflict, the United States sent its Seventh Fleet to the Taiwan Strait "to prevent the Korean conflict from spreading south," effectively preventing Communist forces from realizing their goal of finishing the Chinese Civil War by wresting control of Taiwan from Chiang's forces. In 1971, changing Cold War dynamics, including the Sino-Soviet split, led the Nixon Administration to undertake a profound shift in U.S. policy. Then-Secretary of State Henry Kissinger made a secret visit to China in July 1971. In October of the same year, the United States supported U.N. General Assembly Resolution 2758, recognizing the PRC's representatives as "the only legitimate representatives of China to the United Nations," and expelling "the representatives of Chiang Kai-shek." President Richard Nixon formally ended nearly a quarter of a century of estrangement between the United States and the PRC with his historic visit to China in February 1972. On January 1, 1979, President Jimmy Carter and China's Deng Xiaoping presided over the establishment of diplomatic relations between their two nations. The joint communiqu they signed, one of three that China considers to lay the foundation for the U.S.-China relationship, states that the United States "acknowledges the Chinese position that there is but one China and Taiwan is part of China." It also states that "the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan." In April 1979, Carter signed the Taiwan Relations Act (P.L. 96-8, U.S.C. 3301 et seq.), providing a legal basis for the unofficial U.S. relationship with Taiwan and committing the United States to sell defensive arms to Taiwan. The same year, Deng launched a bold program of "reforming and opening" to the outside world that would transform China from a backward, isolated country into the economic powerhouse, emerging military power, and shaper of global institutions that it is today. Through the 1970s and 1980s, the overriding strategic rationale for the U.S.-China relationship was counterbalancing a shared enemy, the Soviet Union. With the collapse of the Soviet Union in 1991, U.S. and Chinese leaders cast about for a new rationale for their relationship. President Bill Clinton and China's then-leader Jiang Zemin both came to see benefits in expanding bilateral economic ties, including by working together to bring China into the WTO. On October 10, 2000, Clinton signed into law P.L. 106-286 , granting China permanent normal trade relations and paving the way for China to join the WTO, which it did in December 2001. In 2018, the Trump Administration argued that "the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." A former George W. Bush Administration official suggests that "identifying a preferable alternative, even with the benefit of hindsight, is surpassingly difficult." After the terrorist attacks of September 11, 2001, the George W. Bush Administration settled on counterterrorism cooperation as a new strategic rationale for the U.S.-China relationship, but China complicated that rationale when it persuaded the United States to apply a terrorist label to separatist ethnic Uyghurs from its northwest Xinjiang region. During the Obama Administration, even as U.S.-China friction mounted over economic issues, cyber espionage, human rights, and the South China Sea, the two sides embraced as a strategic rationale for their relationship the need for their cooperation to address some of the world's most pressing challenges, including weak global economic growth, climate change, and nuclear proliferation. Observers broadly credited U.S.-China cooperation for contributing to the conclusion of the July 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal with Iran and the December 2015 Paris Agreement under the U.N. Framework Convention on Climate Change. Over the past four decades, the U.S.-China relationship has faced some high-profile tests: In June 1989, a decade after normalization of U.S.-China relations, China's leaders ordered the People's Liberation Army (PLA) to clear Beijing's Tiananmen Square of peaceful protestors, killing hundreds, or more. In response, the United States imposed sanctions on China, some of which remain in place today. In 1995-1996, a U.S. decision to allow Taiwan President Lee Teng-hui to make a private visit to the United States and deliver a speech at his alma mater, Cornell University, led to what became known as the Third Taiwan Strait Crisis. China expressed its anger at the visit by conducting a series of missile exercises around Taiwan, prompting the Clinton Administration to dispatch two aircraft carrier battle groups to the area. In May 1999, two decades after normalization of U.S.-China relations, a U.S. Air Force B-2 bomber involved in North Atlantic Treaty Organization (NATO) operations over Yugoslavia mistakenly dropped five bombs on the Chinese Embassy in Belgrade, killing three Chinese journalists and injuring 20 embassy personnel. The event set off anti-U.S. demonstrations in China, during which protestors attacked U.S. diplomatic facilities. In April 2001, a PLA naval J-8 fighter plane collided with a U.S. Navy EP-3 reconnaissance plane over the South China Sea, killing the Chinese pilot. The U.S. crew made an emergency landing on China's Hainan Island, where Chinese authorities detained them for 11 days. Negotiations for return of the U.S. plane took much longer. In February 2012, a Chongqing Municipality Vice Mayor sought refuge in the U.S. consulate in the western China city of Chengdu, where he is believed to have shared explosive information about wrongdoing by his then-boss, an ambitious Politburo member. Thirty-six hours later, U.S. officials handed the Vice Mayor over to officials from Beijing. The Politburo member, Bo Xilai, soon fell from grace in one of the most spectacular political scandals in PRC history. In April 2012, after Chinese legal advocate Chen Guangcheng, who is blind, escaped house arrest in China's Shandong Province, the U.S. Embassy in China rescued him from the streets of Beijing and brought him into the U.S. Embassy compound, where he stayed for six days. High-stakes negotiations between U.S. and PRC diplomats led to Chen moving first to a Beijing hospital, and then, in May 2012, to the United States. <4. The Bilateral Relationship: Select Dimensions> <4.1. High-Level Dialogues> Presidents Trump and Xi have met face-to-face five times: three times in 2017, once in 2018, and once in 2019 (see Table 1 ). Three of their five meetings have been on the sidelines of summits of the G-20 nations. Even as he has excoriated PRC policies, Trump has generally described his relationship with Xi in warm terms, frequently referring to Xi as "my friend." Writing on Twitter on August 23, 2019, he questioned whether the Federal Reserve chairman or Xi "is our bigger enemy." Three days later, however, the President wrote on Twitter that Xi is "a great leader & representing a great country" and stated publicly, "I have great respect for President Xi." In their April 2017 meetings, Trump and Xi agreed to establish four high-level dialogues to manage the U.S.-China relationship, replacing dialogues that operated during the Obama Administration (see Table 2 ). All of the dialogues convened in 2017. Perhaps reflecting vacancies in senior positions in the Trump Administration and rising tensions in the U.S.-China relationship, only the Diplomatic and Security Dialogue (D&SD) convened in 2018. None of the dialogues has convened in 2019. <4.2. Trade and Economic Relations54> U.S.-China trade and economic relations have expanded significantly over the past three decades. In 2018, China was in terms of goods the United States' largest trading partner, third-largest export market, and largest source of imports. China is also the largest foreign holder of U.S. Treasury securities. The economic relationship has grown increasingly fraught, however. In 2017, the Trump Administration launched an investigation into China's policies on intellectual property (IP), subsidies, advancing technology, and spurring innovation. Beginning in 2018, the Trump Administration imposed tariffs on $250 billion worth of Chinese imports. Tariffs appear to have contributed to a sharp contraction in U.S.-China trade in the first half of 2019. On August 1, 2019, President Trump stated that beginning on September 1, 2019, the United States would impose 10% tariffs on nearly all remaining imports from China. His Administration later exempted some goods from the 10% tariffs and delayed the imposition of tariffs on other goods, but on August 23, 2019, the President also announced his intention to raise the tariff rate for these remaining imports from 10% to 15%. The President has sometimes suggested what some observers characterize as an ambivalence toward the trade relationship. In reference to the persistent large size of the U.S. trade deficit with China, the President stated on August 1, 2019, "If they don't want to trade with us anymore, that would be fine with me. We'd save a lot of money." <4.2.1. Trade> According to U.S. trade data, U.S. exports of goods and services to China totaled $178.0 billion (7.1% of total U.S. exports) in 2018, while imports from China amounted to $558.8 billion (17.9% of total U.S. imports). As a result, the overall bilateral deficit was $380.8 billion, up $43.6 billion (12.9%) from 2017. <4.2.1.1. Trade in Goods> U.S. goods exports to China totaled $120.8 billion in 2018, a 7.3% ($9.4 billion) decrease from the 2017 level (see Table 3 ). The value of U.S. goods imports from China was $540.4 billion over the same period, up 6.8% ($34.4 billion) from 2017. The decrease in U.S. exports and increase in U.S. imports resulted in a $43.8 billion (11.7%) increase in the bilateral trade deficit, to $419.6 billion. Exports to China accounted for 7.2% of all U.S. goods exports, while imports from China accounted for 21.1% of all U.S. goods imports. Top U.S. goods exports to China in 2018 were capital goods, not including automotive products ($52.9 billion or 43.8% of U.S. goods exports to China), industrial supplies ($40 billion or 33.1%), and automotive vehicles and parts ($10.4 billion or 8.6%). Leading U.S. goods imports from China were consumer goods, not including food and automotive ($248.2 billion or 45.9% of U.S. goods imports from China), industrial supplies ($55.6 billion or 10.3%), and automotive vehicles and parts ($23.1 billion or 4.28%). China has levied retaliatory tariffs on most U.S. agricultural and food products. The tariffs reportedly contributed to the sharp overall decline of these exports to China (particularly of U.S. soybeans) in 2018. Total U.S. agricultural exports to China amounted to $9.1 billion, a decline of 53.0% from 2017, while the value of U.S. agricultural imports from China was $4.9 billion, up 8.9% from 2017. China's share of total U.S. agricultural exports declined from 14.1% in 2017 to 6.6% in 2018. <4.2.1.2. Trade in Services> In 2018, U.S. services exports to China totaled $57.1 billion (up 2.0% or $1.1 billion), while U.S. imports of services from China grew 5.1% ($887 million) to $18.3 billion. The bilateral trade surplus in services stood at $38.8 billion (up 0.6% from 2017). Exports to China accounted for 6.9% of all U.S. services exports, while imports from China accounted for 3.2% of all U.S. services imports. Travel represented the largest category of U.S. services exports to China, accounting for 56.1% ($32.1 billion). Other significant categories were charges for the use of IP rights (14.8% of all services exports to China or $8.5 billion) and transport (9.3% or $5.3 billion). Leading U.S. services imports from China were transport (27.4% of all services imports from China or $5.0 billion) and travel (24.7% or $4.5 billion). <4.2.2. Investment> <4.2.2.1. Foreign Direct Investment62> Despite a surge in U.S. foreign direct investment (FDI) in China following the PRC's entry into the World Trade Organization (WTO) in 2001, levels of investment have remained relatively low. China's foreign investment regulatory regime, combined with policies or practices that favor state-owned enterprises (SOEs), has traditionally limited the sectors open to and levels of foreign investment. Amid trade tensions, a U.S. vetting regime with a newly broadened scope for reviewing certain foreign investments for national security implications, and tighter Chinese regulations on capital outflows, Chinese FDI in the United States has slowed since 2016. According to the U.S. Bureau of Economic Analysis, net U.S. FDI flows to China in 2018 the most recent year for which data are available were $7.6 billion (down 22.9% from 2017), while net Chinese FDI flows into the United States were negative (-$754 million, compared to $25.4 billion in 2016), as outflows exceeded inflows (e.g., asset divestitures). Additionally, the stock of U.S. FDI in China was $116.5 billion (up 8.3% from 2017), while that of China in the United States was $60.2 billion (up 3.7%), on an ultimate beneficiary ownership (UBO) basis. China accounts for approximately 2.0% of total U.S. FDI stock abroad. <4.2.2.2. China's Holdings of U.S. Treasury Securities> As of May 2019, approximately three-fourths (or $1.1 trillion) of China's total U.S. public and private holdings are Treasury securities, which investors generally consider to be "safe-haven" assets. Chinese ownership of these securities has decreased in recent years from its peak of $1.3 trillion in 2011. Nevertheless, it remains significantly higher than in 2002, both in dollar terms (up over $1 trillion) and as a percentage of total foreign holdings (from 8.5% to 17.0%). In 2009, China overtook Japan to become the largest foreign holder of Treasury securities. <4.3. Military-to-Military Relations> The United States and China formalized military ties in 1979, the year the two countries established diplomatic relations, although they had cooperated on some security issues previously. The two countries enjoyed high levels of military cooperation until the PRC's 1989 military crackdown in Tiananmen Square, after which the United States suspended military engagement. The Clinton Administration in 1993 resumed military ties, reportedly in an attempt to reassure Chinese military leaders of the United States' benign intentions toward China, but military relations never again achieved the scope and depth of the previous decade. China on several occasions suspended military ties when it perceived the United States to have harmed Chinese interests (for example, in response to U.S. arms sales to Taiwan). In 1999, Congress included a provision in the National Defense Authorization Act for FY2000 ( P.L. 106-65 ) placing restrictions on military relations with China. The act states that the Secretary of Defense may not authorize any military contact with the PLA that would "create a national security risk due to an inappropriate exposure" of the PLA to 12 operational areas of the U.S. military. In recent years, U.S.-China military exchanges have included high-level visits, recurrent exchanges between defense officials, and functional and academic exchanges (see Table 4 ). According to U.S. Department of Defense (DOD) reports, the frequency of these engagements has declined in recent years, from 30 in 2016 to 12 planned for 2019. The two militaries also occasionally engage in multilateral fora, such as multinational military exercises, and coordinate or de-conflict activities such as counterpiracy patrols in the Gulf of Aden. DOD reporting indicates U.S. objectives for military-to-military relations with China have narrowed in recent years from a broader focus on building trust and fostering cooperation on security issues of mutual interest to a narrower focus on risk reduction. The Trump Administration has been more vocal than past Administrations in expressing its concerns about China's military, and frictions have occasionally flared into public view. Eighteen "unsafe and/or unprofessional interactions" between U.S. and PRC military forces in the maritime realm have occurred since 2016, according to a U.S. Pacific Fleet spokesperson. In late May 2018, the United States disinvited China from the 2018 iteration of the biennial U.S.-led multinational Rim of the Pacific (RIMPAC) maritime exercise in response to China's continued militarization of its outposts in the South China Sea. In September 2018, the U.S. Treasury Department sanctioned the PLA's Equipment Development Department and its head for arms purchases from Russia under the Countering America's Adversaries through Sanctions Act (CAATSA) ( P.L. 115-44 ). The PRC's response to that action, and a September 2018 U.S. arms sale to Taiwan, included suspension of the two militaries' year-old Joint Staff Dialogue. These tensions notwithstanding, both countries appear committed to military-military engagement. Then-U.S. Secretary of Defense Jim Mattis and Chinese Defense Minister Wei Fenghe met three times in 2018. At a meeting of the two countries' Diplomatic and Security Dialogue in November 2018, they "recognized that the U.S.-China military-to-military relationship could be a stabilizing factor for the overall bilateral relationship, and committed to a productive mil-mil relationship." In May 2019 remarks, Assistant Secretary of Defense for Indo-Pacific Security Affairs Randall Schriver echoed this sentiment, saying, "We continue to pursue a constructive result-oriented [military-to-military] relationship between our countries." <4.4. U.S. Foreign Assistance in China> Since 2001, U.S. assistance efforts in China have aimed to support human rights, democracy, rule of law, and environmental programs and to promote sustainable development and environmental conservation and preserve indigenous culture in Tibetan areas in China. The U.S. government does not provide assistance to PRC government entities or directly to Chinese NGOs. The direct recipients of Department of State and U.S. Agency for International Development (USAID) grants have been predominantly U.S.-based nongovernmental organizations (NGOs) and universities. Between 2001 and 2018, the U.S. government provided approximately $241 million for programs in China administered by the Department of State's Bureau of Democracy, Human Rights, and Labor (DRL); $99 million for Tibetan programs; $72 million for rule of law and environmental efforts in the PRC; $43 million for health programs in China focused upon HIV/AIDS prevention, care, and treatment and countering the spread of pandemic diseases; and $8.0 million for criminal justice reform. DRL programs across China have supported rule of law development, civil society, government transparency, public participation in government, and internet freedom. Since 1993, Peace Corps volunteers have engaged in environmental awareness programs and teaching English as a second language in China. Since 2015, Congress has appropriated funds for Tibetan communities in India and Nepal ($6 million in FY2019). Since 2018, Congress has provided an additional $3 million annually to strengthen institutions and governance in the Tibetan exile communities. (See Table 5 .) The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) appropriated an estimated $25.8 million for programs in China. This total includes ESF funding of $17 million for programs in China (non-Tibetan areas), ESF of $8 million for Tibetan areas in China, and INCLE funding of $800,000 for rule of law programs. Of the ESF appropriation for non-Tibetan areas, DRL administers human rights and democracy programs amounting to $11 million. In addition, P.L. 116-6 provided $17.5 million for Global Internet Freedom efforts, of which China programs are a major recipient. The FY2020 Department of State foreign operations budget justification does not include a funding request for programs in China. Appropriations for such programs are determined largely by congressional foreign operations appropriations legislation. <5. Select Issues in the Bilateral Relationship> <5.1. Economic Issues> <5.1.1. Section 301 Investigation and Tariffs> In March 2018, the USTR released the findings of an investigation into PRC policies related to technology transfer, IP, and innovation under Sections 301-308 of the Trade Act of 1974 (19 U.S.C. 2411-2418). The investigation concluded that four IP rights-related PRC policies justified U.S. action: forced technology transfer requirements; cyber-enabled theft of U.S. IP and trade secrets; discriminatory and nonmarket licensing practices; and state-funded strategic acquisition of U.S. assets. Subsequently, the Trump Administration imposed increased 25% tariffs on three tranches of imports from China worth approximately $250 billion (see Table 6 ). China in turn raised tariffs (at rates ranging from 5% to 25%) on approximately $110 billion worth of U.S. products. After negotiations to resolve the standoff broke down in May 2019, the President ordered the USTR to begin the process of levying increased 25% tariffs on nearly all remaining imports from China. Following a 12 th round of talks between U.S. and Chinese trade negotiators in Shanghai at the end of July 2019, the President on August 1, 2019, announced that the United States would impose additional 10% tariffs on these remaining imports beginning September 1, 2019. On August 13, 2019, the Trump Administration announced that some imports from China previously identified as potentially subject to the additional 10% tariffs would be exempted "based on health, safety, national security and other factors," and that for some other imports from China, including cell phones, laptop computers, video game consoles, computer monitors, and some toys and footwear and clothing items, the additional 10% tariffs would be delayed until December 15. China responded to the President's August 1, 2019, announcement by allowing its currency, the renminbi or RMB, to weaken against the U.S. dollar, making Chinese exports more competitive abroad, and in part "offsetting" the impact of U.S. tariffs. Chinese companies also suspended new purchases of U.S. agricultural products. On August 23, 2019, China's Ministry of Finance announced plans to impose retaliatory tariffs of 5% to 10% on $75 billion worth of imports from the United States. Tariffs on some products took effect on September 1, 2019; tariffs on the rest are to go into effect on December 15, 2019. The Ministry also announced restoration of 5%-25% tariffs on U.S. autos and auto parts, to go into effect December 15, 2019. President Trump responded, in turn, to China's tariff announcements by stating that he would increase the tariff rate for $250 billion worth of imports from China from 25% to 30%, effective October 1, 2019, and that he would increase the proposed tariff rate for the remaining imports from China from 10% to 15%, to go into effect for some products on September 1, 2019, and for other products on December 15, 2019. Trade negotiators from the two sides are scheduled to meet for a 13 th round of negotiations in Washington, DC, in September 2019. <5.1.2. Tariffs on Aluminum and Steel> In March 2018, President Trump issued a proclamation imposing a 10% tariff on aluminum and a 25% tariff on steel products from most countries, including China, based on "national security" justifications under Section 232 of the Trade Act of 1962 (P.L. 87-794; 19 U.S.C. 1862). In response, China raised tariffs by 15% to 25% on $3 billion worth of U.S. imports. China is also pursuing legal action against the United States at the WTO. In turn, the United States filed its own WTO complaints over China's retaliatory tariffs. <5.1.3. Alleged PRC Currency Manipulation> On August 5, the U.S. Treasury Department labeled China a currency manipulator under Section 3004 of the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ) and announced that Treasury Secretary Steven Mnuchin would "engage with the International Monetary Fund [IMF] to eliminate the unfair competitive advantage created by China's latest actions." In its annual review of China's economic policies, released on August 9, 2019, however, the IMF stated, "[e]stimates suggest little FX [foreign exchange] intervention by" China's central bank, the People's Bank of China. <5.1.4. Bilateral Trade Deficit> President Trump has raised concerns about U.S. bilateral trade imbalances, particularly with China. Some policymakers view the large U.S. trade deficit as an indicator of an unfair trade relationship resulting from Chinese trade barriers, such as comparatively high tariffs, and currency manipulation. Others view conventional bilateral trade deficit data as misleading, given multinational firms' growing use of global supply chains. Supporters of the latter view note that products may be invented or developed in one country and manufactured or assembled elsewhere using imported components from multiple foreign sources and then exported. Conventional U.S. trade data may not fully reflect the value added in each country, and thus are often a relatively poor indicator of who benefits from global trade. Economists generally agree that the overall size of the trade deficit stems largely from U.S. macroeconomic policies and an imbalance between saving and investment in the economy, rather than from foreign trade barriers. <5.1.5. Industrial Policies> The Trump Administration, some Members of Congress, and others charge that the Chinese government employs policies, including subsidies, tax breaks, low-cost loans, trade and investment barriers, discriminatory IP and technology practices, and technology transfer mandates, to support and protect domestic firms, especially state-owned enterprises (SOEs). Chinese government plans, such as "Made in China 2025," appear to signal an expanded role for the government in the economy, which many analysts fear could distort global markets and hurt the global competitiveness of U.S. firms. Separately, some U.S. officials are concerned that participation by Chinese firms in certain global supply chains, such as information and communications technology (ICT) products and services, could pose risks to U.S. national security, primarily because of PRC firms' relationships with the Chinese state. <5.1.6. Intellectual Property Rights (IPR) and Cyber-Theft> As noted in the Section 301 investigation, the Trump Administration considers Chinese IPR violations to be a major source of U.S. economic losses. U.S. firms cite lax IPR enforcement as one of the biggest challenges to doing business in China, and some view the enforcement shortfalls as a deliberate effort by the Chinese government to give domestic firms an advantage over foreign competitors. In 2018, the U.S. National Counterintelligence and Security Center described China as having "expansive efforts in place to acquire U.S. technology to include sensitive trade secrets and proprietary information." It warned that if the threat is not addressed, "it could erode America's long-term competitive economic advantage." The U.S. government's first charges against a state actor for cyber-enabled economic espionage were against China. In May 2014, the Obama Administration Justice Department indicted five PRC military officers for hacking into and stealing secrets from U.S. firms in the nuclear power, metals, and solar products industries. All those indicted remain at large. In September 2015, the Obama Administration and China reached a bilateral agreement on cybersecurity during President Xi's state visit to the United States. Under that agreement, Presidents Xi and Obama pledged that neither country's government would conduct or knowingly support cyber-enabled theft of intellectual property for commercial purposes. In February 2018 testimony to Congress, the U.S. intelligence community assessed that PRC cyber activity continued, but at "volumes significantly lower than before" the 2015 agreement. In October 2018, however, the cofounder of cybersecurity firm CrowdStrike asserted that after a lull, China was "back to stealing intellectual property on a massive scale." In 2019, the intelligence community's testimony to Congress stated, "China remains the most active strategic competitor responsible for cyber espionage against the US Government, corporations, and allies." <5.1.7. Advanced Technology and Huawei105> The Trump Administration has raised national security concerns over global supply chains of advanced technology products, such as ICT equipment, where China is a major global producer and supplier. In 2017, the President blocked a proposed Chinese acquisition of a U.S. semiconductor firm on national security grounds. On May 15, 2019, citing a "national emergency," President Trump signed Executive Order 13873, authorizing the Secretary of Commerce to ban certain technology transactions involving "foreign adversaries." The Trump Administration has subjected Chinese telecommunications firm Huawei Technologies Co., Ltd. to particular scrutiny. On May 16, 2019, the U.S. Department of Commerce added Huawei and 68 of its non-U.S. affiliates to the Bureau of Industry and Security's (BIS's) Entity List, generally requiring U.S. companies to apply for an export license for the sale or transfer of U.S. technology to those entities, with a "presumption of denial" for such applications. The BIS entity list decision cites "reasonable cause to believe Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States," and notes Huawei's indictment in the U.S. District Court for the Eastern District of New York on charges of violating Iran sanctions. On May 20, 20 19, BIS eased the effect of the entity list decision by issuing a three-month temporary general license authorizing some continued transactions with Huawei and its non-U.S. affiliates. On August 19, 2019, BIS added an additional 46 non-U.S. Huawei affiliates to the entity list, while also extending the temporary general license for another three months, to November 18, 2019. In apparent response to U.S. actions, China's Ministry of Commerce in June 2019 announced plans for its own "unreliable entities list," to include foreign entities that damage "the legitimate rights and interests" of Chinese firms or "boycott or cut off supplies to Chinese companies for non-commercial reasons." Vice President Pence and U.S. Secretary of State Pompeo have repeatedly urged allies not to work with Huawei. In Ottawa, Canada, in May 2019, Pence argued, "The simple fact is that the legal framework within China gives the Chinese government access to information and data that is collected by Chinese companies like Huawei," making Huawei "incompatible with the security interests of the United States of America or our allies in freedom-loving nations across the world." Pompeo warned European allies, partners, and friends in June 2019, "don't do anything that would endanger our shared security interests or restrict our ability to share sensitive information." Of U.S. allies, only Australia has so far barred Huawei completely from its networks. China's Foreign Ministry accuses the United States of seeking to "strangle [Chinese companies'] lawful and legitimate operations." The Huawei issue has spilled into U.S.-Canada and Canada-China relations. In 2018, the United States requested that Canada detain top Huawei executive Meng Wanzhou, a daughter of Huawei's founder, and charged her with financial fraud related to alleged violation of Iran sanctions. She faces possible extradition to the United States. China has retaliated against Canada by detaining and later arresting Canadians Michael Kovrig and Michael Spavor on state secrets charges and cutting off imports first of Canadian canola seed, and then of Canadian meat. <5.1.8. China's Status as a "Developing Country" in the WTO> The 164-member WTO allows members to designate themselves as either developed or developing economies, with the latter eligible for special and differential treatment (SDT) both in the context of existing WTO obligations and in new negotiations. Developed countries, including the United States and the European Union, have expressed frustration at those rules, under which two-thirds of WTO members, including China, have designated themselves as "developing." On July 26, 2019, President Trump issued a "Memorandum on Reforming Developing-Country Status in the World Trade Organization." The President stated that the WTO dichotomy between developed and developing countries is outdated and "has allowed some WTO Members to gain unfair advantages in the international trade arena." He specifically called out China, stating that "the United States has never accepted China's claim to developing-country status, and virtually every current economic indicator belies China's claim." The President instructed USTR to work to reform the WTO self-declaration practice and, if no substantial progress is made within 90 days, to take certain unilateral actions, such as no longer treating a country as developing if the USTR believes that designation to be improper, and to publish a list of all economies USTR believes to be "inappropriately" claiming developing-economy status. Responding to the U.S. memorandum, a PRC Foreign Ministry spokesperson insisted that the principle of SDT "reflects the core values and basic principles of the WTO" and "must be safeguarded no matter how the WTO is reformed." At the same time, she stated that in claiming the status, "China does not intend to shy away from its due international responsibilities." The U.S. position, she said, shows the United States to be "capricious, arrogant and selfish." <5.1.9. China's Belt and Road Initiative (BRI)> In 2013, President Xi launched two projects aimed at boosting economic connectivity across continents by land, an effort known as the "Silk Road Economic Belt," and by sea, an effort known as the, "21 st Century Maritime Silk Road." Collectively, China refers to the two projects as the "Belt and Road Initiative" (BRI). Under the initiative, PRC institutions are financing transportation and energy infrastructure projects in dozens of countries and PRC government agencies are working to reduce investment and trade barriers and boost people-to-people ties. BRI is also intended to alleviate overcapacity in the Chinese economy, bring new economic activity to China's western provinces, and promote PRC diplomatic and security interests, including securing energy supply routes and perhaps facilitating future Chinese military or intelligence use of Chinese-built ports and other infrastructure around the world. The size and scale of PRC financing, investments, and loans issued under BRI is debated. China does not issue its own authoritative figures. PRC financing has the potential to address serious infrastructure shortfalls in recipient countries, but China's initial implementation of BRI has sometimes been rocky. A June 2019 Asia Society Policy Institute report examines BRI projects in Southeast Asia and faults China for a "laissez-faire approach" that allows mainly Chinese developers "to benefit by cutting corners and evading responsibility for legal, social, labor, environmental, and other issues." The report identifies such problems as rushed agreements, a failure to conduct feasibility studies and environmental and social impact assessments, and financing terms that create unsustainable debt for host governments. All those issues "have begun to alienate local communities and taint the BRI brand," the report asserts. Some countries have sought to renegotiate the terms of their BRI agreements. The Trump Administration has adopted a sharply critical stance toward BRI. In his October 4, 2018, speech on China policy, Vice President Pence accused China of engaging in "so-called 'debt diplomacy.'" The terms of PRC loans, he said, "are opaque at best, and the benefits flow overwhelmingly to Beijing." In Congress, the Better Utilization of Investments Leading to Development (BUILD) Act of 2018 ( P.L. 115-254 ) established a new U.S. International Development Finance Corporation (IDFC) by consolidating existing U.S. government development finance functions. It is widely portrayed as a U.S. response to BRI. At the Second Belt and Road Forum in Beijing in April 2019, Xi appeared to respond to criticism from the United States and other countries when he referenced the "need to ensure the commercial and fiscal sustainability of all projects so that they will achieve the intended goals as planned." He declared that in pursuing BRI, "everything should be done in a transparent way, and we should have zero tolerance for corruption." He also vowed to "adopt widely accepted standards and encourage participating companies to follow general international rules and standards in project development, operation, procurement and tendering and bidding." <5.2. Security Issues> <5.2.1. PRC Military Modernization> U.S. policymakers are concerned about the challenges that China's ambitious military modernization program is now posing to U.S. interests in Asia and elsewhere. China's military modernization program has emerged in recent years as a significant influence on U.S. defense strategy, plans, budgets, and programs, and the U.S.-China military competition has become a major factor in overall U.S.-China relations. Since 1978, the PRC has worked to transform the PLA from an infantry-heavy, low-technology, ground forces-centric military into a high-technology, networked force with an increasing emphasis on joint operations, maritime and information domains, offensive air operations, power projection, and cyber and space operations. The PLA is becoming a global military, as demonstrated by a navy increasingly capable of operating far from home. The PLA undertakes counterpiracy patrols in the Gulf of Aden, regular patrols in places like the South China Sea and the Indian Ocean, and task group and goodwill deployments all over the world, and in 2017 established China's first-ever overseas military base in Djibouti. President Xi has set two major deadlines for the PLA: to complete its modernization process by 2035, and to become a "world class" military by 2049, the centenary of the establishment of the PRC. According to China's July 2019 defense white paper, China seeks to build "a fortified national defense and a strong military commensurate with the country's international standing and its security and development interests" in service of several national defense aims. According to DOD, the PLA is seeking to develop "capabilities with the potential to degrade core U.S. operational and technological advantages." As China's military advances, it increasingly is in a position to challenge U.S. dominance in certain domains, including air, space, and cyberspace, where the PLA has directed significant political, organizational, and financial resources in recent years. China also is investing heavily in advanced military technologies such as autonomous and unmanned systems, maneuverable reentry vehicles (including hypersonic missiles), and artificial intelligence and other enabling technologies. Chinese officials insist China's military posture is defensive in nature. In January 2018, a spokesperson for China's Ministry of National Defense stated, "China resolutely follows the path of peaceful development and upholds a defensive national defense policy." The spokesperson added, "China is not interested in dominance." <5.2.2. North Korea> The United States and China have both committed to the goal of denuclearization of North Korea, but have sometimes disagreed on the best path toward that goal. Between 2006 and 2017, China voted for U.N. Security Council Resolutions imposing ever stricter sanctions on North Korea over its nuclear weapons and missile programs, though it often sought to weaken the resolutions first. With China sharing a 880-mile border and serving as North Korea's primary trading partner, the Trump Administration deems China's sanctions implementation to be "at times inconsistent, but critical." The Treasury Department has designated mainland China-based companies, Hong Kong-based shipping companies, and PRC nationals for alleged violations of U.S. North Korea sanctions. In both 2018 and 2019, the United States led efforts to request that a U.N. sanctions committee declare that North Korea had procured refined petroleum products at levels greater than U.N. sanctions permit, and to halt all new deliveries. Both times, China and Russia are reported to have blocked the effort. North Korea is alleged to have obtained the above-quota petroleum products through illegal ship-to-ship transfers at sea. The announcement of President Trump's June 2018 summit with North Korean leader Kim Jong-un led to a thaw in previously frosty China-North Korea ties. Since March 2018, Kim has visited China four times and President Xi has visited North Korea once, in June 2019. China urges all parties to undertake "phased and synchronized steps" in a "dual-track approach" to a political settlement of issues on the Korean Peninsula, with one track focused on denuclearization and the other on establishing a peace mechanism. <5.2.3. East China Sea133> In the East China Sea, the PRC is involved in a territorial dispute with Japan over the sovereignty of uninhabited land features known in Japan as the Senkaku Islands and in the PRC as the Diaoyu Dao. The features are also claimed by Taiwan, which refers to them as the Diaoyutai. The United States does not take a position on the sovereignty dispute over the Senkakus, but it does recognize Japanese administration of the features. That recognition, reaffirmed by every U.S. Administration since Nixon, has given the United States a strong interest in the issue because Article 5 of the U.S.-Japan Treaty of Mutual Cooperation and Security covers areas under Japanese administration. The U.S. military regularly conducts freedom of navigation operations (FONOPs) and presence operations, as well as combined exercises with the Japan Self-Defense Force, in and above the East China Sea. Since 2012, China has stepped up what it calls "routine" patrols to assert jurisdiction in China's "territorial waters off the Diaoyu Islands." In November 2013, China established an air defense identification zone (ADIZ) in the East China Sea covering the Senkakus as well as airspace that overlaps with the existing ADIZs of Japan, South Korea, and Taiwan. <5.2.4. South China Sea137> China makes extensive, though imprecise, claims in the South China Sea, which is believed to be rich in oil and gas deposits as well as fisheries, and through which a major portion of world's trade passes. On maps, China depicts its claims with a "nine-dash line" that, if connected, would enclose an area covering approximately 90% of the sea. China physically controls the Paracel (known in China as the Xisha) Islands in the northern part of the sea, seven of the approximately 200 geographic features in the Spratly (Nansha) Islands chain in the southern part of the sea, and Scarborough Shoal (Huangyan Island) in the eastern part of the sea (see Figure 3 ). Areas claimed by the PRC are also claimed in part by Brunei, Malaysia, the Philippines, and Vietnam, and in entirety by Taiwan, with the fiercest territorial disputes being those between China and Vietnam and China and the Philippines. The South China Sea is bordered by a U.S. treaty ally, the Philippines, and is a key strategic waterway for the U.S. Navy. Since 2013, the PRC has built and fortified artificial islands on seven sites in the Spratly Island chain, and sought to block other countries from pursuing economic or other activity within the exclusive economic zones (EEZs) they are entitled to under the U.N. Convention on the Law of the Sea (UNCLOS). According to DOD, China has placed anti-ship cruise missiles and long-range surface-to-air missiles on the artificial islands and is "employing paramilitary forces in maritime disputes vis- -vis other claimants." In May 2018, the United States disinvited the PRC from the 2018 edition of the U.S.-hosted RIMPAC maritime exercise over the PRC's continued militarization of the sites. To challenge what the United States considers excessive maritime claims and to assert the U.S. right to fly, sail, and operate wherever international law allows, the U.S. military undertakes both FONOPs and presence operations in the sea. In June 2019, Chinese Minister of National Defense Wei appeared to refer to those operations when he complained that "some countries outside the region come to the South China Sea to flex muscles, in the name of freedom of navigation." He declared that, "The large-scale force projection and offensive operations in the region are the most serious destabilizing and uncertain factors in the South China Sea." China and members of the Association of Southeast Asian Nations (ASEAN) are involved in negotiations over a Code of Conduct for the South China Sea. In November 2018, China's Premier, Li Keqiang, set a deadline of 2021 to complete the negotiations. The parties have not made public the latest draft of their negotiating text, but an initial August 2018 draft reportedly included proposed language from China stating that, "The Parties shall not hold joint military exercises with countries from outside the region, unless the parties concerned are notified beforehand and express no objection." Such language would appear to target U.S. military exercises with allies and partners, including such ASEAN members as the Philippines, Thailand, and Vietnam. In 2013, the Philippines sought arbitration under UNCLOS over PRC actions in the South China Sea. An UNCLOS arbitral tribunal ruled in 2016 that China's nine-dash line claim had "no legal basis." The ruling also stated that none of the land features in the Spratlys is entitled to any more than a 12-nautical mile territorial sea; that three of the Spratlys features that China occupies generate no entitlement to maritime zones; and that China violated the Philippines' sovereign rights in various ways. China declined to participate in the arbitration process and declared the ruling "null and void." <5.3. Human Rights and Rule of Law146> After consolidating power in 2013, Xi Jinping intensified and expanded the reassertion of party control over society that began during the final years of his predecessor, Hu Jintao, who served as CPC General Secretary from 2002 to 2012. Since 2015, China's government has enacted new national laws that strengthen the role of the state over a wide range of social activities in the name of national security and authorize greater controls over the Internet and ethnic minority groups. Government arrests of human rights advocates and lawyers, which intensified in 2015, were followed by Party efforts to instill ideological conformity in various spheres of society. In 2016, Xi launched a policy known as "Sinicization," by which China's religious populations, particularly Tibetan Buddhists, Muslims, and Christians who worship in churches that are not registered with the government, are required to conform to Han Chinese culture, the socialist system, and Communist Party policies. <5.3.1. Xinjiang148> In the name of combating terrorism and religious extremism, authorities in China's northwest region of Xinjiang have since 2017 undertaken the mass internment of Turkic Muslims, mainly ethnic Uyghurs (also spelled "Uighurs"), in ideological reeducation centers. Scholars, human rights activists, and the U.S. government allege that those detained without formal charges include an estimated 1.5 million Uyghurs out of a population of about 10.5 million, and a smaller number of ethnic Kazakhs. Nearly 400 prominent Uyghur intellectuals reportedly have been detained or their whereabouts are unknown. Many detainees reportedly are forced to express their love of the Communist Party and Xi, sing patriotic songs, and renounce or reject many of their religious beliefs and customs. According to former detainees, treatment and conditions in the camps include beatings, food deprivation, and crowded and unsanitary conditions. PRC officials describe the Xinjiang camps as "vocational education and training centers" in which "trainees" undertake a curriculum of "standard spoken and written Chinese, understanding of the law, vocational skills, and deradicalization." In July 2019, a Xinjiang official claimed that the majority of those who return from the camps "find suitable jobs that they really like, and they can earn a satisfactory living." Many Uyghurs living abroad say they still have not heard from missing relatives in Xinjiang. In July 2019, at the second Ministerial to Advance Religious Freedom hosted by the Department of State, Secretary of State Mike Pompeo said, "China is home to one of the worst human rights crises of our time; it is truly the stain of the century." The Administration was reported to be considering sanctions under the Global Magnitsky Human Rights Accountability Act against officials in Xinjiang, but these actions reportedly were set aside during the U.S.-China bilateral trade negotiations, possibly for fear of disrupting progress. On July 8, 2019, 22 nations at the United Nations Human Rights Council (UNHRC) issued a joint statement to the UNHRC president and U.N. High Commissioner on Human Rights calling on China to "refrain from the arbitrary detention and restrictions on freedom of movement of Uighurs, and other Muslim and minority communities in Xinjiang" and to "allow meaningful access to Xinjiang for independent international observers." On July 12, 2019, envoys from 37 countries, including over one dozen Muslim-majority countries, cosigned a counter-letter to the UNHRC in support of China's policies in Xinjiang. As of July 29, 2019, China said the number of countries signing the counter-letter had risen to 50. <5.3.2. Hong Kong161> Hong Kong is a Special Administrative Region (SAR) of the PRC located off China's southern coast with a population of 7.5 million people, including about 85,000 U.S. citizens. Sovereignty of the former British colony reverted to the PRC on July 1, 1997, under the provisions of a 1984 international treaty known as the "Joint Declaration" negotiated between China and the United Kingdom. Among other things, the Joint Declaration promises Hong Kong a "high degree of autonomy, except in foreign and defence affairs" and pledges that Hong Kong's "current social and economic systems" will remain unchanged for at least 50 years. As required by the Joint Declaration, on April 4, 1990, China's National People's Congress passed the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China (Basic Law), which serves as a mini-constitution for the city. The United States-Hong Kong Policy Act of 1992 ( P.L. 102-383 , 22 U.S.C. 5701-5732) affords Hong Kong separate treatment from China in a variety of political, economic, trade, and other areas so long as the HKSAR remains "sufficiently autonomous." Since June 2019, hundreds of thousands of Hong Kongers have joined large rallies and marches against proposed legal amendments that would for the first time allow extraditions to Mainland China. Chief Executive Carrie Lam Cheng Yuet-ngor suspended consideration of the amendments in response to the demonstrations in early June, but has also characterized the demonstrations as "riots," and authorized the Hong Kong Police Force to use tear gas, rubber bullets, pepper spray, and truncheons to break up the protests. In response, the demonstrators have expanded their demands to include that Lam fully withdraw the amendments, drop all charges against arrested protesters, renounce her characterization of the demonstrations as "riots," set up an independent commission to investigate alleged police misconduct, and implement the election of the Chief Executive and Legislative Council by universal suffrage, as promised in the Basic Law. China's state media have accused the United States of covertly instigating and directing the unrest in Hong Kong. On August 8, 2019, they circulated a photograph of a political officer at the U.S. Consulate General in Hong Kong meeting with opposition leaders at a hotel, accusing her of being "the behind-the-scenes black hand creating chaos in Hong Kong." Like Chief Executive Lam, President Trump has termed the demonstrations in Hong Kong "riots." The President has indicated that the situation is for China's central government and the HKSAR government to work out, has praised President Xi's handling of the Hong Kong protests, and stated that he does not see the situation in Hong Kong providing leverage in ongoing talks with China. He has also indicated, however, that "it would be very hard to deal if they [China] do violence. I mean, if it's another Tiananmen Square, it's I think it's a very hard thing to do if there's violence." The cochairs of the Tom Lantos Human Rights Commission and other Members of Congress have called for the Trump Administration to stop U.S. sales of tear gas, pepper spray, and other riot gear to the Hong Kong Police Force. Hong Kongers have taken to the streets in large numbers twice before to protest China's alleged failure to fulfill its obligations under the Joint Declaration or to abide by the provisions of the Basic Law. On July 1, 2003, an estimated 500,000 Hong Kong residents rallied against a proposed antisedition bill that they believed would sharply curtail their rights. Large numbers of Hong Kong residents protested again beginning on September 26, 2014, against PRC restrictions on a proposal to elect the Chief Executive by universal suffrage. Those protests became known as the "Umbrella Movement." <5.3.3. Tibet170> U.S. policy toward Tibet is guided by the Tibetan Policy Act of 2002 ( P.L. 107-228 ), which requires the U.S. government to promote and report on dialogue between Beijing and Tibet's exiled spiritual leader, the Dalai Lama, or his representatives; to help protect Tibet's religious, cultural, and linguistic heritages; and to support development projects in Tibet. The act requires the State Department to maintain a Special Coordinator for Tibetan Issues. (The position has been vacant throughout the Trump Administration.) The act also calls on the Secretary of State to "make best efforts" to establish a U.S. consular office in the Tibetan capital, Lhasa; and directs U.S. officials to press for the release of Tibetan political prisoners in meetings with the Chinese government. The U.S. government and human rights groups have been critical of increasingly expansive official Chinese controls on religious life and practice in Tibetan areas of China instituted in the wake of anti-Chinese protests in 2008. Human rights groups have catalogued arbitrary detentions and disappearances; a heightened Chinese security presence within monasteries; continued "patriotic education" and "legal education" campaigns that require monks to denounce the Dalai Lama; strengthened media controls; and policies that weaken Tibetan-language education. PRC restrictions on access to Tibet for foreigners prompted Congress to pass, and the President to sign, the Reciprocal Access to Tibet Act (RATA) ( P.L. 115-330 ). Enacted in December 2018, RATA requires the Department of State to report to Congress annually regarding the level of access PRC authorities granted U.S. diplomats, journalists, and tourists to Tibetan areas in China. It also states that no individual "substantially involved in the formulation or execution of policies related to access for foreigners to Tibetan areas" may be granted a visa or admitted to the United States so long as restrictions on foreigners' access to Tibet remain in place. The Department of State is required to submit annually a list of PRC officials "substantially involved" in such policies, and to identify those whose visas were denied or revoked in the previous year. Of growing concern to human rights groups and foreign governments is China's insistence on controlling the succession process for the Dalai Lama. Now aged 84, the Dalai Lama is the 14 th in a lineage that began in the 14 th century, with each new Dalai Lama identified in childhood as the reincarnation of his predecessor. As a spokesperson for China's Foreign Ministry restated in March 2019, the PRC's position is that, "reincarnation of living Buddhas including the Dalai Lama must comply with Chinese laws and regulations and follow religious rituals and historical conventions." In July 2019, a Chinese official told visiting Indian journalists that the Dalai Lama's reincarnation would be required to be found in China and approved by the central government in Beijing, adding, "The Dalai Lama's reincarnation is not decided by his personal wish or by some group of people living in other countries." In 2011, however, the Dalai Lama asserted that, "the person who reincarnates has sole legitimate authority over where and how he or she takes rebirth and how that reincarnation is to be recognized." China lobbies strenuously to prevent world leaders from meeting with the Dalai Lama, the 1989 Nobel Peace Prize winner and 2006 recipient of the Congressional Gold Medal. U.S. Presidents since George H. W. Bush have met with the Dalai Lama. President Trump has not so far done so. <5.3.4. Use of Surveillance Technology> PRC methods of social and political control are evolving to include the widespread use of sophisticated surveillance and big data technologies. Chinese authorities and companies have developed and deployed tens of millions of surveillance cameras, as well as facial, voice, iris, and gait recognition equipment, to reduce crime. The government uses the same equipment to target and track the movements and internet-use of ethnic Tibetans and Uyghurs and critics of the regime. In addition, the government is developing a "social credit system," involving aggregating data on companies and individuals across geographic regions and industries, and "creating measures to incentivize 'trustworthy' conduct, and punish 'untrustworthy' conduct." Increasingly, Chinese companies are exporting data and surveillance technologies around the world. In April 2019, the Australian Strategic Policy Institute (ASPI), an Australian-based nonpartisan think tank, launched a public database, funded by the U.S. Department of State, mapping the overseas activities of a dozen leading Chinese technology companies. Among other projects, it shows Chinese firms involved in installing 5G networks in 34 countries and deploying so-called "safe cities" surveillance technologies in 46 countries. In an October 2018 report partly funded by the U.S. Department of State, independent research and advocacy organization Freedom House identified 38 countries in which Chinese companies had installed internet and mobile networking equipment, 18 countries that had deployed intelligent monitoring systems and facial recognition developed by Chinese companies, and 36 countries in which media elites and government officials had traveled to China for trainings on new media or information management. The same report, Freedom on the Net 2018 , ranked China last in internet and digital media freedom of 65 countries tracked, just ahead of Iran, Syria, and Ethiopia, the fourth year China held that position in Freedom House's rankings. <5.4. Taiwan178> When the Carter Administration established diplomatic relations with the PRC on January 1, 1979, it terminated formal diplomatic ties with self-ruled Taiwan, over which the PRC claims sovereignty. In joint communiques with China signed in 1978 and 1982, the United States stated that it "acknowledges the Chinese position that there is but one China and Taiwan is part of China," but did not state its own position on Taiwan's status. Under the U.S. "one-China" policy, the United States maintains only unofficial relations with Taiwan, while upholding the 1979 Taiwan Relations Act ( P.L. 96-8 ), which provides a legal basis for the unofficial relationship and includes commitments related to Taiwan's security. The PRC frequently reminds the United States that, for Beijing, "The Taiwan question is the most important and sensitive one in China-US relations." Beijing is particularly wary of U.S. moves that the PRC sees as introducing "officiality" into the U.S.-Taiwan relationship, and regularly protests U.S. legislation supporting Taiwan, U.S. arms sales to Taiwan, and U.S. Navy transits of the Taiwan Strait. (The U.S. Navy conducted seven such transits between January and August 2019.) The United States objects to PRC efforts to isolate Taiwan internationally and to the PRC's real and implied threats of force against Taiwan, including bomber, fighter, and surveillance aircraft patrols around and near the island. After initially questioning the U.S. "one-China" policy after his November 2016 election victory, President Trump used a February 9, 2017, telephone call with President Xi to recommit the United States to it. The Trump Administration's NSS states that the United States "will maintain our strong ties with Taiwan in accordance with our 'One China' policy, including our commitments under the Taiwan Relations Act to provide for Taiwan's legitimate defense needs and deter coercion." Trump Administration language on Taiwan has evolved since 2017. DOD's June 2019 Indo-Pacific Strategy Report discusses Taiwan without referencing the U.S. "one-China" policy. In a first for a high-profile U.S. government report in the era of unofficial relations, it also refers to Taiwan as a "country." The strategy presents Taiwan, along with Singapore, New Zealand, and Mongolia, as Indo-Pacific democracies that are "reliable, capable, and natural partners of the United States." The document asserts that, "The United States has a vital interest in upholding the rules-based international order, which includes a strong, prosperous, and democratic Taiwan." In 2018, the 115 th Congress passed and President Trump signed the Taiwan Travel Act ( P.L. 115-135 ), stating that it should be U.S. policy to allow U.S. officials at all levels, "including Cabinet-level national security officials, general officers, and other executive branch officials," to travel to Taiwan for meetings with counterparts, and to allow high-level Taiwan officials to enter the United States under respectful conditions to meet with U.S. officials, "including officials from the Department of State and the Department of Defense and other Cabinet agencies." In May 2019, the United States hosted a meeting between the U.S. and Taiwan National Security Advisors, the first such meeting publicly disclosed since the United States broke diplomatic relations with Taiwan in 1979. In July 2019, the Trump Administration allowed Taiwan President Tsai Ing-wen to make high-profile "transit" visits through New York City and Denver, CO, on her way to and from visiting diplomatic allies in the Caribbean. Each visit spanned three days. The New York City transit included a brief closed-door speech at Columbia University, a walk in Central Park, and an event at Taiwan's representative office for the U.N. representatives of Taiwan's diplomatic partners. Since 1995, U.S. policy has allowed Taiwan presidents to visit the United States only on transit visits through the United States on their way to other locations. The Trump Administration has notified Congress of 11 Taiwan FMS cases on five separate dates. The combined value of the 11 FMS cases is about $11.76 billion. (See Table 7 .) On July 12, 2019, in apparent response to Tsai's visit to New York City and the Administration's July 8, 2019, arms sale notification, China's Ambassador to the United States, Cui Tiankai, wrote on Twitter, "Taiwan is part of China. No attempts to split China will ever succeed. Those who play with fire will only get themselves burned. Period." In response to the Administration's August 20, 2019, notification of the proposed sale of F-16C/D Block 70 fighter planes to Taiwan, Chinese Foreign Ministry spokesperson Geng Shuang said China might sanction U.S. companies, stating, "China will take every necessary measure to safeguard its interests, including sanctioning American companies involved in the arms sale this time." <5.5. Select Other Issues> <5.5.1. Climate Change> Both China and the United States are parties to the 1992 United Nations Framework Convention on Climate Change (UNFCCC), the objective of which is to stabilize human-induced climate change. The two countries are widely viewed as having pivotal roles to play in efforts to achieve that goal as they are, respectively, the first- and second-ranking contributors to global greenhouse gas (GHG) emissions. While China emits more than twice as much carbon dioxide (CO 2 , the major human-related GHG) as the United States, comparing the nations' levels of effort to address their GHG emissions can be complicated. For example, while China emits more CO 2 to produce a unit of GDP (its "energy intensity"), China has reduced and continues to reduce its energy intensity more rapidly due to structural changes and policies. The United States is one of the highest global emitters of GHG per person, at twice China's rates, due in large part to higher incomes and rates of consumption. Some U.S. consumption results in GHG emissions from manufacturing in China. China's emissions per person have been rising with incomes and consumption; its total emissions may continue to rise with incomes and the size of its economy. Under current policies, U.S. emissions may remain largely flat through the 2020s and could grow from the 2030s. China has pledged that its emissions will peak before 2030. Under current projections and pledges, it is unclear whether China's GHG emissions will grow, remain stable, or decline toward the "net zero" emissions that would be required to stabilize human-induced climate change. China has set ambitious targets for expanding its supply of energy from non-GHG-emitting sources, improving energy efficiency, and reducing air pollution coemitted with GHG. In this decade, China's efforts have demonstrated measurable effects in reducing the penetration of coal use, energy intensity, and air pollution. Policies in place would not likely reduce GHG emissions toward near-zero, however. The United States and China have cooperated on environmental and energy projects for several decades. Although U.S. policy attention to the two countries' Clean Energy Cooperation program has declined, joint research continues on Carbon Capture and Storage (CCS) technologies, energy efficiency, vehicles, water-energy, and nuclear energy. China is developing a national GHG cap and emissions trading system, building on programs in seven regions of the country, but has delayed its target start date several times currently to 2020. The future of U.S.-China relations with regard to climate change is unclear. China appears to have maintained or increased its leadership under the UNFCCC's 2015 Paris Agreement, a framework for cooperatively addressing climate change through coming decades. The U.S. government has indicated its intention to withdraw from the agreement when it becomes eligible to do so in November 2020. Neither government has produced long-term national-level policies and plans to address its country's GHG emissions or to adapt to expected climate changes. Given the size of their economies and their investments in advancing key technologies, the United States' and China's roles in assisting less-developed countries to address climate change could be important for minimizing long-term global costs. <5.5.2. Consular Issues> An ongoing source of friction in the U.S.-China relationship is the PRC's alleged violations of the Vienna Consular Convention and the 1980 U.S.-China Bilateral Consular Convention in its handling of U.S. citizens. One such apparent violation is China's use of exit bans "to prevent U.S. citizens who are not themselves suspected of a crime from leaving China as a means to pressure their relatives or associates who are wanted by Chinese law enforcement in the United States," according to the U.S. mission in China. The mission states that PRC authorities "also arbitrarily detain and interrogate U.S. citizens for reasons related to 'state security'" and subject U.S. citizens "to overly lengthy pre-trial detention in substandard conditions while investigations are ongoing." Separately, the United States government is seeking China's cooperation in issuing travel documents to PRC nationals whom the United States seeks to repatriate to China. The U.S. mission in China states that as of July 10, 2018, the U.S. government was awaiting travel documents for approximately 2,200 PRC nationals with criminal convictions who were not in Immigration and Customs Enforcement (ICE) custody, and another 139 PRC nationals who were in ICE custody with removal orders. According to the U.S. mission in China, "The Chinese government consistently refuses to issue travel documents to an overwhelming majority of these individuals." <5.5.3. Fentanyl196> According to provisional data from the U.S. Centers for Disease Control and Prevention, synthetic opioids, primarily fentanyl, accounted for more than 31,000 U.S. drug overdose deaths in 2018. The Drug Enforcement Administration (DEA) states, "Clandestinely produced fentanyl is trafficked into the United States primarily from China and Mexico, and is responsible for the ongoing fentanyl epidemic." Responding to pressure from the Trump Administration, China on May 1, 2019, added all fentanyl-related substances to a controlled substances list, the "Supplementary List of Controlled Narcotic Drugs and Psychotropic Substances with Non-Medical Use." Li Yuejin, Deputy Director of China's National Narcotics Control Commission, presented the move as "an important manifestation of China's participation in the global control of illicit drugs and the maintenance of international security and stability." He also said it was "based on the painful lesson from the United States." In April 2019, the DEA welcomed the announcement of China's plan to control all fentanyl substances, saying, "This significant development will eliminate Chinese drug traffickers' ability to alter fentanyl compounds to get around the law." On August 1, 2019, however, President Trump criticized China's record, saying of President Xi, "He said he was going to stop fentanyl from coming into our country it's all coming out of China; he didn't do that. We're losing thousands of people to fentanyl." A spokesperson for China's Foreign Ministry responded, "The root cause of the fentanyl issue in the United States does not lie with China. To solve the problem, the United States should look harder for the cause at home." The spokesperson's comments appeared to refer to China's position that the U.S. opioid epidemic is being driven by U.S. demand, rather than by Chinese supply. <6. Legislation Related to China Introduced in the 116th Congress> In the 116 th Congress, more than 150 bills and resolutions have been introduced with provisions related to China. For details, see Table 8 below. <6.1. China in the National Defense Authorization Act for FY2020> A major vehicle for legislation related to China is the annual National Defense Authorization Act. As of early August 2019, the National Defense Authorization Act for FY2020 is engrossed in the House of Representatives and the Senate ( H.R. 2500 and S. 1790 ). Table 9 , Table 10 , Table 11 , and Table 12 identify provisions in the two bills that explicitly reference China, as well as several provisions potentially related or relevant to China.

The United States and the People's Republic of China (PRC or China) are involved in a prolonged stand-off over trade and in competition that is spilling from political and military areas into a growing number of other spheres, including technology, finance, and education, severely straining ties on the 40 th anniversary of the two countries' establishment of diplomatic relations. The two lead the world in the size of their economies, their defense budgets, and their global greenhouse gas emissions. Both countries are permanent members of the United Nations (U.N.) Security Council. In 2018, they were each other's largest trading partners. During the Trump Administration, competition has dominated the relationship and areas of cooperation have shrunk. The 2017 National Security Strategy (NSS) describes both China and Russia as seeking to "challenge American power, influence, and interests, attempting to erode American security and prosperity." To pressure China to change its economic practices, the United States has imposed tariffs on hundreds of billions of dollars of U.S. imports from China, with almost all imports from China scheduled to be subject to additional tariffs by December 15, 2019. U.S. tariffs and China's retaliatory tariffs have reordered global supply chains and hit U.S. farmers and manufacturers particularly hard. Twelve rounds of negotiations have not resolved the dispute. On August 5, 2019, the U.S. Treasury Department labeled China a currency manipulator for the first time in a quarter century. The Administration has placed restrictions on the ability of U.S. firms to supply PRC telecommunications giant Huawei. The United States has also sought to warn other nations away from business dealings with Huawei and from cooperation with China on infrastructure projects under the framework of China's Belt and Road Initiative (BRI). Many analysts ascribe the rising friction in the relationship today not only to the arguably more confrontational inclinations of the Trump Administration, but also to more assertive behavior by China under President Xi Jinping. Xi assumed the top posts in the Communist Party of China in November 2012 and added the state presidency in March 2013. Later in 2013, China began building military outposts in the South China Sea and Xi launched BRI, an ambitious effort to boost economic connectivity—and China's influence—across the globe. In 2015, China began enacting a suite of national security legislation that shrank the space for independent thought and civil society, subjected ordinary citizens to stepped-up surveillance, and imposed onerous conditions on foreign firms operating in China. The same year, China launched its "Made in China 2025" plan, seeking to reduce China's reliance on foreign technology and directing the considerable resources of the state toward supporting the development of "national champion" Chinese firms in 10 strategic industries. In 2017, at the end of his first five-year term in his Party posts, Xi tasked China's military with turning itself into a "world-class" force by mid-century. Also in 2017, his government began forcing more than 1 million of his Turkic Muslim fellow citizens in the northwest region of Xinjiang into reeducation camps. Increasingly, the United States and China appear to be seeking to draw other countries into competing camps—those who agree to sign (often vague) BRI cooperation agreements with China (some 125 countries as of April 2019, by China's count), and those who, at the U.S. government's behest, do not; those who do business with Huawei, and those who, similarly at the U.S. government's behest, do not; those who publicly censure China for its actions in Xinjiang, and those who offer support. U.S. allies are sometimes in China's "camp." China represents "a new kind of challenge," Secretary of State Michael R. Pompeo has suggested, because "It's an authoritarian regime that's integrated economically into the West in ways the Soviet Union never was." Important areas of remaining U.S.-China cooperation include maintaining pressure on North Korea to curb its nuclear weapons and missile programs; supporting the Afghanistan peace process; managing international public health challenges, from tuberculosis to influenza; and stemming the flow into the United States of China-produced fentanyl, a class of deadly synthetic opioids.

crs_R46256

crs_R46256_0

<1. Introduction> The Health Resources and Services Administration (HRSA), of the Department of Health and Human Services (HHS), is the federal agency charged with improving the nation's health safety net. HRSA provides access to health care services for those who are uninsured, isolated, or medically vulnerable, and educates health care providers on maternal and child health issues. HRSA's main role in maternal health is through its Maternal and Child Health Bureau (MCHB). The MCHB, in this context, encourages health promotion, promotes risk prevention, and disseminates information to health care professionals with the goal of reducing U.S. cases of severe maternal morbidity (SMM) and maternal mortality. According to the Centers for Disease Control and Prevention (CDC) of HHS S evere maternal morbidity refers to a medical condition such as eclampsia and health failure that adversely affects the maternal health outcome of labor and delivery, resulting in either short-term or long-term consequences for pregnant and postpartum women. U.S. maternal death refers to "the death of a woman while pregnant or within 42 days of termination of pregnancy, but excludes those from accidental or incidental causes." CDC estimates the U.S. rate of SMM by measuring U.S. cases of SMM per 10,000 delivery hospitalizations. According to the CDC, the overall U.S. SMM rate increased by 190.9% between 1993 and 2014, from 49.5 SMM to 144.0 SMM. The CDC estimates the prevalence of U.S. maternal deaths by calculating the U.S. maternal mortality ratio (MMR) , which is the number of U.S. maternal deaths per 100,000 live births. According to the CDC, the U.S. MMR increased by 32.8% from 13.1 maternal deaths per 100,000 live births in 2004 to 17.4 maternal deaths per 100,000 live births in 2018. To address U.S. cases of SMM and maternal mortality, the FY2019 appropriations report language for the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019 ( P.L. 115-245 ), among other things, reserved funds within the Special Projects of Regional and National Significance (SPRANS) for HRSA to administer maternal health programs. SPRANS is a competitive grant program for research and training programs and services related to maternal and child health and to children with special health care needs. The FY2019 appropriation provided $109.6 million to SPRANS, which explicitly included $26 million for HRSA to maintain and establish new maternal health programs. Using the SPRANS authority, HRSA allocated $3 million to the previously existing Alliance for Innovation on Maternal Health (AIM) program and for the establishment of the Alliance for Innovation on Maternal Health (AIM) Community Care Initiative. Additionally, HRSA allocated $23 million to establish the State Maternal Health Innovation (MHI) program. In FY2019, HRSA also established the Rural Maternity and Obstetrics Management Strategies (RMOMS) program and the Supporting Maternal Health Innovation (MHI) program. The appropriations report language authorizes HRSA to use $1 million of the $23 million appropriated, for the purchase and implementation of telehealth and to support coordination of rural obstetric care. <1.1. FY2020 Appropriations and FY2021 Budget Request> The FY2020 appropriations report language explicitly provides $5 million to SPRANS for HRSA to carry out the activities through both of the AIM programs and $23 million for the State MHI program; the report language does not explicitly provide funding to the RMOMS program and Supporting MHI program. However, Congress appropriated $119.1 million to SPRANS for FY2020 increasing the FY2019 appropriation level by $10.5 million. For FY2020, according to HRSA, the federal agency is providing $2 million to the RMOMS program, $5 million to carry out the activities through both of the AIM programs, and $23 million to the State MHI program. For FY2021, according to HRSA, the agency is requesting from Congress $12 million for the RMOMS program, $15 million to carry out the activities through both of the AIM programs, and $53 million for the State MHI program. HRSA's FY2021 budget documents do not provide information on either prior year or planned funding allocations for the Supporting MHI program. HRSA funds the five programs through cooperative agreements. According to HRSA, a cooperative agreement refers to "a financial assistance mechanism where substantial involvement is anticipated between HRSA and the recipient during performance of the contemplated project." <1.2. Overview of the Five Maternal Health Programs> Figure 1 provides an overview of and the coordination between the five maternal health programs. HRSA is administering the five maternal health programs under the agency's Improving Maternal Health in America initiative. <2. Report Roadmap> To assist Congress as it considers measures on U.S. maternal health programs, this report provides an overview of the previously existing AIM program and the four new maternal health programs that HRSA established in FY2019. For each of the five maternal health programs, the report provides an overview of the program, discusses the main core activities or functions of the program, provides the program's criteria of eligibility and reporting requirements, and discusses the program's funding allocations. <3. Alliance for Innovation on Maternal Heath (AIM)> The Alliance for Innovation on Maternal Health (AIM) program aims to improve U.S. maternal health outcomes, including maternal safety, by diminishing the number of preventable SMMs and maternal deaths. The initiative funds one cooperative agreement to support continuity of care for pregnant and postpartum women who receive maternal health care services at birthing facilities and hospitals. HRSA established the AIM program in 2014. Since 2014, The American College of Obstetricians and Gynecologists (ACOG), which is a medical professional organization for obstetricians and gynecologists, has been the sole grantee of the AIM program. During the AIM program's most recent four-year performance period. ACOG was responsible for engaging and building partnerships with national stakeholders, promoting the adoption and implementation of hospital-focused maternal safety bundles by state-based teams, and evaluating the delivery of provider education on interconception health. According to HRSA, a maternal safety bundle refers to "a set of small, straightforward evidence-based practices, that when implemented collectively and reliably in the delivery setting have improved patient outcomes and reduced maternal mortality and [SMM]." Hospital-focused maternal safety bundles are designed for health care providers in birthing facilities and hospitals. The best practices contained in the maternal safety bundles are grouped into four administrative activities: (1) readiness, (2) recognition and prevention, (3) response, and (4) reporting/systems learning. Listed below are the current eight hospital-focused maternal safety bundles. For example, the text box below describes the Maternal Mental Health: Depression and Anxiety safety bundle. The eight hospital-focused maternal safety bundles, according to HRSA, "include data metrics, are shown to be clinically effective, and are currently being adopted by states for inpatient use." As of January 2020, according to HRSA, an estimated 1,300 hospitals in 27 states participate in the initial AIM program. The current AIM program has a five-year period of performance of September 1, 2018, through August 31, 2023. <3.1. Three Core Activities> Under the AIM program, the award recipient performs three core activities: (1) facilitating multidisciplinary collaborations to reduce the number of preventable SMMs and maternal mortality, (2) guiding the national implementation and adoption of maternal safety bundles, and (3) collecting and analyzing data. The overall goal of the core activities is to achieve the program's outcomes. According to HRSA, the program objectives are to do the following: Maintain the existing 10 AIM state-based teams and accept 25 new state-based teams to expand the implementation of the current maternal safety bundles. Develop new maternal safety bundles and/or resources that aim to address the quality and safety of maternity care practices. Establish a national campaign on SMM and maternal mortality that demonstrates the impact of AIM and maternal safety bundles. Prevent 100,000 cases of SMM and 1,000 maternal deaths. <3.2. Eligible Applicants> Domestic public and private entities are eligible to apply for the AIM program. Eligibility extends to tribes, tribal organizations, community-based organizations, and faith-based organizations. <3.3. Reporting Requirements and Performance Measures> The AIM grant recipient is required to provide HRSA with annual progress reports, performances reports, and a final report narrative. The recipient is to submit annual reports on progress made toward achieving the program outcomes. The performance reports are to examine measures such as sustainability, depression screening, well-woman visit/preventive care, and health equity in maternal health outcomes, sustainability. According to HRSA, "the Project Officer will provide additional information about [the final report narrative] after HRSA makes the award." <3.4. Program Funding> HRSA may annually allocate no more than $2 million to the sole recipient of the AIM Community Care Initiative. This funding is dependent upon the availability of appropriated funds, recipient's satisfactory progress in meeting program's objectives, and the interest of the federal government. The AIM program has no cost-sharing or matching requirements. On August 1, 2018, HRSA awarded $2 million to ACOG via a cooperative agreement to continue assisting state-based teams with implementing maternal safety bundles. <4. Alliance for Innovation on Maternal Health (AIM) Community Care Initiative> The Alliance for Innovation on Maternal Health (AIM) Community Care Initiative is a designed to improve U.S. maternal health and safety. The initiative funds one cooperative agreement to support continuity of care for pregnant and postpartum women who receive maternal health care services at medical facilities outside of birthing facilities and hospitals. The AIM Community Care Initiative builds on the work of the initial AIM program. Together, both AIM programs aim to expand the implementation and adoption of maternal safety bundles to all 50 U.S. states, the District of Columbia, and U.S. territories, as well as tribal entities. The AIM Community Care Initiative focuses on two priority areas: supporting the development and implementation of nonhospital maternal safety bundles for health care providers in outpatient settings and community-based organizations, and addressing preventable SMM and maternal deaths among pregnant and postpartum women who receive care outside of birthing facilities and hospitals. The initial AIM program, which focuses on hospital-based services, began developing two nonhospital maternal safety bundles: (1) Postpartum Care Basics for Maternal Safety: From Birth to the Comprehensive Postpartum Visit, and (2) Postpartum Care Basics for Maternal Safety: Transition from Maternity to Well-Woman Care. The AIM Community Care Initiative is responsible for further developing these two maternal safety bundles. The award recipient is to aim to advance the two nonhospital maternal safety bundles by developing data metrics, testing the bundles' effectiveness in outpatient settings and community-based organizations, and implementing the bundles in medical facilities outside of birthing facilities and hospitals. The initiative recipient is to collaborate with key stakeholders, including other HRSA grant recipients that address maternal and child health issues, on ways to address preventable SMM and maternal deaths among pregnant and postpartum women who receive care outside of birthing facilities and hospitals. In addition, the awardee is to collaborate with the recipient of the Supporting Maternal Health Innovation Program (discussed in the " Supporting Maternal Health Innovation (MHI) Program " section of this report). The two recipients are to work in partnership to develop resource materials for nonhospital-focused maternal safety bundles. After developing the resources, the Supporting MHI recipient is to assist the AIM Community Care Initiative recipient with disseminating resource materials and other evidence-informed strategies to communities that experience disparities in U.S. maternal morbidity and mortality. The AIM Community Care Initiative has a five-year period of performance of September 30, 2019, through September 29, 2024. <4.1. Three Core Activities> Under this program, the recipient of the AIM Community Care Initiative is to perform three core activities: (1) establishing and convening a maternal safety workgroup, (2) facilitating the national implementation of two maternal safety bundles, and (3) collecting and analyzing data. The overall goal of the core activities is to achieve the program's outcomes. According to HRSA, the program objectives are to do the following: Increase knowledge and awareness of nonhospital-focused maternal safety bundles, and identify how bundle contents are related to best practices among providers, community-based organizations, outpatient clinical settings, etc. Increase the capacity to implement and test nonhospital-focused maternal safety bundles. Increase the number of nonhospital-focused maternal safety bundles developed that address emerging topics in the provision of maternal care services. Increase implementation of the nonhospital-focused maternal safety bundles within nonclinical community-based organizations and outpatient clinical settings across states/communities. Increase awareness of staff and providers in both inpatient and outpatient clinical settings regarding the need to address racial/ethnic disparities when implementing all nonhospital-focused maternal safety bundles. Increase the evidence base on the implementation of nonhospital-focused maternal safety bundles. The first core activity requires the AIM Community Care Initiative award recipient to establish a maternal safety workgroup to guide the activities of the program. Members of the maternal safety workgroup must include community-focused public health and clinical experts in the field of maternal health. The second core activity requires the award recipient to facilitate the national implementation of nonhospital maternal safety bundles at approximately five test sites. The test sites, which subrecipients will manage, are to be located at outpatient clinical settings and nonclinical organizations. The test sites must provide health care services to pregnant and postpartum women. The award recipient is to collaborate with the initial AIM program's state-based teams and other key stakeholders to determine how to best disseminate the nonhospital maternal safety bundles nationwide. Like the test sites, the nonhospital maternal safety bundles are to be adopted by outpatient clinical settings and community-based organizations that provide health care services to pregnant and postpartum women. HRSA expects the recipient of the AIM Community Care Initiative to collaborate with the current AIM program award recipient. The AIM program is to maintain a public website containing materials on non-hospital focused maternal safety bundles. The website would be further developed and maintained by the AIM Community Care Initiative recipient, who would also support the collaboration of the AIM website and the Supporting MHI program website. The third core activity requires the award recipient to collect and analyze structure, process, and outcome data. According to HRSA, the recipient will collect and analyze "quality improvement baseline, process, structure, and outcome data on the implementation of non-hospital focused maternal safety bundles, both within test sites and during national rollout." <4.2. Eligible Applicants> Domestic public and private entities are eligible to apply for the AIM Community Care Initiative. Eligibility extends to tribes, tribal organizations, community-based organizations, and faith-based organizations. <4.3. Reporting Requirements and Performance Measures> The AIM Community Care Initiative awardee is required to provide HRSA with annual progress reports, performance reports, and a final report narrative. The recipient is to submit annual reports on progress made toward achieving the program outcomes/objectives (as described in the " Three Core Activities " section above). The performance reports would examine measures such as quality improvement, health equity in maternal health outcomes, sustainability, and well-woman visit/preventive care. The final performance report must include the project's abstract, expenditure data for the final year of the performance period, and the final scores for the performance measures. According to HRSA, "the Project Officer will provide additional information about [the final report narrative] after HRSA makes the award." <4.4. Program Funding> HRSA may annually allocate approximately $1,830,000 to the sole recipient of the AIM Community Care Initiative. This funding is dependent upon the availability of appropriated funds, recipient's satisfactory progress in meeting program's objectives, and the interest of the federal government. The program has no cost-sharing or matching requirements. The recipient may use the funds for direct, indirect, facility, and administrative costs. Annually, approximately 40% to 50% of the award must cover the costs of subrecipients' test sites and travel/meeting compensation for members of the maternal safety workgroup. In FY2019, HRSA awarded $1.8 million to one recipient. <5. Rural Maternity and Obstetrics Management Strategies (RMOMS) Program> The Rural Maternity and Obstetrics Management Strategies (RMOMS) program is a maternal health care pilot program that funds up to three cooperative agreements for the development, implementation, and testing of models that aim to improve access to and continuity of maternal and obstetrics care in rural communities. RMOMS program recipients serve communities based on factors such as disparities in ethnicity/race, socioeconomic status, primary language, access to maternal health care, and coordinated/continuing maternal and obstetrics care. According to HRSA, the RMOMS program has four goals: 1. improve maternal and neonatal health care outcomes, 2. develop sustainable financing models, 3. develop a network whereby coordination of maternal and obstetric care is sustainable within a rural region, and 4. increase access to and the delivery of preconception, pregnancy, labor and delivery, and postpartum health care services. The FY2019 RMOMS program has a four-year performance period, September 1, 2019, through August 31, 2023. The program occurs in two phases. Phase one. The first phase occurs during the first year of the performance period. During this year, RMOMS program recipients develop baseline data, models, and work plans. In addition, the program recipients participate in the development of network capacity building and infrastructure. RMOMS program recipients collaborate with HRSA to assess the program's impact using specific measures and data elements, including access, workforce proficiency, cost and cost-effectiveness, clinical outcomes, quality of care, and healthy behaviors. The models are designed to address the four RMOMS focus areas described below in the " Four RMOMS Focus Areas " section of this report. In addition, each model addresses payment and reimbursement options, workforce skills required of maternal health care providers, and women's access to maternal health care services, including telehealth . According to HRSA, telehealth refers to "the use of electronic information and telecommunication technologies to support long-distance clinical health care, patient and professional health-related education, public health, and health administration." (Of the $23 million that Congress provided to SPRANS for the establishment of new maternal health grants in FY2019, Congress reserved $1 million for the purchase and implementation of telehealth and to, support coordination of rural obstetric care.) RMOMS program award recipients are to develop and submit to HRSA three-year work plans, which include the baseline data and strategic plans to implement the model. Phase two. The second phase occurs during the remaining second through fourth years of the pilot program. During these years, RMOMS program award recipients implement the models based on the recipients' work plans. In addition, the recipients are to provide mothers and infants with case management and care coordination services. The recipients would collaborate with HRSA to identify the data elements to monitor and measure through the model. <5.1. Four RMOMS Focus Areas> Each RMOMS program award recipient creates strategies to address each of the four RMOMS focus areas: (1) rural hospital obstetric service aggregation, (2) network approach to coordinating a continuum of care, (3) leveraging telehealth and specialty care, and (4) financial sustainability. <5.2. Eligible Applicants> Domestic public or private and nonprofit or for-profit entities are eligible to apply for the RMOMS program. Eligibility extends to tribes, tribal organizations, community-based organizations, and faith-based organizations. Eligible entities, which HRSA refers to as "applicant organizations," are equipped with necessary staff and infrastructure to direct the administrative and programmatic activities of the program. The applicant organization may be located in either an urban or a rural area. However, the application organization must serve a population either in HRSA-designated rural counties or rural census tracts in urban counties. (The Office of Rural Health Policy within HRSA funded the development of Rural Urban Area Codes to classify areas within metropolitan areas as HRSA-designated rural counties and rural census tracts in urban counties.) An entity could have applied twice for the FY2019 RMOMS program: (1) as an applicant organization and (2) as part of a network organization under a different applicant organization. RMOMS applicant organizations must be part of either a formal or an established network. HRSA refers to a network as an organizational arrangement among three or more separately owned domestic public and/or private entities, including the applicant organization. For the purposes of this program, the applicant must have a network of composition that includes: (1) at least two rural hospitals or [critical access hospitals (CAHs)]; (2) at least one health center under section 330 of the Public Health Service Act (Federally Qualified Health Center [FQHC]) or FQHC look-alike; (3) state Home Visiting and Healthy Start Program if regionally available; and (4) the state Medicaid agency. A formal network is a RMOMS Network organization that has signed bylaws, a governing body, and either a memorandum of agreement, memorandum of understanding, or other formal collaborative agreements. HRSA identifies a formal network that has a history of working together as an established network. At least one entity, aside from the applicant organization, within the network must be located in an HRSA-designated rural county or rural census tract in an urban county. Each RMOMS applicant organization and the entities that are part of a network must have separate and different Employer Identification Numbers (EINs) from the Internal Revenue Service. Separate and different EINs are required in order to receive RMOMS program funds. Figure 2 illustrates an example of a RMOMS network. <5.3. Reporting Requirements and Performance Measures> RMOMS program award recipients are required to provide HRSA with annual progress reports, a performance measure report, a sustainability report, and a final closeout report. Recipients are to submit annual reports on progress in achieving the program's four goals (as described in the " Rural Maternity and Obstetrics Management Strategies (RMOMS) Program " section of this report). In addition, the annual reports must specifically include progress toward addressing the third RMOMS focus area, "leveraging telehealth and specialty care." After the end of each budget period, RMOMS program recipients are to submit reports on performance measures. HRSA is to inform the program recipients of the performance measures to report on, during the first year of performance. HRSA provides guidance to RMOMS program recipients on how to complete the sustainability report, which is due during the final year of the performance period. Each RMOMS program award recipient is to provide the MCHB with a final closeout report within 90 days after the end of the performance period. The final report must include information and data such as barriers encountered, core performance data, and the impact of the overall project. The Notice of Award provides program recipients with additional information about the final report. <5.4. Program Funding> HRSA uses two authorities to administer and fund the RMOMS program, according to the program's Notice of Funding Opportunity (see Table 1 ). Using its authority for SPRANS (SSA Section 501(a)(2)), HRSA may provide up to $150,000 to RMOMS program recipients to carry out activities under the RMOMS focus area "leveraging telehealth and specialty care" for each year of the pilot program. Using its authority for the Office of Rural Health Policy within HRSA (SSA 711(b)(5)), HRSA may provide up to $450,000 for recipients to carry out the activities under each of the four RMOMS focus areas for the first year of the pilot program. For each of the remaining years of the pilot program, RMOMS may award recipients receive up to $650,000 to carry those activities. Each RMOMS recipient may receive up to $1.8 million per year. This funding is dependent upon the availability of appropriated funds, satisfactory recipient performance, and the interest of the federal government. RMOMS program award recipients can use funds for direct and indirect costs. In addition, recipients may use funds to cover staff travel expenses to conferences and/or technical assistance workshops. HRSA expects RMOMS program recipients to set-aside funds each year for up to two program staff members to attend a two-and-a-half day technical workshop in Washington, DC. There are no cost-sharing or matching requirements for this program. According to HRSA, the total program costs incurred by the supporting MHI satisfies a cost-sharing or matching requirement. In FY2019, HRSA awarded $9 million to the RMOMS program. <6. State Maternal Health Innovation (MHI) Program> The State Maternal Health Innovation (MHI) program is a maternal health program that funds up to nine cooperative agreements for state-focused demonstration projects, with the goal of improving U.S. maternal health outcomes. State MHI award recipients are to establish demonstration projects within a state or group of states. The demonstration projects are responsible for converting recommendations on SMM and maternal mortality into actionable items that can be implemented by the states or groups of states. Recommendations such as providing maternal women with continuous team-based support, improving quality of maternity health care services, and engaging in productive collaborations derive from HRSA's Maternal Mortality Summit, held in June 2018. State MHI program recipients are required to collaborate with other HRSA program awardees of programs such as AIM, the Healthy Start Program (Healthy Start), and Maternal, Infant, and Early Childhood Home Visiting (MIECHV) programs in their state. The FY2019 State MHI program has a five-year performance period, September 30, 2019, through September 29, 2024. <6.1. Three Core Functions> Each state-focused demonstration project undertakes three core functions: (1) establishing a state-focused Maternal Health Task Force, (2) improving state-level maternal health data and surveillance, and (3) promoting and executing innovation in maternal health service delivery. <6.1.1. Maternal Health Task Force> Each State MHI award recipient is responsible for establishing, and each state-focused demonstration project operates through, a state-focused Maternal Health Task Force (Task Force). The Task Force comprises multidisciplinary stakeholders, including representatives from the state legislature and local public health professionals from state and federal programs, such as the State Department of Health and MCH Services Block Grant Program (Title V). The Task Force is responsible for carrying out two main objectives. First, the Task Force is responsible for identifying maternal health-related gaps at the state level. Examples of such gaps include a state's limited ability to monitor maternal health outcomes and the access barriers that women experience when accessing quality prenatal and maternity care services. Second, the Task Force is responsible for creating and implementing a maternal health strategic plan. The strategic plan must include the maternal health care activities outlined in the most recent State Title V Needs Assessment of each state or group of states. However, state-focused demonstration projects are encouraged not to duplicate the maternal mortality-related activities of the MCH Services Block Grant program. State MHI award recipients must develop their strategic plans by September 29, 2020, and update the plans by including additional actionable recommendations by September 29, 2021. Although not a core function, the Task Force is required to participate in the community of learners' sessions, which are convened by the recipient of the Supporting MHI Program. The goal of convening the community is to encourage peer-to-peer learning, including collective problem-solving and brainstorming sessions on ways the State MHI program recipients can effectively implement their program activities. <6.1.2. Maternal Health Data and Surveillance> Each State MHI award recipient is to aim to improve state-level data on maternal health data and surveillance through the state-focused demonstration project. To do so, the award recipient is to identify the leading factors of maternal deaths in the respective state or groups of states. A state-focused demonstration project can address the state or group of states' need for maternal health data and surveillance by conducting at least one of three activities. The demonstration project can coordinate with another state-focused initiative to collect, analyze, and report maternal morbidity and mortality data. The demonstration project may also coordinate with a multidisciplinary state-focused maternal mortality review committee (MMRC). An MMRC is a multidisciplinary team composed of maternal clinical health experts. Generally, an MMRC team researches and makes recommendations on maternal mortality-related issues such as racial maternal health disparities. In addition, the demonstration project can analyze valid and reliable data on U.S. maternal health outcomes. For example, the goal of the analysis is to determine the preventability of certain maternal deaths and to establish best practices on how to prevent future deaths. The demonstration project can also publish an annual report on maternal death that includes a discussion on how to prevent such deaths from a policy standpoint. <6.1.3. Maternal Health Service Delivery> Each State MHI award recipient is to promote and execute innovation in maternal health service delivery, for example, by implementing strategies to address gaps in the delivery of maternal health care. State-focused demonstration projects can implement innovative strategies by conducting at least one of the following three activities: (1) identifying critical gaps in access to comprehensive, continuous, and high-quality maternal health care services; (2) identifying critical gaps in maternal health workforce needs; and (3) identifying critical gaps in comprehensive postpartum and interconception care interventions. For example, a state-focused demonstration project can assist state birthing facilities with implementing and adopting AIM maternal safety bundles, address access to maternal health care by convening a state advisory panel on innovation payment models for maternal care, address maternal health workforce needs by identifying legislative mandates that affect maternal women accessing maternal health care services, and address comprehensive postpartum and interconception care intervention by disseminating patient educational information on preventing obstetric emergencies. HRSA encourages award recipients to include the use of telehealth as a component of their demonstration projects. The Supporting MHI program recipient hosts the web-based platform, which the State MHI program recipients use to consolidate their work. In addition, the Supporting MHI recipient plans, hosts, and facilitates the annual in-person meetings for State MHI award recipients. <6.2. Eligible Applicants> Domestic public and private entities are eligible to apply for the State MHI Program. Eligibility extends to tribes, tribal organizations, community-based organizations, and faith-based organizations. <6.3. Reporting Requirements and Performance Measures> State MHI Program award recipients are required to provide HRSA with annual progress reports, performance reports, and a final report narrative. By September 29, 2020, award recipients must submit annual reports on the maternal deaths and ways to prevent future maternal deaths in the state. Award recipients must include data in their reports that HRSA can measure under the State Title V Needs Assessment. By that same date, according to HRSA, the award recipients must report the following two sets of performance data to the agency: 1. Increases within the state from baseline on September 30, 2019, for the following: percentage of women covered by health insurance, percentage of women who receive an annual well-woman visit, percentage of pregnant women who receive prenatal care, percentage of pregnant women who receive prenatal care in the first trimester, percentage of pregnant women who receive a postpartum visit, and percentage of women screened for perinatal depression. 2. Decreases within the state from baseline on September 30, 2019, for the following: rate of pregnancy-related deaths, and racial, ethnic, and/or geographic disparities in pregnancy-related mortality rates. The Supporting MHI award recipient is required to help the State MHI award recipients achieve their performance milestones. The performance reports examine measures such as quality improvement, state capacity for advancing the health of maternal and child health populations, prenatal care, well-woman visit/preventive care, and adequate health insurance coverage. The final performance report must include the project's abstract, expenditure data for the final year of the period of performance, and the final scores for the performance measures. Each State MHI award recipient must submit its final report narrative to HRSA at the end of the project. <6.4. Program Funding> HRSA may annually allocate approximately $18,650,000 to fund up to nine cooperative agreements under the State MHI program. This funding is dependent upon the availability of appropriated funds, satisfactory recipient performance, and the interest of the federal government. In FY2019, the awards ranged from $1.9 million to $2.1 million. State MHI program award recipients can use funds to address state and local priorities. There are no cost-sharing or matching requirements for this program. <7. Supporting Maternal Health Innovation (MHI) Program> The Supporting Maternal Health Innovation (MHI) program funds up to one cooperative agreement to help states, stakeholders, and recipients of HRSA-administered awards reduce and prevent U.S. cases of SMM and maternal mortality, and improve U.S. maternal health outcomes. States and stakeholders include state health agencies, community-based organizations, and pregnant and postpartum women and their families. HRSA recipients include those of the initial AIM program, AIM Community Care Initiative, Healthy Start, and MCH Services Block Grant program. Supporting MHI program award recipients aim to achieve the following three program objectives by calendar year 2024: Ensure that 75% of HRSA award recipients report improvement in their ability to implement evidence-informed strategies, with the goal of reducing and preventing maternal morbidity and mortality. Support the State MHI program by ensuring that 75% of HRSA award recipients that aim to improve maternal health outcomes can access the peer-to-peer learning opportunities and resources available through the State MHI program. Support the AIM Community Care Initiative by (1) increasing the dissemination of resource materials to support the adoption of nonhospital-focused maternal safety bundles, and (2) increasing the dissemination of evidence-informed strategies in communities that experience disparities in U.S. maternal morbidity and mortality. The FY2019 Supporting MHI program has a five-year performance period, September 30, 2019, through September 29, 2024. <7.1. Two Core Functions> The State MHI program funds a single project that undertakes two core functions: (1) providing capacity-building assistance, and (2) establishing a national resource center. <7.1.1. Capacity-Building Assistance> The Supporting MHI project provides capacity-building assistance to the state-focused demonstration projects under the State MHI program and to the recipients under the RMOMS program. In this context, capacity-building assistance refers to technical assistance, training, and dissemination of information. The Supporting MHI program grantee provides the State MHI program and the RMOMS program with technical assistance in the form of programmatic, scientific, and mentoring support. Both programs receive training assistance to develop and deliver curricula. The programs also receive support to disseminate evidence-informed strategies to communities that experience disparities in U.S. maternal morbidity and mortality. The Supporting MHI recipient is to provide capacity-building assistance on 10 topic areas, listed below. The Supporting MHI program award recipient is to gather the community of learners for the State MHI program recipients. The goal of convening the community of learners is to encourage peer-to-peer learning, including collective problem-solving and brainstorming sessions on ways the State MHI program recipients can effectively implement program activities. In addition, the Supporting MHI program recipient is to help the State MHI program recipients assess their progress in meeting program goals and planning and facilitating annual in-person meetings for the recipients. <7.1.2. National Resource Center> The Supporting MHI program recipient is responsible for establishing a national resource center where states, HRSA award recipients, and key stakeholders can access guidance on reducing and preventing U.S. cases of SMM and maternal mortality. The resource center offers assistance with trainings/technical issues, partnership building, policy analysis, and dissemination of information. Trainings and technical assistance are provided to stakeholders and HRSA award recipients on topic areas similar to the 10 topic areas described above. HRSA award recipients under this program may include grantees of Healthy Start, the MIECHV program, and the MCH Services Block Grant program. The Supporting MHI program recipient, through the resource center, would collaborate with stakeholders that serve underserved populations to encourage partnership building. Key stakeholders and HRSA award recipients may reach out to the resource center for assistance with developing partnerships with national maternal health organizations (e.g., ACOG, the Association of Women's Health, Black Mamas Matter Alliance, Society for Maternal Fetal Medicine, and Telehealth Resource Centers). The resource center offers policy analysis assistance to stakeholders and HRSA award recipients. For example, the AIM Community Care Initiative award recipient can receive assistance in determining whether any of the nonhospital maternal safety bundles are evidence-informed and could reduce U.S. cases of SMM and maternal mortality. In addition, the resource center develops and maintain a public-facing web-based clearinghouse where key stakeholders can access pertinent resources, such as training materials and evidence-informed practices. The website must have the capability to host the State MHI program recipient's online platform. The Supporting MHI program is also responsible for creating and implementing national guidance on reducing U.S. cases of maternal morbidity and mortality. Education and training are the foci of the national guidance. The national guidance provides learning opportunities to key stakeholders on the following nine topic areas: The national guidance is intended to help key stakeholders with related activities, such as creating tools for collaborations, disseminating information about the project, and providing culturally competent technical assistance to key stakeholders that provide maternal health services to populations that experience disparities in U.S. maternal morbidity and mortality. <7.2. Eligible Applicants> Domestic public and private entities are eligible to apply for the Supporting MHI Program. Eligibility extends to tribes, tribal organizations, community-based organizations, and faith-based organizations. Eligible applicants must be aware of the different HRSA award recipients that address U.S. maternal health outcomes. <7.3. Reporting Requirements and Performance Measures> The Supporting MHI Program awardee is required to provide HRSA with annual progress reports, performance reports, and a final report narrative. By 2024, according to HRSA, the award recipient must submit annual reports on progress made toward achieving the three program objectives listed under the " Supporting Maternal Health Innovation (MHI) Program " section in this report. The performance reports must examine measures such as technical assistance, health equity in maternal health outcomes, state capacity for advancing the health of maternal and child health populations, perinatal and postpartum care, depression screening, and adequate health insurance coverage. The final performance report must include the project's abstract, expenditure data for the final year of the performance period, and the final scores for the performance measures. Each State MHI awardee must submit its final report narrative to HRSA within 90 days from the end of the performance period. <7.4. Program Funding> HRSA may annually award approximately $2.6 million to the sole recipient, as the agency did in FY2019. This funding is dependent upon the availability of appropriated funds, satisfactory recipient performance, and the interest of the federal government. The Supporting MHI program recipient can use the funds for administrative and facility costs. There are no cost-sharing or matching requirements for this program. According to HRSA, the total program costs incurred by the Supporting MHI satisfies a cost-sharing or matching requirement.

The Health Resources and Services Administration (HRSA) of the Department of Health and Human Services (HHS) is one of the federal agencies charged with addressing U.S. maternal health outcomes. HRSA's Improving Maternal Health in America initiative aims to address U.S. maternal health issues by, among other approaches, improving maternal health data, increasing maternal health research, and prioritizing quality improvement in maternal health care services. The FY2019 appropriations report language for the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019 ( P.L. 115-245 ), reserved $26 million within the Special Projects for Regional and National Significance (SPRANS) program for, among other things, the Alliance for Innovation on Maternal Health (AIM) program and the establishment of new maternal health programs under HRSA. Using the SPRANS authority, HRSA established four new maternal health programs designed to improve maternal health outcomes and to prevent and reduce U.S. cases of maternal mortality and severe maternal morbidity (SMM) . SMM refers to medical conditions that adversely affect the maternal health care outcome of labor and delivery, resulting in either short-term or long-term consequences for pregnant and postpartum women. For FY2019, HRSA made awards under each of the four programs, via cooperative agreements, in which HRSA provided financial assistance to the recipients and is involved in program activities. The recipients of awards made under the previously existing AIM program and each of the four new maternal health programs must collaborate with each other. Previously Existing Maternal Health Program: Alliance for Innovation on Maternal Health (AIM). This five-year maternal health program funds a single project that promotes the adoption and implementation of hospital-focused maternal safety bundles (evidence-based practices) for health care providers in birthing facilities and hospitals. Maternal Health Program 1: Alliance for Inn ovation on Maternal Health (AIM– Community Care Initiative ) . This five-year maternal health program funds a single project that expands upon the work of the initial AIM program. The program award recipient supports the development, adoption, and implementation of nonhospital maternal safety bundles for health care providers in community-based organizations and outpatient settings. Maternal Health Program 2: Rural Maternity and Obstetrics Management Strategies (RMOMS) Program. This four-year maternal health pilot program funds the development, testing, and implementation of service models, with the goal of improving access to, and continuity of, maternal and obstetrics care in rural communities. Program award recipients create strategies to address each of the following four RMOMS focus areas: (1) rural hospital obstetric service aggregation, (2) network approach to coordinating a continuum of care, (3) leveraging telehealth and specialty care, and (4) financial sustainability. Maternal Health Program 3: State Maternal Health Innovation (MHI) Program. This five-year maternal health program funds state-focused demonstration projects, with the goal of improving U.S. maternal health outcomes. State-focused demonstration projects undertake three core functions: (1) establishing a state-focused Maternal Health Task Force, (2) improving state-level maternal health data and surveillance, and (3) promoting and implementing innovations in the health care delivery of maternal health care services. Maternal Health Program 4: Supporting Maternal Health Innovation (MHI) Program. This five-year maternal health program aims to support states, key stakeholders, and recipients of HRSA-administered awards, with the goal of reducing and preventing U.S. cases of SMM and maternal mortality, and improving U.S. maternal health outcomes. For example, the Supporting MHI program provides capacity-building assistance to the state-focused demonstration projects under the State MHI program and to RMOMS program recipients. In addition, the Supporting MHI program is expected to establish a national resource center designed to help the AIM–Community Care Initiative recipient determine whether any of the nonhospital maternal safety bundles are evidence-informed and could reduce U.S. SMM and maternal mortality. To assist Congress as it considers measures on U.S. maternal health, this report provides an overview and the funding history of the five maternal health programs that HRSA administers. For each of the five maternal health programs, the report provides an overview of the program, discusses the main core activities and functions of the program, provides the program's criteria of eligibility and reporting requirements, and discusses the program's funding allocations.

crs_R46243

crs_R46243_0

<1. Introduction> In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as "tax extenders." There are 33 temporary tax provisions scheduled to expire at the end of 2020. This report discusses six provisions related to the individual income tax: (1) the tax exclusion for canceled mortgage debt, (2) mortgage insurance premium deductibility, (3) the above-the-line deduction for qualified tuition and related expenses, (4) the credit for health insurance costs of eligible individuals, (5) the medical expense deduction adjusted gross income (AGI) floor of 7.5%, and (6) the exclusion for income of certain state and local tax rebates and reimbursement for volunteer firefighters and emergency medical responders. These six provisions were extended through 2020 in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The first three provisions had expired at the end of 2017 and have been included in recent tax extenders legislation. Two provisions are housing related. The provision allowing homeowners to deduct mortgage insurance premiums was first enacted in 2006 (effective for 2007). The provision allowing qualified canceled mortgage debt income associated with a primary residence to be excluded from income was first enacted in 2007. Both provisions were temporary when first enacted, but in recent years have been extended as part of tax extenders legislation. The above-the-line deduction for qualified tuition and related expenses was first added as a temporary provision in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ), and has regularly been extended since. The Further Consolidated Appropriations Act, 2020, also extended through 2020 individual provisions that expired in 2019 and 2018. The credit for health insurance costs of eligible individuals (also known as the health coverage tax credit [HCTC]) was scheduled to expire after 2019, whereas the medical expense deduction adjusted gross income (AGI) floor of 7.5% had expired at the end of 2018. The act also reinstated for one year, and expanded, a provision allowing for the exclusion from income of certain state and local tax rebates and reimbursement for volunteer firefighters and emergency medical responders that had expired in 2010. The three provisions that expired in 2018, 2019, or 2010 were not in the previous tax extenders legislation. The health coverage tax credit, which applied to recipients of trade adjustment assistance, among others, was last extended through 2019 by the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ). The 7.5% floor for itemized deductions for medical expenses was provided through 2018 by the 2017 tax revision ( P.L. 115-97 , commonly known as the Tax Cuts and Jobs Act). The exclusion of reimbursements for volunteer firefighters and emergency medical respondents was originally enacted in the Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ). In recent years, Congress has chosen to extend most, if not all, recently expired or expiring provisions as part of tax extenders legislation. The most recent tax extenders package is in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The temporary reinstatement of the exclusion for volunteer firefighters and emergency medical responders was in a different part of the act, Division O, the Setting Every Community Up for Retirement Enhancement ("SECURE") Act of 2019. The estimated cost of the extensions of temporary individual tax provisions enacted in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) is provided in Table 1 . As described above, the first three provisions had expired at the end of 2017. Thus, they were extended for three years (with two years of the three-year extension being retroactive). The 7.5% medical expense deduction floor had expired at the end of 2018, meaning that one year of the two-year extension was retroactive. The health care tax credit was scheduled to expire at the end of 2019, and was extended for one year. The provision for volunteer firefighters and emergency medical responders is scheduled to be effective for one year (2020). <2. Tax Exclusion for Canceled Mortgage Debt2> Historically, when all or part of a taxpayer's mortgage debt has been forgiven, the amount canceled has been included in the taxpayer's gross income. This income is typically referred to as canceled mortgage debt income. Canceled (or forgiven) mortgage debt is common with a short sale, in which a homeowner agrees to sell a house and transfer the proceeds to the lender in exchange for the lender relieving the homeowner from repaying any debt in excess of the sale proceeds. For example, in a short sale, a homeowner with a $300,000 mortgage may be able to sell the house for $250,000. The lender would receive the $250,000 from the home sale and forgive the remaining $50,000 in mortgage debt. Lenders report the canceled debt to the Internal Revenue Service (IRS) using Form 1099-C. A copy of the 1099-C is also sent to the borrower, who in general must include the amount listed in his or her gross income in the year of discharge. To understand why forgiven debt has historically been taxable, it may be helpful to explain why it is viewed as income from an economic perspective. Income is a measure of the increase in an individual's purchasing power over a designated period of time. When individuals experience a reduction in their debts, their purchasing power has increased (because they no longer have to make payments). Effectively, their disposable income has increased. From an economic standpoint, it is irrelevant whether a person's debt was reduced via a direct transfer of money to the borrower (e.g., wage income) that was then used to pay down the debt, or whether it was reduced because the lender forgave a portion of the outstanding balance. Both have the same effect, and thus both are subject to taxation. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ), signed into law on December 20, 2007, temporarily excluded qualified canceled mortgage debt income that is associated with a primary residence from taxation. Thus, the act allowed taxpayers who did not qualify for one of several existing exceptions to exclude canceled mortgage debt from gross income. The provision was originally effective for debt discharged before January 1, 2010. Since then, the provision has regularly been extended as part of the tax extenders. The exclusion was most recently extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The rationales for extending the exclusion are to minimize hardship for households in distress and lessen the risk that nontax homeowner retention efforts are thwarted by tax policy. The exclusion's supporters may also argue that extending the exclusion would continue to assist the recoveries of the housing market and overall economy. The exclusion's opponents may argue that extending the provision would make debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfilling debt obligations. Some may also view the exclusion as unfair because its benefits depend on whether a homeowner is able to negotiate a debt cancelation, the taxpayer's income tax bracket, and whether the taxpayer retains ownership of the house following the debt cancellation. <3. Mortgage Insurance Premium Deductibility5> Traditionally, homeowners who itemize their tax deductions have been able to deduct the interest paid on their mortgages, as well as any property taxes they pay. Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Specifically, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if the homeowner itemized, and if the homeowner's adjusted gross income was below a certain threshold ($55,000 for single, and $110,000 for married filing jointly). Originally, the deduction was only to be available for 2007, but it was extended several times. The deduction was extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). Taxpayers of all ages may be less likely to claim the mortgage insurance premium deduction compared to prior periods because other provisions of the 2017 tax revision, including a higher standard deduction (in part as a trade-off for elimination of personal exemptions) and a cap on the deduction of state and local taxes, reduced the expected number of itemizers (projected to fall from about one-third of individual income tax returns to 11%). A justification for allowing the deduction of mortgage insurance premiums is that it helps to promote homeownership and, relatedly, the recovery of the housing market following the December 2007-June 2009 Great Recession. Homeownership is often argued to bestow certain benefits to society, such as higher property values, lower crime, and higher civic participation. Homeownership may also promote a more even distribution of income and wealth, as well as establish greater individual financial security. Furthermore, homeownership may have a positive effect on living conditions, which can lead to a healthier population. With regard to the first justification, it is not clear that the deduction for mortgage insurance premiums affects the homeownership rate. Economists have identified the high transaction costs associated with a home purchase mostly resulting from the down payment requirement, but also from closing costs as the primary barrier to homeownership. The ability to deduct insurance premiums does not lower this barrier most lenders will require mortgage insurance if the borrower's down payment is less than 20% regardless of whether the premiums are deductible. The deduction may allow buyers to borrow more, however, because they can deduct the higher associated premiums and therefore afford a higher housing payment. Concerning the second justification, it is also not clear that the deduction for mortgage insurance premiums is still needed to assist in the housing market's recovery. Based on the S&P CoreLogic Case-Shiller U.S. National Composite Index, home prices have generally increased since the bottom of the market following the Great Recession. In addition, the available housing inventory is now slightly below its historical level. Both of these indicators suggest that the market is stronger than when the provision was enacted. Economists have noted that owner-occupied housing is already heavily subsidized via tax and nontax programs. To the degree that owner-occupied housing is oversubsidized, it could be argued that extending the deduction for mortgage insurance premiums would lead to a greater misallocation of resources that are directed toward the housing industry. <4. Above-the-Line Deduction for Qualified Tuition and Related Expenses10> This provision allows taxpayers to deduct up to $4,000 of qualified tuition and related expenses for postsecondary education (both undergraduate and graduate) from their gross income. Expenses that qualify for this deduction include tuition payments and any fees required for enrollment at an eligible education institution. Other expenses, including room and board expenses, are generally not qualifying expenses for this deduction. The deduction is "above-the-line," that is, it is not restricted to itemizers. Individuals who could be claimed as dependents, married persons filing separately, and nonresident aliens who do not elect to be treated as resident aliens do not qualify for the deduction, in part to avoid multiple claims on a single set of expenses. The amount that can be claimed for the deduction is generally reduced by any tax-free assistance, if that assistance can be used to pay for expenses that qualify for the deduction. Tax-free assistance includes tax-free grants and scholarships (including Pell Grants), employer-provided educational assistance, and veterans' educational assistance. The maximum deduction taxpayers can claim depends on their income level. Taxpayers can deduct up to $4,000 if their income is $65,000 or less ($130,000 or less if married filing jointly); or $2,000 if their income is between $65,000 and $80,000 ($130,000 and $160,000 if married filing jointly). Taxpayers with income above $80,000 ($160,000 for married joint filers) are ineligible for the deduction. These income limits are not adjusted for inflation. The above-the-line deduction for qualified tuition and related expenses was enacted temporarily by the Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107-16 ). It has been extended a number of times. Most recently, the deduction was extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). One criticism of education tax benefits is that the taxpayer is faced with a confusing choice of deductions and credits and tax-favored education savings plans, and that these benefits should be consolidated. Some tax reform proposals have consolidated these benefits into a single education credit. Taxpayers may claim the tuition and fees deduction instead of education tax credits for the same student. These credits include permanent tax credits: the American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit. The AOTC is directed at undergraduate education and is limited to the first four years of postsecondary education. The Lifetime Learning Credit (20% of up to $10,000) is not limited in years of coverage. These credits are generally more advantageous than the deduction, except for higher-income taxpayers, in part because the credits are phased out at lower levels of income than the deduction. For example, for single taxpayers, the Lifetime Learning Credit begins phasing out at $59,000 for 2020. The deduction benefits taxpayers according to their marginal tax rate. Students usually have relatively low incomes, but they may be part of families in higher tax brackets. The maximum amount of deductible expenses limits the tax benefit's impact on individuals attending schools with comparatively high tuitions and fees. Because the income limits are not adjusted for inflation, the deduction might be available to fewer taxpayers over time if extended in its current form. The distribution of the deduction in Table 2 indicates that some of the benefit is concentrated in the income range where the Lifetime Learning Credit has phased out, but also that significant deductions are claimed at lower income levels. Because the Lifetime Learning Credit is preferable to the deduction at lower income levels, it seems likely that confusion about the education benefits may have caused taxpayers not to choose the optimal education benefit. <5. Credit for Health Insurance Costs of Eligible Individuals16> The credit for health insurance costs of eligible individuals, commonly known as the health coverage tax credit (HCTC), reduces the cost of qualified health insurance for eligible individuals. To be eligible to claim the HCTC, taxpayers must be (1) an eligible trade adjustment assistance (TAA) recipient; (2) an eligible alternative TAA recipient or reemployment TAA recipient; or (3) an eligible Pension Benefit Guaranty Corporation (PBGC) pension recipient. Additionally, an individual is not eligible for the HCTC if they have access to "other specified coverage," which includes coverage for which an employer (or former employer) incurs 50% of the cost as well as Medicare, Medicaid, the Children's Health Insurance Programs, and other federal and military health or medical benefit plans. Under this provision, eligible taxpayers are allowed a refundable tax credit for 72.5% of the premiums they pay for qualified health insurance for themselves and their family members. Eligible taxpayers with qualified health insurance may claim the tax credit (1) when tax returns are filed or (2) as advance payments, on a monthly basis, throughout the year. This latter option helps taxpayers pay for health plan premiums as they become due. The credit is not available for months beginning on or after January 1, 2021. The HCTC was originally authorized by the Trade Act of 2002 ( P.L. 107-210 ). The credit has been extended and modified several times. Extensions or modifications have been made in trade adjustment assistance legislation as well as tax extenders legislation. The Trade Preferences Extension Act of 2015 ( P.L. 114-27 ) extended the HCTC through December 31, 2019, and also made changes to address the interaction between the HCTC and the premium tax credit established under the Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended). The credit was extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). <6. Medical Expense Deduction Adjusted Gross Income (AGI) Floor of 7.5%21> Individuals are allowed to deduct unreimbursed medical expenses above a specific income threshold if they itemize their deductions. Prior to 2013, these deductions were allowed only for amounts in excess of 7.5% of income. Expenses reimbursed by an employer or insurance company are not eligible for deduction. The Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) increased the floor for individuals claiming the itemized deduction for medical expenses from 7.5% to 10% of adjusted gross income (AGI). The higher floor went into effect for taxpayers under age 65 beginning for the 2013 tax year. Individuals 65 or older, however, were still able to claim the deduction under the lower, 7.5% floor for tax years 2013 through 2016. The 2017 tax revision ( P.L. 115-97 ) temporarily allowed all taxpayers (not just those aged 65 or older) to claim the deduction subject to the 7.5% floor for the 2017-2018 tax years. The Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), extends the 7.5% floor for all taxpayers through 2020. After 2020, under current law, the floor is scheduled to increase to 10% of AGI for all taxpayers. A complicated set of rules governs the expenses eligible for the deduction. Generally speaking, these expenses include amounts paid by the taxpayer on behalf of himself or herself, his or her spouse, and eligible dependents for the following purposes: (1) health insurance premiums (including employee payments for employer-sponsored health plans, Medicare Part B premiums, and other self-paid premiums); (2) diagnosis, treatment, mitigation, or prevention of disease, or for the purpose of affecting any structure or function of the body, including dental care; (3) prescription drugs and insulin (but not over-the-counter medicines); (4) transportation primarily for and essential to medical care; and (5) lodging away from home primarily for and essential to medical care, up to $50 per night for each individual. The current lower floor is for all taxpayers, and future extensions, if any, could make the lower floor general, or limit it to taxpayers 65 and over. Based on a 2011 special study of deductions by age, 58% of dollars deducted were by those 65 and over, who made up 39% of taxpayers claiming the deduction. Taxpayers of all ages may be less likely to claim the medical expense deduction compared to prior periods because, as mentioned previously, other provisions of the 2017 tax revision, including a higher standard deduction (in part as a trade-off for elimination of personal exemptions) and a cap on the deduction of state and local taxes, reduced the expected number of itemizers (projected to fall from about one-third of taxpayers to 11%). These provisions are slated to expire after 2025, but are in place for the next few years. The likelihood of itemizing generally increases with income. However, the AGI floor for the medical expenses deduction reduces the likelihood that very high-income individuals would claim the deduction. For all taxpayers, medical expenses alone might not make it worthwhile to itemize unless they can also claim other itemized deductions (e.g., home mortgage interest or state and local taxes). <7. Benefits for Volunteer Firefighters and Emergency Medical Responders28> The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ) provided an exclusion from gross income of certain benefits for members of qualified voluntary emergency response organizations. These payments include the forgiveness or rebate of state and local income and property taxes or payments by states or their political subdivisions to reimburse for expenses. The exclusion was limited to $30 a month. The provision disallowed any itemized deductions for the state and local taxes otherwise excluded. This provision was enacted after a 2002 IRS decision that a reduction in property taxes for volunteers who are emergency responders was includible in gross income. The provision was temporary, effective from the date of enactment (December 20, 2007) through 2010. The provision was allowed to expire as scheduled. The SECURE Act of 2019, enacted as Division O of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), reinstated the provision for 2020 and increased the amount to $50 a month. The reinstated provision is likely to have a wider scope than it previously did because of the reduction in the number of itemizers due to provisions of the 2017 tax act ( P.L. 115-97 ), which is expected to reduce the share of itemizers, previously about one-third of taxpayers, to an estimated 11%.

Six temporary individual income tax provisions were extended or reinstated by the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. These provisions are often referred to as "tax extenders." Of the six provisions that were extended through 2020, three had expired in 2017 and were extended retroactively. They are the tax exclusion for canceled mortgage debt, the mortgage insurance premium deduction, and the above-the-line deduction for qualified tuition and related expenses. Two of the tax provisions extended through 2020 are health related. The first of these provisions was scheduled to expire at the end of 2019. The second had expired at the end of 2018, and thus was extended retroactively. They are the health coverage tax credit, and the 7.5% floor for the medical expense deduction. A sixth provision, the exclusion from gross income for volunteer firefighters and emergency responders, which had expired in 2010, was reinstated and expanded for one year, through 2020. This report provides background information on individual income tax provisions that will expire in 2020. For other reports related to extenders, see CRS Report R45347, Tax Provisions That Expired in 2017 ("Tax Extenders") , by Molly F. Sherlock; CRS Report R44990, Energy Tax Provisions That Expired in 2017 ("Tax Extenders") , by Molly F. Sherlock, Donald J. Marples, and Margot L. Crandall-Hollick; and CRS Report R46271, Business Tax Provisions Expiring in 2020, 2021, and 2022 ("Tax Extenders") , coordinated by Molly F. Sherlock.

crs_R43287

crs_R43287_0

<1. Introduction> The Columbia River Treaty (CRT, or Treaty), signed in 1961, is an international agreement between the United States and Canada for the cooperative development and operation of the water resources of the Columbia River Basin for the benefit of flood control and power. Precipitated by several flooding events in the basin (including a major flood in the Northwest in 1948), the CRT was the result of more than 20 years of negotiations seeking a joint resolution to address flooding and plan for development of the basin's water resources. The Treaty provided for 15.5 million acre-feet of additional storage in Canada through the construction of four dams (three in Canada, one in the United States). This storage, along with agreed-upon operating plans, provides flood control, hydropower, and other downstream benefits. In exchange for these benefits, the United States agreed to provide Canada with lump-sum cash payments and a portion of hydropower benefits, known as the "Canadian Entitlement." Implementation of the CRT began in 1964. The Treaty has no specific end date, and most of its provisions would continue indefinitely without action by the U.S. or Canadian Entities. However, beginning in September 2024, either nation can terminate most provisions of the Treaty with a minimum of 10 years' written notice (i.e., notice could have been provided as early as 2014). The U.S. Army Corps of Engineers (Corps) and the Bonneville Power Administration (BPA), in their designated role as the "U.S. Entity," undertook a review of the Treaty beginning in 2011. Based on studies and additional stakeholder input, the U.S. Entity made its recommendation to the U.S. Department of State in December 2013. If the Treaty is not terminated or modified, most of its current provisions would continue, with the notable exception of flood control operations, which are scheduled to end in 2024 and transition to "called-upon" operations. Perspectives on the CRT and its review vary. Some believe that the Treaty should continue but be altered to include, for example, guarantees related to tribal resources and fisheries flows that were not included in the original Treaty. Others believe that the Canadian Entitlement should be adjusted to more equitably share actual hydropower benefits, or even be eliminated entirely. For its part, Canada has stated that without the Canadian Entitlement (or with alterations that would decrease its share of these revenues), it sees no reason for the Treaty to continue. The final Regional Recommendation to the Department of State, coordinated by the U.S. Entity, was to continue the Treaty post-2024, but with modifications. The State Department has since finalized its proposed negotiating parameters, although they are not available to the public. The Canadian recommendation, finalized in March 2013, also favored continuing the treaty, but with modifications "within the Treaty framework," some of which were considerably different than those recommended by the United States. The executive branch, through the State Department, is responsible for negotiations related to the CRT. However, the Senate, through its constitutional role to provide advice and consent, has the power to approve, by a two-thirds vote, treaties negotiated by the executive branch. Changes to the CRT may or may not trigger such a vote; in any case, the Senate may choose to review any changes to the CRT. In addition, both houses of Congress may choose to weigh in on Treaty review activities by the U.S. Entity through their respective oversight powers. This report provides a brief overview of the Columbia River Treaty review. It includes background on the history of the basin and consideration of the treaty, as well as a brief summary of studies and analyses of the Columbia River Treaty review process to date. <2. History and Background> The Columbia River is the predominant river in the Pacific Northwest and is one of the largest in the United States in terms of volume flowing to the ocean. The Columbia River Basin receives water that drains from approximately 259,500 square miles in the northwestern United States and southwestern Canada, including parts of British Columbia in Canada, and four U.S. states: Montana, Idaho, Oregon, and Washington. The basin is unique among large river basins in the United States because of its high annual runoff, limited amount of storage (in the U.S. portion of the basin), and extreme variation in flow levels. The basin has the second-largest runoff in the United States in terms of average flows (275,000 cubic feet per second), and approximately 60% of this runoff occurs in May, June, and July. While only about 15% of the river basin's surface area is in Canada, the Canadian portion of the basin accounts for a considerably larger share of the basin's average annual runoff volume. The Columbia River is the largest hydropower-producing river system in the United States. Federal development of the river's hydropower capacity dates to 1932, when the federal government initiated construction of dams of the Columbia River and its tributaries. In total, 31 federal dams within the Columbia River Basin are owned and operated by the U.S. Army Corps of Engineers (Corps) and the U.S. Bureau of Reclamation (part of the Department of the Interior), and additional dams are owned by nonfederal entities. Power from federal dams on the Columbia River and its tributaries (collectively known as the Federal Columbia River Power System, FCRPS) is marketed by the Bonneville Power Administration (BPA), part of the Department of Energy. Other than the largest of these facilities, Grand Coulee (which has some storage capacity), most of these facilities on the main stem of the river in the United States have limited reservoir storage and are managed as "run of the river" for hydropower, flood control, and navigation. Figure 1 , below, provides an overview of the basin, including dam ownership. Figure 2 shows the relative storage capacity of these dams. The basin is also important habitat for a number of fish species. Economically important species in the region include steelhead trout; chinook, coho, chum, and sockeye salmon; and other species. These fish are important to commercial and sport anglers as well as Native American tribes in the region. The basin also provides habitat for several threatened and endangered species listed under the Endangered Species Act (ESA, 16 U.S.C. 1531-1543); requirements under this law are an important factor in the operation of the FCRPS. Other major uses of the basin's waters include navigation, irrigation, recreation, and water supply. Four federal dams on the river's mainstem have navigation locks which allow for barge traffic to transport bulk commodities that are important to regional and national economies. Due to this infrastructure, the Columbia River is navigable up to 465 miles upstream from the Pacific Ocean. Six percent of the basin's water is diverted for irrigated agriculture, and is particularly important in eastern Washington, northeastern Oregon, and southern Idaho. Basin waters are also diverted for other water supply purposes, and the rivers and reservoirs of the basin are important for recreational users. All of these users have an interest in management of basin water supplies. The negotiation and ratification of the CRT were precipitated by several events in the basin. Most notably, a major flood event in the Northwest in 1948, the Vanport flood, caused significant damage throughout the basin and served as the impetus for negotiations between the United States and Canada, including studies by the International Joint Commission (IJC). Initially, following the flood, the United States had proposed in 1951 to build Libby Dam in Montana (which would flood 42 miles into Canada). Canada was opposed to this solution, and as a response proposed to divert as much as 15.5 million acre feet from the Columbia River for its own purposes. Based on a number of technical studies, the IJC recommended a compromise, which included development of upriver storage in Canada to help regulate flows on the Columbia River, including those for flood control and hydropower generation. The CRT was signed in 1961 but was not fully ratified by both countries (and therefore did not go into effect) until 1964. Implementation of the Treaty occurs through the U.S. Entity (BPA and the Northwestern Division of the Corps, jointly) and the Canadian Entity (the British Columbia Hydro and Power Authority, or BC Hydro). The Treaty provided for the construction of 15.5 million acre-feet (Maf) of additional storage in Canada through the construction of three dams: Duncan (completed in 1968), Hugh Keenleyside, or Arrow (completed in 1969), and Mica (completed in 1973). Construction of Libby Dam in Montana, whose reservoir backs 42 miles into Canada, was completed in 1973. Together, the four dams more than doubled the amount of reservoir storage available in the basin before construction began, providing for significant new flood protection and power benefits throughout the basin (see Figure 2 ). The CRT also required that the United States and Canada prepare an "Assured Operating Plan" (to meet flood control and power objectives) for the operation of Canadian storage six years in advance of each operating year. Along with "Detailed Operating Plans," which may also be developed to produce more advantageous results for both U.S. and Canadian operating entities, these plans govern project operations under the Treaty. Under the CRT, the United States gained operational benefits in the form of flexible storage and reliable operations in Canada that provide for flood control and hydropower generation. In exchange, Canada (through the Canadian Entity) receives lump-sum payments from the United States for flood control benefits through 2024, as well as a portion of annual hydropower benefits from the operation of Canadian Treaty storage. In exchange for the assured use of 8.45 Maf annually of Canadian storage, the United States paid $64.4 million to Canada for flood control benefits as the three Canadian dams became operational. Under the CRT, Canada is also entitled to half of the estimated increase in downstream hydropower generated at U.S. dams. Canada initially sold this electricity (known as the "Canadian Entitlement") to a consortium of U.S. utilities for $254 million over a 30-year term (1973-2003). Currently, the United States delivers the Canadian Entitlement directly to Canada through BPA's Northern Intertie. The value of the Canadian Entitlement has been estimated by the U.S. Entity to be worth between $229 million and $335 million annually, depending on a number of assumptions. Several notable changes to Columbia River operations, since ratification of the CRT, factor into current negotiations. Most notably, declining populations of salmon and steelhead in the Columbia and Snake Rivers led to listings under the Endangered Species Act (ESA, 16 U.S.C. 1531-1543) beginning in 1991. These listings have resulted in steps to improve salmon and steelhead habitat in the United States, including operational changes (e.g., augmented spring and summer flows) and mitigation actions (e.g., construction of fish passage facilities). For more information on these listings and related federal actions, see CRS Report R40169, Endangered Species Act Litigation Regarding Columbia Basin Salmon and Steelhead , by Stephen P. Mulligan and Harold F. Upton. <3. Columbia River Treaty Review> The CRT has no specific end date, and most of its provisions, except those related to flood control operations, would continue indefinitely without action by the United States or Canada. However, beginning in September 2024, either nation can terminate most provisions of the Treaty with a minimum of 10 years' written notice (i.e., notice could have been given as early as 2014). The Corps and the BPA, in their role as the U.S. Entity, undertook a review of the Treaty and delivered a final recommendation to the Department of State in December 2013. If the Treaty is not terminated or modified, most of its provisions would continue, with the notable exception of flood control operations. Assured annual flood control operations under the Treaty are scheduled to end in 2024, independent of a decision on Treaty termination. Flood control provided by the Canadian projects is expected to transition to "called-upon" operations at this time. Under called-upon operations, the United States would be allowed to request alterations to Canadian operations as necessary for flood control, and Canada would be responsible for making these changes. In exchange, the United States would pay for operating costs and economic losses in Canada due to the changed operation. <3.1. Technical Studies> As noted above, the U.S. Entity undertook a series of studies and reports to inform the parties who are reviewing the CRT (this process is also known as "Treaty review"). The U.S. Entity undertook its studies with significant input from a sovereign review team (SRT), a group of regional representatives with whom the U.S. Entity has worked to develop its recommendation on the future of the Treaty. The SRT is made up of representatives of the 4 Northwest states, 15 tribal governments, and 11 federal agencies. In collaboration with the SRT, the U.S. Entity has also conducted stakeholder outreach so as to provide for additional input from other interests in developing a recommendation. The U.S. Entity conducted its technical studies in three iterations. Iteration 1 focused on physical effects of system operations (i.e., effects on hydropower production, etc., not the effects on ecology), and modeled both current and future scenarios. Iterations 2 and 3 included additional analysis of various scenarios, such as modeling effects on fish and wildlife habitat and species. Since Treaty review began, the U.S. Entity has also produced a number of summary reports and fact sheets on Treaty review and potential future scenarios. <3.2. Treaty Review Regional Recommendations> On June 27, 2013, the U.S. Entity shared an initial working draft of its recommendation with the Department of State for comments. On September 20, 2013, the Entity released its Draft Regional Recommendation for additional review and comment through October 25, 2013. The final Regional Recommendation was delivered to the Department of State in December 13, 2013. The recommendation, which reflects U.S. Entity study results as well as stakeholder comments, is to modify the Treaty post-2024. The executive branch, through the State Department, will make the final determination on those changes to the Treaty that are in the national interest and will conduct any negotiations with Canada related to the future of the CRT. This process may involve additional coordination with the U.S. Entity and regional stakeholders. In its Regional Recommendation, the U.S. Entity notes that the Treaty provides benefits to both countries, but recommends that it be modernized so as to "[ensure] a more resilient and healthy ecosystem-based function throughout the Columbia River Basin while maintaining an acceptable level of flood risk and preserving reliable and economic hydropower benefits." The recommendation included nine "general principles" for future negotiations, as well as several specific recommendations related to alterations of the existing Treaty. Some of the notable recommendations for modifications to the Treaty include providing stream flows to promote populations of anadromous and resident fish, including expansion of present CRT agreements to further augment flows for spring and summer (with these flows coming from reduced fall and winter drafts also known as drawdowns in Canadian reservoirs) and development of a joint program for fish passage. Other recommendations include minimizing adverse effects on tribal resources (and addressing them under the FCRPS Cultural Resources Program); incorporating a dry-year strategy; rebalancing the power benefits between the two countries; and implementing post-2024 CRT flood risk management, including effective use and called-upon flood storage, through a coordinated operation plan and definition of "reasonable compensation" for Canada. Finally, the recommendation also suggests that, following negotiations with Canada over the CRT, the Administration should review membership of the U.S. Entity. <3.3. Status of Treaty Negotiations> On October 7, 2016, the State Department finalized U.S. negotiating parameters for the CRT and formally authorized talks with Canada through the State Department Circular 175 Procedure. The document, which is not available to the public, was the culmination of a two-year interagency review process, which itself built on the Regional Recommendation for Treaty modification. After finalizing its negotiating parameters, the United States requested engagement with the Canadian Foreign Ministry. Negotiations between the U.S. and Canadian negotiating teams formally began on May 29-30, 2018. Through May 2019, six "rounds" of negotiations had been held, with the next round scheduled for June 19-20, 2019, in Washington, DC. According to the State Department, the U.S. negotiating position is being guided by the U.S. Entity's Regional Recommendation and includes participation on the negotiating team by the Department of State, BPA, the Corps, the Department of the Interior, and the National Oceanic and Atmospheric Administration. The State Department and the Province of British Columbia have also convened town halls and community meetings to discuss the status of negotiations with the public. <4. Perspectives on Columbia River Treaty Review> Various perspectives on the Columbia River Treaty and the review process have been represented in studies, meetings, and other public forums that have been conducted since Treaty review began. The Regional Recommendation represents the views of the U.S. Entity and the SRT, as well as many of the stakeholders who have weighed in through meetings and the public comment process. However, the Regional Recommendation does not represent the final U.S. approach to Treaty review. The executive branch, through the State Department, will handle those negotiations. To date, the primary Canadian perspectives provided on Treaty review have been centrally coordinated by the British Columbia (BC) provincial government, and BC announced its own decision on March 13, 2014. BC recommends continuing the Treaty, but seeking modifications within the existing framework. A summary of the perspectives of the U.S. Entity, U.S. stakeholders, and BC is provided below. <4.1. U.S. Entity and Stakeholders> To date, studies by the U.S. Entity have generally concluded that although the CRT has been mutually beneficial to the United States and Canada, not all benefits have been shared equitably, and the Treaty should be "modernized." Studies by the U.S. Entity concluded that under a scenario where the Treaty continues, both governments would continue to benefit from assured operating plans that provide for predictable power and flood control benefits, among other things. These same studies generally found that without the CRT, Canada would be able to operate its dams for its own benefit (except for called-upon flood storage, which would still be an obligation regardless of termination). This could make U.S. hydropower generation more difficult to control and predict, and could also result in species impacts if advantageous flows are not agreed upon ahead of time. Despite this unpredictability, the United States would gain some advantages from Treaty termination. Studies by the U.S. Entity have concluded that a relatively large financial benefit for the United States would likely result from terminating the Treaty (and eliminating the Canadian Entitlement), while Canada would likely see reduced financial benefits from hydropower generation under a scenario that abolishes the Canadian Entitlement. However, rather than recommend termination, the U.S. Entity has recommended modification of the Treaty, including a "rebalanced" Canadian Entitlement and assurances for flows to improve ecosystems, among other things. While most stakeholders acknowledge benefits of the CRT, several groups and individuals submitted comments criticizing the Regional Recommendation and/or its earlier drafts. Based on these comments, major areas of debate can generally be divided into three categories: how to handle the Canadian Entitlement, how (or whether) to incorporate flows to benefit fisheries into the current coequal Treaty goals of hydropower and flood control, and specifics related to future called-upon flood management operations. <4.1.1. Status of the Canadian Entitlement> The status of the Canadian Entitlement to one-half of the hydropower contributed by its dam operations has been a matter of contention, especially among power interests. The final Regional Recommendation calls for "rebalancing" of the Canadian Entitlement, without specifics as to what extent it should be rebalanced. While power interests have generally stopped short of calling for termination of the CRT, they criticized the lack of specifics in earlier drafts of the recommendation, and emphasized their view that the single biggest shortcoming of the CRT is that hydropower benefits have not been shared equally. In their public comments, many power interests noted that the Canadian Entitlement should be revised to provide a more equitable methodology for dividing hydropower generation benefits between the countries. Some of these groups believe that because more than half of the actual generation under Treaty-related operations is being returned to British Columbia, the current Canadian Entitlement deprives U.S. power customers of low-cost power, effectively increasing electricity rates in the Northwest. Some suggest that the status of the Canadian Entitlement, rather than ecosystem flows (discussed below), should be the focus of Treaty modernization. <4.1.2. Flows to Improve Ecosystems as a New Treaty Purpose> Perhaps the most controversial aspect of the Treaty review stems from the fact that the 1964 Treaty did not include fisheries or ecosystem flows along with the Treaty's other primary purposes of flood control and hydropower. Subsequent to the Treaty's ratification, Canada and the United States agreed under the Treaty's Detailed Operating Plans to maintain an additional 1 million acre-feet of storage at Canadian dams for flows to improve fisheries. As noted above, the U.S. Entity has recommended that a new Treaty take into account ecosystem flows and include as part of the U.S. Entity a federal fisheries representative. While tribal and environmental groups have generally agreed that provisions for ecosystem-based functions should be incorporated into the agreement, some also have argued that the proposed recommendations for Treaty modifications did not go far enough in providing for these purposes. They have called for the ecosystem function to be explicitly added as a third purpose of the Treaty, to be treated coequally with hydropower production and flood risk management. Interests have argued that the Regional Recommendation's approach (which mentions the ecosystem function but does not call for it to be treated as a coequal purpose) would effectively subordinate these changes to the other two purposes. They acknowledge that adding the ecosystem function as a coequal purpose would likely entail operational changes on the Columbia River in both countries beyond those currently provided for under the ESA, for example. One of the primary goals of these changes would be augmented flows for fisheries in spring and summer months and during water shortages. Conversely, some power interests (including some BPA customers) are concerned with the approach in the Regional Recommendation for the opposite reason: they think that the recommendation embodies more accommodations for ecosystem flows than should be provided. Thus, they oppose efforts to add ecosystem purposes as a stated coequal purpose of the Treaty. In the comment process, some stakeholders noted that ecosystem flows are already prioritized in both countries through major operational changes that have been required since the Treaty was ratified. In addition to recent increases in storage for fisheries flows, they point to the listings of salmon and steelhead on the Columbia and Snake Rivers under the ESA, along with related operational changes and mitigation, as having benefited fisheries. They also note that BPA's power customers already make significant contributions to mitigation through power rates, which have been estimated by some to provide more than $250 million per year to improve fish and wildlife flows. Finally, some have expressed concern with potentially inherent contradictions between the maintenance of existing hydropower operations under the Treaty and expanded spring and summer flows to benefit fisheries. They believe that further operational changes of this type will be damaging to the Northwest economy and to ratepayers. <4.1.3. Uncertainties Related to "Called-Upon" Flood Control> A final area of concern in the Treaty review process has been the future approach to "called-upon" flood control operations. The Regional Recommendation suggests that modifications to the CRT should include a coordinated operation plan and definition of "reasonable compensation" for Canada for called-upon flood control. Details related to these operations, in particular who will pay Canada for U.S. benefits and under what circumstances these operations would be required, are noted to be necessary by both sides. These details will need to be defined as part of the ongoing negotiations (either in modifications to the Treaty or in future operating plans). During the Treaty review process, many regional entities (including states, power ratepayers, and other regional stakeholders) have focused on the recommendation's uncertainty regarding payments for these benefits. They have argued that the federal government (rather than ratepayers or other regional beneficiaries) should be responsible for paying these costs. For its part, the U.S. Entity has not taken a formal position on who should pay for these benefits, and has instead focused on estimating flood risk and potential operational needs. These estimates have been a matter of disagreement with Canada (see below section, " Canadian Perspectives on CRT Review "). <4.2. Canadian Perspectives on CRT Review> Canada, represented by the Canadian Department of Foreign Affairs, Trade, and Development, has the constitutional authority to negotiate international treaties. However the Canadian Entity, the Province of British Columbia (BC), has been the primary entity engaged in Treaty review to date. BC initiated studies to synthesize its perspective on the Treaty beginning in 2011. These studies resulted in a decision, finalized in March 2013, to continue the Treaty while "seeking improvements within the existing Treaty framework." The principles outlined by BC include, among other things, specific requirements and expectations for called-upon flood control operations and a formal statement of the province's belief that the Canadian Entitlement does not account for the full "range" of benefits accruing to the United States and the impacts on British Columbia. The principles also acknowledge that the potential for ecosystem-based improvements "inside and outside the treaty" is an important consideration for the Treaty, but contend that management of salmon populations (including restoration of habitat) is not a Treaty issue per se. Some of the primary differences between the two countries are explained further below. Over the course of its review, British Columbia documented its disagreement with several of the review findings by the U.S. Entity. It argued that, in contrast to the claims of many U.S. interests, the United States actually benefits from the CRT more than Canada. In particular, Canada disagreed with some of the U.S. Entity findings and recommendations pertaining to flood control, hydropower, and ecosystem flows. For instance, Canada noted its disagreement with the U.S. Entity's previous findings related to flood control benefits and expected operations. It argued that the United States has saved billions of dollars as a result of Canadian storage over the life of the Treaty, and that an agreed-upon operational plan for flood control storage similar to the current approach would be preferable to both entities in lieu of the scheduled transition to called-upon flood control operations in 2024. In particular, Canada has disagreed with the U.S. Entity's projections of the need and cost for called-upon flood control after 2024, including the expected runoff "trigger" for called-upon Canadian flood storage. In essence, Canada has argued that smaller U.S. reservoirs which are not currently used for flood control are actually able to provide flood storage, and would be responsible for doing so under the Treaty's requirement that "effective use" be made of U.S. storage before called-upon storage is required (generally the United States has not assumed this would be the case). Canada argues that these new operations would result in forgone benefits to the United States associated with hydropower generation and fisheries, among other things, and thus called-upon operations may not be as cost-effective as some in the United States have projected. The Canadian Entity estimates that, for power production alone, called-upon operations would result in $40 million to $150 million per year in lost benefits to the United States. In contrast, using its own assumptions, the U.S. Entity has previously estimated costs of between $4 million and $34 million per request for called-upon flood control, but has not projected the same level of losses to U.S. generating capacity. Canada has also argued that the Canadian Entitlement is more equitable than previous analysis by the U.S. Entity suggested, and thus that it should remain in place. In its report on U.S. benefits, the Canadian Entity noted that it would see no reason for the Treaty to continue or be renegotiated without the Canadian Entitlement. Among other things, Canada has argued that the reliability of operations provided for under the Treaty allows for generation that is worth more to the United States than the Canadian Entitlement. The Canadian Entity also noted that if the Treaty were terminated, the lack of reliable expectations for Canadian flow would constrain U.S. hydropower benefits. As previously noted, the U.S. Entity has projected that under a Treaty termination scenario, the United States would gain significant revenue while Canadian net revenues would be expected to decrease, largely due to the termination of the Canadian Entitlement. <5. The Role of Congress in Treaty Review> The President, through the National Security Council, determines the negotiating position on the CRT, and the State Department is responsible for conducting negotiations related to the Treaty. However, Congress is also involved in this process. The Constitution gives the Senate the power to approve, by a two-thirds vote, treaties negotiated by the executive branch. The Senate does not ratify treaties; instead it takes up a resolution of ratification, by which the Senate may formally provide its advice and consent on the ratification process. The Senate is not required to provide an up or down vote on a resolution of ratification, nor are treaties required to be resubmitted after each Congress. In the case of the CRT, as the Treaty has been previously negotiated and ratified, the Senate would take up a resolution of ratification if the United States and Canada agree to Treaty modifications and the executive branch submits the modification to the Senate for review (if the Treaty is continued without modification or terminated, there would be no advice and consent role unless there was a new Treaty that needs to be ratified). Both the House and the Senate have also weighed in on Treaty review in their oversight capacities. Additionally, the Northwest delegation (including all 26 lawmakers representing Idaho, Montana, Oregon, and Washington) sent letters to President Obama in 2014 and 2015 expressing concerns with the perceived slow pace of the Interagency Policy Committee review process. In April 2015, lawmakers expressed a collective desire to finalize an Administration position and begin negotiations with Canada in 2015. On June 21, 2017, a bipartisan group of seven House Members from Washington and Oregon wrote to President Trump requesting prompt commencement of CRT negotiations.

The Columbia River Treaty (CRT, or Treaty) is an international agreement between the United States and Canada for the cooperative development and operation of the water resources of the Columbia River Basin to provide for flood control and power. The Treaty was the result of more than 20 years of negotiations between the two countries and was ratified in 1961. Implementation began in 1964. The Treaty provided for the construction and operation of three dams in Canada and one dam in the United States whose reservoir extends into Canada. Together, these dams more than doubled the amount of reservoir storage available in the basin and provided significant flood protection benefits. In exchange for these benefits, the United States agreed to provide Canada with lump-sum cash payments and a portion of downstream hydropower benefits that are attributable to Canadian operations under the CRT, known as the "Canadian Entitlement." Some have estimated the Canadian Entitlement to be worth as much as $335 million annually. The CRT has no specific end date, and most of its provisions would continue indefinitely without action by the United States or Canada. Beginning in September 2024, either nation can terminate most provisions of the Treaty with at least 10 years' written notice (i.e., starting as early as 2014). To date, neither country has given notice of termination, but both countries have indicated a preliminary interest in modification of the treaty. If the CRT is not terminated or modified, most of its provisions would continue, with the exception of its flood control provisions (which are scheduled to transition automatically to "called-upon" operations at that time, meaning the United States would request and compensate Canada for flood control operations as necessary). Perspectives on the CRT and its review vary. Some believe the Treaty should include stronger provisions related to tribal resources and flows for fisheries that are not in the Treaty; others disagree and focus on the perceived need to adjust the Canadian Entitlement to reflect actual hydropower benefits. The U.S. Army Corps of Engineers and the Bonneville Power Administration, in their joint role as the U.S. Entity overseeing the Treaty, undertook a review of the CRT from 2009 to 2013. Based on studies and stakeholder input, they provided a Regional Recommendation to the State Department in December 2013. They recommended continuing the Treaty with certain modifications, including rebalancing the CRT's hydropower provisions, further delineating called-upon flood control operations after 2024, and incorporating into the Treaty flows to benefit Columbia River fisheries. For its part, the Canadian Entity (the Province of British Columbia) released in March 2013 a recommendation to continue the CRT with modifications "within the Treaty framework." It disputed several assumptions in the U.S. Entity's review process. Following a two-year federal interagency review of the U.S. Regional Recommendation, the U.S. State Department finalized its negotiating parameters and authorized talks with Canada in October 2016. Between May 2018 and May 2019, U.S. and Canadian negotiating teams held six rounds of negotiations. Additional negotiations are expected in 2019. If the executive branch comes to an agreement regarding modification of the CRT, the Senate may be asked to weigh in on future versions of the Treaty pursuant to its constitutional role to provide advice and consent. Both houses have also weighed in on CRT-related activities through their oversight roles.

crs_R45812

crs_R45812_0

Policy discussions around issues such as border security, drug trafficking, and the opioid epidemic often involve questions about illicit drug flows into the United States. For instance, while U.S. border officials are charged with facilitating the lawful flow of people and goods, they are also responsible for stopping unauthorized entries and preventing illicit drugs and other contraband from being smuggled into the country. Border security policy debates include questions of how to balance sometimes competing priorities and allocate finite border enforcement resources to respond to various threats. For example, some have questioned where to place border enforcement and drug detection resources to best target the flow of illicit opioids such as heroin, fentanyl, and synthetic opioid analogues being smuggled into the United States. Available data that can help policymakers understand how illicit drugs are trafficked into the United States are often estimated, incomplete, imperfect, or lack nuance. And debates about drug flows and how best to counter drug trafficking into the country often rely on selected data on drug seizures by border officials. This report provides a brief discussion of what data are and are not available to help understand the universe of illicit drugs produced globally as well as what data are and are not available to indicate how much of the illicit drugs produced are destined for and trafficked into the United States. The report illuminates available data on illicit drug seizures by U.S. border officials and discusses potential implications of using these data to inform U.S. policy on drug trafficking into and within the country. <1. Starting at the Beginning: Illicit Drug Production> One way of conceptualizing the flow of illicit drugs into the United States is as a funnel. At the top of this funnel is the universe of illicit drugs produced around the world. These drugs generally fall into two categories: plant-based (e.g., cocaine, heroin, and marijuana) and synthetic (e.g., methamphetamine and fentanyl). Although some illicit drugs are produced in the United States, many originate elsewhere and are smuggled into the country. See Figure 1 for a depiction of the illicit drug supply chain. <1.1. Plant-Based Illicit Drugs> The illicit supply chain for plant-based drugs ultimately destined for the United States begins in the agricultural fields of cash crop farmers. These farmers cultivate coca bush, opium poppy, and cannabis plants in locations that are often remote, politically unstable, or insecure. Potential cultivation and its measurement are affected by a variety of factors. For instance, illicit drug crop productivity varies with each harvest and in each location where the crops are grown; it can be dependent on a mix of factors that include weather, plant disease, soil fertility, field maturity, and farming techniques. There are also factors that limit officials' and analysts' abilities to detect, measure, and obtain comprehensive data on the universe of illicit drugs. For example, where ground-based measurements of the crop fields are impractical, analysts rely on satellite imagery of varying picture quality to estimate the amount of land used for illicit crop cultivation. These estimates can be hampered by cloud cover and techniques to obscure the true scale of cultivation (e.g., interspersing illicit crops between legitimate crops, cultivating smaller plots in new locations). While coca bush and opium poppy crop surveillance programs are ongoing in most major source countries, they do not capture all global cultivation. And, in the case of drug crops that can be cultivated indoors or grown in small amounts (such as cannabis), cultivation estimates are often unreliable or unavailable. Moreover, due to changes in survey methodologies and in the areas surveyed, cultivation estimates may not be directly comparable over time. Satellite imagery-based crop survey data are coupled with information derived from crop yield studies, drug processing efficiency tests, and government-reported eradication totals to arrive at estimates of illicit drug production. Where reported eradication cannot be independently verified, such data can be prone to errors. In addition, variations in the process of refining illicit crops into finished products introduce a host of variables that limit the accuracy of drug production estimates. The U.S. Department of State notes "differences in the origin and quality of the raw material and chemicals used, the technical processing method employed, the size and sophistication of laboratories, the skill and experience of local workers and chemists, and decisions made in response to enforcement pressures all affect production." Ultimately, drug production estimates are calculated in terms of "potential pure" illicit drugs by volume, which assumes that all harvested illicit drug crops are converted into illicit drugs, though this assumption may not hold in all circumstances. In Asia, for example, where opium poppy is often consumed as opium rather than processed further into heroin, the State Department acknowledges that the proportion of opium ultimately processed into heroin is "unknown." At each stage in the illicit drug development cycle, added variables further complicate the ability of analysts to accurately estimate the true amount of illicit drugs produced. <1.2. Synthetic Illicit Drugs> Unlike plant-based drugs, whose cultivation footprint can provide a starting point for estimating potential drug production, the illicit supply chain for synthetic drugs ultimately destined for the United States begins in chemical manufacturing and pharmaceutical facilities. Although the import and export of some chemical inputs (precursors) used in illicit synthetic drug production are internationally regulated, others are not and the trade data for such chemicals are not necessarily current, available for all countries, or indicative of diversion trends. For example, the Combat Methamphetamine Epidemic Act of 2005 (CMEA; Title VII of P.L. 109-177 ) requires the State Department to conduct annual economic analyses on global production of and demand for three precursor chemicals commonly used in the production of methamphetamine, but its efforts have been hampered by data limitations. The State Department has noted that "[e]phedrine and pseudoephedrine pharmaceutical products are not specifically listed chemicals under the 1988 U.N. Drug Convention. Therefore, reporting licit market trade and demand for ephedrine and pseudoephedrine as well as pharmaceutical products derived from them is voluntary . Thus far, the economic analysis required by the CMEA remains challenging because of outdated, insufficient, and unreliable data." Challenges in acquiring and analyzing relevant data on synthetic drug production and precursor chemicals used in illicit drug production are further compounded by the proliferation of new psychoactive substances (NPS) molecularly altered variants, or synthetic analogues, of known illicit substances that are not internationally controlled and thus designed to avoid detection by authorities. NPS also include fentanyl analogues destined for the United States. Law enforcement authorities around the world have reported to the United Nations more than 850 uncontrolled NPS as of the end of 2018. <2. Illicit Drugs in Transit to the United States> The next step in the supply chain of illicit drugs produced abroad and destined for the United States is the transit of these substances toward and into the country, as depicted in Figure 1 . The United States, while a major consumer of illicit drugs, is just one of many drug consumption markets. Of the illicit drugs that are produced around the world, some may be consumed in the country of production, some may be destined for the United States, and some may be intended for an alternate market. Of those drugs intended to be moved to the United States, some may become degraded or lost in transit, some may be seized by law enforcement or otherwise destroyed or jettisoned by traffickers pursued by enforcement officials, and some reach the U.S. border. The challenge of estimating drug flows in transit is a longstanding one. While there are estimates of certain types of illicit drugs produced in certain countries that are subsequently bound for the U.S. market, there is not a comprehensive publicly available dataset detailing the estimated amount of each type of illicit drug produced in each source country that is suspected to be destined for the United States. However, snapshots of these data exist. One of these datasets is the Consolidated Counterdrug Database (CCDB), managed by the Office of the U.S. Interdiction Coordinator. According to the U.S. Government Accountability Office (GAO), the CCDB "records drug trafficking events, including detections, seizures, and disruptions. The database is vetted quarterly by members of the interagency counterdrug community to minimize duplicate or questionable reported drug movements." Specifically, it records drug trafficking events, which helps provide estimates on illicit drugs, particularly cocaine, destined for the United States via the transit zone from South America. Of the unknown total amount of drugs that reach the U.S. border by land, air, or sea, some portion is seized by border officials, and some portion makes its way into the country. While the pro portion of illicit drugs coming into the country that are seized at the border is unknowable, the amount of illicit drugs seized is. It is this snapshot of seizure data that has served as a point of reference for current policy debates surrounding border security and drug flows into the country. <3. Illicit Drugs Seized (or Not) at the Border> There are no exact data on the total quantity of foreign-produced illicit drugs flowing into the United States. Indeed, a fundamental element to understanding drug smuggling is the acknowledgement that the total flow of drugs crossing the border at and between ports of entry (POEs) into the United States is unknowable. As reflected in Figure 1 , as illicit drugs are brought to the border of the United States, they generally fall into two initial categories: drugs that are detected and seized by officials at the border, and drugs that, whether detected or not, are not seized by officials at the border. Illicit drugs that are detected and seized at the border during inbound inspections are quantifiable. Those drugs that are not seized at the border are generally not quantifiable at the time they enter the country. However, some portion of illicit drugs successfully smuggled across the border may later be seized by law enforcement officers. The largely unknown subset of foreign-produced drugs that enter the country but are not seized by officials during inbound inspections at the border is divided into two categories: drugs that are later detected and seized by federal, state, local, or tribal officials; and drugs that, whether detected or not, are not seized by officials. Illicit drugs not seized at the border enter the United States where there are also domestically produced drugs. As such, drugs that are later seized by federal, state, local, or tribal officials in the United States may be of foreign or domestic origin. These drugs may be seized in the interior of the country or by border officials conducting outbound inspections of people and goods leaving the country. <3.1. Border Seizure Data> In the absence of data on the flow of all illicit drugs entering the United States both those that are seized and those that successfully evade enforcement officials policymakers can use certain drug seizure data to better understand how and where drugs are crossing U.S. borders. While a number of agencies may be involved in seizing illicit drugs in the border regions, the primary agency charged with safeguarding the U.S. border (including seizing illicit drugs and other contraband) is U.S. Customs and Border Protection (CBP). Within CBP, the Office of Field Operations (OFO) is responsible for staffing POEs, and drugs seized by OFO are generally seized at POEs . In addition, the Border Patrol is responsible for patrolling the land borders with Mexico and Canada, and the coastal waters surrounding Florida and Puerto Rico; given its responsibilities, drugs seized by the Border Patrol are generally drugs seized between POEs . CBP publishes selected enforcement statistics, including a snapshot of illicit drug seizures of marijuana, cocaine, methamphetamine, heroin, and fentanyl by OFO and the Border Patrol. CBP data indicate that larger quantities by weight of cocaine, methamphetamine, heroin, and fentanyl are seized at POEs than between the ports. Figure 2 illustrates seizures of these four drugs by OFO and the Border Patrol for FY2012 FY2018. Cocaine. From FY2012 to FY2018, CBP reported seizing 388,970 pounds of cocaine at and between POEs. OFO seized 86.1% of this cocaine at POEs, and the Border Patrol seized the remaining 13.9% between POEs. Methamphetamine. From FY2012 to FY2018, CBP reported seizing 266,828 pounds of methamphetamine at and between POEs; 82.2% was seized at POEs and the remaining 17.8% between POEs. Of note, the amount of methamphetamine seized by CBP increased more than three-fold, from 17,846 pounds in FY2012 to 67,676 pounds in FY2018. The consistent increase in methamphetamine seizures during this period was seen both at and between POEs. Heroin. From FY2012 to FY2018, CBP reported seizing 35,193 pounds of heroin at and between POEs. OFO seized 88.0% of this heroin at POEs, and the Border Patrol seized the remaining 12.0% between POEs. Fentanyl. CPB started reporting fentanyl seizures by OFO in FY2015 and by the Border Patrol in FY2016. From FY2015 to FY2018, CBP seized 5,000 pounds of fentanyl at and between POEs; 85.5% was seized at POEs and the remaining 13.5% between POEs. Fentanyl seizures increased from the 70 pounds seized by OFO in FY2015 to 2,173 pounds seized across OFO and the Border Patrol in FY2018. Mar i juana. The landscape for CBP marijuana seizures is different than that for the four drugs discussed above. Whereas intelligence and seizure data indicate that most of these four drugs are moved through the legal POEs, a greater quantity of illicit foreign-produced marijuana is smuggled and seized between the ports (see Figure 3 ). From FY2012 to FY2018, CBP reported seizing 14,023,570 pounds of marijuana at and between POEs. The Border Patrol seized 77.1% of this marijuana between POEs, and OFO seized the remaining 22.9% at the ports. Marijuana seizures dropped from over 2.8 million pounds in FY2012 to 761,319 pounds in FY2018. The bulk of this decline can be seen in Border Patrol seizures, which fell from 2.3 million pounds in FY2012 to 461,030 pounds in FY2018. <3.1.1. Nuances in Illicit Drug Seizure Data> In current discussions of border security, policymakers and the media have relied on this snapshot of regularly published CBP data on seizures of certain illicit drugs (cocaine, methamphetamine, heroin, fentanyl, and marijuana) at and between POEs. While these data provide a summary view of certain CBP drug seizures and indicate generally where certain types of illicit drugs are most often seized by border officials, CBP's dataset that is the foundation for this regularly updated snapshot of seizure data provides a more nuanced view. For instance, the foundational seizure data provide additional information such as the type of POE (e.g., land, air, sea) where drugs were seized and whether the drugs were seized during inbound inspections, outbound inspections, or in operations away from the POEs. Specifically, CRS analysis of OFO drug seizure data from FY2014 to FY2018 indicate that across those five years, about 65% of seized illicit drugs by weight were confiscated at land POEs. In addition, about 28% of seized drugs were confiscated at air POEs, and about 5% were seized at sea POEs (see Figure 4 ). In addition, CRS analysis of OFO drug seizure data from FY2014 to FY2018 indicate that nearly 97% of seized drugs were confiscated during inbound inspections across those years. While nearly all OFO illicit drug seizures occur during inbound inspections, some are seized during outbound inspections of people and goods exiting the country, some may be seized at a POE but cannot be attributed to an inbound or outbound inspection, and some may be seized during enforcement activities occurring away from official POEs (see Figure 5 ). The enforcement statistics that CBP publishes on its website regarding seizures of cocaine, methamphetamine, heroin, fentanyl, and marijuana do not always distinguish between seizures at northern, southern, and coastal border areas. However, officials have noted that "most illicit drug smuggling attempts occur at southwest [border] land POEs." Consistent with this testimony, CRS analysis of OFO drug seizure data indicates that, on average, over 65% of the illicit drugs seized by OFO from FY2014 to FY2018 were seized during inbound inspections at land POEs within the jurisdiction of the OFO field offices along the Southwest border. <3.1.2. Illicit Drug Seizure Datasets> CBP is not the only agency that seizes illicit drugs in the United States or even in the border regions. Federal, state, local, and tribal law enforcement agencies are all involved in enforcement actions that even if not focused on drug-related crimes may involve drug seizures. Notably, there is no central database housing information on illicit drug seizures from all law enforcement agencies. In addition, there is not a set of discrete, yet comprehensive, drug seizure datasets that, if combined, could tally illicit drug seizures for all of the United States. Rather, there are a number of datasets and systems that contain some information on drug seizures. For instance, law enforcement agencies have case management systems, and case files may have certain information on drug seizures. However, this information may or may not exist in electronic format, and may or may not consistently appear in dedicated data fields that allow agencies to sort and tally drug seizure data. In addition, law enforcement case information, including that on drug seizures, may change throughout the course of an investigation, and there is always a chance that case management systems may not be updated to reflect final information, including results of forensic lab tests, on the drugs seized. For instance, an initial report on a case may contain estimates of quantities of drugs seized as well as suspicions or results from preliminary field testing regarding drug types involved. This information could all change as a case progresses and any drugs seized are more thoroughly measured and chemically analyzed. In addition, the data that are available from law enforcement agencies throughout the United States provide imprecise insight into illicit drug smuggling into the country. Foreign-produced illicit drugs that cross the border into the United States without being seized enter the U.S. market along with domestically produced drugs; as such, seizure data from law enforcement agencies across the country may not in and of itself provide information as to the drug's source country and thus cannot always add to an understanding of drug trafficking into the United States. This may be particularly so for marijuana, which has seen increased domestic cultivation coupled with decreased Mexican production and trafficking into the United States. As border officials have noted, CBP seizure data include illicit drugs not just from inbound inspections of goods and people entering the country but from outbound inspections as well. In addition, there is a set of seizures for which it cannot be determined whether the intended flow of drugs seized was into, within, or out of the country. While most drugs flowing across U.S. borders may be coming into the country, some unknown portion of drugs crossing the borders are leaving the country. Drugs leaving the country include those produced in the United States namely marijuana as well as drugs that pass through in transshipment. Despite an acknowledged imprecision in the completeness, accuracy, and nuance of seizure data, some systems can provide selected information on illicit drugs seized in the United States. National Seizure System (NSS). The DEA runs the NSS through the El Paso Intelligence Center (EPIC). This system allows law enforcement entities to submit data on illicit drug seizures around the country. Certain federal law enforcement agencies (DEA, FBI, CBP, ICE, and Coast Guard) are required to report drug seizures that surpass certain threshold levels, but reporting by other law enforcement agencies is voluntary. As such, while the NSS contains mandatory reported data on drug seizures of certain sizes made by specific federal agencies as well as other voluntarily reported drug seizure data, this reflects only a subset and unknown proportion of total illicit drugs seized across the country. Nonetheless, these seizure data can provide officials with information on the location and magnitude of seizures to help build knowledge of the U.S. illicit drug market, drug trafficking activity in the country, and enforcement strategies. National Forensic Laboratory Information System (NFLIS). The DEA runs the NFLIS, which "collects results of forensic analysis, and other related information, from local, regional, and national entities." One component of NFLIS is NFLIS-Drug, which collects drug chemistry analysis results from "50 State systems and 104 local or municipal laboratories/laboratory systems, representing a total of 283 individual laboratories." Currently, the NFLIS reports on the number of drug cases submitted to laboratories for testing as well as the number of distinct drug reports made from those cases. It does not report on the total quantity of drugs seized that are associated with those samples submitted for chemical testing. Because the NFLIS records drug reports from specific labs around the country, it is possible for law enforcement and analysts to gain a better understanding of trends in drug reports involving certain drugs or substances in certain areas of the United States. <3.2. Sourcing Drugs Seized in the United States> As discussed above, the quantities of illicit drugs produced in various countries around the world that are destined for the United States and that are successfully smuggled into the country are unknown, and are likely unknowable. Instead, U.S. officials look at the set of illicit drugs seized in the United States and, in conjunction with drug intelligence, produce estimates of which countries are the major suppliers of certain types of illicit drugs found in the United States. In formulating these estimates, officials submit samples from selected seizures of illicit drugs for chemical testing and analysis. For certain illicit drugs seized in the United States, this chemical analysis helps determine, among other things, the primary source countries and/or methods of production. The chemical testing reveals different information about plant-based drugs than it does about synthetic drugs. Heroin. The DEA operates a heroin signature program (HSP) and a heroin domestic monitor program (HDMP) that helps identify the geographic source of heroin found in the United States. Chemical analysis of a given heroin sample can identify its "signature," which indicates a particular heroin production process that has been linked to a specific geographic source region. The HSP analyzes wholesale-level samples of "heroin seized at U.S. ports of entry (POEs), all non-POE heroin exhibits weighing more than one kilogram, randomly chosen samples, and special requests for analysis" and the HDMP assesses the signature source of retail-level heroin samples seized in the United States. Of the heroin analyzed in the HSP, 86% was identified as originating from Mexico, 10% had inconclusive results, 4% was from South America, and less than 1% was from Southwest Asia in 2016. Cocaine. The DEA's Cocaine Signature Program (CSP) analyzes cocaine samples from bulk seizures for "evidence of how and where the coca leaf was processed into cocaine base (geographical origin), and how cocaine base was converted into cocaine hydrochloride (processing method)." Analyses of cocaine samples seized in 2017 indicate that 93% originated in Colombia, 4% originated in Peru, and 3% had an unknown origin. Methamphetamine. The DEA's methamphetamine profiling program (MPP) examines methamphetamine samples to help determine trends in production methods. The DEA notes, however, that because methamphetamine is synthetically produced, the MPP cannot determine the original source of the drug. Domestic production of methamphetamine commonly involves pseudoephedrine/ephedrine tablets along with household items like lithium batteries, camp fuel, starting fluid, and cold packs. In contrast, Mexican criminal networks "produce methamphetamine using the reductive amination method, which uses the precursor, Phenyl-2-propanone (P2P) instead of pseudoephedrine . According to the DEA MPP, 97 percent of samples analyzed were produced using the reductive amination method, using P2P as the precursor chemical." This implies that most of the methamphetamine samples analyzed in the MPP were produced using techniques employed by Mexican criminal networks. Fentanyl. The DEA also has a Fentanyl Signature Profiling Program (FSPP), analyzing samples from fentanyl seizures to help "identify the international and domestic trafficking networks responsible for many of the drugs fueling the opioid crisis." The DEA has indicated that fentanyl shipped directly from China often has purity levels above 90%, while fentanyl trafficked over the Southwest border from Mexico has purity levels below 10% on average. However, it is unclear how much of the fentanyl consumed in the United States is coming directly from China versus Mexico. <4. Going Forward> <4.1. Reliance on Border Seizure Data> In the absence of comprehensive and precise data on illicit drugs trafficked into the United States, seizure data can provide some insight into various elements of drug flows such as smuggling points into the United States and target markets within the country. For instance, some have relied on selected border seizure data to help understand the locations at which federal enforcement efforts are stopping a portion of the illicit drugs produced abroad from entering the country and joining the domestic drug market. In current policy discussions regarding border security, CBP drug seizure data can help inform policy decisions that involve the most effective placement of counterdrug resources. In addition, drug seizures both at the border and in the interior of the country that are chemically analyzed can provide information on the likely geographic sources of certain illicit drugs found throughout the United States. Policymakers may ask a variety of questions as they debate how to target finite resources to countering illicit drug flows, including which types of illicit drugs are of the highest concern, what are the means traffickers most often employ to smuggle illicit drugs into and throughout the United States, and where can enforcement officials interdict the greatest quantity of top-priority illicit drugs? Border seizure data can also help inform efforts to act on certain policy priorities. If, for example, lawmakers and enforcement officials are particularly concerned with specific categories of illicit drugs such as illicit opioids, they may examine the sufficiency of existing enforcement efforts in the areas where intelligence and seizure data indicate that the flow of these substances may be the highest. For instance, the most recent DEA National Drug Threat Assessment notes that illicit opioids such as heroin are more often smuggled through than between POEs; likewise, CBP seizures of these substances have also been higher at the ports than between them, as reflected in greater seizures of illicit opioids by OFO than by the Border Patrol. As such, in order to counter threats posed by illicit opioids, and in balancing other law enforcement and counterdrug priorities, Congress may consider whether CBP should maintain or change the amount and types of resources allocated to screening for and interdicting illicit drugs at and between POEs. Notably, as reflected in Figure 1 , a focus on border seizures largely excludes a discussion of drug seizures by law enforcement officials throughout the interior of the country. As such, border seizures cannot speak to drug transportation and distribution throughout the U.S. market or law enforcement priorities in the interior of the country. A focus on border seizures also largely excludes a discussion of illicit drugs that are produced domestically. This is, in part, because border seizures largely reflect drugs detected during inbound inspections (and thus are more likely to reflect foreign-produced drugs being moved into the United States). However, drugs detected and seized during outbound inspections may reflect both foreign-produced drugs that were not seized when they entered the country as well as domestically produced drugs being taken out of the country. <4.2. Enhancing Seizure Data Collection and Reporting> If policymakers are interested in having a more comprehensive view of drug seizures throughout the United States, they could move to enhance and consolidate data collection. With respect to federal agencies, Congress could take a variety of steps to enhance data availability on drug seizures, both at the border and in the interior of the country. As noted, the NSS at EPIC contains data on drug seizures of certain sizes by specific federal agencies, as well as additional voluntary reports from additional law enforcement entities, but these data are not comprehensive. Lawmakers could ask GAO to conduct a study on agencies' collection and reporting of drug seizure data; this could provide a better understanding of the portion of drug seizures currently included in the NSS. Another option is that Congress could require that all federal law enforcement agencies report information on a greater portion of or all drug seizures to a central database like the NSS. Congress could also direct the NSS to enhance outreach to state and local law enforcement agencies to encourage them to submit drug seizure data. Yet another option would be for policymakers to incentivize states for example, by providing or withholding grant funding to collect and report such data to help establish a more robust view of seizures in the United States. Enhanced data on drug seizures away from the border may not illuminate how these drugs entered the country; however, these data could help provide a more nuanced picture of the domestic drug market. <4.3. Border Risk Management> To counter threats at U.S. borders, the Department of Homeland Security (DHS) uses a risk management approach, which the department defines as "the process for identifying, analyzing, and communicating risk and accepting, avoiding, transferring, or controlling it to an acceptable level considering associated costs and benefits of any actions taken." Border threats are continually evolving and include those posed by a wide range of actors, from terrorists who may have weapons of mass destruction and transnational criminals smuggling drugs and other contraband to migrants entering the country without authorization. Risks associated with various threats can be seen as a function of the likelihood that the threat will be realized and its potential consequences. However, threats are complex, threat actors are strategic and adaptive in their behaviors, and assessing the likelihood and gauging potential consequences of the various threats can be challenging. For instance, in understanding the risks posed by threat actors smuggling drugs into the United States, one may consider the likelihood of drugs successfully flowing into the country. This likelihood may be complicated by a variety of factors including past and expected frequencies. As the true frequency of illicit drug smuggling is unknown, officials may rely on a combination of intelligence and known drug seizure levels to inform their expectations. Notably, seizure data reflect illicit drugs that were not successfully smuggled into the country; they reflect known, unsuccessful smuggling attempts. In addition, seizures vary across sectors of the border, differ on whether they were made at or between POEs, and are diverse in the associated modes of land, air, or sea transport; as such, they can help inform, along with intelligence, the likelihood of smuggling attempts at various locations and via a host of transport modes. However, seizure data do not speak to the portion of drugs successfully smuggled into the country. Moreover, expectations of future drug flows may combine knowledge about past flows with intelligence and analysis of additional information such as drug market forces in source and destination countries. Policymakers may question how border officials use intelligence about drug flows and data on drug seizures to assess the risks posed by drug trafficking and appropriately allocate resources to counter the threat. Because there is a need to balance resources for sometimes competing priorities, some may also question whether DHS's risk management approach to countering threats at the borders is able to effectively evaluate and reduce threats posed by drug trafficking and whether the data to make this evaluation exist. <4.4. Evaluating Drug Trafficking-Related Strategies> The United States has a number of strategies aimed, at least in part, at reducing drug trafficking into and within the country, and data on drug flows can help evaluate progress toward achieving goals outlined in them. For instance, the 2019 National Drug Control Strategy outlines that one of three key elements in the overarching goal of building a stronger, healthier, drug-free society is reducing the availability of illicit drugs in the United States. The strategy notes that some measures of performance are to "significantly reduce the availability of illicit drugs in the United States by preventing their production outside the United States, disrupt their sale on the internet, and stop their flow into the country through the mail and express courier environments, and across our borders." It also notes that some measures of effectiveness are that "[t]he production of plant-based and synthetic drugs outside the United States has been significantly reduced, illicit drugs are less available in the United States as reflected in increased price and decreased purity, and drug seizures at all U.S. ports of entry increase each year over five years." A robust picture of drug production and movement toward and into the United States can help inform, for instance, whether changes in drug seizures at POEs as outlined in the strategy may be attributable to the effectiveness of U.S. drug control efforts. Intelligence and data on drug flows and seizures could also inform whether changes in seizures may be influenced by other factors such as the amount of drugs arriving at U.S. borders, the means by which traffickers attempt to smuggle drugs into the country, or the staffing levels at and between POEs. For instance, policymakers and officials may question whether fluctuations in drug seizures at ports of entry by OFO, as shown in Figure 2 and Figure 3 , taken with intelligence about other drug supply and demand factors, reflect progress toward meeting goals outlined by the National Drug Control Strategy. Other strategies, such as the National Southwest Border Counternarcotics Strategy and the Strategy to Combat Transnational Organized Crime, also provide action items that involve reducing drug trafficking. While these strategies do not outline specific effectiveness measures, as does the National Drug Control Strategy, the action items and goals could potentially be better evaluated with more specific data such as that on illicit drug production (both domestic and foreign), flows, and seizures.

Policy discussions around issues such as border security, drug trafficking, and the opioid epidemic include questions about illicit drug flows into the United States. While there are numerous data points involved in understanding the trafficking of illicit drugs into the United States, these data are often estimated, incomplete, imperfect, or lack nuance. For example, debates about drug flows and how best to counter drug trafficking into the country often rely on selected drug seizure data from border officials, which do not reflect all drug flows into the United States. One way of conceptualizing the flow of illicit drugs—both plant-based and synthetic—into the United States is as a funnel. At the top of this funnel is the universe of illicit drugs produced around the world, both foreign and domestic. Factors affecting actual illicit cultivation and/or production are numerous and diverse, as are those affecting analysts' and officials' abilities to measure total worldwide production. Of all the illicit drugs that are produced around the world, some portion is destined for the United States. Of the total amount of illicit drugs that reach the U.S. border by land, air, or sea, some portion is known because it was seized by border officials, and an unknown portion is successfully smuggled into the country. While the proportion of illicit drugs coming into the country that are seized is unknowable, the amount of drugs seized is. And, data on drug seizures at the U.S. borders have sometimes served as a reference for policy debates on border security and drug trafficking into the country, in part because it is a knowable portion of drug trafficking problem. The primary agency charged with safeguarding the U.S. borders (including seizing illicit drugs and other contraband) is the U.S. Customs and Border Protection (CBP). Within CBP, the Office of Field Operations (OFO) is responsible for managing ports of entry and seizes drugs being smuggled into the United States at ports of entry; the Border Patrol is responsible for securing the border between ports of entry and seizes drugs being smuggled into the country between ports of entry. CBP data from OFO and Border Patrol indicate that for cocaine, methamphetamine, heroin, and fentanyl, larger quantities by weight are seized at legal ports of entry than are seized between the ports. Conversely, a larger quantity by weight of illicit marijuana is seized between the ports of entry. CRS analysis of OFO drug seizure data from FY2014 to FY2018 indicate that across those five years, about 65% of seized illicit drugs, by weight, were seized at land ports of entry at the border, about 28% of seized drugs were seized at air ports of entry, and about 5% were seized at sea ports of entry. CRS analysis of these data also indicate that nearly 97% of drugs were seized during inbound inspections across those years. CBP is not the only agency that seizes illicit drugs in the United States or even in the border regions. Federal, state, local, and tribal law enforcement agencies are all involved in enforcement actions that—even if not focused on drug-related crimes—may involve drug seizures. Notably, though, there is no central database housing information on illicit drug seizures from all law enforcement agencies, federal or otherwise. Even though the quantity of total illicit drugs produced around the world that is destined for the United States—and successfully smuggled into the country—is unknown, the likely source of the drugs seized may, in some instances, be knowable. U.S. officials chemically analyze a portion of illicit drugs seized to identify the source and, in conjunction with drug intelligence, assess which countries may be the major suppliers of certain illicit drug types found in the country. In the absence of precise data on illicit drugs moving toward and into the United States, seizure data can provide insight into various elements of drug flows such as smuggling points into the United States and target markets within the country. If policymakers are interested in having a more robust view of drug seizures throughout the country, they could move, through mandates or incentives, to enhance data collection and consolidation of drug seizure data by law enforcement officials. Policymakers may also question how border officials use intelligence about drug flows and data on drug seizures to assess the risks posed by drug trafficking and appropriately allocate resources to counter the threat. They may also evaluate how well available data on drug seizures can help measure progress toward achieving goals outlined in national strategies aimed, at least in part, at reducing drug trafficking into and within the country.

crs_R45879

crs_R45879_0

<1. Introduction> For more than 65 years, the U.S. Congress has funded international food assistance through the Food for Peace program (FFP) to alleviate hunger and improve global food security. U.S. food assistance comes in the form of in-kind food commodities purchased in the United States and shipped overseas, and through market-based approaches. Market-based approaches include purchasing food in foreign local and regional markets and then redistributing it, and providing food vouchers and cash transfers that recipients can use to buy food locally. The U.S. Agency for International Development (USAID), the lead development and humanitarian arm of the U.S. government, administers the majority of U.S. international food assistance. Within the agency, the Office of Food for Peace manages the FFP program, which provides both emergency and nonemergency food aid. Nonemergency programming once represented a significant portion of FFP, but this portion has declined (from 83% in FY1959 to 11% in FY2018) as emergency needs have continued to rise and FFP has received emergency funding from additional accounts (see Figure 3 ). The Bureau for Food Security (BFS), within USAID, manages agricultural development and nutrition programs, which support food security goals but are not considered food aid under the umbrella of the Feed the Future Initiative (FTF). The distinctions between FFP nonemergency programs and BFS development programs are found in authorizing legislation, funding flows, and congressional jurisdiction. This report focuses primarily on FFP's nonemergency activities. It explains current programs, legislative history, and funding trends. The report also discusses how FFP nonemergency programs fit within the broader food aid and food security assistance framework, and the future of FFP nonemergency programs in the context of related Trump Administration proposals. Finally, this report explores the challenges Congress faces in conducting oversight of U.S. international food assistance programs, which fall under two separate congressional committee jurisdictions. <2. Food for Peace Nonemergency Programming> In FY2018, Food for Peace (both emergency and nonemergency programs) operated in 59 countries and reached more than 76 million recipients. However, FFP had active nonemergency programs in only 15 countries most of which were in sub-Saharan Africa, with the remaining in Latin America and the Caribbean, and Asia. FFP nonemergency programs seek to aid the poorest of the poor by addressing the root causes of hunger and making vulnerable communities more resilient to shocks, both natural and human-induced. Programs generally last five years and, according to FFP, "aim to reduce chronic malnutrition among children under five and pregnant or lactating women, increase and diversify household income, provide opportunities for microfinance and savings, and support agricultural programs that build resilience and reduce vulnerability to shocks and stresses." Common types of FFP nonemergency activities include in-kind food, cash or voucher distributions, educational programs to encourage dietary diversity and promote consumption of vitamin- and protein-rich foods, farmer training on agricultural value chains and climate-sensitive agriculture, and conflict sensitivity training for local leaders. In building resilience in vulnerable communities, FFP seeks to reduce the need for future emergency assistance and pave the way for communities to pursue longer-term development goals. With few exceptions, nonemergency programs are implemented by nongovernmental organization (NGO) partners. Examples of the range of FFP nonemergency programs include the following: Strengthening Household Ability to Respond to Development Opportunities (SHOUHARDO III ) in Bangladesh began in 2015 to improve "gender equitable food and nutrition security and resilience of the vulnerable people" in two of the country's regions. USAID identified four areas of concern on which interventions should focus: gender inequality and women's disempowerment, social accountability, youth, and climate adaptation. CARE, a nonprofit organization that formed in post-World War II to distribute food packages in Europe, implements SHOUARDO III. The program's goal is to reach 384,000 participants through activities that address climate change and disaster resilience training, supplementary food distributions for pregnant and lactating women, youth skills training, the organization of microenterprise groups, and water supply and sanitation activities, among others. SHOUHARDO III is one of the few FFP nonemergency programs that includes a monetization component. In FY2018, SHOUHARDO received more than $18 million in FFP Title II funding. The program is scheduled to run through the end of FY2020. Tuendelee Pamoja II in the Democratic Republic of Congo (DRC) was initiated in 2016 to improve food security and resilience among 214,000 households in selected provinces, with a special focus on women and youth. Food for the Hungry, an international Christian relief, development, and advocacy organization, implements the program. Interventions include the distribution and testing of new varieties of soybeans, beans, and maize; construction of planting terraces to reduce land erosion; training on fishing practices; literacy and numeracy education; and youth training in wood- and metal-working; among others. The program received more than $15 million in FFP Title II funding in FY2018 and is scheduled to run through the end of 2021. Njira Pathways to Sustainable Food Security in Malawi began in 2014 with the aim of improving food security for more than 244,000 vulnerable people in selected districts in Malawi. The programs were designed to address Feed the Future (FTF)-established food security goals for the country and to complement other FTF programs and development goals under USAID/Malawi Mission's Country Development Cooperation Strategy. Project Concern International (PCI), a global development program established in 1961, implements the Njira project; its activities include distributing livestock and offering animal health services to improve livestock production, increasing access to and participation in women's empowerment savings and loan groups, conducting farmer training to combat Fall Armyworm, and distributing food rations to children under five. In FY2018, the Njira project received nearly $2 million in FFP Title II nonemergency funds and nearly $2.5 million in Community Development Funds (CDF). The project is slated to run through late 2019. <2.1. Food for Peace Nonemergency Programs in the Context of U.S. International Food Assistance> FFP nonemergency programs are largely used to support the transition in food security assistance between short-term emergency food assistance programs and longer-term agricultural development and nutrition assistance programs. They share a close relationship with FFP emergency programs and the BFS-led Feed the Future development programs, but distinct differences exist among these aid channels, which are designed to be complementary and undertaken sequentially (see Figure 1 ) . While Food for Peace nonemergency programs address the root causes of food insecurity and seek to build resilience among vulnerable populations, FFP Title II emergency programs seek to distribute immediate, life-saving food and nutrition assistance to populations in crisis. Assistance primarily through food procured in the United States but also through market-based approaches is meant for those suffering from hunger or starvation as a result of crises. Programs are short, many running between 12-18 months, and are primarily implemented by the United Nations' World Food Programme. In FY2018, some of FFP's largest Title II emergency responses were staged in South Sudan ($335 million), Yemen ($273 million), and Ethiopia ($198 million). As noted, Food for Peace works with the poorest of the poor, focusing on building resilience. Feed the Future works with communities ready for longer-term development and focuses more on agricultural systems strengthening and market development. Catholic Relief Services, for example, currently implements both FFP nonemergency and Feed the Future development programs in Ethiopia. The FFP Ethiopia nonemergency program includes rehabilitating small-scale irrigation systems, conducting assessments on conflict management, and developing "livelihood pathways" for beneficiaries. The FTF development program includes financial education and services training, the establishment of marketing groups, and training for local leaders on youth participation in economic and social development. In this case, Food for Peace is supporting resilience strategies and baseline asset-building, while Feed the Future is encouraging more diverse market engagement and economic development. The use of Food for Peace nonemergency assistance and Feed the Future development assistance can depend on their different statutory requirements and flexibilities. For example, all FFP nonemergency programs funded with Title II must include in-kind food distributions; FTF programs do not. FFP nonemergency programs have funding flexibility that FTF development programs do not: funding may be reprogrammed from nonemergency to emergency responses if a shock occurs during the course of a nonemergency program. This flexibility exists because Title II funding is authorized for both emergency and nonemergency programing (see the " Legislation " section). For example, a five-year FFP nonemergency program in Madagascar shifted some of its funding to emergency programming in 2015, when the southern part of the country was hit with a drought. Once emergency food needs were met in those areas, the program was able to refocus on nonemergency programming. In some instances, Food for Peace nonemergency and Feed the Future development programs pursue similar or overlapping programming. Where such overlap occurs, implementing partners often duplicate programs deliberately to smooth the sustainable sequencing of food security programs, from FFP nonemergency to FTF development programming. <2.2. Program Coordination Within USAID> As Food for Peace nonemergency programs are meant to bridge the gap between emergency programming and longer-term development programs, FFP seeks to coordinate both within the office and with its BFS counterparts. Within FFP, the office's geographic teams manage nonemergency programs alongside emergency programs, and in many cases the same staff manage both types of programs. For example, an FFP officer managing a nonemergency program in Haiti would also be managing emergency programs in the country. This integration allows the office's geographic staff to leverage resources and approaches between nonemergency and emergency programs. FFP officers also work with their Bureau for Food Security counterparts, both in Washington, DC, and in the field. FFP is a part of the Feed the Future target country selection process, and BFS works closely with FFP on its annual country selection process for new countries for FFP nonemergency resources and the subsequent program design for those countries. FFP also uses FTF indicators to measure progress toward programmatic goals in its program evaluations. In the field, BFS and FFP officers collaborate. <3. Legislation> The Food for Peace program was established in 1954 with the passage of the Agricultural Trade Development and Assistance Act of 1954 (P.L. 83-480). Title II of the act authorized the use of surplus agricultural commodities to "[meet] famine or other urgent relief requirements" around the world and provided the general authority for FFP development programs. Now referred to as the Food for Peace Act, the program has evolved to reflect changes in domestic farm policy and in response to foreign policy developments. Congress authorizes the majority of international food assistance programs, including the FFP program, in two pieces of legislation: The Farm Bill. Typically renewed every five years, legislation commonly referred to as the farm bill is a multiyear authorization that governs a range of agricultural and food programs. The majority of farm bill-authorized programs are domestic, but Title III includes the Food for Peace Act as Subtitle A. In the most recent farm bill, the Agriculture Improvement Act of 2018 ( P.L. 115-334 ), Congress authorized programs through FY2023. The Global Food Security Act of 2016 (GFSA). Congress enacted the Global Food Security Act of 2016 ( P.L. 114-195 ) to direct the President to coordinate the development of a whole-of-government global food security strategy and to provide food assistance pursuant to the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2151 et seq.). The GFSA also amended Sections 491 and 492 of the 1961 Act (22 U.S.C. 2292 et seq.) to establish the Emergency Food Security Program (EFSP) under International Disaster Assistance authorities, which FFP uses to provide emergency food assistance primarily through market-based approaches such as local and regional procurement (LRP), vouchers, and cash transfers for food. An extension of GFSA ( P.L. 115-266 ) was enacted in 2018 and authorizes programs through FY2023. Food for Peace nonemergency programs, in particular the Title II in-kind commodity purchase and distribution components, have historically received considerable bipartisan support from a broad domestic constituency. This support is a result of the program's link to U.S. farmers and shippers through the farm bill's statutory requirements. While FFP emergency responses make up the majority of the U.S. in-kind programming, the nonemergency food assistance programs share the same domestic connections. In a prepared statement for the House Agriculture Committee in relation to a 2017 hearing on the farm bill, the chairperson of the USA Rice Farmers Board shared the board's support of U.S. international food aid programs, noting that while U.S. Department of Agriculture (USDA) commodity procurement-purchases comprise only between 1% and 2% of total rice exports, "it is important to the industry that we continue to play a strong role in providing our nation's agricultural bounty to those in need." In written testimony for the House Subcommittee on Agriculture Appropriations, the Senior Director of Policy and Advocacy at Mercy Corps stated that "from our decades of experience working in fragile states, we have found non-emergency FFP programs to be the leading US government tool, for building the resilience of families and communities to food insecurity . [W]ith these investments, we can prevent and mitigate food security crises." Further, FFP has a close relationship with the U.S. maritime industry as a result of longstanding but evolving requirements that a percentage of FFP commodities be shipped on U.S.-flagged vessels. These agricultural cargo preference requirements can sometimes create tension; the U.S. Maritime Administration asserts that agricultural cargo preference is critical to maintaining U.S. sealift capacity while FFP often expresses concern about how the increased cost of adhering to agricultural cargo preference affects its ability to meet the needs of the world's most food insecure populations. Despite this tension, the maritime industry remains engaged and active in FFP programming and has been a vocal advocate for the commodity-based programs. These historic links to the U.S. agriculture and maritime industries have been a significant factor when Congress considers legislation. <4. Funding> Consistent with the two authorization vehicles described above, food assistance funds are appropriated through both Agriculture appropriations (for farm bill-authorized programs) and Department of State, Foreign Operations and Related Programs (SFOPS) appropriations (for GFSA-authorized programs). Funds for nonemergency programs come from two accounts: The Food for Peace Title II Grants account within the Foreign Agricultural Service in Agriculture appropriations. FFP has received Food for Peace Title II Grants since its establishment. The Development Assistance (DA) account within SFOPS appropriations. FFP receives DA funds designated as Community Development Funds (CDF) from BFS to complement its Title II nonemergency resources and improve coordination between FFP and BFS. First legislated in FY2010, Congress intended CDF funds be used to help FFP reduce its reliance on monetization the practice of partners selling U.S. commodities on local markets and using the proceeds to fund nonemergency programs. The level of CDF that FFP receives from BFS is not required by law; however, Congress has designated funds for CDF in the report accompanying annual appropriations (sometimes referred to as a "soft earmark") to which USAID has adhered each fiscal year. FFP receives additional funding for emergency food programs through the International Disaster Assistance (IDA) account within SFOPS appropriations. In FY2010, FFP started receiving IDA funds for the Emergency Food Security Program (EFSP) to supplement its Title II emergency funds. In FY2018, Food for Peace received nearly half of its resources through Agriculture appropriations (see Figure 2 ). Of its overall funding, FFP used 11% ($431 million) for nonemergency programs funded both through Title II and CDF and 89% ($3.250 billion) for emergency programs. As previously mentioned, this was a marked change from the early years of the FFP program. When the Title II program was established, nonemergency programs constituted 65% of funding. While their share of overall programming rose in the first few years of the program in 1959, they made up 83% of Title II programming the share steadily declined in the following decades. By 2007, nonemergency programming accounted for 20% of Title II funds (see Figure 3 ). The following year, Congress established a minimum level (in U.S. dollars) of nonemergency food assistance in the 2008 farm bill ( P.L. 110-246 ). The nonemergency minimum has been maintained in subsequent authorizations but has fallen by $10 million since it was first added to the bill (see Table 1 ). The most recent farm bill ( P.L. 115-334 ), enacted in December 2018, set the minimum level of nonemergency food assistance at $365 million but allowed for Community Development Funds and the Farmer-to-Farmer Program funds to be counted toward the minimum. <5. Issues for Congress> The 116 th Congress may be interested in a number of issues related to Food for Peace nonemergency programs. Areas of interest may include proposed and ongoing reforms to the FFP program funding and structure that could change both how nonemergency programs fit into the broader landscape of U.S. international food assistance programs, and the means through which the program is funded. <5.1. Proposed Elimination of Title II Funding and Food Aid Reform> Since FY2018, the Trump Administration has proposed eliminating funding for the entire FFP Title II program both emergency and nonemergency programs on the basis that doing so would "streamline foreign assistance, prioritize funding, and use funding as effectively and efficiently as possible." In its FY2020 foreign assistance budget request, the Administration referred to providing Title II food aid as "inefficient." Instead of relying on the FFP Title II program, which is funded through Agriculture appropriations, the Administration suggests providing food assistance solely through accounts funded by SFOPS appropriations. The Administration also proposes reducing SFOPS appropriations, indicating a preference for an overall reduction in funding for U.S. foreign assistance, including international food assistance programs. The Trump Administration is not the first to suggest significant changes to U.S. international food assistance programs. The Obama Administration also pursued a food aid reform agenda, proposing in its FY2014 budget request to shift all FFP Title II funds into three SFOPS assistance accounts. According to the Obama Administration, the proposed changes would have increased the flexibility, timeliness, and efficiency of U.S. international food assistance and allowed the programs to reach an additional "4 million more people each year with equivalent funding." While to date Congress has not accepted any proposals to defund Title II, there have been efforts on Capitol Hill to change parts of the Title II program. For example, in the 115 th Congress, Senate Foreign Relations Committee Chairperson Bob Corker and House Foreign Affairs Committee Chairperson Edward Royce both introduced versions of the Food for Peace Modernization Act, with bipartisan support ( S. 2551 and H.R. 5276 , respectively). The two bills would have made changes to the Title II program including eliminating the requirement to purchase all Title II food aid commodities in the United States and removing the monetization requirement in an effort to reduce cost and gain efficiency. Neither bill received further consideration, but some elements of the proposals were incorporated into the most recent farm bill ( P.L. 115-334 ). In FY2018 and FY2019, Congress did not accept Administration proposals to eliminate Title II funding, and for FY2020, the House-passed Agriculture appropriations include $1.85 billion for Title II. As Congress considers its annual appropriations and future authorization measures, Members may consider how to balance calls for reform with the priorities and vested interests of domestic constituencies, including agricultural interests and development groups, and how the often conflicting viewpoints may affect the effectiveness and efficiency of the Title II nonemergency programs. <5.2. Nonemergency Programs in the Context of USAID's Transformation Initiative40> As part of USAID's internal reform initiative, referred to as Transformation , the agency is planning to merge the FFP Office with the Office of U.S. Foreign Disaster Assistance (OFDA) into a new Bureau for Humanitarian Assistance (HA). OFDA is currently responsible for leading the U.S. government response to humanitarian crises overseas. In creating a new HA bureau, USAID would be consolidating its food (currently administered by FFP) and nonfood (currently administered by OFDA) humanitarian responses in an effort to remove potential duplication and present a more unified and coherent U.S. policy on humanitarian assistance on the global stage. In the new HA bureau, FFP and OFDA would no longer remain separate from one another with independent functions; instead, they would be consolidated into one bureau comprising eight offices three geographically focused (Africa; Asia, Latin America, and Caribbean; and Middle East, North Africa, and Europe) and five technical (covering issues such as award management, program quality, donor coordination, and business operations, among others). (See Appendix B .) The humanitarian community remains engaged with the U.S. government on this proposal and its potential effects on the broader efficiency, effectiveness, and coordination of humanitarian assistance. Some food assistance stakeholders have raised concerns about the dissolution of FFP and its potential impact on Title II programming. According to a USAID congressional notification on the intent to form the HA bureau, Title II nonemergency programming would remain in the new HA bureau, though it is unclear how that arrangement will look in practice. For the moment, USAID is planning to have the new HA geographic offices be responsible for managing both emergency and nonemergency Title II programming; however, a number of details need to be worked out by USAID leadership. These include whether and how nonemergency programs will be incorporated into larger disaster risk reduction efforts, and how the nonemergency programs will fit in with the programs to be managed by the new Bureau for Resilience and Food Security. As part of its Transformation process, USAID has held a number of consultations with Members of Congress. While the structural redesign is underway (HA is currently slated to be operational by the end of 2020, though implementation timelines may change), Congress has opportunities to provide feedback and guidance to the agency as it finalizes office-level details. <5.3. Separation of Food for Peace Nonemergency and Feed the Future Development Programs> Some policymakers have questioned why two different offices within USAID are responsible for similar programming, and have suggested either moving FFP's nonemergency portfolio to BFS or vice versa. In either consolidation scenario, the program could potentially benefit from increased coordination. For example, having one office manage all programming and present a unified voice to all stakeholders (including Congress) may reduce communication and coordination challenges. However, USAID could face significant tradeoffs in both consolidation scenarios. If FFP's nonemergency portfolio were to move to USAID's Bureau for Food Security, the programs could lose their focus on serving the most vulnerable populations. Unlike Food for Peace, Feed the Future does not focus its programs on the poorest of the poor, does not include in-kind food distributions in its projects, and cannot shift its funding to meet emergency needs should a shock occur. Were FFP nonemergency programming to move to BFS, these unique FFP qualities may be deprioritized in favor of the more traditional development model BFS has pursued with its Feed the Future programs. Additionally, during a disaster FFP often uses its nonemergency programs as a component in the overall emergency response, by either diverting existing resources or injecting new emergency resources to support an early response. Conversely, if BFS programming were to move to the Office of Food for Peace, the FTF programs could be deprioritized in favor of emergency programming. As discussed earlier, emergency programs have grown to dwarf nonemergency programming in funding terms (see Figure 3 ). If emergency funding needs continue to rise consistent with their previous trajectory, the demands from the emergency portfolio could outpace and overtake the traditional development assistance, jeopardizing the FTF gains already made and risking future programming. <5.4. Use of Community Development Funds (CDF)> Since FY2010, Food for Peace has received Community Development Funds (CDF) from the Development Assistance account in SFOPs appropriations to support its nonemergency programs and reduce reliance on monetization. Over the years, FFP has grown to rely on CDF to pursue the full range of its nonemergency programs. Implementing partners have raised concerns that if the level of CDF funding were to drop, USAID would have to choose between routing CDF funds through BFS to FFP and fully funding BFS-administered programs. If FFP lost its CDF funding, it would likely need to return to using monetization to partially fund its nonemergency programs. To address this potential challenge, Congress could consider changes in legislation, including but not limited to the following: Increasing flexibilities in Title II funding , including the authorized level of Section 202(e). An increase in flexibility through Section 202(e) could mimic the programmatic flexibilities FFP has gained through the use of CDF, including interventions that do not rely on in-kind food distributions. Proposed increases in flexibility have been opposed by some FFP stakeholders, in particular U.S. agricultural commodity groups. Designating in law a specific CDF level for FFP instead of using the "soft earmark" in the bill report thereby guaranteeing a secure line of funding for FFP's nonemergency programs. This approach would likely be supported by the implementing partner community, as it would provide some assurance that the CDF level would remain constant from year to year. However, this approach could negatively affect Feed the Future programming if the overall DA funding were to drop. It also would institutionalize the coordination between FFP and BFS that the sharing of CDF has already propagated. <5.5. Congressional Oversight> The various U.S. international food assistance programs fall under two separate congressional committee jurisdictions, which some argue can reduce Congress's ability to pursue comprehensive, integrated oversight of these programs. In the nonemergency context, FFP Title II-funded programs fall under the jurisdiction of the Agriculture Committees and Agriculture Appropriations Subcommittees, but the CDF-funded programming falls under the jurisdiction of the Foreign Affairs and Foreign Relations Committees and SFOPS Appropriations Subcommittees (see Appendix A ). FFP reports on both of these in the International Food Assistance Report (IFAR), the farm bill-mandated annual report to Congress, even though it is not required to include Community Development Funds. This report offers a complete perspective on the FFP nonemergency programs, but it does not contextualize the programs with the entire U.S. international food assistance landscape. The IFAR does not include Emergency Food Security Program or Feed the Future reporting, because both are overseen by the Foreign Affairs/Relations Committees and are subject to different reporting requirements. As such, no single report currently mandated by Congress captures the entirety of international food assistance. The two oversight jurisdictions also present unique challenges to USAID. The two committee groupings often have different (and sometimes competing) priorities, the push and pull of which can sometimes lead USAID and its implementing partners to shoulder a higher administrative burden than other programs that reside in only one jurisdiction. For example, FFP was subject to eight Government Accountability Office (GAO) audits from 2014 to July 2019, covering issues from the monitoring and evaluation of cash-based food assistance programs to how U.S. in-kind commodities are shipped and stored. By comparison, BFS was the primary subject for one GAO audit in that same time-frame. <6. Looking Ahead> With enactment of the 2018 farm bill ( P.L. 115-334 ), Food for Peace Title II nonemergency programs are authorized through FY2023. However, the Administration continues to propose the elimination of the FFP Title II program in its annual budget requests. By moving forward with USAID's Transformation initiative, the Administration is implementing changes to organizational structures through which nonemergency food assistance programs are administered. Congress may consider addressing its priorities for FFP nonemergency programs in annual appropriations legislation, stand-alone bills that address certain components of the program, and Transformation -related consultations. Appendix A. U.S. International Food Assistance Programs This graphic illustrates the suite of U.S. international food assistance programs, including their administering agency and congressional jurisdiction. The programs highlighted in this graphic are the nonemergency programs discussed in this report. Appendix B. USAID's Proposed Bureau for Humanitarian Assistance

The U.S. government provides international food assistance to promote global food security, alleviate hunger, and address food crises among the world's most vulnerable populations. Congress authorizes this assistance through regular agriculture and international affairs legislation, and provides funding through annual appropriations legislation. The primary channel for this assistance is the Food for Peace program (FFP), administered by the U.S. Agency for International Development (USAID). Established in 1954, FFP has historically focused primarily on meeting the emergency food needs of the world's most vulnerable populations; however, it also manages a number of nonemergency programs. These lesser-known programs employ food to foster development aims, such as addressing the root causes of hunger and making communities more resilient to shocks, both natural and human-induced. Nonemergency activities, which in FY2019 are funded at a minimum annual level of $365 million, may include in-kind food distributions, educational nutrition programs, training on agricultural markets and farming best practices, and broader community development initiatives, among others. In building resilience in vulnerable communities, the United States, through FFP, seeks to reduce the need for future emergency assistance. Similar to emergency food assistance, nonemergency programs use U.S. in-kind food aid—commodities purchased in the United States and shipped overseas. In recent years, it has also turned to market-based approaches, such as procuring food in the country or region in which it will ultimately be delivered (also referred to as local and regional procurement, or LRP) or distributing vouchers and cash for local food purchase. The 115 th Congress enacted both the 2018 farm bill ( P.L. 115-334 ) and Global Food Security Reauthorization Act of 2017 ( P.L. 115-266 ), which authorized all Food for Peace programs through FY2023. In the 116 th Congress, Members may be interested in several policy and structural issues related to nonemergency food assistance as they consider foreign assistance, agriculture, and foreign affairs policies and programs in the course of finalizing annual appropriations legislation. For example, The Trump Administration has repeatedly proposed eliminating funding for the entire FFP program, including both emergency and nonemergency programs, from Agriculture appropriations and instead fund food assistance entirely through Department of State, Foreign Operations, and Related Programs appropriations. The Administration asserts that the proposal is part of an effort to "streamline foreign assistance, prioritize funding, and use funding as effectively and efficiently as possible." To date, Congress has not accepted the Administration's proposal and continued to fund the FFP program in Agriculture appropriations, which is currently authorized through FY2023. USAID's internal reform initiative, referred to as Transformation , calls for the merger of the Office of FFP with the Office U.S. Foreign Disaster Assistance (OFDA) into a new entity called the Bureau for Humanitarian Assistance (HA) by the end of 2020. While the agency has indicated that the new HA will administer nonemergency programming, there are few details on how it will do so. FFP programs fall into two distinct committee jurisdictions—Agriculture and Foreign Affairs/Relations—making congressional oversight of programs more challenging. No one committee receives a comprehensive view of all FFP programming, and the committees of jurisdiction sometimes have competing priorities. For additional information, see CRS Report R45422, U.S. International Food Assistance: An Overview .

crs_R45989

crs_R45989_0

<1. Introduction> Holding capital enables banks to absorb unexpected losses (up to a point) without failing. To improve individual bank safety and soundness and financial system stability, bank regulators have implemented a number of regulations requiring banks to hold minimum levels of capital. These minimums, expressed as ratios between various balance sheet items, are called capital ratio requirements . Although capital ratio requirements can generate the benefits of safety and stability, they impose certain costs, including potentially reducing credit availability and raising credit prices. Given these characteristics, how capital ratio requirements should be calibrated and applied is subject to debate. Capital ratios fall into one of two main types a leverage ratio or a risk-weighted ratio . A leverage ratio treats all assets the same, requiring banks to hold the same amount of capital against the asset regardless of how risky each asset is. A risk-weighted ratio assigns a risk weight a number based on the asset's riskiness that the asset value is multiplied by to account for the fact that some assets are more likely to lose value than others. Riskier assets receive a higher risk weight, which requires banks to hold more capital to meet the ratio requirement, thus better enabling them to absorb losses. One question within the broader debate over bank regulation is what capital ratio requirements relatively small, safe banks should face. In general, policymakers conceptually agree that small, safe banks which have fewer resources to devote to compliance and individually pose less risk to the financial system should face a simpler, less costly regulatory regime. Accordingly, bank regulators have imposed higher thresholds and more complex rules on the largest banks for a number of years. However, some industry observers have argued for further tailoring for smaller banks. In response to concerns that small banks faced unnecessarily burdensome capital requirements, Congress mandated further tailoring of capital rules in Section 201 of P.L. 115-174 , the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA). Section 201 created the Community Bank Leverage Ratio (CBLR), a relatively simple ratio to calculate. Under this provision, a bank with less than $10 billion in assets that meets certain risk-profile criteria set by bank regulators will have the option to exceed a single CBLR threshold instead of being required to exceed several existing, more complex minimum ratios. The CBLR is set at a relatively high level compared to the existing minimum ratio requirements. Banks that exceed the CBLR are to be considered (1) in compliance with all risk-based capital ratios and (2) well capitalized for other regulatory considerations. Because small banks typically hold amounts of capital well above the required minimums, the CBLR option will allow many small banks to opt out of requirements to meet and report more complex ratios. Section 201 grants the federal bank regulatory agencies the Federal Reserve (the Fed), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) (hereinafter collectively referred to as "the bank regulators") discretion over certain aspects of CBLR implementation, including setting the exact ratio, as the statute mandates a range between 8% and 10%. In November 2018, the regulators proposed 9%. The banking industry and certain policymakers criticized this decision, arguing that the threshold would be too high. Despite the criticism, the bank regulators issued a joint press release on October 29, 2019, announcing they had finalized the rule with a 9% threshold. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ) was enacted in an effort to mitigate the adverse effects of the Coronavirus Disease 2019 (COVID-19) pandemic. Section 4012 of the law temporarily lowered the CBLR to 8% until the earlier of (1) the date the public health emergency ends, or (2) the end of 2020. In the rulemaking implementing this provision, the regulators lowered the ratio to 8% until the end of 2020, and chose to raise the ratio first to 8.5% in 2021, before returning it to 9% on January 1, 2022. This report examines capital ratios generally, as well as the capital ratio regime that was in place before EGRRCPA's enactment and will continue to be in place for banks that do not qualify for or do not elect to exercise the CBLR option. It then describes Section 201 of EGRRCPA, the regulation implemented pursuant to that provision, and the ensuing debate surrounding this implementation. The report then describes the temporary lowering of the threshold pursuant to the CARES Act. Lastly, this report presents estimates on the number and characteristics of banks that would have qualified under the rule given their pre-implementation balance sheets and estimates those banks' CBLRs in the pre-implementation time period. This provides context on the number of banks potentially affected by CBLR implementation. <2. Background on Capital Requirements> A bank's balance sheet is divided into assets, liabilities, and capital. Assets are largely the value of loans owed to the bank and securities owned by the bank. To make loans and buy securities, a bank secures funding by either incurring liabilities or raising capital. A bank's liabilities are largely the value of deposits and debt the bank owes depositors and creditors. Banks raise capital through various methods, including issuing equity to shareholders or issuing special types of bonds that can be converted into equity. Importantly, many types of capital unlike liabilities may not contractually require the bank to make payouts of specified amounts. Banks make profits in part because many of their assets are generally riskier, longer-term, and more illiquid than their liabilities, which allows them to earn more interest on their assets than they pay on their liabilities. The practice is usually profitable, but it exposes banks to risks that can lead to failure. When defaults on a bank's assets increase, the money coming into the bank decreases. However, the bank generally remains obligated to make payouts on its liabilities. Capital, though, enables the bank to absorb losses. When money coming in decreases, the bank's payouts on capital can be reduced, delayed, or cancelled. Thus, capital allows banks to continue to meet their rigid liability obligations and avoid failure even after experiencing unanticipated losses on assets. For this reason, regulators require banks to hold a minimum level of capital, expressed as ratios between items on bank balance sheets. <2.1. Generally Applicable Requirements (Without CBLR Option)> Banks have been subject to capital ratio requirements for decades. U.S. bank regulators first established explicit numerical ratio requirements in 1981. In 1988, they adopted the Basel Capital Accords proposed by the Basel Committee on Banking Supervision (BCBS) an international group of bank regulators that sets international standards which were the precursor to the ratio requirement regime used in the United States today. Those requirements now known as "Basel I" were revised in 2004, establishing the "Basel II" requirements that were in effect at the onset of the financial crisis in 2008. In 2010, the BCBS agreed to more stringent "Basel III" standards. Pursuant to this accord, U.S. regulators finalized new capital requirements in 2013. Banks are required to satisfy several different capital ratio requirements. A detailed examination of how these ratios are calculated is beyond the scope of this report. ( Figure 1 provides a highly simplified, hypothetical example.) The following sections examine the mix of leverage and risk-weighted ratio requirements in effect prior to CBLR's implementation to enable comparison between regulatory regimes. <2.1.1. Leverage Ratio Requirements> Most banks are required to meet a 4% minimum leverage ratio. In addition, to be considered well capitalized for other regulatory purposes for example, being exempt from interest-rate and brokered-deposit restrictions banks must meet a 5% leverage ratio. Furthermore, 15 large and complex U.S. banks classified as advanced approaches banks must maintain a minimum 3% supplementary leverage ratio (SLR) that uses an exposure measure that includes both balance sheet assets and certain other exposures to losses that do not appear on the balance sheet. Finally, a subset of eight of the largest and most complex U.S. banks classified as globally systemically important banks (G-SIBs) must meet an enhanced SLR (eSLR) requirement of 5% at the holding-company level to avoid capital-distribution restrictions, and 6% at the depository level to be considered well capitalized. <2.1.2. Risk-Weighted Ratio Requirements> The required risk-weighted ratios depend on bank size and capital quality (some types of capital are considered less effective at absorbing losses than other types, and thus considered lower quality). Most banks are required to meet a 4.5% risk-weighted ratio for the highest-quality capital and ratios of 6% and 8% for lower-quality capital types. To be considered well capitalized for purposes of interest-rate and brokered-deposit restriction exemptions (among other regulatory considerations), a bank's ratios must be 2% above the minimums (i.e., 6.5%, 8%, and 10%, respectively). In addition, banks must have an additional 2.5% of high-quality capital on top of the minimum levels (7%, 8.5%, and 10.5%, respectively) as part of a capital conservation buffer in order to avoid restrictions on capital distributions, such as dividend payments. Advanced approaches banks are subject to a 0%-2.5% countercyclical buffer that the Fed can deploy if credit conditions warrant increasing capital (the buffer is currently 0% and has been so since its implementation). Finally, the G-SIBs are subject to an additional capital surcharge of between 1% and 4.5% based on the institution's systemic importance. <2.2. Effects of Capital Ratio Requirements> Whether the generally applicable capital requirements' (i.e., the requirements facing all banks prior to the implementation of the CBLR) potential benefits such as increased bank safety and financial system stability are appropriately balanced against the potential costs of reduced credit availability is a debated issue. Capital is typically a more expensive source of funding for banks than liabilities. In addition, calculating and reporting the ratios requires banks to devote resources such as employee time and purchases of specialized software to regulatory compliance. Thus, requiring banks to hold higher levels of capital and meet certain ratios imposes costs. This could lead banks to reduce the amount of credit available or raise credit prices. <2.3. Leverage Ratio and Risk-Based Ratios: Relative Strengths and Weaknesses> Leverage ratios and risk-based ratios each have potential strengths and weaknesses. Because the CBLR exempts certain banks from risk-weighted ratio requirements and allows them to use a single leverage ratio, bank regulators will likely consider those relative strengths and weaknesses in determining which banks should have the CBLR option. Riskier assets generally offer greater rates of return to compensate investors for bearing more risk. Thus, without risk weighting banks have an incentive to hold riskier assets because the same amount of capital must be held against risky and safe assets. In addition, a leverage ratio alone may not fully reflect a bank's riskiness because a bank with a high concentration of very risky assets could have a similar ratio to a bank with a high concentration of very safe assets. Risk weighting can address these issues, because the bank is required to hold more capital against risky assets than against safe ones (and no capital against the safest assets, such as cash and U.S. Treasuries). However, risk weighting presents its own challenges. Risk weights assigned to particular asset classes could inaccurately estimate some assets' true risks, especially because they cannot be adjusted as quickly as asset risk might change. Banks may have an incentive to overly invest in assets with risk weights that are set too low (because they would receive a riskier asset's high potential rate of return, but have to hold only enough capital to protect against a safer asset's losses), or inversely to underinvest in assets with risks weights that are set too high. Some observers believe that the risk weights in place prior to the 2007-2009 financial crisis were poorly calibrated and "encouraged financial firms to crowd into" risky assets, exacerbating the downturn. For example, banks held highly rated mortgage-backed securities (MBSs) before the crisis, in part because those assets offered a higher rate of return than other assets with the same risk weight. MBSs then suffered unexpectedly large losses during the crisis. Another criticism is that the risk-weighted system involves needless complexity and is an example of regulator micromanagement. The complexity could benefit the largest banks, which have the resources to absorb the added regulatory cost, compared with small banks that could find compliance costs more burdensome. Thus, critics argue, small banks should be subject to a simpler system to avoid giving large banks a competitive advantage. <3. Section 201 of P.L. 115-174> In response to concerns about the generally applicable capital ratio requirements' effects on small banks, Congress mandated in Section 201 of EGRRCPA that certain qualifying banks that exceed a non-risk-weighted Community Bank Leverage Ratio (CBLR) be considered in compliance with all risked-weighted capital ratios and well capitalized for other regulatory purposes. The provision defined qualifying banks as those with less than $10 billion in assets, but also authorized the federal bank regulators to disqualify banks based on "risk profile, which shall be based on consideration of (i) off-balance sheet exposures; (ii) trading assets and liabilities; (iii) total notional derivatives exposures; and (iv) such other factors as the appropriate Federal banking agencies determine appropriate." This report refers to banks that meet these criteria as CBLR - qualifying banks . Section 201 also directed federal bank regulators to set a threshold ratio of capital to unweighted assets at between 8% and 10% (as discussed in the " Generally Applicable Requirements (Without CBLR Option) " section, the current minimum leverage ratio is 4% and the threshold to be considered well capitalized is 5%). This report refers to qualifying banks that would exceed the threshold as CBLR - compliant banks. Although the act specified in statute one qualifying criterion (less than $10 billion in assets) and established a range within which the CBLR must be set (8% to 10%), it granted the regulators discretion in certain aspects, including setting other qualifying criteria and the exact level within the 8%-10% range. Under Section 201, qualifying banks that meet size and risk criteria would fall into one of two groups with respect to the CBLR threshold when the new regulation goes into effect. The CBLR-compliant banks (i.e., those above the threshold) would have the option to enter the CBLR regime, and be considered in compliance with all risk-based capital ratio minimums and well capitalized for other regulatory purposes. This would free those banks from costs associated with meeting risk-based minimums and reporting their ratios (a quarterly exercise requiring bank resources). Most small banks hold enough capital to exceed the threshold, and thus will be provided this regulatory relief without having to raise extra capital. Banks that meet the size and risk-profile criteria (i.e., CBLR-qualifying banks) but whose capital holdings are below the CBLR threshold can remain in the preexisting capital regime (no banks are required to meet the CBLR), or can choose to raise capital or otherwise change their balance sheet composition in order to become CBLR compliant. <4. Regulatory Implementation> On November 21, 2018, the bank regulators announced they were inviting public comment on a proposed CBLR rulemaking. The proposal included the statutorily mandated qualifying criterion that only banks with less than $10 billion in assets would be eligible. In addition, the regulators used the authority granted by Section 201 to exclude banks based on risk-profile characteristics by including a number of additional qualifying criteria that limited banks' trading activity and off-balance-sheet exposures. On the question of where within the 8% to 10% range to set the CBLR threshold, the regulators chose 9%, arguing that this level supports the "goals of reducing regulatory burden for community banking organizations and retaining safety and soundness in the banking system." The banking industry criticized aspects of the rule. For example, an industry group representing community banks indicated it was "disappointed that regulators have proposed capital standards that are higher than necessary" and "supports an 8% community bank leverage ratio." In its comment letter, the group noted that an 8% threshold "would calibrate the CBLR closer to the current risk-based capital requirements ... [and] put the ratio closer to the current 5% leverage requirement." Despite the criticism, the bank regulators issued a joint press release on October 29, 2019, announcing they had finalized the rule with a 9% threshold. The rule went into effect on January 1, 2020. <5. Section 4012 of the CARES Act (P.L. 116-136)> When borrowers miss payments on loans at an unanticipated high rate, banks incur losses and potentially must write down the value of their capital, reducing their capital ratios. To halt or slow the decline and stay above regulatory thresholds, banks may respond by halting or slowing the growth of assets by making fewer loans. If the missed payments are the result of widespread economic distress, this reduction in credit availability may exacerbate the downturn. The COVID-19 pandemic caused widespread economic disruption as millions of businesses shut down and unemployment soared. To mitigate the pandemic's economic effects, among its other adverse effects, Congress passed the CARES Act ( P.L. 116-136 ). Section 4012 of the CARES Act temporarily lowers the CBLR to give qualifying banks using this capital measure more leeway to continue lending and stay above the threshold as the pandemic's economic effects unfold. The provision directs regulators to lower the CBLR to 8% and to give banks that fall below that level a reasonable grace period to come back into compliance with the CBLR. This mandate expires the earlier of (1) the date the public health emergency ends or (2) the end of 2020. In the rulemaking implementing this provision, the regulators lowered the ratio to 8% until the end of 2020, and chose to raise the ratio first to 8.5% in 2021, before returning it to 9% on January 1, 2022. <6. Analysis: Banks, Qualifying Criteria, and CBLR-Compliant Thresholds> Outside of bank policy circles and absent context, debating whether a threshold ratio of capital to unweighted assets is best set at 8% or 9% may seem inconsequential. However, hundreds of banks can be affected by just fractions of a percentage point. This section provides estimates of how many depositories would, as of June 30, 2019, likely fall above or below the CBLR threshold if set at 9% or 8%. Those estimates at the state level are provided in Appendix A . This section also includes statistics on certain characteristics of banks that meet or do not meet various CBLR criteria. The estimates presented here are based on Congressional Research Service (CRS) analysis of (1) data provided by FDIC-insured depository institutions (insured depository institutions can be either banks or savings associations, but will be referred to as "banks") on their Consolidated Statement on Condition and Income, known as the call report , for the second quarter of 2019; and (2) information found in the CBLR notice of proposed rulemaking published in the Federal Register . CRS could not find in the call report some data points necessary to provide a definitive list of and exact statistics on which banks would and would not qualify and be CBLR compliant. Thus, the CRS list of qualifying and compliant banks and the calculation of every bank's current CBLR may not exactly match the eventual actual numbers. A more detailed description of CRS methodology is provided in Appendix B . CRS began with all 5,352 banks that filed call reports for the second quarter of 2019, and first filtered out those with $10 billion or more in assets (see Figure 2 ). Based on that criterion, 141 banks would not have qualified and 5,211 would have if they met the risk-profile criteria. Those 5,211 were then checked against the risk profile-based criteria, and 5,078 were found to qualify. This high rate of qualification is not entirely surprising at the depository level, because small banks are generally unlikely to engage intensely enough in the activities and products included in the risk criteria to exceed the allowable threshold. Of the 5,078 qualifying banks, 4,440 had CBLRs above 9% and thus would have been CBLR compliant. Of the remainder (638 banks), 515 banks had CBLRs between 8% and 9%, and thus would have been compliant if the CBLR threshold level was 8%. Table 1 compares the averages of certain balance-sheet values and ratios at qualifying and nonqualifying banks. Total assets measures bank size. Loans as a percentage of total assets and deposits as a percentage of total liabilities measure how concentrated a bank is in traditional, core banking activities, while trading assets and liabilities as a percentage of total assets measure how active it is in noncore activities. Off-balance-sheet exposures as a percentage of total assets measures bank risk that is not reflected on the balance sheet. Recall from " Risk-Weighted Ratio Requirements " that banks must meet three different minimum risk-weighted requirements that differ in the types of capital used to calculate the ratio. The types of capital they use are categorized as common equity Tier 1 (CET1), Tier 1, and total capital. Tier 1 capital is what is used to calculate the generally applicable leverage ratio in place before the CBLR. CET1 is the most loss-absorbing category of capital and allows the fewest capital types of the three. Tier 1 includes additional items not allowable in CET1. Total capital is the most inclusive, allowing certain Tier 2 capital items not allowable in Tier 1. The average of these ratios is presented to give an indication of how well capitalized banks were, as measured by the existing capital regime. Banks that would not have qualified for the CBLR under the regulator-set risk-profile criteria were on average almost twice as large as qualifying banks ($1.05 billion vs. $542 million), but were still mostly relatively small banks. In addition, nonqualifying banks' concentrations in lending, deposit taking, and trading were not substantively different from qualifying banks'. However, their off-balance-sheet exposures and capital levels notably differed. Nonqualifying banks had significantly more off-balance-sheet exposures as a percentage of total assets 37% on average, compared to an average of 8.5% at qualifying banks. (A difference is expected, as this characteristic is a risk-profile criterion for qualification. However, the large disparity and the fact that both groups are quite far from the allowable 25% threshold are notable). Furthermore, nonqualifying banks' average risk-based capital ratios were lower than qualifying banks' levels by about a quarter. These latter two differences indicate that regulators set the risk-profile criteria in a way that would disqualify banks with large off-balance-sheet exposures that are relatively thinly capitalized when the risk of their assets is taken into account. Arguably, this would mean that giving those banks the ability to opt out of risk-based requirements could expose them and the banking system to unacceptably high failure risks. Table 2 compares banks that would have exceeded the 9% CBLR threshold, those that would have only met the threshold if it was set at 8%, and those that would not have met any threshold allowable given the Section 201 mandated range (i.e., 8%-10%). When banks compliant at a 9% threshold are compared to those compliant at the 8% threshold, there is a great deal of similarity in size, activities, and off-balance-sheet exposure. However, the 8% banks' risk-based capital ratios were lower by about half when compared to the 9% banks. In this way, banks compliant at 8% were quite similar to the banks that would not have qualified at the 8% level. These capital characteristics may have been a factor in regulators deciding not to allow these banks to opt out of risk-based capital requirements. It is also instructive to compare banks with CBLRs between 9% and 10% and those with CBLRs between 8% and 9%. In Table 2 , the average risk-based ratios of banks with CBLRs greater than 9% were boosted by banks that held very high levels of capital. Since the regulatory agencies cannot set the threshold above 10%, banks with such CBLRs are not at issue in the implementation. Rather, the agencies have determined that banks with CBLRs between 9% and 10% should be able to benefit from the CBLR regime, whereas 8%-9% banks should not. Table 3 shows that the risked-based differences between 9%-10% banks and 8%-9% banks were not as pronounced as when all CBLR compliant banks are the point of comparison. Instead, the increases in the various risked-based measures closely reflect the 1% increase in the CBLR. <7. Key Findings> CRS estimates that of the 5,352 U.S. depositories, 5,078 (95% of all banks) would have been CBLR compliant provided their capital exceeds the 9% threshold set by regulators. Of those, about 4,440 (83% of all banks) currently exceed that threshold. Regulators are statutorily authorized to set the threshold as low as 8%. If they did so, about 515 additional qualifying banks (10% of all banks) would have exceeded the threshold, and thus been eligible for exemption from risk-based ratio compliance. Under the risk-profile criteria set by regulators, nonqualifying banks were on average larger (though still relatively small by industry standards), had significantly larger off-balance-sheet exposures, and held about a quarter less capital than qualifying banks, as measured by risk-based ratios. Banks that would have been CBLR compliant at a 9% threshold were similar in size, activities, and off-balance-sheet exposures to 8% threshold banks. However, the latter group held about half the risk-based capital that the former did. The difference in risk-based measures between 9%-10% CBLR banks and 8%-9% CBLR banks was not as pronounced. The 1 percentage point increase in the CBLR threshold is more or less reflected in the difference in the risk-based measures. Appendix A. Qualifying Banks by CBLR and State Appendix B. Methodology To produce the statistics and estimates presented in this report, CRS used (1) information from the bank regulator Notice of Proposed Rulemaking: Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations , published in the Federal Register on February 8, 2019; and (2) data from Consolidated Reports on Condition and Income as of June 30, 2019, which was downloaded from the Federal Financial Institution Examination Council bulk data download website on September 14, 2019. In the proposed rule notice, bank regulators provided this proposed format for reporting the CBLR, which indicates which measures the regulators were intending to use for qualifying criteria and to calculate the CBLR: The estimates in this report may differ from the actual numbers due to two challenges with data availability. First, exactly how deferred tax assets are counted in the proposals and what deductions from those figures would be permitted differ from the deferred tax asset values banks entered at call report Schedule RC-R, Part I, line 8. However, CRS was unable to locate the exact data identified in the proposal, and so used the deferred tax asset value available in the call report as a proxy. CRS judged that using this proxy was unlikely to cause the estimated bank counts and statistics presented in this report to differ substantively from the actual figures, because the vast majority of qualifying banks reported little or no deferred tax assets. Nevertheless, the difference could cause a bank near the 25% DTA-to-assets qualifying threshold to be erroneously classified as qualifying or nonqualifying. In addition, using this proxy could cause the CBLRs estimated for this report to be slightly different from certain banks' actual CBLRs. Second, while CRS was able to locate values in the call report data for a number of off-balance-sheet exposures identified in the proposal, it was not able to locate others. The exposures included in the proposal are the unused portions of commitments (except for unconditionally cancellable commitments); self-liquidating, trade-related contingent items that arise from the movement of goods, transaction-related contingent items (i.e., performance bond, bid bonds and warranties); sold credit protection in the form of guarantees and credit derivatives; credit enhancing representations and guarantees; off-balance sheet securitization exposures; letters of credit; forward agreements that are not derivatives contracts; and securities lending and borrowing transactions. CRS used the following values banks entered in call reports: (1) Schedule RC-L, lines 1a, 1b, 1c(1)-(2), 1d, and 1e as "unused portions of commitments"; (2) Schedule RC-R, Part II, line 19, Column A as "unconditionally cancellable commitments"; (3) Schedule RC-L lines 7a(1)-(4) Column A as "sold credit protection in the form of guarantees and credit derivatives"; (4) Schedule RC-R, Part II, line 10, Column A as "off balance sheet securitization exposures"; (5) Schedule RC-L line 2, 3, and 4 as "letters of credit"; and (6) Schedule RC-L, line 6a and 6b as "securities lending and borrowing transactions." CRS was unable to locate values for (1) "trade self-liquidating, trade-related contingent items that arise from the movement of goods"; (2) "transaction-related contingent items"; (3) "credit enhancing representations and guarantees"; and (4) "forward agreements that are not derivatives contracts." Thus, the CRS-calculated off-balance-sheet exposures used for this report are underestimates for banks that had any of the latter set of exposures. CRS judges that the number of banks that have these exposures and for which the underestimation is the difference between falling above or below the 25% off-balance-sheet exposures to total assets threshold is likely relatively small. Nevertheless, by omitting the latter set of exposures, the CRS estimate of qualifying banks may be an overcount. To calculate the CBLRs, CRS used the following calculations and call report items (the item number is an identifying number assigned to each line item in the call report data set):

Capital allows banks to withstand losses (to a point) without failing, and regulators require banks to hold certain minimum amounts. These requirements are generally expressed as ratios between balance sheet items, and banks (particularly small banks) indicate that reporting those ratios can be difficult. Capital ratios fall into one of two main types—simpler leverage ratio s and more complex risk-weighted ratio s . A leverage ratio treats all assets the same, whereas a risk-weighted ratio assigns assets a risk weight to account for the likelihood of losses. In response to concerns that small banks faced unnecessarily burdensome capital requirements, Congress mandated further tailoring of capital rules in Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 ( P.L. 115-174 ) and created the Community Bank Leverage Ratio (CBLR). Under the provision, a bank with less than $10 billion in assets that meets certain risk-profile criteria will have the option to meet a CBLR requirement instead of the existing, more complex risk-weighted requirements. Because most small banks currently hold enough capital to meet the CBLR option, Section 201 will allow many small banks to opt out of requirements to meet and report more complex ratios. Questions related to how much riskier bank portfolios will be if they are only subject to a leverage ratio (rather than a combination of leverage and risk-based ratios) and how high the threshold must be to mitigate those risks are matters of debate. Section 201 grants the federal bank regulatory agencies—the Federal Reserve (the Fed), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC)—discretion over certain aspects of CBLR implementation, including setting the exact ratio; the provision mandated a range between 8% and 10%. In November 2018, the regulators proposed 9%, arguing this threshold supports safety and stability while providing regulatory relief to small banks. Bank proponents criticized this decision and advocated an 8% threshold, arguing that 9% is too high and withholds the exemption's benefits from banks with appropriately small risks. Despite the criticism, the bank regulators announced in a joint press release on October 29, 2019, they had finalized the rule with a 9% threshold. Responding to the coronavirus pandemic, Congress mandated in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ) that the ratio be temporarily lowered to 8% until the earlier of (1) the date the public health emergency ends, or (2) the end of 2020, so that banks have more leeway to deal with the pandemic's impact. In rulemaking implementing that provision, the regulators set the ratio for 2021 at 8.5% before raising it back to 9% on January 1, 2022. Of the 5,352 FDIC-insured depository institutions in the United States at the end of the second quarter of 2019, the Congressional Research Service (CRS) estimates that 5,078 (about 95%) would have met the size and risk-profile criteria necessary to qualify for the CBLR option. Under the regulator-set risk-profile criteria, nonqualifying banks were on average larger, had larger off-balance-sheet exposures, and had risk-based capital ratios that are about a quarter lower than qualifying banks. Of the 5,078 banks that would have qualified based on size and risk criteria, CRS estimates 4,440 (or 83% of all U.S. banks) exceeded a 9% threshold and would have been eligible to enter the CBLR regime. An additional 515 banks (9.6%) exceeded an 8% threshold. Thus, the difference between setting the ratio at 8% or 9% could, depending on perspective, potentially have provided appropriate regulatory relief to, or removed important safeguards from, about 10% of the nation's banks, which collectively held about 2% of total U.S. banking industry assets. Banks that would have been CBLR compliant at a 9% threshold were similar in size, activities, and off-balance-sheet exposures to 8% threshold banks, but the latter group's risk-based ratios were about half the level of the former's. However, when banks with CBLRs between 9% and 10% are compared to banks with CBLRs between 8% and 9%, the difference in risk-based ratios becomes much less pronounced.

crs_R45916

crs_R45916_0

<1. Background> The Transportation Investments Generating Economic Recovery (TIGER) grant program is a discretionary program providing grants to projects of national, regional, or metropolitan-area significance in various surface transportation modes on a competitive basis, with recipients selected by the federal Department of Transportation (DOT). It originated in the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ), where it was called "national infrastructure investment" (as it has been in subsequent appropriations acts). Beginning with the FY2018 round of grants, DOT renamed the program the Better Utilizing Investments to Leverage Development (BUILD) program. Unless otherwise noted, all dollar amounts in this report are expressed in 2019 dollars to adjust for inflation over the life of the program, and all percentages are calculated on that basis. These figures therefore do not correspond to DOT data, which in general are not adjusted for inflation. <2. The Origin of the Program> The TIGER program began in the depths of the 2007-2009 recession as a way to both improve transportation infrastructure and stimulate economic activity. For much of its existence it was virtually the only significant discretionary surface transportation grant program, and virtually the only program that allowed local communities to apply for and receive highway funding directly from the federal government rather than through their state's department of transportation, which might have different priorities than the community. One of President Obama's first acts after taking office in January 2009 was to propose an economic stimulus bill. Congress passed ARRA after roughly a month of intense debate. The bill provided over $700 billion to stimulate the economy, mostly through reductions in taxes. It authorized $43 billion for transportation infrastructure, including $1.5 billion for a discretionary grant program to make capital investments in surface transportation infrastructure, which Congress labeled "national infrastructure investment." In implementing this new program, DOT retitled it Transportation Investments Generating Economic Recovery, although the annual DOT appropriations act continues to refer to it as national infrastructure investment. The program initially had two goals: to make investments that would improve the condition of the nation's surface transportation infrastructure, and to do so quickly to provide immediate stimulus to the economy. Thus ARRA required DOT to give priority to projects that were expected to be completed by February 17, 2012, three years after the legislation was enacted. Since it took nearly a year for DOT to set up an office to manage the program, solicit applications, review them, and select which projects to award, the process favored projects that could be completed within two years. The initial awards were announced on February 17, 2010. In that first round, DOT received 1,497 applications requesting $72.5 billion. It awarded 51 grants totaling $1.69 billion. See Table 3 for details about annual applications and awards. Unless otherwise noted, all dollar amounts in this report are expressed in 2019 dollars to adjust for inflation over the life of the program, and all percentages are calculated on that basis. These figures therefore do not correspond to DOT data, which in general are not adjusted for inflation. <3. After Earmarks Ended> During the early 2000s, transportation authorization and appropriations bills included growing numbers of earmarks directing discretionary grants to specific projects. In response to criticism of this practice, in 2011 the Republican conferences in both the House and the Senate prohibited Members from requesting earmarks. In his State of the Union Address on January 25, 2011, President Obama vowed to veto any legislation containing earmarks. In the 2012 surface transportation reauthorization legislation, the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ), Congress reduced opportunities for earmarking by abolishing most of DOT's discretionary grant programs, providing virtually all federal surface transportation funding to recipients based on formulas. The TIGER grant program, which has been funded in the annual DOT appropriations acts and was not included in MAP-21, became one of the few remaining discretionary transportation grant programs. The Obama Administration did not support continuing the program in its FY2010 and FY2011 budgets, but requested funding in FY2012 and following years. A pattern emerged in which the Republican majority in the House of Representatives proposed cutting funding or eliminating it altogether, the Senate supported the program, and the program ultimately received funding in each year's appropriations legislation. Since the Democratic Party regained the House majority in the 2018 midterm election, the House has supported sizable increases in the program ( Table 1 ). <4. Evolution of the Program's Grant Criteria> Since Congress has continued the TIGER/BUILD program on an annual basis, the annual DOT appropriations act gives Congress the opportunity to adjust the criteria for the program each year. Some criteria, such as a requirement that DOT must ensure an equitable distribution of grant funds geographically and between urban and rural areas, have been the same since the first year. Other criteria, such as the minimum and maximum grant size, have changed frequently. In general, the trend has been toward distributing the funding to a larger number of grantees (through such measures as lowering the maximum grant size). Table A-1 summarizes the changes in many of the program's grant criteria over the past decade. <4.1. Merit Criteria: Considerations Beyond Economic Stimulus> Born in the anxious days of early 2009, when there was genuine concern about the state of the U.S. economy, the initial focus of the TIGER/BUILD grant program was twofold: to make grants to surface transportation projects that would improve the nation's transportation infrastructure and that would be able to spend the money quickly in order to stimulate the economy. Other considerations included the likelihood of on-time completion and the benefits of the project compared to the costs. In subsequent years, as the economy began to recover, DOT added additional merit criteria to its project selection, as shown in Table 2 .These criteria were determined administratively, and have not been specified in appropriations legislation providing funds for the program. Some of these criteria can conflict with each other in specific instances. For example, a project could reduce congestion-related emissions on a roadway by supporting alternatives (e.g., transit improvements) or by altering the roadway to reduce congestion (e.g., adding lanes, adjusting traffic signal timing, reshaping intersections). The first option might also reduce dependence on oil, whereas the second might increase dependence on oil while reducing emissions and improving the efficiency of the movement of goods and people. How DOT reconciles such conflicts has not been disclosed. <5. Program Issues> <5.1. Demand and Supply in Program Funding> Beginning with the first round of awards in FY2009, each annual grant announcement has noted that the amount of funding applied for has greatly exceeded the amount of funding available through the program (see Table 3 ). After the relatively large first-year appropriation, in succeeding years the amount provided was around one-third of the first year of funding. The total amount applied for also dropped significantly after the first year. The reasons for the decline in funding may include the opposition of the House of Representatives to funding the program (see Table 1 ), the general limitations on the amounts provided in appropriations bills, and the competition for that funding among the proponents and constituencies of different programs. One possible reason for the dramatic decline in the amount applied for from FY2016 to FY2017 was the reduction in the maximum grant size that Congress decreed for FY2017 (and succeeding years), from a maximum of $100 million in FY2016 to $25 million in FY2017. Of the $9.8 billion applied for in FY2016, $3.8 billion was represented by a total of 87 applications that exceeded $25 million (nominal) and thus exceeded the maximum limit for FY2017. The combination of that lowered cap on grant amounts, combined with the introduction of several new discretionary transportation grant programs beginning in FY2017, may explain part of the decline in the amount applied for in FY2017. The amount applied for rose in FY2018, when the amount of funding available tripled. <5.2. Congressional Directives for Distribution of Grants> <5.2.1. Geographic Distribution> One of the directives Congress gave DOT regarding the distribution of TIGER/BUILD grants was that DOT "shall ensure an equitable geographic distribution." Beyond using the term "equitable," the only other legislative guidance on this point is the limitation on the amount of the program funding that can be awarded to projects in a single state. That limit ranged from a high of 25% to a single state during the FY2010-FY2015 rounds to a low of 10% during the FY2017-FY2019 rounds. There have been a total of 553 grants awarded over the period FY2009-FY2018. Every state and most territories have received at least one grant; America Samoa and the Northern Marianas Islands have not received a grant. California has received the most funding, 6.9% of the total over that period; that is considerably less than California's share of the total U.S. population (12.1%). Of the top 10 states by share of grant funding received, Texas, New York, Pennsylvania, and Florida also received smaller shares of funding than their shares of the nation's population, while Illinois, Washington, Massachusetts, and Missouri received larger shares of funding than their shares of the population (see Table 4 ). It would be difficult for DOT to match the funding awarded to each state's share of the nation's population, since projects are not distributed proportionally among the states on the bases of cost, merit, and number. <5.2.2. Urban and Rural Area Grants> Another congressional directive, in place since the second year of the program, is that DOT "shall ensure an appropriate balance in addressing the needs of urban and rural areas." DOT has responded to this directive in different ways over time. <5.2.2.1. FY2009-FY2016> In the first year (FY2009) of the program, 7% of the funding went to projects in rural areas. Since then, Congress has directed that a specific minimum share of the grant funding go to projects located in rural areas. That share has typically been around 20% to 30% (see Table 5 and Figure 1 ). The definition of rural and urban areas used by the TIGER/BUILD Grant program has varied from that used by the U.S. Census Bureau. The Census Bureau defines urban areas as both Urbanized Areas of 50,000 or more people; Urban Clusters of at least 2,500 and less than 50,000 people. Rural areas are defined as those areas not included within an urban area. By this definition, 81% of the U.S. population lived in urban areas and 19% in rural areas over the 2011-2015 period. For most of its history, the TIGER/BUILD program has defined urban areas as areas located in an Urbanized Area, and rural areas as everything else. Urban Clusters as defined by the Census Bureau were thus considered rural areas for purposes of the program. By this definition, roughly 70% of the U.S. population lived in urban areas and 30% in rural areas in 2015. During the period FY2009-FY2016, the proportion of TIGER/BUILD grant funding awarded to projects in rural areas as defined by the program, measured in 2019 dollars, was around 21%. <5.2.2.2. FY2017-FY2018> In the program's 2017 Notice of Funding Opportunity (NOFO), the new Trump Administration announced that it would give special consideration to projects in rural areas. No rationale for this special consideration has been given, but one is implied in the observation that "While only 19 percent of the nation's population lives in rural areas, 51 percent of all traffic fatalities occurred on rural roads (2014)." In announcing the FY2017 round of awards, the Secretary of Transportation noted that "an effort was made to re-balance the under-investment in rural communities to address overlooked needs." This assertion that there had been under-investment in the transportation needs of rural communities was reiterated in the FY2018 NOFO; that assertion is not included in the FY2019 NOFO, but that document reiterates that special consideration will be given to project applications from rural areas. Under this new policy, the proportion of program funding requested for rural areas rose from 35% in the FY2016 round to 44% in the FY2017 round, and the share of program funding awarded to rural areas rose from 21% to 65% (see Table 5 ). Another factor that may have influenced this shift is that although the amount of grant funding available in the FY2017 round ($500 million) was the same as in the previous couple of rounds, the number of applications and amount of funding applied for dropped significantly in FY2017, particularly from urban areas (see Table 6 ). Why that happened is not clear. The current surface transportation authorization act (MAP-21), which was enacted in December 2015, created several new discretionary grant programs for surface transportation; that, combined with the new lowered cap of $25 million on maximum TIGER/BUILD grant sizes that took effect in FY2017, may have led sponsors of more expensive projects, which are often located in urban areas, to seek funding from the new grant programs rather than from the TIGER/BUILD program. The Administration's stated rationales for prioritizing funding for projects in rural areas are open to question. While 71% of the nation's roads are in rural areas, they account for only 30% of total vehicle miles traveled, and over the period FY2009-FY2015, 37% of federal highway funding went to rural roads. Rural roads are on average in better condition than urban roads; in 2012 93% of the vehicle miles traveled on rural roads were on roads with pavement conditions rated as acceptable or good, compared with 78% of the vehicle miles traveled on urban roads. The Administration's claim that safety factors justify directing two-thirds of BUILD grants to rural areas is only partially supported by available data. While a disproportionate share of highway deaths occurs on rural roads, that proportion has been trending downward, declining from around 60% in the early 2000s to 46% in 2017. The number of traffic fatalities in rural areas declined by 18% from 2008-2017, while the number of fatalities in urban areas increased by 17% over the same period. Moreover, road conditions are only one factor among the reasons why the share of highway fatalities in rural areas exceeds the share of population in those areas. Other factors include driver behavior (e.g., higher typical speeds, lower rates of seat belt use, and higher driver fatigue rates), typically longer travel times for emergency medical care, and vehicle condition. In the FY2019 DOT appropriations act, Congress made two changes that may constrain the Administration's discretion to steer funding toward projects in rural areas: limiting the share of program funding that can go to rural areas to 50%, and changing the definitions of urban and rural areas used in the BUILD program. Urban areas would be defined as areas "located within (or on the boundary of) a Census-designated urbanized area that had a population greater than 200,000 in the 2010 Census." Areas outside that are considered rural. By this definition, roughly 60% of the U.S. population lived in urban areas, and roughly 40% in rural areas, in 2015. Thus, some areas that in previous rounds of applications would have been considered urban areas would now be considered rural for the purposes of the BUILD program. How this change will affect the distribution of funds in FY2019 and subsequent years is unclear. <5.2.3. Grants to a Variety of Modes> Since the second year of the program, Congress has directed DOT to ensure that the program makes "investment in a variety of transportation modes." A unique feature of the BUILD grant program is its flexibility: any surface transportation infrastructure is eligible for funding. Throughout most of the program's life, this flexibility has been reflected in the grants awarded; while road projects received more funding than projects in other modes, other modes collectively received two-thirds of the total program funding (see Table 7 ). This situation changed beginning with the FY2017 round of grants; for FY2017-FY2018, road projects received over two-thirds of the funding awarded, with the remainder divided among four other modes, one of which bicycle-pedestrian projects receiving no funding at all. <5.3. Distribution Requirements Versus Economic Impact in Grant Awards> From the first round of funding through FY2017, Congress directed that grants be made for projects that will have a significant impact on the nation, a metropolitan area, or a region. Surface transportation projects that are likely to have a significant impact on the nation, or even a multistate region, are typically quite expensive; for example, Amtrak's Hudson River Tunnel Project, to replace the deteriorating tunnels that carry Amtrak and commuter trains under the Hudson River between New Jersey and New York, is estimated to cost over $11 billion. Given the relatively modest amounts of funding available for TIGER/BUILD grants each year and Congress's directive that grant funding be awarded equitably across the nation, between rural and urban areas, and among surface transportation modes, the amount of money any single project is likely to receive limits the ability of the TIGER/BUILD program to provide more than a small share of the funding needed to complete projects that could have a significant impact on the nation. The largest single grant awarded during the FY2009-FY2018 period was for $118.5 million, and that was for a project that spanned two states (see Table 8 ). Three grants have been awarded for more than $100 million; of the 553 grants awarded, few have been for more than $50 million. Of the 10 largest grants awarded, nine were awarded in the first year of the program, when available funding was far larger than in any subsequent year (see Table 8 ). Even though the maximum grant size permitted was $200 million from FY2010 to FY2015 and $100 million in FY2016, the largest grant awarded since FY2010 has been $25 million. The first year of grants also saw the largest average grant size, $33 million; in subsequent rounds of funding, the average size of grants in each round has fluctuated between $9 million and $17 million (see Table 9 ). In addition to the lower limit on the maximum grant amount, one factor that may have led to the decrease in the average size of grants after the first year was that the total amount of TIGER/BUILD grant funding available in each year until FY2018 was less than half the amount in FY2009, so DOT may have chosen to make smaller grants in order to distribute the available funding widely. In a 2014 review of the program, the U.S. Government Accountability Office (GAO) reported that while DOT had selection criteria for the TIGER grant program, it had sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects without explaining why it did so, raising questions about the integrity of the selection process. DOT responded that while its project rankings were based on transportation-related criteria, such as safety and economic impact, sometimes it had to select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards. <5.4. Attempt to Increase the Program's Funding Leverage> In FY2018, the Notice of Funding Opportunity soliciting grant applications noted two changes to the program under the Trump Administration: the program was renamed the Better Utilizing Investments to Leverage Development (BUILD), and the practical reflection of that name change was a statement that DOT would give priority to grant applicants that provided new, nonfederal revenue for projects for which they were seeking BUILD funding. "New revenue" was defined as "revenue that is not included in current and projected funding levels and results from specific actions taken to increase transportation infrastructure investment." Examples given in the notice included sales or gas tax increases, tolling, tax-increment financing, and asset recycling. Borrowing (issuing bonds) did not count as a new revenue source. DOT would not consider any source of revenue that had been authorized prior to January 1, 2015, as new revenue. The Administration presented this new stance as a way of increasing the leverage of federal funding to raise more revenue from other sources. Critics charged that the policy penalized states and localities that had already acted to raise more revenue for transportation projects. Critics also noted the irony of the Administration encouraging states and localities to provide additional revenue for transportation investment when Congress had been unable to increase the federal excise tax on motor fuel, the primary source of federal surface transportation revenues, since 1993. Critics also noted that favoring projects involving additional revenue from new sources posed a particular challenge for rural areas, as the number of residents who might pay a new sales tax or highway toll is by definition relatively low. Despite that concern, in the FY2018 round of awards, projects in rural areas received a higher proportion of the program's funding than ever before in the history of the program: 69% (see Table 5 ). The information about the projects receiving grants is not sufficiently detailed to show how much additional nonfederal revenue was raised in connection to the projects. In the FY2019 DOT Appropriations Act, Congress directed DOT not to use an applicant's ability to generate nonfederal revenue as a selection criterion in approving future BUILD grants. <5.5. Measures of Program Impact> In 2016 and 2018 DOT published reports measuring the performance of projects that received TIGER grants. The reports state that, given the array of projects that can receive TIGER grants, measuring their performance is challenging and, for the same reason, valuable. DOT has required grantees to develop performance plans and measures for each project, beginning before the construction of the project and continuing for years after the project is completed. The sponsor of each project is responsible for setting up performance measures it considers relevant to its project. There is no requirement for comparability of the measures across projects. The DOT reports do not summarize the projects and their benefits. Rather, each presents a number of case studies of individual projects, including the performance measures chosen by each grantee. <5.5.1. Appendix. TIGER/BUILD Grant Program Criteria, FY2009-FY2019>

The Transportation Investments Generating Economic Recovery (TIGER) grant program is a discretionary program providing grants to surface transportation projects on a competitive basis, with recipients selected by the U.S. Department of Transportation (DOT). It originated in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), where it was called "national infrastructure investment" (as it has been in subsequent appropriations acts); in FY2018 the program was renamed the Better Utilizing Investments to Leverage Development (BUILD) program. Although the program's stated purpose is to fund projects of national, regional, and metropolitan area significance, in practice its funding has gone more toward projects of regional and metropolitan-area significance. In large part this is a function of congressional intent, as Congress has directed that the funds be distributed equitably across geographic areas, between rural and urban areas, and among transportation modes, and has set relatively low minimum grant thresholds (currently $5 million for urban projects, $1 million for rural projects). The average grant size has been in the $10 million to $15 million range; such sums are only a small portion of the funding requirements for projects of national significance. The TIGER/BUILD program is not a statutory program. Congress has continued the program by providing funding for it each year in the annual DOT appropriations act. It is a popular program in part because for most of its existence it has been one of a few transportation grant programs that offer regional and local governments the opportunity to apply directly to the federal government for funding, and one of a few that offer states additional funding beyond their annual highway and public transportation formula funding. The program is heavily oversubscribed; over the 10-year period FY2009-F2018, the amount of funding applied for totaled around 24 times the amount of money available for grants. The U.S. Government Accountability Office (GAO) has reported that, while DOT has selection criteria for the TIGER grant program, it has sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects without explaining why it did so, raising questions about the integrity of the selection process. DOT has responded that while its project rankings are based on transportation-related criteria, such as safety and economic impact, it must sometimes select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards. Although Congress established the parameters of the program, since the grantees are selected by DOT the Administration controls the grant process. The Obama Administration distributed grants relatively evenly across modes and population areas. The Trump Administration has prioritized grants to road projects in rural areas; in the FY2018 round, 69% of the grant funds went to rural areas. DOT also announced that it would favor projects that provided new nonfederal sources of revenue ("better utilizing investments to leverage development"). Congress subsequently rejected that initiative, directing DOT not to favor projects that provided additional revenue or even projects that requested a low federal share. Congress also capped the share of funding that can go to rural areas in response to the Administration's tilt toward awarding grants to rural areas. DOT has published two reports on the topic of the performance of projects that received TIGER grants. The reports note that measuring the performance of the array of projects in several modes eligible for TIGER grants is challenging. DOT has required grantees to develop performance plans and measures for each project, beginning before the construction of the project and continuing for years. The reports themselves largely consist of case studies of several projects.

crs_R45781

crs_R45781_0

This report describes selected health care-related provisions that are scheduled to expire during the first session of the 116 th Congress (i.e., during calendar year [CY] 2019). For purposes of this report, expiring provisions are defined as portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring provisions included in this report are those related to Medicare, Medicaid, State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. The report also includes health care-related provisions that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or last extended under the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). In addition, this report describes health care-related provisions within the same scope that expired during the 115 th Congress (i.e., during CY2017 or CY2018). Although the Congressional Research Service (CRS) has attempted to be comprehensive, it cannot guarantee that every relevant provision is included here. This report generally focuses on two types of health care-related provisions within the scope discussed above. The first type of provision provides or controls mandatory spending, meaning that it provides temporary funding, temporary increases or decreases in funding (e.g., Medicare provider bonus payments), or temporary special protections that may result in changes in funding levels (e.g., Medicare funding provisions that establish a floor). Mandatory spending is controlled by authorization acts; discretionary spending is controlled by appropriations acts. The second type of provision defines the authority of government agencies or other entities to act, usually by authorizing a policy, project, or activity. Such provisions also may temporarily delay the implementation of a regulation, requirement, or deadline, or establish a moratorium on a particular activity. Expiring health care provisions that are predominantly associated with discretionary spending activities such as discretionary authorizations of appropriations and authorities for discretionary user fees are excluded from this report. Certain types of provisions with expiration dates that otherwise would meet the criteria set forth above are excluded from this report. Some of these provisions are excluded because they are transitional or routine in nature or have been superseded by congressional action that otherwise modifies the intent of the expiring provision. For example, statutorily required Medicare payment rate reductions and payment rate re-basings that are implemented over a specified time period are not considered to require legislative attention and are excluded. The report is organized as follows: Table 1 lists the relevant provisions that are scheduled to expire in 2019. Table 2 lists the relevant provisions that expired during 2018 or 2017. The provisions in each table are organized by expiration date and applicable health care-related program. The report then describes each listed provision, including a legislative history. The summaries are grouped by provisions that are scheduled to expire in 2019 followed by those that expired in 2018 or 2017. Appendix A lists demonstration projects and pilot programs that are scheduled to expire in 2019 or that expired in 2018 or 2017 and are related to Medicare, Medicaid, CHIP, and private health insurance programs and activities or other health care-related provisions that were enacted in the ACA or last extended under the BBA 2018. Appendix B lists all laws that created, modified, or extended the health care-related expiring provisions described in this report. Appendix C lists abbreviations used in the report. <1. CY2019 Expiring Provisions> <1.1. Social Security Act (SSA) Title V: Sexual Risk Avoidance Education Program and Personal Responsibility Education Program> <1.1.1. Family-to-Family Health Information Centers (SSA 501(c); 42 U.S.C. 701(c)(1)(A)(iii))6> <1.1.1.1. Background> The Family-to-Family Health Information Centers program funds family-staffed and family-run centers in the 50 states, the District of Columbia, the territories, and through a tribal organization. The Family-to-Family Health Information Centers provide information, education, technical assistance, and peer support to families of children (including youth) with special health care needs and health professionals who serve such families. They also assist in ensuring that families and health professionals are partners in decision-making at all levels of care and service delivery. This program is administered by the Health Resources and Services Administration (HRSA). <1.1.1.2. Relevant Legislation> The Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ), Section 6064, established the Family-to-Family Health Information Centers program in the 50 states and the District of Columbia and provided $3 million for FY2007, $4 million for FY2008, and $5 million for FY2009. ACA , Section 5507, provided $5 million for each of FY2009 through FY2012. The A merican Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ), Section 624, provided $5 million for FY2013. The Pathway for SGR (Sustainable Growth Rate) Reform Act of 2013 (PSRA; P.L. 113-67 , Division B), Section 1203, provided $2.5 million for October 1, 2013, through March 31, 2014. The Protecting Access to Medicare Act of 2014 (PAMA; P.L. 113-93 ), Section 207, provided $2.5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and provided $2.5 million for the first half of FY2015 (October 1, 2014, through March 31, 2015). The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ), S ection 216 , struck the partial funding provided in PAMA and provided full-year funding of $5 million for FY2015. It also provided $5 million for each of FY2016 and FY2017. BBA 2018 , Section 50501 , expanded the program to require that centers be developed in all of the territories and for at least one Indian tribe. It also provided $6 million for each of FY2018 and FY2019. <1.1.1.3. Current Status> Appropriated funds to create or maintain Family-to-Family Health Information Centers have been enacted for FY2019, but under current law no new funding will be available for FY2020 or subsequent fiscal years. <1.1.2. Sexual Risk Avoidance Education Program (SSA 510; 42 U.S.C. 710)> <1.1.2.1. Background> The Title V Sexual Risk Avoidance Education (SRAE) program, formerly known as the Abstinence Education Grants program, provides funding for education to adolescents aged 10 to 20 exclusively on abstaining from sexual activity outside of marriage. Funding is provided primarily via formula grants. The 50 states, District of Columbia, and the territories are eligible to apply for funds. Jurisdictions request Title V SRAE funds as part of their request for Maternal and Child Health Block Grant funds authorized in SSA Section 501. Funds are allocated to jurisdictions based on their relative shares of low-income children. Funding is also available for eligible entities (not defined in statute) in jurisdictions that do not apply for funding. <1.1.2.2. Relevant Legislation> The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; P.L. 104-193 ), Section 912 , established the Abstinence Education Grants program and provided $50 million for each of FY1998 through FY2002. The Welfare Reform Extension Act of 2003 (WREA 2003; P.L. 108-40 ), Section 6, provided $50 million for FY2003. P.L. 108-89 , Section 101 , provided funding through March 31, 2014 in the manner authorized for FY2002 (i.e., $50 million, but proportionally provided for the first two quarters of FY2004). The Welfare Reform Extension Act of 2004 (WREA 2004, P.L. 108-210 ), Section 2 , provided funding through June 30, 2004 in the manner authorized for FY2002. P.L. 108-262 , Section 2 , provided funding through September 30, 2004 in the manner authorized for FY2002. P.L. 108-308 , Section 2 , provided funding through March 31, 2005 in the manner authorized for FY2004. The Welfare Reform Extension Act of 2005 (WREA 2005, P.L. 109-4 ), Section 2, provided funding through June 30, 2005 in the manner authorized for FY2004. P.L. 109-19 , Section 2 , provided funding through September 30, 2005 in the manner authorized for FY2004. P.L. 109-91 , Section 102 , provided funding through December 31, 2005 in the manner authorized for FY2005. The Tax Relief and Health Care Act of 2006 (TRHCA; P.L. 109-432 ), Section 401 , provided funding through June 30, 2007 in the manner authorized for FY2006. P.L. 110-48 , Section 1 , provided funding through September 30, 2007 in the manner authorized for FY2006. P.L. 110-90 , Section 2 , provided funding through December 31, 2007 in the manner authorized for FY2007. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA; P.L. 110-173 ), S ection 202 , provided funding through June 30, 2008 in the manner authorized for FY2007. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275 ), Section 201 , provided funding through June 30, 2009 in the manner authorized for FY2007. ACA, Section 2954, provided $50 million for each of FY2010 through FY2014. PAMA, Section 205 , provided $50 million for FY2015. MACRA, Section 214 , provided $75 million for each of FY2016 and FY2017. BBA 2018, Section 50502 , renamed the program and provided $75 million for each of FY2018 and FY2019. <1.1.2.3. Current Status> Appropriated funds for the Title V SRAE program have been enacted for FY2019, but under current law no new funding will be available for FY2020 or subsequent fiscal years. <1.1.3. Personal Responsibility Education Program (SSA 513; 42 U.S.C. 713(f))> <1.1.3.1. Background> The Personal Responsibility Education Program (PREP) takes a broad approach to teen pregnancy prevention that targets adolescents aged 10 to 20 and pregnant and parenting youth under the age of 21. Education services can address abstinence and/or contraceptives to prevent pregnancy and sexually transmitted infections. PREP includes four types of grants: (1) State PREP grants, (2) Competitive PREP grants, (3) Tribal PREP, and (4) PREP Innovative Strategies (PREIS). A majority of PREP funding is allocated to states and territories via the State PREP grant. The 50 states, District of Columbia, and the territories are eligible for funding. Funds are allocated by formula based on the proportion of youth aged 10 to 20 in each jurisdiction relative to other jurisdictions. <1.1.3.2. Relevant Legislation> ACA, Section 2953 , established PREP and provided $75 million annually from FY2010 through FY2014. PAMA, Section 206 , provided $75 million for FY2015. MACRA, Section 215 , provided $75 million for each of FY2016 and FY2017. BBA 2018, Section 50503 , provided $75 million for each of FY2018 and FY2019. <1.1.3.3. Current Status> Appropriated funds for PREP have been enacted for FY2019, but under current law no new funding will be available for FY2020 or subsequent fiscal years. <1.2. SSA Title VXIII: Medicare> <1.2.1. Temporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA 1886(m)(6)(B)(i); 42 U.S.C. 1395ww(m)(6)(B)(i))> <1.2.1.1. Background> Medicare pays LTCHs for certain inpatient hospital care under the LTCH prospective payment system (LTCH PPS), which is typically higher than payments for inpatient hospital care under the inpatient prospective payment system (IPPS). PSRA amended the law so that the LTCH PPS payment is no longer available for all LTCH discharges but instead is available only for those LTCH discharges that met specific clinical criteria. Specifically, LTCHs are paid under the LTCH PPS if a Medicare beneficiary either (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. (Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See sections " Temporary Exception for Certain Spinal Cord Conditions from Application of the Medicare LTCH Site Neutral Payment for Certain LTCHs (SSA 1886(m)(6)(F); 42 U.S.C. 1395ww(m)(6)(F)) " and " Temporary Exception for Certain Severe Wound Discharges from Application of the Medicare Site Neutral Payment for Certain Long Term Care Hospitals (SSA 1886(m)(6)(E) and (G); 42 U.S.C. 1395ww(m)(6)(E) and (G)) " below.) For LTCH discharges that did not qualify for the LTCH PPS based on these clinical criteria, a "site neutral payment rate" similar to the PPS for inpatient acute care hospitals (IPPS) was to be phased-in. The site neutral rate is defined as the lower of an "IPPS-comparable" per diem amount, as defined in regulations, or the estimated cost of the services involved. <1.2.1.2. Relevant Legislation> PSRA, Section 1206(a), established patient criteria for payment under the LTCH PPS and a site-neutral payment rate for LTCH patients who do not meet these criteria. During a phase-in period for discharges in cost-reporting periods beginning in FY2016 and FY2017, LTCHs received a blended payment amount based on 50% of what the LTCH would have been reimbursed under the LTCH PPS rate and 50% of the site neutral payment rate. For cost-reporting periods beginning in FY2018 and subsequent years, the LTCH was to receive the site neutral payment rate. BBA 2018, Section 51005 , extended the transition period to site neutral Medicare payments for LTCH patients who do not meet the patient criteria for an additional two years, to include discharges in cost-reporting periods beginning during FY2018 and FY2019. During this period, LTCHs continue to receive the 50/50 blended payment for discharges that do not meet certain LTCH PPS criteria. <1.2.1.3. Current Status> The extended transition period to site neutral payments during which LTCHs receive a blended payment for discharges that do not meet the patient criteria expires for discharges occurring in cost-reporting periods beginning during FY2020 and subsequent years. <1.2.2. Temporary Exception for Certain Spinal Cord Conditions from Application of the Medicare LTCH Site Neutral Payment for Certain LTCHs (SSA 1886(m)(6)(F); 42 U.S.C. 1395ww(m)(6)(F))> <1.2.2.1. Background> Medicare pays LTCHs for inpatient hospital care under the LTCH PPS, which is typically higher than payments for inpatient hospital care under the IPPS. Effective for cost-reporting periods beginning in FY2016, LTCHS are paid the LTCH PPS rate for patients that meet one of the following two criteria: (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. For LTCH discharges that did not qualify for the LTCH PPS based on these criteria, a site neutral payment rate is being phased-in for cost-reporting periods beginning FY2016 through FY2019. Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See section " Temporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA 1886(m)(6)(B)(i); 42 U.S.C. 1395ww(m)(6)(B)(i)) " for details related to site neutral payment. <1.2.2.2. Relevant Legislation> The 21 st Century Cures Act ( Cures Act ; P.L. 114-255 ) , Division C, Section 15009 established an additional temporary criterion for payment under the LTCH PPS related to certain spinal cord conditions for discharges occurring in cost-reporting periods FY2018 and FY2019. Specifically, the LTCH PPS rate would apply to an LTCH discharge if all of the following are met: (1) the LTCH was a not-for-profit on June 1, 2014; (2) at least 50% of the LTCH's CY2013 LTCH PPS-paid discharges were classified under LTCH diagnosis related groups (DRGs) associated with catastrophic spinal cord injuries, acquired brain injury, or other paralyzing neuromuscular conditions; and (3) the LTCH during FY2014 discharged patients (including Medicare beneficiaries and others) who had been admitted from at least 20 of the 50 states, as determined by the Secretary of Health and Human Services (HHS) based on a patient's state of residency. <1.2.2.3. Current Status> The authority for the temporary criterion related to certain spinal cord conditions to receive payment under the LTCH PPS expires for discharges occurring in cost reporting periods beginning during FY2020 and subsequent years. <1.2.3. Funding for Implementation of Section 101 of MACRA (MACRA Section 101(c)(3))> <1.2.3.1. Background> Section 101 of MACRA made fundamental changes to the way Medicare payments to physicians are determined and how they are updated. To implement the payment modifications in Section 101 of MACRA, the law authorized the transfer of $80 million from the Supplementary Medical Insurance (SMI) Trust Fund for each fiscal year beginning with FY2015 and ending with FY2019. The amounts transferred are to be available until expended. <1.2.3.2. Relevant Legislation> MACRA , Section 101 , provided for the transfer of $80 million, for each of FY2015 through FY2019, from the Medicare SMI Trust Fund. <1.2.3.3. Current Status> Appropriated funds to support the activities under this subsection have not been enacted for FY2020 or subsequent fiscal years. <1.2.4. Priorities and Funding for Measure Development (SSA 1848(s); 42 U.S.C. 1395w-4(s))> <1.2.4.1. Background> SSA Section 1848(s) required the HHS Secretary to develop a plan for the development of quality measures for use in the Merit-based Incentive Payment System program, which is to be updated as needed. The subsection also requires the Secretary to enter into contracts or other arrangements to develop, improve, update, or expand quality measures, in accordance with the plan. In entering into contracts, the Secretary must give priority to developing measures of outcomes, patient experience of care, and care coordination, among other things. The HHS Secretary, through the Center for Medicare & Medicaid Services (CMS), annually reports on the progress made in developing quality measures under this subsection. <1.2.4.2. Relevant Legislation> MACRA, Section 102 , provided for the transfer of $15 million, for each of FY2015 through FY2019, from the Medicare SMI Trust Fund. <1.2.4.3. Current Status> Appropriated funds to support the activities under this subsection have not been enacted for FY2020 or subsequent fiscal years. However, funds appropriated prior to FY2020 are available for obligation through the end of FY2022. <1.2.5. Contract with a Consensus-Based Entity Regarding Performance Measurement (SSA 1890(d); 42 U.S.C. 1395aaa)> <1.2.5.1. Background> Under SSA Section 1890, the HHS Secretary is required to have a contract with a consensus-based entity (e.g., National Quality Forum, or NQF) to carry out specified duties related to performance improvement and measurement. These duties include, among others, priority setting, measure endorsement, measure maintenance, and annual reporting to Congress. <1.2.5.2. Relevant Legislation> MIPPA, Section 183 , transferred, from the Medicare hospital insurance (HI) and SMI Trust Funds, a total of $10 million for each of FY2009 through FY2012 to carry out the activities under SSA Section 1890. ATRA, Section 609(a) , provides $10 million for FY2013 and modified the duties of the consensus-based entity. PSRA, Section 1109 , required that transferred funding remain available until expended. PAMA, Section 109 , transferred $5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and $15 million for the first six months of FY2015 (from October 1, 2014, to March 31, 2015) to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d); funds were required to remain available until expended. MACRA, Section 207 , transferred $30 million for each of FY2015 through FY2017 to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d). The funding provided under MACRA for FY2015 effectively replaced the funding provided under PAMA for that year; therefore, the total funding for FY2015 was $30 million. Funds were required to remain available until expended. BBA 2018, Section 50206 , transferred $7.5 million from the Medicare HI and SMI Trust Funds for each of FY2018 and FY2019 to carry out both Section 1890 and SSA Section 1890A(a)-(d). The section also added new HHS reporting requirements and modified existing NQF reporting requirements to specify use of funding, among other things. Amounts transferred for each of FY2018 and FY2019 are in addition to any unobligated balances that remained from prior years' transfers. <1.2.5.3. Current Status> Appropriated funds to support the contract with the consensus-based entity from SSA Section 1890 have not been enacted for FY2020 or subsequent fiscal years. However, funds appropriated prior to FY2020 are available for obligation until expended. <1.2.6. Quality Measure Selection (SSA 1890A; 42 U.S.C. 1395aaa-1)> <1.2.6.1. Background> SSA Section 1890A requires the HHS Secretary to establish a pre-rulemaking process to select quality measures for use in the Medicare program. As part of this process, the Secretary makes available to the public measures under consideration for use in Medicare quality programs and broadly disseminates the quality measures that are selected to be used, while the consensus-based entity with a contract (NQF) gathers multi-stakeholder input and annually transmits that input to the Secretary. NQF fulfills this requirement through its Measure Applications Partnership (MAP), an entity that convenes multi-stakeholder groups to provide input into the selection of quality measures for use in Medicare and other federal programs. MAP publishes annual reports with recommendations for selection of quality measures in February of each year, with the first report published in February 2012. <1.2.6.2. Relevant Legislation> ACA, Section 3014(c) , transferred a total of $20 million from the Medicare HI and SMI Trust Funds for each of FY2010 through FY2014 to carry out SSA Section 1890A(a)-(d) (and the amendments made to SSA Section 1890(b) by ACA Section 3014(a)). PAMA, Section 109 , transferred $5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and $15 million for the first six months of FY2015 (from October 1, 2014, to March 31, 2015) to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d); funds were required to remain available until expended. MACRA, Section 207 , transferred $30 million for each of FY2015 through FY2017 to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d). The funding provided under MACRA for FY2015 replaced the funding provided under PAMA for that year; therefore, the total funding for FY2015 was $30 million. BBA 2018, Section 50206 , transferred $7.5 million for each of FY2018 and FY2019 to carry out both Section 1890 and SSA Section 1890A(a)-(d). The section also added new HHS reporting requirements and modified existing NQF reporting requirements to specify use of funding, among other things. Amounts transferred for each of FY2018 and FY2019 are in addition to any unobligated balances that remained from prior years' transfers. <1.2.6.3. Current Status> Appropriated funds to carry out the measure selection activities from SSA Section 1890A(a)-(d) have not been enacted for FY2020 or subsequent fiscal years. However, funds appropriated prior to FY2020 are available for obligation until expended. <1.2.7. Floor on Work Geographic Practice Cost Indices (SSA 1848(e)(1); 42 U.S.C. 1395w-4(e)(1)(E))> <1.2.7.1. Background> Payments under the Medicare physician fee schedule (MPFS) are adjusted geographically for three factors to reflect differences in the cost of resources needed to produce physician services: physician work, practice expense, and medical malpractice insurance. The geographic adjustments are indices known as Geographic Practice Cost Indices (GPCIs) that reflect how each area compares to the national average in a "market basket" of goods. A value of 1.00 represents the average across all areas. These indices are used in the calculation of the payment rate under the MPFS. Several laws have established a minimum value of 1.00 (floor) for the physician work GPCI for localities where the work GPCI was less than 1.00. <1.2.7.2. Relevant Legislation> Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( M MA , P.L. 108-173 ), Section 412, provided for an increase in the work geographic index to 1.0 (floor) for any locality for which the work geographic index was less than 1.0 for services furnished from January 1, 2004, through December 31, 2006. TRHCA , Section 102 , extended the floor through December 31, 2007. MMSEA , Section 103, extended the floor through June 30, 2008. MIPPA , Section 134, extended the floor through December 31, 2009. In addition, beginning January 1, 2009, MIPAA set the work geographic index for Alaska to 1.5 if the index otherwise would be less than 1.5; no expiration was set for this modification. ACA , Section 3102, extended the floor through December 31, 2010. Medicare and Medicaid Extenders Act of 2010 ( MMEA , P.L. 111-309 ) , Section 103, extended the floor through December 31, 2011. Temporary Payroll Tax Cut Continuation Act of 2011 ( TPTCCA , P.L. 112-78 ) , Section 303, extended the floor through February 29, 2012. Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, P.L. 112-96 ) , Section 3004, extended the floor through December 31, 2012, and required the Medicare Payment Advisory Commission ( MedPAC) to report on whether any work geographic adjustment to the MPFS is appropriate, what that level of adjustment should be (if appropriate), and where the adjustment should be applied. The report also was required to assess the impact of such an adjustment, including how it would affect access to care. ATRA , Section 602, extended the floor through December 31, 2013. PAMA , Section 102, extended the floor through March 31, 2015. MACRA , Section 201, extended the floor through December 31, 2017. BBA 2018 , Section 50201, extended the floor through December 31, 2019. <1.2.7.3. Current Status> The authority for the MPFS GPCI floor will expire after December 31, 2019. <1.2.8. Transitional Payment Rules for Certain Radiation Therapy Services (SSA 1848(b)(11); 42 U.S.C. 1395w-4(b)(11))> <1.2.8.1. Background> Currently, Medicare payments for services of physicians and certain non-physician practitioners, including radiation therapy services, are made on the basis of a fee schedule. To set payment rates under the MPFS, relative values units (RVUs) are assigned to each of more than 7,000 service codes that reflect physician work (i.e., the time, skill, and intensity it takes to provide the service), practice expenses, and malpractice costs. The relative value for a service compares the relative work and other inputs involved in performing one service with the inputs involved in providing other physicians' services. The relative values are adjusted for geographic variation in input costs. The adjusted relative values are then converted into a dollar payment amount by a conversion factor. CMS, which is responsible for maintaining and updating the fee schedule, continually modifies and refines the methodology for estimating RVUs. CMS is required to review the RVUs no less than every five years; the ACA added the requirement that the HHS Secretary periodically identify physician services as being potentially misvalued, and make appropriate adjustments to the relative values of such services under the Medicare physician fee schedule. In determining adjustments to RVUs used as the basis for calculating Medicare physician reimbursement under the fee schedule, the HHS Secretary has authority, under previously existing law and as augmented by the ACA, to adjust the number of RVUs for any service code to take into account changes in medical practice, coding changes, new data on relative value components, or the addition of new procedures. Under the potentially misvalued codes authority, certain radiation therapy codes were identified as being potentially misvalued in 2015. However, because of concerns that the existing code set did not accurately reflect the radiation therapy treatments identified, CMS created several new codes during the transition toward an episodic alternative payment model. <1.2.8.2. Relevant Legislation> Patient Access and Medicare Protection Act (PAMPA ; P.L. 114-115 ) required CMS to apply the same code definitions, work RVUs, and direct inputs for the practice expense RVUs in CY2017 and CY2018 as applied in 2016 for these transition codes, effectively keeping the payments for these services unchanged, subject to the annual update factor. PAMPA exempted these radiation therapy and related imaging services from being considered as potentially misvalued services under CMS's misvalued codes initiative for CY2017 and CY2018. PAMPA also instructed the HHS Secretary to report to Congress on the development of an episodic alternative payment model under the Medicare program for radiation therapy services furnished in non-facility settings. BBA 2018 Section 51009, extended the restrictions through CY2019. <1.2.8.3. Current Status> The payment restrictions expire after December 31, 2019. <1.3. Other Medicare Provisions> <1.3.1. Outreach and Assistance for Low-Income Programs (MIPPA 119; 42 U.S.C. 1395b-3 note)> <1.3.1.1. Background> The Administration for Community Living (ACL) administers federal grant programs that fund outreach and assistance to older adults, individuals with disabilities, and their caregivers in accessing various health and social services. Funding for these programs is provided through discretionary budget authority in annual appropriations to the following entities: State Health Insurance Assistance Programs (SHIPs): programs that provide outreach, counseling, and information assistance to Medicare beneficiaries and their families and caregivers on Medicare and other health insurance issues. Area Agencies on Aging (AAA): state-designated public or private nonprofit agencies that address the needs and concerns of older adults at the regional or local levels. AAAs plan, develop, coordinate, and deliver a wide range of home and community-based services. Most AAAs are direct providers of information and referral assistance programs. Aging and Disability Resource Centers (ADRCs): programs in local communities that assist older adults, individuals with disabilities, and caregivers in accessing the full range of long-term services and supports options, including available public programs and private payment options. The National Center for Benefits and Outreach Enrollment assists organizations to enroll older adults and individuals with disabilities into benefit programs that they may be eligible for, such as Medicare, Medicaid, the Supplemental Security Income (SSI) program, and the Supplemental Nutrition Assistance Program (SNAP), among others. In addition to discretionary funding for these programs, beginning in FY2009, MIPPA provided funding for specific outreach and assistance activities to Medicare beneficiaries. This mandatory funding was extended multiple times, most recently in BBA 2018 through FY2019, and provided for outreach and assistance to low-income Medicare beneficiaries including those who may be eligible for the Low-Income Subsidy program, Medicare Savings Program (MSP), and the Medicare Part D Prescription Drug Program. The HHS Secretary is required to transfer specified amounts for MIPPA program activities from the Medicare Trust Funds. BBA 2018 also requires ACL to electronically post on its website by April 1, 2019, and biennially thereafter, the following information with respect to SHIP state grants: (1) the amount of federal funding provided to each state and the amount of federal funding provided by each state to each entity and (2) other program information, as specified by the HHS Secretary. Publicly reported information must be presented by state as well as by entity receiving funds from the state. <1.3.1.2. Relevant Legislation> MIPPA , Section 119, authorized and provided a total of $25 million for FY2009 to fund low-income Medicare beneficiary outreach and education activities through SHIPs, AAAs, ADRCs, and coordination efforts to inform older Americans about benefits available under federal and state programs. ACA , Section 3306, extended authority for these programs and provided a total of $45 million for FY2010 through FY2012 in the following amounts: SHIPs, $15 million; AAAs, $15 million; ADRCs, $10 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. ATRA , Section 610, extended authority for these programs through FY2013 and provided a total of $25 million in the following amounts: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. PSRA , Section 1110, extended authority for these programs through the second quarter of FY2014 and provided funds at FY2013 levels ($25 million) for the first two quarters of FY2014 (through March 31, 2014). PAMA , Section 110, extended authority for these programs through the second quarter of FY2015 (through March 31, 2015). For FY2014, PAMA provided a total of $25 million at the following FY2013 funding levels: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5.0 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5.0 million. In addition, PAMA provided funds at FY2014 levels for the first two quarters of FY2015 (through March 31, 2015). MACRA , Section 208, extended authority for these programs through September 30, 2017. For FY2015, MACRA provided funding at the previous year's level of $25 million in the following amounts: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. For FY2016 and FY2017, MACRA provided $37.5 million annually, a $12.5 million per year increase from FY2015 funding levels, in the following amounts: SHIPs, $13 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $12 million. BBA 2018, Section 50207, extended authority for these programs through September 30, 2019. For FY2018 and FY2019, BBA 2018 provides funding at the FY2017 funding level of $37.5 million annually in the following amounts: SHIPs, $13 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $12 million. <1.3.1.3. Current Status> Funding authorized under BBA 2018 for low-income outreach and assistance programs will expire after September 30, 2019. However, funds appropriated will be available for obligation until expended. <1.3.2. Patient-Centered Outcomes Research Trust Fund (IRC 9511 and 4375-4377, SSA 1183); 26 U.S.C. 9511; 26 U.S.C. 4375-4377; 42 U.S.C. 1320e-2> <1.3.2.1. Background> SSA Section 1181 establishes the Patient-Centered Outcomes Research Institute (PCORI), which is responsible for coordinating and supporting comparative clinical effectiveness research. PCORI has entered into contracts with federal agencies, as well as with academic and private sector research entities for both the management of funding and conduct of research. PHSA Section 937 requires the Agency for Healthcare Research and Quality (AHRQ) to broadly disseminate research findings that are published by PCORI and other government-funded comparative effectiveness research entities. IRC Section 9511 establishes the "Patient-Centered Outcomes Research Trust Fund" (PCORTF) to support the activities of PCORI and to fund activities under PHSA Section 937. It provides annual funding to the PCORTF over the period FY2010-FY2019 from the following three sources: (1) annual appropriations, (2) fees on health insurance and self-insured plans, and (3) transfers from the Medicare HI and SMI Trust Funds. SSA Section 1183 provides for the transfer of the required funds from the Medicare Trust Funds. Transfers to PCORTF from the Medicare HI and SMI Trust Funds are calculated based on the number of individuals entitled to benefits under Medicare Part A or enrolled in Medicare Part B. IRC Sections 4375-4377 impose the referenced fees on applicable health insurance policies and self-insured health plans and describe the method for their calculation. For each of FY2011 through FY2019, IRC Section 9511 requires 80% of the PCORTF funds to be made available to PCORI, and the remaining 20% of funds to be transferred to the HHS Secretary for carrying out PHSA Section 937. Of the total amount transferred to HHS, 80% is to be distributed to AHRQ, with the remainder going to the Office of the Secretary (OS)/HHS. <1.3.2.2. Relevant Legislation> ACA, Section 6301(e), provided the following amounts to the PCORTF: (1) $10 million for FY2010, (2) $50 million for FY2011, and (3) $150 million for each of FY2012 through FY2019. In addition, for each of FY2013 through FY2019, the section provided an amount equivalent to the net revenues from a new fee that the law imposed on health insurance policies and self-insured plans. For policy/plan years ending during FY2013, the fee equals $1 multiplied by the average number of covered lives. For policy/plan years ending during each subsequent fiscal year through FY2019, the fee equals $2 multiplied by the average number of covered lives. Finally, the section (in addition to ACA Section 6301(d)) provided for transfers to PCORTF from the Medicare Part A and Part B trust funds; these are generally calculated by multiplying the average number of individuals entitled to benefits under Medicare Part A, or enrolled in Medicare Part B, by $1 (for FY2013) or by $2 (for each of FY2014 through FY2019). <1.3.2.3. Current Status> Appropriated funds to PCORTF have not been enacted for FY2020 or subsequent fiscal years. Funds transferred to the HHS Secretary under IRC Section 9511 remain available until expended. No amounts shall be available for expenditure from the PCORTF after September 30, 2019, and any amounts in the Trust Fund after such date shall be transferred to the general fund of the Treasury. <1.4. SSA Title XIX: Medicaid> <1.4.1. Protection for Recipients of Home and Community-Based Services Against Spouse Impoverishment (SSA 1924; 42 U.S.C. 1296r-5)> <1.4.1.1. Background> When determining financial eligibility for Medicaid-covered long-term services and supports (LTSS), there are specific rules under SSA Section 1924 for the treatment of a married couple's assets when one spouse needs long-term care provided in an institution, such as a nursing home. Commonly referred to as "spousal impoverishment rules," these rules attempt to equitably allocate income and assets to each spouse when determining Medicaid financial eligibility and are intended to prevent the impoverishment of the non-Medicaid spouse. For example, spousal impoverishment rules require state Medicaid programs to exempt all of a non-Medicaid spouse's income in his or her name from being considered available to the Medicaid spouse. Joint income of the couple is divided in half between the spouses, and the Medicaid spouse can transfer income to bring the non-Medicaid spouse up to certain income thresholds. Assets of the couple, regardless whose name they are in, are combined and then split in half. The non-Medicaid spouse can retain assets up to an asset threshold determined by the state within certain statutory parameters. Prior to enactment of the ACA, spousal impoverishment rules applied only in situations where the Medicaid participant was receiving LTSS in an institution. States had the option to extend these protections to certain home and community-based services (HCBS) participants under a Section 1915(c) waiver program. Beginning January 1, 2014, ACA Section 2404 temporarily substituted the definition of "institutionalized spouse" under SSA Section 1924(h)(1) to include application of these spousal impoverishment protections to all married individuals who are eligible for HCBS authorized under certain specified authorities. Thus, beginning January 1, 2014, for a five-year time period, the ACA required states to apply the spousal impoverishment rules to all married individuals who are eligible for HCBS under these specified authorities, not just those receiving institutional care. This modified definition expired on December 31, 2018. The 116 th Congress extended the authority for these protections and included a provision regarding state flexibility in the application of income or asset disregards for married individuals receiving certain HCBS. <1.4.1.2. Relevant Legislation> ACA, Section 2404, required states to extend spousal impoverishment rules to certain beneficiaries receiving HCBS for a five-year period beginning on January 1, 2014. The Medicaid Extenders Act of 2019 ( P.L. 116-3 ) , Section 3 , extended this provision through March 31, 2019. The Medicaid Services Investment and Accountability Act of 2019 ( P.L. 116-16 ) , Section 2, further extends this provision through September 30, 2019. <1.4.1.3. Current Status> The authority for the extension of spousal impoverishment protections for certain Medicaid HCBS recipients will expire after September 30, 2019. <1.4.2. Additional Medicaid Funding for the Territories (SSA 1108; 42 U.S.C. 1308)> <1.4.2.1. Background> 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. The federal Medicaid funding for the territories comes from a few different sources. The permanent source of federal Medicaid funding for the territories is the annual capped funding. Since July 1, 2011, Medicaid funding for the territories has been supplemented by a few additional funding sources available for a limited time provided through the ACA; the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) ; and BBA 2018. Prior to the availability of these additional Medicaid funding sources, all five territories typically exhausted their federal Medicaid funding prior to the end of the fiscal year. <1.4.2.2. Relevant Legislation> ACA, Section 2005, as modified by Section 10201, provided $6.3 billion in additional federal Medicaid funding to the territories available between July 1, 2011, and September 30, 2019. ACA, Section 1323, provided $1.0 billion in additional federal Medicaid funding to the territories that did not establish health insurance exchanges. This funding is available January 1, 2014, through December 31, 2019. The Consolidated Appropriations Act, 2017 Division M, Title II , provided an additional $295.9 million in federal Medicaid funding to Puerto Rico available through September 30, 2019. BBA 2018 , Division B, Subdivision 2, Title III , increased the federal Medicaid funding for Puerto Rico by $3.6 billion and the U.S. Virgin Islands by $106.9 million. This funding may be further increased by $1.2 billion for Puerto Rico and $35.6 million for U.S. Virgin Islands if certain conditions are met. This funding is available January 1, 2018, through September 30, 2019. <1.4.2.3. Current Status> The $6.3 billion in additional Medicaid federal funding under ACA Section 2005 as modified and the additional funding provided to Puerto Rico and the U.S. Virgin Islands under the Consolidated Appropriations Act, 2017 and the BBA 2018 expire after September 30, 2019, and the $1.0 billion in ACA Section 1323 funding expires after December 31, 2019. <1.5. Public Health Service Act (PHSA) CY2019 Expiring Provisions> <1.5.1. Community Health Center Fund (PHSA 330; 42 U.S.C. 254b-2(b)(1))> <1.5.1.1. Background> The Community Health Center Fund (CHCF) provided mandatory funding for federal health centers authorized in PHSA Section 330. These centers are located in medically underserved areas and provide primary care, dental care, and other health and supportive services to individuals regardless of their ability to pay. The mandatory CHCF appropriations are provided in addition to discretionary funding for the program; however, the CHCF comprised more than 70% of health center programs' appropriations in FY2019. <1.5.1.2. Relevant Legislation> ACA, Section 10503 , established the CHCF and provided a total of $9.5 billion to the fund annually from FY2011 through FY2015, as follows: $1 billion for FY2011, $1.2 billion for FY2012, $1.5 billion for FY2013, $2.2 billion for FY2014, and $3.6 billion for FY2015. The ACA also provided $1.5 billion for health center construction and renovation for the period FY2011 through FY2015. MACRA, Section 221 , provided $3.6 billion for each of FY2016 and FY2017 to the CHCF. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes ( P.L. 115-96 ), Section 3101(a), provided $550 million for the first and second quarters of FY2018 to the CHCF. BBA 2018 , Section 50901 , made a number of changes to the health center program replaced language that had provided two quarters of funding and provided $3.8 billion to the CHCF in FY2018 and $4.0 billion in FY2019. <1.5.1.3. Current Status> Appropriated funds for CHCF have been enacted for FY2019, but under current law no new funding is provided for FY2020 or subsequent fiscal years. Any unused portion of grants awarded for a given fiscal year prior to October 1, 2019, remains available until expended. <1.5.2. Special Diabetes Programs (PHSA 330B and 330C; 42 U.S.C. 254c-2(b) and 254c-3(b))> <1.5.2.1. Background> The Special Diabetes Program for Type I Diabetes (PHSA Section 330B) provides funding for the National Institutes of Health to award grants for research into the prevention and cure of Type I diabetes. The Special Diabetes Program for Indians (PHSA Section 330C) provides funding for the Indian Health Service (IHS) to award grants for services related to the prevention and treatment of diabetes for American Indians and Alaska Natives who receive services at IHS-funded facilities. <1.5.2.2. Relevant Legislation> The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ), Sections 4921 and 4922 , established the two special diabetes programs and transferred $30 million annually from CHIP funds to each program from FY1998 through FY2002. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA 2000; P.L. 106-554 ), Section 931 , increased each program's annual appropriations to $70 million for FY2001 through FY2002 and provided $100 million for FY2003. P.L. 107-360 , Section 1 , increased each program's annual appropriations to $150 million and provided funds from FY2004 through FY2008. MMSEA, Section 302 , provided $150 million through FY2009. MIPPA, Section 303, provided $150 million through FY2011. MMEA, Section 112 , provided $150 million through FY2013. ATRA, Section 625 , provided $150 million through FY2014. PAMA, Section 204 , provided of $150 million through FY2015. MACRA, Section 213 , provided $150 million through FY2017. Disaster Tax Relief and Airport and Airway Extension Act of 2017 ( P.L. 115-63 ), Section 301(b) , provided $37.5 million for first quarter of FY2018 for the Special Diabetes Program for Indians (Note: it did not provide funding for the Special Diabetes Program for Type I Diabetes.) P.L. 115-96 , S ection 3102 , provided $37.5 million for the second quarter for the Special Diabetes Program for Indians and provided $37.5 million for the first and second quarters of FY2018 for the Special Diabetes Program for Type I Diabetes. BBA 2018, Section 50902 , replaced language that had provided funding for the first and second quarters of FY2018 to provide $150 million for each program in FY2018 and FY2019. <1.5.2.3. Current Status> Appropriated funds for the two special diabetes programs have been enacted for FY2019, but under current law no new funding is provided for FY2020 or subsequent fiscal years. Any unused portion of grants awarded for a given fiscal year prior to October 1, 2019, remains available until expended. <1.5.3. National Health Service Corps Appropriations (PHSA 338H; 42 U.S.C. 254b-2(b)(2))> <1.5.3.1. Background> The National Health Service Corps (NHSC) provides scholarships and loan repayments to certain health professionals in exchange for providing care in a health professional shortage area for a period of time that varies based on the length of the scholarship or the number of years of loan repayment received. The NHSC receives mandatory funding from the CHCF through PHSA Title III. The NHSC also received discretionary appropriations in FY2011. Between FY2012 and FY2017, the program did not receive discretionary appropriations. Beginning in FY2018 and continuing in FY2019, the program received discretionary appropriations, primarily to expand the number and type of substance abuse providers participating in the NHSC. The mandatory funding from the CHCF represents more nearly three-quarters of the program's funding in both FY2018 and FY2019. <1.5.3.2. Relevant Legislation> ACA, Section 10503 , funded $1.5 billion to support the NHSC annually from FY2011 through FY2015, as follows: $290 million for FY2011, $295 million for FY2012, $300 million for FY2013, $305 million for FY2014, and $310 million for FY2015. Funds are to remain available until expended. MACRA, Section 221 , funded $310 million for each of FY2016 and FY2017 for the NHSC. P.L. 115-96 , Section 3101(b) , funded $65 million for the first and second quarters of FY2018 for the NHSC. BBA 2018 , Section 50901(c) , replaced language that had provided two-quarters of funding and funded $310 million for each of FY2018 and FY2019 for the NHSC. <1.5.3.3. Current Status> Appropriated funds for CHCF funds have been enacted for FY2019, but under current law no new funding is provided for FY2020 or subsequent fiscal years. Any unused portion of grants awarded for a given fiscal year prior to October 1, 2019, remains available until expended. <1.5.4. Teaching Health Centers (PHSA 340H; 42 U.S.C. 256h)> <1.5.4.1. Background> The Teaching Health Center program provides direct and indirect graduate medical education (GME) payments to support medical and dental residents training at qualified teaching health centers (i.e., outpatient health care facilities that provide care to underserved patients). <1.5.4.2. Relevant Legislation> ACA , Section 5508(a) , established the Teaching Health Center program and provided $230 million for direct and indirect GME payments for the period of FY2011 through FY2015. MACRA, Section 221 , provided $60 million for each of FY2016 and FY2017 for direct and indirect GME payments for teaching health centers. Disaster Tax Relief and Airport and Airway Extension Act of 2017 , Section 301(a) , provided $15 million for the first quarter of FY2018 for direct and indirect GME payments for teaching health centers. P.L. 115-96 , Section 3101(c) , struck the first quarter of funding and provided $30 million for the first and second quarters of FY2018 for direct and indirect GME payments for teaching health centers. It also limited the amount of funding that could be used for administrative purposes. BBA 2018 , Section 50901(d) , made a number of changes to the Teaching Health Center program and replaced language that had provided two-quarters of funding and provided $126.5 million for each of FY2018 and FY2019 for direct and indirect GME payments for teaching health centers. <1.5.4.3. Current Status> Appropriated funds for Teaching Health Center GME payments have been enacted for FY2019. Under current law no new funding is provided for FY2020 or subsequent fiscal years. <2. Other CY2019 Expiring Provisions> <2.1. Pregnancy Assistance Fund (ACA 10212; 42 U.S.C. 18201-18204)> The Pregnancy Assistance Fund (PAF) program seeks to improve the educational, health, and social outcomes of vulnerable individuals who are expectant or new parents and their children. PAF funding is awarded competitively to the 50 states, District of Columbia, the territories, and tribal entities that apply successfully. The grantees may use the funds for providing subgrants to community service providers and selected other entities that provide services during the prenatal and postnatal periods. Grantees may also provide, in partnership with the state attorney general's office, certain legal and other services for women who experience domestic violence, sexual assault, or stalking while they are pregnant or parenting an infant. Further, grant funds can be used to support public awareness efforts about PAF services for the expectant and parenting population. <2.1.1. Relevant Legislation> ACA, Section 10212 , established the PAF program and provided $25 million for each of FY2010 through FY2019. <2.1.2. Current Status> Appropriated funds for the PAF program funds have been enacted for FY2019, but under current law no new funding will be available for FY2020 or subsequent fiscal years. <2.2. Health Coverage Tax Credit (IRC 35; 26 U.S.C. 35)> <2.2.1. Background> The Health Coverage Tax Credit (HCTC) subsidizes 72.5% of the cost of qualified health insurance for eligible taxpayers and their family members. Potential eligibility for the HCTC is limited to two groups of taxpayers. One group is composed of individuals eligible for Trade Adjustment Assistance (TAA) allowances because they experienced qualifying job losses. The other group consists of individuals whose defined-benefit pension plans were taken over by the Pension Benefit Guaranty Corporation because of financial difficulties. HCTC-eligible individuals are allowed to receive the tax credit only if they either cannot enroll in certain other health coverage (e.g., Medicaid) or are not eligible for other specified coverage (e.g., Medicare Part A). To claim the HCTC, eligible taxpayers must have qualified health insurance (specific categories of coverage, as specified in statute). The credit is financed through a permanent appropriation under 31 U.S.C. 1324(b)(2); therefore, the financing of the HCTC is not subject to the annual appropriations process. <2.2.2. Relevant Legislation> The T rade Act of 2002 ( P.L. 107-210 ), Section s 2 01-203, authorized the Health Coverage Tax Credit, specified the eligibility criteria for claiming the credit, and made conforming amendment to the U.S. Code for purposes of financing the credit. The American Recovery and Reinvestment Act of 2009 ( ARRA , P.L. 111-5 ), Part VI: TAA Health Coverage Improvement Act of 2009 expanded eligibility for and subsidy of the HCTC including retroactive amendments, and provided $80 million for FY2009 and FY2010 to implement the enacted changes to the HCTC. The Trade Adjustment Assistance Extension Act of 2011 ( P.L. 112-40 ), Section 241 , established a sunset date of before January 1, 2014. The T rade Preferences Extension Act of 2015 ( P.L. 114-27 ), Section 407 , retroactively reauthorized the HCTC and established a new sunset date of before January 1, 2020. <2.2.3. Current Status> Authorization for the HCTC is scheduled to expire after December 31, 2019. <2.3. Annual Fee on Health Insurance Providers (ACA 9010)> <2.3.1. Background> An annual fee is imposed on certain health insurance issuers. The aggregate fee is set at $8.0 billion in CY2014, $11.3 billion in CY2015 and CY2016, $13.9 billion in CY2017, and $14.3 billion in CY2018. After CY2018, the fee is indexed to the annual rate of U.S. premium growth. The fee is based on net health care premiums written by covered issuers during the year prior to the year in which payment is due. Each year, the Internal Revenue Service calculates the fee on covered issuers based on (1) their net premiums written in the previous calendar year as a share of total net premiums written by all covered issuers and (2) their dollar value of business. Covered issuers are not subject to the fee on their first $25 million of net premiums written. The fee is imposed on 50% of net premiums above $25 million and up to $50 million and on 100% of net premiums in excess of $50 million. <2.3.2. Relevant Legislation> ACA , Section 9010 , established the annual fee on certain health insurance issuers. The fee became effective for CY2014. The C onsolidated A ppropriations A ct , 20 16 ( P.L. 114-113 ), Division P, Title II, Section 201 , suspended collection of the fee for CY2017. Making further continuing appropriations for the fiscal year ending September 30, 2018, and for other purposes ( P.L. 115-120 ), Section 4003, suspended collection of the fee for CY2019. <2.3.3. Current Status> The moratorium on the collection of the fee is to end after CY2019, meaning covered entities are scheduled to be subject to the fee again beginning in CY2020. <2.4. Excise Tax on Medical Device Manufacturers (26 U.S.C. 4191)> <2.4.1. Background> An excise tax is imposed on the sale of certain medical devices. For the purposes of the tax, a "medical device" is defined by the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) and pertains to devices "intended for humans." Congress exempted eyeglasses, contact lenses, and hearing aids from the tax and any other medical device determined by the Secretary of the Treasury to be of the type that is "generally purchased by the general public at retail for individual use." The tax is equal to 2.3% of the device's sales price and generally is imposed on the manufacturer or importer of the device. <2.4.2. Relevant Legislation> The Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152 ), Section 1405 , created the excise tax on medical device manufacturers starting in CY2013. The C onsolidated A ppropriations A ct , 20 16 , Division Q, Title I, Subtitle C, Part 2, Section 174 , suspended imposition of the tax for CY2016 and CY2017. Making further continuing appropriations for the fiscal year ending September 30, 2018, and for other purposes ( P.L. 115-120 ), Section 4001, extended the suspension of the imposition of the tax for CY2018 and CY2019. <2.4.3. Current Status> The suspension of the tax is to end after CY2019, meaning the tax is to apply to sales of medical devices again beginning in CY2020. <3. CY2017 and CY2018 Expired Provisions> <3.1. SSA Title XVIII: Medicare> <3.1.1. Temporary Exception for Certain Severe Wound Discharges from Application of the Medicare Site Neutral Payment for Certain Long Term Care Hospitals (SSA 1886(m)(6)(E) and (G); 42 U.S.C. 1395ww(m)(6)(E) and (G))> <3.1.1.1. Background> Medicare pays LTCHs for inpatient hospital care under the LTCH PPS, which is typically higher than payments for inpatient hospital care under the IPPS. Effective for cost-reporting periods beginning in FY2016, LTCHS are paid the LTCH PPS rate for patients that meet one of the following two criteria: (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. For LTCH discharges that did not qualify for the LTCH PPS based on these criteria, a site neutral payment rate is being phased-in for cost-reporting periods beginning FY2016 through FY2019. Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See section " Temporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA 1886(m)(6)(B)(i); 42 U.S.C. 1395ww(m)(6)(B)(i)) " for details related to site neutral payment. <3.1.1.2. Relevant Legislation> The C onsolidated A ppropriations A ct , 20 16 , Division H, Title II, Section 231 , provided an additional temporary criterion for payment under the LTCH PPS for discharges before January 1, 2017. Specifically, the LTCH PPS rate would apply to an LTCH discharge if all three of the following are satisfied: (1) the LTCH is a grandfathered hospital-within-hospital; (2) the LTCH is located in a rural area; and (3) the patient discharged has a severe wound defined as a stage 3 or 4 wound, unstageable wound, nonhealing surgical wound, infected wound, fistula, osteomyelitis, or wound with morbid obesity. Cures Act, Division C, Section 15 0 10 , reinstated, after a lapse period and with some modifications, the temporary criterion for payment under the LTCH PPS related to certain spinal cord conditions for discharges occurring in cost-reporting period beginning during FY2018. The reinstated temporary criterion, similar to the Consolidated Appropriations Act of 2016 criterion, applies only to a grandfathered hospital-within-hospital. It eliminates the requirement from Consolidated Appropriations Act of 2016 that an LTCH be located in a rural area and narrows the definition of a severe wound that was used in Consolidated Appropriations Act of 2016. In addition, unlike the Consolidated Appropriations Act of 2016 criterion, only discharges associated with diagnosis-related groups relating to cellulitis or osteomyelitis are eligible for the reinstated temporary criterion. <3.1.1.3. Current Status> The temporary criterion for certain severe wound discharges for payment under the LTCH PPS expired for discharges in cost-reporting periods beginning during FY2019 and subsequent years. <3.1.2. Exclusion of ASC Physicians from the Medicare Meaningful Use Payment Adjustment (SSA 1848(a)(7)(D); 42 U.S.C. 1395w 4(a)(7)(D))> <3.1.2.1. Background> Congress has passed several bills to promote the widespread adoption of health information technology (HIT) and to support the electronic sharing of clinical data among hospitals, physicians, and other health care stakeholders. HIT encompasses interoperable electronic health records (EHRs) including computerized systems to order tests and medications, and support systems to aid clinical decision making and the development of a national health information network to permit the secure exchange of electronic health information among providers. <3.1.2.2. Relevant Legislation> ARRA , Section 4101, which incorporated the Health Information Technology for Economic and Clinical Health Act (HITECH), authorized Medicare and Medicaid incentive payments to acute-care hospitals and physicians who attest to being meaningful users of certified EHR technology. The law instructed the HHS Secretary to make the measures of "meaningful use" more stringent over time, which CMS has done in stages. Beginning in CY2015, hospitals and physicians that were or are not meaningful EHR users are subject to a Medicare payment adjustment (i.e., penalty) unless they qualify for a hardship exception. Cures Act, Section 16003, exempted physicians who furnish "substantially all" of their services to patients in ambulatory surgery centers from a meaningful use payment penalty in CY2017 and CY2018 because physicians who provide services to beneficiaries in ASCs faced additional difficulties in meeting some of the meaningful use criteria. <3.1.2.3. Current Status> The exemption as specified in the Cures Act expired December 31, 2018. Current law states that this exemption is to sunset "as of the first year that begins more than 3 years after the date on which the Secretary determines, through notice and comment rulemaking, that certified EHR technology applicable to the ambulatory surgical center setting is available." This has yet to occur. <3.1.3. Delay in Authority to Terminate Contracts for Medicare Advantage (MA) Plans Failing to Achieve Minimum Quality Ratings (SSA 1857; 42 U.S.C. 1395w-27)> <3.1.3.1. Background> Under Medicare Advantage (Medicare Part C, or MA) CMS pays private health plans a per-enrollee amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plan. SSA Section 1853(o)(4) requires the HHS Secretary to use a five-star quality rating system to adjust maximum possible payments to high-performing MA plans. High star quality also results in an increase in an MA organization's rebate if its contract bid is less than the maximum amount that Medicare will pay. In addition, the five-star quality ratings are publicly reported and can be used by beneficiaries when considering which MA, Part D, or Medicare Advantage-Prescription Drug (MA-PD) plan to enroll in. The Social Security Act authorizes the HHS Secretary to terminate a contract with an MA organization or a Perscription Drug Plan (PDP) if the HHS Secretary determines that the MA organization or PDP has failed substantially to carry out the contract, is carrying out the contract in a manner inconsistent with the efficient and effective administration of the Medicare program, or no longer meets the applicable Medicare program conditions. CMS amended its regulations in 2012 to include a ground for contract termination relating to an MA organization's or a PDP's rating under the five-star system. Specifically, under the regulation, CMS may terminate a contract with an MA organization or a PDP if the plan receives a "summary plan rating of less than 3 stars for 3 consecutive contract years." The regulation applies to plan ratings issued by CMS after September 1, 2012. CMS has terminated some MA organizations' contracts on this basis. <3.1.3.2. Relevant Legislation> Cures Act, Division C, Section 17001: through the end of plan year 2018, the HHS Secretary is prohibited from terminating an MA organization's contract (or Part D contract) solely because the contract failed to achieve a minimum quality rating under the five-star rating system. <3.1.3.3. Current Status> The HHS Secretary has the authority to terminate an organization's MA or Part D contract based solely on the organization's receipt of a Part C or Part D summary rating of less than three stars for three consecutive contract years. The Secretary issued a memorandum to MA plans indicating that the first star rating released after December 2018 is the first that could count toward termination. Star ratings are released in the fall of one year, displayed for beneficiary use the next year, and then used for payment purposes the following year. As such, the CY2020 rates (released fall CY2019 and used for payment purposes in CY2021) are the first that could apply toward potential termination. The soonest possible effective date for a CMS termination of an MA contract under this policy would be December 31, 2022. <3.2. Other Medicare Provisions> <3.2.1. Delay in Applying the 25% Patient Threshold Payment Adjustment for Long-Term Care Hospitals (MMSEA 114(c); 42 U.S.C. 1395ww note)> <3.2.1.1. Background> LTCHs generally treat patients who have been discharged from acute-care hospitals but require prolonged inpatient hospital care due to their medical conditions. LTCH patients have an average length of inpatient stay longer than 25 days. LTCHs can be (1) freestanding a hospital generally not integrated with any other hospital; (2) co-located with another hospital, either located in the same building as another hospital or in a separate building on the hospital's campus; or (3) a satellite facility of an LTCH a separately located facility (which may be co-located with another hospital) that operates as part of the LTCH. Beginning in FY2005, CMS implemented a new Medicare payment regulation for LTCHs that are co-located with other hospitals and LTCH satellite facilities to limit inappropriate patient shifting driven by financial rather than clinical considerations. Under the new policy, if such an LTCH received more than 25% of its Medicare patients from any single referring hospital, the LTCH is paid the lower of the LTCH PPS or the IPPS payment for discharges that exceeded the threshold. Beginning in FY2008, CMS expanded the 25% patient threshold adjustment policy to include all LTCHs. <3.2.1.2. Relevant Legislation> MMSEA , Section 114(c)(1) , delayed the application of CMS's 25% patient threshold adjustment for freestanding LTCHs and "grandfathered hospitals-within-hospitals" LTCHs for three years from the enactment of MMSEA (December 29, 2007). MMSEA Section 114(c)(2) delayed the application of CMS's 25% patient threshold adjustment for LTCHs or satellite facilities co-located with another hospital if (1) LTCHs or satellite facilities located in a rural area or co-located with an urban single or Metropolitan Statistical Area (MSA) dominant hospital receive no more than 75% of their Medicare inpatients from such co-located hospitals or (2) other LTCHs or satellite facilities co-located with another hospital receive no more than 50% of their Medicare inpatients from such co-located hospitals. ARRA, Section 4302(a) , modified the beginning of the delays in MMSEA Sections 114(c)(1) and 114(c)(2) from the date of enactment of MMSEA (December 29, 2007) to July 1, 2007. This section also modified the end date for the delay under MMSEA Section 114(c)(2) (LTCHs co-located with another hospital) from three years from the date of enactment to three years from October 1, 2007 (or July 1, 2007, in the case of a satellite facility described in 42 C.F.R. 412.22(h)(3)(i)). In addition, ARRA Section 4302(a) modified the delay under MMSEA Section 114(c)(1) to include LTCHs or satellite facilities that, as of the date of enactment under MMSEA, were co-located with a provider-based off-campus location of an IPPS hospital that did not provide services payable under the IPPS at the off-campus location. ACA , Section 3106 , extended the delay of the 25% patient threshold adjustment two additional years. PSRA, Section 1206(b)(1) , extended the delay of the 25% patient threshold adjustment four additional years to expire after June 30, 2016 (or after September 30, 2016, for certain LTCHs co-located with another hospital). Cures Act, Division C, Section 15006 , delayed the 25% patient threshold adjustment for discharges occurring October 1, 2016, through September 30, 2017. This provision reinstated the PSRA delay that expired after June 30, 2016 (and extended the PSRA delay that expired after September 30, 2016, for certain LTCHs co-located with another hospital). <3.2.1.3. Current Status> The statutory delay in CMS applying the 25% patient threshold adjustment to LTCHs expired after September 30, 2017. However, the HHS Secretary extended the delay through FY2018 and eliminated it beginning FY2019 through rulemaking. <3.2.2. Long-Term Care Hospital Moratoria (MMSEA 114(d); 42 U.S.C. 1395ww note)> <3.2.2.1. Background> Under Medicare, LTCHs were exempt from the IPPS when it was established in 1983. Instead, LTCHs were paid on a reasonable-cost basis subject to certain limits established by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA; P.L. 97-248 ). Under the Balanced Budget Refinement Act of 1999 (BBRA 99; P.L. 106-113 ), the LTCH PPS was established, which provides a per-discharge payment based on the average costs and patient mix of LTCHs. The LTCH PPS typically provides higher Medicare payment rates for inpatient hospital care than the IPPS. The rapid increase in both the number of LTCHs and LTCH payments led to enactment of a temporary moratorium on the development of new LTCHs and a moratorium on new LTCH beds, with certain exceptions. <3.2.2.2. Relevant Legislation> MMSEA , Section 114(d) , established a three-year moratorium from the date of enactment (December 29, 2007) on the development of new LTCHs, with exceptions for (1) LTCHs that began their qualifying period for Medicare reimbursement before the enactment of MMSEA; (2) LTCHs that had a binding written agreement before the enactment of MMSEA for the actual construction, renovation, lease, or demolition of an LTCH, and had expended at least 10% of the estimated cost of the project (or $2.5 million, if less); and (3) LTCHs that had obtained an approved certificate of need in a state where one is required on or before the date of enactment of MMSEA. MMSEA Section 114(d) also established a three-year moratorium from the date of enactment (December 29, 2007) on the increase in beds in existing LTCHs, with exceptions for (1) LTCHs located in a state where there is only one other LTCH and (2) LTCHs that request an increase in beds following the closure or decrease in the number of beds of another LTCH in the state. ARRA, Section 4302 , amended the three-year moratorium on the increase in beds in existing LTCHs by providing an exception to LTCHs that had obtained a certificate of need for such an increase in LTCH beds on or after April 1, 2005, and before the enactment of MMSEA. ACA , Section 3106(b) , extended the moratoria established under MMSEA an additional two years (expiring after December 29, 2012). PSRA, Section 1206(b)(2) , reinstated the moratoria under MMSEA beginning January 1, 2015, and expiring after September 30, 2017; however, PSRA did not allow any exceptions to the reinstated moratoria. PAMA , Section 112(b) , amended the moratoria reinstated by PSRA to begin with enactment of PSRA (December 26, 2013) rather than January 1, 2015. Further, this section provided the same exceptions on the development of new LTCHs that had been provided under MMSEA but did not provide exceptions for the increase in LTCH beds. Cures Act, Division C, Section 15004 , reinstated the exception to the moratorium on the increase in LTCH beds effective as if it had been enacted by PAMA, April 1, 2014, to coincide with the previously reinstated exception for new LTCHs. <3.2.2.3. Current Status> The moratorium on the development of new LTCHs and on the increase of beds in existing LTCHs expired as of September 30, 2017. <3.2.3. Extension of Enforcement Instruction on Supervision Requirements for Outpatient Therapeutic Services in Critical Access and Small Rural Hospitals> <3.2.3.1. Background> The 2009 Outpatient Prospective Payment System (OPPS) final rule required that therapeutic hospital outpatient services be furnished under the direct supervision of a physician. However, beginning in CY2010, CMS instructed its contractors not to evaluate or enforce the supervision requirements for therapeutic services provided to outpatients in critical access hospitals (CAHs). CMS extended this non-enforcement instruction for CY2011 and expanded it to include small rural hospitals with 100 or fewer beds. Subsequently, CMS extended the instruction for CY2012 and CY2013, The non-enforcement instruction has been extended several more times through legislation and rules. <3.2.3.2. Relevant Legislation> An Act to Provide for the Extension of the Enforcement Instruction on Supervision Requirements for Outpatient Therapeutic Services in Critical Access and Small Rural Hospitals Through 2014 ( P.L. 113-198 ), required the HHS Secretary to extend the non-enforcement instruction through CY2014. An Act to Provide for the Extension of the Enforcement Instruction on Supervision Requirements for Outpatient Therapeutic Services in Critical Access and Small Rural Hospitals Through 2015 ( P.L. 114-112 ) , required the HHS Secretary to extend the non-enforcement instruction through CY2015. Cures Act , Section 16004 , extended the non-enforcement instruction through CY2016. BBA 2018 , Section 51007, extended the non-enforcement instruction through CY2017 retroactively. <3.2.3.3. Current Status> Although the non-enforcement instruction has statutorily expired, the CY2018 OPPS/ Ambulatory Surgery Center (ASC) final rule with comment period re-established the non-enforcement policy beginning on January 1, 2018, and extended the instruction through December 31, 2019. Appendix A. Demonstration Projects and Pilot Programs This appendix lists selected health care-related demonstration projects and pilot programs that are scheduled to expire during the first session of the 116 th Congress (i.e., during calendar year [CY] 2019). The expiring demonstration projects and pilot programs listed below have portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring demonstration projects and pilot programs included here are those related to Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. This appendix also includes other health care-related demonstration projects and pilot programs that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or last extended under the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). In addition, this appendix lists health care-related demonstration projects and pilot programs within the same scope that expired during the 115 th Congress (i.e., during CY2017 or CY2018). Although CRS has attempted to be comprehensive, it cannot guarantee that every relevant demonstration project and pilot program is included here. Table A-1 , lists the relevant demonstration projects and pilot programs that are scheduled to expire in 2019. Table A-2 lists the relevant provisions that expired during 2018 or 2017. Appendix B. Laws That Created, Modified, or Extended Current Health Care-Related Expiring Provisions Appendix C. List of Abbreviations AAA: Area Agencies on Aging ACA: Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) ACF: Administration for Children and Families ACL: Administration for Community Living ADRC: Aging and Disability Resource Center AHRQ: Agency for Healthcare Research and Quality ARRA: American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) ASC: Ambulatory Surgery Center ATRA: American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) BBA 13: Bipartisan Budget Act of 2013 ( P.L. 113-67 , Division A) BBA 97: Balanced Budget Act of 1997 ( P.L. 105-33 ) BBA 2018 : Bipartisan Budget Act of 2018 BBRA 99: Balanced Budget Refinement Act of 1999 ( P.L. 106-113 ) BIPA 2000 : Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 ( P.L. 106-554 ) CAH: Critical access hospital CHCF: Community Health Center Fund CHIP: State Children's Health Insurance Program CHIPRA: Children's Health Insurance Program Reauthorization Act ( P.L. 111-3 ) CMS: Centers for Medicare & Medicaid Services CPI-U: Consumer Price Index for All Urban Consumers CRS: Congressional Research Service CY: Calendar year DME: Durable medical equipment DRA: Deficit Reduction Act of 2005 ( P.L. 109-171 ) DSH: Disproportionate share hospital E-FMAP: Enhanced federal medical assistance percentage EHR: Electronic health record FMAP: Federal medical assistance percentage FY: Fiscal year GAO: Government Accountability Office GME: Graduate medical education GPCI: Geographic Practice Cost Index HCERA: Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) HCFAC: Health Care Fraud and Abuse Control HH: Home health HHS: Department of Health and Human Services HI: Hospital Insurance HIPAA: Health Insurance Portability and Protection Act of 1996 ( P.L. 104-191 ) HIT : Health information technology HITECH: Health Information Technology for Economic and Clinical Health Act HPOG: Health Profession Opportunity Grants HRSA: Health Resources and Services Administration IHS: Indian Health Service IPPS: Medicare Inpatient Prospective Payment System LTCH: Long-term care hospital LTCH PPS: Long-term care hospital prospective payment system LTSS: Long-term services and supports MA: Medicare Advantage MA-PD: Medicare Advantage-Prescription Drug MACRA: Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ) MAP: Measure Applications Partnership MCTRJCA: Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) MEDH: Medicare-dependent hospital MedPAC: Medicare Payment Advisory Commission MIECHV: Maternal, Infant, and Early Childhood Home Visiting MIP: Medicare Integrity Program MIPPA: Medicare Improvements for Patients and Providers Act of 2008 ( P.L. 110-275 ) MMA: Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( P.L. 108-173 ) MMEA: Medicare and Medicaid Extenders Act of 2010 ( P.L. 111-309 ) MMSEA: Medicare, Medicaid and SCHIP Extension Act of 2007 ( P.L. 110-173 ) MPFS: Medicare physician fee schedule MSA : Metropolitan Statistical Area NHSC: National Health Service Corps NQF: National Quality Forum OBRA 90: Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) OPPS: Outpatient Prospective Payment System PAMA: Protecting Access to Medicare Act of 2014 ( P.L. 113-93 ) PAMPA: Patient Access and Medicare Protection Act ( P.L. 114-115 ) PCORI: Patient-Centered Outcomes Research Institute P CORTF: Patient-Centered Outcomes Research Trust Fund PDP: Prescription Drug Plan PHSA: Public Health Service Act PPS: Prospective payment system PQMP: Pediatric Quality Measures Program PREP: Personal Responsibility Education Program PRWORA: Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) PSRA: Pathway for SGR Reform Act of 2013 ( P.L. 113-67 , Division B) RVU: Relative value unit SGR: Sustainable Growth Rate SHIP: State Health Insurance Assistance Program SMI: Supplementary Medical Insurance SNAP: Supplemental Nutrition Assistance Program SSA: Social Security Act SRAE: Sexual Risk Avoidance Education SSI: Supplemental Security Income TAA: Trade Adjustment Assistance TANF: State Temporary Assistance for Needy Families TEFRA: Tax Equity and Fiscal Responsibility Act of 1982 ( P.L. 97-248 ) TPL: Third-party liability TPTCCA: Temporary Payroll Tax Cut Continuation Act of 2011( P.L. 112-78 ) TRHCA: Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) U.S.C.: U.S. Code WREA 2003: Welfare Reform Extension Act of 2003 ( P.L. 108-40 ) WREA 2004: Welfare Reform Extension Act of 2004 ( P.L. 108-210 ) WREA 2005: Welfare Reform Extension Act of 2005 ( P.L. 109-4 )

This report describes selected health care-related provisions that are scheduled to expire during the first session of the116 th Congress (i.e., during calendar year [CY] 2019). For purposes of this report, expiring provisions are defined as portions of law that are time-limited and will lapse once a statutory deadline is reached absent further legislative action. The expiring provisions included in this report are those related to Medicare, Medicaid, State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. The report also includes health care-related provisions that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or last extended under the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). In addition, this report describes health care-related provisions within the same scope that expired during the 115 th Congress (i.e., during CY2017 or CY2018). Although the Congressional Research Service (CRS) has attempted to be comprehensive, it cannot guarantee that every relevant provision is included here. This report generally focuses on two types of health care-related provisions within the scope discussed above. The first type of provision provides or controls mandatory spending, meaning that it provides temporary funding, temporary increases or decreases in funding (e.g., Medicare provider bonus payments), or temporary special protections that may result in changes in funding levels (e.g., Medicare funding provisions that establish a floor). The second type of provision defines the authority of government agencies or other entities to act, usually by authorizing a policy, project, or activity. Such provisions also may temporarily delay the implementation of a regulation, requirement, or deadline, or establish a moratorium on a particular activity. Expiring health care provisions that are predominantly associated with discretionary spending activities—such as discretionary authorizations of appropriations and authorities for discretionary user fees—are excluded from this report. Certain types of provisions with expiration dates that otherwise would meet the criteria set forth above are excluded from this report. Some of these provisions are excluded because they are transitional or routine in nature or have been superseded by congressional action that otherwise modifies the intent of the expiring provision. For example, statutorily required Medicare payment rate reductions and payment rate re-basings that are implemented over a specified time period are not considered to require legislative attention and are excluded. The report provides tables listing the relevant provisions that are scheduled to expire in 2019 and that expired in 2018 or 2017. The report then describes each listed provision, including a legislative history. An appendix lists relevant demonstration projects and pilot programs that are scheduled to expire in 2019 or that expired in 2018 or 2017.

crs_R46106

crs_R46106_0

<1. Background> The government's purchase card program has its origins in Executive Order (E.O.) 12352, issued by President Ronald Reagan in 1982. E.O. 12352 directed agencies to develop programs that simplified procedures and reduced the administrative costs of procurement, particularly with regard to "small" purchases ($25,000 or less). Several agencies subsequently participated in a pilot program that evaluated the use of a commercial credit card, called a purchase card, as an acquisition tool. At the time, even a routine order for widely available items, such as office supplies, typically required agency program staff to submit a written procurement request to a contracting officer, who reviewed it, obtained the necessary signatures, made the actual purchase, and processed the associated paperwork. To critics, this process was inefficient, especially for small purchases. Not only was it time-consuming for both program and procurement personnel, but it also prevented program offices from quickly filling immediate needs. Under the pilot program, nonprocurement staff used purchase cards to conduct small-dollar transactions directly with local suppliers, thus bypassing procurement officers entirely. A report on the pilot program concluded that purchase cards could reduce administrative costs and improve delivery time, and in 1989 the Office of Management and Budget (OMB) tasked the General Services Administration (GSA) with making purchase cards available government-wide. Participation in GSA's purchase card program was not mandatory, and card use did not initially grow as rapidly as some had expected. In 1993, however, a report issued by the National Performance Review (NPR) sparked a number of legislative and regulatory reforms intended to increase purchase card use. The NPR was a Clinton Administration initiative that sought to "reinvent" the federal government by making government operations both less expensive and more efficient. One of the NPR's objectives was to identify opportunities to streamline a number of government-wide processes, including procurement. Drawing on input from experts in the public and private sectors, the NPR's initial report recommended expanding the use of purchase cards across the government, a step it said would "lower costs and reduce bureaucracy in small purchases." In a separate report that focused solely on procurement, the NPR estimated that if half of all small acquisitions were made using purchase cards, the government would realize $180 million in savings annually. The report further recommended amending the Federal Acquisition Regulation (FAR) the government's primary source of procurement guidance to promote the use of purchase cards for small purchases. Building on the NPR's recommendations, Congress passed the Federal Acquisition Streamlining Act (FASA; P.L. 103-355 ) in 1994. FASA introduced several reforms that increased the use of purchase cards. Among these, Title IV of FASA established a simplified acquisition threshold (SAT) of $100,000 (increased to $250,000 in 2017). Purchases at or below the threshold were exempted from the provisions of a number of procurement laws. This reform obviated the need for procurement officials to make small purchases. To further streamline procedures for the smallest acquisitions, Title IV also established a "micro-purchase" threshold of $2,500 (which was increased to $3,000 in 2006, and again to $10,000 in 2017). FASA further exempted micro-purchases from sections of the Buy American Act and the Small Business Act, and they could be made without obtaining a competitive bid, if the cost was deemed reasonable by the cardholder. At the same time, the Clinton Administration took steps to increase the use of purchase cards. Citing the need to make agency procurement procedures "more consistent with recommendations of the National Performance Review," President Clinton issued Executive Order 12931 on October 13, 1994. E.O. 12931 directed agency heads to (1) expand purchase card use; and (2) delegate the micro-purchasing authority provided in FASA to program offices, which would enable them to make purchases whose value did not exceed the micro-purchase threshold. E.O. 12931 also directed agency heads to streamline procurement policies and practices that were not mandated by statute, and to ensure that their agencies were maximizing their use of the new simplified acquisition procedures. In addition, the FAR was amended in 1994 to designate the purchase card as the "preferred method" for making micro-purchases. Card use increased sharply as agencies implemented these reforms. The dollar value of goods and services acquired with purchase cards increased from $527.0 million in FY1993 to $19.5 billion in FY2011. During that same time span, the number of cardholders nearly tripled to 278,000, and the number of purchase card transactions increased from 1.5 million to just under 22.8 million in FY2011. The flexibility of the purchase card may have contributed to its growth: it could be used for in-store purchases, which allowed the cardholder to take immediate possession of needed goods, or it could be used to place orders by telephone or over the internet and have goods delivered. According to GSA, the use of purchase cards now saves the government $1.7 billion a year in administrative costs. <2. Structure> The federal purchase card program is implemented by individual agencies, with the involvement of GSA and OMB. In broad terms, agencies establish and maintain their own programs, but they select pu rchase card services from contracts that GSA negotiates with selected banks, and their programs must conform to the government-wide guidance issued by OMB. <2.1. Agencies> Each agency is responsible for establishing its own purchase card program. The agency, within the framework of OMB guidance, establishes internal rules and regulations for purchase card use and management, decides which of its employees are to receive purchase cards, and handles billing and payment issues for agency purchase card accounts. Two levels of supervision generally exist within an agency's purchase card program. Individual cardholders are assigned to an Approving Official (AO). The AO is considered the "first line of defense" against card misuse, and agency policies often require the AO to ensure that all purchases comply with statutes, regulations, and agency policies. To that end, the AO is responsible for authorizing cardholder purchases, either by approving purchases before they are made or by verifying their legitimacy through reviews of cardholder statements and supporting documentation, such as receipts. The AO may also be required to ensure that statements are reconciled and submitted to the billing office in a timely manner. Each agency also appoints an Agency Program Coordinator (APC) to serve as the agency's liaison to the bank and to GSA. At some agencies, each major component has an APC, one of whom is chosen to serve as the agency's liaison. The APCs are also usually responsible for agency-wide activities, such as developing internal program guidelines and procedures, sampling cardholder transactions to identify fraudulent or abusive purchases, setting up and deactivating accounts, and ensuring that officials and cardholders receive proper training. <2.2. GSA> GSA's primary responsibility is to award and administer contracts with card vendors on behalf of the government. In November 1998, agency purchase card programs began operating under GSA's SmartPay initiative. SmartPay permitted agencies to select a range of credit card products from five banks with which GSA had negotiated contracts. The SmartPay contracts established prices, terms, and conditions for credit card products and services from these five banks. Purchase cards were established as centrally billed accounts under the contracts, which meant that agencies, and not individual cardholders, were billed for purchases. The contracts required agencies to make payment in full at the end of each billing cycle. New purchase card contracts known collectively as SmartPay2 took effect government-wide in November 2008. In November 2018, all federal agencies began operating under SmartPay3 contracts. <2.3. OMB> OMB issues charge card management guidance that all agencies must follow. This guidance, located in Appendix B of OMB Circular A-123, establishes agencies' responsibilities for implementing their purchase, travel, and fleet card programs. Chapter 4 of Appendix B identifies the responsibilities of charge card managers in developing and implementing risk management controls, policies, and practices (often referred to collectively as "internal controls") that mitigate the potential for charge card misuse. Agency charge card managers must ensure that cardholder statements, supporting documentation, and other data are reviewed to detect delinquency and misuse; key duties are separated, such as making purchases, authorizing purchases, and reviewing and auditing purchase documentation; records are maintained for training, appointment of cardholders and authorizing officials, cardholder purchase limits, and related information; disciplinary actions are initiated when cardholders or other program participants misuse their cards; appropriate training is provided for cardholders, approving officials, and other relevant staff; employees are asked about questionable or suspicious transactions; and charge card statement reconciliation occurs in a timely manner. Chapter 4 also identifies administrative and disciplinary actions that may be imposed for charge card misuse, such as deactivation of employee accounts, and it requires managers to refer suspected cases of fraud to the agency's Office of Inspector General or the Department of Justice. Circular A-123 provides OMB with oversight tools by requiring agencies to submit to OMB each year a charge card management plan that details their efforts to implement and maintain effective internal controls and minimize the risk of card misuse and payment delinquency. It also requires agencies to report the number of AOs it has appointed, the average number of monthly purchase card transactions each AO reviews, the number of reported cases of misuse, and the number of disciplinary actions taken in response to misuse. <3. Purchase Card Program Weaknesses> Audits of agency purchase card programs conducted by the Government Accountability Office (GAO) and agency inspectors general (IGs) through FY2011 attracted congressional attention with their revelations of abusive purchases made by government employees. Among the many cases of abuse cited by auditors were a Department of Agriculture (USDA) employee who, over a period of six years, used her purchase card to funnel $642,000 to her boyfriend; a Forest Service employee who charged $31,342 to his purchase card for personal items, including Sony PlayStations, cameras, and jewelry; and a Coast Guard cardholder who used his purchase card to buy a beer brewing kit and then brewed alcohol while on duty. Congress held several hearings to address purchase card misuse and the underlying internal control weaknesses that auditors said allowed it to occur. The following section examines the weaknesses identified in audit reports published between 2002 and 2011, which highlight the issues that led to the passage of the Charge Card Act. <3.1. Ineffective Transaction Review and Approval Processes> One of the primary safeguards against improper use of government purchase cards is the review and approval of cardholder transactions by someone other than the cardholder. As noted, purchase card AOs are usually responsible for reviewing the cardholder's monthly statement. Given that the AO is often the only person other than the cardholder to assess the validity of a purchase before payment is made to the purchase card vendor, the review and approval process is considered one of the most critical components of an agency's purchase card control environment. Steven Kutz, GAO's Managing Director of Forensic Audits and Special Investigations, stated in testimony before the Senate, Basic fraud prevention concepts and our previous audits of purchase card programs have shown that opportunities for fraud and abuse arise if cardholders know that their purchases are not being properly reviewed. Despite the importance of the AO's role in preventing and detecting improper purchases, some agencies failed to ensure that cardholder statements were carefully reviewed prior to their approval. At the Department of Education, auditors estimated that 37% of monthly cardholder statements they reviewed had not been approved by the AO. GAO also estimated that nearly one of every six purchase card transactions government-wide had not been properly authorized. Even when AOs did conduct reviews, they sometimes failed to meet government standards. Agencies are required by OMB to ensure that cardholder statements are compared with supporting documentation, such as invoices and receipts, as part of the review process. This is necessary because purchase card statements are rarely itemized; they usually provide only the store or contractor name and the amount charged. For AOs, receipts and invoices are the principal means of verifying what items were purchased and determining whether those items were for legitimate program purposes. According to GAO, many agencies have not ensured that supporting documentation is available and examined as part of the review and approval process. An audit of the Department of Housing and Urban Development's (HUD's) purchase card program found that the agency did not have adequate documentation for 47% of transactions auditors deemed questionable purchases from merchants that are not normally expected to do business with HUD which meant auditors "were unable to determine what was purchased, for whom, and why." Similarly, an audit of the Veterans Health Administration's (VHA's) purchase card program estimated that $313 million of its transactions lacked key supporting documentation. One consequence of these weaknesses was that fraudulent and abusive transactions slipped through the review process unnoticed. For instance, GAO found that AOs at agencies across the government approved cardholder statements that included questionable transactions, such as purchases of jewelry, home furnishings, cruise tickets, electronics, and other consumer goods. At the Forest Service, one employee used her purchase card over a period of years to accumulate more than $31,000 in jewelry and electronics. Similarly, HUD cardholders spent $27,000 at department stores like Macy's and J.C. Penney in a single year. In one egregious case, a Federal Aviation Authority (FAA) employee had his statement approved even though it showed he violated agency policy by charging cash advances to his purchase card while at a casino. The lack of adequate oversight is also evident where AOs have approved duplicate transactions vendors charging the government twice for the same goods or services and purchases made by someone other than the cardholder. One audit identified an estimated $177,187 in duplicate charges at one agency. An audit at FAA discovered that a cardholder had allowed unauthorized individuals to charge over $160,000 to her purchase card account. When an AO identifies unauthorized and duplicate transactions, the agency should use the process described in the SmartPay master contract to dispute the charges. When AOs fail to identify and dispute fraudulent charges, the government often pays them in full or fails to obtain a refund from the purchase card vendor. <3.2. Inconsistent Program Monitoring> GAO further found that many agencies failed to monitor and evaluate the effectiveness of their purchase card controls, a responsibility that is often assigned to the APC. Monitoring and evaluation may include sampling purchase card transactions for potentially improper purchases, ensuring purchase card policies are being properly implemented across the agency or component, and assessing program results. These duties are often unfulfilled. At FAA, for example, an audit found that APCs "generally were not" utilizing available reports to detect misuse and fraud, nor was the headquarters APC taking steps to assess the overall program. Similarly, an audit of the Forest Service purchase card program found that the agency's APCs failed to review sampled transactions for erroneous or abusive purchases, as required by USDA regulations. <3.3. Lack of Separation of Duties> Agencies are required to ensure that key procurement functions are handled by different individuals. When having goods shipped, for example, the same person should not approve and place the order, or place the order and receive the goods. At many agencies, however, the cardholder may perform two functions that should be separated, which increases the possibility that items may be purchased for personal use, lost, or stolen. In March 2008, GAO estimated that agencies were unable to document separation of duties for one of every three purchase card transactions. Three Navy cardholders ordered and received $500,000 of goods for themselves with their purchase cards before getting caught. In this way, inadequate separation of duties may result in millions of dollars of items that cannot be located. Items that are easily converted to personal use commonly referred to as "pilferable property" are particularly vulnerable to loss and theft. The Department of Education, for example, could not account for 241 personal computers bought with purchase cards at a cost of $261,500. An audit of the Federal Emergency Management Agency's (FEMA's) spending on items related to hurricane recovery found that $170,000 worth of electronics equipment acquired with purchase cards had not been recorded in FEMA's property records and could not be found. <3.4. Inadequate Training> Given the complexities of federal procurement policies and procedures, training on the proper use and management of purchase cards is considered an important component of an agency's internal control environment. Through training, cardholders, approving officials, and program managers learn their roles in ensuring compliance with applicable regulations and statutes, and in reducing the risk of improper card use. To that end, OMB requires all agencies to train everyone who participates in a purchase card program. Cardholder training covers federal procurement laws and regulations, agency policies, and proper card use. Approving officials are required to receive the same training as cardholders, in addition to training in their duties as AOs. Program managers are required to be trained in cardholder and AO responsibilities, as well as management, control, and oversight tools and techniques. In addition, all purchase card program participants are supposed to complete their initial training prior to appointment (e.g., becoming a cardholder, or being designated as an AO or program manager) and receive refresher training at least every three years. Agency audits published between 2002 and 2011 revealed a number of agencies had not fully implemented OMB's training requirements. A report by the inspector general at the Department of the Interior (DOI), for example, noted that DOI had not provided any training to its AOs, and concluded that many of those officials were not performing adequate reviews. The AOs themselves reportedly said that they did not know how to conduct a proper review of purchase card transactions, or how and why to review supporting documentation both subjects that are normally included in AO training. Similarly, an audit at FAA concluded that the agency's failure to provide refresher training for cardholders and AOs may have contributed to violations of statutory sourcing requirements. The failure to comply with sourcing statutes, which require agencies to purchase certain goods and services from specified vendor categories, may undermine congressional procurement objectives. The Javits-Wagner-O'Day Act (JWOD), for example, requires the government to buy office supplies and services from nonprofits that employ blind and disabled Americans. Cardholder failure to comply with the provisions of JWOD and other sourcing statutes was widespread enough that GAO estimated that tens of millions of dollars of purchase card transactions may have been conducted with vendors other than the ones Congress intended. <3.5. Excessive Number of Cards Issued and High Credit Limits> The number of cardholders grew from under 100,000 in FY1993 to 680,000 in FY2000. After auditors expressed concerns that the government had issued too many credit cards and provided excessive credit limits factors that raised the risk of card misuse OMB issued a memorandum in April 2002 that required agencies to examine the number of purchase cards they issued and to consider deactivating all cards that were not a "demonstrated necessity." That same year, provisions in the Bob Stump National Defense Authorization Act for FY2003 ( P.L. 107-314 ) required the Department of Defense (DOD) to establish policies limiting both the number of purchase cards it issued and the credit available to cardholders. These reforms contributed to a net decrease of 392,000 government purchase cards between FY2000 and FY2011. Despite this decrease in the total number of purchase card users, audits through FY2011 indicated that a number of agencies, including some with relatively large purchase card programs, did not establish appropriate controls over card issuance and credit limits. A 2006 GAO report on purchase cards at the Department of Homeland Security (DHS), for example, identified 2,468 cardholders about 20% of all DHS cardholders who had not made any purchases in over a year. Similarly, a congressionally directed audit of the Veterans Health Administration's (VHA's) $1.4 billion purchase card program found that VHA had issued cards with credit limits up to 11 times greater than the cardholders' historical spending levels, thereby exposing its program to unnecessary risk. <4. Government Charge Card Abuse Prevention Act> In response to these findings and evidence of similar abuse in agency travel card programs Congress passed the Government Charge Card Abuse Prevention Act of 2012 (Charge Card Act; P.L. 112-194 ). The Charge Card Act established new internal control and reporting requirements for both purchase cards ( 2), and travel cards ( 3 and 4). The following paragraphs examine the Charge Card Act's requirements for purchase cards. Given that the Charge Card Act directly amends the U.S. Code, the requirements are identified by their location in code rather than in the act itself. <4.1. Management of Purchase Cards> Statutory purchase card requirements for civilian agencies are located in a different title of the U.S. Code than those for DOD. The Charge Card Act therefore amended Title 41 to codify the civilian agency provisions and Title 10 to codify DOD's provisions. In addition, the Charge Card Act establishes similar, but not identical, requirements for civilian agencies and DOD. <4.1.1. Civilian Purchase Card Program Requirements> Section (2)(a)(1) of the Charge Card Act added civilian agency purchase card requirements to Chapter 19, Title 41, of the U.S. Code. The new requirements are found in 41 U.S.C. 1909(a) through (e). 41 U.S.C. 1909(a), Required Safeguards and Internal Controls, requires executive agencies to ensure 1. There is a record of each cardholder that includes the applicable limitations on single transaction and total transactions. 2. Each cardholder is assigned an AO other than the cardholder. 3. Each cardholder and AO are responsible for (a) reconciling the charges appearing on the cardholder's statements with receipts and other supporting documentation; and (b) forwarding a summary report to the certifying official. 4. Any disputed charges or discrepancies between the cardholder's receipts and bank statements are resolved in accordance with the terms of GSA's purchase card contract with the card issuer. 5. Payments on purchase card accounts are made by the prescribed deadlines to avoid interest penalties. 6. Rebates and refunds are reviewed for accuracy and recorded as receipts. 7. Records of each transaction are retained in accordance with record disposition policies. 8. Periodic reviews are performed to determine whether each cardholder needs a purchase card. 9. Appropriate training is provided to each purchase card holder and official responsible for overseeing purchase cards in the agency. 10. The agency has specific policies that establish the number of purchase cards issued by various component organizations and the authorized credit limits for those cards. 11. The agency uses effective systems, techniques, and technologies to identify illegal, improper, or erroneous purchases. 12. The agency invalidates the purchase card of each employee who (a) ceases to be employed by the agency, immediately upon termination, or (b) transfers to another unit of the agency, immediately upon transfer, unless both units are covered by the same purchase card authority. 13. The agency takes steps to recover the cost of any illegal, improper, or erroneous purchases made with a purchase card, including through salary offsets. 41 U.S.C. 1909(b), Guidance, requires the OMB Director to provide guidance on the implementation of the requirements of subsection (a). 41 U.S.C. 1909(c), Penalties and Violations, requires agencies to establish adverse personnel actions or other punishment for cases where a cardholder violates agency purchase card policies or otherwise makes illegal, improper, or erroneous purchases with a card. The prescribed penalties must include dismissal of the employee, as appropriate. In addition, subsection (c) requires the head of each agency with more than $10 million in annual purchase card expenditures to issue a semiannual report on purchase card violations by its employees. The report must be issued jointly with the agency IG and submitted to the OMB Director. 41 U.S.C. 1909(d), Risk Assessment and Audits, requires the IG of each agency to 1. Conduct periodic assessments of agency purchase card programs to identify and analyze the risks of misuse and to use these assessments to develop an audit plan. 2. Audit purchase card transactions in order to identify potential misuse, patterns of misuse, and categories of purchases that could be made with another payment method in order to obtain lower prices. 3. Report the audit results to the agency head, along with recommendations for addressing any findings. 4. Report to the OMB Director on the implementation of the IG's recommendations. The OMB Director must compile the IG reports and transmit them to Congress and the Comptroller General. 41 U.S.C. 1909(e), Relationship to Department of Defense Purchase Card Regulations, clarifies that subsections (a) through (d) do not apply to DOD. <4.1.2. DOD Purchase Card Program Requirements> Section 2(a)(2) of the Charge Card Act amended 10 U.S.C. 2784(b) to codify new purchase card management requirements for DOD. Only the Charge Card Act requirements are listed below. 10 U.S.C. 2784(b)(2) requires DOD to ensure that each cardholder is assigned an approving official other than the cardholder. 10 U.S.C. 2784(b)(11) requires DOD to use effective systems, techniques, and technologies to prevent or identify potential fraudulent transaction. 10 U.S.C. 2784(b)(12) requires DOD to invalidate the purchase card of each employee who (a) ceases to be employed by DOD, immediately upon termination, (b) transfers to another unit of DOD, immediately upon transfer, unless both units are covered by the same purchase card authority, or (c) is separated or released from active duty or full-time National Guard duty. 10 U.S.C. 2784(b)(13) requires DOD to take steps to recover the cost of any illegal, improper, or erroneous purchases made with a purchase card, including through salary offsets. 10 U.S.C. 2784(b)(15) requires DOD to conduct periodic assessments of agency purchase card programs in order identify and analyze the risks of misuse and to report the results to the OMB Director and Congress. <5. Implementation of the Charge Card Act> In an effort to assess compliance with the Charge Card Act and other purchase card requirements across the government, GAO reviewed agency policies and data from FY2014 and released its analysis in 2017. More recently, the Council of the Inspectors General on Integrity and Efficiency (CIGIE) launched a coordinated audit of FY2017 purchase card data. The IGs at 20 agencies sampled a total of 1,255 "high-risk" transactions purchases that potentially violated program policies or procedures from and shared their findings with CIGIE. By July 2018, the IGs had released their own reports and CIGIE had issued a summary and analysis of the findings. According to the CIGIE analysis, while there were few examples of fraud at the 20 agencies that participated in the project, nearly 51% (501) of the purchases sampled failed to comply with at least one purchase card policy. Patterns of noncompliance, with examples and analysis from the GAO report, individual agency audits, and the CIGIE report are discussed below. <5.1. Purchases from Prohibited or Questionable Merchants> Federal statutes and regulations, including agency-specific regulations, may prohibit the purchase of supplies and services from certain merchants or for certain items. USDA's purchase card guidance, for example, prohibits employees from using their purchase cards to obtain cash advances, bail bonds, personal items, or escort services. Agencies are often able to block merchants of certain categories such as cruise lines or casinos through the card-issuing bank. Some merchants, while not prohibited, are considered "questionable" because the items or services they offer may be allowed by agency policies, only if certain conditions are met. A purchase card may be used at a catering company, for example, but only under certain circumstances. Exceptions may be permitted for transactions with prohibited or questionable merchants under limited circumstances, but they must be justified by the cardholder and approved by the AO. The CIGIE analysis found that nearly 8% of high-risk purchases violated agency policies regarding prohibited or questionable merchants. Of those, nearly one-half lacked a written justification and/or authorization from the AO. An IG at one agency found an employee had used his purchase card to lease multiple vehicles at a cost of more than $5,700, and had provided no documentation to support the need and appropriateness of the transaction. In addition, agencies often failed to block merchant categories; one agency permitted transactions at seven types of prohibited businesses. Even when agencies attempted to block certain merchant categories, the technology did not work consistently. The EPA IG found 20 purchase card transactions at merchants who had been blocked by the agency the cards had not been declined at the point of sale. <5.2. Purchases from Nonmandatory Sources> Purchase card holders are required to use mandatory sources to obtain needed supplies, when possible. Cardholders may use other sources only after confirming that the supplies or services they need are not available from a mandatory source. Auditors found, however, that in nearly one out of every five transactions (19.9%), cardholders purchased supplies and services from nonmandatory sources when they could have acquired them from mandatory sources. As a consequence, agencies not only failed to support certain categories of merchants that are mandatory sources, such as people who are blind or severely disabled, but they also may not obtain the best available price and thereby reduce potential cost savings. One cardholder, for example, purchased batteries from a nonmandatory source for $64.49 when they were available from a mandatory source for $11.42 meaning the agency overpaid by 565%. Similarly, a cardholder at USDA purchased a used Global Positioning System (GPS) device from a nonmandatory source when a new model was available from a mandatory source for 15% less. Purchases from nonmandatory sources may be authorized if a written justification is provided, but cardholders frequently failed to provide one. Auditors at the Department of the Interior (DOI), for example, determined that cardholders had failed to justify purchases from nonmandatory sources 65% of the time. Overall, the CIGIE reported that cardholders provided no justification for a majority of transactions with nonmandatory sources. Other documentation policies were violated as well. The CIGIE data showed that 36% of nonmandatory purchases lacked a requisition request, 32% lacked evidence of receipt, and 6% had no documentation at all. <5.3. Purchases that Included Sales Tax> Generally, federal purchase card transactions are exempt from state and local sales taxes. Cardholders are responsible for ensuring that their transactions do not include sales taxes, and attempting to recover sales taxes if they are paid erroneously. IGs at 20 federal agencies found many instances of purchase card holders paying sales taxes more than 5% of the high-risk transactions in the CIGIE study included charges for sales taxes. Of the transactions that included sales tax, 58% lacked a written justification for paying the taxes and 20% of the items may not have been needed by the government. In many cases, agencies did not track whether the sales taxes were recovered. The USDA IG investigated seven transactions that included sales taxes, and none of the cardholders provided any documentation as to whether they attempted to recover the tax charges. An audit of NASA's purchase card transactions found that 7% of all high-risk purchases included sales tax, and that there was no evidence that the cardholders had attempted to reclaim those costs. While sales tax on any single transaction may not be considered significant, the cumulative amount in a fiscal year may total in the hundreds of thousands of dollars. The DOI IG obtained actual tax-paid data from the agency's purchase card program and determined that in the first six months of FY2017, DOI paid $338,212 in sales taxes involving 19,716 transactions. The IG for HUD found the agency expended $42,944 in sales tax on purchase card transactions during FY2018. <5.4. Purchases that Split Transactions> Each purchase card holder is assigned a dollar amount, or threshold, which may not be exceeded on a single transaction. This threshold is known as the single purchase limit. Cardholders may not split a large purchase into smaller ones in order to circumvent the single purchase limit. Auditors typically flag an account that shows multiple purchases from the same vendor on the same day where the total costs exceed the cardholder's single purchase limit this pattern is often associated with split transactions. The CIGIE report estimated that 6.6% of all high-risk transactions involved split transactions. The USDA IG, for example, identified a series of transactions on the same day, with the same vendor, for the same product, where the sum of the charges was more than double the cardholder's single purchase limit. Similarly, the NASA IG determined that an employee had tried to circumvent the single transaction limit by making three purchases from the same vendor on the same day. Auditors at the Social Security Administration (SSA) identified split transactions in 6.5% of its sample. The agency suggested that its staff lacked the time to investigate these purchases and determine if they were inappropriate. <6. Implications for Agency Internal Controls> Although the CIGIE initiative did not assess the implementation status of every requirement in the Charge Card Act, the IGs' findings indicated weaknesses remain in many agencies' internal controls. In particular, the audit results showed that AOs did not adequately monitor cardholder purchases; employee training on purchase card policies and procedures is insufficient; and agency policies and procedures have gaps. <6.1. Lack of Adequate Oversight from AOs> The Charge Card Act required agencies to strengthen AOs' capacity to monitor cardholder activity. AOs play a central role in preventing and detecting purchase card misuse, as they review cardholder statements to verify any suspicious or questionable transactions. In addition, AOs reconcile transaction records with supporting documentation to ensure that all purchases were appropriate. Audit findings highlighted the ongoing need for AOs to carefully review cardholder transactions. Many transactions that violated agency purchase card policies had not been reviewed and approved by an AO. GAO found that 11% of all the transactions it sampled from FY2014 had not been reviewed and approved by an AO. Similarly, the CIGIE report found that 44% of the transactions involving questionable or prohibited sources and 38% of split transactions had not been reviewed by the AO. These charges may have been questioned had the AOs thoroughly reviewed the purchases. In many cases, AOs approved transactions that lacked complete supporting documentation. GAO estimated that 22% of all purchase card transactions in FY2014 lacked complete documentation. IGs reported that 59% of the purchases that violated agency policies on the use of mandatory sources lacked written justification, as did 58% of the purchases that violated policies prohibiting the payment of sales taxes. In many cases, AOs approved transactions where there was no documentation that the goods or services had been received. The CIGIE report estimated that of the total number of transactions that violated an agency purchase card policy, 27% were approved without a receipt. <6.2. Lack of Proper Training> The Charge Card Act specifies that agencies are to ensure that cardholders and AOs receive appropriate training on their duties. IGs found that at many agencies, purchase card training programs did not cover some policies or refresher training had not occurred within the past three years conditions which are inconsistent with OMB training requirements. Auditors considered the lack of proper training to be a significant weakness with wide-ranging effects. As the EPA IG's office wrote, "cardholder noncompliance primarily resulted from ineffective training and/or a lack of monitoring and control activities." The CIGIE report found, for example, that agency training programs often lacked adequate explanations of the rules governing split transactions, which meant that AOs did not know how to properly identify such purchases and cardholders were unaware that split purchases were violations of policy. The NASA IG recommended that the agency revise its purchase card training program to emphasize minimum documentation requirements, which constituted NASA's largest category of policy violations. Multiple agencies were unable to provide complete training records. The HUD IG found, for example, that the agency had not maintained records of the cardholders and managers who had completed the required training, as did the IG at the Small Business Administration (SBA). <6.3. Lack of Clear and Complete Policies> Agencies develop their own policies to implement government-wide and agency-specific purchase card requirements. The CIGIE report found that agency guidance was often unclear. Consequently, cardholders and managers did not always understand and properly follow purchase card policies. The IG at the Department of State recommended that the agency reissue its purchase card guidance to specify the frequency with which "refresher training" must be completed a policy which was inconsistently represented at different components. The NASA IG linked one particular weakness the absence of supporting documents for purchase card transactions to agency guidance, which was unclear about the document requirements for purchases below $500. The EPA IG recommended that the agency revise its guidance on the use of mandatory sources to make it easier to understand. More than 39% of EPA's noncompliant transactions were related to the inappropriate use of nonmandatory sources. In some cases, agency policies did not provide sufficient information about purchase card requirements. GAO found that several agencies did not require someone other than the cardholder to receive purchases. In addition, the CIGIE report found that while split transactions were a common violation, many agencies "lacked the policies necessary to identify split purchases." The USDA IG identified 1,410 transactions in FY2018 where the agency paid sales taxes and could not determine if any efforts had been made to recover those charges. The IG wrote that This occurred because USDA does not have a policy requiring cardholders to document reasons for paying or attempting to recover sales tax, such as documenting on the receipt or using the AXOL system to describe the transaction. As a result, cardholders are improperly paying sales tax and not documenting why sales taxes were paid or if recovered, making it difficult for approving officials to determine why State and local sales taxes were paid or if any recovery was attempted. Auditors at EPA determined that the agency did not have adequate controls over its purchase card program, in part because the agency lacked a specific policy for the appropriate number of cardholders needed to make purchases at its various components. <7. Concluding Observations> Oversight of agency purchase card programs is limited by the availability of data. While the CIGIE report identified areas where implementation of the Charge Card Act is incomplete, not all agencies had provided data and the data provided did not reflect or represent all of the law's requirements. Moreover, implementation of the Charge Card Act is ongoing and some agencies may have already addressed the weaknesses identified in the CIGIE initiative, which analyzed FY2017 data. Going forward, Congress has the option of requesting a study of the implementation of the Charge Chard Act. If GAO were to examine implementation of the Charge Card Act, it would possibly be able to use more recent data and it could target agencies with the highest risk of card misuse, as determined by dollar volume or history of violations, among other criteria. GAO might be asked to evaluate specific requirements, particularly in areas that were cited by auditors prior to the Charge Card Act. Have agencies implemented policies that require separation of duties? Have agencies established appropriate dollar thresholds for various categories of cardholders? Are agencies invalidating purchase cards when an employee terminates employment or is transferred to another component? The CIGIE report noted another potential weakness approximately 8.6% of the high-risk transactions sampled involved purchase card activity on closed accounts. The extent of agency compliance with these and other purchase card requirements will not be known without additional, timely information. In addition to agency efforts, an evaluation of the effectiveness of SmartPay bank services and tools might be useful. As noted, agencies have reported that merchant block codes do not always prevent transactions from being approved at prohibited merchants. In addition, GAO found that SmartPay banks did not always retain records for the amount of time required by their contracts, in part due to confusion over which records were considered part of the transaction. An evaluation of bank services might identify additional issues that need to be addressed. It also might include a comparison of the technologies different agencies utilize and discuss what benefits they have realized. Given the potential for technology to enhance oversight, reduce administrative burden, and mitigate the risk of improper purchases, an assessment of SmartPay bank services may help agencies identify potentially useful technologies they have not yet incorporated into their charge card programs.

Following their introduction in the mid-1990s, the usage of government purchase cards expanded at a rapid rate. Spurred by legislative and regulatory reforms designed to increase the use of purchase cards for small acquisitions, the dollar volume of government purchase card transactions grew from $527 million in FY1993 to $19.5 billion in FY2011. While the use of purchase cards was credited with reducing administrative costs during that time, audits of agency purchase card programs found varying degrees of waste, fraud, and abuse. One of the most common risk factors cited by auditors was a weak internal control environment: many agencies failed to implement adequate safeguards against card misuse, even as their purchase card programs grew. In response to these findings, Congress passed the Government Charge Card Abuse Prevention Act of 2012 (Charge Card Act; P.L. 112-194 ), which sought to enhance the management and oversight of agency purchase card programs. Drawing on recommendations from the Government Accountability Office (GAO), the Charge Card Act required executive branch agencies to implement a specific set of internal controls, establish penalties for employees who misuse agency purchase cards, and conduct periodic risk assessments and audits of agency purchase card programs. This report begins by providing background on the origin and structure of agency purchase card programs. It then discusses identified weaknesses in agency purchase card controls that have contributed to card misuse, and examines provisions of the Charge Card Act that are intended to address those weaknesses. Finally, the report examines implementation of the Charge Card Act and analyzes ongoing risks to agency purchase card programs.

crs_R46190

crs_R46190_0

<1. Introduction> Federal rulemaking is one of the crucial methods through which public policy is established and implemented in the United States. Under the constitutional separation of powers system, Congress enacts statutes th at often delegate rulemaking authority to federal agencies. Using that delegated authority, agencies issue regulations to implement those statutes and set the details of public policy. To structure the ways in which agencies issue regulations pursuant to their delegated authority, Congress has created a statutory scheme of procedural controls. The most significant of these controls is the Administrative Procedure Act (APA) of 1946, which generally requires agencies to issue a proposed rule and take public comment prior to issuing a final rule. Congress designed these basic steps which create the backbone of the federal rulemaking process to allow for public input into federal agencies' policymaking decisions. As one scholar noted, "One of the APA's objectives was to open rulemaking to public participation, especially by those whose interests might be adversely affected by an agency's actions. Congress viewed hearing from such parties as a normal part of the legislative process, and therefore applicable to rulemaking." The APA's notice and comment requirements are possibly the best known and most significant mechanism allowing for public input into the rulemaking process. A lesser known procedural control that Congress created in the APA is a petition mechanism through which any interested party can request an agency to issue, amend, or repeal a rule. An agency is not necessarily required to grant the petition or take the requested action, but the APA does require the agency to respond and to do so in a "reasonable time." Thus, the APA petition mechanism is a potentially efficient (and arguably underused) means for an individual or stakeholder to call on an agency to take a particular action. This report briefly discusses the origin of the APA petition mechanism, outlines the mechanism's requirements for agencies, provides information from various outside sources about what may make an effective petition, discusses potential benefits to agencies and the public, and, finally, identifies some examples of statutory petition mechanisms that Congress created in addition to the APA's. <2. APA Petition Mechanism: Historical Origins> The APA's petition mechanism essentially re-stated the right to petition the government established by the U.S. Constitution, which can be traced as far back as the Magna Carta and Declaration of Independence. <2.1. U.S. Constitution> The principles on which the APA's petition mechanism are based are generally traced by scholars to the Magna Carta and, in the American context, to the Declaration of Independence. Though it was centuries old by the time of the American Revolution, the Magna Carta was a heavy influence on the colonists who declared their independence from Britain in the 1770s. The Declaration of Independence, which relied on many of the stated rights and liberties granted under the Magna Carta, referenced the failure of the British government to respond to petitions by stating the following immediately after its list of grievances: "In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury." Thus, the implication was that the colonists had an inherent right to petition the king, as well as a right to a response. Likely as a direct consequence of this perceived slight by the British government, the founders explicitly stated in the First Amendment of the U.S. Constitution that the people had a right to petition the government. Specifically, the First Amendment states that "Congress shall make no law abridging the right of the people to petition the Government for a redress of grievances." Although the First Amendment establishes a right to petition the government, it goes no further in detailing whether or how the government shall respond. <2.2. The Administrative Procedure Act> The lineage of this constitutional provision can be traced forward into the 20 th century and directly to the APA itself. The APA's petition mechanism, which allows interested persons to petition the government to take a rulemaking action, could easily be considered a more modern application of the constitutional right to petition. One scholar described the APA as "the bill of rights for the new regulatory state" that "defined the relationship between government and governed." The petition mechanism appears to fit within that characterization. Indeed, the APA's legislative history confirms the link: "Every agency possessing rule-making authority will be required to set up procedures for the receipt, consideration, and disposition of these petitions. The right of petition is written into the Constitution itself. This subsection confirms that right where Congress has delegated legislative powers to administrative agencies." Congress enacted the APA in 1946 following a large expansion of the federal government's size and authorities during the Franklin D. Roosevelt Administration's New Deal. The APA is considered by most observers to be a compromise between two groups in Congress: conservatives who were wary of the rapid growth of the administrative state and liberals who wanted to protect the ability of agencies to exercise their delegated administrative power. This balance was reflected in the foreword to the compiled legislative history of the APA, in which Senate Judiciary Committee Chairman Pat McCarran stated that although the APA "is brief, it is a comprehensive charger of private liberty and a solemn undertaking of official fairness. It is intended as a guide to him who seeks fair play and equal rights under law, as well as to those invested with executive authority. It upholds law and yet lightens the burden of those in whom the law may impinge." The petition mechanism, like other elements of the APA, can be contextualized by considering this balancing act between these two main perspectives on the administrative process reforms of the 1930s and 1940s. Many conservatives in Congress who believed that the rapid expansion of the government in the New Deal had the potential to threaten individual rights saw a petition mechanism as a way to provide individuals a means through which they could address grievances directly to government agencies. Some liberals in Congress who were generally more trusting of regulatory agencies and wanted to protect recently enacted New Deal programs were willing to agree to a petition mechanism, but they were cautious about how much would be required of agencies to respond. The petition provision that was ultimately included in the final version of the APA can be seen as a compromise between these two sides and is discussed in detail below. <3. APA Petition Mechanism: Overview and Requirements> Section 553(e) of the APA states, "Each agency shall give an interested person the right to petition for the issuance, amendment, or repeal of a rule." Such petitions are sometimes referred to as 553(e) petitions, petitions for rulemaking, petitions for reconsideration, administrative petitions, or citizens' petitions. <3.1. Scope of the Petition Mechanism> The APA's requirement for a petition mechanism applies to all agencies covered by the APA, which includes executive agencies and independent regulatory agencies. Section 553(e) states that the right to petition applies to any "interested person." The Attorney General's Manual on the A dministrative P rocedure A ct , which was published in 1947 and provides the executive branch's interpretation of the APA, states that the right to petition "must be accorded to any 'interested person'" and that "it will be proper for an agency to limit this right to persons whose interests are or will be affected by the issuance, amendment or repeal of a rule." The scope of agency actions that are covered by the right to petition is wide-ranging. The APA's definition of rule is broad and covers a variety of agency actions, including several types of actions that are not subject to the APA's notice-and-comment rulemaking procedures. Such actions include agency interpretive rules and policy statements categories that are often colloquially referred to as "guidance documents" and rules of agency organization, procedure, and practice. Thus, the petition mechanism could potentially be used for more than just rules that have undergone, or would be required to undergo, the APA's notice-and-comment procedures. <3.2. Interaction with APA Rulemaking Procedures> If an agency grants a petition requesting that it issue, amend, or repeal a rule, any relevant procedural requirements for rulemaking or other type of action would still apply. The Attorney General's Manual states, "If the agency is inclined to grant the petition, the nature of the proposed rule would determine whether public rule making proceedings under section 4(a) and (b) are required." In other words, a rulemaking action is not subject to, or exempt from, any procedural requirements as a result of the action having been taken pursuant to a petition under the APA it does not provide an alternative means for an agency to take an action without going through otherwise-required procedures. Rather, the granting of the petition merely serves as a starting point for the agency to take an action. If the nature of the action requires notice-and-comment rulemaking, for example, the agency must still engage in those procedures. In any action an agency chooses to take pursuant to a petition, the agency may act only within the delegated authority that Congress has provided to it in statute. A petition can serve only as a procedural mechanism that could cause or encourage an agency to take action under its established authority. <4. Agency Consideration and Response to Petitions> Although Section 553(e) is only one sentence in length and provides very little detail, other sections of the APA contain some additional requirements for agencies with regard to receiving, considering, and responding to matters presented to them, including rulemaking petitions. Those requirements are discussed below. Notably, however, agencies have a great deal of discretion in determining the specifics of their procedures for receiving, considering, and responding to petitions. <4.1. Submission and Consideration of Petitions> Whereas the constitutional right to petition under the First Amendment does not require the government to consider or respond to a petition as described by one scholar, "it is little more than the right to make a clamor" the legislative history of the APA's petition mechanism stated that Congress did not intend for agencies to consider petitions "in a merely pro forma manner." Furthermore, the legislative history states that "where such petitions are made, the agency must fully and promptly consider them." Thus, the APA's legislative history suggests that agencies are minimally required to consider rulemaking petitions and arguably to do so in a timely manner. The text of the APA itself provides little information, however, on how agencies are to consider petitions, thus leaving quite a bit of discretion regarding the process and elements of agencies' consideration of petitions. The Attorney General's Manual states that agencies should establish, and publish procedural rules governing the receipt, consideration and disposition of petitions filed pursuant to section 4(d) [of the APA]. These procedural rules may call, for example, for a statement of the rulemaking action which the petitioner seeks, together with any data available in support of his petition, a declaration of the petitioner's interest in the proposed action, and compliance with reasonable formal requirements. <4.1.1. Agency Procedures for Consideration of Petitions> Several agencies have established such requirements for the submission of petitions. For example, the Food and Drug Administration (FDA) has issued regulations requiring certain petitioners to submit four copies of a petition, sign the petition, and include information referenced in the petition as applicable, among other things. Under those same regulations, the FDA commissioner must follow certain procedures and consider specified criteria when making a decision on whether to grant a petition, such as whether the petition is in the public interest and is being pursued in good faith. On the contrary, some agencies have not established additional requirements for petitioners and merely have the minimal requirements of the APA as a basis for their petition process. For example, the Securities and Exchange Commission provides an address for petitions and asks petitioners to "set forth the text of any proposed rule or amendment" or "specify the rule the repeal of which is sought" but requires little else of petitioners explicitly in its regulations. In some cases, agencies publish a notice in the Federal Register acknowledging receipt of a petition and asking for public comment as part of its consideration process. For example, in June 2017, the Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA) issued a notice stating, "In response to petitions for reconsideration of the final rule on lease and interchange of passenger-carrying commercial motor vehicles (CMVs) published on May 27, 2015, and effective on July 27, 2015, FMCSA intends to revise the regulations to address 'chartering' (subcontracting) and the 48-hour delay in preparing a lease. FMCSA is requesting public comment on the proposed responses to the petitions discussed below." This public input would not substitute for the notice-and-comment rulemaking requirements of the APA if the agency decides to grant a petition, but it could assist the agency in gauging public interest and could provide information to assist the agency in its decision. <4.1.2. ACUS Recommendations on Consideration of Petitions> In 2014, the Administrative Conference of the United States (ACUS) reported that "few agencies have in place official procedures for accepting, processing, and responding to petitions for rulemaking" and that "how petitions are received and treated varies across and even within agencies." ACUS issued several recommendations related to petitions for rulemaking, including some that addressed the consideration of petitions. The recommendations stated that, for example, "Each agency that has rulemaking authority should have procedures, embodied in a written and publicly available policy statement or procedural rule, explaining how the agency receives, processes, and responds to petitions" and that "the procedures should indicate how the agency will coordinate the consideration of petitions with other processes and activities used to determine agency priorities, such as the Unified Agenda and retrospective review of existing rules." ACUS also recommended that "the procedures should explain what type of data, argumentation, and other information make a petition more useful and easier for the agency to evaluate." Such information could be of assistance to petitioners as they are preparing to petition agencies. <4.2. Response to Petitions> The APA requires that agencies respond to petitions in a timely manner. Specifically, Section 555(b) states that "with due regard for the convenience and necessity of the parties or their representatives and within a reasonable time, each agency shall proceed to conclude a matter presented to it." This provision has generally been interpreted to apply to a number of potential matters brought to an agency, including petitions for rulemaking: "Citing various combinations of 553(e), 555(b), and 555(e), courts have repeatedly found that agencies must at least 'respond' to petitions for rulemaking." Furthermore, the APA appears to require that if the response to a petition is a denial, the agency must provide a reason for the denial. Section 555(e) states that "prompt notice shall be given of the denial in whole or in part of a written application, petition, or other request of an interested person made in connection with any agency proceeding. Except in affirming a prior denial or when the denial is self-explanatory, the notice shall be accompanied by a brief statement of the grounds for denial." Although these provisions appear to establish a requirement for the agency to provide a timely response and a reason for denial, the APA does not further explicate what a response might or should entail. Presumably, if an agency grants a petition, the agency would conduct any procedural requirements that may apply (such as if the petition requested the agency to issue a rule subject to the APA's notice-and-comment requirements). Simply receiving a petition, however, does not require the agency to grant a petitioner's request. The legislative history of the APA states that agencies have several options in responding to petitions, including denial: "The agency may either grant the petition, undertake public rulemaking proceedings as provided by subsections (a) and (b) of this section, or deny the petition." The Attorney General's Manual appears to express a similar view: "the mere filing of a petition does not require the agency to grant it or to hold a hearing or to engage in any other public rule making proceedings." Thus, it appears that the agency is not necessarily obligated to grant any petition, but it must meet the minimum requirements of receiving the petition and responding to it in a timely manner. <4.2.1. ACUS Recommendations on Agency Responses to Petitions> The ACUS recommendations mentioned above also addressed agencies' responses to petitions, stating that agencies "should provide a reasoned explanation beyond a brief statement of the grounds for denial" and "should not reflexively cite only resource constraints or competing priorities." Furthermore, ACUS recommended that agencies should adopt in their procedures "an expectation that it will respond to all petitions for rulemaking within a stated period (e.g., within 6, 12, or 18 months of submission)," "[e]stablish and make publicly available an individual target timeline for responding to that petition," and "provide the petitioner and the public with a brief explanation for the delay, along with a reasonable new target timeline," if the target cannot be met. <4.2.2. Denial of a Petition: Judicial Review> An agency's denial of a petition may also be subject to judicial review. Section 706(2) of the APA states that courts can review and set aside final agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Section 555's requirement for the agency to give notice of the denial of a petition and to generally accompany the denial with a "brief statement of the grounds for denial" has, at times, been interpreted in combination with Section 706(2) of the APA to require the agency to issue a rational (but potentially brief) explanation for a denial of a petition. In some instances, courts have found agencies' denials of petitions to be in violation of the APA. Frequently when this has occurred, courts have remanded the denial to the agency to reconsider the petition. <5. Potential Benefits of Rulemaking Petitions> Rulemaking petitions have several potential benefits, such as that they can provide additional, low-cost opportunities for public participation in federal rulemaking. The subsections below identify and discuss several potential benefits of rulemaking petitions. However, as discussed in the last subsection below, responding to rulemaking petitions could potentially require agencies to allocate resources they would otherwise use elsewhere. <5.1. Public Involvement in Rulemaking> The primary benefit is arguably the opportunity for stakeholders and interested persons to engage directly in a significant type of federal policymaking. Federal rulemaking is the means through which most federal statutes and programs are implemented, and public participation in that process has been an essential component since the APA was enacted in 1946. The benefits of public participation could flow in both directions: Non-agency parties have a chance to make their views known to agencies, and agencies could learn from petitioners about the impacts of their rules previously issued or not-yet-issued by obtaining additional information or perspectives they may not otherwise consider. One study of the use of petitions for rulemaking under the Endangered Species Act found that outside groups petitioning the Fish and Wildlife Service provided useful information for identifying species that are "at least as deserving of protection under the Act as species identified by the agency on its own," further concluding that "these public participation tools might have an important role to play in collecting dispersed or diffuse information to help better inform agency decisionmaking." <5.2. Less Costly Than Judicial Review> The rulemaking petition process provides an arguably more democratic, widely available opportunity for public access by individuals and entities who may not otherwise have an opportunity to challenge agency rules through the courts by seeking judicial review. Filing a petition with a federal agency under the APA or another statutory petition mechanism is likely to be less costly financially and resource-wise than the potential cost of litigation. <5.3. Potential for Compelling an Agency to Act> Petitions for rulemaking can potentially serve as a mechanism to try to force an agency to issue a rule through a court challenge: On occasion, rulemaking petitions that were denied and challenged have led to court orders for the issuance of a rule. For example, in 1999, a group of stakeholders petitioned the Environmental Protection Agency (EPA) to regulate greenhouse gas emissions from new motor vehicles under its Clean Air Act regulatory authority. EPA took comments on the petition and published notice in 2003 that it was denying the petition. After a judicial challenge to the denial of the petition, in 2007, the Supreme Court held that EPA's reasons for denial of the petition were invalid and that EPA did have the authority to regulate greenhouse gas emissions under the Clean Air Act. The Court determined that, under the Clean Air Act, EPA must make a determination on the merits of whether to regulate greenhouse gas emissions or provide a reasonable explanation why it cannot or will not make that decision. <5.4. Potential Intersection with Retrospective Review of Regulations and Regulatory Budgeting> Rulemaking petitions can also encourage agencies to review or eliminate specific regulations that are outdated, ineffective, or overly burdensome. Administrations going back at least to the 1970s have required agencies to engage in retrospective regulatory review. The Trump Administration has taken that requirement a step further with its "one-in-two-out" regulatory requirement, which requires agencies to identify offsetting costs from at least two rules for every rule that imposes new costs. Rulemaking petitions could provide an information mechanism for agencies to comply with these requirements: Outside parties could help identify regulations or portions of regulations that are ripe for revision or elimination. <5.5. Increase in Public Legitimacy of Agency Rulemaking> Additionally, by allowing for participation in addition to the notice-and-comment requirements of the APA, agencies could potentially increase their public legitimacy either for a particular regulation or as a more general matter. The APA's legislative history acknowledges a potential "public relations" improvement for agencies that use petitions, stating that petitions "should be a most useful instrument of both improving the public relations of administrative agencies and protecting the public by affording interested persons a legal and regulatory means of securing the issuance, change, or rescission of a rule." An announcement in the Federal Register that an agency is considering granting a petition could serve as a notification similar to an advance notice of proposed rulemaking (ANPRM), which is another mechanism for early public participation in the rulemaking process. Such a notice could indicate, even in highly tentative terms, the type of action being considered by the agency and invite public input. <6. Potential Disadvantages for Rulemaking Petitions> Nonetheless, considering and responding to rulemaking petitions can be time- and resource-intensive for agencies. In 2013, the Nuclear Regulatory Commission (NRC) published a proposed rule to amend its procedures for receiving and considering petitions. In the document, the agency cited an increase in the number of rulemaking petitions it had received recently, stating that this "presented a significant resource challenge to the NRC." Such allocation of resources could cause delays in other activities at an agency, such as issuing other regulations. The use of resources to respond to a petition varies widely depending on the nature and content of the petition, however. <7. What Makes a Petition Effective?> The effectiveness of, and timing of response to, a petition for rulemaking likely depends on many factors, including the quality and nature of the arguments presented, the policy preferences of the agency and the Administration, any statutory requirements or constraints the agency faces, the evidence available to the agency and its ability to justify taking any particular action, and whatever preferences the agency and Administration may have for prioritization of resources at the agency. Many of these factors are outside of the control of a petitioner, but there are certain steps a petitioner might take to make a stronger case to the agency. Some outside groups have offered advice to the public for how to petition agencies more effectively. For example, the Center for Effective Government suggested that a petition for rulemaking should include information such as an explanation of the proposed action; the language the petitioner would like to propose for a new or amended rule or eliminate from a rule; information and arguments that support the petitioner's proposed action, including relevant technical and scientific data; specific facts or circumstances that support the proposed action; and relevant legal information about any specific laws or statutory provisions that is relevant to the petition and the rule in question. Individual agencies may provide guidance, or even requirements, for petitioners on their websites or in their regulations. For example, some of the suggestions provided by the Center for Effective Government above are from the Federal Aviation Administration's (FAA) regulations and guidance, which are on its website. Similarly, the NRC has regulations and detailed information on its website on how to submit petitions, as well as information tracking petitions that have been submitted to it, including visual information on the number and status of the petitions that have been submitted. As noted above, however, ACUS found in 2014 that few agencies had established official procedures for receiving, considering, and responding to petitions. As such, guidance may not necessarily be available for any particular agency's expectations or requirements. In such circumstances, general guidelines, such as those referred to above from the Center for Effective Government, may be useful. <8. Other Statutory Authorities for Petitions for Rulemaking> In addition to the APA petition mechanism, Congress has enacted various criteria for specific agencies' decisionmaking processes. Generally, these additional statutory mechanisms appear to build upon the 553(e) petition mechanism. A comprehensive list of all such provisions is beyond the scope of this report, but some examples include the following: The Fixing America's Surface Transportation Act required FMCSA to publish on a publicly accessible website a summary of all petitions for regulatory action submitted to FMCSA; "prioritize the petitions submitted based on the likelihood of safety improvements resulting from the regulatory action requested;" respond to each petition within 180 days of posting the summary; prioritize responses to petitions consistent with a petition's potential to reduce crashes, improve enforcement, and reduce unnecessary burdens; and keep an updated inventory of the petitions on its website. The Endangered Species Act states, "To the maximum extent practicable, within 90 days after receiving the petition of an interested person under section 553(e) of title 5, to add a species to, or to remove a species from, either of the lists published under subsection (c), the Secretary [of the Interior] shall make a finding as to whether the petition presents substantial scientific or commercial information indicating that the petitioned action may be warranted. If such a petition is found to present such information, the Secretary shall promptly commence a review of the status of the species concerned. The Secretary shall promptly publish each finding made under this subparagraph in the Federal Register." The Food, Drug, and Cosmetic Act contains requirements for the Secretary of Health and Human Services and for individuals petitioning the agency for a regulation on food additives. The statute lists information the petitions shall include, such as detailed scientific information about the additive and "full reports of investigations made with respect to the safety for use of such additive, including full information as to the methods and controls used in conducting such investigations." It also requires a petition to respond to requests from the Secretary for additional information and further requires the Secretary to publish notice of the regulation proposed by the petitioner.

The Administrative Procedure Act (APA), enacted in 1946, is known primarily for its procedural requirements for notice-and-comment rulemaking. Those requirements state that when issuing regulations, agencies must generally give public notice (i.e., issue a proposed rule), hold a public comment period, and publish a final rule. A lesser known provision in the APA is a petition mechanism through which any interested party can request an agency to issue, amend, or repeal a rule (Section 553(e)). Such petitions are sometimes referred to as 553(e) petitions, petitions for rulemaking, petitions for reconsideration, administrative petitions, or citizens' petitions. The APA petition mechanism is a potentially efficient (and arguably underused) means for an individual or stakeholder to call on an agency to take a particular action. Although Section 553(e) is only one sentence in length and provides very little detail, other sections of the APA contain some additional requirements for agencies with regard to receiving, considering, and responding to rulemaking petitions. An agency is not necessarily required to grant the petition or take the requested action, but the APA does require the agency to consider the petition and respond and to do so "within a reasonable time." Notably, however, agencies have a great deal of discretion in determining the specifics of their procedures for receiving, considering, and responding to petitions. In 2014, the Administrative Conference of the United States (ACUS) found that "few agencies have in place official procedures for accepting, processing, and responding to petitions for rulemaking" and that "how petitions are received and treated varies across—and even within—agencies." The APA's requirement for a petition mechanism applies to all agencies covered by the APA, which includes executive agencies and independent regulatory agencies. The APA's definition of rule is broad and covers a variety of agency actions, including several types of actions that are not subject to the APA's notice-and-comment rulemaking procedures. Such actions include agency interpretive rules and policy statements—categories that are often colloquially referred to as "guidance documents"—and rules of agency organization, procedure, and practice. Thus, the petition mechanism could potentially be used for more than just rules that have undergone, or would be required to undergo, the APA's notice-and-comment procedures. If an agency grants a petition for rulemaking—thus issuing, amending, or repealing a rule per request of the petitioner—any relevant procedural requirements for rulemaking or other type of action would still apply. Furthermore, in taking any action pursuant to a petition, the agency may act only within the delegated authority Congress has provided to it in statute. This report briefly discusses the origin of the APA petition mechanism, outlines the mechanism's requirements for agencies, provides information from various outside sources about what may make an effective petition, discusses potential benefits to agencies and the public, and, finally, identifies some examples of statutory petition mechanisms that Congress created in addition to the APA's.

crs_R46129

crs_R46129_0

Following his resignation as President, Richard Nixon wanted to destroy recordings created in the White House that, among other things, documented actions he and others took in response to investigations connected to a burglary in the Watergate building and his reelection campaign. Under policy at the time, presidential materials were considered the President's private property. In response, Congress passed a number of laws to preserve the integrity of documents and other information related to Nixon's presidency and made those laws applicable to all future presidencies. Enacted in 1978, the Presidential Records Act (PRA; 44 U.S.C. 2201-2207) established public ownership of records created by Presidents and their staff in the course of discharging their official duties. The PRA additionally established procedures for congressional and public access to presidential and vice presidential information and the preservation and public availability of such records at the conclusion of a presidency. This report provides context on the institutions involved in presidential recordkeeping, explains what is and is not considered to be a presidential record, and identifies recordkeeping responsibilities and access policies during and after a presidency. The report concludes with information and policy options for congressional oversight and enforcement of the PRA with respect to electronic records provisions under the Presidential and Federal Records Act Amendments of 2014. While the PRA provides similar provisions for records created by the Vice President, this report focuses on presidential records. Also, information on the Federal Records Act (FRA), more broadly, is available in CRS Reports CRS Report R43072, Common Questions About Federal Records and Related Agency Requirements , by Meghan M. Stuessy and CRS In Focus IF11119, Federal Records: Types and Treatments , by Meghan M. Stuessy. <1. The Institutions> The PRA governs the records of the President, Vice President, and certain components of the Executive Office of the President (EOP). The PRA specifies roles and responsibilities for the management and enforcement of presidential records policy to the President, the National Archives and Records Administration (NARA), and the Department of Justice (DOJ). The PRA requires the President to take "all such steps as may be necessary to assure that the activities, deliberations, decisions, and policies that reflect the performance of the President's constitutional, statutory, or other official or ceremonial duties are adequately documented." The President is further directed to implement records management controls to accomplish these ends and may consult NARA and DOJ on how to best comply with the statute. NARA preserves selected government records, oversees recordkeeping throughout the government, and makes government records publicly available pursuant to the PRA and other authorities. NARA provides advice and assistance to the White House on records management practices upon request, throughout a presidential transition and a presidency, and to former Presidents. The PRA details which presidential records and materials NARA is to assume responsibility for at the conclusion of a President's Administration. The PRA requires the head of NARA, the Archivist of the United States, to consult with Congress and particular congressional committees on requests for the disposal of such records deemed to be of special congressional interest. DOJ provides guidance to the executive branch on how to comply with the legal requirements of government information policy, of which records maintenance policy, including presidential records, is a part. Additionally, the Archivist and the Attorney General jointly investigate the unlawful removal or destruction of government and presidential records. <2. Defining Presidential Records> The PRA defines presidential records as documentary materials, or any reasonably segregable portion thereof, created or received by the President, the President's immediate staff, or a unit or individual of the Executive Office of the President whose function is to advise or assist the President, in the course of conducting activities which relate to or have an effect upon the carrying out of the constitutional, statutory, or other official or ceremonial duties of the President. Such term (A) includes any documentary materials relating to the political activities of the President or members of the President's staff, but only if such activities relate to or have a direct effect upon the carrying out of constitutional, statutory, or other official or ceremonial duties of the President. This definition of presidential records is distinct from federal records and excludes a President's personal records. Unlike federal records, which may be considered temporary or permanent records depending on their content, all presidential records are considered permanent records due to their permanent value and, as a result, should be maintained in perpetuity by the federal government, subject to some limitations described below. A President's personal records identified in the PRA as documents "of a purely private or nonpublic character" are excluded from preservation requirements. As a result of the Presidential and Federal Records Act Amendments of 2014, all government records (both presidential and federal) are assessed for preservation not by the media used to store the information but rather by the content of the information itself. In the PRA's case, documentary materials , of which presidential records are a part, includes "all books, correspondence, memoranda, documents, papers, pamphlets, works of art, models, pictures, photographs, plats, maps, films, and motion pictures, including, but not limited to, audio and visual records, or other electronic or mechanical recordations, whether in analog, digital, or any other form." If the content of any documentary material meets the criteria of a presidential record, the information must be preserved according to the PRA regardless of the information's format. Presidential records are additionally protected and restricted from public consumption for a set period of time. Because of these additional restrictions on presidential records versus federal records, it is important to identify which organizations within the EOP create presidential records instead of federal records. Additionally, the time during a President's life in which the documents are created may help differentiate between personal, private records and presidential records. <2.1. Creators of Presidential Records> As defined in statute, the President and the President's immediate staff create presidential records. However, certain EOP components create presidential records, while others create federal records. The difference in statutory application between these components may have implications for access to their records. According to NARA, EOP components considered to "solely advise and assist the President" and therefore create presidential records include: The White House Office, The Office of the Vice President, The Office of Policy Development, The Council of Economic Advisors, The National Security Council, The President's Foreign Intelligence Advisory Board, The President's Intelligence Oversight Board, The National Economic Council, and The Office of Administration. Conversely, NARA has identified EOP components that create federal records and not presidential records as follows: The Office of Management and Budget, The Office of the United States Trade Representative, The Council on Environmental Quality, The Office of Science and Technology Policy, and The Office of National Drug Control Policy. <2.2. Presidential versus Personal Records> The PRA distinguishes between a President's personal records and presidential records. Personal records of a purely private or nonpublic character include such things as diaries or journals but also include (1) materials relating exclusively to the President's own election and to the election of a particular individual or individuals to federal, state, or local office that "have no relation to or direct effect upon the carrying out of constitutional, statutory, or other official or ceremonial duties of the President;" and (2) materials relating to private political associations. Because personal records are not presidential records, they are not subject to the same materials retention or access requirements. <2.2.1. Presidential Transition Materials> Records created by the President-elect and his transition team prior to inauguration are considered personal records. However, NARA notes, "To the extent that these records are received and used after the inauguration by the incoming Presidential Administration, they may become Presidential or Federal records. Former Presidents have traditionally donated these personal transition records to [NARA] for deposit in their Presidential Library." During the 2016 election cycle, NARA issued additional guidance relating to President-elect transition team materials where it specified how the PRA would govern such materials. As the statute makes clear, materials relating to the President's own election (e.g., campaign materials) are not considered presidential records. Similarly, transition team materials are considered personal and private, not presidential records. In instances where the transition team receives briefing materials from a federal agency, however, the briefing materials are considered federal records of the briefing agency and maintained accordingly. <2.3. Who Decides If Information Is a Presidential Record?> While statute allows for materials relating to campaign events and private political associations to be considered personal records so long as the materials have no relation to or direct effect upon the carrying out of the President's various duties, critically, the President has a high degree of discretion over what materials are to be preserved under the PRA. NARA does not have direct oversight authority over the White House records program as it does over federal agencies' records programs. Instead, NARA "provides advice and assistance to the White House on records management practices upon request," which would appear to give the President discretion over which materials might be included under the PRA. As noted previously, whether these records are classified as presidential or personal records affects public and congressional access to such materials. For example, the PRA does not provide an access mechanism for personal records. In the event of potentially unlawful removal or destruction of government records, Title 44, Section 3106, of the U.S. Code requires the head of a federal agency to notify the Archivist, who initiates action with the Attorney General for the possible recovery of such records. The Archivist is not authorized to independently investigate removal or recover records. <3. Custody and Control of Presidential Records> Policies concerning the custody of presidential materials informs the way such information is controlled, accessed, and released during and after a President's time in office. Prior to the PRA's enactment, presidential papers were traditionally the private property of the President, who would then donate the materials to institutions for public consumption. The PRA fundamentally changed the status of presidential records as publicly owned materials. The PRA is explicit: "The United States shall reserve and retain complete ownership, possession, and control of Presidential records; and such records shall be administered in accordance with the provisions of this chapter." In passing the PRA, Congress required that "public access to the materials would be consistent under standards fixed in law." The PRA provides records maintenance requirements and permissions depending on whether a presidency is in progress or has concluded. <3.1. During a Presidency> During a presidency, the incumbent President is exclusively responsible for custody, control, and access to presidential records, and the Archivist may maintain and preserve the records on behalf of the President. While the PRA establishes the President's responsibility, NARA notes that the agency is available for the President to consult with regarding records management practices upon request, although the PRA does not require such a consultation. <3.1.1. Disposal of Presidential Records> An incumbent President also has authority under the PRA to seek the disposal of records, which routinely occurs with temporary records under the Federal Records Act. All presidential records are initially considered permanent records, but the PRA provides a process for the incumbent President to seek a change in the disposal schedule of the President's own records by obtaining the Archivist's written approval. Additionally, such presidential records may be disposed of if the President submits copies of the intended disposal schedule to (a) the Senate Committee on Rules and Administration and the Senate Committee on Homeland Security and Governmental Affairs, and (b) the House Committee on Oversight and Government Reform (now the House Committee on Oversight and Reform) and the House Committee on Government Operations (now the House Subcommittee on Government Operations) at least 60 calendar days before the proposed disposal date. If the Archivist considers the identified records in the President's proposed disposal schedule to be of special interest to Congress or that consultation with Congress is necessary to assess the disposal request, the Archivist shall request the advice of the listed committees. <3.2. After a Presidency> After a presidency, the responsibility for the custody, control, preservation of, and access to presidential records shifts to the Archivist. Additionally, statute requires the Archivist to make the former President's records publicly available as rapidly and as completely as possible. The PRA does not provide the former President with a process for disposing of presidential records after leaving office. In contrast to the disposal request process for incumbent Presidents, the Archivist may dispose of a former President's presidential records if they are deemed by the Archivist to have insufficient value to warrant their continued preservation. The Archivist must publish a notice in the Federal Register at least 60 days in advance of the proposed disposal date. <3.2.1. Designating a Presidential Library> Because the United States owns all presidential records, a former President must seek the Archivist's permission to display presidential records in a different facility, such as a presidential library. The Archivist is directed to deposit all of the former President's records in a presidential archival depository or another federal archival facility and is authorized to designate, after consultation with the former President, a director of the chosen facility who is responsible for the care and preservation of the records. Presidential libraries are not constructed using federal funds but are operated and maintained by NARA through its budget. <3.3. Restricted Access to Presidential Records> The PRA does not establish automatic access for an incumbent President's records, which may be protected by executive privilege on a case-by-case basis. However, the PRA does statutorily narrow an outgoing President's ability to restrict records access. As the length of time between the conclusion of a presidency and the present day increases, presidential records become more accessible. Access to a former President's records is governed in terms of time passed since the conclusion of the presidency: Less than five years out, no public access is granted due to the Archivist's processing of the records. Between five and 12 years out, the Archivist determines PRA restrictions in accordance with Title 44, Section 2204, of the U.S. Code with the former President. After 12 years, these PRA restrictions no longer apply. The Freedom of Information Act (FOIA; 5 U.S.C. 552) governs the public release of government information, including presidential records. Throughout these time periods, FOIA exemptions (for example, information that is prohibited from disclosure by another federal law) may additionally restrict records access. However, records created by a former President are not subject to FOIA's (b)(5) deliberative process exemption (which incorporates the deliberative process, executive, and attorney-client privileges, among others). The PRA (44 U.S.C. 2204) permits the outgoing President to restrict access to six categories of presidential records for specified durations of time, not to exceed 12 years. The records categories for which a former President can restrict access include: 1. Records described in an executive order as in the interest of national defense or foreign policy or are otherwise classified documents, 2. Records relating to appointments to federal office, 3. Records specifically exempted from disclosure by statute, 4. Records that contain trade secrets and commercial or financial information, 5. Records of confidential communications requesting or submitting advice between the President and the President's advisers or between such advisers, and 6. Records of personnel and medical files whose disclosure would constitute an invasion of personal privacy. After the expiration of the 12-year period, under Executive Order 13489, incumbent and former Presidents must be notified of the Archivist's intent to disclose materials at least 30 days in advance of the release of the records. Prior to this release, incumbent and former Presidents may assert a claim of executive privilege over certain presidential records, thereby limiting public access. If an incumbent President invokes a claim of executive privilege over the release of a former President's records, the Attorney General and the Counsel to the President shall review and decide whether the invocation of executive privilege is justified. Similarly, if a former President invokes a claim of executive privilege, the current Archivist, Attorney General, and Counsel to the President are to confer and determine whether to honor the former President's claim of executive privilege. The incumbent President may extend the time period to withhold the records and is to provide a reason for the extension. <3.3.1. Exceptions to Restricted Access of a Former President's Records> Certain federal officials may access a former President's records within the 12-year time frame by gaining "special access" to presidential records. Per the PRA: [S]ubject to any rights, defenses, or privileges which the United States or any agency or person may invoke, Presidential records shall be made available (A) pursuant to subpoena or other judicial process issued by a court of competent jurisdiction for the purposes of any civil or criminal investigation or proceeding; (B) to an incumbent President if such records contain information that is needed for the conduct of current business of the incumbent President's office and that is not otherwise available; and (C) to either House of Congress, or, to the extent of matter within its jurisdiction, to any committee or subcommittee thereof if such records contain information that is needed for the conduct of its business and that is not otherwise available. Observers have questioned what constitutes a House or Senate request for presidential records and who needs to make the request for the records for it to qualify under Section 2205(C). However, NARA explains that its "longstanding and consistent practice has been to respond only to requests from the Chair of Congressional Committees, regardless of which political party is in power." This practice as a result of statutory ambiguity may impact the ability of minority party members or general committee members to gain access to presidential records. <4. Issues for Congress: Enforcement of the PRA> The PRA's effectiveness relies on its ability to be enforced, both in terms of accessing presidential records for oversight purposes through the mechanisms described in statute and in terms of maintaining the records themselves so that they may be accessed. In light of the Presidential and Federal Records Act Amendments of 2014 requirement to collect presidential records regardless of their media but based on their content, questions regarding the volume and the meaning of an electronic record's completeness are creating policy implications that may be suitable for congressional consideration. These matters may be of particular interest to Congress as it carries out its oversight activities and ensures that emerging formats of presidential records are effectively collected and controlled. <4.1. Volume of Electronic Presidential Records> The volume of presidential records has increased exponentially in the digital age, as indicated by reporting on the amount of such records at the conclusion of a presidency. According to NARA's 2009 Report on Alternative Models for Presidential Libraries , the Clinton Administration provided NARA 20 million presidential record emails at the conclusion of the President's eight-year tenure. The George W. Bush Administration provided 150 million email records after its eight-year tenure more than seven times the number of emails provided by the previous Administration. To date, the Barack Obama Presidential Library estimates that NARA has received 300 million emails, doubling the amount from the previous Administration. "Huge volumes of electronic information" are a "major challenge" in record management, according to the Government Accountability Office (GAO), and "electronic information is increasingly being created in volumes that pose a significant technical challenge to our ability to organize it and make it accessible." NARA's ability to process the volume of presidential records is closely linked to information access issues. In its FY2020 congressional budget justification, NARA noted it has "a significant backlog of unanswered [FOIA] requests at Presidential Libraries covered" by the PRA in part because of the volume of records and the information restriction process: NARA must review all Presidential papers page-by-page, to identify and redact national security and other restricted information, which means it will take decades to make all of the records available to the public. Processing records in response to FOIA requests is even more time-consuming than processing the same number of pages in a systematic, archival fashion and does not produce discrete records collections that would be meaningful to the general public. Because of this increased volume, NARA's ability to keep pace with the explosion of records will be dependent on NARA's staffing, funding, and training levels. Any delay in NARA's processing of records may impact the ability of interested parties to access materials in a timely fashion, and NARA's ability to comply with the PRA's statutory directive to make records available as rapidly and completely as possible. <4.2. Completeness of Electronic Presidential Records> The increasing use of electronic records also requires the institutions involved in presidential records oversight to ensure the record information's authenticity and completeness. The EOP and NARA need to ensure that record materials are appropriately protected from corruption or destruction, but these protections take on a different meaning in a digital, instead of analog, environment. Given the increase in presidential records, Congress may consider whether or not the presidential records institutions are able to consistently meet NARA directives, bearing in mind that while NARA supervises agency implementation of the FRA, NARA provides advice and assistance to the White House on records management practices upon request . NARA has provided guidance on including metadata elements in the collection of federal records under the FRA that the EOP may adopt as well. However, data on implementation is self-reported by agencies, and similar information is not required to be provided for presidential records on a routine basis. Last updated in 2005, NARA's guidance on identifying and maintaining trustworthy websites says that such records have the following characteristics: reliability: content is trusted as a full and accurate representation of transactions, activities, or facts; authenticity: proven to be what it purports to be; integrity: complete and unaltered; and usability: can be located, retrieved, presented, and interpreted. NARA's guidance suggests that agencies "maintain the content, context, and sometimes the structure of" their websites to ensure that their records are trustworthy. One instructive example is NARA's attempts to archive underlying documents and web materials on whitehouse.gov. While collecting records material appears to be a straightforward task, policy decisions such as when and what to collect impact the material's context (i.e., the circumstances that situate the material and give it meaning), usability, and completeness. Some accompanying digital information, such as who accessed the information or reviewed the document, may not be available without holistic preservation. For example, NARA acknowledges that it does not archive the user interface of the White House website, but it has attempted to "freeze" an approximation of the website as it appeared at the conclusion of a presidency and not at various points during an Administration. Further, NARA notes, "These 'frozen in time' sites are representations of the original websites and approximate the interface and functionality for easy access by the public. These websites are no longer updated so links to external websites and some internal pages will not work." Such decisions may have implications on the type of information available to future researchers, federal agencies, and Congress.

Presidential records provide Congress, members of the public, and researchers with documentation, context, and explanations for presidential actions. The Presidential Records Act (PRA; 44 U.S.C. §§2201-2207) set forth requirements regarding the maintenance, access, and preservation of presidential and vice presidential information during and after a presidency. This report describes the institutions involved in presidential recordkeeping, explains what is and is not considered a presidential record, and identifies recordkeeping responsibilities and access policies during and after a presidency. The report concludes with information and policy options for congressional oversight and enforcement of the PRA with respect to electronic records provisions under the Presidential and Federal Records Act Amendments of 2014. Prior to the PRA, records were considered the President's private property. Now, the PRA states that presidential records are the property of the United States. Under the PRA, the President may request advice and assistance from the National Archives and Records Administration (NARA) regarding records management practices, and the Archivist of the United States (the head of NARA) plays an important role in the maintenance and access of a former President's records. The PRA does not establish automatic access to an incumbent President's records, which may be protected by executive privilege on a case-by-case basis. However, the PRA does statutorily narrow an incumbent President's ability to restrict records access as the Administration draws to a close. As the length of time between the conclusion of a presidency and the present day increases, presidential records become more accessible. Access to a former President's records is governed in terms of time passed since the conclusion of the presidency: Less than five years out, no public access is granted due to the Archivist's processing of the records. Between five and 12 years out, the Archivist determines PRA restrictions with the former President in accordance with Title 44, Section 2204, of the U.S. Code . After 12 years, these PRA restrictions no longer apply. Certain federal officials may access a former President's records within the 12-year time frame by gaining "special access" to presidential records. The PRA permits either house of Congress, committees, or subcommittees requesting information for chamber or committee business to be granted special access to the former President's records. In practice, observers have questioned what constitutes a House or Senate request for presidential records and who needs to make the request to qualify under the PRA. This statutory ambiguity may impact the ability of minority party members and general committee members to gain access to presidential records. As a result of the Presidential and Federal Records Act Amendments of 2014, presidential records are assessed for preservation not by the media used to store the information but rather by the content of the information itself. Questions regarding the volume and completeness of records may be suitable for congressional consideration. Any delay in NARA's processing of records will directly impact timely access to those records and the ability of NARA to comply with the PRA's statutory directive to make records available as rapidly and completely as possible.

crs_R46364

crs_R46364_0

<1. Introduction> The House of Representatives has standing rules that govern how bills and resolutions are to be taken up and considered on the floor. However, to expedite legislation receiving floor action, the House may temporarily set aside these rules for measures that are not otherwise privileged for consideration. This can be done by agreeing to a special order of business resolution (special rule) or by adopting a motion to suspend the rules and pass the underlying measure. In general, special rules enable the consideration of complex or contentious legislation, such as major appropriations or reauthorizations, while the suspension of the rules procedure is usually applied to broadly supported legislation that can be approved without floor amendments or extensive debate in the chamber. Most bills and resolutions that receive floor action in the House are called up and considered under suspension of the rules. The suspension procedure allows non-privileged measures to be raised without a special rule, waives points of order, limits debate, and prohibits floor amendments. Motions to suspend the rules and pass the measure require a two-thirds vote, so the procedure is typically reserved for bills and resolutions that can meet a supermajority threshold. Decisions to schedule bills for consideration under suspension are generally based on how widely supported the measures are, how long Members wish to debate them, and whether they want to propose floor amendments. These decisions are not necessarily related to the subject matter of the measure. Accordingly, measures brought up under suspension cover a wide range of policy areas but most often address government operations, such as the designation of federal facilities. This report describes the suspension procedure, which is defined in clause 1 of House Rule XV, and provides an analysis of measures considered under suspension during the 115 th Congress (2017-2018). Figures 1-8 display statistical data, including the prevalence and form of suspension measures, sponsors of measures, committee consideration, length of floor debate, voting, and resolution of differences between the chambers. Table 1 summarizes the final legislative status of measures initially considered in the House under the suspension of the rules. Finally, the Appendix depicts the use of the suspension procedure from the 110 th through the 115 th Congresses (2009-2018). <2. House Rule XV (Clause 1)> The suspension of the rules procedure is established by clause 1 of House Rule XV. Bills, resolutions, House amendments to Senate bills, amendments to the Constitution, conference reports, and other types of business may be considered under suspension, even those "that would otherwise be subject to a point of order [or have] not been reported or referred to any calendar or previously introduced." Suspension motions are in order on designated days. Rule XV states that "the Speaker may not entertain a motion that the House suspend the rules except on Mondays, Tuesdays, and Wednesdays and during the last six days of a session of Congress." Suspension measures, however, may be considered on other days by unanimous consent or under the terms of a special order of business (special rule) reported by the Committee on Rules and agreed to by the House. A motion to suspend the rules is a compound motion to suspend the House rules and pass a bill or agree to a resolution. When considering such a motion, the House is voting on the two questions simultaneously. Once recognized, the Member making the motion will say, "Mr. [or Madam] Speaker, I move to suspend the rules and pass___." The House rules that are suspended under this procedure include those that "would impede an immediate vote on passage of a measure such as ordering the previous question, third reading, recommittal, or division of the question." A measure considered under the suspension procedure is not subject to floor amendment. The motion to suspend and pass the measure, though, may provide for passage of the measure in an amended form. That is, the text to be approved may be presented in a form altered by committee amendments or by informal negotiations. Suspension measures that are passed with changes incorporated into the text are passed "as amended." There are no separate votes on the floor approving such amendments. Suspension motions are "debatable for 40 minutes, one-half in favor of the motion and one-half in opposition thereto." However, in most instances, a true opponent never claims half the time, and most speakers come to the floor to express support for the measure. Debate time is controlled by two floor managers, one from each party, who sit on a committee of jurisdiction. Each manager makes an opening statement and may yield increments of the 20 minutes they control to other Members to debate the measure. Once debate has concluded, a single vote is held on the motion to suspend the rules and pass the measure. The motion requires approval by "two-thirds of the Members voting, a quorum being present." Should the vote fall short of the two-thirds required for passage (290, if all Members vote), the measure is not permanently rejected. Before the end of the Congress, the House may consider the measure again under suspension, or the Committee on Rules may report a special rule that provides for floor consideration of the measure. <3. Prevalence and Form of Suspension Measures, 115th Congress> As illustrated in Figure 1 , the majority of measures considered on the House floor during the 115 th Congress were initially called up under the suspension of the rules procedure. Sixty-four percent of all measures that received floor action were initially considered under suspension (952 out of the 1,498), compared to those under the terms of a special rule (12%), unanimous consent (10%), or privileged business (15%). Figure 2 displays the form of suspension measures. Most of the measures considered under suspension during the 115 th Congress (94%) were bills. House bills made up 83% of the suspension total, Senate bills 10%. The remaining measures were House resolutions, House concurrent resolutions, and House joint resolutions. There were no Senate concurrent or joint resolutions considered under suspension of the rules in the 115 th Congress. <4. Sponsors of Suspension Measures> As represented in Figure 3 , most suspension measures were sponsored by members of the majority party during the 115 th Congress. House or Senate majority-party members sponsored 73% of all bills and resolutions initially considered in the House under suspension, while House majority-party members sponsored 627 (73%) of the 855 House-originated measures (designated with an H.R., H.Res., H.Con.Res. or H.J.Res. prefix). Suspension is, however, the most common procedure used to consider minority-sponsored legislation in the House by a wide margin. In the 115 th Congress, 77% of the minority-sponsored measures that were considered on the House floor were raised under the suspension procedure. Members of the House or Senate minority parties sponsored 27% of all suspension measures originating in either chamber, compared to 14% of legislation subject to different procedures, including privileged business (27 measures) and unanimous consent (48 measures). Minority-party House Members sponsored 228 (27%) of the 855 House measures considered under suspension. There were no minority-sponsored measures considered under the terms of a special rule. <5. Committee Consideration> <5.1. Committee Referral> Most suspension measures are referred to at least one House committee before their consideration on the chamber floor. In the 115 th Congress, 896 out of the 952 suspension measures considered (94%) were previously referred to a House committee. Of the 55 measures that were considered without a referral, 51 were Senate bills that were "held at the desk," and four were House resolutions that provided concurrence to Senate amendments with an amendment. Measures may be referred to multiple House committees before receiving floor action. When a bill or resolution is referred to more than one House committee, the Speaker will designate one committee as primary, meaning it is the committee exercising jurisdiction over the largest part of the measure. Generally, the chair of the committee of primary jurisdiction works with majority party leadership to determine if and when a measure should be considered under suspension. Figure 4 shows the number and percentage of measures brought up under suspension from each House committee of primary jurisdiction. The House Committee on Natural Resources was the committee of primary jurisdiction for the plurality of measures considered under suspension in the 115 th Congress: 146, or 15%, of the total number of suspension measures considered. Many of these bills concerned the designation or use of federally owned land. For most House committees, the majority of their referred measures that reached the floor were raised under the suspension procedure. In the 115 th Congress, the three exceptions were the Committee on House Administration which had several measures considered by unanimous consent and the Committees on Budget and Appropriations, which had all or most of their measures considered pursuant to special rules, respectively. For the other committees, suspension measures ranged from 56% to 100% of the total number of the committee's measures receiving floor action ( Figure 5 ). Since suspension motions require a two-thirds majority for passage, House committees that handle less contentious subjects tend to have more of their measures considered under the suspension procedure in comparison to other committees. In the 115 th Congress, high-suspension committees included Small Business and Homeland Security (100% of measures receiving floor action); Veterans' Affairs (92%); and Science, Space, and Technology (90%). The Small Business Committee's measures sought to authorize new business development programs. Veterans' Affairs measures included authorizations, reauthorizations, and bills designating federal facilities. <5.2. Committee Markup and Reporting> While suspension measures are not subject to floor amendments, committees may recommend amendments to legislative texts during markup meetings or through informal negotiations. The motion to suspend the rules can include these proposed changes when a Member moves to suspend the rules and pass the measure "as amended." In the 115 th Congress, 521 suspension measures (55% of the total) were considered "as amended," meaning that the text to be approved differed from the measure's introduced text. Clause 2 of House Rule XIII requires that measures reported by House committees must be accompanied by a written report. Otherwise, they are not placed on a calendar of measures eligible for floor consideration. However, the written report requirement is among those rules suspended under the suspension procedure. Thus, measures may be called up on the floor under suspension of the rules even if a committee never ordered them to be reported or wrote an accompanying committee report. Instead, the motion to suspend the rules discharges the committee and moves the legislation directly to the House floor. In the 115 th Congress, 659 (69%) suspension measures were ordered to be reported by a House committee. Of this number, 505 were reported with an accompanying House committee report. Fifty-seven measures that did not have a House report did have a Senate report (of these, 24 were Senate bills that did not receive a House committee referral), while 390 measures had no written report from either chamber (41% of the total number of suspension measures). <6. Floor Consideration> <6.1. Raising Measures (Day of Week)> Pursuant to Rule XV, motions to suspend the rules are regularly in order on Mondays, Tuesdays, and Wednesdays or on the last six days of a session of Congress. However, suspension motions may be considered on other days by unanimous consent or under the terms of a special rule reported by the Committee on Rules and agreed to by the House. As displayed in Figure 6 , in the 115 th Congress, the plurality of suspension measures were considered on Tuesdays (446, 47% of the total number considered), followed by Mondays (279, 29%) and Wednesdays (168, 18%). In addition, 31 suspension measures were considered on Thursdays and 28 on Fridays. Of these, seven were considered by unanimous consent, while 52 were called up under suspension pursuant to permission included in a special rule reported by the Rules Committee and agreed to by the full House. Such special rules included a provision stating, "It shall be in order at any time on the legislative day of ___ for the Speaker to entertain motions that the House suspend the rules as though under clause 1 of rule XV." <6.2. Majority and Minority Floor Managers> Pursuant to Rule XV, suspension measures are "debatable for 40 minutes, one-half in favor of the motion and one-half in opposition thereto." In practice, there is rarely a true opponent to a motion to suspend the rules, and the time is divided between two floor managers, usually one from each party, who both favor the motion. The floor managers each control 20 minutes of debate. The managers may be their parties' sole representatives for or against the motion, or they may yield increments of the 20-minute allotment to other Members. Typically, the relevant committee chairs and ranking members select the majority and minority floor managers for particular bills and resolutions. These managers may be the measure's sponsor, the chair or ranking member of the measure's committee of primary jurisdiction, or another committee member. In the 115 th Congress, the measure's sponsor served as the majority manager on 23% of the suspension measures receiving floor action. The committee chair managed 28% of the measures. The minority manager was the measure's sponsor for 9% of the measures and the committee's ranking member for 25% of the measures considered. Occasionally, floor managers controlling time on a motion to suspend the rules ceded their control to other Members during debate. By unanimous request, the other Member then controlled the remaining amount of time allotted. In one identified case, another Member claimed the time in true opposition during the initial floor consideration on the basis of both the majority and minority floor managers favoring the measure. Pursuant to the rule, the Member in true opposition then controlled 20 minutes of debate. In at least two instances, the minority manager opposed the measure. <6.3. Debate> <6.3.1. Managers and Additional Speakers> A majority floor manager makes the motion to suspend the rules by stating, "Mr. [or Madam] Speaker, I move to suspend the rules and pass the bill [or resolution] ____." The Speaker (or Speaker pro tempore) responds, "Pursuant to the rule, the gentleman[woman] from [state] and the gentleman[woman] from [state] each will control twenty minutes." The majority and minority managers then, in turn, make opening statements regarding the measure using the 20 minutes each controls. If the majority and minority managers have secured additional speakers, the speakers generally alternate between the parties within the 40-minute limit. During the 115 th Congress, on a motion to suspend the rules, the average number of speakers in addition to the floor managers was fewer than two. On 56% of the measures (531) considered, there were one or two additional speakers. On 28% of the measures (268) considered, there were no additional speakers, and in 14% of the measures (136) considered, there were three to 13 additional speakers. Seventeen measures had 14 or more additional speakers. The measure with the most additional speakers (34), H.J.Res. 2 , proposing an amendment to the Constitution, was allowed four hours of debate under the terms of a special rule ( H.Res. 811 ). At the start of the debate period, the majority manager may request "unanimous consent that all Members may have five legislative days in which to revise and extend their remarks and add extraneous materials on this bill [resolution]." This request enables general leave statements to be inserted into the Congressional Record . In 20% of the suspension measures considered in the 115 th Congress, a written general leave statement appeared in the Record following in-person remarks, indicating that the remarks were submitted on the day the legislation was considered. General leave statements submitted on a day other than the day of consideration appear in the Extension of Remarks section of the Congressional Record . <6.3.2. Length of Consideration> Suspension measures are limited to a maximum of 40 minutes of debate under Rule XV. However, if there are time gaps between speakers or procedural interruptions, such as a vote on a motion to adjourn, the time period between the start of the first speaker's remarks and the conclusion of debate may exceed 40 minutes. The statistics displayed in Figure 7 show the length of consideration of suspension measures as documented in Congress.gov, not the accumulated length of statements, as kept by official timekeepers in the chamber. In the 115 th Congress, the average length of consideration on a motion to suspend the rules was 12 minutes and 21 seconds, and more than half of the measures considered had a debate period of 10 minutes or less. Thus, while overall debate is limited to 40 minutes under the rule, on most suspension measures, a fraction of that time was actually expended during consideration. Twenty-eight measures, however, had consideration periods that exceeded 40 minutes due to procedural delays or, in the case of H.J.Res. 2 , proposing an amendment to the Constitution, due to the terms of a special rule ( H.Res. 811 ), which enabled four hours of debate. <6.4. Voting and Passage in the House> House leaders generally choose measures for suspension that are likely to achieve the two-thirds majority threshold for passage. Thus, almost all suspension measures were passed by the House in the 115 th Congress. The House passed, via motions to suspend the rules, 790 of the 794 House bills that were initially considered under suspension. Four House bills did not receive the requisite supermajority. Three of these bills were later considered and approved under the terms of a special rule. The other bill did not return to the floor and therefore did not pass the House. The House agreed to all House resolutions (47) and concurrent resolutions (10) that were considered under suspension. The House approved three out of the four House joint resolutions. The House joint resolution that did not receive the requisite supermajority was H.J.Res. 2 , proposing a balanced budget amendment to the Constitution. The House approved 93 out of the 97 Senate bills under the suspension procedure. One of the Senate bills, which initially failed in the House, was later passed under the terms of a special rule. The other three Senate bills did not receive further consideration in the House. <6.4.1. Voice Votes> Most suspension motions are agreed to in the House by voice vote, which is the chamber's default method of voting on most questions. In 2017 and 2018, this method of voting led to the final approval of 72% (687) of the motions to suspend the rules and pass the measures (see Figure 8 ). <6.4.2. Record Votes> After the initial voice vote, Members triggered an eventual record vote (often called a roll call vote) on 266 (28%) of the suspension measures considered in the 115 th Congress. This was done by demanding the "yeas and nays," objecting to the vote "on the grounds that a quorum is not present," or, in two cases, demanding a recorded vote. In most instances, the chair elected to postpone the vote to a later period within two additional legislative days, pursuant to clause 8 of House Rule XX. Of the 266 record votes, two immediately followed debate on the measure. The remaining 264 votes were postponed to another time on the legislative schedule, usually later the same day. In the 115 th Congress, 257 suspension motions were adopted by record vote, and nine motions to suspend the rules were defeated by record votes. The defeat of a motion to suspend the rules, however, does not necessarily kill the legislation. The Speaker may choose to recognize a Member at a later time to make another motion to suspend the rules and pass the bill, or the House may consider the measure pursuant to a special rule reported by the Committee on Rules. Accordingly, four of the initially unsuccessful measures were later called up and passed under the terms of a special rule. The House Rules Committee reported a special rule for another measure, but the special rule was not considered on the floor, so the measure did not receive further action. Four additional measures were not considered again, via any procedure, before the end of the 115 th Congress. Thus, of the measures initially considered on the House floor under suspension of the rules, five did not receive House approval. <7. Final Disposition of Measures Considered Under Suspension of the Rules> <7.1. Passed by the Senate> Although suspension measures generally receive broad support, measures that receive the requisite two-thirds majority in the House are not guaranteed passage in the Senate. As noted in Table 1 , in the 115 th Congress, the Senate agreed to one of the four House joint resolutions and six of the 10 House concurrent resolutions considered under suspension of the rules. The Senate passed 229 of the 794 House bills initially considered under suspension (29%). Of the number of suspension measures that passed the House and Senate, 77 entered a "resolution of differences" stage between the chambers. Fifty-eight House measures and 19 Senate bills were subject to an amendment exchange process. (No measure initially considered under suspension of the rules had bicameral differences resolved in a conference committee.) Two of these measures, H.R. 88 and H.R. 695 , did not have their differences resolved because the House and Senate did not agree on the final text as amended by both chambers. The House passed, with amendments, two Senate bills ( S. 488 and S. 2497 ) that did not enter the "resolving differences" stage because the Senate did not take up the House amendments. Likewise, the Senate passed, with amendments, four House bills ( H.R. 4969 , H.R. 4203 , H.R. 1967 , and H.R. 1020 ) that did not receive final passage because the House did not take up the Senate amendments. Thus, these bills, as well as H.R. 88 and H.R. 695 , were not enacted into law. <7.2. Presidential Action> Of the measures initially considered under suspension during the 115 th Congress, President Trump was presented with 223 House bills, 92 Senate bills, and one House joint resolution for signature or veto. The President signed all of these measures (vetoing none), so a total of 315 bills, and one joint resolution, were enacted into law (see Table 1 ). <7.2.1. Appendix. Use of Suspension Motions, 110th-115th Congresses>

Suspension of the rules is the most commonly used procedure to call up measures on the floor of the House of Representatives. As the name suggests, the procedure allows the House to suspend its standing and statutory rules in order to consider broadly supported legislation in an expedited manner. More specifically, the House temporarily sets aside its rules that govern the raising and consideration of measures and assumes a new set of constraints particular to the suspension procedure. The suspension of the rules procedure has several parliamentary advantages: (1) it allows non-privileged measures to be raised on the House floor without the need for a special rule, (2) it enables the consideration of measures that would otherwise be subject to a point of order, and (3) it streamlines floor action by limiting debate and prohibiting floor amendments. Given these features, as well as the required two-thirds supermajority vote for passage, suspension motions are generally used to process less controversial legislation. In the 115 th Congress (2017-2018), measures considered under suspension made up 64% of the bills and resolutions that received floor action in the House (952 out of 1,498 measures). The majority of suspension measures were House bills (83%), followed by Senate bills (10%) and House resolutions (5%). The measures covered a variety of policy areas but most often addressed government operations, such as the designation of federal facilities or amending administrative policies. Most measures that are considered in the House under the suspension procedure are sponsored by a House or Senate majority party member. However, suspension is the most common House procedure used to consider minority-party-sponsored legislation regardless of whether the legislation originated in the House or Senate. In 2017 and 2018, minority-party members sponsored 27% of suspension measures, compared to 14% of legislation subject to different procedures, including privileged business (27 measures) and unanimous consent (48 measures). There were no minority-party sponsored bills that were considered under the terms of a special rule. Most suspension measures are referred to at least one House committee before their consideration on the floor. The House Committee on Natural Resources was the committee of primary jurisdiction for the plurality of suspension measures considered in the 115 th Congress. Additional committees—such as Energy and Commerce, Homeland Security, Oversight and Government Reform (now Oversight and Reform), Foreign Affairs, and Veterans' Affairs—also served as the primary committee for a large number of suspension measures. Suspension motions are debatable for up to 40 minutes. In most cases, a fraction of that debate time is actually used. In the 115 th Congress, the average amount of time spent considering a motion to suspend the rules was 12½ minutes. The House adopted nearly every suspension motion considered in 2017 and 2018. Approval by the House, however, did not guarantee final approval in the 115 th Congress. The Senate passed or agreed to 37% of the bills, joint resolutions, and concurrent resolutions initially considered in the House under suspension of the rules, and 316 measures were signed into law. This report briefly describes the suspension of the rules procedure, which is defined in House Rule XV, and provides an analysis of measures considered under this procedure during the 115 th Congress. Figures and one table display statistics on the use of the procedure, including the prevalence and form of suspension measures, sponsorship of measures by party, committee consideration, length of debate, voting, resolution of differences between the chambers, and the final status of legislation. In addition, an Appendix illustrates trends in the use of the suspension procedure from the 110 th through the 115 th Congresses (2007-2018).

crs_R46292

crs_R46292_0

Recently, the Federal Bureau of Investigation (FBI) announced that it would only accept mailed Freedom of Information Act (FOIA) requests and not those submitted electronically due to the COVID-19 pandemic. Conversely, the Centers for Disease Control and Prevention (CDC) has adopted a contrasting policy, saying that CDC would not be able to respond to mailed FOIA requests and that requests should be placed electronically. These examples of differing policies, among others examples not mentioned, when combined with agencies' adoption of additional telework flexibilities , raise questions about how agencies will be responding to FOIA requests in the near future. This report provides an overview of the FOIA request process and actual and potential FOIA request processing changes within federal government agencies as a result of COVID-19. <1. Processing a FOIA Request> FOIA does not require requests for agency information to be submitted in a particular format, only that the request reasonably describes the records sought and complies with agency regulations. Most agencies accept requests via mail, email, web form, or fax. The statute also requires the affirmative disclosure of certain categories of agency information, such as "substantive rules of general applicability," "rules of procedure," and, since 2016, records requested three or more times. While the text of FOIA does not specifically dictate the method in which the public must request information from an agency, FOIA does prescribe how an agency is to respond to the request. From an administrative perspective, FOIA directs the amount of time an agency has to respond to a request, defines whether and how an agency may recoup costs for providing services in response to a request, and provides nine instances where an agency may exempt information from public disclosure. After an agency receives a request, the agency is to inform the requester of its receipt. Generally, an agency is to respond to a correctly routed, simple request within 20 days with a determination of the scope of the documents the agency will produce and any exemptions it will apply to withhold records or information. Complex or incorrectly routed requests may be subject to additional days of processing, per the statute (5 U.S.C. 552(a)(6)). Also, agencies managing backlog s of FOIA requests do not always process requests within the statutory period. When completed, a written response may provide the information requested or some of the information requested with redactions per one of FOIA's nine exemptions, inform the requester that the agency does not have responsive records, or deny a request entirely due to one of the nine exemptions. Requesters may administratively appeal an agency's adverse decision. <2. COVID-19 Considerations for Locating Information> Government information requests through FOIA may be impacted by COVID-19 in two ways: (1) certain types of information related to the outbreak may be eligible for expedited consideration; and (2) processes for locating information may change due to employees working remotely or on administrative leave. <2.1. Expedited Processing of Requests> Pursuant to 5 U.S.C. 552(a)(6)(E), processing of FOIA requests is to be expedited as soon as practicable in cases in which the person requesting the records demonstrates a compelling need. Statute defines a "compelling need" as a case where the lack of expedited treatment could reasonably be expected to pose an imminent threat to someone's life or physical safety; or there is an urgency to inform the public about an actual or alleged federal government activity, but only if the request is made by a person who is primarily engaged in disseminating information. Agencies may also establish additional standards for granting expedited processing. Whereas agencies are to initially respond to most FOIA requests within 20 days, they must determine whether to grant expedited processing within 10 days. <2.2. Changes Due to Remote Work> Locating information responsive to a FOIA request requires employees and systems to search and review the information . Additionally, not all agency information is created or available in a digital format. Per the Department of Justice's FOIA.gov portal, There is no central office in the government that handles FOIA requests for all federal departments and agencies.... There are many different officials at these agencies who work hard every day to make sure that the FOIA works. There are the FOIA professionals who search for and process records in response to FOIA requests, FOIA Contacts and FOIA Public Liaisons who work with FOIA requesters to answer questions and resolve concerns, and Chief FOIA Officers who oversee their agency's compliance with the FOIA. Because of the decentralized FOIA process at federal agencies, multiple physical and digital systems and many people may be involved in processing a single request. However, given the work flexibilities at many agencies due to COVID-19, some or all of the members of an agency's FOIA team may currently be working offsite. If a record responsive to a request is only available on-site in a paper format, that record's practical availability may be limited by these conditions. <3. Survey of FOIA Processing Changes for Selected Agencies> While challenges in locating responsive information may occur at any agency, responses to requests for information during the COVID-19 outbreak have varied. CRS performed a search of federal department websites and their components. As of March 26, 2020, CRS identified statements by 13 agencies regarding COVID-19's impact on FOIA request processing. Table 1 presents these recent statements regarding the impact of COVID-19 or simply changes in agencies' abilities to process FOIA requests, provides Code of Federal Regulations (C.F.R.) citations to each agency's policy regarding expedited FOIA requests, and notes whether the agency has made additional allowances for expediting requests. The table should be considered a snapshot in time, as agencies may update or change their statements. Of the 13 agencies identified, 8 altered the transmission method by which a FOIA request should be submitted. Some statements also discuss current operating status, and mention anticipated delays due to COVID-19. Six of the identified agencies have additional allowances for expediting requests: U.S. Air Force, Department of Housing and Urban Development, Department of Labor, Department of Veterans Affairs, National Archives and Records Administration, and Office of Government Information Services. Of the six agencies that established additional allowances for expediting requests, five permit expediting cases where due process rights would be impacted, four permit expediting cases where there exist possible questions affecting public confidence in the federal government's integrity, one permits expediting due to humanitarian needs, and one permits expediting at the discretion of the agency's FOIA Officer. The exact language from the C.F.R. is provided in Table 1 below.

As federal agencies adjust their operations in light of the COVID-19 pandemic, activities related to the processing and release of government information are also changing. Agencies such as the Federal Bureau of Investigation within the Department of Justice, the U.S. Postal Service, and the Centers for Disease Control and Prevention within the Department of Health and Human Services, among others, have announced changes to their processing of Freedom of Information Act (FOIA) requests due to the pandemic. Government information requests through FOIA may be impacted by COVID-19 in two ways. First, certain types of information related to the outbreak may be eligible for expedited consideration; FOIA requests are to be expedited as soon as practicable in cases in which the person requesting the records demonstrates a compelling need. Second, processes for locating information may change due to employees working remotely or on administrative leave. This In Brief report provides an overview of the typical FOIA request process and usual conditions for requesting expedited processing of a request. The report then provides analysis of the impact of agency procedures in response to the pandemic on government information availability, and concludes with a survey of announced agency processing alterations.

crs_R46334

crs_R46334_0

<1. Introduction> The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with the number of confirmed cases and fatalities growing daily. Containment and mitigation efforts by U.S. federal, state, and local governments have been undertaken to "flatten the curve" that is, to slow the widespread transmission that could overwhelm the nation's health care system. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ) was enacted on March 27, 2020. It is the third comprehensive law to address the pandemic. In addition to its health provisions, the CARES Act provides additional supplemental appropriations to support federal response efforts and authorizes a number of economic stimulus measures, among other things. The CARES Act follows two other laws that made supplemental appropriations and amended health care financing and public health authorities to respond to the pandemic. The first, 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. This act also waives certain telehealth restrictions to make telehealth services more available during the emergency. The second, the Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ), enacted on March 18, 2020, provides authority, funding, and/or requirements to cover COVID-19 testing and related services under federal programs, many private health insurance plans, and for the uninsured (as defined in the act). Among other provisions, it temporarily increases the federal share of Medicaid assistance to states, provides additional Medicaid assistance to territories, and waives liability and establishes injury compensation for certain respiratory protection devices. <1.1. A Snapshot of CARES Act Health Provisions> Medical supply shortages. The COVID-19 pandemic has affected the medical product supply chain both globally and domestically, resulting in widespread shortages of medical countermeasures (MCMs) and other critical medical supplies. MCMs are medical products that may be used to treat, prevent, or diagnose conditions associated with emerging infectious diseases or chemical, biological, radiological, or nuclear threats. Examples of MCMs include biologics (e.g., vaccines), drugs (e.g., antivirals), and devices (e.g., diagnostic tests and personal protective equipment, or PPE). The CARES Act includes several provisions to address such shortages, including expanding reporting requirements for firms that experience interruptions in drug and device manufacturing; explicitly requiring that the Strategic National Stockpile (SNS) contain PPE, ancillary medical supplies, and other applicable supplies; and extending liability protections for certain respiratory protective devices used during emergencies. The CARES Act also requires a study of U.S. dependence on critical drugs and medical devices imported from or manufactured in other countries. Vaccine access and cost. A vaccine(s) for the COVID-19 virus, if and when it becomes available, will be provided or required to be covered without cost-sharing to patients and beneficiaries of federal health programs and most private health insurance enrollees, pursuant to numerous provisions in Division A, Title III, of the CARES Act. The CARES Act does not explicitly address vaccine access for the uninsured. However, with available appropriations and preexisting authorities, the HHS Secretary could assist safety net providers (e.g., health centers), health departments, and other entities in furnishing vaccines to this population. The medical workforce. The CARES Act makes a number of changes to health workforce programs. Some changes aim to extend the services available during the COVID-19 period and beyond, particularly for rural or otherwise underserved populations. For example, the CARES Act confers medical malpractice liability on health professionals who choose to volunteer during the emergency period and amends the program rules for the National Health Service Corps (NHSC) program to permit individuals to volunteer during the emergency period. The CARES Act also reauthorizes a number of health workforce programs that had been considered for reauthorization during the 116 th Congress, but prior to the CARES Act no reauthorization of these programs was enacted. Marketing of over-the-counter drugs. The CARES Act establishes a new process for the marketing of certain over-the-counter (OTC) drugs, including hand sanitizer and sunscreen. Specifically, Title III replaces the current OTC drug monograph rulemaking process with an administrative order process a less burdensome alternative. It also provides an expedited process for removing from the market certain OTC drugs that pose a public health hazard and for requiring certain safety labeling changes. The CARES Act provides an incentive 18 months of marketing exclusivity to firms that make certain changes to previously marketed OTC drugs and creates a new user fee program to fund FDA's OTC monograph drug activities. <1.2. Report Contents> This report describes the majority of health-related sections in Division A, Title III of the CARES Act, "Supporting America's Health Care System in the Fight Against the Coronavirus." Relevant background is provided for context. Specifically, this report describes provisions regarding, among other things the following: The medical countermeasures (MCMs) drugs, tests, treatments, medical devices, and supplies such as PPE including research and development; product regulation by the Food and Drug Administration (FDA); the strategic national stockpile (SNS); and other supply chain matters. The health workforce, including telehealth programs, the rural health care system, and the Commissioned Corps of the U.S. Public Health Service (USPHS). Additional workforce provisions described in this report include reauthorization and extension of appropriations for existing Health and Human Services (HHS) health workforce programs, and liability limitation. Provisions addressed at the Medicare and Medicaid programs and on private health insurance plans to temporarily require, or increase payment for, telehealth services and specified services related to COVID-19 testing, diagnosis, or treatment. A newly established FDA authority for OTC drug review. This report does not address education or labor provisions in Subtitle B or C in Part IV of Title III, or provisions in Subtitle E of Part IV of Title III, "Health and Human Services Extenders," which are described in another CRS report. The report also does not include Division B of the act, which provides emergency supplemental appropriations for the COVID-19 response. Division B includes additional funding for numerous HHS public health and social services activities, and a $100 billion fund to reimburse eligible health care providers for health care-related expenses or lost revenues attributable to COVID-19. This report concludes with an Appendix that catalogues deadlines, effective dates, and reporting requirements for provisions described in the report. The report does not discuss cost estimates for specific provisions; however, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) provided a preliminary estimate of the budget effects of the CARES Act. Overall, the act is estimated to increase federal deficits by $1.8 trillion over the 2020-2030 period. This estimate breaks down these budgetary effects into three categories: a $988 billion increase in mandatory outlays; a $446 billion decrease in revenues; and a $326 billion increase in discretionary outlays from supplemental appropriations. The estimates that CBO generated for health programs in Title III include programs in Subtitle E of Part IV of Title III, "Health and Human Services Extenders," which are not discussed in this report. Among the provisions discussed in this report, JCT estimates that Section 3702, which expands the products that are eligible for tax-advantaged distributions from health savings accounts (HSAs), health flexible spending arrangements (FSAs), and other similar tax-advantaged savings arrangements, will reduce revenues by $9 billion over a ten-year period from 2020-2030. CBO also estimated the costs of a number of Medicare payment changes included in CARES Sections 3701-3715. These provisions generally increase the amount that Medicare will reimburse for services; as such, CBO estimates that they will increase Medicare spending from 2020-2030. CBO also noted that some provisions e.g., the requirement for Medicare to cover the costs of vaccines for COVID-19 cannot be estimated because no such vaccine has been developed at this time. In general, these CBO 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. This report is intended to reflect the CARES Act at enactment (i.e., March 27, 2020). It does not track the law's implementation or funding and will not be updated. This report is one of a number of CRS reports related to COVID-19; additional CRS products on COVID-19 are available at https://www.crs.gov/resources/coronavirus-disease-2019 . <1.3. Definitions, Abbreviations, and Acronyms> <1.3.1. "Section 319" Public Health Emergency> Numerous provisions in the CARES Act refer to the Public Health Emergency declaration made pursuant to Section 319 of the Public Health Service Act (PHSA). 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. Some provisions refer to "the emergency period declared under section 319" or similar construction, meaning the time during which a Section 319 declaration is in effect. The declaration for COVID-19 was made on January 31, 2020, retroactive to January 27, 2020. It is in effect for 90 days and is expected to be renewed and remain in effect for the duration of the response. Several provisions in Title III, Subtitle D, regarding health care financing and amending the Social Security Act (SSA), refer to "the emergency period described in section 1135(g)(1)(B)" or comparable construction. Section 1135 allows the HHS Secretary, under certain conditions, to waive specified requirements and regulations to ensure that health care items and services are available to enrollees in the Medicare, Medicaid, and State Children's Health Insurance Program (CHIP) programs during emergencies. Paragraph (1)(B) of SSA Section 1135(g) refers specifically 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 [PHSA]," and any renewal of such declaration. Hence, these references to SSA Section 1135(g)(1)(B) simply mean the period during which the Section 319 public health emergency declaration for COVID-19 whether initial or renewed is in effect. <1.3.2. Additional Definitions and Acronyms> Throughout this report, unless otherwise stated, the "Secretary" means the HHS Secretary. Mentions of "this section" refer to matters addressed under that specific section of the CARES Act. This report uses a number of acronyms, listed in the table below. <2. CARES Act Health Provisions in Title III> <2.1. Subtitle A Health Provisions> <2.1.1. Part I Addressing Supply Shortages Subpart A Medical Product Supplies> The COVID-19 pandemic has affected the medical product supply chain both globally and domestically. Domestically, the pandemic has highlighted existing limitations in the U.S. medical product supply chain, including lack of transparency regarding where specific medical products and their components are manufactured and heavy reliance on foreign countries for drugs and medical devices. Perhaps most salient has been the impact of COVID-19 on the availability of PPE, such as respirators for health care personnel, and other respiratory devices, such as ventilators for patients. Although the federal government and states generally have stockpiles of PPE and ventilators to distribute during public health emergencies, stockpiled quantities have been insufficient to meet current needs. FDA, with other agencies, has taken various steps to prevent and mitigate shortages of critical PPE and respiratory devices, for example, by waiving certain regulatory requirements and by enabling access to respirators and other medical devices that have not received agency clearance prior to marketing. <2.1.1.1. Section 3101. National Academies Report on America's Medical Product Supply Chain Security> Background The extent to which the United States relies on other countries for medical products is not completely known, but available data suggest a heavy reliance. According to FDA, as of August 2019, 72% of facilities that manufacture active pharmaceutical ingredients (APIs) and 53% of facilities manufacturing finished drugs for the U.S. market are located outside of the United States. FDA is unable to determine the volume of APIs that a specific country manufactures for the domestic or global market. The 2019 annual report from the U.S.-China Economic and Security Review Commission states that the United States sources 80% of its APIs from foreign countries and has identified China as the world's largest producer of APIs. Recent reports have identified limitations in FDA's ability to oversee foreign drug manufacturing facilities and have indicated that FDA inspections of these facilities have decreased since 2016. The COVID-19 pandemic has further restricted FDA's ability to oversee the increasingly globalized medical product supply chain, causing FDA to postpone most foreign facility inspections until at least May 2020. Provision Section 3101 requires the Secretary, within 60 days of enactment, to enter into an agreement with the National Academies of Science, Engineering, and Medicine (NASEM) to examine and report, "in a manner that does not compromise national security," on the security of the U.S. medical product supply chain. The report must assess and evaluate U.S. dependence on critical drugs and devices from other countries; provide recommendations (e.g., a plan to improve resiliency of the supply chain); and address any supply vulnerabilities or potential disruptions that would significantly affect or pose a threat to public health or national security, as appropriate. In conducting the study and developing the report, NASEM must consider input from federal departments and agencies and consult with stakeholders through public meetings and other forms of engagement. <2.1.1.2. Section 3102. Requiring the Strategic National Stockpile to Include Certain Types of Medical Supplies> Background The federal government maintains a supply of medicine and medical supplies to respond to a public health emergency severe enough to deplete local supplies (e.g., hurricane, infectious disease outbreak, or terrorist attack). This supply, known as the Strategic National Stockpile (SNS), includes antibiotics, intravenous fluids, and other medical supplies such as PPE and ventilators. In addition, the SNS contains certain medicines, such as anthrax and smallpox vaccines and treatments that may not be otherwise available for public use. In 2019, HHS stated the SNS contained approximately $8 billion worth of supplies. In FY2018, management of the SNS transferred from the Centers for Disease Control and Prevention (CDC) to the Assistant Secretary for Preparedness and Response (ASPR). Provision This section amends PHSA Section 319F-2(a)(1) to require the Secretary to maintain a stockpile of "drugs, vaccines and other biological products, medical devices, and other supplies." This act further defines "other supplies" as "including PPE, ancillary medical supplies, and other applicable supplies required for the administration of drugs, vaccines and other biological products, medical devices, and diagnostic tests in the stockpile." Some of these types of supplies, such as PPE, were included in the stockpile even before enactment of this clarifying language. <2.1.1.3. Section 3103. Treatment of Respiratory Protective Devices as Covered Countermeasures> Background In 2005 Congress passed the Public Readiness and Emergency Preparedness Act (PREP Act, P.L. 109-417 ), which authorizes the federal government to waive liability (except for willful misconduct) for manufacturers, distributors, and providers of MCMs, such as drugs and medical supplies, 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. Section 6005 of FFCRA ( P.L. 116-127 ) explicitly added personal respiratory protective devices used for the COVID-19 response to the list of countermeasures covered by the PREP Act. Provision Section 3103 amends PHSA Section 317F-3 to change the definition of such covered devices to apply more broadly, to "a respiratory protective device that is approved by the National Institute for Occupational Safety and Health (NIOSH) under part 84 of title 42, Code of Federal Regulations (or any successor regulations), and that the Secretary determines to be a priority for use during a public health emergency declared under [PHSA] section 319." <2.1.2. Subpart B Mitigating Emergency Drug Shortages> Background Drug shortages have remained a serious and persistent public health concern, despite the prevention and mitigation efforts of Congress, FDA, and the private sector. Causes of drug shortages include manufacturing and quality issues, lack of transparency in the supply chain, and business decisions made by individual firms (e.g., low profit margins leading to market exit). The Federal Food Drug and Cosmetic Act (FFDCA) and FDA regulations require manufacturers of certain drugs to submit to FDA specified information related to product shortages. In addition, the FFDCA and FDA regulations allow FDA to take action to mitigate or prevent shortages and require FDA to make public certain information about drug shortages. More specifically, FFDCA Section 506C(a) requires that the manufacturer of a drug that is life-supporting, life-sustaining, or intended for use in the prevention or treatment of a debilitating disease or condition notify the Secretary (FDA by delegation of authority) of any permanent discontinuance or interruption in the manufacture of the drug that is likely to disrupt its U.S. supply. The notification must include the reasons for the interruption or discontinuance. FFDCA Section 506C(g) allows FDA, based on notifications received pursuant to Section 506C(a), to expedite facility inspections and review of supplements to new drug applications (NDAs), abbreviated NDAs (ANDAs), and supplements to ANDAs that could help mitigate or prevent a drug shortage. FFDCA Section 506E requires FDA to maintain a public, up-to-date list of drugs that are in shortage. The list must include the name of the drug in shortage, the name of the manufacturer, and, as determined by FDA, the estimated duration of and reason for the shortage. Persons that engage in the "manufacture, preparation, propagation, compounding or processing" of a drug must register their facility with FDA. FFDCA Section 510(j) requires that at the time of registration, such persons must file a list of all drugs being "manufactured, prepared, propagated, compounded or processed" for commercial distribution. Facilities registered with FDA are subject to inspection by the agency. FFDCA Section 704(b) requires that after a facility has been inspected, the inspector must provide a report, in writing, to the person in charge of that facility detailing the observations that led the inspector to determine that a product made in that facility may be adulterated. A copy of this report also must be sent to FDA. <2.1.2.1. Section 3111. Prioritize Reviews of Drug Applications; Incentives> Section 3111 amends FFDCA Section 506C(g) to require rather than allow as was the case prior to the CARES Act FDA to prioritize and expedite rather than expedite as prior to CARES facility inspections and review of ANDAs and supplements to NDAs and ANDAs that could help mitigate or prevent a drug shortage. <2.1.2.2. Section 3112. Additional Manufacturer Reporting Requirements in Response to Drug Shortages> Section 3112(a) amends FFDCA Section 506C(a) to extend notification requirements to the manufacturer of any drug "that is critical to the public health during a public health emergency declared by the Secretary" under PHSA Section 319. It also requires a manufacturer to notify FDA of any permanent discontinuance or interruption in the manufacture of an API not just the finished drug that is likely to lead to a meaningful disruption in the supply of the API of such drug. The notification must include, in addition to the reasons for the drug's discontinuance or interruption, as applicable, information about the source of the API and alternative sources, as well as whether any associated device used in the preparation or administration of the drug has contributed to the shortage, among other information. Section 3112(b) amends FFDCA Section 506C to add a new subsection (j). New FFDCA Section 506C(j) requires the manufacturer of a drug, API, or associated medical device subject to the notification requirements under FFDCA Section 506C(a), as amended, to develop, maintain, and implement a redundancy risk management plan, as appropriate. Such plan should identify and evaluate risks to the supply of the drug, as applicable, for each facility in which the drug or API is manufactured. The plan is subject to inspection and copying by the Secretary. Section 3112 (c) amends FFDCA Section 506E to require the Secretary, not later than 180 days after enactment and every 90 days thereafter, to transmit to the Centers for Medicare & Medicaid Services (CMS) a report regarding the drugs on the current drug shortage list. Section 3112 (d) amends FFDCA Section 704(b) to require that following the inspection of a facility manufacturing a drug at risk of shortage or with limited competition, a copy of the inspection report be sent "promptly" to all appropriate FDA offices with expertise in drug shortages. Specifically, this requirement applies to the inspection of a facility manufacturing a drug approved under an NDA or ANDA for which a notification has been submitted under FFDCA Section 506C(a) (regarding an interruption in manufacturing or discontinuance), a drug that has been on the shortage list under FFDCA Section 506E in the past five years, or a drug with no blocking patents or exclusivities for which there are not more than three approved drugs listed in the Orange Book. Section 3112(e) amends FFDCA Section 510(j) to require each drug manufacturer that registers with FDA to report annually to the Secretary for each listed drug "the amount that was manufactured, prepared, propagated, compounded, or processed by such person for commercial distribution." The Secretary may require this information to be submitted in electronic format, may require that this information be submitted at the time a public health emergency is declared under PHSA Section 319, and may exempt certain biologics from these reporting requirements if the Secretary determines it is not necessary to protect the public health. <2.1.3. Subpart C Preventing Medical Device Shortages> <2.1.3.1. Section 3121. Discontinuance or Interruption in the Production of Medical Devices> Background FDA regulates the safety and effectiveness of medical devices in the United States. All medical device manufacturers are required to register their establishments with FDA, and such establishments are subject to inspections by FDA personnel or representatives. In addition, most medical devices are required to be reviewed by the agency prior to marketing; such premarket review mechanisms include premarket notification (510(k)), premarket approval, de novo classification request, and humanitarian device exemption, among others. Prior to the COVID-19 outbreak, concerns arose about potential medical device shortages due to the closure of ethylene oxide sterilization facilities that were not in compliance with U.S. Environmental Protection Agency (EPA) standards. In contrast to the agency's authority to compel manufacturers of certain drugs to report discontinuances or interruptions in production, FDA did not have such authority for medical devices prior to the CARES Act. Rather, FDA relied on manufacturers to voluntarily report such information to the agency. In its FY2021 Congressional Justification, FDA requested additional authority to "require firms to notify FDA of an anticipated significant interruption in the supply of an essential device; require all manufacturers of devices determined to be essential to periodically provide FDA with information about the manufacturing capacity of the essential device(s) they manufacture; and authorize the temporary importation of devices whose risks presented when patients and healthcare providers lack access to critically important medical devices outweigh compliance with U.S. regulatory standards." Legislation introduced in the 116 th Congress would provide FDA with additional authority to mitigate potential device shortages, generally through adding required reporting requirements on device manufacturers and allowing for expedited premarket review and inspections in certain cases of shortage. However, some bills propose providing FDA with more authority than others, such as those allowing for importation of unapproved devices in the case of a device shortage. Provision Section 3121 creates a new FFDCA Section 506J, which requires medical device manufacturers to report to FDA during or prior to a public health emergency any permanent discontinuance of production, or interruption in production, likely to lead to a meaningful disruption in supply of a medical device, including the reasons for the discontinuance or interruption. Medical device manufacturers are required to report this information to FDA at least six months prior to occurrence, or as soon as is practical. In turn, FDA is required to make such information public to appropriate organizations (e.g., physicians, supply chain partners) unless such a disclosure would adversely affect the public's health. If a manufacturer fails to submit information about discontinuances or interruptions, FDA is required to submit a letter to the manufacturer documenting this failure. The manufacturer is required to respond with reasons for noncompliance, as well as with information on interruptions or discontinuances as originally required, within 30 days. FDA would make such information public within 45 days of receipt but is not able to disclose to the public any information considered confidential or a trade secret. New FFDCA Section 506J also requires FDA to establish and maintain a device shortage list that includes, among other things, the category or name of the device in shortage and, as determined by FDA, the reason(s) for the shortage (e.g., demand increase for the device) and the expected duration of the shortage. Such information must be made public, except if such information is considered confidential, a trade secret, or determined by FDA to be harmful to the public's health (e.g., increases the possibility of hoarding). Finally, new FFDCA Section 506J requires FDA to expedite premarket review and facility inspections of medical devices considered to be, or likely to be, in shortage and defines the terms "meaningful disruption" and "shortage." <2.1.4. Part II Access to Health Care for COVID-19 Patients> <2.1.5. Subpart A Coverage of Testing and Preventive Services> This subpart includes three provisions related to coverage of COVID-19 tests and subsequent vaccines that may be developed to prevent COVID-19. They primarily address private health insurance coverage, including insurer payments to providers who furnish the test. One provision expands the FFCRA definition of testing that must be covered without cost-sharing by most private health insurance plans, and by other public and private health coverage programs and plans that reference the FFCRA definition. <2.1.5.1. Section 3201. Coverage of Diagnostic Testing for COVID-19> Background Through multiple provisions in Divisions A and F, FFCRA provides payment for or requires coverage of testing for the COVID-19 virus, and items and services associated with such testing, without any cost-sharing. Several of these provisions refer to a definition for COVID-19 testing established in FFCRA Section 6001(a)(1), which defines such tests to include in vitro diagnostics (IVDs), as defined in FDA regulation, that detect the SARS-CoV-2 virus or diagnose COVID-19 and that have received either 510(k) clearance, premarket approval, authorization pursuant to de novo classification, or emergency use authorization (EUA) for marketing. This definition is used or cross-referenced in the following provisions providing payment for or requiring coverage of testing for the COVID-19 virus: (1) Section 6001(a)(1)-(2), with respect to specified types of private health insurance coverage; (2) Section 6006, with respect to TRICARE, veterans' health care, and federal civilian employee health coverage (Federal Employees Health Benefits Program or FEHBP); and (3) Section 6007, with respect to the Indian Health Service (IHS). In addition, appropriations provided in FFCRA Division A to the Defense Health Program, Veterans Health Administrations, IHS, and 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 FFRCA Section 6001(a)(1). On March 16, 2020, FDA updated guidance relating to COVID-19 diagnostic tests during the public health emergency. In this guidance, the agency detailed four policies, whereby manufacturers or laboratories could develop, use, or market laboratory-developed tests or test kits for COVID-19. Two of these policies allowed for laboratories and test kit manufacturers to begin using or distributing their tests prior to receiving an EUA from the agency, as long as they submitted an EUA application within 15 business days of beginning clinical testing or distribution of the test kit and notified the agency that the test was in use. Therefore, tests and test kits would be in clinical use without having been granted an EUA (or 510(k) clearance, de novo authorization, or premarket approval). In addition, the agency outlined a policy allowing states to authorize laboratories within their state to carry out testing without FDA involvement; therefore, these tests would also be in clinical use without authorization from the FDA (or 510(k) clearance, de novo authorization, or premarket approval). Therefore, pursuant to the FDA's updated March 16 guidance, some tests in clinical use would fall outside the definition at FFCRA Section 6001(a)(1) and may not be included in the above-referenced provisions' requirements providing payment for or requiring coverage of testing for the COVID-19 virus. Provision Section 3201 amended FFCRA Section 6001(a)(1) to include those IVDs (1) that have received either 510(k) clearance, premarket approval, authorization pursuant to de novo classification, or an EUA; (2) where the developer has requested, or intends to request, an EUA; (3) that are developed in and authorized by a state that has notified the Secretary of its intention to review tests intended to diagnose COVID 19; and (4) that are determined appropriate through guidance by the Secretary. <2.1.5.2. Section 3202. Pricing of Diagnostic Testing> Background FFCRA Section 6001 created a requirement for most private health insurance plans to cover specified COVID-19 testing and testing-related items and services. The coverage must be provided without consumer cost-sharing, including deductibles, copayments, or coinsurance. This coverage requirement applies to the specified items and services that are furnished during the COVID-19 public health emergency described in FFCRA. The provision did not address the reimbursement amount that a provider must receive from a health plan for furnishing COVID-19 testing. In private health insurance, the amount paid for covered items and services is generally contingent upon whether a consumer's health plan has negotiated with a provider to enter into a contract. The contract between the health plan and the provider generally specifies the total amount that a provider may receive for furnishing particular items or services to that health plan's enrollees. A provider that enters into a contract with a health plan is considered to be part of the health plan's network, otherwise referred to as being in-network. A provider that does not enter into a contract with a health plan is considered out-of-network and as such there is no negotiated rate between the provider and the health plan. In situations involving services provided by an out-of-network provider, the amount that a provider will receive from a health plan depends on whether the health plan covers out-of-network services. In situations where health plans do not cover out-of-network services, the health plan will not pay any amount to a provider for services provided to an enrollee of the health plan. In situations where plans do cover out-of-network services, as there is no negotiated rate between health plans and out-of-network providers, health plans will use their own methodologies for calculating how much they will pay out-of-network providers for services. Provision Section 3202 establishes a methodology for determining the amount that a health plan must reimburse a provider for the COVID-19 testing, and testing-related items and services that are required to be covered under FFCRA Section 6001(as amended). If a health plan had a negotiated rate with a provider prior to the declaration of the COVID-19 public health emergency declared under PHSA Section 319, then the health plan must apply that negotiated rate throughout the period of the COVID-19 public health emergency. If a health plan did not have a negotiated rate with a provider prior to the emergency declaration, then the health plan must either reimburse the provider an amount that equals the cash price for the COVID-19 testing, as listed on the provider's public website, or the health plan and provider may negotiate a rate that is less than the cash price. During the period of the COVID-19 public health emergency, providers of COVID-19 diagnostic testing must make public the cash price for the COVID-19 test on the provider's public website. The Secretary may impose a civil monetary penalty on a provider of COVID-19 diagnostic testing that is not in compliance with the requirement to post the cash price for the COVID-19 testing and has not completed a corrective action plan to comply with the requirement. The amount of the civil monetary penalty may not exceed $300 per day that the violation is ongoing. <2.1.5.3. Section 3203. Rapid Coverage of Preventive Services and Vaccines for Coronavirus> Background PHSA Section 2713 and accompanying regulations require most private health insurance plans to cover, without cost-sharing, specified types of clinical preventive services. These include any preventive service recommended with an A or B rating by the United States Preventive Services Task Force (USPSTF), or any immunization with a recommendation by the Advisory Committee on Immunization Practices (ACIP), adopted by CDC, for routine use for a given individual. These coverage requirements apply no sooner than one year after a recommendation is published. Requirements of Section 2713 apply to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. The requirements do not apply to grandfathered individual or group plans, or to short-term, limited duration insurance (STLDI). By regulation, plans are generally not required to cover preventive services furnished out-of-network. Cost-sharing for office visits associated with a furnished preventive service may or may not be allowed, as specified in regulation. Provision Section 3203 requires specified plans the same types of plans as those subject to PHSA Section 2713 to cover a COVID-19 vaccine and potentially other COVID-19 preventive services, as recommended by ACIP or USPSTF, respectively. This coverage must be provided without cost-sharing. Section 3203 also applies an expedited effective date for coverage of 15 business days after an applicable ACIP or USPSTF recommendation is published. Otherwise, requirements of Section 3203 mirror existing requirements under PHSA Section 2713. <2.1.6. Subpart B Support for Health Care Providers> This subpart includes provisions that aim to extend the services available during the COVID-19 period and beyond, particularly for rural or otherwise underserved populations. The subpart includes additional appropriations for health centers that provide care to populations that are underserved or are located in underserved areas. Other provisions relate directly to health care providers; for example, by conferring medical malpractice liability on health professionals who choose to volunteer during the emergency period, by amending program rules for the NHSC program to permit individuals to volunteer during the emergency period, and by clarifying aspects of the USPHS Ready Reserve Corps program. The Ready Reserve Corps is composed of reserve officers serving in other roles who would be subject to intermittent involuntary deployment ("call up") to bolster the available workforce for public health emergency missions. Finally, the subpart reauthorizes and amends existing programs related to supporting rural health care providers and encouraging the use of telehealth to expand access to care. <2.1.6.1. Section 3211. Supplemental Awards for Health Centers> Background The federal health center program, authorized by PHSA Section 330 and administered by the Health Resources and Services Administration (HRSA), provides grants to not-for-profit organizations or state and local government entities to operate outpatient health centers. Participation in the program requires grantees to provide care regardless of a patient's ability to pay, and grant funding is provided to support this care. These centers are also required to be located in medically underserved areas (MUAs) or to provide care to a population that is designated as underserved. Health centers are part of the health care safety net, and they have been used as a way to fund safety net providers during prior disasters, when additional funds were appropriated to make awards to existing grantees to respond to an emerging need. In FY2020, health centers received a combination of discretionary and mandatory funding, which together provided more than $5.6 billion to support the program. Health centers also received additional funds in P.L. 116-123 , Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, the first law to respond to COVID-19. That law provided the program with an additional $100 million. These funds were awarded via formula to supplement existing health center funding. Provision This section appropriates $1.32 billion in supplemental funding for health centers for FY2020 for the detection of the COVID-19 virus, or prevention, diagnosis, and treatment of COVID-19 illnesses. The section also applies the limits on using these funds for abortion that were included in Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), which provided FY2020 appropriations for HHS, among other agencies. <2.1.6.2. Section 3212. Telehealth Network and Telehealth Resource Centers Grant Programs> Background PHSA Section 333(I) authorizes two telehealth programs that were authorized at "such sums as may be necessary" through FY2006. Both programs have been funded since that time, despite the lapsed authorization of appropriation. The programs are administered by HRSA. The first program, authorized in PHSA Section 333I(d)(1), is the Telehealth Network Grant Program (TNGP). This program aims to demonstrate how telehealth technologies can be used through telehealth networks for medically underserved populations who live in rural areas, frontier communities, and MUAs. Prior to passage of the CARES Act, only nonprofit entities were eligible to apply for TNGP grants; however, prior law permitted both nonprofit and for-profit organizations to participate in the grantees' telehealth networks. The second program is the Telehealth Resource Centers (TRC) Program. This program aims to coordinate telehealth organizations that serve rural and underserved communities throughout the country, by providing technical assistance to those organizations through national and regional TRCs. FY2020 appropriations report language provides $28.5 million to HRSA's overarching Telehealth Program, which includes both of these programs. Provision This section amends PHSA Section 330I to make changes to both the TNGP and the TRC programs. It makes the following changes: (1) The Telehealth Network Grant Program (TNGP) Grants. Section 3212 amends PHSA Section 330I by replacing the HRSA Administrator's Director's authority to award grants to eligible grantees to demonstrate how telehealth technologies can be used through telehealth networks, with the authority to award grants to evidence-based projects that utilize telehealth technologies through telehealth networks. The purpose of the TNGP now includes improving access to and quality of health care services for the TNGP patient population. Grantees may no longer use TNGP funds to expand health care provider training or for decision-making purposes. Grant period. Section 3212 allows the HRSA Administrator to extend the period of performance for the TNGP from four years to five years. This section also makes administrative changes to the statutory requirements on telehealth networks, including the nature of entities and composition of telehealth networks. This section removes the statutory requirements that grantees of TNGP be nonprofit entities and that telehealth networks be composed in a certain manner. Applications. Grant applicants are now required to describe within their applications how the applicants' proposed TNGP projects will, among other things, improve access and quality of the health care services that patients will receive. Prior to passage of the CARES Act, this provision was optional. Terms , conditions , maximum amount of assistance. Section 3212 removes the statutory requirements that the Secretary has to establish the terms and conditions of the TNGP, as well as the maximum amounts awarded to each TNGP recipient for each fiscal year. This section removes the federal mandate that required the Secretary to publish, through HRSA, a notice of application requirements for the TNGP program for each fiscal year. Preferences. The Secretary is required to also give preference to eligible entities that develop plans for or establish telehealth networks that provide mental health care services, public health care services, long-term care, home care, preventive care, case management services, or prenatal care for high-risk pregnancies. This section also expands preference to eligible entities that propose projects that promote local and regional connectivity within areas, communities, and populations served. The Secretary, however, may no longer give preference to applicants that demonstrate integration of health care information into TNGP projects. Distribution of funds. The HRSA Administrator no longer has to ensure that the total amount of funds awarded in a given fiscal year is not less than the total amount awarded for projects in FY2001. The HRSA Administrator must continue to ensure that no less than 50% of funds are awarded to TNGP projects in rural areas. Use of funds. Grantees no longer have the authority to use TNGP funds to purchase certain equipment. Grantees are prohibited from purchasing computer hardware and software, audio and video equipment, computer network equipment, interactive equipment, and data terminal equipment. However, grantees may continue to purchase equipment that furthers the objectives of the TNGP, such as to expand access to health care services. Prohibited uses of funds. TNGP grantees are prohibited from using more than 20% of total grant funds to purchase or lease equipment. Under prior law, grantees were allowed to use no more than 40% of total grant funds. Section 3212 also removes the examples of transmission equipment from the list of items that TNGP funds cannot be used to purchase. Report and regulations . The section requires the Secretary to submit a report, to specified congressional committees, that describes the activities and outcomes of the TNGP, no later than March 27, 2024, and every five years thereafter. The Secretary is no longer required to issue regulations specifying the definition of frontier area. (2) The Telehealth Resource Centers (TRC) Program Grants and eligibility . Section 3212 amends PHSA Section 330I by replacing the HRSA Administrator's authority to award grants for projects to demonstrate how telehealth technologies can be used in certain areas and communities, with the authority to award grants to support initiatives that utilize telehealth technologies. The CARES Act removes the program's authority to establish new TRCs, which essentially makes the current TRCs permanent recipients of federal funds under the program and does not allow for other entities to participate as TRCs. The section also permits the HRSA Administrator to extend the period of performance for the TRC program from four years to five years. Section 3212 removes the statutory requirement that grantees of the TRC program be nonprofit entities. Terms , conditions , maximum amount of assistance. Section 3212 removes the statutory requirement that the Secretary has to establish the terms and conditions of the TRC program, as well as the maximum amount awarded to each TRC program recipient for each fiscal year. This section no longer requires the Secretary to publish, through HRSA, a notice of application requirements for the TRC program for each fiscal year. Preferences. The section requires the Secretary to also give preference to eligible entities with successful records in delivering health care services to rural areas, MUAs, and medically underserved populations. Use of funds. The section specifies that grantees no longer have the authority to use TRC program funds to foster certain telehealth activities. It also prohibits grantees from using funds to foster the use of telehealth technologies to provide health care information. However, grantees may continue to foster the use of telehealth technologies to educate health care providers and consumers in an effective manner. Report and regulations . The section requires the Secretary to submit a report, to specified congressional committees, on the activities and outcomes of the TRC program, no later than March 27, 2024, and every five years thereafter. (This report need not to be a separate report from that required of the TNGP.) The Secretary is no longer required to issue regulations specifying the definition of frontier area. Authorization of appropriations. The section authorizes an appropriation of $29 million for each of FY2021 through FY2025. <2.1.6.3. Section 3213. Rural Health Care Services Outreach, Rural Health Network Development, and Small Health Care Provider Quality Improvement Grant Programs> Background PHSA Section 330A authorizes three grant programs supporting rural health care providers: the rural health care services outreach grants, the rural health network development grants, and the small health care provider quality improvement grants. These programs are administered by HRSA's Federal Office of Rural Health Policy (FORHP). In each case, grants are available to nonprofit or governmental health entities for a period of three years. The Rural Health Network Development program also permits additional one-year planning grants. Funds for the program had been authorized at $45 million annually through FY2012, and required a one-time report to Congress that was required at the end of FY2005. Despite the lapsed authorizations of appropriations, these programs have continued to be funded in recent years. Most recently, the programs received an appropriation of $79.5 million in FY2020. Provision This section makes a number of technical corrections to PHSA Section 330A. It also replaces language related to essential health services to make reference to basic health services, extends the duration of Rural Health Care Service Outreach grants and Rural Health Network Development grants from three to five years, and expands eligibility for the programs to any rural health entity (prior eligibility was limited to rural public or nonprofit health entities). The section also eliminates the one-year planning grants from the Rural Health Network Development program and extends the grant period of the Small Health Care Quality Improvement grants from three to five years. Finally, the section requires a report, to be delivered to specified congressional committees, on these grant programs, not later than four years after enactment and every five years thereafter, and authorizes an appropriation of $79.5 million for each of FY2020 through FY2025. No additional funding for FY2020 is appropriated in this provision. <2.1.6.4. Section 3214. United States Public Health Service Modernization> Background The USPHS Commissioned Corps is a branch of the U.S. uniformed services, but it is not one of the armed services. The Corps is based in HHS under the authority of the U.S. Surgeon General (SG). USPHS-commissioned officers are physicians, nurses, pharmacists, engineers, and other public health professionals who serve in federal agencies, or as detailees to state or international agencies, to support a variety of public health activities. ACA (the Patient Protection and Affordable Care Act, P.L. 111-148 , as amended), Section 5210, authorized a USPHS Ready Reserve Corps reserve officers serving in other roles who would be subject to intermittent involuntary deployment ("call up") to bolster the available workforce public health emergency missions. HHS had not received an appropriation for this purpose and had not established a Ready Reserve Corps. It has been reported that the ACA authority did not fully authorize this action, and legislation ( S. 2629 , the United States Public Health Service Modernization Act of 2019) was introduced to address this. Provision Section 3214 enacts the language of S. 2629 , making several technical and substantive amendments to PHSA Title II to clarify provisions regarding deployment readiness, retirement, compensation, and other matters as they would affect the Ready Reserve Corps. <2.1.6.5. Section 3215. Limitation on Liability for Volunteer Health Care Professionals During COVID-19 Emergency Response> Background In 1997, Congress enacted the Volunteer Protection Act of 1997 (VPA; P.L. 105-19 ). This act provides that a volunteer at a nonprofit organization or governmental entity is not liable for the harm he or she causes by an act (or an act of omission) on behalf of the organization, provided the following: (1) the volunteer was, among other things, properly licensed, certified, or authorized for the activities in a state, if applicable; (2) the volunteer was acting within the scope of his or her responsibilities in the organization at the time of the act (or act of omission); and (3) the harm was not caused by "willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer." The law does not convey liability protections in certain instances (e.g., when misconduct is a criminal act or when the defendant acted under the influence of drugs or alcohol), and the law specifies how it interacts with relevant state law. This law was not specific to health professionals in a volunteer capacity but, rather, covered all types of volunteers. Provision This section limits the medical malpractice liability of health professionals who volunteer during the COVID-19 emergency. Specifically, it limits the liability under federal and state law for any harm caused by an act or omission while providing health services during the emergency, provided that the health services are within the scope of the health professional's license registration, or certification, and that the health professional acted in good faith. The section specifies that health professionals do not have liability protections in situations where harm was caused by "willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious flagrant indifference to the rights or safety of the individual harmed by the health care professional," or when services were provided by a health professional who was under the influence of drugs or alcohol. The section specifies that it preempts state or local laws that are inconsistent with this section, unless those laws provide great liability protections, and specifies that the liability protections are in addition to those provided under the VPA. Finally, the section defines relevant terms and specifies that this provision is effective at enactment and will remain in effect for the length of the public health emergency declared by the Secretary under PHSA Section 319, declared by the Secretary on January 30, 2020. <2.1.6.6. Section 3216. Flexibility for Members of National Health Service Corps During Emergency Period> Background The federal government supports a number of health workforce programs administered by HRSA. Among the largest of these programs is the NHSC, which provides scholarships and loan repayment to health care providers in exchange for a two-year or more service commitment in a health professional shortage area (HPSA). The program is authorized in PHSA Sections 332-338I. PHSA Section 333 specifies the types of health care facilities and the conditions they must meet to receive NHSC personnel. Generally, these are outpatient health facilities in HPSAs. Provision This section specifies that for the duration of the public health emergency declared under PHSA Section 319 for the COVID-19 response, the Secretary may waive the requirements in PHSA Section 333 in order to assign NHSC members to voluntarily provide health services to respond to the emergency. The provision allows NHSC members to volunteer services for the number of hours that the Secretary determines appropriate. The provision further specifies that NHSC members must be assigned voluntarily, that the assignment site must be in reasonable proximity to the NHSC corps member's original practice site, and that these hours are to count toward fulfilling their NHSC service commitment. <2.1.7. Subpart C Miscellaneous Provisions> <2.1.7.1. Section 3221. Confidentiality and Disclosure of Records Relating to Substance Use Disorder> Background Generally, the privacy of health information is governed by the HIPAA (Health Insurance Portability and Accountability Act of 1996, P.L. 104-191 , as amended) Privacy Rule, which establishes requirements for covered entities' (health care plans, providers, and clearinghouses) and their business associates' use and disclosure of protected health information (PHI). All health information is generally treated similarly under the HIPAA Privacy Rule, with certain exceptions in place relating to the use and disclosure of psychotherapy notes. In contrast, stricter federal privacy requirements at PHSA Section 543 requirements promulgated in and commonly known as the "Part 2" rule apply to individually identifiable patient information received or acquired by federally assisted substance use disorder programs. Specifically, the Part 2 rule governs any information that would identify a patient as having or having had a substance use disorder, and that is obtained or maintained by a federally assisted substance use disorder program for the purpose of treating a substance use disorder, making a diagnosis for that treatment, or making a referral for that treatment. Part 2 requirements apply to an individual or entity (other than a general medical facility) that is federally assisted and provides and holds itself out as providing diagnosis, treatment, or referral for treatment of substance use disorders. "Federally assisted programs" include programs that are carried out in whole or in part by the federal government or supported by federal funds. The Part 2 rule strictly regulates the disclosure and redisclosure of patient identifying information held by Part 2 programs. The rule allows disclosure of this information only either (1) with written patient consent or (2) pursuant to exceptions in statute or regulation (e.g., for a medical emergency, for research). A general authorization for the release of medical information does not satisfy the rule's requirement for written consent, although a general designation in consent is allowed in cases where a class of participants may receive and redisclose amongst themselves Part 2 information if there exists a treatment relationship. Further, the rule strictly prohibits the subsequent redisclosure of information received from a Part 2 program without consent from the patient, and a notification clearly prohibiting this redisclosure by the receiving entity travels with any disclosed Part 2 information. Under PHSA Section 543(f), any person who violates any provision of the section or any regulation issued pursuant to the section shall be fined in accordance with Title 18 of the U.S. Code . Provision Section 3221 amends PHSA Section 543 to allow for, pursuant to written consent, the use or disclosure of covered records by a covered entity, business associate, or a Part 2 program for purposes of treatment, payment, and health care operations as permitted by the HIPAA Privacy Rule. In addition, the section allows information disclosed pursuant to this exception to be subsequently redisclosed in accordance with the HIPAA Privacy Rule. It further allows the disclosure of deidentified records to public health authorities, without written consent, if the information meets the deidentification standards in the HIPAA Privacy Rule. Section 3221 applies the penalties under SSA Sections 1176 and 1177 for violations of PHSA Section 543, as specified. It also prohibits discrimination against an individual on the basis of information received pursuant to an inadvertent or intentional disclosure of covered records, or information contained in covered records, in multiple instances (e.g., employment, access to courts). The section applies the HIPAA breach notification requirements to a program or activity under PHSA Section 543 in case of a breach of records. Section 3221 requires the Secretary to revise regulations as necessary such that changes in the section apply with respect to uses and disclosures of covered records occurring on or after the date that is 12 months after enactment. It also requires the Secretary, not later than one year after enactment and in consultation with appropriate legal, clinical, privacy, and civil rights experts, to update the notice of privacy practices requirement in the HIPAA Privacy Rule to require covered entities and entities creating or maintaining covered records to provide notice, in plain language, of privacy practices regarding those records. The section also establishes that nothing in the act shall be construed to limit (1) the right of an individual to request a restriction on the use or disclosure of a record under PHSA Section 543 for purposes of treatment, payment, or health care operations, and (2) the choice of a covered entity to obtain consent to use or disclose a covered record for purposes of treatment, health care operations, or payment. <2.1.7.2. Section 3222. Nutrition Services> Background The OAA (Older Americans Act, P.L. 89-73, as amended; 42 U.S.C. 3001 et seq.) Nutrition Services Program provides grants to states and U.S. territories under Title III of the act to support congregate nutrition services (i.e., meals served at group sites such as senior centers, community centers, schools, churches, and senior housing complexes) and home-delivered nutrition programs for individuals aged 60 and older. The Nutrition Services Program is designed to address problems of food insecurity, promote socialization, and promote the health and well-being of older persons through nutrition and nutrition-related services. The program is administered by the Administration for Community Living (ACL) under HHS. States and territories receive separate funding allotments for each program based on a statutory funding formula. Under OAA, states and U.S. territories have authority to transfer up to 40% of their allotments between congregate and home-delivered nutrition services and can request waivers to transfer up to 10% of additional funding between these programs. In addition, OAA provides states authority to transfer up to 30% of program funding from the Supportive Services Program to the Nutrition Services Program. Nutrition services providers are required to offer at least one meal per day, five or more days per week (except in rural areas, where the provision of meals may be less frequent). The meals must comply with the Dietary Guidelines for Americans published by the Secretary of HHS and the Secretary of Agriculture. Providers must serve meals that meet specified minimum amounts for the daily recommended dietary reference intakes (DRIs) established by the Food and Nutrition Board of the National Academies of Sciences, Engineering, and Medicine based on the number of meals served by the project each day. With respect to home-delivered nutrition programs, individuals aged 60 or older and their spouses (regardless of age) may participate in the home-delivered nutrition program. Persons aged 60 or over who are frail, homebound by reason of illness or disability, or otherwise isolated, are also prioritized for OAA Title III services. Services may be available to individuals under age 60 with disabilities if they reside at home with the older individual. Service eligibility is determined by the states and local Area Agencies on Aging (AAA); however, according to the ACL, entities may waive any eligibility requirements they have established for home-delivered meals in response to the COVID-19 pandemic. Provision During any portion of the COVID-19 public health emergency declared under PHSA Section 319, the section sets forth additional transfer authority between OAA nutrition programs, clarifies participant requirements for home-delivered meals, and authorizes the Assistant Secretary for Aging to waive certain dietary requirements for nutrition services. Specifically, the HHS Secretary is required to allow a state agency or an AAA to transfer up to 100% of the funds appropriated and received for congregate and home-delivered nutrition between these two programs, for such use as the state or area considers appropriate to meet service needs without prior approval. For purposes of state agencies' determining the delivery of nutrition services, the provision requires the same meaning to be given to individuals who are unable to obtain nutrition because they are practicing social distancing due to the emergency as is given to an individual who is homebound because of illness. And, to facilitate implementation of nutrition services programs, the Assistant Secretary is authorized to waive compliance with the Dietary Guidelines for Americans and the specified minimum amounts for the daily recommended DRI requirements. The provision defines the terms ''Assistant Secretary,'' ''Secretary,'' ''State agency,'' and ''area agency on aging'' to have the same meanings as under OAA Section 102. <2.1.7.3. Section 3223. Continuity of Service and Opportunities for Participants in Community Service Activities Under Title V of the Older Americans Act> Background OAA Title V establishes the Community Service Employment for Older Americans program (CSEOA), sometimes referred to as the Senior Community Service Employment Program (SCSEP). CSEOA promotes part-time employment opportunities in community service activities for unemployed low-income persons aged 55 and older and who have poor employment prospects. The Title V program is administered by the Department of Labor's (DOL's) Employment and Training Administration. DOL allocates Title V funds for grants based on a statutory funding formula to state agencies in all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories, and to national organizations. Program participants work part-time in community service jobs, including employment at schools, libraries, social service organizations, and senior-serving organizations. Program participants earn the higher of minimum wage or the typical wage for the job in which they are employed. An individual may typically participate in the program for a cumulative total of no more than 48 months. Provision Due to the effects of the COVID-19 public health emergency declared under PHSA Section 319, this section specifies additional flexibility for the Secretary of Labor with respect to administration and implementation of the CSEOA program. Specifically, it authorizes the Secretary to allow individuals participating in OAA Title V projects as of March 1, 2020, to extend their participation for a period that exceeds 48 months in the aggregate, as determined by the Secretary. It authorizes the Secretary to increase the average participation cap for grantees of 27 months for eligible individuals to a cap the Secretary determines is appropriate. And it authorizes the Secretary to increase the amount available to pay the authorized administrative costs for a project, which is currently 13.5% of the grant amount, to not exceed 20% of the grant amount, if the Secretary determines that such increase is necessary to adequately respond to additional administrative needs. <2.1.7.4. Section 3224. Guidance on Protected Health Information> Background The HIPAA Privacy Rule governs covered entities' (health care plans, providers, and clearinghouses) and their business associates' use and disclosure of PHI. In addition, it establishes strong individual rights of access to an individual's own PHI. PHI is defined as individually identifiable health information created or received by a covered entity that is transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium. The rule sets forth multiple situations in which covered entities may permissibly use or disclose PHI without written authorization, while generally all other uses and disclosures of PHI (i.e., those that are not expressly permitted under the rule) require an individual's prior written authorization. Broadly, covered entities may share PHI between and among themselves for the purposes of treatment, payment, or health care operations, with few restrictions and, specifically, without the individual's authorization. The Privacy Rule also recognizes that PHI may be useful or necessary in circumstances besides health care treatment and payment for a given individual or general health care operations, or entirely unrelated to health care or the health care system. For this reason, the rule lists a number of "national priority purposes" for which covered entities may disclose PHI without an individual's authorization or opportunity to agree or object. Examples of these include disclosures for public health activities, health oversight, and pursuant to a requirement in law (e.g., state law). In response to the COVID-19 pandemic, the Office of Civil Rights (OCR)/HHS has issued guidance relating to the disclosure of PHI to first responders and law enforcement, as well as on telemedicine and the HIPAA Privacy Rule. OCR has also released several notifications of exercise of enforcement discretion during the COVID-19 public health emergency, specifically with respect to use and disclosure of PHI by business associates (BAs); the operation of Community-Based Testing Sites during the COVID-19 public health emergency; and the provision of care using telehealth. In addition, under authorities in SSA Section 1135 and the Project Bioshield Act ( P.L. 108-276 ), the Secretary has the authority to waive sanctions and penalties for certain HIPAA Privacy Rule violations during certain emergency periods. These have been waived. The specific HIPAA Privacy Rule requirements for which penalties may be waived are as follows: (1) the requirement to distribute a notice of privacy practices (45 C.F.R. 164.520); (2) the patient's right to request certain privacy restrictions (45 C.F.R. 164.522(a)); (3) the patient's right to request confidential communications (45 C.F.R. 164.522(b)); (4) the requirement to honor a request to opt out of a facility directory (45 C.F.R. 164.510(a)); and (5) the requirement to obtain agreement to share information with family and friends involved in a patient's care (45 C.F.R. 164.510(b)). These waivers apply only (1) in the emergency area identified in the public health emergency declaration and for the duration of the emergency, (2) to those hospitals that have a disaster plan; and (3) for the first 72 hours after the hospital's plan has been initiated. Provision Section 3224 requires the Secretary, not later than 180 days after enactment, to issue guidance on the sharing of patients' PHI (as defined at 45 C.F.R. 106.103) during emergency declarations and determinations, with respect to COVID-19, pursuant to PHSA Section 319, Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), and the National Emergencies Act. The section requires the guidance to address compliance with the HIPAA Privacy Rule and applicable policies, including any policies that may come into effect during these emergencies. <2.1.7.5. Section 3225. Reauthorization of Healthy Start Program> Background The Healthy Start Program (Healthy Start), which is authorized in PHSA Section 330H and administered by HRSA, is a competitive grant program. The program enables eligible public or private entities, community-based organizations, faith-based organizations, and Indian or tribal organizations to propose and administer innovative, community-based ways to decrease U.S. infant mortality rates (IMRs), improve perinatal and maternal health outcomes, and reduce ethnic and racial health disparities in perinatal health. ( I nfant mortality refers to the death of an infant before his or her first birthday. An infant mortality rate refers to the comparison of the number of infant deaths against 1,000 live births in a given year.) Healthy Start participants consist of women, men, infants, children, and involved parties such as family members. The program requires participants to reside in communities with IMRs that are at least 1.5 times greater than the U.S. IMR and/or have high rates of adverse perinatal outcomes such as preterm births and maternal deaths. The program's authorization of appropriations, which expired in 2013, was "the amount authorized for the preceding fiscal year increased by the percentage increase in the Consumer Price Index (CPI) for all urban consumers for such year." Provision Purpose and considerations in making grants. Section 3225 amends PHSA Section 330H by expanding the Healthy Start project areas to those with increasing IMRs that are above the U.S. IMR. Section 3225 removes the mandate that required applicants to include consumers of project services as participants in community-based consortiums. The Secretary instead must require applicants to include state substance abuse agencies, participants, and former participants of project areas as participants in community-based consortiums. The Secretary, when considering grant awards, is required to consider factors that contribute to infant mortality, including poor birth outcomes (e.g., low birthweight and preterm birth) and social determinants of health. In addition, the Secretary must consider factors such as applicants' collaboration with the local community in developing Healthy Start projects and applicants' use and collection of data demonstrating the program's effectiveness in decreasing IMRs and improving perinatal outcomes. Coordination. Section 3225 makes conforming changes and moves the current language in subsection (c) to a new paragraph (1) and adds a new paragraph (2), under subsection (c). The new paragraph (2) requires the Secretary to ensure the Healthy Start program coordinates with similar programs and activities administered by HHS that aim to reduce IMRs and improve infant and perinatal health outcomes. Funding. The section authorizes an appropriation of $125.5 million for each of FY2021-FY2025, eliminates the CPI requirement, and authorizes the Secretary to reserve 1% of appropriated funds to evaluate Healthy Start projects. Section 3225 expands the Secretary's use of the reserved funds to evaluate information related to, among other things, progress made toward meeting program metrics or health outcomes on reducing IMRs, improving perinatal outcomes, and diminishing health disparities. GAO report. Section 3225 makes conforming changes and adds a new subsection (f). The new subsection requires the Government Accountability Office (GAO) to conduct an independent evaluation of Healthy Start and to submit a report to appropriate congressional committees, no later than March 27, 2024. The section specifies that the evaluation must include a determination of whether Healthy Start projects have been effective in reducing the health disparity in health care outcomes between the general population group and racial and minority population groups, where applicable and appropriate. The report must also contain a review, an assessment, and recommendations on, among other topics, HRSA's allocation of funding to urban and rural areas and progress towards meeting the evaluation criteria for programs that increase and decrease IMRs, improve and adversely affect perinatal outcomes, and affect disparities in infant mortality and perinatal health outcomes. <2.1.7.6. Section 3226. Importance of the Blood Supply> Background The nation's blood supply is largely managed by a network of independent blood centers and the American Red Cross, with some oversight from HHS. These organizations collect blood product donations (e.g., whole blood, platelets) from individuals through scheduled appointments, walk-in appointments, and blood drives. The COVID-19 pandemic poses significant challenges for the United States' blood supply. Mitigation strategies to prevent the spread of COVID-19, such as closures of schools and workplaces, have led to blood drive cancellations, resulting in a critical blood supply shortage. In addition, individuals are reluctant to schedule blood donations while advised to social distance from others. Provision This section requires the Secretary to carry out a national campaign to improve awareness of, and support outreach to the public and health care providers about, the importance and safety of blood donation and the need for donations for the blood supply. The section requires the Secretary to consult with heads of relevant federal agencies (including FDA, CDC, and National Institutes of Health [NIH]), accrediting bodies, and representative organizations to carry out the campaign. In addition, the Secretary is authorized to enter into contracts with public or private nonprofit entities to carry out the campaign. The section requires the Secretary to submit a report to specified congressional committees, not later than two years from enactment that (1) describes the activities carried out, (2) describes trends in blood supply donations, and (3) evaluates the impact of the public awareness campaign. <2.1.8. Part III Innovation> This part adds two new authorities to the broad body of law that provides incentives for medical product research and development. <2.1.8.1. Section 3301. Removing the Cap on OTA During Public Health Emergencies> Background The Biomedical Advanced Research and Development Authority (BARDA) supports the clinical research and development, regulatory approval, and procurement of new MCMs (e.g., vaccines, treatments, and diagnostics) planned for use in public health emergencies. In addition to grants, contracts, and cooperative agreements, the PHSA permits BARDA to enter into "other transactions," which are exempt from many statutory provisions and procurement regulations. In February 2020, BARDA announced it was using its other transaction authority (OTA) to expand existing relationships with private partners to speed the development of COVID-19 countermeasures. In general, such transactions above $100 million require a written determination "by the Assistant Secretary for Financial Resources, that the use of such authority is essential to promoting the success of the project." Provision Section 3301 amends PHSA Section 319L in a number of ways that appear to be somewhat ambiguous, but the intent seems to be to waive the requirement for a written determination for transactions above $100 million during a public health emergency declared under PHSA Section 319. Transactions made under this provision would not be terminated solely due to the expiration of the public health emergency. The Secretary is required to report the use of this provision to specified congressional committees after the public health emergency ends. <2.1.8.2. Section 3302. Priority Zoonotic Animal Drugs> Background A zoonotic disease is an infectious disease that is transmissible between humans and nonhuman animals. Many emerging infections that have caused significant outbreaks among humans, are believed to have arisen from animal-to-human transmission. Drugs to treat animals are evaluated for approval by FDA. An animal origin for the COVID-19 virus is considered likely but unproven. Provision Section 3302 adds a new Section 512A to the FFDCA regarding Priority Zoonotic Animal Drugs. It requires the Secretary, upon an applying drug sponsor's request, to expedite the development and review of a new animal drug "if preliminary clinical evidence indicates that the new animal drug, alone or in combination with 1 or more other animal drugs, has the potential to prevent or treat a zoonotic disease in animals, including a vector borne-disease, that has the potential to cause serious adverse health consequences for, or serious or life-threatening diseases in, humans." The request may be made upon, or any time after, the opening of an investigational new animal drug file or filing of an application for approval, and the Secretary shall act on such request within 60 days. Actions that may be used to expedite review include expanded consultations and guidance regarding novel designs or drug development tools to make clinical trials more efficient. <2.1.9. Part IV Health Care Workforce> PHSA Title VII authorizes a number of programs to support the health workforce. These include scholarships, loans, and academic programs that seek to diversify the workforce, train primary care providers, and increase the number of geriatric health care providers, among other things. PHSA Title VIII authorizes similar programs to support the nursing workforce. Many of Title VII and Title VIII programs were most recently reauthorized in Title V of the ACA, which made program changes, added new programs, and generally provided authorizations of appropriations through either FY2013 or FY2014. Although authorizations of appropriations for most Title VII and Title VIII have lapsed, a number of these programs have continued to receive appropriations through HRSA's Bureau of the Health Care Workforce. These programs have also been considered for reauthorization in the 116 th Congress, where bills would typically provide a five-year authorization of appropriations at the amounts provided in the most recent fiscal year. For example, S. 2997 , Title VII Health Care Workforce Reauthorization Act of 2019, would have reauthorized a number of Title VII programs for five years, and would have authorized funding at FY2019 funding levels. Much of S. 2997 was included in Sections 3401-3403 of the CARES Act, generally with funding amounts reflective of FY2020 appropriations and with a five-year authorization that begins in FY2021. Similarly, S. 1399 , Title VIII Nursing Workforce Reauthorization Act of 2019, would have reauthorized a number of Title VIII programs for five years, and would have authorized funding at FY2019 funding levels. Much of what was included in S. 1399 was enacted in Section 3404 of the CARES Act, with funding amounts reflective of FY2020 appropriations and with a five-year authorization that begins in FY2021. <2.1.9.1. Section 3401. Reauthorization of Health Professions Workforce Programs> Background PHSA Title VII authorizes a number of programs to support the health workforce. Though authorizations of appropriations for most Title VII programs have lapsed, several programs have received appropriations in recent years. The relevant Title VII programs (with their FY2020 appropriation level, if appropriate) are summarized below. The summary also notes other relevant PHSA Title VII advisory groups amended by this section. Centers of Excellence (Section 736) supports centers that seek to recruit, retain, and train underrepresented minorities in the health professions. The program received an appropriation of $23.711 million in FY2020. Health Professions Training for Diversity (Section 740) authorizes appropriations for a number of diversity-related training programs. Subsection (a) authorizes appropriations for scholarships for disadvantaged students (PHSA 737), which received an appropriation of $51.47 million in FY2020; subsection (b) authorizes appropriations for loan repayment and fellowships for minority health professional faculty (PHSA 738), which received an appropriation of $1.19 million in FY2020; subsection (c) authorizes appropriations for the Health Careers Opportunity Program (PHSA 739), which provides grants for programs that provide health career training to individuals from disadvantaged backgrounds. This program received an appropriation of $15 million in FY2020, and subsection (d) required a report on diversity in the health professions that was due not later than six months after enactment. Primary Care Training and Enhancement (Section 747) authorizes grant programs to support primary care medicine and physician assistant training. The program received an appropriation of $48.925 million in FY2020. Training in General, Pediatric, and Public Health Dentistry (PHSA Section 748) authorizes grants to support dentists and dental hygienist training. The program received an appropriation of $28 million in FY2020. Advisory Committee on Training in Primary Care Medicine and Dentistry (Section 749) authorizes the advisory committee that provides oversight over PHSA Section 747 and Section 748 programs. Authorizations of appropriations for those programs are contained in their respective authorizing provisions. Section 749 was renumbered in the ACA, but its language was not amended at that time. Area Health Education Centers (Section 751) authorizes grants for centers at medical or nursing schools that provide training for students from underserved backgrounds or in underserved (often rural) areas. This program received $41.25 million in FY2020. Quentin N. Burdick Program for Rural Interdisciplinary Training (Section 754) provided grants for interdisciplinary rural-focused health workforce training projects. This program has not been funded in the past decade and does not have a current authorization of appropriations. Allied Health and Other Disciplines (Section 755) authorizes grants to support allied health professionals. This program has not been funded in recent years. Health Workforce Information and Analysis (Section 761) established HRSA's National Center for Health Workforce Analysis and authorizes grant programs to support state, local, and longitudinal workforce analyses. This program received an appropriation of $5.663 million in FY2020. The C ouncil on Graduate Medical Education (COGME; Section 762) analyzes and reports to relevant congressional committees on issues related to the physician workforce, training, and the financing of training. The committee is authorized in Section 762, which lays out the committee membership and its reporting requirements. The section also specifies that the committee was to sunset in 2003; however, language in appropriations laws have waived this sunset date. Public Health Training Centers (Section 766) authorizes grants at public health schools to train public health professionals in health promotion and preventive medicine, among other things. This program receives its authorizations of appropriation in PHSA Section 770(a). Authorization of Appropriations (Section 770) authorizes appropriations for the group of public health workforce programs authorized in PHSA Sections 765-770. Public health workforce programs received an appropriation of $17 million in FY2020. Pediatric Subspecialty Loan Repayment Program (Section 775) authorizes loan repayment to specific pediatric subspecialists (including behavioral health specialists) in exchange for a service requirement in underserved areas. This program was created in the ACA but has never been funded or implemented. Provision This section extends authorizations of appropriations for a number of sections in PHSA Title VII. In each case, appropriations are authorized for each of FY2021-FY2025. The section reauthorizes the health workforce diversity programs as follows: $23.711 million for PHSA Section 736, $51.470 million PHSA Section 740(a), $1.19 million for PHSA Section 740(b), and $15 million for PHSA Section 740(c). The section also amends the date of a report on diversity in the health professions required in PHSA Section 740(d) to require that the report is due to the appropriate congressional committees not later than September 30, 2025, and every five years thereafter. The section also amends and extends the authorizations of appropriations for a number of programs related to primary care medical and dental training, as specified below. The section amends PHSA Section 747, which authorizes training programs for primary care physicians and physician assistants. The section makes the following changes: (1) removes reference to demonstration projects in grants related to innovative care models; (2) amends granting priorities to permit the Secretary to give preference to qualified applicants that train residents in rural areas, including for Tribes or Tribal Organizations that are located in rural areas; (3) changes references from "substance-related disorders" to "substance use disorders;" and (4) authorizes an appropriation of $48.294 million annually for each of FY2021-FY2025. The section amends PHSA Section 748, which authorizes training programs for general, pediatric, and public health dentists and dental hygienists; it changes references from "substance-related disorders" to "substance use disorders" and authorizes an appropriation of $28.531 million for each of FY2021-FY2025. The section amends PHSA Section 749(d), which authorizes the Advisory Committee on Training in Primary Care Medicine and Dentistry, to update references to congressional committees to reflect the current committee names. The section amends PHSA Section 751, which authorizes the Area Health Education Center program, to authorize an appropriation of $41.25 million for each of FY2021-FY2025. The section amends PHSA Section 754, which authorizes the Quentin N. Burdick Program for Rural Interdisciplinary Training, to revise language related to using grant funds by replacing "new and innovate" with "innovative or evidence-based." The section amends in PHSA Section 755, which authorizes grants for training in Allied Health and Other Disciplines to replace language related to the elderly with reference to "geriatric populations or for maternal and child health." The section amends PHSA Section 761, which authorized Health Workforce Information and Analysis, to authorize to be appropriated $5.663 million annually for each of FY2021-FY2025. The section amends PHSA Section 762 (COGME) to update references to congressional committees to reflect the current committee names; change language from the Health Care Financing Administration to CMS; make conforming changes; add the HRSA Administrator to the council; delete language related to reports required at COGME's outset and the council's termination; and add new reporting requirement dates. Specifically, it requires a report to be delivered to specified congressional committees not later than September 30, 2023, and not less than every five years thereafter. The section amends PHSA Section 766 (Public Health Training Centers) to delete language related to Healthy People 2000 and to add language related to rural areas. The section amends PHSA Section 770 (Authorization of Appropriations), which authorizes appropriations for Public Health Workforce Programs, to authorize $17 million to be appropriated for each of FY2021-FY2025. The section amends PHSA Section 775 (Loan Repayment for Pediatric Subspecialists) to authorize such sums as may be necessary for each of FY2021-FY2025. <2.1.9.2. Section 3402. Health Workforce Coordination> Background HRSA administers a number of health workforce programs through its Bureau of Health Workforce. A number of these programs also have advisory committees that advise HRSA and Congress about specific programs (e.g., the Advisory Committee on Training in Primary Care Medicine and Dentistry provides oversight of programs authorized in Sections 747 and 748 related to primary care medicine and dental training). Each of these advisory groups has a specific charge or scope, and their work is generally not coordinated. For example, although COGME evaluates graduate medical education (GME) policy, the bulk of GME funding is from CMS, while the relevant advisory group is administered through HRSA. Experts have recommended the need for more coordinated GME and overall health workforce policy as a way to better focus federal health workforce investments across the federal government. Provision This section requires the Secretary, in consultation with the Advisory Committee on Training in Primary Care Medicine and Dentistry and the COGME, to develop a comprehensive plan that coordinates HHS's health care workforce development programs. The plan must include certain specified elements such as performance measures, as specified; gap analyses and plans to rectify these gaps; and barriers to implementing strategies to rectify the identified gaps. It also requires the Secretary to coordinate with other federal agencies and departments that administer relevant education and training programs. The purpose of such coordination is to evaluate whether these programs are meeting U.S. health workforce needs and identify opportunities to improve information collected to better inform program improvements. Finally, the section requires the Secretary to submit a report describing the comprehensive health workforce plan and its implementation to specified congressional committees no later than two years after enactment. <2.1.9.3. Section 3403. Education and Training Relating to Geriatrics> Background PHSA Section 753 authorizes a number of geriatric workforce programs. Separately, PHSA Section 865 authorizes similar geriatric workforce programs focused on nurses, because nurses are generally not eligible for programs in Title VII. Beginning in FY2015, HRSA opted to consolidate and administer these geriatric workforce programs together and has since supported two training programs: the Geriatrics Workforce Enhancement Program (GWEP) and the Geriatrics Academic Career Awards (GACA). GWEP provides grants to create training programs that focus on training inter-professional teams to increase geriatric competence among primary care and other types of health care providers. GACA makes awards to institutions on behalf of junior (non-tenured) faculty to support the career development of academic geriatricians in medicine, pharmacy, nursing, social work, and other health professions. The expectation is that GACA award recipients will provide inter-professional clinical training and become leaders in academic geriatrics. PHSA Section 753 was most recently reauthorized in the ACA, which added a number of new subsections within the section that authorized new geriatric training programs. These new programs were never implemented. Appropriations were authorized through FY2014, with the exception of the Geriatric Career Incentive Award program, which had been authorized through FY2013. Despite the lapsed authorization of appropriations, these programs have been funded in recent years; most recently they received $40.737 million in FY2020. Provision This section replaces PHSA Section 753 with a new PHSA Section 753, "Education and Training Related to Geriatrics." The new section codifies two existing geriatric workforce training programs: (1) GWEP and (2) GACA. It deletes existing unfunded geriatric training programs. The section, in new subsection (a) requires the Secretary to award grants, contracts, or cooperative agreements to specified health professional schools, including schools of allied health, nursing schools, and programs that focus on geriatric education, to establish GWEPs. It specifies the GWEP requirements that include health trainee support, and an emphasis on patient and family engagement and primary care integration. The section also specifies the activities that GWEP programs are authorized to provide, including specific types of training and Alzheimer's disease education. The section specifies that GWEP grants may not be awarded for more than five years; that applicants must submit an application, as specified; and that the Secretary is required to use certain awarding priorities but may also take into account specified awarding considerations. Finally, with regard to the GWEP program, the section specifies grantee reporting requirements, requires the Secretary to report to specified congressional committees not later than four years after the enactment of Title VII Health Care Workforce Reauthorization Act of 2019 and every five years thereafter, and requires that the report be made publicly available. New PHSA Section 753(b) establishes the GACA grant program where grants are awarded to eligible entities to support their geriatric careers. The section defines the entities eligible for GACA awards, including nursing schools and the health professionals who are eligible to receive support. The section also specifies that academics must be junior non-tenured faculty at the time the award is made, but that they remain eligible for the award if they receive tenure during the award period. The section specifies the application requirements and the assurances regarding service requirements that the application must contain. It specifies that, when making awards, the Secretary is required to ensure a geographical distribution among award recipients, including among rural MUAs. The section also specifies that grants must be a minimum of $75,000 in FY2021, to increase annually by the CPI thereafter; that award periods may not exceed five years; and the service requirement that awardees must fulfill as a condition of receiving an award. Finally, for both GWEP and GACA, the section waives certain awarding preferences that otherwise apply to Title VII grants, and it authorizes to be appropriated $40.737 million for each of FY2021-FY2025. <2.1.9.4. Section 3404. Nursing Workforce Development> Background PHSA Title VIII authorizes a number of nursing workforce programs. Part A provides general provisions of the title, including definitions and entities eligible for the grants made available under the title. Part B authorizes grant programs to support advance practice nurses, including nurse practitioners, nurse anesthetists, and nurse midwives. Part C authorizes grant programs that seek to increase nursing workforce diversity, and Part D authorizes grant programs that aim to strengthen the nursing workforce and improve nursing practice. This effort includes programs that seek to expand the nursing career ladder whereby individuals in lower skilled health professions receive training and education to advance in the nursing field (e.g., from a nursing assistant to a registered nurse). Finally, Part E establishes the nursing student loan program. These programs were most recently reauthorized in the ACA, with authorizations of appropriations through FY2013 or FY2014. Despite the lapsed authorization, these programs have been funded in recent years. Specifically, in FY2020, they received an appropriation of $260 million. Provision This section reauthorizes programs in PHSA Title VIII in subsection (a), while subsection (b) requires a GAO report on nursing loan programs. General Provision s . Subsection (a) makes the following changes to Title VIII. It adds nurse-managed health clinics to the definition of entities eligible for grants authorized in Title VIII; adds new language to applications (in Section 802), to use of funds (in Section 803), and to provisions that are generally applicable to Title VIII (Section 806). Specifically, the subsection adds new language that grants should be awarded to address national nursing needs, as specified; to require new information from grantees; and to add new language requiring a biennial report that includes certain specified elements to be delivered not later than September 30, 2020, to specified congressional committees. The subsection also makes a number of changes to Section 811 (grants for advance education nursing grants) to replace language that references master's level nurses to graduate level nurses, to change language referencing clinical nurse leaders to nurse administrators, and to add that clinical nurse specialist programs, as specified, are eligible for grants under this section. Nurse Education, Quality, and Retention Grants . The subsection amends Section 831 to rename the section "Nurse Education, Quality, and Retention Grants." It also amends the description of practice priority groups and retention priority areas within the nursing career ladder by adding language, that among other things, specifies that grants help individuals, including health aides or community health practitioners certified under the IHS Community Health Aide Program, enter the nursing career ladder. It adds language to Section 831 specifying that grants may be used to develop and implement fellowship and residency programs and to encourage the mentoring and development of nursing specialties. It also deletes subsection (e), referring to grant awards preferences in prior years, and (h), which had authorized appropriations from FY2010-FY2014, and renumbers the subsection accordingly. The subsection also amends the reporting requirements in Section 831 to require the Secretary to submit a report on the grants in this section as part of a larger report required under Section 806, and expands the entities eligible for grants under this section to add, in addition to nursing schools, health care facilities, Federally Qualified Health Centers (FQHCs), nurse-managed health clinics, and a partnership of such a school and facility. Deletions . The subsection deletes PHSA Section 831A (Nurse Retention Grants), because grants for this purpose are now included in the amended PHSA Section 831. It then amends PHSA Section 846 (Loan Repayment and Scholarship Program) to permit individuals to fulfill their service commitment and for-profit health facilities, to make language gender neutral, and to remove the sections authorization of appropriation and make reference to an amount allocated under PHSA Section 871(b). The section also deletes the separate authorization of appropriations from PHSA Section 846A (Nurse Faculty Loans) and Section 847 (Eligible Individual Student Loan Repayment); adds language referencing clinical nurse specialists to PHSA Section 851 (National Advisory Council on Nurse Education and Practice); amends the committees that the council is required to report to update to current committee names; and amends language related to amounts available to fund the council's activities. The section also deletes PHSA Section 861 (Public Service Announcements) and PHSA Section 862 (State and Local Public Service Announcements). Appropriation Changes . Finally, the subsection amends Section 871, which authorizes appropriations for the title to authorize $137.837 million for each of FY2021-FY2025 to carry out Parts B, C, and D of Title VIII and to authorize $117.135 million for each of FY2021-FY2025 to carry out Part E (Student Loan Funds). Subsection (b) of the provision requires a GAO report that evaluates nurse loan repayment programs, as specified, to be delivered to specified congressional committees, no later than 18 months after enactment. <2.2. Subtitle D Finance Committee> Subtitle D makes a series of changes in the Medicare and Medicaid programs in response to the COVID-19 public health emergency declared by the Secretary. The Medicare provisions increase certain payments to providers, including hospitals; expand the use of allowable telehealth services; make any potential COVID-19 vaccine available under Medicare Part B without cost-sharing; and relax certain program requirements to make it easier for Medicare patients to obtain certain services. The provisions also address cost-sharing to states for Medicaid services. <2.2.1. Section 3701. Exemption for Telehealth Services> Background A health savings account (HSA) is a tax-advantaged account that individuals can use to pay for unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by insurance). Individuals are eligible to establish and contribute to an HSA if they have coverage under an HSA-qualified high-deductible health plan (HDHP), do not have disqualifying coverage, and cannot be claimed as a dependent on another person's tax return. To be considered an HSA-qualified HDHP, a health plan must meet several criteria: (1) it must have a deductible above a certain minimum level, (2) it must limit out-of-pocket expenditures for covered benefits to no more than a certain maximum level, and (3) it can cover only preventive care services before the deductible is met. For example, if a health plan satisfies the first two of the aforementioned criteria and provides coverage for preventive care services and prescription drugs before the deductible is met, that health plan would not be considered an HSA-qualified HDHP because it provides prescription drug benefits before the deductible is met. Disqualifying coverage is generally considered any other health coverage that is not an HSA-qualified HDHP or that provides coverage for any benefit that is covered under their HSA-qualified HDHP. Provision Section 3701 amends Internal Revenue Code (IRC) Section 223(c) for plan years beginning on or before December 31, 2021, to allow HSA-qualified HDHPs to provide "telehealth and other remote care services" before the deductible is met and still be considered an HSA-qualified HDHP. For plan years beginning on or before December 31, 2021, Section 3701 provides that telehealth and other remote care would not be considered disqualifying coverage that would prevent an otherwise eligible individual from being considered HSA-eligible. These provisions were effective upon the date of enactment (i.e., March 27, 2020). <2.2.2. Section 3702. Inclusion of Certain Over-The-Counter Medical Products as Qualified Medical Expenses> Background There are four categories of health-related tax-advantaged accounts/arrangements: HSAs, Archer medical savings accounts (Archer MSAs), flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs). Distributions from HSAs and Archer MSAs and reimbursements from FSAs and HRAs that are used to pay for qualified medical expenses are not taxed. Each account/arrangement category has a different set of medical expenses that would be considered a qualified medical expense, but all accounts/arrangements generally consider, at a minimum, the following as qualified medical expenses: the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part of the body; the amounts paid for transportation to receive medical care; and qualified long-term care services. Most recently, OTC medicines and drugs (other than insulin) were not considered a qualified medical expense for any account/arrangement category unless an individual received a corresponding prescription for each non-prescribed expense. Provision Section 3702 amends Sections 106, 220(d)(2)(A), and 223(d)(2) of the IRC to allow OTC medicines and drugs (without a prescription) and menstrual care products to be considered qualified medical expenses for HSAs, Archer MSAs, FSAs, and HRAs. This change in the definition of qualified medical expenses applies to amounts paid or expenses incurred after December 31, 2019. <2.2.3. Section 3703. Increasing Medicare Telehealth Flexibilities During Emergency Period> Background Medicare coverage under Part B (fee-for-service) for telehealth services is defined under SSA Section 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, Section 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. 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. Subsequently, FFCRA Division F, Section 6010, expanded the definition of a qualified provider to include those who had provider-patient relationships within the past three years outside of Medicare. Provision Section 3703 removes the list of telehealth restrictions the Secretary was allowed to waive under P.L. 116-123 and broadens the Secretary's authority to temporarily waive any of the SSA Section 1834(m) telehealth requirements. The provision also removes the definition of a "qualified provider" for telehealth services during the COVID-19 emergency period pursuant to SSA Section 1135. The provision strikes the specific subsection added under P.L. 116-123 related to telephone use, such that the waiver authority applies more broadly to include "a telehealth service [ ] furnished in any emergency area (or portion of such an area) during any portion of any emergency period to an individual." In addition, removing the "qualified provider" definition eliminates the requirement of a prior relationship between the patient and the provider for telehealth services to be delivered and covered under the COVID-19 emergency declaration. <2.2.4. Section 3704. Enhancing Medicare Telehealth Services for Federally Qualified Health Centers and Rural Health Clinics During Emergency Period> Background Under current law, FQHCs and rural health clinics (RHCs) are allowed to be originating sites for covered telehealth services (sites where a patient is located) but are not allowed to be distant sites, where physicians may provide telehealth services to eligible patients at other locations (originating sites). Generally, both FQHC and RHCs are not paid under the Medicare physician fee schedule (MPFS). Rather, FQHCs are paid through an FQHC-specific prospective payment system (PPS), while RHCs are reimbursed as an all-inclusive rate for the services they provide. Provision Section 3704 allows FQHCs and RHCs to serve as distant sites for the furnishing of telehealth services to telehealth-eligible individuals during the emergency period. The Secretary is required to develop and implement, through program instruction or otherwise, payment methods for this purpose that apply to FQHCs and RHCs serving as a distant sites that furnish telehealth services to eligible telehealth individuals during such an emergency period. Such services are to be paid similar to the national average amount for comparable telehealth services under the MPFS. The costs associated with this care are not to be included when calculating the payments for the FQHC PPS or the RHC all-inclusive rates, under current law. <2.2.5. Section 3705. Temporary Waiver of Requirement for Face-To-Face Visits Between Home Dialysis Patients and Physicians> Background Medicare is the main source of health care coverage for Americans with end-stage renal disease (ESRD). Individuals with ESRD have substantial and permanent loss of kidney function and require either a regular course of dialysis (a process that removes harmful waste products from an individual's bloodstream) or a kidney transplant to survive. Medicare covers beneficiaries aged 65 and older who have ESRD, as well as qualified individuals with ESRD who are under the age of 65. Medicare ESRD benefits include thrice-weekly dialysis treatment and coverage for kidney transplants. CMS pays physicians, typically nephrologists, and other practitioners a monthly per-patient rate for most dialysis-related services. Physicians and practitioners managing ESRD patients who perform home-based dialysis are paid a single monthly rate based on the ESRD beneficiary's age. A physician or practitioner is required to have at least one face-to-face visit with a home dialysis patient each month. As part of the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), Congress expanded the use of telehealth services for ESRD patients undergoing home dialysis. Starting in 2019, ESRD beneficiaries who use home dialysis have been allowed to receive monthly face-to-face clinical assessments via telehealth services, so long as the beneficiaries receive a face-to-face assessment without the use of telehealth (1) at least monthly for the initial three months of home dialysis, and (2) after the initial three months, at least once every three consecutive months. Provision Section 3705 amends SSA Section 1881(b)(3)(B) to allow the Secretary to waive the requirement that to receive telehealth services, a Medicare ESRD beneficiary undergoing home dialysis receive a face-to-face clinical assessment from a practitioner monthly during the initial three months of home dialysis and once every three months thereafter. The requirement may be waived for the period that the COVID-19 emergency is in effect. <2.2.6. Section 3706. Use of Telehealth to Conduct Face-To-Face Encounter Prior to Recertification of Eligibility for Hospice Care During Emergency Period> Background The Medicare hospice benefit provides coverage for certain services provided to Medicare beneficiaries with a life expectancy of six months or less. Such services must be rendered by Medicare-certified hospices, which are either public agencies or private organizations primarily engaged in providing hospice services. Although beneficiaries who elect hospice care may disenroll from the hospice benefit at any time, the benefit is administratively structured by "periods": specifically, two 90-day periods and an unlimited number of subsequent 60-day periods. For hospice care to be covered under Medicare, an initial certification of a terminal illness must be obtained by the hospice at the beginning of the first 90-day period of care. The initial certification requires signed declarative statements attesting to the presence of a terminal illness by the hospice physician and the beneficiary's attending physician, if the individual has designated one. For each subsequent period of hospice care, recertification of the beneficiary's terminal illness is required only by the hospice physician. Since the beginning of 2011, part of the recertification process to determine continued eligibility has included a mandatory face-to-face encounter with the beneficiary by the hospice physician or nurse practitioner. Provision Section 3706 amends SSA Section 1814(a)(7)(D)(i) to provide that, as determined appropriate by the Secretary, a hospice physician or nurse practitioner may conduct a face-to-face encounter for continued eligibility purposes via telehealth during a period that the COVID-19 emergency is in effect. <2.2.7. Section 3707. Encouraging Use of Telecommunications Systems for Home Health Services Furnished During Emergency Period> Background Medicare covers visits by participating home health agencies for beneficiaries who (1) are confined to home and (2) need either skilled nursing care on an intermittent basis, physical therapy, or speech language therapy. As required by SSA Section 1895, home health agencies are paid for services under a home health PPS based on 30-day episodes of care. Generally, the home health PPS consists of a nationwide payment amount that is subject to adjustments for the expected care needs of a beneficiary (i.e., case-mix) and differences in local wages. Further payment adjustments are made in certain situations, including a low-utilization payment adjustment (LUPA) for episodes of care with few home visits. Under SSA Section 1895, home health agencies are not precluded from adopting telemedicine or other technologies, but such services are not permitted to serve as a substitute for visits paid under the home health PPS. Accordingly, federal regulations define a home health visit as an episode of personal contact. As such, telemedicine services are not accounted for in the home health PPS, nor do providers receive direct payment for telemedicine services generally. Although there is no direct payment for home health services provided through remote technologies, regulations in 42 C.F.R. Part 409.46 designate remote patient monitoring as a service with costs that may be reported as administrative if remote patient monitoring is used to augment the care planning process. Remote patient monitoring is defined in regulations as the collection of patient health information that is digitally stored or transmitted by the patient and/or caregiver to the home health agency. CMS allows home health agencies to include the costs of remote patient monitoring as an allowable administrative cost. Provision Section 3707 requires the Secretary to consider how HHS can encourage the use of telemedicine by home health agencies with respect to home health services provided to Medicare beneficiaries during the period that the COVID-19 emergency is in effect. Specifically, the Secretary is required to consider ways to encourage the use of telecommunications systems, including for remote patient monitoring, and other communications or monitoring services. Use of new technologies must be consistent with the plan of care for beneficiaries. As part of this consideration, the Secretary may clarify guidance and conduct outreach, as appropriate. <2.2.8. Section 3708. Improving Care Planning for Medicare Home Health Services> Background Medicare covers certain home health services under both Parts A and B. Special eligibility requirements and benefit limits exist for home health services furnished under Part A to beneficiaries who are enrolled in both Parts A and B. For such beneficiaries, Part A pays for only "postinstitutional" home health services, provided for up to 100 visits during a "spell of illness," which is a period that extends 14 days after a discharge from a skilled nursing facility or a hospital following a minimum stay of three consecutive days. Part B covers any medically necessary home health services that exceed the 100-visit limit, as well as medically necessary home health services that do not qualify as "postinstitutional." For beneficiaries enrolled in only Part A or Part B, the requirements described above do not apply. Part A or Part B, as applicable, covers all medically necessary episodes of home health care without a visit limit, regardless of whether the episode of care follows a hospitalization. Whether a beneficiary is enrolled in Part A only, Part B only, or in both, the scope of the Medicare home health benefit is the same. Medicare's payments to home health agencies are calculated using the same methods, and beneficiaries have no cost-sharing. As required under SSA Sections 1814 and 1835 (for Parts A and Part B, respectively), for a beneficiary to receive home health services under Medicare, certain eligibility requirements must be certified by a physician, including a face-to-face encounter performed by a physician or a specified medical professional working in collaboration with, or under the supervision of, the physician, as applicable. For a beneficiary to be eligible for coverage, the physician certifies that home health services are required because the beneficiary, under the care of the physician, is (1) confined to the home and (2) in need of either skilled nursing care on an intermittent basis, physical therapy, or speech language therapy. After this eligibility is established, the eligibility period may be continued for homebound beneficiaries with a certified continuing need for occupational therapy services. A physician is prohibited from certifying home health eligibility if he or she has a significant ownership interest in, or a significant financial or contractual relationship with, the home health agency in which the services are to be provided. These conditions are delineated in federal regulations and include an authorized exception for instances in which there is a solitary community home health agency. BBA 2018, Section 51002, amended SSA Sections 1814 and 1835 to expand the scope of supporting documentation the Secretary may use to document Medicare eligibility for home health services. Under the BBA changes, in addition to using a physician's medical record or a record compiled by an acute/post-acute facility, the Secretary may also use a home health agency's medical record as appropriate to the case involved. Provision Section 3708 amends SSA Section 1814(a)(2)(C) and Section 1835(a)(2)(A) to allow, no later than six months after enactment, a nurse practitioner, clinical nurse specialist, or physician assistant to certify the eligibility requirements for Medicare home health services under Parts A and B, respectively. Section 3708 further allows a nurse practitioner, clinical nurse specialist, or physician assistant to conduct the required face-to-face encounter that is part of the certification process. Section 3708 also amends SSA Sections 1814 and 1835 to prohibit such professionals with a significant financial stake in a home health agency from certifying beneficiary eligibility when that agency is the entity providing the necessary services. However, the same exemption exists as the one pertaining to certifying physicians: the prohibition is waived if the servicing entity is the sole community home health agency. Further, Section 3708 conforms to language in the BBA 2018 to allow the Secretary to use a home health agency's medical record, in addition to a medical record compiled by medical professionals with certification authority, to document eligibility as appropriate to a specific case. Section 3708 also amends SSA Sections 1861 and 1895 to ensure that the general definitions of home health services, coverage, and payment system encompass and conform with current statutory language referencing the medical professionals to whom certification authority is extended. In addition, amendments made under Section 3708 are applied under SSA Title XIX (Medicaid) in the same manner and to the same extent such requirements apply to Medicare under SSA Title XVIII or regulations promulgated thereunder. No later than six months after enactment, the Secretary is required to implement regulations relevant to application of the amendments. If necessary, the Secretary must produce an interim final rule to comply with the required six-month effective date. <2.2.9. Section 3709. Adjustment of Sequestration> Background The Budget Control Act of 2011 (BCA; P.L. 112-25 ) provided for increases in the debt limit and established procedures designed to reduce the federal budget deficit, including the creation of the Joint Select Committee on Deficit Reduction. The failure of the Joint Committee to propose deficit reduction legislation that was subsequently enacted into law by its mandated deadline triggered automatic spending reductions, including the "sequestration" (i.e., across-the-board reductions) of mandatory spending in FY2013 through FY2021. Subsequent legislation extended the sequestration of mandatory spending through FY2029. Medicare benefits are funded through mandatory spending and are subject to reductions under such sequestration. Section 256(d) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177 ) contains special rules for the Medicare program in the event of a sequestration. Among other things, it specifies that for Medicare, sequestration is to begin the month after the annual sequestration order has been issued and to continue for one calendar year. Subsequent sequestration orders begin the first month after the previous order ends. Therefore, as the initial sequestration order was issued March 1, 2013, Medicare sequestration began April 1, 2013, and was (most recently) scheduled to continue through March 31, 2030. Under a BCA mandatory sequestration order, Medicare benefit payments cannot be reduced by more than 2%. Since April 1, 2013, Medicare benefit-related payments, which include payments to health care providers, Medicare Advantage (MA), and Part D plans, have been subject to 2% reductions. Provision This provision waives the application of sequestration to the Medicare program for the period May 1, 2020, through December 31, 2020. This provision also extends the sequestration of mandatory spending for an additional year, through FY2030. (For Medicare, this means that sequestration will continue through March 31, 2031.) <2.2.10. Section 3710. Medicare Hospital Inpatient Prospective Payment System Add-On Payment for COVID-19 Patients During Emergency Period> Background Medicare pays most acute care hospitals under the inpatient prospective payment system (IPPS). The IPPS payment is a predetermined, fixed amount for most services provided to a Medicare beneficiary during an inpatient hospital stay. The bundled, fixed, per-discharge portion of the IPPS is referred to as the IPPS base amount. The total IPPS payment is the base amount, adjusted by a number of factors. These adjustments generally include such things as the geographic location of the hospital, the complexity of the patient's condition, and a hospital's teaching status, among others. One of the adjustments is a payment weight associated with the Medicare severity-diagnosis related group (MS-DRG) to which a patient is assigned. This weight reflects the average cost of patients in a specific MS-DRG relative to the average cost across all MS-DRGs due to differences in the severity of patients' conditions. In FY2020, there are 759 MS-DRGs (i.e., codes). The MS-DRG weights are recalibrated annually, generally effective October 1 of each year. The recalibrations are done in a budget-neutral manner. Provision Section 3710 amends SSA Section 1886(d)(4)(C) to require the Secretary to increase the MS-DRG weight that would otherwise apply for a COVID-19-related Medicare discharge by 20% during the COVID-19 emergency period. IPPS payment increases associated with this provision are not to be included in applying budget neutrality. The Secretary is not required to use notice and comment to implement this provision; it may be done through program instruction or otherwise. A state that has a Section 1115A waiver of all or part of SSA Section 1886 to test alternative payment and delivery models through the Center for Medicare & Medicaid Innovation is not precluded from implementing a similar payment adjustment. <2.2.11. Section 3711. Increasing Access to Post-Acute Care During Emergency Period> Background Medicare pays for intensive inpatient rehabilitation services physical, occupational, or speech therapy that is generally required after illness, injury or surgery under the Inpatient Rehabilitation Facility (IRF) prospective payment system (IRF PPS). The IRF PPS payment is a predetermined, fixed amount per discharge. To receive the IRF PPS payment, the rehabilitation hospital, or a rehabilitation unit within another provider type, must meet IRF requirements specified in regulation. Medicare covers IRF services for patients who, among other requirements, can reasonably be expected to actively participate in, and benefit from, intensive rehabilitation therapy. Intensive rehabilitation therapy is specified in regulation as occurring either 3 hours a day at least five days per week, or 15 hours within a consecutive seven-day period. Medicare also pays for extended periods of inpatient hospital care for chronic critical illness under the long-term care hospital inpatient prospective payment system (LTCH PPS). The LTCH PPS payment is a predetermined, fixed amount per discharge, and it is generally greater than the IPPS amount. Specifically, LTCHs are paid under the LTCH PPS if a Medicare beneficiary either (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay, or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours, and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. LTCH discharges occurring in FY2020, and subsequent fiscal years that do not meet the aforementioned criteria are paid a site-neutral payment rate similar to the IPPS amount. Also, an LTCH must have no more than 50% of its Medicare discharges paid at the site-neutral rate to continue to receive the LTCH PPS payment amount for LTCH-eligible cases. Provision Section 3711(a) waives the Medicare IRF rule that patients must reasonably be expected to participate in, and benefit from, at least 15 hours of therapy per week, during the COVID-19 emergency period. Section 3711(b) waives the site-neutral payment requirement for COVID-19-related LTCH discharges so that all these discharges will be paid under the LTCH PPS, and it waives the 50% requirement during the during the COVID-19 emergency period. <2.2.12. Section 3712. Revising Payment Rates for Durable Medical Equipment Under the Medicare Program Through Duration of Emergency Period> Background Medicare Part B covers a wide variety of medical equipment and devices under the heading of durable medical equipment (DME), or prosthetics and orthotics (PO) if the products are medically necessary and prescribed by a physician. Examples of DME include hospital beds, blood glucose monitors, and ventilators. Prosthetics and orthotics include artificial limbs and back and knee braces. The DMEPOS benefit also includes related supplies (S), such as drugs and biologics that are necessary for the effective use of a product. Except in competitive bidding areas, Medicare pays for most DMEPOS based on fee schedules, which are statutory formulas for determining prices of items. Medicare pays 80% of the lower of a supplier's charge for an item or a fee schedule amount. A beneficiary is responsible for the remaining 20%. In general, fee schedule amounts are updated each year, by inflation and a measure of economy-wide productivity. In addition, since 2016, Medicare fee schedule rates that apply outside of competitive bidding areas for certain DMEPOS have been reduced based on price information collected from the competitive bidding program. (Prices for DMEPOS under competitive bidding are generally lower than the fee schedule rates.) The fee schedule reductions were phased in during 2016, meaning that during that year, 50% of the Medicare payment rate was based on the unadjusted (higher) fee schedule amount, and 50% was based on the (lower) rate fully adjusted with information from competitive bidding. The phase-in was complete by January 2017, at which time fee schedules were based entirely on the adjustment with information from competitive bidding. In response to concerns that the adjusted rates were too low, the Secretary, in June 2018, again applied a phase-in methodology for rural and noncontiguous areas , meaning that in these areas the fee schedule was no longer fully adjusted by competitive bidding data, but instead went back to a 50/50 blend of rates based on both (higher) unadjusted fee schedule rates and (lower) rates fully adjusted by competitive bidding information. As such, two different fee schedules apply to DMEPOS products outside of competitive bidding areas, depending on an area's rural/urban designation and whether an area is part of the contiguous United States. First, in rural or noncontiguous areas, the fee schedule is a 50/50 blend: 50% from the unadjusted fee schedule and 50% from the fee schedule adjusted to account for lower price information from competitive bidding (i.e., the phase-in methodology). Second, in areas that are not rural or noncontiguous (i.e., nonrural and contiguous), the fee schedules are fully adjusted by information from the competitive bidding program. In both cases, CMS regulations specify that this methodology applies from June 1, 2018, through December 31, 2020. Provision Section 3712 of the CARES Act extends the 50/50 blended DMEPOS payment rate provided in rural or noncontiguous areas through the duration of the COVID-19 emergency period, if the emergency period lasts longer than December 31, 2020. Section 3712 also increases the DMEPOS payment rate for items provided in areas other than rural areas and noncontiguous areas for the duration of the COVID-19 emergency period. Items and services furnished in these areas on or after the date that is 30 days after the enactment of the CARES Act (i.e., April 26, 2020) would be reimbursed under a fee schedule that is equal to a 75/25 blend, where 75% of the fee schedule is fully adjusted by competitive bidding rates, and 25% is based on unadjusted (higher) fee schedule amounts. <2.2.13. Section 3713. Coverage of the COVID-19 Vaccine Under Part B of the Medicare Program Without Any Cost-Sharing> Background Medicare Part B specifically covers the following vaccines: influenza virus (flu), pneumococcal pneumonia (pneumonia), hepatitis B virus (HBV) for beneficiaries at high or intermediate risk, and other vaccines directly related to treatment of an injury or direct exposure to a disease or condition. Otherwise, Medicare Part B does not cover preventive vaccines. If a vaccine is provided by a Medicare-participating practitioner, there is no cost-sharing for Medicare beneficiaries for the flu, HBV, or pneumonia vaccine ingredient or the vaccine administration. However, Medicare Part B cost-sharing applies (20% of the Medicare approved amount plus an annual deductible) for vaccines administered to treat an injury or direct exposure to a disease or condition. Medicare Part C (MA) plans generally are required to cover the same services as original Medicare, Parts A and B. As a result, MA plans are required to cover, without beneficiary cost-sharing, the flu, HBV, and pneumonia vaccines. MA plans may cover without beneficiary cost-sharing vaccines directly related to treatment of an injury or direct exposure to a disease or condition and other vaccines. MA enrollee cost-sharing for vaccines not covered by Medicare Part B may vary depending on the plan and the vaccine, because they may be covered as supplemental benefits. Provision Section 3713 amended SSA Section 1861(s)(10)(A) and SSA Section 1852(a)(1)(B) to require Medicare Part B and MA plans to cover a COVID-19 vaccine and its administration without beneficiary cost-sharing, including waiving applicable annual deductibles. This section was effective upon enactment (i.e., March 27, 2020) and is applicable to a COVID-19 vaccine on the date it is licensed by FDA. The Secretary is authorized to implement Section 3713 through program instructions or otherwise. <2.2.14. Section 3714. Requiring Medicare Prescription Drug Plans and MA-PD Plans to Allow During the COVID-19 Emergency Period for Fills and Refills of Covered Part D Drugs for Up to a 3-Month Supply> Background Medicare Part D is a voluntary outpatient prescription drug benefit. Enrollees purchase Part D prescription drug plans from private insurers, known as plan sponsors. To participate in the Part D program, plan sponsors must meet a series of requirements, including (1) providing an adequate formulary, or list of covered drugs, and (2) providing a sufficient network of contracted pharmacies that dispense prescriptions for set reimbursement. Federal law also requires that Part D sponsors provide enrollees with "adequate emergency access" to needed drugs. Under longstanding CMS guidance, plan sponsors have some latitude in deciding how to comply with the emergency access provisions. In general, however, CMS expects plan sponsors to limit pharmacy edits (i.e., dispensing restrictions) that prevent enrollees from seeking early prescription refills in the case of a federally declared disaster or a public health emergency that is reasonably expected to disrupt access. In a March 10, 2020, memo to Part D sponsors, CMS reiterated its emergency access guidelines and outlined options for responding to the COVID-19 emergency. In the memo, CMS specified actions that Part D sponsors may or must take: Sponsors may relax "refill-too-soon" edits on prescriptions if circumstances are reasonably expected to result in a disruption in access. Sponsors have discretion regarding how to relax the edits, so long as enrollees have access to Part D drugs at the point-of-sale (i.e., a retail pharmacy). Sponsors may allow an enrollee to obtain the maximum extended-day supply available under his or her plan, if the prescription is requested and available. Sponsors must ensure that an enrollee has adequate access to covered drugs at a pharmacy located out of the enrollee's regular pharmacy network. The requirement would apply in cases where an enrollee could not reasonably be expected to obtain the drugs at a network pharmacy. Enrollees would still be responsible for required cost-sharing and possible additional charges (i.e., the out-of-network pharmacy's usual and customary charge for the drugs). Sponsors may relax plan-imposed policies that could discourage certain types of prescription delivery, such as mail or home delivery, if a disaster or emergency makes it difficult for enrollees to get to a retail pharmacy, or when enrollees are prohibited from going to a retail pharmacy (such as in a quarantine situation). Sponsors may waive requirements that enrollees receive prior authorization before filling a prescription for drugs used to treat or prevent COVID-19, if or when such drugs are identified. Any plan waivers would be provided to enrollees uniformly. Part D plan sponsors also operate drug management programs for beneficiaries deemed to be at risk of misusing or abusing frequently abused drugs. Sponsors may place additional controls on pharmacy dispensing to such individuals, including placing limits on the number of providers allowed to write prescriptions for at-risk enrollees and limiting the number of pharmacies allowed to dispense drugs to such enrollees. Under CMS regulations, at-risk enrollees must have reasonable access to prescriptions in case of natural disasters or similar situations. Provision Section 3714 amends SSA 1860D 4(b) to require Part D sponsors to provide extended dispensing to enrollees during the COVID-19 emergency period. Under the provision, Part D sponsors must allow an enrollee to have access to up to a 90-day fill or refill of a prescription. Plan sponsors cannot deny such prescriptions based on existing plan cost and utilization management requirements that limit dispensing of particular drugs, except for restrictions based on drug safety. The Secretary may implement the provision by program instruction or otherwise. <2.2.15. Section 3715. Providing Home and Community-Based Services in Acute Care Hospitals> Background Medicaid home and community-based services (HCBS) include coverage of specific benefits such as case management, personal care, homemaker, respite care, and adult day health care, among other services. Medicaid HCBS are authorized under the Medicaid state plan, which is the contract a state makes with the federal government to administer its Medicaid program, subject to CMS approval. These HCBS state plan authorities include optional services that states may choose to provide under the SSA Section 1915(i) HCBS State Plan Option, the SSA Section 1915(k) Community First Choice State Plan Option, and SSA Section 1915(j) Self-Directed Personal Care Assistance Services. Medicaid HCBS are also authorized through waiver programs that permit states to disregard certain Medicaid requirements under the state plan in the provision of waiver services, also subject to CMS approval. Medicaid HCBS waiver authorities include SSA Section 1915(c) HCBS waivers, SSA Section 1915(d) HCBS waivers for the elderly, and SSA Section 1115 research and demonstration waivers. SSA Section 1902(h) states that nothing in Title XIX (Medicaid) should be construed as authorizing the Secretary to limit the amount of payment that may be made under a Medicaid state plan for home and community care. Provision Section 3715 amends SSA Section 1902(h) by adding a new paragraph (1) to specify that the limit on the amount of payment under a Medicaid state plan for home and community care applies to certain statutory authorities for providing Medicaid HCBS under state plan services authorized under SSA Section 1915(i), Section 1915(j), and Section 1915(k), as well as waiver authorities under Section 1915(c), Section 1915(d), and Section 1115. The provision adds a new paragraph (2), which states that nothing in SSA Titles XI (General Provisions), XVIII (Medicare), or XIX (Medicaid) shall be construed as prohibiting receipt of any care or services specified in paragraph (1) in an acute care hospital that are identified in an individual's person-centered service plan (or comparable plan of care); provided to meet needs of the individual that are not met through the provision of hospital services; not a substitute for services that the hospital is obligated to provide through its conditions of participation or under federal or state law, or under another applicable requirement; and designed to ensure smooth transitions between acute care settings and home and community-based settings, and to preserve the individual's functional abilities. <2.2.16. Section 3716. Clarification Regarding Uninsured Individuals> Background FFCRA Section 6004 permits state Medicaid programs to extend time-limited COVID-19 testing (as specified under that law's new Medicaid mandatory service category) without cost-sharing to uninsured individuals. For the purposes of this provision, FFCRA Section 6004 defines uninsured individuals 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 are not enrolled in (1) a federal health program (e.g., Medicare, Medicaid, CHIP, or TRICARE); (2) a specified type of private health insurance plan (e.g., individual health insurance coverage, group health insurance coverage, or a group health plan); or (3) an FEHBP. FFCRA provides a 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. Provision Section 3716 of the CARES Act amends the definition of uninsured individuals under FFCRA Section 6004 for the purposes of determining Medicaid eligibility for the state plan option to allow for time-limited COVID-19 testing (as specified under the new Medicaid mandatory service category) without cost-sharing. Under the CARES Act, uninsured individuals will also include those (1) who would be eligible for Medicaid via the ACA Medicaid expansion pathway in states that have not adopted this eligibility pathway (i.e., non-ACA Medicaid expansion states), and (2) certain specified Medicaid enrollees who, by virtue of their Medicaid eligibility pathway, are entitled to limited Medicaid benefits, including low-income tuberculosis-infected individuals who are entitled to services related to the tuberculosis infection, women needing treatment for breast or cervical cancer, individuals eligible only for family planning services and supplies, individuals eligible through the Medically Needy pathway whose coverage does not meet minimum essential health coverage, and certain low-income pregnant woman who are entitled to limited pregnancy-related services. <2.2.17. Section 3717. Clarification Regarding Coverage of COVID-19 Testing Products> Background FFCRA Section 6004 added FDA-approved tests and testing-related state plan services for the COVID-19 virus without cost-sharing, as defined in Section 6004 to the list of Medicaid mandatory services under traditional Medicaid benefits. States and territories are required to offer services under this new mandatory benefit for the period beginning March 18, 2020, through the duration of the public health emergency, as declared by the Secretary pursuant to PHSA Section 319. During the specified public health emergency period, Section 6004 of FFCRA also permits state Medicaid programs to extend FDA-approved COVID-19 testing (and testing-related state plan services) to uninsured individuals without cost-sharing, as defined in Section 6004 and requires CHIP programs to cover FDA-approved COVID-19 testing and the administration of such testing without cost-sharing for CHIP enrollees. Section 6004 also amended SSA Section 1905(a)(3) to define applicable tests to include IVDs, as defined in FDA regulation, that detect SARS-CoV-2 or diagnose COVID-19 and that had received either 510(k) clearance, premarket approval, authorization pursuant to de novo classification, or emergency use authorization (EUA) for marketing. Provision The CARES Act modifies the definition of COVID-19 tests covered under Medicaid and CHIP for the specified public health emergency period. Specifically, Section 3717 amends SSA Section 1905(a)(3)(B), as added by FFCRA Section 6004, to remove language requiring FDA approval, clearance, or authorization for covered tests. Under this modified definition, tests are defined simply as IVDs, as defined in FDA regulation, that detect SARS-CoV-2 or diagnose COVID-19. 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." <2.2.18. Section 3718. Amendments Relating to Reporting Requirements With Respect to Clinical Diagnostic Laboratory Tests> Background Outpatient clinical laboratory services are paid under the Medicare Clinical Laboratory Fee Schedule (CLFS). Previously, CLFS payment rates were based on historical laboratory charges. The Protecting Access to Medicare Act (PAMA, P.L. 113-93 ) established a new method for determining clinical laboratory payments beginning in 2018, with Medicare CLFS payment rates based on reported private insurance payment amounts. Per PAMA, CMS was to collect data from clinical laboratories (aside from advanced diagnostic laboratory tests, for which PAMA also altered payment, coding, and coverage) about private payer payment rates beginning in 2016. The new payment system was to be phased in from 2017 through 2022; during the phase-in period, payment could not be reduced, compared with the amount of the payment in the preceding year, by more than a statutorily specified limit. For each year 2017-2019, the CLFS payment reduction limit was to be 10%, and for each year 2020-2022, the payment reduction limit was to be 15%. Beginning in 2018, CMS set CLFS rates based on the weighted median of private payer rates for each laboratory service, collected from applicable laboratories. These CLFS payment rates are national and do not vary based on geography. Section 105 of the Further Consolidated Appropriations Act of 2020 ( P.L. 116-94 ) modified the schedule for implementing the new CLFS payment system and reporting requirements. A period during which there would be no reporting required from diagnostic laboratories was established, from January 1, 2020, through December 31, 2020. The first required reporting period would begin January 1, 2021, and end March 31, 2021, with subsequent reporting periods required every three years thereafter. The phase-in schedule was modified so that the payment reduction limit was to be 10% for each year from 2017 through 2020, with the limit to be 15% from 2021 through 2023. Provision Section 3718 further delays the reporting requirements under the new CLFS payment methodology and makes additional revisions to the payment reduction limits during the phase-in schedule. The provision would extend the initial period during which no reporting is required from the period beginning January 1, 2021, through December 31, 2021, with the first required reporting period to begin on January 1, 2022, and end March 31, 2022. Subsequent required reporting periods would occur every three years thereafter. For 2021, there would be no payment reduction (i.e., 0% limit) during the phase-in of the private payer rate implementation schedule; the payment reduction limit would be 15% for 2022 through 2024, when the private payer rate is to be fully implemented. <2.2.19. Section 3719. Expansion of the Medicare Hospital Accelerated Payment Program During the COVID-19 Public Health Emergency> Background SSA Section 1815 permits the Secretary to make accelerated payments to an IPPS hospital and to a Puerto Rico IPPS hospital that experiences significant cash flow problems. Cash flow problems must arise out of one or more of the following: (1) a delay in Medicare payments, (2) exceptional situations beyond a hospital's control that result in delayed billing, or (3) highly exceptional situations where the Secretary deems an accelerated payment is appropriate. The amount of the accelerated payment may not exceed 70% of the estimated unbilled charges or unpaid bills (less deductibles and coinsurance). An accelerated payment must be paid-in-full within 90 days after such payment is made. If an accelerated payment is not paid in full within 90 days, CMS is authorized to withhold Medicare payments until the accelerated payment is repaid. Accelerated payments must be requested by a hospital, and those requests are reviewed and approved by the appropriate CMS regional office. Provision Section 3719 amends SSA Section 1815 to expand eligibility for accelerated payments to Critical Access Hospitals (CAHs), pediatric hospitals, and IPPS-exempt cancer hospitals located in one of the 50 states or the District of Columbia, during the COVID-19 emergency period. The expansion of accelerated payments made under this provision is subject to appropriate safeguards against fraud, waste, and abuse. In addition, upon the request of a hospital that is eligible for accelerated payment under this provision, the Secretary may implement the following amendments during the designated public health emergency period: make accelerated payments on a periodic or lump sum basis; increase payments by an amount up to 100% of the estimated unbilled charges or unpaid bills or 125% for CAHs; and specify that the accelerated payments can cover up to a six-month period of unbilled charges or unpaid bills. The Secretary is required to extend the recoupment period up to 120 days upon request of the hospital. Also upon request, a hospital is allowed no less than 12 months from the date of the first accelerated payment to pay in full any outstanding balance. The Secretary may implement this provision through program instruction or otherwise. <2.2.20. Section 3720. Delaying Requirements for Enhanced FMAP to Enable State Legislation Necessary for Compliance> Background 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 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, two temporary FMAP exceptions were available to provide states with fiscal relief due to recessions. They were provided through the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ) and the American Recovery and Reinvestment Act of 2009 ( 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 to ensure that local governments did not pay a larger percentage of the state's nonfederal Medicaid expenditures than would have been required otherwise. Section 6008 of 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 public health 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. States, the District of Columbia, and the territories will not receive this FMAP rate increase if (1) the 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) eligibility is not maintained for individuals enrolled in Medicaid on the date of FFCRA enactment (i.e., March 18, 2020) or for individuals who enroll during the public health emergency period through the end of the month in which the public health 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). Section 6008 of FFCRA also modifies SSA Section 1905(cc) to add 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 payments than what was required on March 11, 2020. Provision Section 3720 of the CARES Act amends Section 6008 of FFCRA to delay the application of the requirement that a state cannot receive the increased FMAP rate if the amount of premiums imposed by the state is higher than the amount imposed as of January 1, 2020. Specifically, the application of the premium requirement is delayed for 30 days after March 18, 2020 (i.e., the date of enactment for FFCRA). Effectively, a state will be eligible for the FFCRA FMAP increase through April 17, 2020, if the amount of premiums imposed by the state exceeds the amount imposed as of January 1, 2020, as long as the premiums were in effect on the date of enactment for FFCRA. In order to receive the FMAP increase, a state still needs to be in compliance with all of the other requirements listed in FFCRA. <2.3. Subtitle F Over-the-Counter Drugs> <2.3.1. Part I OTC Drug Review> Background FDA regulates the safety and effectiveness of nonprescription or OTC drugs sold in the United States. Examples of OTC drugs include hand sanitizer, sunscreen, and certain analgesics. To market an OTC drug, a company may follow one of two pathways. First, a company may submit an NDA to FDA for approval. Second, a company may use the OTC drug monograph process. A monograph establishes conditions active ingredient(s) and related conditions (e.g., dosage level, combination of active ingredients, labeled indications, warnings and adequate directions for use) under which an OTC drug in a given therapeutic category (e.g., sunscreen, antacid) is considered generally recognized as safe and effective (GRASE) for use. If an OTC drug product complies with a monograph, it does not need FDA approval of its NDA prior to marketing. Prior to enactment of the CARES Act, monographs were established and amended through rulemaking. FDA assesses monograph compliance as part of its inspection process. The OTC drug monograph program established in 1972 was intended to provide an efficient mechanism through which OTC drugs could be marketed without individual FDA evaluation and approval. However, the program has been met with several challenges. For example, some monographs remain unfinalized, so there are OTC drugs on the market without final safety and effectiveness determinations. There are also perceived limitations to the industry's ability to propose innovations to currently marketed OTC drugs without submitting an NDA, and FDA has stated that it has limited resources to support OTC monograph activities. <2.3.1.1. Section 3851. Regulation of Certain Nonprescription Drugs that Are Marketed Without an Approved Drug Application> Provision Section 3851 establishes a new FFDCA Section 505G, which replaces the current OTC drug monograph rulemaking process with the administrative order process a less burdensome alternative. This new process allows FDA, on its own initiative or upon request, to issue an administrative order (rather than a rule) determining that a drug, or class or combination of drugs, is GRASE or not GRASE. Certain monograph changes (e.g., new active ingredient, new indication) that are industry-requested and subject to a final administrative order are eligible for 18 months of marketing exclusivity. New FFDCA Section 505G, among other things, also (1) requires that certain OTC drugs be marketed only pursuant to FDA approval via an NDA; (2) creates an expedited process for the issuance of administrative orders in certain circumstances (i.e., public health hazard, safety labeling changes); (3) provides for circumstances under which minor changes in dosage form can be made without a new administrative order; (4) requires FDA to publish on its website information related to final interim and administrative orders, develop guidance, and establish meeting procedures; and (5) requires GAO to conduct a study on the impact of the 18-month marketing exclusivity period for certain eligible OTC drugs. <2.3.1.2. Section 3852. Misbranding> Section 3852 amends FFDCA Section 502 to deem a drug misbranded if it is an OTC monograph drug that is subject to new FFDCA Section 505G, is not the subject of an approved NDA or ANDA, and does not comply with the requirements in FFDCA Section 505G. This provision also deems a drug misbranded if it is "manufactured, prepared, propagated, compounded, or processed" in a facility for which OTC monograph user fees have not been paid. <2.3.1.3. Section 3853. Drugs Excluded from the Over-The-Counter Drug Review> Section 3853 states that nothing in this act (or the amendments made by it) applies to any OTC drug excluded by FDA from the OTC Drug Review in accordance with the statement set out at 37 FR 9466 published on May 11, 1972. <2.3.1.4. Section 3854. Treatment of Sunscreen Innovation Act> Background Some industry stakeholders and members of Congress perceived FDA to be delaying consumer access to new sunscreens that were not originally included in the OTC Drug Review, and in November 2014, the Sunscreen Innovation Act (SIA; P.L. 113-195 ) was enacted. The SIA codified in FFDCA Chapter V Subchapter I created a new pathway for establishing whether certain OTC sunscreen active ingredients (i.e., those marketed in the United States after 1972 or those without any U.S. marketing experience) are GRASE. The SIA requires FDA to make GRASE determinations in the form of administrative orders (first proposed orders and then final orders) rather than through rulemaking, among other things. FDA has not yet approved any submissions for new sunscreen through the SIA process, requesting that sponsors submit additional safety and effectiveness data. Provision Section 3854 allows the sponsor of an OTC sunscreen active ingredient that is subject to a proposed sunscreen order under the SIA to elect to transition into the review process under new FFDCA Section 505G. The sponsor must notify FDA of such decision within 180 days of enactment, as specified. Otherwise, the order must continue to be reviewed under the SIA. Final sunscreen orders issued under the SIA are deemed final administrative orders under FFDCA Section 505G. Certain final sunscreen orders issued under new FFDCA Section 505G are eligible for 18 months of marketing exclusivity. Section 3854(b)(4) adds new FFDCA Section 586H, which sunsets FFDCA Chapter V Subchapter I (added by the SIA) at the end of FY2022. <2.3.1.5. Section 3855. Annual Update to Congress on Appropriate Pediatric Indication for Certain OTC Cough and Cold Drugs> Background Between 2004 and 2005, more than 1,500 children under two years of age were treated in U.S. emergency departments for adverse events associated with cough and cold medications. Concerns also arose regarding the use of these products in children under six years of age. In October 2007, FDA convened the Joint Meeting of the Nonprescription Drugs Advisory Committee and the Pediatric Advisory Committee "to discuss the safety and efficacy of [OTC] cough and cold products marketed for pediatric use." The committees determined that the available published studies did not demonstrate that OTC monograph cough and cold products marketed for pediatric use were effective in children and recommended additional studies and labeling changes. To date, FDA has not amended the monograph for these products in 21 C.F.R. Part 341 to reflect the committee recommendations. Absent rulemaking, FDA has issued several consumer updates warning of potential harms associated with the use of certain cough and cold drug products in children. Manufacturers voluntarily removed OTC infant cough and cold products intended for children under two years of age and voluntarily updated product labeling to include the warning "do not use in children under 4 years of age." However, such labeling changes are not required by FDA under the cough and cold monograph, and in order for FDA to require such labeling for these products, the agency would have to amend the monograph. Provision Section 3855 requires that, not later than one year after enactment and annually thereafter until FDA completes its evaluation, the Secretary submits to the Senate HELP and House Energy and Commerce committees a letter describing FDA's progress in (1) evaluating the cough and cold monograph under 21 C.F.R. Part 341 with respect to children under age six and (2) as appropriate, revising the monograph to address children under age six, through the administrative order process under new FFDCA Section 505G(b). <2.3.2. Part II User Fees> <2.3.2.1. Section 3862. Fees Relating to Over-The-Counter Drugs> Background Historically, OTC drug monograph activities have been funded solely by discretionary appropriations from the General Fund of the Treasury. This funding method is in contrast to FDA's prescription drug activities, which are funded by a combination of discretionary appropriations and industry-paid user fees. This is because in 1992, the Prescription Drug User Fee Act (PDUFA) gave FDA the authority to collect fees from the pharmaceutical industry and use the revenue to support "the process for the review of human drug applications." PDUFA connected the user fees to performance goals that were negotiated between FDA and industry. The five-year PDUFA authority has been renewed on five subsequent occasions, and user fee authorities have been added for medical devices, animal drugs, tobacco products, and other FDA-regulated products and activities. These fee authorities codified in FFDCA Chapter VII, Subchapter C allow the Secretary, acting through the FDA Commissioner, to assess, collect, and spend user fees paid from regulated entities for specified FDA activities. Provision Section 3862 creates in FFDCA Chapter VII, a new Part 10 "Fees Relating to Over-The-Counter Drugs" and the following new FFDCA sections: Section 744L ("Definitions"), Section 744M ("Authority to Assess and Use OTC Monograph Fees"), and Section 744N ("Reauthorization; Reporting Requirements"). New FFDCA Section 744M establishes a legal framework for the Secretary, beginning with FY2021, to assess and collect facility fees and monograph order request fees to support FDA's OTC monograph drug activities (e.g., review of order requests, inspections). Fees may be collected and spent only to the extent and in the amount provided in advance in appropriations acts (with an exception for the first year of the program), may remain available until expended, and may be transferred as specified for monograph drug activities only. This user fee program is authorized through FY2025. New FFDCA Section 744N requires the Secretary to submit annual performance and fiscal reports on user fee collection and spending to the Senate HELP and House Energy and Commerce committees. The performance and fiscal reports must be made publicly available on FDA's website. New FFDCA Section 744N also specifies the process for reauthorization of the user fee program, requiring the Secretary to consult with stakeholders on recommendations for future monograph activities and to transmit the recommendations to Congress no later than January 15, 2025. <2.3.2.1.1. Appendix. Health Provisions in Title III of the CARES Act: Implementation Dates, Reporting Requirements, and Deadlines> The table below includes relevant provisions (listed in order number) that include an effective date, a required report, or an explicit sunset date. The table does not include every provision described in this report, nor does it include required internal reports (i.e., reports required by grantees); it includes only reports that must be made public or be delivered to Congress. This CRS report reflects the CARES Act at enactment and will not be track actions pursuant to these deadlines, nor will this report be updated.

The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with the number of confirmed cases and fatalities growing daily. Containment and mitigation efforts by U.S. federal, state, and local governments have been undertaken to "flatten the curve"—that is, to slow the widespread transmission that could overwhelm the nation's health care system. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ) was enacted on March 27, 2020. It is the third comprehensive law enacted in 2020 to address the pandemic. In addition to a number of broad health care provisions, the CARES Act provides additional supplemental appropriations to support federal response efforts and authorizes a number of economic stimulus measures, among other things. This report describes the majority of health-related sections in Division A, Title III, of the CARES Act, "Supporting America's Health Care System in the Fight Against the Coronavirus." Relevant background is provided for context. Specifically, this report describes provisions regarding, among other things, the following: The availability of medical countermeasures (MCMs)—drugs, tests, treatments, medical devices, and supplies such as personal protective equipment (PPE)—including research and development; product regulation by the Food and Drug Administration (FDA); the Strategic National Stockpile (SNS); and other supply chain matters. The health workforce, including telehealth programs, the rural health care system, and the Commissioned Corps of the U.S. Public Health Service (USPHS). Additional workforce provisions described in this report include reauthorization and extension of appropriations for existing HHS health workforce programs, and liability limitation. Provisions addressed at the Medicare and Medicaid programs and on private health insurance plans that temporarily require, or increase payment for, telehealth services and specified services related to COVID-19 testing, diagnosis, or treatment. A newly established FDA authority for over-the-counter (OTC) drug review. This report does not address education or labor provisions in Subtitle B or C in Part IV of Title III, or provisions in Subtitle E of Part IV of Title III, "Health and Human Services Extenders," which are described in other CRS reports. The report also does not include Division B of the act, which provides emergency supplemental appropriations for the COVID-19 response. The Appendix catalogues deadlines, effective dates, and reporting requirements for provisions described in the report. This report is intended to reflect the CARES Act at enactment (i.e., March 27, 2020). It does not track the law's implementation or funding and will not be updated.

crs_R46357

crs_R46357_0

<1. Introduction> Congressional oversight of the executive branch is a topic of perennial interest to many Members of Congress, their staff, and the public. Statutory reporting requirements can be useful in facilitating congressional oversight by enhancing congressional access to information about the implementation of public policy. Each year, Congress enacts a variety of requirements for the President, executive departments, agencies, and other federal government entities to provide advance notification of actions and decisions, to create plans and strategies to carry out certain activities, to summarize steps taken toward implementation of particular policies, or to study problems and issue recommendations. Reporting requirements can be used to accomplish a range of different goals. When designing such requirements, policymakers face a number of choices that may affect the content, frequency, and other features of the information that Congress receives as a result. This report provides an overview of statutory reporting requirements used by Congress to obtain information from the executive branch; describes the goals that various types of reporting requirements may help achieve; and analyzes statutory requirements enacted during the 115 th Congress to identify common features of legislative language used to establish such requirements. <1.1. Statutory Reporting Requirements and Congressional Oversight> Congress relies in large part on information provided by the executive branch in order to conduct oversight. To that end, Congress frequently enacts statutory provisions that require executive agencies and other federal entities to provide Congress or its committees with specified information. The type and amount of information required by these provisions can vary substantially. Congress often requires federal entities to provide, among other things, notifications of actions or decisions, data and statistics related to particular topics, reports describing the results of studies or evaluations, detailed plans to implement particular policies, and recommendations for legislative actions. The volume of statutory reporting requirements has varied over time, and policymakers have periodically taken steps to assess and/or reduce the number of reporting requirements. Still, Congress requires various federal entities to submit thousands of reports, notices, studies, and other materials each year, and new requirements for both singular and recurring reports continue to be enacted. Statutory reporting requirements come in several common forms, and can serve a range of potentially overlapping purposes. These include ensuring compliance with legislative intent, gathering vital data and statistics, monitoring the implementation of public policy, evaluating the effectiveness of particular programs, assessing federal capacity to meet particular challenges, studying issues that are not well-understood, and obtaining recommendations for legislative or other action. <2. Reporting Requirements: Types and Purposes> Each year, Congress typically enacts a range of reporting requirements of varying types. Most requirements can be roughly divided into several categories: notifications of actions or decisions; descriptive reports that summarize actions taken or provide other factual information; plans to accomplish particular goals; and studies or evaluations relating to a specific problem or concern. Each category is discussed in additional detail below. <2.1. Notification Requirements> Many statutory provisions require that specified federal officials, typically Cabinet Secretaries or the heads of other federal entities, notify Congress either before or soon after taking some action. For instance, Congress may grant a Secretary the authority to take a particular action or waive a particular restriction, provided that the Secretary notifies Congress when utilizing such authority. In some instances, notification requirements specify additional information that must be submitted, such as justification supporting the relevant action. The National Defense Authorization Act for FY2019 ( P.L. 115-232 ), for example, provided the following notification requirement: (c) WAIVER. The Secretary of the Navy may waive the limitation under subsection (a) with respect to a naval vessel if the Secretary submits to the congressional defense committees notice in writing of (1) the waiver of such limitation with respect to the vessel; (2) the date on which the period of overseas forward deployment of the vessel is expected to end; and (3) the factors used by the Secretary to determine that a longer period of deployment would promote the national defense or be in the public interest. This type of reporting requirement can help Congress supervise executive branch activities as they occur. Notification requirements may also help Congress monitor the use of a new grant of authority in order to ensure compliance with legislative intent. Additionally, notification requirements may provide legislators an opportunity to prevent or modify certain executive actions with which they disagree, or to consult with relevant officials before such action is carried out. Further, the requirement to keep Congress notified of ongoing developments may provide a disincentive for the executive branch to take actions that might prompt a legislative response. <2.2. Descriptive Reports> A broad category of reporting requirements might be labeled descriptive reports on executive branch activities. This category of reports largely consists of descriptions of agency activity and other factual information. Requirements for descriptive reports often direct officials to provide Congress with data and statistics, to summarize actions taken by an agency on a particular policy matter, or to list actions taken during a specified time frame. The scope of content that may be required in this category of reports is wide-ranging. Some common formulations include requirements for agencies to provide data and statistics pertaining to a particular program or policy issue; summaries of major agency activities or accomplishments during a specified time frame; descriptions of the operations or results of a particular program; recurring reports on how certain appropriated funds are used; summaries of steps taken to implement a set of recommendations; or reports describing instances in which a Secretary or other executive branch official utilized a particular grant of authority during a specified time frame. <2.3. Plans> Congress may require agencies to submit plans to achieve particular goals. Requirements in this category often require agencies to describe timelines for achieving goals, and to establish performance indicators that will be used to measure progress. Certain acts, such as the Government Performance and Results Act (GPRA) and the GPRA Modernization Act of 2010, have established requirements for multiple executive branch agencies to create and submit agency-wide strategic and performance plans on a recurring basis. In addition to agency-wide plans, Congress may enact provisions that require a particular agency to specify how it plans to accomplish specific goals, such as the establishment of a new program, or the implementation of new policies and procedures. For example, the Harry W. Colmery Veterans Educational Assistance Act of 2017 ( P.L. 115-48 ) included the following provision, requiring the Secretary of Veterans Affairs to outline plans to make changes and improvements to a particular information technology system: (a) PROCESSING OF CERTAIN EDUCATIONAL ASSISTANCE CLAIMS. The Secretary of Veterans Affairs shall, to the maximum extent possible, make such changes and improvements to the information technology system of the Veterans Benefits Administration of the Department of Veterans Affairs to ensure that (1) to the maximum extent possible, all original and supplemental claims for educational assistance under chapter 33 of title 38, United States Code, are adjudicated electronically; and (2) rules-based processing is used to make decisions with respect to such claims with little human intervention. (b) IMPLEMENTATION PLAN. Not later than 180 days after the date of the enactment of this Act, the Secretary of Veterans Affairs shall submit to Congress a plan to implement the changes and improvements described in subsection (a). Reporting provisions of this sort might also be accompanied by requirements for regular status updates on how such a plan is being carried out. Agencies also may be required to submit plans that describe how funds appropriated for a particular purpose are to be spent, potentially as a precondition for the expenditure of such funds. For instance, a provision of the Consolidated Appropriations Act for FY2017 ( P.L. 115-31 ) required the Secretary of State to report to the House and Senate Committees on Appropriations prior to obligating certain funds: (3) PRE-OBLIGATION REQUIREMENTS. Prior to the obligation of funds made available pursuant to paragraph (2) and following the submission of the Strategy as required in paragraph (1), the Secretary of State shall submit to the Committees on Appropriations a multi-year spend plan as described under this section in the explanatory statement described in section 4 (in the matter preceding division A of this Consolidated Act), including a description of how such funds shall prioritize addressing the key factors in countries in Central America that contribute to the migration of undocumented Central Americans to the United States. Requiring an agency to submit a plan to achieve a particular goal can force attention to matters of interest to Congress that an agency might otherwise choose to deprioritize. Further, plans that establish timelines and performance metrics can help policymakers more systematically measure and assess agency progress. <2.4. Studies and Evaluations> Congress often asks departments, agencies, and other federal entities to study a problem or emerging issue, evaluate government performance in a particular area, or perform some other analytical task. These provisions often include a requirement that the reporting entity issue recommendations for legislative or other actions to address particular concerns. Unlike descriptive reporting requirements, this category of requirements tends to address forward-looking concerns that may not be well or fully understood. Studies and evaluations required by Congress may serve to highlight issues and call attention to problems; to obtain expertise concerning issues that are technical or complex; to assess government performance and capacity; and to obtain recommendations and inform legislative decisionmaking. The John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ), for example, established the National Security Commission on Artificial Intelligence, which was directed to "review advances in artificial intelligence, related machine learning developments, and associated technologies," and to submit recurring reports to Congress and the President on the commission's findings and recommendations. Other reporting requirements direct agencies to conduct an evaluation of a program or policy. For example, The Federal Aviation Administration (FAA) Reauthorization Act of 2018 ( P.L. 115-254 ) directed the Secretary of Transportation to establish an advisory panel "to review and evaluate the effectiveness of the FAA's personnel management system and performance management program"; to develop a series of recommendations based on the results of the review; and to report its findings to the Secretary, the FAA Administrator, and the appropriate committees of Congress. In addition, Congress also enacts provisions that require the Government Accountability Office (GAO) to conduct studies and evaluations. GAO is a legislative branch agency that performs audits, evaluations, investigations, and other services that support Congress in its oversight role. GAO prepares reports, testimonies, and other products in response to requirements established in statute, contained in committee or conference reports, and in response to requests from committees and individual Members. <3. Potential Benefits and Challenges of Reporting Requirements> <3.1. Potential Benefits> As discussed above, reporting requirements may be designed to serve several, potentially overlapping, purposes. These purposes include supervising executive activity, ensuring compliance with legislative intent, focusing agency attention on matters of importance to Congress, gathering factual information, assessing the effectiveness of programs and policies, and obtaining better understanding of complex or emerging issues. Reports on studies and evaluations may also help originate new legislative proposals and better inform legislative decisionmaking. Agency reviews of policies and procedures might provide useful information to Congress regarding potentially outdated or otherwise incompatible provisions of law that might need reconsideration. The addition of reporting requirements might serve as a compromise position for legislators in certain circumstances. For example, Members may disagree on whether to provide the Executive with a certain grant of authority. Granting the authority, provided that the Executive reports to Congress on its use, might serve as a middle ground in such a scenario. <3.2. Potential Drawbacks and Other Challenges> Some observers have criticized the reporting burden that Congress places on the executive branch as excessive and costly. Although various entities have periodically attempted to estimate the financial cost of certain reporting requirements, efforts to estimate the total cost of reporting requirements are complicated by, among many factors, the lack of a comprehensive inventory of required reports. Nonetheless, preparing and submitting reports to Congress requires expenditure of agency resources including time, money, and personnel. Ensuring the ongoing relevance of existing reporting requirements is another concern. Many statutory reporting requirements instruct that a report shall be submitted on a recurring basis, often without any sunset provision. Elimination or consolidation of reports that are considered to be duplicative, outdated, ineffective, or excessively costly has been a long-standing challenge for policymakers, and several attempts have been made to address the issue. Again, because no comprehensive inventory of reporting requirements currently exists, assessing the usefulness of existing requirements and deciding whether a contemplated new requirement is duplicative of existing requirements both pose challenges for Congress. Agency compliance with reporting requirements poses another difficulty. Due to a variety of factors, including vagueness in some statutory deadlines, and the lack of a complete inventory of reporting requirements and actual submissions, assessing whether required reports have been submitted (and whether the submission was timely) can be difficult. Moreover, the content of reports submitted to Congress may sometimes fall short of statutory requirements or congressional expectations. <4. Designing Reporting Requirements: Considerations for Congress> Although statutory reporting requirements vary widely in the scope and nature of the information they are designed to elicit, most requirements carry several common provisions. When designing these requirements, Congress faces a number of choices that may affect the content, frequency, and other features of the information ultimately received. To better understand various options and legislative considerations for creating reporting requirements, this report analyzes requirements enacted during the 115 th Congress that could be identified using a keyword search. <4.1. Identifying Statutory Reporting Requirements Enacted in the 115th Congress> <4.1.1. Challenges in Identifying Reporting Requirements> CRS is unaware of a search method that can obtain an exact accounting of all reports required to be submitted to Congress. Perhaps the best-known compendium of statutory reporting requirements is Reports to be Made to Congress , a document published annually by the Clerk of the House pursuant to clause 2(b) of House Rule II. This document provides an extensive listing of reporting requirements and is sometimes used by analysts attempting to quantify the reporting burden placed by Congress on the executive branch. Although the information provided in the Clerk's report is valuable and extensive, it may not provide a complete accounting of statutory reporting requirements. Reports to Congress might arise from several sources. These include statutory reporting requirements; House, Senate, and conference committee report language; and interactions between Members of Congress and agency officials. The diversity of sources of reporting requirements means that any accounting of requirements based on a single source (such as public laws) will necessarily be incomplete. Congress utilizes reporting requirements to obtain a wide array of information through a variety of different products. Accordingly, variation in the legislative language used to refer to reports and their contents as well as recipients of such reports poses additional challenges in comprehensively identifying reporting requirements. For instance, Congress may require agencies to conduct and submit information regarding a review, evaluation, assessment, plan, strategy, analysis, or study; it may ask for a report, list, summary, briefing, notification, certification, or some other product; and agencies might be directed to submit this product to Congress, to committees of Congress, or to specified individuals (such as the Speaker of the House, the President Pro Tempore of the Senate, or the chairperson and ranking member of relevant committees). <4.1.2. Search Method> To identify statutory reporting requirements created during the 115 th Congress, CRS searched the text of public laws enacted in the 115 th Congress for a variety of terms related to reports, and a variety of terms related to Congress. Each search result was examined to determine whether the language required a federal official, agency, or other entity to submit specified information to Congress, congressional committees, or congressional leaders. This search process resulted in the identification and analysis of over 3,000 reporting requirements enacted in statute during the 115 th Congress. <4.1.3. Limitations> Although the described search method identified many reporting requirements, the results identified should not be considered a complete accounting of the reporting requirements placed on agencies during the 115 th Congress, and may not be representative of all reporting requirements. These limitations include the following: The diversity in statutory language used to establish reporting requirements makes it unlikely that any single keyword search will capture all of them. Some legislative provisions require that agencies produce a report, but do not specify a congressional recipient requiring instead, for instance, that the agency make a copy of such report publicly available on its website. Because this search used the proximity between words related to reports and words related to Congress in order to identify reporting requirements, any requirements that did not specify a congressional recipient are not included. Agency reports to Congress may originate from statutory provisions, committee report language, and other sources. Because this search was conducted exclusively within the text of public laws, any reporting requirements contained in other sources will necessarily be excluded. Reporting requirements identified for this report are only those statutory requirements enacted during the 115 th Congress. Therefore, any patterns gleaned from these data may not be generalizable to requirements enacted in other years. <4.2. Identified Reporting Requirements Enacted During the 115th Congress: Overview> The search process outlined above identified 3,359 reporting requirements enacted during the 115 th Congress. Several laws contained the bulk of the 3,359 identified requirements. In particular, four acts the Consolidated Appropriations Acts for FY2017 and FY2018, as well as National Defense Authorization Acts for FY2018 and FY2019 together contain more than half of all identified requirements. Reporting requirements identified in appropriations measures generally differ from those identified in other measures. For instance, identified notification requirements were more common in appropriations acts than in other acts, which generally contained a greater number of provisions requiring agencies to submit other types of reports to Congress (descriptive reports, plans, and studies and evaluations). Appropriations measures enacted in the 115 th Congress contained numerous requirements for agencies and officials to notify Congress before (or soon after) the obligation, transfer, or reprogramming of certain funds. The permanence of reporting provisions constitutes another difference between appropriations and nonappropriations measures. Reporting requirements contained in appropriations acts generally expire at the end of the relevant fiscal year. Still, some requirements contained in appropriations acts reappear in subsequent appropriations bills, effectively making them recurring provisions. <4.3. Specific Components of Statutory Reporting Provisions> Analysis of reporting provisions enacted in the 115 th Congress identified several components common to statutory reporting requirements. Most reporting provisions specify the information that must be contained in the report; the identity of the official or agency responsible for submission; the recipient of the report; the deadline by which the report must be submitted; and whether the requirement is for a one-time or recurring report. Depending on the type of reporting requirement, the reporting provision may also include language detailing whether the information reported to Congress must also be made publicly available, and how any potentially classified material contained in the report ought to be handled. <4.3.1. Contents> Every identified reporting requirement specifies some information that must be submitted to Congress. Analysis of these reporting provisions uncovered a wide range in the nature, type, and specificity of content required. As already mentioned, reporting provisions require many different products to be submitted to Congress, such as notifications, certifications, plans, summary reports, studies, assessments, and evaluations, among many others. Instructions regarding the information required to be submitted ranged from general to highly specific. For instance, some reporting provisions direct agencies to produce a "status update," or a "quarterly report" on a particular topic, without detailing specific matters that must be analyzed or included in such reports. Other reporting provisions detail in length the components and subcomponents that an agency must include in its report to Congress. Greater specificity in the required contents of a report may help ensure agency attention to matters of congressional interest. However, adding additional components to a requirement may place greater burdens on the responsible agency. Although requirements for written reports are most common, Congress also periodically directs agencies to share information in other ways, including through briefings and testimony. For instance, the Save Our Seas Act of 2018 ( P.L. 115-265 ) provided the following: (a) IN GENERAL. Not later than December 19 of 2018, and of each of the 2 subsequent years thereafter, the Commandant shall provide to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives a briefing on the status of implementation of each action outlined in the Commandant's final action memo dated December 19, 2017, regarding the sinking and loss of the vessel El Faro. <4.3.2. Official or Agency Responsible for Submission> Reporting requirements typically specify one or more federal officials responsible for submitting a report to Congress. Among the reporting requirements CRS identified, Cabinet Secretaries were most commonly directed to submit reports, though in many cases, the heads of other federal entities and subentities (officials with the titles Under Secretary, Deputy Secretary, Assistant Secretary, Director, Administrator, and Chief, among others) were also specified. In a smaller number of cases, no specific official was identified, but instead an agency or other entity (such as a federal commission, task force, board, or some other group) was made responsible for submission. Some reporting requirements direct multiple federal agencies to participate in creating and submitting a report. A common formulation is to direct that a report be prepared and submitted by an official, "jointly," "in consultation," or "in coordination" with one or more officials from other agencies. For example, the National Defense Authorization Act for FY2018 ( P.L. 1 15-91 ) directed that the Secretary of Defense, in consultation with the Secretary of State, shall submit to the congressional defense committees, the Committee on Foreign Relations of the Senate, and the Committee on Foreign Affairs of the House of Representatives a report that contains a strategy to prioritize United States defense interests in the Indo-Asia-Pacific region. Some requirements may also direct federal officials to work with nonfederal entities in the creation of reports. These provisions might be used in cases where Congress desires agency consultation with outside experts on complex issues, or collaboration with other relevant stakeholders. For example, the Weather Research and Forecasting Innovation Act of 2017 ( P.L. 115-25 ) directs the Under Secretary of Commerce for Oceans and Atmosphere to "assess the National Oceanic and Atmospheric Administration system for issuing watches and warnings regarding hazardous weather and water events," and specifies the following: (4) Consultation. In conducting the assessment required by paragraph (1)(A), the Under Secretary shall (A) consult with such line offices within the National Oceanic and Atmospheric Administration as the Under Secretary considers relevant, including the National Ocean Service, the National Weather Service, and the Office of Oceanic and Atmospheric Research; (B) consult with individuals in the academic sector, including individuals in the field of social and behavioral sciences, and other weather services; (C) consult with media outlets that will be distributing the watches and warnings; (D) consult with non-Federal forecasters that produce alternate severe weather risk communication products; (E) consult with emergency planners and responders, including State and local emergency management agencies, and other government users of the watches and warnings system, including the Federal Emergency Management Agency, the Office of Personnel Management, the Coast Guard, and such other Federal agencies as the Under Secretary determines rely on watches and warnings for operational decisions; and (F) make use of the services of the National Academy of Sciences, as the Under Secretary considers necessary and practicable, including contracting with the National Research Council to review the scientific and technical soundness of the assessment required by paragraph (1)(A), including the recommendations developed under paragraph (2)(B). <4.3.3. Recipient of Report> Among identified requirements, statutory language identifying the recipients of reports varies substantially. Report recipients specified in statute include Congress as a whole, specific congressional committees, committee chairs and ranking members, congressional leaders, executive branch officials, and a combination of several of the above. Most identified reporting requirements direct that the report or notification in question be submitted to one or more standing committees of Congress, or to the chairs and ranking members thereof. Often, a report is directed to be submitted to a single pair of committees (e.g., both the House and Senate Committees on Appropriations), but some statutes designate multiple committees in each chamber as recipients of the report. The second-most-common category of reporting requirements are those that specify Congress as the recipient, without identifying any particular committee. Reports submitted to Congress as a whole, and received by the Speaker of the House or the presiding officer in the Senate, are generally referred to the committee of jurisdiction in each chamber. The decision to specify Congress, a single pair of House and Senate committees, or several committees in each chamber may have consequences for dissemination of relevant information. Although some reports may contain information of value to multiple committees, reports submitted to Congress as a whole are generally referred to a single relevant committee in each chamber. Accordingly, directing that a report be submitted to Congress may not always guarantee that the report reaches all interested congressional audiences. Some requirements direct that reports be submitted to the President, agency officials, or other recipients, in addition to Congress or its committees. For instance, some statutes establish independent panels that conduct studies and report their recommendations to both Congress and the President, particularly in cases where the panel may produce recommendations for both legislative and administrative action. Several identified requirements direct an agency to submit a report to both Congress and the Comptroller General, and require the Comptroller General to subsequently assess the contents of such report and submit findings and/or recommendations to Congress. Inclusion of such provisions may help Congress obtain an outside perspective on the matter in question, assess the quality of plans or recommendations issued by agencies, and help ensure that the report produced by the agency in question meets the standards laid out in statute. For instance, the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) included the following provision: (a) STRATEGY. Not later than 180 days after the date of enactment of this Act, the Administrator shall submit to the appropriate congressional committees and the Comptroller General of the United States a strategy to guide operations of surface transportation security inspectors that addresses the following: (1) Any limitations in data systems for such inspectors, as identified by the Comptroller General. (2) Alignment of operations with risk assessment findings, including an approach to identifying and prioritizing entities and locations for inspections. (3) Measurable objectives for the surface transportation security inspectors program. (b) GAO REVIEW. Not later than 180 days after the date the strategy under subsection (a) is submitted, the Comptroller General of the United States shall review such strategy and, as appropriate, issue recommendations. <4.3.4. Deadlines> Nearly all identified reporting requirements contain some deadline by which the specified information must be submitted. In some cases, a calendar date is provided. More often particularly in the case of notification requirements the deadline is fixed to the occurrence of a specified event. For example, reports may be required to be submitted to Congress within a certain amount of time following enactment of legislation containing the requirement; a specified action taken by an agency or official (such as the waiver of a requirement, the completion of a review, or a determination that certain conditions have been met); submission of the President's budget request to Congress; termination of a program; and the end of a fiscal year or quarter. <4.3.4.1. Calendar Date Deadline Versus Deadline Tied to a Specified Event> The decision to require a report by a certain calendar date, or instead by some amount of time following a specified event, can involve trade-offs between a report's timeliness and the quality of the information received. For instance, setting a calendar-date deadline for submission of a report may help ensure that relevant information is submitted to Congress in a timely and predictable manner. However, any delay in the actual enactment of such a requirement would have the practical effect of reducing the amount of time available to the agency to produce the report. Instead, fixing the deadline to an event for instance, by instructing that the report be submitted within 180 days of enactment (or some other time frame) would provide the agency with the same amount of time to complete the report, regardless of when the requirement is enacted. This may help ensure that an agency has sufficient time to produce a report that addresses congressional concerns. On the other hand, tying the deadline to an event rather than establishing a calendar-date deadline may delay the actual submission date of the report in question. Additionally, it may be more difficult for legislators and staff to oversee compliance with complex deadlines. Some report deadlines are tied to events that are less easily observed than the enactment of legislation or the submission of the President's budget request. For instance, reports and notifications may be required to be submitted within some period of time following (or in advance of) a specific action taken by an agency official, such as waiving a requirement, awarding a contract, or certifying that certain conditions have been met. In such cases, knowing when to expect a report to be delivered and assessing agency compliance with statutory requirements may be challenging. <4.3.4.2. No Fixed Deadline> Occasionally, reporting requirements do not specify a deadline for submission. Instead, these provisions may provide some other incentive for agencies to submit the information often by making funds available for a particular purpose, or permitting some other action only after the report is submitted. For example, the National Defense Authorization Act for FY2018 ( P.L. 115-91 ) limited the availability of funds authorized to be appropriated for the upgrade of certain vehicles, until the Secretary of the Army submitted specified information: (a) LIMITATION. Of the funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2018 for the upgrade of M113 vehicles of the Army, not more than 50 percent may be obligated or expended until the date on which [the] Secretary of the Army submits to the congressional defense committees the report described in subsection (b). (b) REPORT. The report described in this subsection is a report setting forth the strategy of the Army for the upgrade of M113 vehicles that includes the following: (1) A detailed strategy for upgrading and fielding M113 vehicles. (2) An analysis of the manner in which the Army plans to address M113 vehicle survivability and maneuverability concerns. (3) An analysis of the historical costs associated with upgrading M113 vehicles, and a validation of current cost estimates for upgrading such vehicles. (4) A comparison of (A) the total procurement and life cycle costs of adding an echelon above brigade requirement to the Army MultiPurpose Vehicle; and (B) the total procurement and life cycle costs of upgrading legacy M113 vehicles. (5) An analysis of the possibility of further accelerating Army Multi-Purpose Vehicle production or modifying the fielding strategy for the Army Multi-Purpose Vehicle to meet near-term echelon above brigade requirements. <4.3.5. Frequency of Reports> Some reports to Congress are designed to be submitted once, whereas others are to be submitted on a periodic basis. Whether a reporting requirement is one-time or reoccurring may depend on the type of requirement and the nature of the information being reported. <4.3.5.1. One-Time Reports> Many statutes provide for one-time, nonrecurring reports to Congress. Often, these reports are designed to address a particular problem or concern. Studies and evaluations, for instance, are commonly one-time reports. One-time reports constituted the single largest category of identified reporting requirements enacted in the 115 th Congress. <4.3.5.2. Regularly Recurring Reports> Reports are also commonly required to be submitted at regular intervals. Recurring reports to Congress might include, among other things, periodic status updates on the implementation of a particular policy, annual summaries of agency activity and accomplishments, regularly reported data and statistics related to a particular program or policy issue, and quarterly reports on how certain funds are obligated and expended. Among identified regularly recurring reporting requirements, annual and quarterly reporting intervals were the most common, though intervals ranged from as short as every month to as long as every five years. Requiring reports on a frequent basis may help Congress maintain close supervision of executive activity; on the other hand, frequent reports may increase the burden placed on agency resources. A number of identified recurring requirements contain a sunset date for the recurring reporting provision. For example, the SUPPORT for Patients and Communities Act ( P.L. 115-271 ) included the following recurring reporting requirement: (3) ADDITIONAL REPORTS. Not later than 1 year after the date of enactment of this Act, and annually thereafter until the date that is 5 years after the date of enactment of this Act, the Attorney General shall submit to Congress a report providing, for the previous year (A) the number of reports of suspicious orders; (B) a summary of actions taken in response to reports, in the aggregate, of suspicious orders; and (C) a description of the information shared with States based on reports of suspicious orders. In the long term, automatic expiration of recurring reporting requirements may reduce the reporting burden placed on agencies, and help legislators and staff avoid the task of searching for and identifying outdated or duplicative requirements. <4.3.5.3. Reports Required Under Specified Circumstances> In contrast to requirements for one-time reports and reports provided at fixed intervals, some provisions mandate the submission of a report to Congress only under particular circumstances. Many such provisions, for instance, direct an agency official to report to Congress each time a certain action is taken. Depending on how often the circumstances arise, an individual requirement of this type may give rise to the possibility of zero, one, or multiple actual reports to Congress. For instance, the Veterans Appeals Improvement and Modernization Act of 2017 ( P.L. 115-55 ) directs the Secretary of Veterans Affairs to report to Congress "whenever" the Secretary makes a certain determination: (a) AUTHORIZATION. (1) IN GENERAL. The Secretary of Veterans Affairs may carry out such programs as the Secretary considers appropriate to test any assumptions relied upon in developing the comprehensive plan required by section 3(a) and to test the feasibility and advisability of any facet of the new appeals system. (2) REPORTING REQUIRED. Whenever the Secretary determines, based on the conduct of a program under paragraph (1), that legislative changes to the new appeals system are necessary, the Secretary shall submit to the Committee on Veterans' Affairs of the Senate and the Committee on Veterans' Affairs of the House of Representatives notice of such determination. Requirements for agencies to notify Congress of actions or decisions commonly fall into this category. Examples include, among many others, provisions that require congressional notification prior to (or soon after) the obligation, transfer, or reprogramming of funds; awarding a certain type of contract; waiving sanctions; waiving a specified limitation; or utilizing some grant of authority. For example, the Agriculture Improvement Act of 2018 ( P.L. 115-334 ) provided that [t]he Secretary shall not close any field office of the Natural Resources Conservation Service unless, not later than 30 days before the date of the closure, the Secretary submits to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a notification of the closure. As previously discussed, in addition to helping Congress monitor agency activity on a close-to-real-time basis, this type of requirement may provide an opportunity to consult with executive branch officials about a contemplated action, or to take steps to modify, prevent, or reverse the action in cases of disagreement. <4.3.6. Other Components> <4.3.6.1. Actions Permitted Following Submission of Report> As noted above, some statutes create requirements for reports and notifications that, upon or after submission, clear the way for some exercise of authority or permit some other action by executive branch officials. For instance, Congress may provide executive branch officials with the discretion to waive certain requirements, provided that the official provides Congress with justification for the decision. The Countering America's Adversaries through Sanctions Act, for example, includes a number of provisions that permit the President to waive or terminate particular sanctions, contingent upon the submission of specified information to Congress. Other statutes place limitations on how certain funds may be obligated, contracts may be awarded, or other authorities may be used, until a particular report is submitted. <4.3.6.2. Public Release> Requiring that a report be made publicly available may enhance access to and awareness of its contents, among both legislators and the general public. Certain reports to Congress are made public by default for instance, all unclassified GAO reports are made publicly available on the agency website. However, other agencies submitting reports to Congress or its committees may not be required to be make such reports publicly available, absent some explicit instruction. Some reporting provisions do contain such instructions, often directing that a report be made available on an agency's public website. The Consolidated Appropriations Act for FY2018 included a blanket provision that gave agency officials discretion over whether to make certain reports public: (1) Requirement. Any agency receiving funds made available by this Act shall, subject to paragraphs (2) and (3), post on the publicly available Web site of such agency any report required by this Act to be submitted to the Committees on Appropriations, upon a determination by the head of such agency that to do so is in the national interest. (2) Exceptions. Paragraph (1) shall not apply to a report if (A) the public posting of such report would compromise national security, including the conduct of diplomacy; or (B) the report contains proprietary, privileged, or sensitive information. (3) Timing and Intention. The head of the agency posting such report shall, unless otherwise provided for in this Act, do so only after such report has been made available to the Committees on Appropriations for not less than 45 days: Provided , That any report required by this Act to be submitted to the Committees on Appropriations shall include information from the submitting agency on whether such report will be publicly posted. <4.3.6.3. Classified Annex> Some reports required to be submitted to Congress may contain national security classified material, which may restrict who may access the information, how an agency might provide it to Congress, and how it may be accessed. In such cases, reporting provisions may require submission of a nonclassified report, with a classified annex. Separating classified and nonclassified material may increase a given report's usefulness by facilitating policymakers' access to relevant nonclassified materials. <5. Concluding Observations> Reporting requirements can serve as a critical component of legislative oversight. They may be designed to accomplish a variety of purposes, including monitoring executive activity, obtaining information on complex or emerging issues, and generating ideas and recommendations for legislative action. However, legislators, agencies, and outside observers have periodically voiced concerns regarding the volume and cost of reporting requirements, whether certain requirements are duplicative and ineffective, and the difficulty in monitoring agency compliance with such requirements. Each concern noted above is complicated by the lack of a comprehensive inventory of existing report requirements and report submissions. Legislators have periodically introduced legislation to create a centralized repository of congressionally mandated reports. For example, the Access to Congressionally Mandated Reports Act ( H.R. 736 , 116 th Congress) would, among other things, require the Government Publishing Office (GPO) to create a publicly available online portal of "all congressionally mandated reports," subject to certain exceptions. The bill was passed by the House on July 7, 2019. Establishing a centralized, public repository for congressionally mandated reports may address a number of concerns related to the reporting process. For instance, a comprehensive database of submitted reports may allow Congress to more easily monitor whether an expected report has been submitted, and whether it was submitted in a timely fashion. Additionally, it may facilitate greater accessibility to and awareness of reports submitted to Congress. Greater awareness of reports that have already been submitted may in turn help Congress make better use of information provided by agencies, and also help determine whether contemplated requirements for new reports may be duplicative of existing reports. Lastly, a centralized database of submitted reports may help Congress better assess the reporting burden placed on federal agencies. On the other hand, creating a database of all submitted reports would not necessarily provide Congress with a complete picture of reporting requirements . Reports that are required, but are not submitted, would not appear in a repository of submitted reports, potentially limiting its use as a tool for monitoring agency compliance. For reasons already discussed, obtaining a complete inventory of existing requirements would be a complicated and potentially resource-intensive task. Additionally, the establishment of any centralized repository would require ongoing maintenance and other resources as new requirements are established and new reports are submitted. However, an incomplete understanding of the full range of existing requirements may make it difficult or impossible to determine the total volume of reports required, to attempt to identify and eliminate outdated requirements, to assess agency compliance, or to determine whether a contemplated new reporting requirement is duplicative of existing requirements.

Congress frequently requires the President, departments, agencies, and other entities of the federal government to transmit reports, notifications, studies, and other information on a specified timeline. Reporting requirements may direct agency officials to notify Congress or its committees of forthcoming actions or decisions, describe actions taken on a particular matter, establish a plan to accomplish a specified goal, or study a certain problem or concern. Reporting requirements may be designed to serve a range of purposes that facilitate congressional oversight of the executive branch and inform congressional decisionmaking. Required reports may help legislators monitor executive activity, ensure compliance with legislative intent, focus agency attention on matters of importance to Congress, and assess the effectiveness of existing programs and policies. Certain reports on complex or emerging issues may also help originate or inform legislative proposals. This report discusses the potential benefits and challenges of reporting requirements, and analyzes a number of statutory reporting requirements enacted during the 115 th Congress. (Patterns gleaned from these data may not be generalizable to requirements enacted in other years.) This report analyzes features common to legislative language establishing reporting requirements. In general, most identified statutory reporting provisions specify the information that must be contained in the report; the identity of the official or agency responsible for submission; the recipient of the report; the deadline by which the report must be submitted; and whethe r the requirement is for a one-time or recurring report. Depending on the type of reporting requirement, the reporting provision may also include language detailing whether the information reported to Congress must also be made publicly available, and how any potentially classified material contained in the report ought to be handled. Some provisions also permit certain activities only upon the submission of a report or notification to Congress, such as the waiver of sanctions, or the transfer or reprogramming of appropriated funds.

crs_R46118

crs_R46118_0

Since the U.S. Small Business Administration's (SBA's) creation in 1953, the SBA Disaster Loan Program has provided low-interest disaster loans to businesses to help them repair, rebuild, and recover from federally declared disasters. SBA business disaster loans fall into two categories: (1) Economic Injury Disaster Loans (EIDL), and (2) business physical disaster loans. EIDLs provide up to $2 million for working capital to help small businesses meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan amounts for EIDLs are based on actual economic injury and financial needs, regardless of whether the business suffered any property damage. Business physical disaster loans provide up to $2 million to businesses of all sizes to repair or replace damaged physical property, including machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. In addition to repairing and replacing damaged physical property, a portion of the loans can also be applied toward mitigation measures, including grading or contouring land, installing sewer backflow valves, relocating or elevating utilities or mechanical equipment, building retaining walls, and building safe rooms or similar structures designed to protect occupants from natural disasters. The limits on post-disaster mitigation loans are the lesser of either the measure or 20% of the verified loss. An important aspect of the SBA Disaster Loan Program is that a business must already be damaged and be located in a federally declared disaster area to apply a portion of its disaster loan toward mitigation measures. As will be discussed in this report, Congress experimented with business pre-disaster mitigation (PDM) through a pilot program operated by the SBA from FY2000 to FY2006. Providing mitigation assistance to businesses after a disaster is arguably consistent with the mitigation policies of other federal programs. For example, the Federal Emergency Management Agency (FEMA) provides both pre-disaster and post-disaster mitigation grants to states and localities, but post-disaster mitigation grants are substantially larger than pre-disaster grants. For example, from FY2014 to FY2018, $3.35 billion was spent on post-disaster mitigation grants through FEMA's Hazard Mitigation Grant Program (HMGP) and Fire Management Assistance Grants (FMAGs). In contrast, during the same period, $430 million was spent on FEMA's Pre-Disaster Mitigation (PDM) program (see Figure 1 ). Figure 1. FEMA Pre-Disaster Mitigation Funding and Post-Disaster Mitigation FundingFY2014-FY2018Source: Data obtained from FEMA, Data Feeds, https://www.fema.gov/data-feeds. Notes: PDM denotes FEMA's Pre-Disaster Mitigation Program. HMGP denotes FEMA's Hazard Mitigation Grant Program. FMA denotes fire management assistance provided by FEMA's Fire Management Assistance Grants. Funding for pre-disaster mitigation, however, may increase with the enactment of the Disaster Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254 ). Section 1234 of DRRA authorized the National Public Infrastructure Pre-Disaster Mitigation Fund (NPIPDM), which allows the President to set aside 6% from the Disaster Relief F und (DRF) with respect to each declared major disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, P.L. 93-288 , as amended; 42 U.S.C. 5121 et seq.). This 6% "set aside" is the aggregate amount funded by the following sections of the Stafford Act: 403 (essential assistance); 406 (repair, restoration, and replacement of damaged facilities); 407 (debris removal); 408 (federal assistance to individuals and households); 410 (unemployment assistance); 416 (crisis counseling assistance and training); and 428 (public assistance program alternative procedures). Although post-disaster and pre-disaster mitigation are not mutually exclusive, there are reasons why one may be favored over the other. The following section provides the underlying rationale for the two approaches to mitigation. <1. Rationale for Post-Disaster vs. Pre-Disaster Mitigation> Over the years, scholars, researchers, and policymakers have debated whether mitigation is more effective before or after an incident. The following sections list the rationales for each approach. <1.1. Post-Disaster Mitigation> The underlying rationales for providing post-disaster mitigation include incidents such as floods and hurricanes are known to recur in the same areas. Post-disaster mitigation targets those areas to protect them from future disasters; post-disaster mitigation helps ensure that the opportunity to take mitigation measures to reduce the loss of life and property from disasters is not lost during the reconstruction process following a disaster; the recovery phase of an incident may be the most ideal time to introduce new structural changes because damaged structures are already in the process of being replaced and rebuilt; post-disaster mitigation can be used to support a "build back better" approach to avoid or reduce future disaster damages; providing mitigation funding after an incident is programmatically easier to administer because the grants are concomitant with a federally declared incident. In contrast, pre-disaster projects have generally been awarded on a competitive basis each application must be scrutinized and prioritized over other applications; and policymakers may find it difficult to justify or defend expenditures for incidents that may not occur for long periods of time (or never occur). This may be particularly true during periods of heightened concern over the federal budget. <1.2. Pre-Disaster Mitigation> Others may argue that mitigation is more effective when implemented before rather than after an incident. The rationales for pre-disaster mitigation include post-disaster mitigation may fail to address vulnerable areas that have not had a major disaster declaration; and studies indicate that mitigation can significantly reduce recovery costs. For example, a study published by the National Institute of Building Sciences found that for every $1 that FEMA spent on mitigation grants, there is a $6 dollar return of avoided losses in the future. Those savings, however, cannot be calculated until there are subsequent disasters. <2. SBA Pre-Disaster Mitigation Loan Pilot Program> Based on findings similar to the one issued by the National Institute of Building Sciences, Congress in 1999 passed P.L. 106-24 which amended the Small Business Act to include a Pre-Disaster Mitigation (PDM) pilot program. The program authorized SBA to make low-interest (4% or less) fixed-rate loans of no more than $50,000 per year to small businesses to implement mitigation measures designed to protect small businesses from future disaster-related damage. Section 1(a) of P.L. 106-24 authorized the SBA during fiscal years 2000 through 2004, to establish a predisaster mitigation program to make such loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred (guaranteed) basis), as the Administrator may determine to be necessary or appropriate, to enable small businesses to use mitigation techniques in support of a formal mitigation program established by the Federal Emergency Management Agency, except that no loan or guarantee may be extended to a small business under this subparagraph unless the Administration finds that the small business is otherwise unable to obtain credit for the purposes described in this subparagraph. The SBA PDM pilot program was developed in support of "Project Impact," a new FEMA mitigation program that emphasized disaster prevention rather than solely relying on response and recovery activities. Similarly, SBA PDM loans were intended to lessen or prevent future damages to businesses. According to the House report on H.R. 818 (the companion bill to S. 388 , which became P.L. 106-24 ) The cost of disaster assistance has risen over the past several years due to increases in construction and other costs. By implementing a program to help small businesses use techniques that would lessen damage in the event of natural disasters the possibility exists to save millions of dollars in potential losses. The report also stated that the Administrator of the Small Business Administration, testified concerning the SBA's request for $934 million dollars in disaster loans for anticipated damage in the coming year. She also discussed FEMA and SBA's current efforts at mitigation and stated that FEMA estimates a $2 saving for every $1 spent on mitigation. The Administrator expressed strong support for H.R. 818 . Section 1(c) of P.L. 106-24 required the SBA Administrator to submit a report to Congress on the effectiveness of the pilot program. The report required information and analysis on the areas served under the pilot program; the number and dollar value of loans made under the pilot program; the estimated savings to the federal government resulting from the pilot program; and other relevant information as the Administrator determines to be appropriate for evaluating the pilot program. Congress initially authorized appropriations of $15 million each fiscal year to carry out the PDM pilot program for FY2000 through FY2004. Congress later extended the program until the end of FY2006 and authorized an additional $15 million for the program in FY2005 and $15 million in FY2006. Since its expiration at the end of FY2006, many Members have discussed the possibility of reauthorizing the PDM pilot program. <2.1. SBA PDM Pilot Program Performance> According to SBA, four loans were approved during the SBA PDM pilot program, with a total gross approval amount of $101,400 (a small fraction compared to the $105 million Congress authorized to be appropriated to the program over the seven-year period of its existence). Two of the loans defaulted and the other two loans (amounting to $52,400) were repaid in full. As mentioned previously, Section 1(c) of P.L. 106-24 required the SBA Administrator to submit a report to Congress on the effectiveness of the pilot program, including the areas served and dollar amounts provided under the program, estimated savings resulting from the SBA PDM pilot program, and other relevant information. A CRS search of databases could not locate the required report on the effectiveness of the pilot program and the SBA could not verify whether the report was ever submitted. The following sections describe the possible reasons for the lack of participation in the SBA PDM pilot program. <2.2. Challenges to the Success of the SBA PDM Pilot Program> The limited number of businesses that participated in the SBA PDM pilot program may be attributable to its alignment with FEMA programs . Aligning the two programs m ay have (1) limited the time frame to obtain a PDM loan, and (2) limited the number of businesses eligible for PDM loans . Additionally, businesses may not have been aware that pre-disaster loans were being made available through the SBA PDM pilot program. <2.2.1. Limited Time Frame> The SBA PDM pilot loan program was created in conjunction with FEMA's pre-disaster mitigation program, dubbed Project Impact. Because the two programs were aligned, the time frame in which businesses could apply for PDM loans was limited by a series of delays in the implementation of the FEMA program. That may help explain, in part, why so few businesses obtained SBA PDM loans. According to SBA, the PDM program rules were effective as of October 1, 1999. However, communities could not apply to be accepted as a pre-disaster mitigation eligible community because FEMA had not yet implemented Project Impact. Project Impact's implementation was further delayed "pending appropriations in the FY2002 Departments of Veterans Affairs, Housing and Urban Development and Independent Agencies Appropriations Act." On November 26, 2001, the appropriations act provided $25 million to FEMA for its pre-disaster mitigation grant program. Upon receiving the appropriation, FEMA decided to reevaluate and revamp Project Impact before its full implementation further delaying the program. Once Project Impact was implemented, SBA revised rules (some in response to FEMA comments) concerning the SBA PDM pilot program before it was put into effect (see Appendix for additional information on both Project Impact and the SBA PDM pilot program). The sequence of events described above shortened the timeframe for applying for PDM loans. A CRS search of the Federal Register indicates that PDM loans first became available July 16, 2003. <2.2.2. Limited Number of Eligible Applicants> The Project Impact requirement significantly reduced the number of businesses eligible for the SBA PDM pilot program. The SBA PDM pilot program was intended to complement Project Impact by participating in the "whole of community approach" to disaster mitigation; SBA PDM loan eligibility was contingent on whether the business was located in a Project Impact community. The Project Impact requirement may have unintentionally limited the number of businesses eligible for PDM disaster loans. As demonstrated in Figure 2 , few communities participated in the Project Impact program. There may have been businesses in "non-Project Impact" areas that wanted SBA PDM loans but were ineligible because of the Project Impact requirement. Further limiting participation, businesses that were in Project Impact communities but not in a Special Flood Hazard Area (SFHA) were not eligible for an SBA PDM loan if it was for flood prevention measures. Finally, though the SBA PDM loan pilot program continued until FY2006, Project Impact was replaced by the Pre-Disaster Mitigation (PDM) program in FY2002. According to then-FEMA Director Joe M. Allbaugh: I want to take the "concept" of Project Impact and fold it in to the program of mitigation. Project Impact is not mitigation. It is an initiative to get "consumer buy-in." In many communities it became the catch-phrase to get local leaders together to look at ways to do mitigation. The PDM program does not designate participating communities. Rather, state and local governments submit mitigation planning and project applications to FEMA. Once FEMA reviews the application for eligibility and completeness, FEMA makes funding decisions "based on the agency's priorities for the most effective use of grant funds and the availability of funds posted in the Notice of Funds Opportunity announcement." Eligibility requirements for the SBA PDM loan pilot program were not changed to reflect the new FEMA PDM program. It is unclear what effect this may have had on the SBA PDM loan pilot program. <2.2.3. Outreach and Notifications> As mentioned previously, SBA published notices in the Federal Register announcing the availability of pre-disaster mitigation loans. The notice designated a 30-day application filing period with a specific opening date and filing deadline, as well as the locations for obtaining and filling applications. In addition to the Federal Register notification, SBA coordinated with FEMA to issue press releases to inform potential applicants of the loan program. It is unclear, however, how effective these efforts were at letting businesses know PDM loans were available. <3. Considerations for Congress and Policy Options> <3.1. Reauthorizing the SBA PDM Pilot Program> The following considerations may help increase business participation should Congress decide to reauthorize the SBA PDM pilot program. First, implementation delays and eligibility restrictions, such as the ones described above, may not be an issue if Congress reauthorized the SBA PDM pilot program, because the pilot would no longer need to be tied to Project Impact. If Congress should desire that the program align with or support FEMA mitigation efforts, Congress may consider tying a reauthorized SBA PDM loan program to FEMA's Pre-Disaster Mitigation program, or, instead, making them available to all small U.S. domestic businesses. Second, if the SBA PDM pilot program were to be reauthorized, one option available to address outreach would be to require SBA to spend a portion of the PDM loan appropriation money on outreach, including advertising to educate businesses on the importance of mitigation to protect their investment from being damaged or destroyed by a disaster, and to help businesses become aware that PDM loans are available. Additionally, SBA could be required to provide information to Congress concerning its efforts to make businesses aware of the program, including where they could apply for a PDM loan. Further, as mentioned previously, Section 1(c) of P.L. 106-24 required the SBA Administrator to submit a report to Congress on the effectiveness of the pilot program. The report required information and analysis on: the areas served under the pilot program; the number and dollar value of loans made under the pilot program; the estimated savings to the federal government resulting from the pilot program; and other relevant information as the Administrator determines to be appropriate for evaluating the pilot program. If Congress reauthorized the SBA PDM pilot program, it could consider requiring SBA to provide similar information. Additionally, Congress could tie the report to appropriations to communicate legislative intent to carry out the reporting measure once it becomes law. Although report language itself is not law and thus not binding in the same manner as language in statute, agencies usually seek to comply with the directives contained therein. According to one congressional scholar, "the criticisms and suggestions carried in the reports accompanying each bill are expected to influence the subsequent behavior of the agency. Committee reports are not the law, but it is expected that they be regarded almost as seriously." <3.2. Restructuring Existing Business Physical Disaster Loans> As mentioned previously, the limits on post-disaster mitigation loans are the lesser of either the measure or 20% of the verified loss. If Congress wanted to encourage mitigation, one option would be to consider increasing this percentage to a higher amount in addition to, or instead of, reauthorizing the SBA PDM loan program. Congress could also consider doing the same for home physical disaster loans. <3.3. Assistance with Continuity and Disaster Response Plans> Research indicates that many businesses do not have contingency or disaster recovery plans. For example, a survey of Certified Public Accounting (CPA) firms located on Staten Island, NY, indicated that 7% of the respondents had a formal continuity or disaster recovery plan in place prior to Hurricane Sandy. The survey found that nearly 42% of those firms that had a formal continuity or disaster recovery plan admitted that they never tested their plan. Approximately 40% had an informal plan that had been discussed but not documented. More than half of the responding firms did not have a contingency or disaster recovery plan. Of those that did not have any type of a plan, 60% thought the plans were unnecessary and 20% said that establishing a plan was too time-consuming. Congress could investigate methods that would incentivize businesses to develop contingency and disaster recovery plans. This could be done through new programs or through existing ones, such as FEMA's Ready Business Program or through SBA's emergency preparedness efforts. The Ready Business Program is designed to help businesses plan and prepare for disasters by providing businesses various online toolkits that can help them identify their risks and develop a plan to address those risks. The SBA provides a range of resources to help businesses develop plans to protect employees, reduce the financial impact of a disaster, and reopen the business more quickly. <3.4. Pre-Disaster Mitigation Loans for Homeowners> In addition to disaster loans for businesses, SBA also provides disaster loans to homeowners. In fact, roughly 80% of SBA disaster assistance goes to individuals and households rather than businesses. Homeowners located in a declared disaster area (and in contiguous counties) may apply to SBA for loans up to $200,000 to help repair and rebuild their primary residence. Similar to businesses, only damaged homes in declared disaster areas are eligible for disaster loans. According to regulations 20% "of the verified loss (not including refinancing or malfeasance), before deduction of compensation from other sources, up to a maximum of $200,000 for post-disaster mitigation." Homeowners seeking mitigation assistance before a disaster strikes, however, must look to other sources for the assistance. In addition to mitigation measures, such as retrofitting structures, contouring land, and relocating utilities, Section 4 of the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE Act, P.L. 115-88 ) allows homeowners to use a portion of their physical damage disaster loans for the construction of safe rooms or similar storm shelters designed to protect property and occupants from tornadoes or other natural disasters. Some homeowners may wish to build a safe room or storm shelter before a disaster. If that is the case, they may be interested in a pre-disaster mitigation loan to fund its construction. Homeowners may also be interested in other pre-disaster mitigation measures. The SBA PDM pilot program, however, only provided pre-disaster loans to businesses. If reauthorized, Congress could consider expanding the program by making pre-disaster loans available to homeowners. In addition to making the program available to homeowners, Congress could consider making home pre-disaster mitigation loans contingent on homeowners insurance. This could help protect the home from future disasters and have the additional benefit of making sure that the homeowner has adequate insurance to repair and rebuild their home without additional federal assistance. <4. Concluding Observations> For nearly a century, Congress has contemplated how to help businesses repair and rebuild after a disaster and protect their investments from future incidents. Though businesses can use a portion of their SBA disaster loans for mitigation measures, critics might question why only damaged businesses are eligible for disaster loans. The SBA's PDM pilot program addressed this criticism, but the program had few participants. As described in this report, the lack of participation could have been a result of its alignment with FEMA programs related to delays in the implementation of FEMA's Project Impact, eligibility limitations, and the number of businesses that were aware that the program was available. If Congress were to reauthorize the SBA PDM pilot program, among the policy options available are decoupling the PDM loan program from FEMA programs and requiring enhanced advertising and outreach efforts. Another option would be to restructure business physical disaster loans so that a greater portion of the loan can be used for mitigation. Finally, Congress could examine methods that would help businesses develop business continuity and disaster response plans. Businesses may be more receptive to pre-disaster mitigation loans as a result of the large-scale disasters that have occurred since 2005. Prior to Hurricane Katrina, the salience of disaster issues generally, and mitigation specifically, may have been on the periphery of business concerns. While there were some large-scale disasters, the scope of those disasters tended to be regional rather than national. Furthermore, the focus of emergency management during that time was arguably more oriented toward terrorism concerns resulting from the 9/11 attacks. Consequently, the need to mitigate against future disasters may have been just one concern coequal with other, competing concerns. The policy environment may have changed as a result of hurricanes Katrina, Harvey, Irma, Maria, and Michael. These disasters, in addition to increasing concerns about the impact of climate change on the frequency and severity of disasters, may make businesses more amenable to the idea of pre-disaster mitigation loans to protect their investment from future disasters. <4.1. Appendix. Project Impact and SBA PDM Pilot Loan Program Information> Project Impact P.L. 104-204 established a mitigation program (which FEMA named Project Impact) to help communities make mitigation investments prior to disasters to reduce their vulnerability to future disasters. The program was based on a "whole of community" approach involving all sectors of the nation. According to the House report on the bill: The conferees agree that up to $5,000,000 of the amount provided for pre-disaster mitigation is available immediately to fund up to seven pilot projects approved by the Director of FEMA. Prior to the expenditure of the remaining funds for any specific pre-disaster mitigation program or project, the conferees direct that the appropriate level of funding be used by the Agency to conduct a formal needs-based analysis and cost/benefit study of all of the various mitigation alternatives. The results of these analyses and studies, along with any relevant information learned from the aforementioned seven pilot projects, shall be incorporated into a comprehensive, long-term National Pre-disaster Mitigation Plan. The plan should be developed, independently peer-reviewed, and submitted to the Committees on Appropriations not later than March 31, 1998. FEMA is directed to involve in this planning effort participants which shall include, but are not limited to, representatives of FEMA and other federal agencies, state and local governments, industry, universities, professional societies, the National Academy of Sciences, The Partnership for Natural Disaster Reduction, and [Centers for Protection Against Natural Disasters] CPAND. The conferees intend that none of the remaining funds provided herein be obligated until the plan has been completed and submitted as outlined above. The conferees note that this approach is intended to be the foundation for providing the best and most cost-effective solution to reduce the tremendous human and financial costs associated with natural disasters. Project Impact was designed to serve as a model for promoting mainstream emergency management and mitigation practices into every community in America. The program asked communities to identify risks and establish plans to reduce those risks. It also asked communities to establish partnerships with community stakeholders, including the business sector. Primary Tenets of Project Impact mitigation is a local issue that is best addressed through local partnerships involving the government, business, and citizens; the participation of the private sector is essential because disasters threaten the economic and commercial growth of communities; and mitigation consists of long-term efforts and requires long-investments. Methodology members of the community, including elected officials, local, state, and federal disaster personnel, business representatives, environmental groups, and citizens, joined together to form a Disaster Resistant Community Planning Committee that (1) examined risks hazards and identified vulnerabilities to them; (2) prioritized risk reduction actions based on the hazard identification and vulnerability assessment; and (3) communicated its findings and mitigation plan to other community leaders and residents. Project Impact Grants Project Impact grants were largely used to fund planning and outreach activities. The Project Impact grants could be used to fund costs associated with logistics and meetings, staff support, and travel to meetings with the community or to FEMA Project Impact meetings; training including costs to train state officials supporting Project Impact and to develop training packages for state and local officials; travel of local community officials to other communities, state meetings, or national conferences at state request to share Project Impact information; state costs in information development and dissemination to support Project Impact; and expert, short-term technical assistance support to Project Impact communities. According to a Government Accountability Office (GAO) report, state and local officials said that Project Impact has been successful in increasing awareness of and community support for mitigation efforts due to its funding of these types of activities. The same GAO report stated During fiscal years 1997 through 2001, Project Impact provided a total of $77 million to communities within every state and certain U.S. territories. Unlike the HMGP, the amount of Project Impact funding available to communities within a state was not predicated upon the occurrence of a disaster; in fact, the program was structured so that under its funding formula, communities in every state participated in the program. By 2001, there were nearly 250 communities participating in the program, with Project Impact communities receiving grants between $60,000 and $1,000,000. Appendix III lists Project Impact grants by year and community. While states selected which communities received Project Impact grants, communities were responsible for selecting the mitigation measures to fund with these grants. Similar to the HMGP, however, communities were required to provide 25 percent of the costs for the mitigation measures. The George W. Bush Administration eliminated Project Impact from the FY2002 budget and FEMA rebranded Project Impact as the Pre-Disaster Mitigation (PDM) program. The PDM program retained some of Project Impact's themes, but placed the responsibility on the governor of each state to suggest up to five communities to be considered for pre-disaster mitigation assistance. While the governor nominated potential grantees, FEMA made the final selections. In addition, under the statute, FEMA had the discretion under "extraordinary circumstances" to award a grant to a local government that had not been recommended by a governor. SBA PDM Pilot Loan Program Loan Application SBA published notices in the Federal Register announcing the availability of pre-disaster mitigation loans in 2003. The notice designated a 30-day application filing period with specific opening dates and filing deadlines, as well as the locations for obtaining and filing applications. In additional to the Federal Register notification, SBA coordinated with FEMA to issue press releases to inform potential applicants of the loan program. Businesses were required to submit a Pre-Disaster Mitigation Small Business Loan Application to SBA during the filing period. Applications had to include a written statement from the state or local coordinator confirming that the mitigation project was (1) located in a Project Impact community, and (2) in accordance with the specific priorities and goals of the community participating in the pre-disaster mitigation community. The completed application served as the loan request. Loans were provided on a first-come, first-served basis until SBA allocated all program funds. If SBA declined a loan request, SBA notified the business in writing with the rationale for the denial. SBA also advised the business of the procedures to request reconsideration of the decision. Loan Terms The SBA PDM pilot program provided businesses up to $50,000 per fiscal year to finance mitigation measures to protect commercial property, leasehold improvements, or contents from disaster-related damages that could occur in the future. Mitigation loans could also be used to relocate the business. Interest rates for the loans had a statutory ceiling set at 4% per annum. Loan Eligibility Businesses applying for SBA PDM loans had to meet certain criteria to be eligible for mitigation loans. Two, in particular, were designed to tie the SBA PDM pilot program to FEMA programs. First, as already noted, the business had to be located in a participating Project Impact community; and, second, if the mitigation measures were designed specifically to protect against flooding, the business had to be located in a Special Flood Hazard Area (SFHA). Additional criteria for loan eligibility required that the business and its affiliates lack the financial resources to fund the mitigation measures without undue hardship; the business be a small business as defined by SBA regulations; the business be in operation in the same location for at least one year; and the mitigation loan had to be used for the protection of a building leased primarily for commercial rather than residential purposes, if the business leased out real property. Businesses were not eligible for the SBA PDM Loan Program if the business: was primarily engaged in political or lobbying activities; derived more than one-third of its revenues from legal gambling activities; or owners were incarcerated, on parole, or on probation.

For nearly a century, Congress has contemplated how to help businesses repair and rebuild after a disaster. Congress has also expressed interest in helping businesses use mitigation measures to protect their investments from future incidents. Mitigation activities entail identifying risks and hazards and taking measures to either substantially reduce or eliminate the impact of an incident. As described in this report, mitigation measures primarily take place during the recovery phase of a disaster. Currently, only damaged businesses in declared disaster areas are eligible for disaster loans. Businesses seeking mitigation assistance before a disaster strikes, however, must look to other sources for the assistance. Congress experimented with business pre-disaster mitigation (PDM) through a pilot program operated by the Small Business Administration (SBA) from FY2000 to FY2006. Though Congress authorized appropriations of $15 million each fiscal year to carry out the SBA PDM pilot program, four businesses obtained pre-disaster mitigation loans, totaling just over $100,000. Although the federal government has traditionally favored a post-disaster approach to mitigation, there are indications suggesting congressional interest in pre-disaster mitigation has increased in recent years, partly as a result of recent and recurring large-scale disasters, including hurricanes Katrina, Harvey, Irma, Maria, and Michael. This is evidenced by enactment of the Disaster Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254 ), which made substantial reforms to pre-disaster mitigation. The renewed focus on pre-disaster mitigation has also led to discussions about reauthorizing the SBA PDM pilot program. This report describes the underlying rationale for post-disaster and pre-disaster mitigation and provides an overview of the SBA PDM loan pilot program, including its past performance and potential reasons why so few businesses participated in the pilot program. These potential reasons include (1) the fact that the pilot program was tied to FEMA programs, which delayed the program's implementation; (2) limitations on business eligibility for SBA PDM loans; and (3) the fact that businesses may not have been aware that the SBA was offering pre-disaster mitigation loans. This report also provides an overview of various policy options should Congress decide to reauthorize the SBA PDM pilot program, including considerations that may help increase business participation. These policy options include decoupling the SBA PDM disaster loan pilot program from FEMA programs and examining the most effective forms of outreach and advertising. Congress could also consider restructuring the current SBA Disaster Loan Program to allow businesses to apply a greater percentage of their disaster loan towards mitigation, and may consider investigating ways to help businesses develop continuity and disaster response plans. Congress could also consider providing PDM loans to homeowners so they can protect their homes before a disaster strikes.

crs_R45747

crs_R45747_0

<1. Introduction> Motor vehicle electrification has emerged in the past decade as a potentially viable alternative to internal combustion engines. Although only a small proportion of the current motor vehicle fleet is electrified, interest in passenger vehicle electrification has accelerated in several major industrial countries, including the United States, parts of Europe, and China. Despite advances in technology, electric vehicles (EVs) continue to be significantly more expensive than similarly sized vehicles with internal combustion engines. For this reason, governments in many countries have adopted policies to promote development and sales of electric vehicles. This report discusses federal and state government policies in the United States to support electrification of light vehicles and transit buses, as well as proposals to reduce or eliminate such support. <2. Background on Motor Vehicle Electrification> More than 92 million light vehicles passenger cars, pickup trucks, and SUVs were sold worldwide in 2018. The three largest markets were China (27 million vehicles sold), Europe (20 million), and the United States (17 million). Most of these vehicles are powered by internal combustion engines. The global market for electrified vehicles is small but growing: In 2018, more than 2 million plug-in hybrid and battery electric vehicles were sold worldwide, a 64% increase over 2017. These account for about 2% of all passenger vehicle sales, both worldwide and in the United States. Demand for electric vehicles is expected to continue to grow, as some countries have called for a complete shift away from sales of new fossil-fuel vehicles by 2030. The market for urban transit buses is smaller than the passenger car and SUV markets, but electric vehicles make up a larger part of its footprint. China leads in this category, with 106,000 electric buses put in service in 2017, bringing its total electric bus fleet to 384,000. It has been forecast to remain the largest electric bus market going forward. In the European Union (EU) and the United States, the pace of electrification is slower: More than 200 electric buses were sold in the EU in 2017, bringing the total in service to 1,700; in the United States, approximately 100 electric buses were sold, bringing the total to 300. Two basic types of electric vehicles are now in use: Hybrid electric vehicles (HEVs) have both internal combustion engines and electric motors that store energy in batteries. They do not plug into external sources of electricity, but use regenerative braking and the internal combustion engine to recharge. Plug-in electric vehicles, of which there are two types: plug-in hybrid electric vehicles (PHEVs) use an electric motor and an internal combustion engine for power, and they use electricity from an external source to recharge the batteries. Battery electric vehicles (BEVs) use only batteries to power the motor and use electricity from an external source for recharging. In this report, electric vehicles refer to these two types of plug-in vehicles, unless otherwise noted. Electrification of vehicles has been limited by three factors: (1) the high cost of producing the lithium ion batteries (currently the preferred battery chemistry) that propel them; (2) their limited range; and (3) vehicle charging time and location. Not all motorists have easy access to charging stations at home or at work, and it can take several hours to fully charge the battery that powers the vehicle, depending on the type of charger used. <2.1. U.S. Trends> In 2018, more than 361,000 plug-in electric passenger vehicles (including PHEVs and BEVs) were sold in the United States, as well as more than 341,000 hybrid electric vehicles. This was the first year in which total sales of plug-in vehicles exceeded sales of hybrids ( Figure 1 ). Nearly all automakers offer electric vehicles for sale: 42 different models were sold in 2018, with Tesla and Toyota recording the largest number of vehicle sales. Sales of plug-in hybrid and battery electric vehicles in 2018 rose by over 80% from the previous year, bringing the total sales of plug-in vehicles since 2010 to just over 1 million. The plug-in hybrid and battery electric share of the U.S. light vehicle market in 2018 was 2.1%. The price of new electric vehicles is one factor inhibiting faster adoption. For example, the Leaf, a battery electric vehicle produced by Nissan, has a manufacturer's suggested retail price (MSRP) of $29,990, whereas the Nissan Sentra, a conventional vehicle similar in size and specifications to the Leaf, has an MSRP of $17,990. A smaller, less powerful vehicle with an internal combustion engine, the Nissan Versa, has an MSRP of $12,360; no electric counterpart is available in this price range. Electric vehicles are generally more expensive because of the high cost of producing the lithium-ion batteries that power them. The federal government has supported vehicle electrification in several ways. There have been tax incentives for the purchase of vehicles as well as for construction of vehicle infrastructure, such as charging stations. Federal research and development investments have sought to reduce battery costs, increase vehicle range, and decrease charging times. The federal government has also made other investments to build out EV infrastructure. <3. Federal Tax Incentives for Electrification> Two types of tax incentives have been used to promote electric vehicles: consumer incentives for the purchase of plug-in electric vehicles and individual and business incentives to install electric-vehicle charging stations to expand the charging network. <3.1. Tax Credits for Vehicle Purchases> The credit for plug-in electric vehicles (Internal Revenue Code [IRC] 30D) is the primary federal tax incentive for electric vehicles. The credit ranges from $2,500 to $7,500 per vehicle, depending on the vehicle's battery capacity. The tax credit is not a function of the vehicle's price. Therefore, the subsidy amount is larger (as a percentage of a vehicle's price) for less-expensive vehicles. Generally, taxpayers claim tax credits for vehicle purchases. If the purchaser or lessee is a tax-exempt organization, the seller of the vehicle may be able to claim the credit. The plug-in electric vehicle credit begins phasing out after a vehicle manufacturer has sold 200,000 qualifying vehicles for use in the United States. General Motors (GM) and Tesla have reached the 200,000-vehicle limit, and tax credits for their vehicles have begun to phase down. Empirical studies have found that tax incentives lead to increased EV purchases. However, particularly for higher-income taxpayers, the tax credit may be claimed for purchases that would have occurred absent a federal tax incentive. Some studies have also found that incentives given closer to the point of sale, such as a rebate given at the time of purchase, are more effective in stimulating vehicle sales than tax credits. The Joint Committee on Taxation (JCT) projects that the plug-in electric vehicle credit will reduce federal tax revenues by $7.5 billion between FY2018 and FY2022. Any extensions to or expansions of the credit could increase this amount. About half of the forgone revenue is from credits claimed on corporate tax returns. Additionally, the tax credits tend to be claimed by higher-income taxpayers. For 2016, 78% of the claimants filed returns with adjusted gross income (AGI) of $100,000 or more, and such returns accounted for 83% of the amount claimed. (By comparison, of all returns filed, about 17% have AGI above $100,000.) Legislation has been introduced in the 116 th Congress that would modify the plug-in electric vehicle tax credit. Some bills propose expanding the credit. For example, the Driving America Forward Act ( S. 1094 / H.R. 2256 ) would increase the per-manufacturer cap to 600,000 vehicles and modify the credit during the phase-out period. The Electric Credit Access Ready at Sale (Electric CARS) Act of 2019 ( S. 993 / H.R. 2042 ) would extend the credit through December 31, 2029, and would also allow the credit to be transferred to the financing entity. Other proposals would eliminate the credit. The Fairness for Every Driver Act ( S. 343 / H.R. 1027 ) would eliminate the credit and impose federal highway user fees on alternative fuel vehicles. <3.2. Tax Incentives for Infrastructure> The primary federal tax incentive for EV infrastructure has been the tax credit for alternative fuel vehicle refueling property (IRC 30C), which expired in 2017. The credit was generally 30% of the cost of qualified property, with the credit limited to $30,000 for businesses at each separate location and $1,000 for property installed at a taxpayer's primary residence. For property sold to a tax-exempt entity, such as a school or a hospital, the seller of the property may have been able to claim the credit. Qualifying property included electric charging infrastructure as well as other forms of clean-fuel refueling property. The credit for alternative fuel vehicle refueling property has been a temporary tax credit since first enacted in 2005. The credit has been extended six times, often retroactively. The credit most recently expired at the end of 2017, but could be extended again. The uncertainty surrounding temporary tax incentives that are often retroactively reinstated diminishes their effectiveness as an investment incentive. The Electric CARS Act of 2019 ( S. 993 / H.R. 2042 ) would extend the credit through 2029. Data are not available on how much of the revenue loss associated with this provision is for EV infrastructure. The most recent one-year extension of this incentive, for all types of alternative fuel refueling property, was estimated to reduce federal tax revenues by $67 million over the 10-year budget window. Making the credit permanent for all types of qualifying property would reduce federal revenue by an estimated $332 million between FY2018 and FY2027. The tax credits for EV charging infrastructure that expired at the end of 2017, if extended, could support additional investment in Level 2 charging infrastructure. Expanded access to Level 2 charging at homes and workplaces could be a cost-effective solution to building out EV infrastructure in the near term. However, if electric vehicles are to be widely used for long-distance trips, a network of direct-current fast charger (DCFC) infrastructure (Level 3) is likely necessary. The tax credit is relatively small compared to the cost of a DCFC charging station. The high cost of this infrastructure, even if tax credits are extended, may continue to pose a barrier, especially if utilization rates are low. Given the differences in the costs and benefits associated with Level 2 and DCFC chargers, tax incentives could be provided that reflect some of these differences. There are few DCFC public chargers, yet having access to such infrastructure may have strong network benefits. Broadly, access to charging infrastructure has been shown in some studies to be a driver of demand for EVs. If Congress wanted to encourage greater EV use, tax credits could be designed to provide a larger incentive for investments in public DCFC infrastructure, relative to Level 2 charging stations. Storage incentives are another policy option that could support investment in EV infrastructure. On-site battery storage systems can be installed to allow solar power to be used for EVs. Tax incentives for batteries that facilitate EV use could encourage more of this activity. The Energy Storage Tax Incentive and Deployment Act of 2019 ( S. 1142 / H.R. 2096 ) would provide an investment credit for business or home use of energy storage. Tax-preferred bond financing options could also be used to support EV infrastructure investment. State and local financing for infrastructure solely or partially dedicated to EV charging projects may use tax-exempt bonds so long as the project is classified as serving a "public purpose" as defined in the federal code (IRC 141). A federal infrastructure bank or "green bank" might also be used to support EV infrastructure investment. One option to capitalize this type of bank would be to issue tax-favored bonds. <3.3. EVs and Federal Highway Taxes> Since 1956, federal surface transportation programs have been funded largely by taxes on motor fuels that flow into the highway account of the Highway Trust Fund (HTF). A steady increase in the revenues flowing into the HTF due to increased motor vehicle use and occasional increases in fuel tax rates accommodated growth in surface transportation spending over several decades. In 2001, though, trust fund revenues stopped growing faster than spending. In 2008, Congress began providing Treasury general fund transfers to keep the highway account solvent. Electric vehicles do not burn motor fuels, and hence users do not pay motor fuels taxes. Several states have imposed some form of tax or fee on electric vehicles that is dedicated to transportation, such that EV drivers also contribute to paying for highway infrastructure. Legislation has been introduced in the 116 th Congress the Fairness for Every Driver Act ( S. 343 / H.R. 1027 ) that would, in addition to repealing the existing tax credit for plug-in electric vehicles, impose an annual fee on alternative-technology vehicles that draw power from a source not subject to fuel excise taxes. This fee would be designed to compensate for plug-in electric vehicles not paying the gas tax (or other fuel excise tax). Imposing a fee on electric vehicles or other alternative vehicles would increase their cost of ownership, although as a share of the vehicle's total cost, the amount would likely be small. Exempting electric vehicles from taxes or fees imposed on other types of vehicles is one option for encouraging the purchase of electric vehicles. <4. Research and Development Priorities> Investment in transportation electrification R&D is one approach to reducing the overall cost of electric vehicle technologies. The Obama Administration made vehicle electrification a national goal including increased spending on battery R&D, stimulus funding for construction of battery manufacturing plants in the United States, and development of DOE electric vehicle research and demonstration programs such as the "EV Everywhere Grand Challenge." The Trump Administration requested reductions in funding levels for vehicle technologies R&D for FY2018 and FY2019, but Congress instead increased the program's funding levels for those years. Federal R&D funding for electric vehicles and electric vehicle charging infrastructure is primarily administered through the DOE's Office of Energy Efficiency and Renewable Energy (EERE). Within EERE, the Office of Transportation oversees the sustainable transportation R&D portfolio, which includes R&D programs in vehicle technologies, bioenergy technologies, and hydrogen and fuel cell technologies. Activities related to electric vehicles and charging infrastructure are within the Vehicle Technologies Office. In the 116 th Congress, some legislative proposals would support R&D programs. The Vehicle Innovation Act of 2019 ( S. 1085 / H.R. 2170 ) would authorize R&D programs and other activities to develop innovative vehicle technologies (including electric vehicles and charging infrastructure). <4.1. Appropriations for Electric Vehicle Research> Congress provides funding for electric vehicle technologies R&D through annual appropriations to EERE in the Energy and Water Development appropriations bill. The Trump Administration's budget request for EERE was $343 million for FY2020, $2,036 million (86%) less than the FY2019 enacted level of $2,379 million ( Table 1 ). The budget request, which "focuses DOE resources toward early-stage R&D and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies," would provide $73.4 million to vehicle technologies for FY2020, $279.6 million (79%) less than the $344 million that was directed to vehicle technologies within the Joint Explanatory Statement of the FY2019 appropriations conferees. The FY2019 joint explanatory statement included support for various vehicle technologies to advance transportation electrification research: $163.2 million for the battery and electrification technologies subprogram ($38.1 million for electric drive research and development including $7 million to enable extreme fast charging and advanced battery analytics); $10 million for continued funding of Section 131 of the 2007 Energy Independence and Security Act ( P.L. 110-140 ) for transportation electrification; and $37.8 million for the Clean Cities program, which provides competitive grants to support alternative fuel, infrastructure, and vehicle deployment activities. According to the FY2020 DOE budget request, the vehicle technologies program has set goals that "are necessary for new technology options to be more efficient and at least as affordable compared to [the] baseline while also accounting for consumer pay- back period expectations." To advance vehicle electrification, DOE established the following research priorities: identify new battery chemistry and cell technologies with the potential to reduce the cost of electric vehicle batteries by more than half, to less than $100 per kilowatt hour (kWh) (with an ultimate goal of $80/kWh); increase vehicle range to 300 miles; and decrease charge time to 15 minutes or less by 2028. The request for FY2020 would reduce funding and prioritize "early-stage activities," including the development of critical materials-free battery technologies. The request would eliminate funding for battery safety testing, battery thermal performance testing, and Clean Cities coalition support, training and technical assistance, and partnership activities. <4.1.1. Clean Cities Program> The DOE Clean Cities program supports local actions to reduce petroleum use in transportation. The program funds transportation projects nationwide through a competitive application process, and leverages these funds with additional public- and private-sector matching funds and in-kind contributions. While the program supports a variety of alternative fuels and vehicles in an effort to reduce petroleum use, funding opportunities by Clean Cities that directly support EVs include the EV Everywhere Plug In Electric Vehicle Local Showcases. EV Everywhere Plug In Electric Vehicle Local Showcases were selected in 2016 and are in progress. The three projects were selected to promote and demonstrate plug-in electric vehicle (PEV) use by "establishing local showcases that provide a hands-on consumer experience and in-depth education in a conveniently located, brand-neutral setting." The awardees plan to establish showcases in at least 14 states, including states in the Upper Midwest, California, the Pacific Northwest, and New England. In the FY2019 joint explanatory statement, Congress directed DOE "to continue to support the Clean Cities program, including competitive grants to support alternative fuel, infrastructure, and vehicle deployment activities." In the FY2020 budget request, the Trump Administration proposed eliminating funding for the Clean Cities program. In the 116 th Congress, two bills that pertain to electric vehicles would establish competitive grant programs within the Department of Transportation for electric vehicle charging infrastructure ( H.R. 2616 and S. 674 ). <4.2. Alternative Fuel Corridors> Purchases of electric vehicles in the near future will depend to some extent on the steps state and local governments and private entities take to build a reliable network of charging stations. Section 1413 of the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94 ) seeks to address that goal; it requires the Department of Transportation (DOT) to designate by 2020 national alternative fuel corridors (AFCs) to promote vehicle use of electricity, hydrogen, propane, and natural gas. The Federal Highway Administration (FHWA) has been working with other federal, state, and local officials and industry groups to plan AFC designations on interstate corridors ( Figure 2 ). FHWA has assigned designations to highways as either "corridor ready" they have enough fueling stations to serve a corridor or "corridor pending," where alternative fueling is insufficient. In the case of electric vehicles, a corridor-ready designation would apply if there were EV charging stations at 50-mile intervals, with a goal of establishing Level 3 DC Fast Charge infrastructure. Under this program, FHWA has developed standardized AFC signage and other forms of public education, and encouraged regional cooperation in planning new fueling networks. FHWA has undertaken three rounds of AFC nominations, the latest announced in April 2019. FHWA has identified building out alternative corridors on the most traveled Interstates, such as I-95 and I-80, as priorities for third-round funding. An additional goal is to secure nominations for areas targeted for EV investments by Electrify America in its Zero Emission Vehicle (ZEV) investment plan. Signage and installation of alternative fueling infrastructure along these corridors have been determined to be eligible expenses under FHWA's Congestion Mitigation and Air Quality Improvement (CMAQ) Program. In addition, the Department of Energy's Clean Cities program provides funding for fueling infrastructure, and some states have similar programs. <4.3. Federal Support for Municipal Bus Electrification> Until recently, the operation of battery electric buses in U.S. cities was seen as a long-term prospect because of their relatively high cost, range limits, and recharging infrastructure needs. But with technological improvements, public transportation agencies have begun to show interest in electric buses to replace vehicles powered by diesel and other fossil fuels. This interest is especially strong in metropolitan areas with air quality problems. The Federal Transit Administration (FTA) provides substantial support to transit agencies to purchase buses. Federal funds can be spent on most types of bus technology; the choice of technology is up to the transit agency concerned. Transit buses typically operate over short distances with fixed routes and frequent stops. In 1996, 95% of the buses in service were powered by diesel fuel ( Figure 3 ). More recently, transit agencies have integrated buses fueled by compressed natural gas (CNG), liquefied natural gas (LNG), and biodiesel into their fleets. Since the end of the last recession, the share of lower-emission hybrid buses including diesel buses with electric motors has also increased, rising from just under 5% of buses in use in 2009 to nearly 15% in 2016. Diesel-electric buses are powered by both an electric motor and a smaller-than-normal internal combustion engine; regenerative braking systems store energy from use of the bus's mechanical systems, giving the bus greater range. The purchase price of hybrids is less expensive than a fully electric bus, and hybrids reduce emissions compared to conventional diesel buses. There were 300 battery electric buses in operation domestically at the end of 2017, less than 0.5% of the 65,000 buses in public transit agencies' fleets. However, the two biggest transit bus systems in the United States, Los Angeles Metro and New York City Transit, have announced plans to move to zero-emission bus fleets, most likely using battery electric buses, by 2030 and 2040, respectively. Electric buses are typically expensive to purchase, costing as much as $300,000 more than conventional diesel buses, and require additional investment to build recharging infrastructure. On the other hand, electric buses are quieter than internal combustion engine vehicles, may have lower operating costs due to the absence of engines and transmissions requiring maintenance, and have low or zero direct emissions. The range an electric bus can travel on one charge has in the past been a limiting factor, but newer models can travel more than 200 miles, still short of the 600-mile or more range that conventional and other alternative fuel buses can travel. A study by Carnegie Mellon University found that when social costs, such as the health effects of diesel emissions, are taken into account, battery electric buses have lower total annualized costs than conventional diesel buses over the typical 12-year life cycle of a transit bus. Electric buses are generally eligible for FTA funding under several programs, including the Bus and Bus Facilities Program. One discretionary component of the FTA bus program is the Low or No Emission Vehicle (Low-No) program, which provides funding to state and local authorities for the purchase or lease of zero-emission and low-emission transit buses as well as acquisition, construction, and leasing of required supporting facilities. Electric buses are purchased through the Low-No bus program; mandatory spending of $55 million per year through FY2020 was authorized in the FAST Act. An additional $29.5 million was appropriated for FY2018. School buses generally have diesel engines, and they are primarily funded locally. FTA does not fund school buses, but the Environmental Protection Agency (EPA) administers the School Bus Rebate Program, which assists school districts in reducing diesel emissions. In 2017, nearly $9 million was provided to replace diesel buses with diesel-electric hybrids. In the 116 th Congress, some legislative proposals would support vehicle fleet electrification, including transit buses. The Green Bus Act of 2019 ( H.R. 2164 ) would require that any bus purchased or leased with funds provided by the Federal Transit Administration for public transportation purposes be a zero-emission bus. The Federal Leadership in Energy Efficient Transportation (FLEET) Act ( H.R. 2337 ) would authorize the U.S. Postal Service to enter into energy savings performance contracts to purchase or lease low-emission and fuel-efficient vehicles (including electric vehicles) and to construct or maintain infrastructure, including electric vehicle charging stations, among other provisions. <5. Other Federal Policies Affecting Electrification> The following policies were generally established for purposes not directly related to vehicle electrification, but they have dimensions that may support that goal. <5.1. Volkswagen Settlement> In 2016, Volkswagen Group reached a number of legal settlements concerning violations of the Clean Air Act. As part of its settlement terms, Volkswagen pledged to invest $2 billion over a 10-year period in zero-emissions vehicle infrastructure and education in select U.S. cities through its Electrify America initiative. Of that amount, $800 million is to be spent in California. As an additional condition, Volkswagen was also required to fund a $2.7 billion national Environmental Mitigation Trust, funds from which are available to states and other beneficiaries for mitigating the negative impacts of the excess diesel emissions that were released by Volkswagen's noncompliant vehicles. States could choose to spend some of this special funding on bus electrification, including school buses. <5.2. Federal Motor Vehicle Environmental Regulations> The first motor vehicle fuel economy standards were enacted in 1975 in response to the oil embargo of 1973-1974 (Energy Policy and Conservation Act of 1975; P.L. 94-163 , as amended). The National Highway Traffic Safety Administration (NHTSA) sets and enforces the Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks, which were most recently legislatively set in the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) at 35 miles per gallon (mpg) by 2020. Because EPA has authority to regulate greenhouse gas (GHG) emissions, it joined with NHTSA during the Obama Administration to promulgate new, stricter combined CAFE/GHG standards for motor vehicles. These new standards established targets for reduced GHG emissions and rising CAFE fuel economy of nearly 50 mpg by model year (MY) 2025. Electrification was seen as one means of reaching the new CAFE/GHG targets. The Trump Administration has proposed to leave the current CAFE/GHG standards in place through model year 2026, based on its analysis that economic and technological factors have changed since the standards were put in place in 2010. EPA asserted in April 2018 that the goals established for MY2026 could be achieved only with more extensive vehicle electrification than now anticipated, and rejected previous EPA determinations that EV sales in future years would grow rapidly enough to enable automakers to comply with the MY2022-MY2025 standards: "Based on consideration of the information provided, the Administrator believes that it would not be practicable to meet the MY 2022 2025 emission standards without significant electrification and other advanced vehicle technologies that lack a requisite level of consumer acceptance." <6. Prospects for Electrification of Autonomous Vehicles> Fully autonomous passenger vehicles hold the potential for safer transportation and new mobility for the elderly, the disabled, and those who cannot afford to purchase a car. The projected timeline for emergence of fully autonomous vehicles varies from several years to several decades. It is often assumed that autonomous vehicles including those providing ride-sharing services will employ electric motors instead of internal combustion engines, but that assumption is based on the types of federal and state policies that are put in place. In the absence of policies favoring EVs, future autonomous vehicles could be powered by fossil fuels. There are several reasons why electrification may not be the ultimate choice for autonomous vehicles. Analyses by Ford and Volvo have for the following reasons led them to retain internal combustion engines for their ride-sharing ventures for the present: Expense and I nconvenience . Electric vehicles remain expensive compared to conventional vehicles, and many models have short driving ranges and long refueling times. Shared vehicles, which may be on the road for many hours a day, magnify these shortcomings. Battery L ife . Frequent use of battery fast charging is known to lead to faster degradation of the battery. Energy- I ntensity . Autonomous vehicles rely on energy-intensive technologies. It has been estimated that operation of an autonomous driving system for two hours in an electric vehicle could use as much as 10% of its stored energy before the vehicle moves, requiring even more frequent recharging. These drawbacks are countered by the following factors that could make electrification of autonomous vehicles the more attractive power source: Compatibility . The extensive use of computers and sensors in autonomous vehicles may be easier to embed in electric vehicles, which have fewer mechanical and more electronic parts than a conventional vehicle. Operability . Electricity is generally less expensive than gasoline or diesel, and maintenance costs for electric vehicles, with many fewer parts, may be considerably lower. Emissions . The power demands of autonomous vehicle equipment and computers will reduce the fuel economy of gasoline and diesel vehicles and increase emissions. It has been estimated that increased power requirements will increase emissions from combustion vehicles by over 60 grams of CO 2 equivalent per mile, equal to reducing fuel economy of a 35 mpg vehicle to 29 mpg. Switching to electricity would diminish the direct emissions. <7. State Incentives and Utility Issues> Acceptance of electric vehicles and related infrastructure is affected by legislation, regulations, and policies adopted by state agencies and electric utilities. <7.1. State Incentives> Incentives vary widely from state to state. The National Conference of State Legislatures tracks vehicle and charger incentives on a state-by-state basis. Forty-five states and the District of Columbia currently offer incentives for certain hybrid or electric vehicles, or both. Those incentives include permitting solo drivers of electric and hybrid vehicles to use high-occupancy (carpool) lanes, income tax credits and rebates for the purchase of an electric vehicle, reduced registration fees, parking fee exemptions, excise tax and emission test waivers, and income tax credits for installation of a home or business charger. These incentives have been found to vary in their effectiveness. Several analyses have shown that tax incentives for electric vehicles and infrastructure are the "dominant factors in driving PEV adoption." Rebates which happen at the point of sale or within a short time after a vehicle purchase have been identified as the most effective incentive because their value is clear to buyers at the time of a vehicle transaction. <7.2. Zero Emission Vehicle Program> The California Air Resources Board (CARB) adopted low-emission vehicle regulations in 1990, requiring automakers to sell light vehicles in that state that meet progressively cleaner emissions standards. As part of these emission regulations, CARB also established the Zero-Emission Vehicle (ZEV) program, which requires automakers to offer for sale the lowest-emission vehicles available, with a focus on battery electric, plug-in hybrid electric, and hydrogen fuel cell vehicles. The number of ZEVs each automaker is required to sell is based upon its total light-vehicle sales in California. CARB has set ZEV sales percentages through a vehicle credit system, increasing annually to 2025. Nine other states have adopted the California ZEV regulations. The states affected by the regulations represent over one-third of all U.S. new light vehicle sales. <7.3. Utilities and EVs and EV Infrastructure: Tax and Regulatory Issues> Electric utilities, which are regulated by the state in which they are located, are in a unique position as the primary providers of electricity to aid in integrating EVs into the grid. Utilities can provide incentives to consumers to charge EVs during off-peak hours when there is excess generation. Utilities may also be in the position to install public electric charging infrastructure, assuming that there are no limits on their owning these assets. Many of the barriers utilities face with respect to electrification infrastructure are regulatory, and the role of tax policy in addressing such barriers may be limited. Sluggish growth in energy demand has posed a challenge for the electric utility sector. The industry has recognized EVs as an opportunity for growth. For this reason, electric utilities may have their own market-based incentives (absent federal intervention) to invest in EV infrastructure and take measures to support consumer EV adoption. Further, electric utilities may support extending current-law vehicle and infrastructure tax credits. At the same time, preparing the grid for a surge in electric car ownership could require substantial capital investments, if peak demand is increased. <7.3.1. Tax Incentives to Utilities for Electric Vehicle Infrastructure> A number of challenges are associated with providing tax incentives to utilities that provide EV infrastructure. While 65% of electricity customers across the United States are customers of investor-owned utilities, most other users purchase electricity from cooperatives or municipal power providers. There are limited options for providing a direct federal tax benefit to cooperative or municipal utilities that do not pay federal income taxes. Further, in many states customers may purchase electricity from competing suppliers and pay the local electric utility for delivering it. A tax incentive to provide EV infrastructure might be made available only to utilities, to other electricity suppliers, or to both. Applicability of such an incentive would vary according to state policies or the type of utility. State regulatory commissions typically establish prices or rates that allow utilities to earn a rate of return that the regulator determines to be reasonable. This rate of return is fixed, such that additional tax incentives do not necessarily increase the return that a utility can realize. Federal taxes are an operating expense. In some states, tax incentives that reduce utilities' operating expenses result in lower rates for electricity customers (not higher returns for utilities). Hence, federal tax incentives may provide a limited near-term incentive for utilities to increase capital spending on EV infrastructure. <7.3.2. State Regulatory Considerations> In the United States, the sale of electricity is governed by many different federal, state, and local regulations. When it comes to the sale of electricity for the purpose of charging EVs, the states generally have regulatory jurisdiction over retail electricity transactions, though federal and municipal authorities may also play a role. State approaches to regulation vary considerably. Rules and regulations governing the retail sale of electricity generally originate with a state public utility commission. An electric utility is defined in federal law as any person, state, or federal agency "which sells electric energy." This definition could potentially be interpreted to mean that electric vehicle charging station operators are electric utilities by virtue of the fact that they sell electricity, and are therefore subject to all laws, requirements, and regulations pertaining to electric utilities. Should charging station operators be subject to regulation as electric utilities, or is regulatory reform necessary to accommodate this new class of electricity transactions? Faced with the question of whether or how to regulate the operators, states have taken a variety of approaches: Some states have issued new guidelines or regulations that define the requirements for regulated utilities to operate charging stations. For example, some states (e.g., Oregon) allow existing regulated utilities to invest in and operate EV charging stations as separate, nonregulated ventures. Others (e.g., Texas) have effectively limited the operation of charging stations to electric distribution utilities by requiring operators to meet high technical and financial standards. Still others (e.g., Kansas) have prevented electric utilities from owning and operating charging stations altogether. Other states (e.g., New York) have exempted charging station operators from public utility regulations. This leaves questions as to which regulatory agency, if any, is responsible for regulating the charging station operators, as well as whether additional regulation is needed in order to ensure fair market practices. Finally, some states have refrained from taking action altogether. Without regulatory changes, private charging station operators in these states may be subject to regulation as a utility by the state's public commission. Lack of clarity about how operators will be regulated is seen by some as an impediment to the spread of the technology in these states. In some cases, EV service providers have avoided regulation as a utility by providing charging services for free, or by charging customers by the minute rather than by the amount of electricity used. Whether public utilities or private companies may operate electric vehicle charging stations and whether station operators are subject to regulation as a utility may affect deployment of EV charging infrastructure. State jurisdiction over retail electricity transactions may limit the potential role of the federal government in regulating the provision of EV charging services. An additional consideration is the potential for electric vehicle batteries to be used for storage, referred to as vehicle-to-grid (V2G) storage. V2G storage would allow idle vehicle batteries to be used for grid services, such as demand response. The batteries could reduce vehicle owners' electricity demand during peak periods or provide electricity to the grid during peak periods in response to time-based rates or other financial incentives. In the United States, utilities are beginning to test V2G performance in demonstration projects. In addition to technology, other identified challenges include regulation, market, and end-user acceptance.

Most of the 270 million cars, trucks, and buses on U.S. highways are powered by internal combustion engines using gasoline or diesel fuel. However, improvements in technology have led to the emergence of vehicle electrification as a potentially viable alternative to internal combustion engines. Several bills pending in the 116 th Congress address issues and incentives related to electric vehicles and charging infrastructure. Experience with fully electric vehicles is relatively recent: While a few experimental vehicles were marketed in the United States in the 1990s, the first contemporary all-electric passenger vehicles were introduced in 2010. Since then, newer models have increased the range an electric vehicle can travel on a single charge, and charging stations have become more readily available. These developments have been spurred by a range of government incentives, both in the United States and abroad. Transit buses are the fastest-growing segment of vehicle electrification in China, while in the United States and the European Union, the pace of bus electrification is slower. In the United States, federal incentives for electric passenger vehicle purchases have remained largely unchanged for more than a decade and are based primarily on tax credits for electric vehicle purchases and recharging infrastructure investments, and spending on battery chemistry research to develop less-expensive technologies: The plug-in electric tax credit permits a taxpayer to take a credit of up to $7,500 for each vehicle that can be recharged from the electricity grid; it phases out after a manufacturer has sold 200,000 eligible vehicles, a threshold that has been met by Tesla and General Motors. A tax credit for installation of alternative fuel vehicle refueling property expired in 2017; it had allowed a tax credit of $1,000 for equipment installed at a residence and up to $30,000 for business installations. I nvestment in transportation electrification research and development (R&D) , which has led to the gradual reduction in the cost of producing lithium-ion batteries, is administered by the U.S. Department of Energy (DOE) in cooperation with private industry. Although the Trump Administration has recommended large reductions in these programs, Congress has maintained annual funding for sustainable transportation of nearly $700 million in the past two fiscal years. Other programs that directly influence the level of vehicle electrification include the DOE Clean Cities Program, which supports local efforts to reduce fossil fuel-powered transportation, and the Department of Transportation's Alternative Fuel Corridors, which are designated Interstate Highway corridors with a sufficient number of alternative fueling stations, including electric vehicle chargers, to allow alternative fuel vehicles to travel long distances. The federal government also funds municipal transit bus electrification through Federal Transit Administration grants, which may be used for the purchase of all-electric buses. The pace of electrification also may be affected by proposals for less stringent federal standards for Corporate Average Fuel Economy (CAFE) and greenhouse gas emissions from vehicles. Beyond these federal programs, states and electric utilities provide a range of incentives for electrification. The National Conference of State Legislatures reports that 45 states and the District of Columbia offer incentives such as income tax credits for electric vehicle and charger purchases, reduced registration fees, and permitting solo drivers of electric vehicles to use carpool lanes. The California Zero Emission Vehicle program is spurring sales of electric vehicles in 10 states. Utilities can provide incentives to charge during off-peak hours, install public electric charging infrastructure, and utilize vehicle-to-grid (V2G) storage. V2G storage would allow idle vehicle batteries to supply electricity to the grid rather than drawing power from it during peak demand periods.

crs_R45988

crs_R45988_0

<1. Introduction: U.S. Natural Gas Sets a High Mark> In 2019, the United States stands atop the international natural gas world. The United States is the largest producer of natural gas (NG) ( Figure 11 ), is the largest consumer of natural gas, has the most natural gas storage capacity, and has the biggest and most expansive pipeline network. Production from shale formations ( Figure 7 ) has transformed the United States from a growing importer of natural gas to an increasing exporter ( Figure 12 ), with some of the lowest prices in the world ( Figure 10 ). The United States is the 4 th largest exporter of natural gas ( Figure 17 ), but its capacity by pipeline and by ship is growing. How the United States transformed its natural gas sector is a story of market competition, technological innovation, and other factors. As natural gas has played a bigger role in the U.S. economy, congressional interest in it has grown, as measured by the number of bills introduced ( Figure 19 ). <2. 1998 2008: Prices Spark Innovation> In 1998, the United States was the 2 nd largest national producer of natural gas behind Russia ( Figure 11 ), and the largest consumer. U.S. consumption outpaced production that year by more than 1,400 billion cubic feet (BCF) or 7% of consumption, and the United States was viewed as a growing importer of natural gas. Natural gas comprised 24% of the U.S. energy mix in 1998, and that figure remained unchanged in 2008. Canada supplied about 97% of U.S. imports in 1998. Between 1998 and 2008, the difference between U.S. production and consumption averaged 1,764 BCF annually. In 1998, U.S. natural gas consumption was mainly in the industrial sector, but by 2008 natural gas used to generate electricity equaled its use in the industrial sector. During this same time period, average annual U.S. natural gas prices quadrupled, reaching a peak in June, 2008. From 1998 to 2008, the United States added to its LNG import capacity by expanding existing facilities and constructing new import terminals. Import capacity in 2008 was almost 4,800 BCF, with an additional 2,000 BCF added later. There were also more than 20 additional import projects at various stages of development, most of which were never built because the market did not need additional import capacity as the United States moved toward being an exporter. <3. Shale Gas: Technological Breakthroughs> In the mid-2000s, as LNG import terminals were capturing headlines in the U.S. effort to meet growing demand, some small and mid-size production companies were trying to figure out how to produce the massive resources of natural gas that were trapped in shale formations. Multi-stage hydraulic fracturing and improved directional drilling capability were the keys to unlocking these resources. During this time, there were wide swings in U.S. daily natural gas prices as market conditions changed, sometimes quickly. Nevertheless, prices trended upward until the loss of economic activity from the Great Recession decreased demand. As prices rose, interest in developing shale gas grew. Shale gas started to come to market near the end of 2008 concurrent with the start of the Great Recession. The increased supply of natural gas, together with reduced demand, caused prices globally to plummet ( Figure 10 ). New production in the northeast, especially in Pennsylvania, began to grow rapidly. The percentage of U.S. natural gas production from shale also started to rise. <4. 2008 2018: Growing Importer to Net Exporter> Between 2008 and 2018, U.S. production and consumption of natural gas rose, 51% and 28%, respectively, while domestic prices fell about 65%. Despite the fall in prices, U.S. production continued to increase almost every year between 2008 and 2018. The cost of producing shale gas fell as the industry innovated to remain competitive. In 2011, U.S. production started to outpace consumption and the interest in exporting U.S. natural gas took hold. During this period, natural gas became more incorporated in the nation's energy mix, especially in the electrical sector. As U.S. prices fell, the world took note. In 2010, Cheniere Energy became the first U.S. company to apply for a permit to export U.S. natural gas from the lower-48 states from its Sabine Pass facility (which was originally an import terminal), transporting it as LNG. Liquefaction facilities like Sabine Pass liquefy natural gas convert it to LNG and store it in liquid state so that it can be shipped globally in specialized tankers. Liquefaction of natural gas is achieved by cooling the gas to -260" F. At this temperature, the natural gas becomes a liquid and occupies only 1/600 th of its gaseous volume making it economical to send by ship. U.S. companies were looking to exports of natural gas for additional demand and a way to access higher world prices. As the global economy improved, natural gas prices outside the United States began to climb, which increased the number of companies looking to export U.S. natural gas. By the end of 2009, the United States surpassed Russia as the world's largest producer of natural gas. Global production of natural gas rose 28% between 2008 and 2018. U.S. production outpaced other producers and its share of the global natural gas market rose from 18% to 22%, while Russia's fell from 20% to 17%. <4.1. U.S. Exports on the World Stage> The United States did not begin exporting LNG from the lower-48 states until February 2016. However, export of natural gas by pipeline, mainly to Mexico, more than doubled during the 2008 and 2018 timeframe. Mexico imported two-thirds of U.S. pipeline exports and about half of all U.S. gas exports in 2018. U.S. LNG export capacity is on the rise, with six different facilities in operation in 2019 with a capacity of approximately 2,700 billion cubic feet per year or 7.32 BCF per day. The United States is the world's 4 th largest exporter of natural gas overall, and the 6 th largest LNG exporter ( Figure 17 ). With another 3,000 BCF per year under construction, the United States is poised to rise in the export rankings and may have the most capacity, worldwide, within the next five years. Regionally, Asian countries have imported the most LNG from the United States (44%). Within Asia, the nations of South Korea, Japan, China, and India are the biggest consumers. However, in the first half of 2019, China's imports of U.S. LNG declined by 83% over the same time period in 2018, in part because of the trade dispute between the countries. Thirty-six countries have imported U.S. LNG since 2016. Almost half the gas has gone to countries with which the United States has a free trade agreement, a stipulation for an expedited Department of Energy permit. Both South Korea and Mexico, the two largest overall importers of U.S. LNG exports, have free trade agreements with the United States. <5. Conclusion: Growth of Natural Gas Continues> Between 2016 and the first half of 2019, U.S. LNG exports have grown by 489%. On a monthly basis, LNG exports were largest in May 2019 and are expected to continue to grow as additional port facilities become operational. Meanwhile, there has been no corresponding rise in U.S. natural gas prices due to increased exports. Since February 2016, there has been about, on average, a $1.74 price differential between U.S. spot prices and U.S. LNG export prices. In addition to the price of U.S. spot natural gas, the current price at which natural gas can be bought or sold, importers take into account the cost of liquefying the natural gas, transporting it, regasifying it, and moving it to consumers. Natural gas is expensive to liquefy and transport and requires sophisticated technology. Even though the United States is the largest producer of natural gas in the world, it is not the largest exporter. Russia, mainly through its pipeline exports to Europe, remains the largest overall exporter of natural gas. Qatar was the largest exporter of LNG in 2018, but Australia is projected to surpass it in 2019. Whereas the United States was the target market for LNG exporters in 2008, it is now a net exporter of natural gas and has seen its imports diminish by 27% since 2008. Industry analysts expect U.S. exports to rise significantly over the next few years. LNG now accounts for 35% of global natural gas trade. Energy issues have been a perennial topic of interest to Congress. Natural gas, especially since the advent of shale gas, has grown in importance and congressional interest. Exports of natural gas by pipeline and particularly LNG by ship have added to the significance of natural gas' interest to Congress. In the 116 th Congress, 100 bills have been introduced covering a wide variety natural gas related topics, from production, exports, infrastructure, the environment, and employment, among other things.

In the beginning of the 21 st century, natural gas prices were increasing and the United States was viewed as a growing natural gas importer. Multiple liquefied natural gas (LNG) import terminals were built while existing ones were recommissioned and expanded. However, the market conditions also drove domestic producers to innovate. As average U.S. prices peaked in 2008, domestic shale gas production was brought to market. Improvements in technologies such as hydraulic fracturing and horizontal drilling made the development of unconventional natural gas resources such as shale and other lower-permeability rock formations economically possible. Improved efficiency has lowered production costs, making shale gas production competitive at almost any price. The large amount of natural gas brought to market enabled large-scale exports from the United States. Of today's total global trade in natural gas, some 35% takes the form of LNG. As U.S. natural gas production increased and prices fell, U.S. consumption of natural gas grew. The rise in consumption did not keep pace with production, so companies turned to greater exports of natural gas, first by pipeline to Mexico and then as LNG to other parts of the world. The United States started exporting LNG from the lower-48 states in February 2016. The entrance of the United States as an exporter of LNG has caused significant changes to LNG markets. The U.S. natural gas market is one of the few that does not link the price of natural gas to oil, and this has carried in to LNG contracts. Some buyers view U.S. LNG exports as a hedge against oil prices. U.S. exporters do not require destination clauses, although where U.S. LNG exports end up must be reported to the U.S. Department of Energy. The relatively low price of U.S. natural gas has also helped consumers in other regions negotiate better prices for imports from non-U.S. sources. The United States is poised to rise in the export rankings and may have the most LNG export capacity, worldwide, within the next five years. According to projections by the U.S. Energy Information Administration (EIA), U.S. natural gas production, consumption, and exports will continue to grow for decades to come, while U.S. prices are projected to stay relatively low. One aspect of EIA projections is a status quo assumption when it comes to technology, laws and regulations, and markets among other things. As the advent of shale gas has shown, changes to the industry happen and may happen in significant ways and quickly. Natural gas has been and continues to be a topic of interest for Congress. One hundred bills have been introduced in the 116 th Congress related to different aspects of natural gas. Natural gas may play a bigger or smaller role in the U.S. economy depending, in part, upon congressional actions. Nevertheless, natural gas is an integral part of the U.S. and global energy mix. Knowing the major natural gas producing and exporting nations and how natural gas is transported for export are essential to understanding the sector and how U.S. natural gas fits into the global market.

crs_R46116

crs_R46116_0

<1. Surprise Billing> As the term is currently being discussed, surprise billing typically refers to situations where a consumer is unknowingly, and potentially unavoidably, treated by a provider outside of the consumer's health insurance plan network and, as a result, unexpectedly receives a larger bill than he or she would have received if the provider had been in the plan network. Most recently, in federal policy discussions, surprise billing has commonly been discussed in the context of two situations: (1) where an individual receives emergency services from an out-of-network provider and (2) where a consumer receives nonemergency services from an out-of-network provider who is working in an in-network facility. However, surprise billing may occur in other situations (e.g., ground ambulance and air ambulance services) where consumers are unknowingly and unavoidably treated by an out-of-network provider. As these situations imply, surprise billing is rooted in most private insurers' use of provider networks. Therefore, this report begins with a discussion of the relationship between provider network status and private health insurance billing before discussing existing federal and state requirements around surprise billing. This report then discusses various policy issues that Congress may want to consider when assessing surprise billing proposals. Such policy topics include what plan types should be addressed; what types of services or provider types should be addressed; what types of consumer protections should be established; what requirements (including financial requirements) should be placed on insurers, providers, or both; how these policies will be enforced; and what is the role of the state. The list of topics discussed in this report is not exhaustive but should touch on many aspects of the surprise billing proposals currently under consideration. The report also briefly discusses potential impacts of the various surprise billing approaches. It then concludes with an Appendix table comparing two federal proposals that have gone through committee markup procedures. Specifically, the proposals included in the appendix are Title I of S. 1895 (Alexander), which went through a Senate Committee Health, Education, Labor, and Pensions (HELP) markup session on June 26, 2019, and Title IV of the amendment in the nature of a substitute (ANS) to H.R. 2328 , which went through a markup session held by the House Committee on Energy and Commerce on July 17, 2019. As of the date of this report, no other proposals have been approved through committee markup or gone further in the legislative-making process. <1.1. Private Health Insurance Billing Overview> The charges and payments for health care items or services under private health insurance are often the result of the contractual relationships between consumers, insurers, and providers for a given health plan. Health care providers establish dollar amounts for the services they furnish; such amounts are referred to as charges and reflect what providers think they should be paid. However, the actual amounts that a provider is paid for furnishing services vary and may not be equal to the provider-established charges. The amounts a provider receives for furnished services, and how the payment is divided between the insurer and the consumer, can vary due to a number of factors, including (but not limited to) whether a given provider has negotiated a payment amount with a given insurer, whether an insurer pays for services provided by out-of-network providers, enrollee cost-sharing requirements, whether a provider can bill the consumer for an additional amount above the amounts paid by the consumer (in the form of cost sharing), and the insurer. Figure 1 highlights the effects of the aforementioned distinctions. The following sections discuss them in the context of in-network and out-of-network billing. <1.1.1. In-Network Coverage> Under private insurance, the amount paid for a covered item or service is often contingent upon whether a consumer's insurer has contracted with the provider. Insurers typically negotiate and establish separate contracts with hospitals, physicians, physician organizations (such as group practices and physician management firms), and other types of providers. For each provider where such a contract exists with a particular insurer, that provider is then generally considered to be a part of that insurer's provider network (i.e., that provider is considered in network ). The contents of contracts between insurers and providers vary and typically are the result of negotiations between providers and insurers; however, these contracts generally specify the amounts that providers are to receive for providing in-network services to consumers (i.e., negotiated amounts ). Negotiated amounts typically are lower than what providers would otherwise charge, had they not contracted with an insurer. When an in-network provider furnishes a service to a consumer, the insurer and consumer typically will share the responsibility of paying the provider the negotiated amount established in the contract. The consumer's portion of the negotiated amount is determined in accordance with the cost-sharing requirements of the consumer's health plan (e.g., deductibles, co-payments, coinsurance, and out-of-pocket limits; see Figure 1 ). Consumers who receive covered services from in-network providers generally have lower cost-sharing requirements than consumers who receive the same services out of network. Generally, in-network providers are contractually prohibited from billing consumers for any additional amounts above the negotiated amount (i.e., balance bill). <1.1.2. Out-Of-Network Coverage> In instances where a contract between an insurer and provider does not exist, the provider is considered out of network. The total costs for services furnished by an out-of-network provider, and who pays for such services, depend on a number of factors; one key factor is whether the plan covers out-of-network services in the first place. Generally, point of service plans and preferred provider organization (PPO) plans cover out-of-network services, whereas exclusive provider organization plans and health maintenance organization (HMO) plans generally only cover services by providers within the plan's network (except in an emergency). <1.1.2.1. Insurer Pays for Out-Of-Network Services> In instances where an insurer pays some amount toward out-of-network services, both the consumer and the insurer contribute some amount to the provider, with the consumer's amount determined in accordance with the plan's cost-sharing requirements. Consumer cost-sharing requirements for services provided by an out-of-network provider may be separate from (and are typically larger than) cost-sharing requirements for the same services provided by an in-network provider. For example, a plan may have different deductibles for in-network and out-of-network services. Table 1 provides an example of how cost-sharing requirements may differ for in-network and out-of-network services. Although cost-sharing requirements will indicate how the cost for the service is shared between an insurer and a consumer, the insurer needs to determine the total amount that cost-sharing requirements will be based on (since there are no negotiated amounts established in contracts between out-of-network providers and insurers). The amount ultimately determined by the insurer is often referred to as the total allowed amount and does not necessarily match the negotiated amount insurers may have contracted with other providers or the provider charge amount for that service. If a total allowed amount is larger than a negotiated rate, then the consumer's payment for out-of-network services could be larger than a corresponding payment for in-network services because of increased cost sharing, as per the terms of the plan and the fact that the total cost of services on which consumer cost sharing is based is larger. Insurers have their own methodologies for calculating the total allowed amount. They may do so by incorporating the usual, customary, and reasonable rate (UCR), which is the amount paid for services in a geographic area based on what providers in the area usually charge for the same or similar medical services. If an out-of-network provider's total charge for a service exceeds the total allowed amount (and if allowed under state law), the provider may directly bill (i.e., balance bill ) a consumer for the amount of that difference (sometimes referred to as the excess charge ; see Figure 1 ). The consumer would therefore be responsible for paying amounts associated with any cost-sharing requirements and the balance bill. The provider is responsible for collecting any balance bill amounts; from an administrative standpoint, it is considered more difficult to collect these balance bill amounts than to collect payments from insurers. In some instances, providers may ultimately settle with balance-billed consumers for amounts that are less than the total balance bill. There are no federal restrictions on providers balance billing consumers with private health coverage. <1.1.2.2. Insurer Does Not Pay for Out-of-Network Services> If the insurer pays only for in-network services, the consumer is responsible for paying the entire bill for out-of-network services (represented in Figure 1 as "Out-of-Network Services Not Covered Under Plan"). Although the consumer pays the provider in this instance, the consumer costs are not technically cost sharing (since the insurer is not sharing costs with the consumer), nor are they the balance remaining after the provider receives certain payments. Therefore, this report refers to these costs as other c onsumer c osts . Similar to balance bills, providers are responsible for collecting these other consumer costs and ultimately may decide to settle with the consumer for amounts that are less than the initial provider charges. <2. Existing Requirements Addressing Surprise Billing> <2.1. Federal Requirements> Currently, no federal private health insurance requirements address surprise billing; however, federal requirements do address related issues. The Affordable Care Act (ACA; P.L. 111-148 , as amended) established requirements regarding consumer cost sharing for, and plan coverage of, out-of-network emergency services and consumer cost-sharing requirements for ancillary provider services furnished at in-network facilities. <2.1.1. Emergency Services> As a result of the ACA, if a self-insured plan or a fully insured large-group plan, small-group plan, or individual-market plan covers services in a hospital emergency department, the plan is required to cover emergency services irrespective of the provider's contractual status with the plan. In other words, insurers of plans that cover in-network emergency services are effectively required under the ACA to contribute some amount to a provider that furnishes out-of-network emergency services to an enrolled consumer, even if the insurer otherwise would not contribute any amount for services furnished by other types of out-of-network providers. More specifically, insurers are required to recognize the greatest of the following three payment standards as the total allowed amount for emergency services: (1) the median amount the insurer has negotiated with in-network providers for the furnished service; (2) the usual, customary, and reasonable amount the insurer pays out-of-network providers for the furnished service; or (3) the amount that would be paid under Medicare for the furnished service. (Insurers may recognize another amount as the total allowed amount provided such amount is larger than all three of the aforementioned amounts.) After determining the appropriate total allowed amount, the insurer and the consumer each will pay the provider a portion of the total allowed amount, according to the cost-sharing requirements of the consumer's plan. The ACA requirement also addressed a consumer's payment responsibility vis- -vis her health plan for out-of-network emergency care. Specifically, when a consumer receives emergency services from an out-of-network provider, the ACA limits a consumer's cost sharing, expressed as co-payment amount or coinsurance rate, to the in-network amount or rate of the consumer's health plan. In other words, if a consumer receives out-of-network emergency services and is enrolled in a plan that has a 15% coinsurance rate for in-network services and a 30% coinsurance rate for out-of-network services, the consumer will be responsible for 15% of the total allowed amount for the out-of-network care. The requirement does not address the plan deductible or out-of-pocket limits. Therefore, if a plan has separate deductibles and out-of-pocket limits for in-network and out-of-network services, then the plan may require that consumer payments for out-of-network emergency services be applied to these out-of-network amounts. As a result, although a consumer would be subject to in-network co-payment amounts or coinsurance rates, the consumer may still be responsible for greater cost sharing than if the payments for the services were applied to the in-network deductible and out-of-pocket limit. The requirement does not limit a provider from balance billing the consumer after receiving consumer cost-sharing and insurer payment amounts. <2.1.2. Ancillary Provider Services> Individual-market and small-group plans must adhere to network adequacy standards in order to be sold on an exchange. As part of these standards, plans with provider networks must count consumer cost sharing for an essential health benefit furnished by an out-of-network ancillary provider at an in-network facility toward the consumer's in-network out-of-pocket maximum, unless the plan provides a notice to the consumer prior to the furnishing of such services. <2.2. State Requirements> Although there are no federal requirements that directly address surprise billing, at least half of states have implemented policies to address some form of surprise billing. As of July 2019, 26 states had addressed surprise billing for emergency department services and 19 states had addressed surprise billing for nonemergency care at in-network hospitals. State policies to address surprise bill vary and, as a result, have created different sets of requirements on insurers and providers to establish different sets of protections for consumers. However, state surprise billing laws are consistent in that they do not apply requirements to self-insured plans (see text box below). Multiple research organizations have highlighted the differences among state policies. They have shown whether state surprise billing policies (1) determine the amounts or methodologies by which providers are paid by insurers and consumers for specified out-of-network services; (2) include transparency standards for providers and insurers (e.g., notification requirements on providers or requirements on insurers with respect to provider directory maintenance), (3) address different types of provider settings and services, and (4) address different types of plans (i.e., HMO or PPO). The National Academy of State Health Policy (NASHP) examined the differences between the eight states with surprise billing laws. As an example of the variance between states, NASHP indicated that the eight states varied in terms of how the total allowable amount is set under the laws. Further, two states set payment standards based on a greater of multiple benchmark rates, one state sets payment standards based on a lesser of multiple benchmark rates, one state sets payment standards based on the commercially reasonable value , one state sets payment standards based on the rates set under a regulatory authority within the state, and four states create a dispute-resolution process to resolve surprise balance bills. In addition to the often-discussed out-of-network emergency services provided in facilities and services provided by out-of-network providers at in-network facilities, some states have attempted to regulate ground and air ambulance surprise billing, albeit to a lesser extent. Although states have attempted to regulate air ambulances, they have been limited in their ability to do so as a result of the Airline Deregulation Act of 1978 ( P.L. 95-504 ), which preempts state regulation of payment rates for certain air transportation carriers (including air ambulances). <3. Policy Considerations> Federal surprise billing proposals, like state laws, typically seek to address the current financial relationships between insurers, providers, and consumers for certain services. In doing so, the proposals generally would establish new requirements on insurers, providers, or both in specified billing situations to create a degree of consumer protection. As an example, requirements on insurers may address how the insurer pays for specified services or what consumer cost-sharing requirements would be under specified plans. Requirements on providers may address the extent to which providers may balance bill consumers. Requirements on both entities may establish the terms under which insurers and providers participate in alternative dispute resolution processes (e.g., arbitration) to determine the amount providers are paid by insurers and consumers for surprise bills. Surprise billing can be addressed in a variety of ways, and the following sections discuss questions policymakers may want to consider when evaluating these different approaches. The following policy discussions are examples of the types of questions policymakers may want to consider when evaluating surprise billing proposals and should not be treated as an exhaustive list. Furthermore, due to the development, introduction, and modification of numerous federal proposals on this topic during the 116 th Congress, the policy discussions in this section of the report generally do not include specific references to any current or historical federal proposals. The report references state surprise billing laws to provide examples and context, but such references should not be considered comprehensive references of all applicable state laws. Although specific federal policies are not explicitly discussed in this section of the report, the report concludes with an Appendix that provides side-by-side summaries of the two surprise billing proposals from the 116 th Congress that have passed through committee markups, both as part of larger bills. Specifically, the proposals included in the appendix are Title I of S. 1895 (Alexander), which went through a Senate Committee on Health, Education, Labor, and Pensions (HELP) markup session on June 26, 2019, and Title IV of the amendment in the nature of a substitute (ANS) to H.R. 2328 , which went through a markup session held by the House Committee on Energy and Commerce on July 17, 2019. <3.1. What Plan Types Could Be Addressed?> Federal private health insurance requirements generally vary based on the segment of the private health insurance market in which the plan is sold (individual, small group, large group, and self-insured). Some requirements apply to all market segments, whereas others apply only to selected market segments. For example, plans offered in the individual and small-group markets must comply with the federal requirement to cover the essential health benefits; however, plans offered in the large-group market and self-insured plans do not have to comply with this requirement. States, in their capacity as the primary regulators of health insurance plans, can regulate fully insured plans in the individual, small-group, and large-group markets. States are not able to directly apply surprise billing requirements to self-insured plans, but certain state requirements may affect state residents enrolled in a self-insured plan. For example, at least one state (New Jersey) has allowed self-insuring entities to opt in to surprise billing requirements. Relatedly, state requirements on providers may affect consumers with self-insured coverage. For example, New York established an arbitration process for certain surprise billing situations, which applied to providers and fully insured plans. This arbitration process did not apply to self-insured plans. However, results from a National Bureau of Economic Research working paper suggest the policy affected consumers with both fully insured and self-insured plans. The authors hypothesized that because most providers were unaware of whether the consumer's plan was fully insured or self-insured, providers billed amounts that were "likely chosen to reflect the possibility of arbitration." In light of this example, to the extent that a federal proposal would establish requirements on providers for consumers enrolled in plans in a specific market segment (e.g., only self-insured plans), providers may need to develop processes to determine whether a consumer has such a plan, as this information is not necessarily available to the provider when services are furnished. Broadly applying a provider requirement so that it addresses consumers enrolled in all types of health plans would minimize the potential that consumers inadvertently receive a surprise bill. Many federal proposals would be broadly applicable to self-insured and fully insured individual, small-group, and large-group private health insurance plans, though there has been some variance with respect to certain types of plans (e.g., Federal Employees Health Benefits [FEHB] Program plans). <3.2. What Types of Services or Provider Types Could Be Addressed?> Federal surprise billing proposals from the 116 th Congress have commonly focused on variants of two different types of services: (1) where an individual receives emergency services from an out-of-network provider and (2) where an individual receives services from an out-of-network provider that is working at an in-network facility. For context on the prevalence of surprise billing, a recent study estimated that 20% of hospital inpatient admissions from an emergency department, 14% of outpatient visits to an emergency department, and 9% of elective inpatient admissions in 2014 were likely to produce surprise medical bills (i.e., were "cases in which one or more providers were out of network and the patient was likely to be unaware of the provider's status or unable to choose an in-network provider for care instead"). Another study found that the prevalence of similarly defined "surprise" out-of-network billing increased for emergency department visits and inpatient admissions between 2010 and 2016. Researchers have suggested that surprise billing tends to occur around these particular types of services due to a unique set of market forces that differentiate these services from how other services function within the provider-insurer-consumer relationship. Many providers decide to join an insurer's network (thereby accepting a lower negotiated rate for services) knowing that by doing so, the insurer will steer their enrollees toward in-network providers. Insurers steer their enrollees toward in-network providers by limiting plan coverage to in-network providers only or providing more generous coverage for in-network providers as compared with other out-of-network providers (i.e., reduced cost sharing). This approach effectively disincentives consumers from seeking out-of-network care in most situations. However, in the aforementioned billing situations, consumers are not necessarily able to choose an in-network provider. For example, a consumer may be unconscious due to a medical emergency and unable to decide whether he or she wants to be seen by an in-network or out-of-network emergency provider. In this instance, the consumer may be taken to the nearest hospital emergency department (without consideration of network status of the hospital and/or the emergency department providers within the hospital). As another example, consumers may be able to select or seek out a particular in-network hospital or in-network surgeon for a specific procedure, but the consumers are unlikely to be able to select every provider participating in that specific procedure. This is especially true if the consumer is unaware of the need for additional assistance when he or she arranges the procedure. Considering this, certain emergency and ancillary providers may have fewer incentives to join the network of a health insurer, since they are more likely to receive constant demand for their services regardless of network status and consumer choice. Instead, these provider types may find it more beneficial to stay out of network in order to be able to charge more for their services than the negotiated rate they would accept had they been considered in network. However, surprise billing is not limited to the aforementioned situations. It can occur in other situations (e.g., ambulance services or in situations where an in-network physician sends a consumer's lab test to an out-of-network lab). Some federal surprise billing proposals address air ambulance services, albeit fewer than address emergency services and services provided by out-of-network providers at in-network facilities. Air ambulances are similar to the previously discussed situations in that consumers often are not able to choose an in-network air ambulance due to the urgency associated with the request for services. In addition, the "relative rarity and high prices charged [by air ambulance providers] reduces the incentives of both air ambulance providers and insurers to enter into contracts with agreed-upon payment rates." For context, the Government Accountability Office found, as a result of its analysis of FAIR Health claims data, that 69% of air ambulance transports for privately insured consumers were out of network. In conclusion, surprise billing proposals may address one or multiple different types of situations. To the extent that the proposals address multiple situations, they may treat such situations similarly or may apply different types of requirements to each situation. <3.3. How Could a Proposal Address Consumer Protections?> In surprise billing situations, the consumer is typically the one being surprised. Correspondingly, proposals seeking to address surprise billing situations generally include provisions that would establish consumer protections. Most federal surprise billing proposals from the 116 th Congress generally address consumer financial liabilities in these situations. Generally, they do so by tying consumer cost sharing (in some capacity) to what cost sharing would be had specified services been provided in network and by limiting the extent to which consumers can be balance billed for specified services. In addition, some federal proposals incorporate various requirements designed to inform consumers so they can make more informed choices about seeing in-network or out-of-network providers. In current federal proposals, this has most commonly taken the form of consumer notification requirements, which are designed to inform the consumer, prior to receiving out-of-network services, that he or she might be seen by an out-of-network provider (among other pieces of information). Some federal proposals link such notification requirements with consumer financial protections, so that the consumer financial protections would not apply in instances where notification requirements were satisfied (e.g., a consumer may be balanced billed only if the provider satisfied consumer notification requirements). The aforementioned financial protections and notification requirements typically are established by creating requirements on insurers, providers, or both. They may take a variety of forms, as discussed in the subsequent sections. <3.3.1. What Could Be the Consumer's Financial Responsibility in Surprise Billing Situations?> As stated in the " Private Health Insurance Billing Overview " section, privately insured consumers may be liable for three types of consumer financial responsibilities when receiving services: cost sharing, balance bills, and other consumer costs. In out-of-network situations, consumers with plans that cover out-of-network benefits would potentially be responsible for consumer cost sharing and balance bills, whereas consumers with plans that do not cover out-of-network benefits would be responsible for other consumer costs. Surprise billing requirements may address any combination of these three consumer financial responsibilities (cost sharing, balance billing, and other consumer costs), which would have direct implications on the total amount that consumers pay, and the total amount that providers receive as payment, for these services. Cost-sharing and balance billing requirements would affect those consumers with plans that cover services provided by out-of-network providers, whereas other consumer cost requirements would affect insured consumers with plans that do not cover services provided by out-of-network providers. The following sections discuss how surprise billing requirements associated with each of these financial responsibilities may be structured. <3.3.1.1. Cost Sharing> Consumer cost sharing for specified out-of-network services could be limited by defining, through requirements on plans, consumer cost-sharing rates for out-of-network services. Most federal proposals generally include cost-sharing requirements that tie cost sharing (in some capacity) to corresponding in-network requirements. One study of state-level surprise billing laws indicated that state-level laws generally included similar cost-sharing requirements. Although it has been common to tie out-of-network cost sharing to in-network requirements (e.g., the same co-payment amount or the same coinsurance percentage) for certain services, cost sharing could be tied to any rate or amount. Cost-sharing requirements do not need to apply to deductibles, coinsurance rates, co-payment amounts, and out-of-pocket limits. For example, under current federal law, when a consumer receives emergency care from an out-of-network provider, the cost-sharing requirement, expressed as a co-payment or coinsurance rate, is limited to the in-network amount or rate of the consumer's health plan. Cost sharing does not address the plan deductible or out-of-pocket maximum. Therefore, under this requirement, insurers may apply out-of-network deductibles and out-of-pocket maximums for emergency services if such cost-sharing requirements generally apply to out-of-network benefits, which could increase the amount owed by the consumer as compared with a requirement that aligned the deductible, co-payment amount, coinsurance rate, and out-of-pocket limit. Cost-sharing requirements do not necessarily specify the total dollar amount that a consumer pays for out-of-network services. For example, coinsurance is based on a percentage of the amount recognized by the insurer as the total cost of care. Therefore, the total cost-sharing dollar amount a consumer ultimately pays for care also may be influenced by any provisions that establish methodologies for determining the total cost of care for specified surprise billing situations. <3.3.1.2. Balance Billing> Establishing limitations on cost-sharing requirements alone does not prohibit or limit the extent to which a consumer may be balance billed (in instances where the plan covers out-of-network services). Therefore, if policymakers were interested in defining the extent to which a provider may balance bill a consumer (if at all), such language also would need to be included. Requirements that insulate consumers from balance billing may be placed on providers or insurers. For example, language may explicitly prohibit, fine, or limit the extent to which a provider can directly balance bill a consumer. By contrast, language may require insurers to "hold the consumer harmless" and pay the provider "their billed charges or some lower amount that is acceptable to the provider." From the consumer's perspective, both types of requirements would have similar effects, in that both requirements would result in the consumer only being responsible for paying the cost sharing associated with the service. According to one study of state-level surprise billing laws, 28 states had incorporated provisions (as of July 31, 2019) that insulated consumers from certain balance bills through requirements on insurers, providers, or both. <3.3.1.3. Other Consumer Costs> Surprise billing proposals may be structured so that consumers with a plan that does not cover out-of-network services (e.g., HMO) are treated differently in surprise billing situations than consumers with plans that do cover out-of-network services (e.g., PPO). For example, a surprise billing proposal may be structured so it applies only to consumers with plans that cover out-of-network benefits (i.e., it would not address other consumer cost situations). In other words, this type of policy could reduce a consumer's financial liabilities in surprise billing situations if the consumer were enrolled in a plan with out-of-network benefits, but it would not address the consumer's financial liabilities if the consumer were enrolled in a plan that does not cover out-of-network benefits. Alternatively, proposals may define the financial liability individuals face for receiving out-of-network care while enrolled in a plan that does not cover out-of-network benefits. Such requirements would effectively define the other consumer cost (i.e., the total cost of care) and could incorporate similar methodologies used in other surprise billing laws (e.g., benchmark). Without any additional requirements, the consumer would still be responsible for the entire other consumer cost. Proposals also could include provisions that require insurers to cover a portion of the other consumer cost, effectively requiring the consumer's plan to cover that particular benefit. This could occur because of language that explicitly requires plans to cover a particular benefit or defines the amount that a plan must contribute for specified services. To date, many federal surprise billing proposals have addressed other consumer costs by requiring insurers to cover a portion of such costs. Many federal proposals have done this by making surprise billing provisions that limit consumer costs in surprise billing situations to a specified amount (e.g., in-network cost sharing) and require insurers to contribute some amount to providers applicable to all plans, irrespective of whether a plan would cover such out-of-network service. <3.3.2. What Kind of Information Could Be Provided to the Consumer Prior to the Receipt of Services?> Because surprise billing may occur when a consumer is unknowingly treated by a provider outside of the consumer's health insurance plan's network, surprise billing proposals may include a variety of requirements that would seek to provide consumers with more information about the providers in their network and/or the care they are to receive in order to make an informed decision about their medical care providers. Such requirements alone would not eliminate surprise billing but could reduce the prevalence of unexpected out-of-network use, which in turn would decrease the prevalence of surprise billing. The effectiveness of such provisions in reducing surprise billing is tied to the extent to which consumers can use the new information to decide whether to receive services from an out-of-network provider (e.g., consider information utilization in emergency situations). <3.3.2.1. Notification> In the surprise billing context, consumer notifications typically are discussed as a way to provide various pieces of information (e.g., about provider network status and estimates of related financial responsibilities) to consumers prior to the receipt of services so consumers can make informed decisions about their medical care providers. This type of requirement can apply to insurers, providers, or both. If considering a notification requirement, policymakers may want to identify what information should be included within a notification requirement. For example, the notification may be structured to include the provider's and/or facility's network status, the estimated costs of the services, the provider's ability to bill the consumer for amounts other than plan cost-sharing amounts, or any other piece of information that policymakers feel needs to be provided to consumers. In addition, policymakers may want to address who is responsible for providing the notice to the consumer (i.e., insurer or provider), when the notice must be provided to the consumer, and if and when the consumer must provide consent to the notice. Notice requirements should account for any limitations on the types of services and settings that would be subject to such requirement and the consumer's ability to use (and, where applicable, consent to) such information (e.g., emergency situations or complications mid-procedure). Furthermore, any notification requirement should account for whether the insurer or provider subject to the notification requirement has access to the information that is required to be included in the notice. A notification requirement may be coupled with consumer financial liability protections. For example, some federal proposals apply consumer financial liability protections in some surprise billing situations (e.g., non-emergent care) only when a provider does not adhere to a corresponding notification requirement. <3.3.2.2. Provider Directories> Provider directories contain information for consumers regarding the providers and facilities that are in a plan network. Provider directory requirements may fall on insurers and providers. Insurers typically are responsible for developing and maintaining the directory; however, the information used to populate the provider directory typically comes from the providers. If considering provider directory requirements, policymakers may want to identify what information is included in the directory, how the information is made available to the consumer (e.g., posted on a website), and how often the directory needs to be updated or verified. A provider directory requirement may be coupled with consumer financial liability protections. In these instances, policymakers may consider how financial liability protections would interact with provider directory requirements. For example, financial liability protections could be limited to situations where a consumer receives services from a provider based on incorrect provider directory information. <3.4. What Types of Requirements Could Be Placed on Insurers, Providers, or Both?> In considering surprise billing proposals, there has been debate around how to shield consumers from receiving unexpected and likely large bills from out-of-network providers that the consumer did not have the opportunity to choose while balancing the impact of establishing a method for ensuring payment for those services. Proposals to address surprise billing situations have generally sought to address the lack of a contractual relationship between insurers and out-of-network providers by establishing standards for determining the total provider payment and the insurer payment net of specified consumer cost sharing. Other methods have sought to create network requirements that would reduce the probability that a consumer would be treated by an out-of-network provider at an in-network facility. The following sections will discuss these different types of requirements. <3.4.1. How Could a Proposal Address Insurer and Provider Financial Responsibilities in Surprise Billing Situations?> As discussed in the " Private Health Insurance Billing Overview " section, in general, payment for out-of-network services depends on whether the plan covers out-of-network benefits. Regardless of whether or not a plan provides out-of-network benefits, there is no contract establishing a set payment rate between an insurer and an out-of-network provider. If an insurer provides out-of-network benefits, the insurer determines the amount it will pay and the provider can balance bill consumers. If an insurer provides no out-of-network benefits, the insurer will not pay anything toward the out-of-network service. Both scenarios are subject to state and federal law that may define the amount insurers pay out-of-network providers in certain situations (e.g., federal requirements related to emergency services, state surprise billing laws). Most federal proposals in the 116 th Congress to address surprise billing situations include provisions establishing methodologies for determining how much insurers must pay out-of-network providers in specified surprise billing situations. To date, proposals have focused on two main methods for determining the financial responsibility of insurers. One approach has been to select a benchmark payment rate that would serve as the basis for determining a final payment amount that a provider must be paid for a service. The other approach has been to establish an alternative dispute resolution process, such as arbitration, with provider payment determined by a neutral third party. The final payment amount determined by either approach may affect consumer cost sharing to varying degrees based on a consumer's plan. For example, under a plan that has a coinsurance to determine a consumer's cost sharing for a service, rather than a co-payment, the amount that the consumer would be responsible for would depend on the final payment rate for a service. In addition to discussing the benchmark and arbitration approaches, this section includes a discussion on using a bundled payment approach . In this approach, an insurer makes one payment (net of cost sharing) to a facility, and that facility then is responsible for paying providers practicing within the facility. Following that discussion will be a section on the possibility of establishing network requirements to address surprise billing situations, including network matching. When considering a proposal that establishes a method for determining payment rates, policymakers may want to consider a number of factors; these factors include, but are not limited to, the potential effects on the financial viability of providers and the financial impact on health insurers, which in turn may affect health insurance premiums. This may include consideration of the cost and burden associated with establishing payment rates and the predictability of each method for determining payment rates. In addition, policymakers may want to consider the extent to which these payment models would apply uniformly to all types of plans, services, and/or providers. The various options all have trade-offs, and the relative effect of a given proposal on providers and insurers might vary depending on the local health care market structure. A full assessment of the different choices is beyond the scope of the report. Policy solutions for surprise billing situations that involve setting out-of-network payment rates may have secondary effects that result from potential changes in relative leverage between insurers and providers. For example, a proposal that would establish higher out-of-network rates than in-network rates previously agreed upon between providers and insurers for certain services may encourage some providers to go out of network or remain out of network to obtain the higher rate. This may lead insurers to raise in-network rates for these services to incentivize providers to join networks. If this response subsequently leads to higher average in-network rates as well as out-of-network rates (along with increased out-of-network coverage), then it may result in higher premiums in the market. Conversely, if the proposal lowers out-of-network payment rates below in-network rates previously agreed upon between providers and insurers, the proposal may increase the amount of leverage insurers have when negotiating with providers for network inclusion, creating downward pressure on in-network payment rates. <3.4.1.1. Benchmark Approach> Federal surprise billing proposals that use a benchmark approach involve tying payment to a reference price, such as Medicare rates or market-based private health insurer rates. A benchmark-based surprise billing proposal would be structured to specify one or more benchmarks and a methodology for calculating a final payment rate. <3.4.1.2. Medicare as a Benchmark> Some recent federal proposals would require insurers to pay an out-of-network provider a rate tied to the payment for that service under Medicare. Studies have shown that Medicare rates for physician services provided by specialists most often involved in surprise billing situations (e.g., pathology, anesthesiology, radiology) generally are lower than commercial rates paid by insurers in the private health insurance markets. Policymakers seeking to adjust for the differences between Medicare and commercial rates may structure payment as a percentage of Medicare rates. For example, some surprise billing state laws establish private health insurance rates for certain services at Medicare plus an added percentage. <3.4.1.3. Market-Based Benchmark> As compared with a Medicare benchmark approach, a market-based benchmark approach may raise different questions that need to be considered in order to determine the most appropriate reference price on which to base payment. Determining the market data that will provide the foundation for a benchmark for out-of-network payment rates is critical, as the effect may go beyond setting out-of-network payment rates. The distribution of data, which can vary, may have an anchoring effect on the negotiation of in-network payment rates. For example, a proposal that relies on a benchmark that would result in out-of-network payment rates below current in-network payment rates for some providers may shift the negotiating leverage in favor of insurers, which may then use the threat of the lower out-of-network rate to negotiate lower in-network rates. If a proposal results in higher out-of-network payment rates than in-network payment rates for some providers, the leverage to negotiate will shift toward providers, who may demand higher in-network payment rates. Policymakers may need to decide whether to base the benchmark on provider charges or insurer payment rates. Provider charges are the amounts that providers charge a consumer and/or insurer for a furnished service. These amounts generally will be higher than the negotiated amounts, because they do not include any discount negotiated between insurers and providers. There are no federal proposals that rely on provider charges as a benchmark for setting payment for services provided by out-of-network providers. There are federal proposals using a benchmark approach that rely on private insurer in-network payment rates. Insurer payment rates could be specified as an insurer's usual, customary, and reasonable (UCR) rates or as an insurer's in-network contracted rates. UCR rates are a method that insurers use to determine payment to providers for out-of-network services if a plan provides out-of-network benefits. Insurers have discretion over how UCR rates are calculated, and such determinations vary from insurer to insurer. In-network contracted rates are the payment rates determined either through negotiation between insurers and providers for in-network services or based on a fee schedule developed by an insurer; a provider must agree to this fee schedule for inclusion in the insurer's network. Once policymakers establish whether a proposal uses provider charges or insurer payment rates, they may specify a methodology for determining the final payment rate. For example, a policy proposal may specify a mean, a median, a percentage, or a percentile of the benchmark rate. The most appropriate metric will depend on the underlying distribution of the benchmark data being used and how the resulting payment rate compares with current in-network and out-of-network rates. To the extent that a benchmark is based on market-based rates, policymakers may want to consider whether to limit the rates included in the benchmark to a specific geographic area to account for the variations in the underlying cost of health care services in different communities. However, a geographic region that is too large may not account for the discrepancies between markets within the region for example, rural and urban health care costs and a geographic region that is too small may result in situations where only one particular provider or insurer is included. Policymakers also may want to consider whether to set a benchmark based on current payment data or on historical payment rates combined with an inflation factor. Using historical rates may mitigate potential fluctuations in in-network rates in response to implementing a surprise billing approach, including changes in network strategies by insurers or providers looking to influence future payments. However, using historical rates may not, depending on the data used, account for material changes in a local health care market (e.g., changes in technology, market consolidation, etc.). Finally, there may be situations in which an insurer does not have the appropriate data to determine payment rates under a market-based benchmark. For example, an insurer that is a new entrant to a market will not have established in-network payment rates for past years. In such a case, the new entrant may have to rely on public or privately run databases that aggregate payment rate data of other insurers in a market to determine an average in-network rate for a particular provider type in a particular geographic area. Given such a situation, policymakers may want to consider whether to specify a source of data, whether public or private, for reference prices an insurer may use to calculate payment rates or a set of standards for databases that an insurer may use to establish payment rates. The quality and breadth of the data may affect the degree to which reference prices accurately represent the market and population. Currently, there is no universal source of data for all market types and insurers. Some states operate all-payer claims databases (APCDs); of the states that have APCDs, a subset of the APCDs are voluntary initiatives that may not collect data from all insurers in the state. However, state APCDs cannot require the collection of data from self-insured group health plans. <3.4.1.4. Multiple Benchmarks> Proposals may specify multiple benchmarks. In these types of proposals, multiple benchmarks may be used to establish guardrails (i.e., a floor or a ceiling) to counterbalance the potential anchoring effects of a single benchmark discussed earlier. There are different methodologies for determining which benchmark would apply in a surprise billing situation. The methodology may involve choosing whether the payment should be based on the greatest or least among the various benchmarks. If using a greatest of approach, then the insurer would be responsible for paying a rate to a provider based on the benchmark that results in the highest payment rate among the various specified benchmarks. A least of approach would make an insurer responsible for paying a provider a payment rate that is based on the benchmark that results in the lowest payment rate among the various specified benchmarks. For example, an insurer may be required to pay a provider a percentile of UCR or, at a minimum, a percentage of Medicare. <3.4.1.5. Alternative Dispute Resolution> Some federal surprise billing proposals from the 116 th Congress have considered an alternative dispute resolution process, such as arbitration. In an arbitration model, the provider and the insurer would submit proposals for payment amounts to a neutral third party. The third party would then determine, on a case-by-case basis, the total amount to be paid to the provider, which would include the insurer payment and the consumer cost sharing. The cost-sharing parameters would be determined under the proposal, not by the arbitrator, and would depend on the cost-sharing structure of the consumer's health plan. However, the rate set by the arbitrator can affect the amount paid by the consumer. The arbitration model might provide more flexibility than the benchmark in that payment would not be fixed based on a reference price. However, it might involve more administrative costs to determine payment rates on a case-by-case basis and would provide less predictability regarding payment rates for out-of-network services. As arbitration relies on a third party to decide payment, proposals typically establish criteria for determining who may act as an arbitrator. Criteria may include a conflict-of-interest standard to ensure the third party does not have an interest in the process's outcome. Policymakers also may want to consider whether to establish standards for when insurers or providers may elect arbitration. Standards may be structured to require a minimum amount of time after a provider has billed for a service before either the provider or the insurer may seek arbitration to settle a payment dispute. This approach would afford providers and insurers an opportunity to negotiate a payment rate. In addition to a time requirement, policymakers seeking to limit resources expended on arbitration may consider establishing a threshold requirement to prohibit providers and insurers from seeking arbitration for charges under a certain dollar amount. If a proposal does not include a threshold requirement, then providers and insurers would be able to seek arbitration for any surprise billing payment dispute. The requirement may be structured to provide a specific amount, which may include a method for adjusting the amount year to year to account for inflation. Alternatively, policymakers could choose to provide authority to agencies to establish a method for determining the threshold amount. If a threshold requirement is set in a way that prohibits parties from seeking arbitration below a certain dollar amount, then policymakers may want to consider how to address payment for amounts under the threshold. A proposal could be structured to require insurers to pay any charges under the threshold amount, or a benchmark, as described earlier, could be used on a limited basis for any charged amounts under the threshold. Once it is determined who may seek arbitration for a surprise billing dispute, policymakers may want to consider how to structure the arbitration process, including how an arbitrator decides payment. One possible approach, taken by the state of New York, would be to institute a baseball-style arbitration process in which each party submits its best and final offer to the arbitrator, who then decides which offer to accept as the final payment rate. Another possibility would be to provide the arbitrator with the flexibility to decide a final payment rate that may differ from the proposals submitted by the parties to the arbitration. Regardless of the flexibility given to the arbitrator, policymakers may want to consider specifying factors that the arbitrator should take into account when making a final decision. <3.4.1.6. Hybrid Approach> It is possible to combine the benchmark and arbitration approaches. For example, in response to stakeholder concerns regarding the use of particular methods for determining final payment amounts, some states and one federal proposal pair the use of a benchmark with the option of arbitration if either party is not satisfied with the payment rate established by the benchmark. Another hybrid approach could involve establishing an arbitration process in which the arbitrator picks one amount from a list of benchmarks to establish a final payment rate. <3.4.1.7. Bundled Payment Approach> Some researchers have proposed a bundled payment approach as an alternative to establishing how much an insurer must pay directly to an out-of-network provider. Instead of regulating the relationship between an insurer and the out-of-network provider, a bundled payment approach would focus on the insurer and the facility in which the service was provided. An insurer would make one payment to the facility, after which the facility would be responsible for paying providers for services provided in the facility. Instituting a bundled payment would shift the onus from the out-of-network provider to the facility to negotiate with the insurer for a bundled rate. It would then be the facility's responsibility to negotiate with the providers for payment of services provided within the facility. Currently, no federal proposals or state laws use a bundled payment approach to address surprise billing. <3.4.2. How Could a Proposal Address Network Requirements?> An alternative to focusing on payment for out-of-network services would be to reduce the probability that consumers would inadvertently receive care from out-of-network providers. An alternative to setting a benchmark or establishing an arbitration process would be to set network requirements. <3.4.2.1. Network Adequacy Requirements> Network adequacy is a measure of a plan's ability to provide access to a sufficient number of in-network providers, including primary care and specialists. In the individual and small-group markets, states have been the primary regulator of plan networks and have network adequacy standards for most health insurance plans. The ACA created a federal network adequacy standard. However, the federal government defers to states to enforce network adequacy standards. Self-insured plans are not subject to network adequacy standards. Instituting stricter network adequacy standards (i.e., requiring plan networks to include a larger number of providers of varying types) may not address all surprise billing situations. Unless network adequacy standards require all providers to be in network, they do not guarantee that insurers will contract with every provider that a consumer may see, especially in situations where a consumer travels outside the plan's service area. <3.4.2.2. Network Matching> Some researchers have proposed another network-based approach, referred to as network matching , which would involve the creation of an in-network guarantee to address surprise billing situations in which consumers receive care from out-of-network providers in in-network facilities. An in-network guarantee would ensure that a facility and the providers practicing in that facility contract with the same insurers to be included in the same networks. However, surprise bills might still occur in the case of emergency services, when consumers may not have the option to choose an in-network facility, especially when a consumer travels outside the service area of his or her health plan. No current federal proposals or state laws use a network matching approach to address surprise billing. An in-network guarantee could be structured in a few ways. Policymakers could create an in-network guarantee that applies to insurers and would prohibit insurers from contracting with a facility unless the facility guaranteed that all providers practicing in the facility would contract to be in the same networks as the facility. Another way to structure an in-network guarantee would be to prohibit the insurer from paying out-of-network providers for any services provided to the consumer in an in-network facility. When paired with a prohibition on balance billing, a provider that was previously not incentivized to be in network because of the possibility of higher out-of-network payments might be incentivized to negotiate with an insurer to be included in plan networks to obtain payment beyond consumer cost sharing. <3.5. How Could Surprise Billing Requirements Be Enforced?> To the extent a surprise billing proposal imposes any prohibitions or affirmative obligations on the insurer, the provider, or both, a question remains as to how to enforce any such limits or requirements. The current legal framework for enforcing discrete requirements for insurers and providers may be a template for Congress to consider when drafting surprise billing legislation. Potential enforcement mechanisms include authorizing the Secretary of Health and Human Services (HHS) and/or the Secretary of Labor depending on the plan type to bring enforcement actions or allowing private entities to seek a right of action in a court against a regulated entity. An enforcement scheme also may attach specified statutory penalties to a violation of the statute. Depending on whether a surprise billing proposal amends an existing statute, these options may be included as the principal enforcement mechanism or could be added to supplement any existing enforcement schemes. <3.5.1. Current Enforcement Mechanisms on Private Health Insurance Issuers> A number of federal surprise billing proposals would amend provisions (including the emergency services provision) under Part A of Title XXVII of the Public Health Service Act (PHSA). This part of the PHSA, as amended by the ACA, was incorporated by reference into Part 7 of the Employee Retirement Income Security Act (ERISA) and Chapter 100 of the Internal Revenue Code (IRC). As a result, these three statutes' existing enforcement mechanisms may be relevant to any additional prohibitions or requirements added to Part A of Title XXVIII of the PHSA by a surprise billing proposal. Existing enforcement provisions under these statutes currently apply only to insurers and not to providers. <3.5.1.1. Public Health Service Act> In general, the existing enforcement provisions for Title XXVII of the PHSA's requirements apply to health insurance issuers in the group and individual markets and to self-funded nonfederal governmental group plans. With respect to health insurance issuers, states are the primary enforcers of the PHSA's requirements. If the HHS Secretary determines that a state has failed to substantially enforce a provision of Title XXVII of the PHSA with respect to health insurance issuers in the state, or if a state informs the Secretary that it lacks the authority or ability to enforce certain PHSA requirements, the Secretary is responsible for enforcing these provisions. In the event that federal enforcement is needed, the HHS Secretary may impose a civil monetary penalty on insurance issuers that fail to comply with the PHSA requirements. The maximum penalty imposed under PHSA is $100 per day for each individual with respect to which such a failure occurs, but the Secretary has the discretion to waive part or all of the penalty if the failure is due to "reasonable cause" and the penalty would be excessive. <3.5.1.2. Employee Retirement Income Security Act> Part 7 of ERISA currently includes various requirements for (1) group health plans, which generally consist of both insured and self-insured plans providing medical care that an employer establishes or maintains, and (2) health insurance issuers offering group health insurance coverage. ERISA provides two general enforcement mechanisms for these requirements. First, the Secretary of Labor may initiate a civil action against group health plans of employers that violate ERISA, but the Secretary may not enforce ERISA's requirements against health insurance issuers. Second, Section 502(a) of ERISA authorizes a participant or beneficiary of a plan to initiate certain civil actions against group health plans and health insurance issuers. Plan beneficiaries may, for instance, bring actions against the plans to recover or clarify their benefits under the terms of the plans. <3.5.1.3. Internal Revenue Code> In general, the group health provisions in Chapter 100 of the IRC apply to all group health plans (including church plans), but they do not apply to governmental plans and health insurance issuers. Under the IRC, the group health plan requirements are enforced through the imposition of an excise tax. Failure to comply with an IRC requirement generally would subject a group health plan to a tax of $100 for each day in the noncompliance period with respect to each individual to whom such failure relates. Limitations on a tax may be applicable under certain circumstances (e.g., if the person otherwise liable for such tax did not know, and exercising reasonable diligence would not have known, that such violation existed). Failure to pay the applicable excise tax may result in further penalties, and a dispute regarding any penalty liabilities may be resolved by a proceeding before a U.S. district court or the Court of Federal Claims. <3.5.2. Current Enforcement Mechanisms on Providers> As noted above, the PHSA, ERISA, and IRC currently do not include enforcement provisions that apply to providers; instead, the applicable statutes impose requirements on only the relevant group health plans and health insurance issuers. Indeed, because the regulation of medical providers is traditionally within the province of the states, federal law has generally limited its role in regulating providers to specified circumstances. To the extent any federal requirements are imposed on providers, the requirements generally are enforced through provisions specific to the applicable regulatory framework. The enforcement provisions applicable to federal health care programs (including Medicare and Medicaid), for instance, authorize the HHS Secretary to initiate enforcement proceedings against any person (including a health care provider) for certain specified violations, including the submission of improperly filed claims and the improper offer or acceptance of payments to reduce the provision of health services. Violators may be subject to civil penalties, be excluded from further participation in federal health programs, or both. Thus, to the extent a surprise billing proposal would impose specific limits or requirements directly on providers, policymakers may want to consider enforcement provisions specific to those regulatory requirements. Consistent with this approach, many federal surprise billing proposals to date particularly if they would amend Part A of Title XXVII of the PHSA include enforcement provisions that would apply specifically to providers in this context. The proposals generally would limit the application of these enforcement provisions to providers who have not been subject to an enforcement action under applicable state law. <3.6. How Could a Federal Surprise Billing Proposal Interact with State Surprise Billing Laws?> As discussed in the " State Requirements " section of this report, many states have enacted laws that address surprise billing in various situations and incorporate different policies discussed throughout this report. Given the likely overlap between state laws and any potential federal laws, policymakers may want to consider how federal surprise billing policies should interact with related state laws. In other words, policymakers may want to determine which laws are applicable in situations addressed by both federal and state laws. They may opt to have federal law defer to state law, have federal law preempt state law, or some combination thereof. To date, many federal proposals have included language that would maintain state surprise billing laws and would apply federal law only in instances where states do not have such laws. In the event that a federal surprise billing law would provide deference to state surprise billing laws, it may be worth considering how such deference would be provided. For example, a federal proposal that addresses ambulances may be drafted so that federal law does not apply in any state with any type of surprise billing law, regardless of whether such state law addresses ambulances. As mentioned earlier in this report, state surprise billing laws have varied in their application to different situations and/or providers, and some states have only applied surprise billing laws and regulations to a narrow set of situations. For example, surprise billing protections in Arizona, Massachusetts, Missouri, New Hampshire, and Oregon apply only for emergency services provided by an out-of-network provider at in an in-network hospital. Therefore, this type of federal ambulance surprise billing law would not apply in those states. It is also possible that a federal surprise billing law would apply only to services, situations, and plans that have not been addressed by state surprise billing laws (or have been addressed in a manner that does not satisfy criteria included within such proposal). This type of policy would likely result in multiple different ways to handle surprise billing situations within a state. For example, fully insured plans could be subject to state laws and self-insured plans could be subject to federal laws. As a result, enrollees of different types of plans may have different protections in surprise billing situations. The extent of the aforementioned discrepancy would correspond to the extent to which state residents are enrolled in a self-insured plan. For reference, in 2017, Hawaii had the lowest percentage of private sector employees enrolled in a self-insured plan at an employer offering health insurance coverage (31.2%) and Wyoming had the highest percentage (72.4%). The national average was 59.4% in 2017. This difference can also be highlighted in the context of the interactions between surprise billing protections in Arizona, Massachusetts, Missouri, New Hampshire, and Oregon, which apply only for emergency services provided by an out-of-network provider at in an in-network hospital, and a hypothetical federal policy that applies to emergency services generally and provides deference to state laws. In this example, state law would apply to emergency services provided by an out-of-network provider at an in-network hospital and federal law would apply to emergency services provided by an out-of-network provider at an out-of-network hospital. Considering that a surprise billing federal policy would affect insurers, providers, or both and could alter these parties' incentives to enter into network agreements together (see " Potential Policy Impacts "), the combination of a federal policy with varying state policies would likely result in a unique set of incentives for insurers and providers within each state. By contrast, a federal surprise billing law may be structured so that state deference is not provided. Under this type of proposal, a federal surprise billing law would be uniformly applicable to all states, regardless of previous state surprise billing legislative action. In addition to considering the relationship between state and federal surprise billing laws, policymakers may want to incorporate policies that provide states with opportunities to tailor a federal proposal. For example, a federal policy could allow states to select the benchmark parameter used for plan payments out of a list included in the federal policy, or a federal policy could allow states to further determine the information included in a notification requirement. Such provisions would provide states with the ability to determine how best to incorporate federal policies given the relationship structure between insurers, providers, and consumers within that state. <4. Potential Policy Impacts> Since policy decisions rarely occur in a vacuum, many of the aforementioned policy considerations directly affect one (or multiple) aspects of the billing process. These impacts can be considered narrowly, by looking at how specific actors (i.e., insurers, providers, and consumers) may respond to such policy considerations. For example, consider the effects of a federal policy that (1) establishes a benchmark reimbursement rate that is lower than what insurers currently typically pay out-of-network providers for a specific service provided to consumers and (2) prohibits balance billing. From the insurer's perspective, an insurer may decide to lower premiums for plans that cover out-of-network benefits if its net payments to providers decrease after adjusting for any changes in consumer cost sharing under the policy. Relatedly, to the extent that such policy requires insurers to cover a portion of other consumer costs for specific services, insurers may choose to increase premiums on plans that do not cover out-of-network benefits to cover these additional costs. From the provider perspective, impacted out-of-network providers may see a reduction in revenue from the lower payment rate and the prohibition on balance billing consumers for those services. The provider also may see a reduction in the administrative costs associated with being an out-of-network provider (e.g., costs associated with communicating with and collecting payments from numerous consumers and/or insurers, costs associated with failure to collect payments from consumers). Depending on the extent to which the provider is affected, the provider may respond to this example federal policy by adjusting the prices of other services not affected by the policy or adjusting what services are offered. A different surprise billing policy that would establish an arbitration process could create greater administrative costs for insurers and providers. These costs could subsequently be incorporated into premium prices or provider charges for services. Policy impacts also can be considered more generally by identifying how these policies could alter the relationships between insurers, providers, and consumers. For example, policies that require insurers to pay providers specified amounts for out-of-network services might affect contract negotiations between insurers and providers. If a proposal required insurers to pay out-of-network providers their median in-network rate for services, insurers might be incentivized to reduce rates for those providers earning above the median amount or be less likely to contract with such providers during subsequent contract negotiations. If insurers did not contract with such providers, the provider would be considered out of network and the plan would pay providers the plan's median rate for services included in the surprise billing proposal. Inversely, providers earning below the median rate might be likely to demand increased payment rates or to consider dropping out of the network, the latter of which would result in those providers also being paid at a plan's median rate. Together, if insurers and providers responded accordingly, a plan's payment rates for the specified services included in a surprise billing proposal would move to the median rates for both in-network and out-of-network providers. If a proposal required insurers to pay out-of-network providers based on an arbitration model (i.e., dispute resolution process), then some providers that furnish specialized services or work on complex cases might be more likely to demand increased payment rates. This could occur because these providers would otherwise be more likely to receive results that are more favorable as an out-of-network provider participating in an arbitration process that considers the extent of the provider's expertise and the complexity of each case. The Congressional Budget Office (CBO) estimated the net effects of these types of policies on insurance premiums and the related effects on the federal budget in its scoring of two surprise billing bills from the 116 th Congress ( S. 1895 and H.R. 2328 , which are compared in the Appendix ). As implied by the policy impacts of these types of proposals on premiums, different policies also could have varying effects on national health expenditures. For example, the surprise billing proposal that required insurers to pay out-of-network providers their median in-network rate for services likely would reduce the aggregate dollar amount of private health insurance spending on out-of-network care relative to current law. This shift likely would occur even if consumers utilized the same amount of services, because "median rates are generally lower than the current overall average rates." Future health expenditures also could grow slower than what is expected under current law if such a benchmark were indexed to an inflationary rate that is generally smaller than the rate of growth for provider rates. Relative to a benchmark-type policy that is tied to median in-network rates, an arbitration model policy likely would result in greater heath expenditures because arbitration would likely affect the negotiation of in-network rates. The potential threat of arbitration may afford certain providers increased leverage during the negotiation of in-network rates. However, the total effect of such policies on national health expenditures would be contingent upon the percentage of expenditures affected by the federal policies. The discussion of the aforementioned policies should not be interpreted as likely effects of all benchmark or all arbitration type policies. For example, a benchmark rate set at median rates would have different effects than a benchmark rate set at billed charges. Although comprehensive studies of state surprise billing laws are limited, there is anecdotal evidence of the impacts of such laws. For example, the effects of implementing a payment methodology were anecdotally evident in California, where a law required insurers to pay certain out-of-network providers the greater of the average contracted rate or an amount equal to 125% of the Medicare fee-for-service (FFS) rate. As a result, at least some insurers took the position that "providers should either accept a lower contract rate or not contract and, potentially, receive only 125% of Medicare FFS rates." A related example involves insurer responses to a Colorado surprise billing law that required insurers to pay the in-network payment rates for services furnished to enrollees of managed care plans by out-of-network providers at in-network facilities. A subsequent state survey of insurers regarding the implementation of the surprise billing law highlighted that certain insurers felt that "out-of-network providers [were] encouraged not to join networks because they will receive in-network payment regardless" and "hospital-based physicians had greater leverage when negotiating contracts with managed care plans." The Colorado law did not affect all insurers equally. Of the 52 insurers that issued managed care plans in the private health insurance market during the evaluation period and provided responses to the survey, 7 carriers reported that the law had a positive effect on network adequacy, 20 carriers indicated no change, 21 carriers indicated a negative effect, and 4 carriers indicated insufficient experience and time to evaluate the change. Relatedly, New York implemented an arbitration-type surprise billing law (independent dispute resolution, or IDR) for emergency physician services and other specified non-emergency services. From 2015 to 2018, different provider types participated in the IDR process differently. For example, plastic surgery providers submitted 40% of emergency service IDR disputes and neurosurgery providers submitted 31% of the specified non-emergency service IDR disputes. The Colorado and New York examples highlight the likelihood that a federal surprise billing policy will affect individual actors within a market differently, which is the result of existing dynamics between insurers and providers within each specific market (e.g., market concentration and network participation). CBO accounted for this effect in its scoring of the two bills from the 116 th Congress. This idea is further compounded by the fact that each state has its own set of regulations (potentially including surprise billing laws). Therefore, the effects of federal surprise billing proposals also will have varying impacts on insurers and providers across states. <4.1. Appendix. Side-by-Side Comparison of Selected Federal Surprise Billing Provisions> This appendix provides a side-by-side comparison of surprise billing provisions included within two federal bills that have gone through markup procedures. Specifically, the sections of the bills included in the appendix are Title I of S. 1895 (Alexander), which went through a Senate Committee on Health, Education, Labor, and Pensions markup session on June 26, 2019, and Title IV of the amendment in the nature of a substitute (ANS) to H.R. 2328 , which went through a markup session held by the House Committee on Energy and Commerce on July 17, 2019. The language from each bill summarized in this appendix addresses multiple medical billing situations, such as services furnished at an in-network facility by out-of-network providers, services related to an emergency medical condition, and/or air ambulance services. As each bill addresses more than one type of situation, this appendix refers to different situations as scenarios . For each proposal, different scenarios are identified numerically in the "Applicable Health Services and Providers" row. Where applicable, each subsequent cell under a given proposal refers back to the terminology used in the "Applicable Health Services and Providers" row to indicate how a given requirement in the proposal applies to each scenario addressed within that specific proposal. In some instances, the requirement may apply solely to one scenario, apply differently across multiple scenarios, or apply similarly to all scenarios. As an example, Title I of S. 1895 (Alexander) includes provisions regarding six scenarios, including (1) emergency services provided by an out-of-network provider at an emergency department of a hospital or freestanding emergency room and (2) ancillary services performed by an out-of-network provider at an in-network facility if such services would have been covered had they been provided in network. In the "Applicable Health Services and Providers" row for the Title I of S. 1895 (Alexander) column, these scenarios are identified as Scenario 1 and Scenario 2 , respectively (with additional scenarios listed accordingly). Subsequently throughout the Title I of S. 1895 (Alexander) column, each reference to Scenario 1 discusses how that particular requirement would apply to emergency services provided by an out-of-network provider at an emergency department of a hospital or freestanding emergency room. Consumer costs for the services addressed within each of the proposals are discussed in the "Consumer Cost-Sharing" and "Other Consumer Costs" rows; a distinction that incorporates (1) the aforementioned discussion (highlighted in Figure 1 ) around whether a plan does or does not cover services provided by an out-of-network provider that would have been covered if provided by an in-network provider and (2) whether a particular service is a covered benefit under the plan irrespective of the network status of the provider (i.e., whether the service is considered an excluded service). When reading the appendix table, if the same language is used across the bills for a given feature, it means the bills have language that is identical or substantively similar. However, there may be underlying differences between the bills. For example, both bills create limits on consumer cost-sharing requirements, but the actual requirements that would be affected (e.g., deductible, co-payment) may vary between the bills, depending on how cost sharing is defined in either that bill itself or the amending statute (for bill language that does not include a definition of the term). This appendix table focuses on, and incorporates, language as included and defined in the aforementioned bills. It does not compare or analyze differences between the bill languages as a result of underlying statutory differences. Each bill summary is based on a review of the provisions as drafted. If a given proposal lacks specificity or includes inconsistencies, no assumptions were made to fill in gaps or resolve any discrepancies. Finally, the table does not address drafting errors or other technical issues within the proposals (unless such errors required an interpretation to incorporate bill text into the table). The table also does not address policy implications or identify potential unintended consequences.

In response to individuals receiving large, unexpected medical bills for out-of-network care, Congress has recently been considering legislation to address surprise billing. As the term is currently being discussed, s urprise billing typically refers to situations where consumers are unknowingly, and potentially unavoidably, treated by providers outside of the consumers' health insurance plan networks and, as a result, unexpectedly receive larger bills than they would have received if the providers had been in the plan networks. In the 116 th Congress, federal proposals have sought to address surprise billing in the context of two types of situations: (1) where an individual receives emergency services from an out-of-network provider and (2) where an individual receives services from an out-of-network provider that is working at an in-network facility. Although no federal requirements directly address surprise billing, at least half of the states have implemented policies to address surprise billing in some capacity. However, the state laws are limited in application, as certain types of plans, such as self-funded plans offered by employers, are exempt from state insurance regulation. State policies to address surprise billing vary in terms of the types of consumer financial protections provided (e.g., consumer balance billing limitations) and the related requirements on insurers and providers to establish such protections. Among states that offer similar types of consumer protections, policies may vary in their application and may differ according to the types of situations addressed (e.g., emergency services, out-of-network care at an in-network facility), the types of plans addressed (e.g., HMO, PPO), and the methods used to determine insurer payments to providers for such services (e.g., benchmark, arbitration). Similar to many state laws, recent federal legislative proposals related to surprise billing typically seek to address the financial relationships between insurers, providers, and consumers. They do so by establishing new requirements on insurers, providers, or both to create a degree of consumer protection related to reducing patient financial responsibilities with respect to some types of out-of-network care. In addition to including language that limits consumer cost sharing in surprise billing situations, the federal proposals typically include language that specifies the methods by which insurers determine payment to providers for the services being addressed in the bill (since solely reducing consumer financial liability in such situations would reduce the total amount providers receive for their services). When combined with balance billing prohibitions, this type of requirement effectively results in what the insurer and provider recognize as the total payment for out-of-network care. To date, federal proposals are largely aligned in how they would address consumer protections in surprise billing situations. However, the proposals differ in how they would address total payment for specified services furnished by out-of-network providers. Federal proposals generally have focused on at least one of two methods to determine insurers' financial responsibility: (1) selecting a benchmark provider payment rate that serves as the basis for determining specific amounts that insurers must pay providers, net of consumer cost sharing or (2) establishing an alternative dispute resolution process, such as arbitration, with provider payment determined by a neutral third party. This report discusses selected policy issues that Congress may want to consider as it assesses surprise billing proposals. The report concludes by providing an overview of how surprise billing proposals may affect some combination of insurers, providers, and consumers. An Appendix table compares two federal proposals that have gone through committee markup procedures: Title I of S. 1895 (Alexander), which went through a Senate Committee on Health, Education, Labor, and Pensions (HELP) markup session on June 26, 2019, and Title IV of the amendment in the nature of a substitute (ANS) to H.R. 2328 , which went through a markup session held by the House Committee on Energy and Commerce on July 17, 2019.

crs_R46354

crs_R46354_0

<1. Introduction> In Congress, multiple bills and resolutions have been introduced related to China's handling of a novel coronavirus outbreak in Wuhan, China, that expanded to become the coronavirus disease 2019 (COVID-19) global pandemic. This report provides a timeline of key developments in the early weeks of the pandemic, based on available public reporting to date. The timeline starts with the onset of symptoms among the first known patients later identified as having COVID-19. The timeline documents the subsequent responses in China, at the World Health Organization (WHO), and in the United States through January 31, 2020, the day U.S. Department of Health and Human Services (HHS) Secretary Alex M. Azar II declared the pandemic had become a public health emergency for the United States. The report opens with short sections on disease terminology and the Chinese geographic and political context of the outbreak in its early weeks. The report next offers discussion of select issues raised by the timeline. A detailed timeline follows. A concise timeline is included in an Appendix . <2. Disease Terminology> On February 11, 2020, the International Committee on Taxonomy of Viruses named the novel coronavirus "severe acute respiratory syndrome coronavirus 2" (SARS-CoV-2). The name references the virus' genetic link to the coronavirus responsible for the 2002-2003 severe acute respiratory syndrome (SARS) outbreak, which began in China's Guangdong Province and sparked global panic, infecting 8,096 people worldwide and causing 774 deaths. Also on February 11, WHO named the disease caused by SARS-CoV-2 "coronavirus disease 2019" (COVID-19). Earlier, from January 30, 2020, to February 11, WHO referred to the virus by the interim name "2019 novel coronavirus" (2019 nCoV), and to the disease by the interim name, "2019 novel coronavirus acute respiratory disease" (2019-nCoV acute respiratory disease). China initially referred to the illness its doctors were observing in Wuhan as "pneumonia of unknown cause." Beginning on January 1, 2020, official Chinese sources began referring to it as a "viral pneumonia." On January 12, 2020, the day after China shared the genomic sequence of the novel coronavirus with WHO and on an open-source platform, Wuhan authorities began using the term, "novel coronavirus infection pneumonia." The government and media in China continue to refer to the disease by that name. <3. Chinese Geographic and Political Context> Chinese doctors first identified cases of the disease later named COVID-19 in Wuhan, capital of China's Hubei Province. Wuhan, with a population of 11.2 million, is the largest city in central China, a region comprised of six provinces with a combined population of 368 million. Situated at the intersection of the Yangtze River and its largest tributary, the Hanshui River, the city is a major transportation hub, with river, highway, high-speed rail, and air links to the rest of China. Until the pandemic led airlines to suspend service, the city also offered direct air routes to destinations around the world. Wuhan is a major industrial base and boasts a concentration of elite universities and research centers. The Wuhan Municipal Health Commission, the city's health agency, is in the third tier of a national health hierarchy that extends from the National Health Commission in Beijing down through the Health Commission of Hubei Province, whose offices are also located in Wuhan. The Wuhan Municipal Health Commission reports both to the Wuhan People's Government and to the provincial health commission. The Wuhan Municipal Health Commission directly oversees a dozen hospitals and the Wuhan Center for Disease Control and Prevention (Wuhan CDC), which has a staff of about 220. Wuhan is divided into 13 districts. Each has its own health bureau and CDC, which report both to the district government and the next higher-level entity in their hierarchies, the Wuhan Municipal Health Commission and Wuhan CDC. Jianghan District, home to the Huanan Seafood Wholesale Market, where a number of earliest known COVID-19 patients worked, has a population of 730,000. Population density in Jianghan District is on par with Manhattan. In China's political system, Communist Party secretaries are the most powerful officials at every level of government. They oversee the party bureaucracy and make major decisions. A deputy party secretary usually serves concurrently as head of the parallel state bureaucracy, which implements the Party's decisions. At the national level, Communist Party General Secretary Xi Jinping is China's top leader. He serves concurrently as Chairman of the Party's Central Military Commission and as State President. The Party's second-most senior official, Li Keqiang, serves as Premier of the State Council, or cabinet, overseeing China's state bureaucracy. Both men are members of China's most senior decisionmaking body, the seven-man Communist Party Politburo (or Political Bureau) Standing Committee. At the outset of the epidemic, the top officials of Hubei Province were Party Secretary Jiang Chaoliang and Governor Wang Xiaodong, with the latter serving concurrently as a provincial deputy party secretary. The Party removed Jiang from office on February 13, 2020, and replaced him with former Shanghai Mayor Ying Yong, an associate of Party General Secretary Xi. Governor Wang remains in office. In the city of Wuhan, the top officials at the outset of the epidemic were Party Secretary Ma Guoqiang, who served concurrently as a deputy party secretary for Hubei Province, and Mayor Zhou Xianwang, who served concurrently as the city's deputy party secretary. The Party removed Ma from his provincial and municipal party posts on February 13, 2020, and replaced him with the former Party Secretary of the eastern China city of Jinan, Wang Zhonglin. Mayor Zhou remains in office. At the outset of the epidemic, the top officials of the Hubei Provincial Health Commission were Party Secretary Zhang Jin and Director Liu Yingzi. The Party removed both from their posts on February 11, 2020, replacing them with a former deputy director of China's National Health Commission, Wang Hesheng. The top official of the Wuhan Municipal Health Commission remains Zhang Hongxing. He has served as both Party Secretary and Director of the commission since early 2019. <4. Issues Raised by the Timeline> <4.1. China's Interactions with WHO> In 2002-2003, China's government was widely criticized for waiting more than two months to report the outbreak of SARS to WHO and to its own people. China has shared information about COVID-19 more quickly and comprehensively. The timeline shows, for example, that Chinese authorities allowed experts from the WHO China Country Office and WHO's Western Pacific Regional Office to conduct what WHO describes as "a brief visit to Wuhan" January 20-21, 2020. The timeline nonetheless raises questions for some about China's interactions with WHO at key moments in the early weeks of the pandemic. Article 6 of the International Health Regulations (IHR) (2005), an international agreement to which China, the United States, and 194 other countries are parties, outlines State Parties' obligations, including: Each State Party shall assess events occurring within its territory.... Each State Party shall notify WHO, by the most efficient means of communication available, by way of the National IHR Focal Point, and within 24 hours of assessment of public health information, of all events which may constitute a public health emergency of international concern within its territory.... Following a notification, a State Party shall continue to communicate to WHO timely, accurate and sufficiently detailed public health information available to it on the notified event, where possible including case definitions, laboratory results, source and type of the risk, number of cases and deaths, conditions affecting the spread of the disease and the health measures employed; and report, when necessary, the difficulties faced and support needed in responding to the potential public health emergency of international concern. The timeline suggests that in the early weeks of the pandemic, Chinese authorities may not always have communicated with WHO in the "timely, accurate and sufficiently detailed" way IHR (2005) requires. <4.1.1. "Verification" vs. "Notification" of the Outbreak> It appears China may not have proactively notified WHO of the outbreak, as required by Article 6.1 of IHR (2005). According to Dr. Michael Ryan, Executive Director of WHO's Health Emergencies Programme, WHO headquarters in Geneva first learned about the outbreak in Wuhan not directly from Chinese authorities, but rather from the Program for Monitoring Emerging Diseases (ProMED), a U.S.-based open-source platform for early intelligence about infectious disease outbreaks. At 11:59 p.m. Eastern Standard Time (EST), a ProMed user posted a machine translation of a Chinese-language report about the outbreak from a news organization, Yicai , the financial news arm of China's state-owned Shanghai Media Group. Yicai had published its report online just under three hours earlier. It detailed the contents of two Wuhan Municipal Health Commission "urgent notices" about atypical pneumonia cases, which the commission had sent the day before to medical institutions in Wuhan, and which internet users in Wuhan had leaked online within minutes. Another document from Wuhan that circulated widely online overnight on December 30-31 a photograph of a patient lab report showing a positive result for SARS, with the SARS finding circled in red alerted Chinese news organizations to the possible significance of the "urgent notices." The head of emergency medicine at Wuhan Central Hospital, Dr. Ai Fen, had shared the image online with a former classmate and a group of colleagues in the time between the issuance of the two Wuhan Municipal Health Commission "urgent notices" on December 30. Another Wuhan Central Hospital doctor, Li Wenliang, had shared the image with a group of his former classmates in a private online WeChat group a few hours later. (Dr. Li would later be reprimanded by Wuhan authorities for his social media posts, celebrated by the Chinese public as a whistleblower, and fall victim to COVID-19. He died on February 7, 2020, at the age of 33. ) For WHO, the ProMED post appears to have triggered Articles 9 and 10 of IHR (2005). Article 9 provides for WHO to "take into account reports from sources other than notifications or consultations" by State Parties, and then "attempt to obtain verification from the State Party in whose territory the event is allegedly occurring." Article 10 requires State Parties to respond to verification requests from WHO within 24 hours. Speaking at a WHO press conference on April 20, 2020, Ryan said as soon as WHO headquarters learned about the outbreak from ProMed on December 31, it asked the WHO China Country Office to request "verification of the event" from the government of China under IHR (2005). Ryan noted, "member states are required to respond within 24 to 48 hours of any request from the WHO for clarification or verification of an event or a signal that we believe may be significant." (IHR (2005) stipulates 24 hours, not 48.) China's official timeline says it began "regularly informing" WHO of developments related to the outbreak on January 3. On January 4, WHO tweeted, "China has reported to WHO a cluster of pneumonia cases with no deaths in Wuhan, Hubei Province." WHO's Ryan said the WHO China Country Office formally requested verification of the outbreak on January 1, "[t]hat process continued and on 4 th January WHO tweeted the existence of the event." Whether intentionally or otherwise, WHO's first formal statement about the outbreak, on January 5, was not clear on how the WHO Country Office learned about the outbreak. It used passive voice to state that the China Country Office "was informed" on December 31, 2019, of cases of pneumonia of unknown cause in Wuhan. <4.1.2. Sharing Identification of a Novel Coronavirus and the Virus' Genomic Sequence> China's government appears to have potentially hesitated before informing WHO both when it determined a novel coronavirus was responsible for the outbreak and when its scientists sequenced the virus' genome. On January 9, 2020, WHO announced, "Chinese authorities have made a preliminary determination of a novel (or new) coronavirus, identified in a hospitalized person with pneumonia in Wuhan." On January 11, 2020, WHO tweeted, "BREAKING: WHO has received the genetic sequences for the novel #coronavirus (2019-nCoV) from the Chinese authorities." China appears to have determined that a novel coronavirus was responsible days before January 9, 2020, however. Its scientists also sequenced the virus' genome days earlier than January 11, 2020. According to Caixin , a respected Chinese news organization, hospitals in Wuhan sent samples from their pneumonia cases to commercial companies for analysis in late December 2019. Several of those companies informed the hospitals that the patient samples indicated a novel coronavirus. One company, BGI Genomics, completed genomic sequencing of the novel coronavirus on December 26, 2019, Caixin reports. The next entity reported to have sequenced the genome was the Wuhan Institute of Virology (WIV), an affiliate of the Chinese Academy of Sciences. Chinese state media say WIV sequenced the virus' genome on January 2. A timeline in a March 26, 2020, article by China CDC experts and others in T he New England Journal of Medicine indicates China CDC sequenced the genome on January 3, 2020. China's official timelines provide January 7 as the date China CDC sequenced the genome. January 9, 2020, media reports about the CDC's sequencing breakthrough appear to have prompted WHO to issue its statement announcing identification of a novel coronavirus. A fourth group of scientists, led by Prof. Yong-zhen Zhang of Fudan University in Shanghai, sequenced the genome on January 5, 2020, and was the first to share it with the world. They deposited the sequence with the U.S. National Institutes of Health's GenBank, a database of publicly available DNA sequences, on January 5, submitted a paper on their work to the journal Nature on January 7, 2020, and posted the genome on Virological.org, an open-access hub for pre-publication data and analyses, on the morning of January 11. Later on January 11, 2020, a team from China CDC and two other teams shared genomic sequences of the novel coronavirus on Global Initiative on Sharing All Influenza Data (GISAID), an international platform for sharing influenza data, and WHO tweeted that Chinese authorities had provided WHO with genetic sequences for the virus. <4.1.3. Biological Samples> Chinese authorities do not appear to have shared biological samples with WHO or other international partners as of January 28, 2020, and possibly as of April 25. A line in a January 28, 2020, WHO press release about WHO Director-General Dr. Tedros Adhanom Ghebreyesus' meeting with Chinese leader Xi Jinping indicates that China's government had yet to share biological samples with the organization. Among other things, Director-General Tedros and Xi discussed, "continuing to share data, and for China to share biological material with WHO," the WHO press release stated. On April 25, 2020, State Department Spokesperson Morgan Ortagus tweeted, "China has not shared any #COVID19 virus or clinical samples to the best of our knowledge." <4.2. Chinese Authorities' Information Sharing> The timeline indicates that information Chinese authorities provided to the Chinese public and to the world in the early weeks of the epidemic was often incomplete and understated the extent of the virus' spread. China shared more information beginning January 20, 2020. On January 21, for example, China's National Health Commission began issuing daily updates on case numbers. Information gaps in the early weeks and other information-sharing issues include the following. Wuhan doctors suspected person-to-person transmission of the mysterious new pneumonia as early as late December. Dr. Zhang Jixian of the Hubei Provincial Hospital of Integrated Chinese and Western Medicine later told China's state news agency that she reported a family cluster of cases to her superiors on December 27, 2019, because, "It is unlikely that all three members of a family caught the same disease at the same time unless it is an infectious disease." When visitors from Hong Kong, Macao, and Taiwan visited Wuhan January 13-14, 2020, an official from China's National Health Commission told them, "limited human-to-human transmission cannot be excluded." A WHO expert echoed that position in a January 14, 2020, press conference, stating that China had experienced "limited" human-to-human transmission of the novel coronavirus, mainly in families. Chinese authorities first publicly confirmed person-to-person transmission on January 20. Wuhan medical personnel began falling ill with symptoms similar to their patients' in December, but Chinese authorities did not acknowledge medical worker infections until January 20. The best-known victim of the novel coronavirus in China is Dr. Li Wenliang of Wuhan Central Hospital, whom Wuhan police reprimanded on January 3, 2020, for sharing information about the virus online. Li was hospitalized on January 12, 2020, and died on February 7, 2020. Among other reports of medical worker infections, a single "super-spreader" patient who underwent surgery at the Wuhan Union Hospital on January 7, 2020, was later found to have infected 14 medical staff. Wuhan's Municipal Health Commission issued no updates while a five-day-long political meeting took place in the city January 6-10. For the duration of a second major political meeting in the city, January 12-17, the Wuhan Municipal Health Commission issued daily updates, but reported no new infections. The commission's report on January 11, issued on the day between the two political meetings, gave the impression the epidemic was shrinking. On January 5, the commission had reported a cumulative 59 cases in the city. On January 11, it revised the cumulative number of cases down to 41, a number that remained constant through January 16. The absence of updates from January 6 to 10, and the official statements that no new cases had been detected between January 3 and January 16, may have given Wuhan residents a false sense of security that the outbreak was under control. The United States made multiple offers over the course of January 2020 to send a U.S. Centers for Disease Control and Prevention (U.S. CDC) team to China to assist with response to the outbreak. Any team that went would also have learned information about the epidemic of relevance to the U.S. response. The timeline shows U.S. officials offered to send a U.S. CDC team on January 4, January 6, and January 27. On January 27, President Trump supported the offer with a tweet, saying, "We have offered China and President Xi any help that is necessary. Our experts are extraordinary!" No U.S. CDC team traveled to China in this period, although Weigong Zhou, an employee of U.S. CDC, and Clifford Lane, an employee of the U.S. National Institutes of Health (NIH), did participate in a WHO-China Joint Mission to China from February 16 to 24, 2020. Although Chinese experts have published a stream of papers in English-language scientific journals since the epidemic began, including several important papers in January 2020, some in the international community have expressed frustration over what China has not shared. One area of interest is analysis of samples from the Huanan Seafood Wholesale Market (also referred to in some sources as South China Seafood City). China CDC provided summary details of its findings to Chinese state media it found 33 of 585 samples tested positive for SARS-Cov-2 but China CDC has not issued details of its scientific analysis of the samples and appears to have not taken samples from animals in the market. Chinese media reports indicate that local authorities disinfected the market on at least the two nights before it closed, potentially also compromising samples. On May 6, 2020, Secretary of State Michael R. Pompeo stated, "China is still refusing to share the information we need to keep people safe, such as viral isolates, clinical specimens, and details about the many COVID-19 patients in December 2019, not to mention 'patient zero.'" It remains unclear who was responsible for decisions to withhold information in the early weeks. In a nationally televised interview, Wuhan Mayor Zhou Xianwang pointed to China's Law on Prevention and Control of Infectious Diseases , which he said restricted Wuhan from sharing information without permission from higher-ups. <4.3. Chinese Authorities' Efforts to Discourage Information Sharing> In addition to examples of incomplete information provided by Chinese authorities, the timeline of events through January 31, 2020, includes instances of official actions to discipline those who shared information about the epidemic publicly, as well as examples of censorship. They include the following: Wuhan Municipal Public Security officers reprimanded at least eight people for allegedly "spreading rumors" about the outbreak and thereby creating a "negative social influence." It remains unclear whether two of the best known medical workers reprimanded for sharing early information about the outbreak, Wuhan Central Hospital's Dr. Ai Fen and Dr. Li Wenliang, are counted among the eight, or if theirs are additional cases. The day after the team of scientists led by Prof. Yong-zhen Zhang of Fudan University in Shanghai became the first to share the genetic sequence of the novel coronavirus with the world, Shanghai authorities closed down Professor Zhang's laboratory for "rectification," implying it is being investigated for unspecified wrongdoing. Hong Kong's South Morning Post , which reported the development, wrote that it was "not clear whether the closure was related to the publishing of the sequencing data before the authorities." Official Chinese timelines omit mention of the team's work. Official censorship has blocked access to enterprising reporting undertaken by both Chinese and foreign news organizations. Dr. Ai Fen's first-person account in a national magazine, People ( Renwu ), for example, was deleted from Renwu's website the day it appeared, though Chinese internet users have worked to keep it accessible. Chinese activists have archived it and many other censored reports on sites such as Terminus2049. Some of those activists are now missing. <4.4. Chinese Leadership Signaling Related to the Novel Coronavirus> Prior to January 20, the public record provides little evidence that China's top leaders saw containment of the epidemic as a high priority. China's state media reported three meetings of China's top decisionmaking body, the seven-man Communist Party Politburo (also known as "Political Bureau") Standing Committee, in the month of January 2020, on January 7, 13, and 25. Contemporaneous reporting on the first two meetings made no mention of the epidemic, although on February 15 the Communist Party released February 3 remarks in which General Secretary Xi recalled having "raised a demand for prevention and control of the novel coronavirus pneumonia" at the January 7 meeting. People's Daily , the newspaper of the Communist Party Central Committee, made no mention of the epidemic in its pages until January 21, when it carried six articles, including two on the front page. Chinese officials at all levels monitored the paper closely for signals about leadership priorities. General Secretary Xi, in his capacity as State President, made an official visit to Burma from January 17-18, 2020, to celebrate the 70 th anniversary of bilateral diplomatic relations. State media coverage of the trip gave no indication that Xi and his Burmese hosts discussed the epidemic or efforts by China to contain it. The Chinese leadership's approach to the epidemic changed dramatically on January 20. On that day, a medical expert lauded for his role in the SARS epidemic, Zhong Nanshan, officially confirmed human-to-human transmission and medical worker infections. China's National Health Commission declared novel coronavirus-caused pneumonia a statutory notifiable infectious disease under the PRC Law on the Prevention and Treatment of Infectious Diseases . China also amended the PRC Health and Quarantine Law , opening the way for mandatory quarantines and lock-downs. The day ended with General Secretary Xi issuing an "important instruction," carried in all major media, to prioritize novel coronavirus prevention and control work. <4.5. The Role of China's Holiday Calendar> China's holiday calendar likely set back efforts to contain the outbreak and contributed to its spread overseas. The Lunar New Year, also known as Spring Festival, is China's most important holiday. In 2020, it fell on January 25. Ahead of the holiday, millions of Wuhan residents left the city to return to their hometowns to spend the festival with their extended families. A smaller number of Wuhan residents got on planes to holiday destinations abroad. In Wuhan, a community of 40,000 households with a two-decade tradition of mass potluck banquets ahead of the Lunar New Year went ahead with its 20 th annual potluck on January 18, 2020, contributing to the virus' spread. <5. Timeline> Note that when times are listed, the timeline also notes the time zone, whether Chinese Standard Time (CST) for China, Eastern Standard Time (EST) for the eastern part of the contiguous United States, or Central European Time (CET) for Geneva, Switzerland, the headquarters location for WHO. <5.1. November 17, 2019-December 8, 2019> <5.1.1. China (Wuhan)> Retrospectively, the date the earliest known COVID-19 patient first developed symptoms remains unclear. In a March 2020 report, the Hong Kong-based South China Morning Post , citing Chinese "government data seen by the Post ," indicates that the first known patient was a 55-year-old from Hubei Province who became ill on November 17. Asked in March 2020 about the Post report, China CDC Director Gao Fu states, "There is no solid evidence to say we already had clusters in November." In a January 24, 2020, article in The Lancet medical journal, doctors from a Wuhan infectious disease hospital and their co-authors state that among the first 41 cases in Wuhan later identified as being COVID-19, the first patient showed symptoms on December 1. In January 11-12 communications with WHO and in an authoritative February 17 report, Chinese authorities provide December 8 as the day when the first known patient later identified as having COVID-19 became symptomatic. <5.2. December 24, 2019> Doctors at Wuhan Central Hospital take fluid samples from the lungs of a 65-year-old patient with pneumonia and send them to Vision Medicals, a genomics company in Guangzhou, Guangdong Province, for testing. <5.3. December 26, 2019> <5.3.1. China (Wuhan)> Another Wuhan hospital sends a sample from a pneumonia patient to publicly-listed genomics company BGI Genomics for analysis. <5.4. December 27, 2019> <5.4.1. China (Wuhan)> Dr. Zhang Jixian, Director of Respiratory and Critical Care Medicine at the Hubei Provincial Hospital of Integrated Chinese and Western Medicine in Wuhan, files a report with her supervisors about three members of a single family whom she found to be suffering from pneumonia of unknown cause. She later recalls concluding, "It is unlikely that all three members of a family caught the same disease at the same time unless it is an infectious disease." The hospital notifies Center for Disease Control for its district of Wuhan, Jianghan District. Vision Medicals, the genomics company to which Wuhan Central Hospital sent samples from the lungs of the 65-year-old patient for analysis on December 24, calls with the results. According to an account Dr. Zhao Su, the hospital's head of respiratory medicine, gave news organization Caixin in February 2020, "They just called us and said it was a new coronavirus." Wuhan Central Hospital admits a 41-year-old man with pneumonia, collects biological samples from him, and sends the swabs to another laboratory, CapitalBio Medlab Co. Ltd., for analysis. <5.5. December 29, 2019> <5.5.1. China (Wuhan)> The Hubei Provincial Hospital of Integrated Chinese and Western Medicine has identified additional cases of pneumonia of unknown cause. Other hospitals in Wuhan are reporting similar cases. Wuhan Municipal CDC organizes an expert team to investigate. BGI Genomics is the first known entity to complete sequencing of the novel coronavirus virus, based on the sample sent to it on December 26. A BGI Genomics source later tells Caixin the company did not know the virus was responsible for multiple illnesses and so did not understand the significance of its work at the time. <5.6. December 30, 2019> <5.6.1. China (Wuhan)> 3:10 p . m . (CST) : The Wuhan Municipal Health Commission issues an "urgent notice" intended only for medical institutions in Wuhan. It states that cases of pneumonia of unknown cause have emerged from the city's Huanan Seafood Wholesale Market. It orders hospitals to compile statistics on all such cases admitted in the previous week and report them by email to the Health Commission by 4 p.m. A later investigation by the National State Supervisory Commission, an agency tasked with investigating graft and malfeasance among public servants, will reveal that someone leaks the notice online within 12 minutes of its being issued. About 12 p.m. CST : Dr. Ai Fen, head of the emergency department at Wuhan Central Hospital, receives a WeChat message from a former classmate at another hospital, Tongji Hospital, asking about a message circulating online: "Don't go to Huanan [Market]. A lot of people there have fevers ." Dr. Ai sees the message from her classmate while she is reviewing a computed tomography (CT) scan of an infected patient's lungs. She records an 11-second clip of the CT scan and sends it to him. A bout 4 p.m . CST : Dr. Ai Fen reads Capital Bio's laboratory report on the patient admitted on December 27, which states that his sample has tested positive for Severe Acute Respiratory Disease (SARS). (The finding is later determined to be erroneous. The patient was infected with the novel coronavirus, later named SARS-CoV-2.) Dr. Ai telephones the hospital's public health department and its infectious disease department to report the finding and tells the director of the respiratory disease department in person. Then she draws a red line around the "SARS" finding and shares an image of the report online with her classmate at Tongji Hospital, as well as with a group of colleagues. She will later say she does so "to remind everyone to pay attention to protecting themselves." 5:43 p . m . CST : Wuhan Central Hospital ophthalmologist Li Wenliang sends a message to a group of his medical school classmates on the WeChat social media platform, reporting, "7 confirmed SARS cases from the Huanan Fruit and Seafood Market." Dr. Li does not personally know Dr. Ai Fen, but he sends an image of the laboratory report Dr. Ai shared with her associates less than two hours earlier. He also sends the 11-second lung CT scan of a patient's lungs that Dr. Ai shared with her classmate at noon. 6:50 p . m . CST : The Wuhan Municipal Health Commission issues a second "urgent notice" to medical institutions, instructing them on how to manage patients with pneumonia of unknown cause and ordering them to track such cases and report them in a timely fashion to district CDCs and the Wuhan Municipal Health Commission. A later investigation by China's State Supervisory Commission will reveal that someone leaks the notice online within 10 minutes of its being issued. <5.7. December 31, 2019> <5.7.1. China (Wuhan)> The Wuhan Municipal Health Commission alerts China's National Health Commission and China CDC in Beijing to the cases. The National Health Commission dispatches a working group and the first of several expert teams to Wuhan. Morning CST: Several Chinese media outlets confirm the authenticity of the Wuhan Health Commission's "urgent notices" of the day before, which spread rapidly across social media overnight. Yicai (also known as China Business News ), the financial news arm of state-owned Shanghai Media Group, confirms the notices are genuine by calling the Wuhan Municipal Health Commission's public hotline number. Yicai publishes a story on the outbreak in Wuhan online at 10:16 a.m. CST. Another Chinese news organization, Xin Jing Bao , confirms the authenticity of the documents with Wuhan CDC, and publishes its own story 37 minutes later. <5.7.2. United States (Brookline, MA)> 11:59 p.m. EST ( December 30 ) / 5:59 a.m. CET (Geneva)/12:59 p.m. CST ) : A user of the U.S.-based listserv Program for Monitoring Emerging Diseases or ProMED posts a machine translation of Yicai's article. <5.7.3. China (Wuhan)> 1:38 p . m . CST : The Wuhan Municipal Health Commission posts on its website its first public statement on the outbreak. It states that some medical institutions in the city have treated cases of pneumonia linked to the city's Huanan Seafood Wholesale Market. The commission says it asked medical institutions to search for cases related to the market and do retrospective investigations, and they identified 27 cases, including seven cases in which patients are seriously ill. The commission notes that hygiene investigation and environmental sanitation measures at the market are underway. Doctors at Wuhan's Jinyintan Hospital request that the Wuhan Institute of Virology under the Chinese Academy of Sciences conduct whole-genome sequencing on samples from six patients. <5.7.4. WHO> World Health Organization (WHO) headquarters in Geneva learns of "a cluster of pneumonia cases in China" from the ProMED platform. (See " United States (Brookline, MA) ".) WHO headquarters requests that the WHO China Country Office follow up with Chinese authorities. <5.7.5. Taiwan and WHO> Taiwan's Centers for Disease Control sends an email to WHO. It reads, "News resources today indicate that at least seven atypical pneumonia cases were reported in Wuhan, CHINA. Their health authorities replied to the media that the cases were believed not SARS; however the samples are still under examination, and cases have been isolated for treatment. I would greatly appreciate if you have relevant information to share with us." Taiwan's Central Epidemic Command Center later notes, "To be prudent, in the email we took pains to refer to atypical pneumonia, and specifically noted that patients had been isolated for treatment. Public health professionals could discern from this wording that there was a real possibility of human-to-human transmission of the disease." <5.8. January 1, 2020> <5.8.1. China (Wuhan)> Between 5 a.m. and 6 a.m. CST : Wuhan's Jianghan District government suspends operation of the Huanan Seafood Wholesale Market linked to cases of atypical pneumonia. (In addition to selling seafood, the market also sold live wild animals, including hedgehogs, badgers, snakes, and turtledoves. ) Vendors tell the news organization Xin Jing Bao that workers wearing masks have been spraying disinfectant in the market late at night since at least December 30, 2019. Morning CST : A team from China's National Institute for Viral Disease Control and Prevention, part of Beijing-based China CDC, visits the Huanan Seafood Wholesale Market and collects 515 environmental samples, which it sends back to the institute for analysis. CDC experts will return on January 12, 2020, to take 70 more samples from stalls where vendors sold wild animals. Other scientists will later fault the team for not undertaking direct animal sampling in the market before it closed, as without such samples, it may be difficult to determine whether animals at the market were reservoirs for the virus. 5:38 p.m. CST : The Wuhan Municipal Public Security Bureau announces on its official Weibo social media account that it has investigated eight people for "spreading rumors." The bureau's announcement states that while medical institutions in the city have admitted multiple pneumonia cases, some netizens posted and shared "inaccurate information" online, creating a "negative social influence." The eight "law breakers" have been "dealt with," the bureau says. It warns others against "manufacturing rumors, believing rumors, or spreading rumors." Chinese Central Television (CCTV), the Xinhua News Agency, and national other news outlets report on the Wuhan Municipal Public Security Bureau's announcement, also warning against spreading rumors. The Hubei Provincial Health Commission reportedly orders genomics companies to stop testing samples from Wuhan and to destroy existing samples. <5.8.2. WHO> Following the protocols of Article 9 of the International Health Regulations (IHR) (2005), an international agreement on responses to infectious disease outbreaks, WHO's China Country Office formally requests that the government of China provide "verification" of the outbreak. <5.9. January 2, 2020> <5.9.1. China (Wuhan)> At just after 8 a.m. CST, a senior official of Wuhan Central Hospital subjects Dr. Ai Fen to what she later describes as "an unprecedented and very severe rebuke." The official tells her not to speak to anyone, including her husband, about the pneumonia cases. She will comply, but will later express regret about lives lost because she didn't "keep screaming." Using samples from patients at Wuhan's Jinyintan Hospital, the Wuhan Institute of Virology identifies the novel coronavirus and sequences its genome. <5.9.2. China (Beijing)> China CDC and the Chinese Academy of Medical Sciences (CAMS) receive biological samples from four patients in Hubei Province and begin work to identify the pathogen responsible for their illnesses. <5.10. January 3, 2020> <5.10.1. China (Wuhan)> About 1:30 p.m. CST : Wuhan Central Hospital's Dr. Li Wenliang, accompanied by a colleague, arrives at the Wuchang Sub-station of the Wuhan Public Security Bureau to discuss his December 30 posts to the WeChat group. Li is required to sign a letter of reprimand, which he will post online on January 31. The letter states that Li's "false statement" "severely disturbed social order" and violated the People's Republic of China's Law on Penalties for Administration of Public Security . (Article 25 of the law prohibits "intentionally disturbing the public order by spreading rumors or making false reports of dangerous situations, epidemic situations, or police actions." ) 5:08 pm CST : The Wuhan Municipal Health Commission reports it has identified 44 patients with symptoms consistent with pneumonia of unknown origin, some of whom worked at the Huanan Seafood Wholesale Market and 11 of whom are severely ill. <5.10.2. China (Shanghai)> Professor Yong-zhen Zhang of the Shanghai Public Health Clinical Center and School of Public Health at Fudan University in Shanghai receives biological samples for analysis from Wuhan Central Hospital. The samples are from a 41-year-old pneumonia patient who worked at the Huanan Seafood Wholesale Market in Wuhan and was admitted to Wuhan Central Hospital on December 26, 2019. <5.10.3. China (Beijing)> China CDC completes genomic sequencing of the novel coronavirus, according to a March 26 paper by China CDC experts and others in the The New England Journal of Medicine . (China's official timeline gives January 7 as the date China CDC completed sequencing of the virus.) China's National Health Commission issues a directive on management of biological samples in major infectious disease outbreaks. The directive reportedly "ordered institutions not to publish any information related to the unknown disease, and ordered labs to transfer any samples they had to designated testing institutions, or to destroy them." <5.10.4. United States and China (Beijing)> U.S. Centers for Disease Control and Prevention (U.S. CDC) Director Robert Redfield emails and then speaks with his Chinese counterpart, Gao Fu (George F. Gao), Director-General of China CDC, who tells him about the atypical pneumonia outbreak in Wuhan. (China later says this is the first of 30 briefings it will provide to the U.S. government through February 3. ) Redfield then calls HHS Secretary Alex M. Azar II at home to brief him on the call. Secretary Azar reportedly tells his chief of staff to notify the White House's National Security Council. <5.11. January 4, 2020> <5.11.1. WHO> In its first public statement on the outbreak, WHO tweets, "China has reported to WHO a cluster of pneumonia cases with no deaths in Wuhan, Hubei Province. Investigations are underway to identify the cause of this illness." The tweet appears to reflect that China has formally verified the outbreak, as the WHO China Country Office requested it do on January 1. <5.11.2. United States and China (Beijing)> The U.S. CDC offers to send technical experts to China. U.S. CDC Director Robert Redfield emails China CDC Director-General Gao Fu, saying, "I would like to offer [U.S.] CDC technical experts in laboratory and epidemiology of respiratory infectious diseases to assist you and China CDC in identification of this unknown and possibly novel pathogen." Neither the United States nor China has disclosed how Gao responds, if at all, but no U.S. CDC team goes to China at this time. <5.12. January 5, 2020> <5.12.1. China (Wuhan)> The Wuhan Municipal Health Commission announces that it has identified 59 patients with symptoms consistent with pneumonia of unknown origin. It states that a preliminary investigation has uncovered no "clear evidence of human-to-human transmission" or infections among medical workers. <5.12.2. China (Shanghai)> The team led by Prof. Yong-zhen Zhang of Fudan University in Shanghai identifies a novel coronavirus and sequences its genome. The team reports its work to Chinese authorities and submits the sequence to GenBank, a genetic sequence database operated by the U.S. National Institutes of Health that serves as "an annotated collection of all publicly available DNA sequences." (China's official timelines omit mention of the team's work, perhaps because it was not coordinated by China's National Health Commission. China's official timelines state that successful sequencing of the genome happened two days later, with China CDC's reported sequencing of the virus on January 7. ) <5.12.3. WHO> WHO issues its first formal public statement on the outbreak, a "disease outbreak news" item. It states, "On December 31, 2019, the WHO China Country Office was informed of cases of pneumonia of unknown etiology (unknown cause) detected in Wuhan City, Hubei Province of China." The statement adds, "Based on the preliminary information from the Chinese investigation team, no evidence of significant human-to-human transmission and no health care worker infections have been reported." WHO says it "advises against the application of any travel or trade restrictions on China based on the current information available on this event." <5.13. January 6, 2020> <5.13.1. China (Wuhan)> The annual full session of the Wuhan Municipal People's Congress opens. The congress will last five days and occupy 515 of the city's most important citizens, including the city's entire top leadership. While the congress is in session, the Wuhan Municipal Health Commission will issue no updates on the status of the epidemic. <5.13.2. United States> U.S. CDC issues a "Watch Level 1 Alert (be aware and practice usual precautions)" for Wuhan, due to "a pneumonia outbreak of unknown cause." It advises travelers to Wuhan to "Avoid animals (alive or dead), animal markets, and products that come from animals (such as uncooked meat)," "Avoid contact with sick people," and "Wash hands often with soap and water." It also advises anyone who has traveled to Wuhan and feels sick to isolate at home except for seeking medical care. HHS Secretary Azar and CDC Director Robert Redfield renew Redfield's offer to send U.S. CDC experts to China, this time in the form of an official letter. Azar later recalls, "We made the offer to send the [U.S.] CDC experts in laboratory and epidemiology of respiratory infectious diseases to assist their Chinese colleagues to get to the bottom of key scientific questions like, how transmissible is this disease? What is the severity? What is the incubation period and can there be asymptomatic transmission?" <5.14. January 7, 2020> <5.14.1. China (Wuhan)> A 69-year-old patient undergoes neurosurgery at Wuhan Union Hospital. Four days later, he will develop symptoms that will later be identified as those of the novel coronavirus. Following his admission, he will infect 14 medical workers, making him the virus' first identified "super-spreader." Chinese authorities will not disclose infections among medical personnel until January 20. <5.14.2. China (Beijing)> China's leader, Xi Jinping, convenes an all-day meeting of the country's seven-man Politburo Standing Committee, the country's highest decisionmaking body. Media reports of the meeting at the time do not mention the epidemic. In a February 3 speech made public on February 15, however, Xi states that at the January 7 meeting, he "raised a demand for prevention and control of the novel coronavirus pneumonia." 9 p . m . CST : A China CDC team reportedly sequences the genome of the novel coronavirus. Chinese state media will announce this on January 9. <5.14.3. China (Shanghai)> The team led by Prof. Yong-zhen Zhang of Fudan University in Shanghai submits an article to the peer-reviewed journal Nature detailing the team's sequencing of the novel coronavirus. <5.15. January 8, 2020> <5.15.1. China (Hong Kong Special Administrative Region)> In an article with a Hong Kong byline, "New Virus Discovered by Chinese Scientists Investigating Pneumonia Outbreak," The Wall Street Journal is the first major publication to report that Chinese scientists have genetically sequenced a novel coronavirus. The Wall Street Journal says "Chinese scientists" sequenced the virus, but it does not identify them or their institutions. <5.15.2. United States and China (Beijing)> U.S. and Chinese CDC Directors speak by phone about "technological exchanges and cooperation," according to China's official timeline. <5.16. January 9, 2020> <5.16.1. China (Beijing)> 9:45 a.m. CST : The Xinhua news agency publishes an interview in which a prominent medical expert states that the pneumonia cases in Wuhan appear to be caused by a novel coronavirus. 10:32 a.m. CST: CCTV reports that on January 7, China CDC successfully sequenced the genome of the novel coronavirus responsible for the Wuhan outbreak. <5.16.2. WHO> WHO issues a statement about the preliminary determination of a novel coronavirus, observing, "Preliminary identification of a novel virus in a short period of time is a notable achievement." It adds, "WHO does not recommend any specific measures for travelers. WHO advises against the application of any travel or trade restrictions on China based on the information currently available." <5.17. January 10, 2020> <5.17.1. China (Wuhan)> The annual full session of the Wuhan Municipal People's Congress concludes after five days, during which the Wuhan Municipal Health Commission issued no updates on the epidemic. The Wuhan Institute of Virology is among the institutions that have now developed testing kits. All suspected novel coronavirus patients in Wuhan are tested. <5.17.2. WHO and China> Chinese National Health Commission Party Secretary and Director Ma Xiaowei and China CDC Director-General Gao Fu speak separately by telephone with WHO Director General Tedros about the epidemic. According to China's official timeline, the Chinese government shares "specific primers and probes for detecting the novel coronavirus" with WHO. WHO issues "Advice for International Travel and Trade in Relation to the Outbreak of Pneumonia Caused by a New Coronavirus in China." It recommends against entry screening for travelers, stating, "It is generally considered that entry screening offers little benefit, while requiring considerable resources." Reflecting information from China, it states, "From the currently available information, preliminary investigation suggests that there is no significant human-to-human transmission, and no infections among health care workers have occurred." <5.18. January 11, 2020> <5.18.1. China (Wuhan)> In its first statement since January 5, the Wuhan Municipal Health Commission states that it has identified no new infections since January 3 and that cases preliminarily attributed to novel coronavirus pneumonia stand at 41 18 fewer than the 59 cases of pneumonia of unknown cause the commission reported on January 5. The commission announces the first death of a coronavirus patient, a 61-year-old man who was a long-time customer of the Huanan Seafood Wholesale Market. The commission states again that it has not found evidence of person-to-person transmission or infections among health care workers. <5.18.2. China (Beijing and Wuhan)> 9 :08 a.m. CST : The team led by Prof. Yong-Zhen Zhang of Fudan University in Shanghai becomes the first to share the genomic sequence of the novel coronavirus with the world. Australian virologist Edward C. Holmes tweets that he has posted an "initial genome sequence of the coronavirus associated with the Wuhan outbreak" on Virological.org, a hub for pre-publication data and analyses. On Virological.org, Holmes writes that he is acting on behalf of the consortium of scientists led by Prof. Zhang, and that the team has also deposited the sequence with GenBank. After the Shanghai team's announcement, China CDC's National Institute for Viral Disease Control and Prevention shares three sequences on Global Initiative on Sharing All Influenza Data (GISAID), an international platform for sharing influenza data. Two other Chinese teams share sequences to GISAID, too. <5.18.3. WHO> WHO tweets, "BREAKING: WHO has received the genetic sequences for the novel #coronavirus (2019-nCoV) from the Chinese authorities. We expect them to be made publicly available as soon as possible." China later says the Chinese institutions that jointly share the genomic sequence with WHO are China CDC, the Chinese Academy of Medical Sciences, and the Wuhan Institute of Virology under the Chinese Academy of Sciences, as designated agencies of the National Health Commission. <5.19. January 12, 2020> <5.19.1. China (Wuhan)> The annual full session of the People's Congress of Hubei Province opens in Wuhan. It will last five-and-a-half days and involve 683 delegates. Representatives from the U.S. and United Kingdom consulates in Wuhan attend the opening ceremony. While the congress is in session, the Wuhan Municipal Health Commission will issue daily updates, but will report no new infections. Dr. Li Wenliang is hospitalized with symptoms of the novel coronavirus. In a January 31 Weibo micro-blog post, he recalls thinking at this time, "How can the bulletins still be saying there is no human-to-human transmission, and no medical worker infections?" Chinese authorities do not disclose medical worker infections until January 20. A team from China's National Institute for Viral Disease Control and Prevention, part of China CDC, return to the shuttered Huanan Seafood Wholesale Market to collect 70 additional samples from stalls where vendors sold wild animals. China CDC previously collected an initial 515 environmental samples from the market on January 1, 2020. <5.19.2. China (Shanghai)> The Shanghai Health Commission orders Dr. Yong-zhen Zhang's laboratory at the Shanghai Public Health Clinical Centre and School of Public Health at Fudan University to close for unspecified "rectification.'" No reason is given. According to Hong Kong's South Morning Post , it is "not clear whether the closure was related to the publishing of the sequencing data before the authorities." <5.19.3. WHO and China> WHO issues a statement noting, "China shared the genetic sequence of the novel coronavirus on 12 January, which will be of great importance for other countries to use in developing specific diagnostic tests." WHO also states, "The evidence is highly suggestive that the outbreak is associated with exposures in one seafood market in Wuhan. The market was closed on 1 January 2020. At this stage, there is no infection among healthcare workers, and no clear evidence of human to human transmission." <5.20. January 13, 2020> <5.20.1. Taiwan, Hong Kong, Macao, and Wuhan> Two experts from Taiwan's Communicable Disease Control Medical Network and its Centers for Disease Control arrive in Wuhan for a two-day visit to investigate the outbreak. With colleagues from the Chinese Special Administrative Regions of Hong Kong and Macao, they visit Wuhan's Jinyintan Hospital, where an official from China's National Health Commission tells them, "limited human-to-human transmission cannot be excluded." One of the Taiwan experts recalls thinking, "that means human-to-human transmission absolutely." <5.20.2. China (Beijing)> The Communist Party's top decisionmaking body, the Politburo Standing Committee, meets in Beijing to discuss reports to be delivered at upcoming annual full meetings of the national legislature, the National People's Congress, and a political advisory body. (Both meetings will subsequently be postponed due to the epidemic.) Chinese media reports on the meeting do not mention the novel coronavirus. <5.20.3. Thailand> Thai authorities confirm the first case of the coronavirus outside of China. The individual confirmed to have the virus is a Chinese national who traveled to Thailand from Wuhan. <5.21. January 14, 2020> <5.21.1. WHO> WHO headquarters tweets, "Preliminary investigations conducted by the Chinese authorities have found no clear evidence of human-to-human transmission of the novel #coronavirus (2019-nCov) identified in #Wuhan, #China." Dr. Maria Van Kerkhove, acting head of WHO's emerging diseases unit, tells a press conference in Geneva the same day, "it is certainly possible that there is limited human-to-human transmission." <5.22. January 15, 2020> <5.22.1. China (Wuhan)> The Wuhan Municipal Health Commission reports no new infections or deaths, stating that the cumulative number of cases in the city has remained steady at 41. In a question-and-answer statement dated January 14 but posted to its website on January 15, the Wuhan Municipal Health Commission confirms that the case reported by Thai authorities on January 13 is a resident of Wuhan. The commission also answers the question, "Up to now, has there been person-to-person transmission?" The commission answers, "Existing investigative results indicate no clear evidence of person-to-person transmission. We cannot rule out the possibility of limited person-to-person transmission, but the risk of sustained person-to-person transmission is low." <5.23. January 17, 2020> <5.23.1. China (Wuhan)> The annual full session of the People's Congress of Hubei Province, which opened on January 12, concludes. After the session closes, the Wuhan Municipal Health Commission announces new infections for the first time since January 3. It states that four new infections bring the number of confirmed cases in the city to 45, with two deaths. <5.23.2. China and Burma> Chinese leader Xi Jinping arrives in Burma (also known as Myanmar) at the start of a state visit to celebrate the 70 th anniversary of bilateral diplomatic relations and the "China-Myanmar Year of Culture and Tourism." It is his first overseas trip of the year. Chinese media coverage of his trip does not mention the novel coronavirus. <5.23.3. United States> U.S. CDC and the Department of Homeland Security's U.S. Customs and Border Protection begin health screenings for travelers arriving from Wuhan at three U.S. airports. The airports, identified as receiving the greatest number of travelers from Wuhan, are San Francisco (SFO), New York (JFK), and Los Angeles (LAX). <5.24. January 18, 2020> <5.24.1. China (Wuhan)> To celebrate the Lunar New Year, more than 40,000 households in Wuhan's Bubuting neighborhood hold their 20 th annual potluck banquet. Observers later blame the banquet for contributing to the spread of the virus in Wuhan. In a January 22 interview with CCTV, Wuhan Mayor Zhou Xianwang says the decision to go forward with the banquet was "based on the judgment that in this epidemic, transmission between people was limited." Evening CST : A six-person National Health Commission high-level expert group led by Dr. Zhong Nanshan, a hero from China's struggle against SARS in 2002-2003, arrives in Wuhan. <5.24.2. China and Burma> Chinese leader Xi Jinping returns to Beijing after a two-day state visit to Burma. <5.24.3. United States> In a telephone call, HHS Secretary Azar briefs President Donald J. Trump about the epidemic for the first time. <5.25. January 19, 2020> <5.25.1. China (Guangdong Province)> China's National Health Commission confirms the first case of the new coronavirus outside of Hubei Province, in a 66-year-old resident of Shenzhen, Guangdong Province, next to Hong Kong. The patient had traveled to Wuhan on December 29, 2019, developed symptoms on January 3, and returned to Shenzhen on January 4. <5.25.2. China (Wuhan)> The Wuhan Municipal Health Commission announces that the city's cumulative total of cases is 62, with two deaths. The Chinese National Health Commission high-level expert team receives a briefing from the Wuhan Municipal Health Commission and visits the Jinyintan Hospital, where novel coronavirus patients are being treated, and Wuhan CDC. At 5 p.m. CST, the expert team boards a plane for Beijing. <5.26. January 20, 2020> <5.26.1. China (Wuhan)> The Wuhan Municipal Health Commission announces its cumulative case count is 198, an increase of 136 cases from the day before, with three deaths. The city of Wuhan establishes a "Novel Coronavirus Infection Pneumonia Epidemic Prevention and Control Command Center" headed by Wuhan Mayor Zhou Xianwang. <5.26.2. China (Beijing)> 8 a.m. to 12 p.m. CST: The National Health Commission high-level expert group led by Dr. Zhong Nanshan briefs China's cabinet, the State Council, on findings from the group's visit to Wuhan the day before. 5:00 p.m. -7:00 p.m. CST : In a group interview organized by the National Health Commission, the head of the Chinese National Health Commission's High-Level Expert Group, Dr. Zhong Nanshan, publicly confirms for the first time that the novel coronavirus is being transmitted from person to person and that medical personnel have been infected. 7:27 p.m. CST : Xinhua News Agency reports that Chinese leader Xi Jinping has issued an "important instruction" to prioritize prevention and control work. He tells Communist Party and government bodies at all levels to put people's lives and health "in first place." He also orders "timely issuance of epidemic information and deepening of international cooperation." China's National Health Commission classifies the novel coronavirus-caused pneumonia as a Category B statutory notifiable infectious disease under the PRC Law on the Prevention and Treatment of Infectious Diseases . This empowers hospitals to put those with the disease under mandatory isolation or quarantine and allows the government to blockade epidemic areas. The commission also declares the new disease an infectious disease subject to quarantines for the purposes of the PRC Frontier Health and Quarantine Law , allowing authorities to impose quarantines and other measures on travelers entering and exiting China. <5.26.3. WHO and China (Wuhan)> Experts from the WHO China Country Office and WHO's Western Pacific Regional Office arrive in Wuhan for a brief field visit. They visit Wuhan's Tianhe Airport, Zhongnan Hospital, and Hubei Provincial CDC. They will leave the next day. <5.27. January 21, 2020> <5.27.1. China (Wuhan)> The Wuhan Municipal Health Commission reports that 15 medical personnel in the city have been infected with the novel coronavirus. <5.27.2. China (Guangzhou)> 4:00 p.m. CST: At a Guangdong Provincial Government press conference, Dr. Zhong Nanshan, head of the National Health Commission's high-level expert group, discloses that in Wuhan, a single patient infected 14 medical personnel. <5.27.3. China (Beijing)> People's Daily , the authoritative newspaper of the Communist Party Central Committee, breaks its silence on the novel coronavirus epidemic. Its January 21 issue carries six articles on the epidemic, including two on the front page. <5.27.4. WHO> WHO issues its first situation report on the novel coronavirus. It reports 278 confirmed cases in China and four outside the country. <5.27.5. United States> U.S. CDC confirms the first novel coronavirus case in the United States, in a patient who returned from Wuhan on January 15, 2020. <5.28. January 22, 2020> <5.28.1. United States> U.S. CDC issues a "Watch Level 2 Alert (Practice Enhanced Precautions)" for the pneumonia caused by the novel coronavirus. In addition to advice issued on January 6, U.S. CDC now also advises that older travelers and those with underlying health issues "should discuss travel to Wuhan with their healthcare provider." <5.29. January 23, 2020> <5.29.1. China (Wuhan)> 2 a.m. CST : Wuhan Municipality's Novel Coronavirus Infection Pneumonia Epidemic Prevention and Control Command Center issues its first order. It states, "From 10 a.m. on January 23, 2020, the entire city's public transportation, subway, ferries, and long-distance travel will be suspended. Without special reasons, city residents must not leave Wuhan. Channels for departing Wuhan from the airport and railway station are temporarily closed." <5.29.2. China (Beijing)> 3 :55 p.m. CST: In an "urgent notice," China's Ministry of Transport orders transportation authorities across China to suspend passenger travel into Wuhan by road and waterway, and to bar transportation operators from taking passengers out of Wuhan. <5.29.3. China (Hubei Province)> The epidemic command centers of other cities in Hubei Province start ordering lockdowns. 9:09 p.m. CST: Hubei Province's epidemic command center suspends all intra-provincial flights, trains, buses, and ferry travel in and out of the city of Wuhan. <5.29.4. China (Zhejiang, Guangdong, and Hunan)> The provinces of Zhejiang, Guangdong, and Hunan are the first to raise their public health emergency response levels to Level I ("extremely significant"), the highest of four levels in China's public health emergency management system. The Level I alert makes provincial governments responsible for coordinating emergency measures related to the epidemic undertaken by government, health authorities, medical institutions, centers for disease control and prevention, and border and quarantine authorities. <5.29.5. WHO> A WHO Emergency Committee convened under the International Health Regulations (2005) is unable to reach consensus on whether the outbreak constitutes a Public Health Emergency of International Concern. The committee requests to reconvene in 10 days' time. The 15-member body includes a U.S. citizen, Dr. Martin Cetron of U.S. CDC, and a citizen of China, Wannian Liang of China's National Health Commission. <5.29.6. United States> The State Department orders the mandatory departure of nonemergency U.S. personnel and their family members from the U.S. consulate in Wuhan. National Security Adviser Robert O'Brien briefs President Trump for the first time on "the potential pandemic threat" of the novel coronavirus. <5.30. January 24, 2020> <5.30.1. China (Hubei Province)> Hubei Province's newly-established epidemic command center raises the province's public health emergency response level to Level I. Additional cities in the province impose travel and transport restrictions, putting tens of millions of residents under partial lockdown. An article published in T he Lancet medical journal raises questions about whether Wuhan's Huanan Seafood Wholesale Market is the source of the virus. The co-authors, including experts from Wuhan's leading infectious disease hospital, report that among the first 41 patients identified in Wuhan, the first patient to show symptoms, on December 1, 2019, had no exposure to the market. Two of the next three patients to show symptoms, all on December 10, also had no exposure to the market. <5.30.2. WHO> WHO updates its advice for international travelers. Whereas on January 10 it advised against entry screening for travelers, it now notes that in the current outbreak "the majority of exported cases were detected through entry screening." It thus "advises that measures to limit the risk of exportation or importation of the disease should be implemented, without unnecessary restrictions of international traffic." <5.30.3. United States> President Trump tweets, "China has been working very hard to contain the Coronavirus. The United States greatly appreciates their efforts and transparency. It will all work out well. In particular, on behalf of the American People, I want to thank President Xi!" The State Department raises its travel alert for Hubei Province to Level 4 ("Do not travel"), its highest alert level, due to the coronavirus outbreak. <5.31. January 25, 2020> Lunar New Year's Day, also known as Spring Festival. <5.31.1. China (Beijing)> China's Politburo Standing Committee meets for the third time since January 7. This is the first meeting at which the novel coronavirus is contemporaneously acknowledged to be on the agenda. State media reports the body discusses prevention and control of the outbreak and establishes a high-level working group, known as a central leading group, to oversee control efforts. <5.31.2. China> By 9 p.m. CST, 30 of mainland China's 31 provincial-level jurisdictions have raised their public health alerts to Level I. The only such jurisdiction not to do so is Tibet, which has not so far identified a suspected or confirmed case of novel coronavirus infection. <5.32. January 26, 2020> <5.32.1. China (Wuhan)> China's National Institute for Viral Disease Control and Prevention, part of China CDC, announces it has confirmed the presence of the novel coronavirus in environmental samples collected from Wuhan's Huanan Seafood Wholesale Market earlier in the month. According to Xinhua, 33 of 585 samples from the market test positive. Of these, all but two were collected from an area of the market where wildlife vendors were concentrated. Xinhua says the results indicate "the virus stems from wild animals on sale at the market." <5.32.2. China (Beijing)> The Communist Party of China announces the establishment of the new top-level Party body focused on combating the epidemic, the Central Leading Small Group for Work to Counter the Novel Coronavirus Infection Pneumonia Epidemic. The Party names Premier Li Keqiang, the Communist Party's second-most senior official, to head the body. At a press conference in Beijing, a senior official says his ministry is working to divert personal protective equipment (PPE) that Chinese factories make for export about 50,000 sets a day to domestic use. Vice Minister Wang Jiangping of the Ministry of Industry and Information Technology presents the challenge as one of tweaking China's standards rules to allow PPE made to European and U.S. standards to be used in China. Wang says China has also begun procuring PPE from abroad, with 220,000 sets of PPE purchased on the international market currently on their way to China. <5.33. January 27, 2020> <5.33.1. China (Wuhan)> In a nationally televised interview, Wuhan Mayor Zhou Xianwang acknowledges having failed to disclose information "in a timely manner" and says China's Law on Prevention and Control of Infectious Diseases restricted Wuhan from sharing information without permission from higher-ups. Zhou also acknowledges that an estimated 5 million people left Wuhan before travel restrictions went into effect. Premier Li Keqiang, head of the Communist Party's Leading Group on Prevention and Control of the Novel Coronavirus Epidemic, visits Wuhan and thanks front-line workers. <5.33.2. China (Beijing)> In an effort to reduce the movement of people across the country, China's government extends the Lunar New Year Holiday to February 2, 2020. It had originally been scheduled to last from January 24 to 30. The government will later extend the holiday to February 13, 2020, in Hubei Province. <5.33.3. United States and China (Beijing)> HHS Secretary Azar speaks to the Chinese National Health Commission Director Ma Xiaowei, and repeats his offer to send a U.S. CDC team to China to assist with COVID-19 public health response efforts. Neither side discloses how Minister Ma responds, if at all, but no CDC team goes to China at this time. Weigong Zhou, an employee of U.S. CDC, and Clifford Lane, an employee of the U.S. National Institutes of Health (NIH), will, however, participate in a WHO-China Joint Mission to China from February 16 to 24. <5.33.4. United States> President Trump tweets, "We are in very close communication with China concerning the virus. Very few cases reported in USA, but strongly on watch. We have offered China and President Xi any help that is necessary. Our experts are extraordinary!" U.S. CDC issues its highest-level travel health notice, Level 3, recommending that travelers avoid all nonessential travel to China. The State Department raises its own travel advisory for all of China to Level 3 of 4, urging U.S. citizens to "reconsider travel" to China, while retaining its Level 4 travel advisory for Hubei Province. <5.34. January 28, 2020> <5.34.1. China (Beijing)> China's Supreme People's Court criticizes Wuhan Public Security Bureau officers for their reprimand of the eight Wuhan citizens accused of spreading rumors about the new disease. "It might have been a fortunate thing if the public had believed the 'rumors' then and started to wear masks and carry out sanitization measures, and avoid the wild animal market," the court posts on its WeChat account. <5.34.2. China (Beijing) and WHO> President Xi Jinping and WHO Director-General Tedros Adhanom Ghebreyesus meet in Beijing. According to WHO, they agree "that WHO will send international experts to visit China as soon as possible." (They will begin their mission to China nearly three weeks later, on February 16.) WHO also requests that China "share biological material with WHO," indicating that China has not yet shared biological samples with WHO. WHO quotes Tedros as saying, "We appreciate the seriousness with which China is taking this outbreak, especially the commitment from top leadership, and the transparency they have demonstrated, including sharing data and [the] genetic sequence of the virus." <5.34.3. WHO> WHO raises its global level risk assessment to "high," one rung below its risk assessment for China, which is "very high." <5.35. January 29, 2020> <5.35.1. United States and China> A U.S. State Department-organized charter flight leaves Wuhan carrying 195 U.S. government personnel and their family members, private U.S. citizens and their family members, and some third country nationals. The flight will arrive in California the same day. The United States is the first country to evacuate its citizens from Wuhan. The State Department will organize four more evacuation flights from Wuhan before the end of February. Secretary of State Michael R. Pompeo speaks by telephone with Yang Jiechi, a member of the Communist Party of China's 25-person Politburo, the country's second highest decisionmaking body. The call is the most senior-level U.S.-China conversation related to the novel coronavirus to date. According to the State Department, Pompeo "expressed condolences for the Chinese citizens who lost their lives as a result of the coronavirus outbreak." He also thanked Yang for assistance in evacuating Americans from Wuhan. According to China's state news agency, Xinhua, "Pompeo conveyed sympathy for the casualties" in China and "expressed appreciation for China's timely response to U.S. concerns after the outbreak of the epidemic." The State Department authorizes the voluntary departure of nonemergency personnel and family members of U.S. government employees from remaining diplomatic posts in mainland China: the Embassy in Beijing and consulates in the Chinese cities of Chengdu, Guangzhou, Shanghai, and Shenyang. <5.36. January 30, 2020> <5.36.1. WHO> WHO Director-General Tedros reconvenes the Emergency Committee under the International Health Regulations (2005). The committee advises him that the novel coronavirus outbreak constitutes a "Public Health Emergency of International Concern" (PHEIC). Tedros declares the PHEIC. He states, "Let me be clear: this declaration is not a vote of no confidence in China. On the contrary, WHO continues to have confidence in China's capacity to control the outbreak." He also states, "WHO doesn't recommend limiting trade and movement." <5.36.2. United States> At a campaign rally in Iowa, President Trump states, "maybe we've never had a better relationship [with China] and we[']re working with them very closely on the Coronavirus. We're working with them very, very closely. We only have five people [infected]. Hopefully everything's going to be great. They have somewhat of a problem, but hopefully it's all going to be great. But, we're working with China just so you know, and other countries very, very closely, so it doesn't get out of hand, but it's something that we have to be very, very careful with, right? We have to be very careful." The President announces the formation of the President's Coronavirus Task Force, headed by HHS Secretary Azar, with coordination provided by the National Security Council. The State Department elevates its travel advisory for all of China to Level 4 ("do not travel") and advises Americans in China to "consider departing using commercial means." <5.37. January 31, 2020> <5.37.1. China> Daily confirmed cases peak in areas of China outside Hubei, with 875 new confirmed cases reported outside the province. <5.37.2. China (Wuhan)> Dr. Li Wenliang posts to social media platform Weibo from his iPhone, recounting the details of his encounter with the law and his struggle with the virus. The next day, Li will share in his last-ever social media post that he has tested positive for the novel coronavirus. Li will die from COVID-19 on February 7, at age 33. <5.37.3. United States> The State Department orders the departure of all under-age-21 family members of U.S. personnel in China. President Trump signs Proclamation 9984, effective February 2, suspending entry into the United States of most foreigners who were physically present in mainland China during the preceding 14-day period. The order does not apply to lawful permanent residents, most immediate relatives of U.S. citizens and lawful permanent residents, and some other groups. HHS Secretary Azar declares a public health emergency for the United States "to aid the nation's healthcare community in responding to 2019 novel coronavirus." He also announces that beginning February 2, all U.S. citizens returning to the United States who have been in Hubei Province in the previous 14 days will be subject to up to 14 days of mandatory quarantine. Azar states, "The United States appreciates China's efforts and coordination with public health officials across the globe and continues to encourage the highest levels of transparency." <5.37.4. WHO> WHO's daily situation report reports a cumulative tally of 9,748 confirmed cases in mainland China and 78 cases in the rest of the world. <5.37.4.1. Appendix. Concise Timeline of COVID-19 and China (December 2019 to January 2020)> First identified in Wuhan, China, in December 2019, coronavirus disease 2019 (COVID-19) is now a global pandemic. The timeline below includes key developments in the responses of China, the World Health Organization (WHO), and the United States through January 31, 2020, the day U.S. Department of Health and Human Services (HHS) Secretary Alex M. Azar II declared the pandemic had become a public health emergency for the United States. Late December: Hospitals in Wuhan, China identify cases of pneumonia of unknown origin. December 30: The Wuhan Municipal Health Commission issues "urgent notices" to city hospitals about cases of atypical pneumonia linked to the city's Huanan Seafood Wholesale Market. The notices leak online. | Wuhan medical workers, including ophthalmologist Li Wenliang, trade messages about the cases in online chat groups. December 31: Chinese media outlets confirm the authenticity of the official "urgent notices" that spread online overnight and publish reports about the outbreak. A machine translation of one such media report is posted to ProMED, a U.S.-based open-access platform for early intelligence about infectious disease outbreaks. WHO headquarters in Geneva sees the ProMED post. Following protocols established in International Health Regulations (IHR) (2005), an international health agreement, WHO headquarters instructs the WHO China Country Office to request verification of the outbreak from China's government. | The Wuhan Municipal Health Commission issues its first public statement on the outbreak, saying it has identified 27 cases. January 1: WHO's China Country Office requests China verify the outbreak. | Wuhan authorities shut down the city's Huanan Seafood Wholesale Market. A Chinese Center for Disease Control and Prevention (China CDC) team collects environmental samples from the closed market for analysis. | Wuhan's Public Security Bureau announces it has investigated eight people for "spreading rumors" about the outbreak. January 3: Dr. Li Wenliang is summoned to a local police station, where he is reprimanded for spreading allegedly false statements about the outbreak online. | China CDC Director-General Gao Fu (George F. Gao) tells U.S. Centers for Disease Control and Prevention (U.S. CDC) Director Robert Redfield about a respiratory illness spreading in Wuhan. January 4: In its first public statement on the outbreak, WHO tweets, "China has reported to WHO a cluster of pneumonia cases with no deaths in Wuhan, Hubei Province." The tweet appears to confirm China's government has verified the outbreak to WHO under IHR (2005). January 5: A team led by Prof. Yong-zhen Zhang of Fudan University in Shanghai sequences the novel coronavirus' genome and deposits it in the U.S. National Institutes of Health's GenBank database of publicly available DNA sequences. January 6: Department of Health and Human Services (HHS) Secretary Alex M. Azar II and U.S. CDC Director Redfield offer to send U.S. CDC experts to China. | U.S. CDC issues a "Watch Level 1 Alert" for Wuhan due to "a pneumonia outbreak of unknown cause" and advises travelers to Wuhan to avoid animals, animal markets, and animal products. January 7: China CDC reportedly sequences the genome of the novel coronavirus. January 11 : Prof. Yong-zhen Zhang's team posts the genetic sequence of the virus on open-access platform Virological.org, becoming the first to share it with the world. | China CDC and two other teams post additional genetic sequences of the virus on Global Initiative on Sharing All Influenza Data (GISAID), another open-access platform. | China shares the virus' genomic sequence with WHO. | WHO issues guidance for international travel, recommending against entry screening for travelers. January 12: Dr. Li Wenliang is hospitalized with symptoms of the novel coronavirus. He will die from the disease on February 7. January 13: Thai authorities announce the first case of the novel coronavirus outside China. | Experts from Taiwan and the Chinese Special Administration Regions of Hong Kong and Macao visit Wuhan. A National Health Commission official tells them "limited human-to-human transmission cannot be excluded." January 14: WHO headquarters tweets, "Preliminary investigations conducted by the Chinese authorities have found no clear evidence of human-to-human transmission." The acting head of WHO's emerging diseases unit tells a press conference in Geneva, "it is certainly possible that there is limited human-to-human transmission." January 17: The Wuhan Municipal Health Commission states cases in the city stand at 45, with two deaths. | U.S. CDC and the U.S. Customs and Border Protection begin health screenings for travelers arriving from Wuhan at three U.S. airports. January 18: In a telephone call, HHS Secretary Azar briefs President Trump about the epidemic for the first time. January 20: The head of a high-level Chinese National Health Commission expert team, Dr. Zhong Nanshan, confirms person-to-person transmission of the novel coronavirus and infections among medical workers. | Wuhan establishes an epidemic prevention and control command center. | China declares the disease caused by the novel coronavirus a statutory notifiable infectious disease under the PRC Law on the Prevention and Treatment of Infectious Diseases and an infectious disease for the purposes of the PRC Health and Quarantine Law , opening the way for mandatory quarantines and lock downs. | Communist Party General Secretary Xi Jinping issues an "important instruction" to prioritize epidemic prevention and control work and orders "timely issuance of epidemic information and deepening of international cooperation." | Experts from WHO's China Country Office and its Western Pacific Regional Office arrive in Wuhan for an overnight visit. January 21: WHO issues its first situation report on the novel coronavirus. | U.S. CDC confirms the first novel coronavirus case in the United States, in a patient who returned from Wuhan on January 15, 2020. January 23: At 2 a.m. CST, Wuhan's new epidemic command center issues its first order, suspending public transportation and barring residents from leaving the city, effective at 10 a.m. | Provinces around China begin raising their public health alerts to Level I ("extremely significant"), making provincial governments responsible for coordinating emergency measures related to the epidemic. | An Emergency Committee convened by WHO under IHR (2005) does not reach consensus on whether the outbreak constitutes a Public Health Emergency of International Concern. | The U.S. State Department orders the mandatory departure of nonemergency U.S. personnel and their families from the U.S. Consulate in Wuhan. | National Security Adviser Robert O'Brien briefs President Donald J. Trump for the first time on "the potential pandemic threat" of the novel coronavirus. January 24: Additional cities in Hubei Province impose travel and transport restrictions, putting much of the province of 59 million under partial lockdowns. | WHO updates its advice for international travelers to advise measures to limit the risk of importing the disease, including entry screening. | President Trump tweets, "China has been working very hard to contain the Coronavirus. The United States greatly appreciates their efforts and transparency." January 25: China's most senior decisionmaking body, the seven-man Communist Party Politburo Standing Committee, meets for the third time since January 7. For the first time, the novel coronavirus is contemporaneously acknowledged to be on the agenda. | All but one of mainland China's 31 provincial-level jurisdictions have by now raised their public health alerts to Level I. January 26: China CDC announces it has identified the novel coronavirus in samples collected from Wuhan's Huanan Seafood Wholesale Market earlier in the month. State media suggest this indicates the virus came from wild animals sold at the market. | At a press conference in Beijing, a Vice Minister of Industry and Information Technology says he is working to make personal protective equipment (PPE) manufactured for export available for domestic use. January 27: Premier Li Keqiang, head of a new Communist Party body on prevention and control of the epidemic, visits Wuhan. He is the first member of the Politburo Standing Committee to visit. | HHS Secretary Azar speaks to China's Minister of Health and repeats his offer to send a U.S. CDC team to China. | President Trump tweets, "We have offered China and President Xi any help that is necessary." January 28: Chinese leader Xi Jinping and WHO Director-General Tedros Adhanom Ghebreyesus meet in Beijing. Xi agrees to accept a visit from a WHO international expert team. (The mission will begin February 16.) WHO requests that China "share biological material with WHO," indicating China has not so far done so. | WHO raises its global level risk assessment to "high," one rung below its risk assessment for China, which is "very high." | China's Supreme People's Court criticizes the Wuhan Public Security Bureau for its reprimand of the eight Wuhan citizens accused of spreading rumors about the new disease. January 29: A U.S. State Department-organized charter flight carrying U.S. government personnel, their families, and private U.S. citizens evacuated from Wuhan arrives in California. | Secretary of State Michael R. Pompeo speaks by telephone with Yang Jiechi, a member of China's second highest decisionmaking body, the Communist Party's 25-person Politburo. The call is the highest-level U.S.-China conversation related to the novel coronavirus to date. Pompeo expresses condolences for Chinese lives lost in the outbreak and thanks Yang for China's assistance in evacuating the Americans from Wuhan. January 30: WHO Director-General Tedros declares the epidemic a Public Health Emergency of International Concern. | President Trump states, "maybe we've never had a better relationship" with China, and says the two countries are working together "very closely" to respond to the epidemic. | The President announces the formation of the President's Coronavirus Task Force, headed by HHS Secretary Azar, with coordination provided by the National Security Council. | The State Department elevates its travel advisory for all of China to Level 4 ("do not travel") and advises Americans in China to "consider departing using commercial means." January 31: President Trump signs Proclamation 9984, suspending entry into the United States of most foreigners who were physically present in mainland China during the preceding 14-day period, effective February 2. | HHS Secretary Azar declares a public health emergency for the United States "to aid the nation's healthcare community in responding to 2019 novel coronavirus." He also announces that beginning February 2, all U.S. citizens returning to the United States who have been in Hubei Province in the previous 14 days will be subject to up to 14 days of mandatory quarantine. | WHO's daily situation report reports a cumulative total of 9,748 confirmed cases in mainland China and 78 cases in the rest of the world.

In Congress, multiple bills and resolutions have been introduced related to China's handling of a novel coronavirus outbreak in Wuhan, China, that expanded to become the coronavirus disease 2019 (COVID-19) global pandemic. This report provides a timeline of key developments in the early weeks of the pandemic, based on available public reporting. It also considers issues raised by the timeline, including the timeliness of China's information sharing with the World Health Organization (WHO), gaps in early information China shared with the world, and episodes in which Chinese authorities sought to discipline those who publicly shared information about aspects of the epidemic. Prior to January 20, 2020—the day Chinese authorities acknowledged person-to-person transmission of the novel coronavirus—the public record provides little indication that China's top leaders saw containment of the epidemic as a high priority. Thereafter, however, Chinese authorities appear to have taken aggressive measures to contain the virus. The Appendix includes a concise version of the timeline. A condensed version is below: Late December: Hospitals in Wuhan, China, identify cases of pneumonia of unknown origin. December 30: The Wuhan Municipal Health Commission issues "urgent notices" to city hospitals about cases of atypical pneumonia linked to the city's Huanan Seafood Wholesale Market. The notices leak online. | Wuhan medical workers, including ophthalmologist Li Wenliang, trade messages about the cases in online chat groups. December 31: A machine translation of a Chinese media report about the outbreak is posted to ProMED, a U.S.-based open-access platform for early intelligence about infectious disease outbreaks. WHO headquarters in Geneva sees the ProMED post and instructs the WHO China Country Office to request verification of the outbreak from China's government. | The Wuhan Municipal Health Commission issues its first public statement on the outbreak, saying it has identified 27 cases. January 1: Wuhan authorities shut down the city's Huanan Seafood Wholesale Market. January 3: Dr. Li Wenliang is reprimanded by local Wuhan police for spreading allegedly false statements about the outbreak online. | Chinese Center for Disease Control and Prevention (China CDC) Director-General Gao Fu tells U.S. Centers for Disease Control and Prevention (U.S. CDC) Director Robert Redfield about a pneumonia outbreak in Wuhan. January 4: In its first public statement on the outbreak, WHO tweets, "China has reported to WHO a cluster of pneumonia cases—with no deaths—in Wuhan, Hubei Province." January 6: Department of Health and Human Services (HHS) Secretary Alex M. Azar II and U.S. CDC Director Redfield offer to send U.S. CDC experts to China. | U.S. CDC issues a "Watch Level 1 Alert" for Wuhan and advises travelers to Wuhan to avoid animals, animal markets, and animal products. January 11 : A team led by Prof. Yong-zhen Zhang of Fudan University in Shanghai posts the genetic sequence of the virus on an open-access platform, sharing it with the world. | China CDC and two other Chinese teams subsequently also post genetic sequences of the virus on an open-access platform. | China shares the virus' genomic sequence with WHO. January 1 2: Dr. Li Wenliang is hospitalized with symptoms of the novel coronavirus. January 20: China confirms person-to-person transmission of the novel coronavirus and infections among medical workers. January 21: U.S. CDC announces the first novel coronavirus case in the United States, in a patient who returned from Wuhan on January 15, 2020. January 23: Wuhan suspends public transportation and bars residents from leaving the city. January 28: Chinese leader Xi Jinping and WHO Director-General Tedros Adhanom Ghebreyesus meet in Beijing. January 30: WHO Director-General Tedros declares the epidemic a Public Health Emergency of International Concern. | President Trump announces the formation of the President's Coronavirus Task Force. January 31: President Trump suspends entry into the United States of most foreigners who were physically present in mainland China during the preceding 14-day period, effective February 2. | HHS Secretary Azar declares a public health emergency for the United States to aid response to the novel coronavirus.

crs_R45993

crs_R45993_0

<1. Introduction> When a non-U.S. national (alien) enters the United States illegally or overstays a temporary visa, her presence in the country violates the Immigration and Nationality Act (INA). She is subject to removal from the country on that basis alone, regardless of whether she has a criminal history or other factors, and there are few circumstances in which she can legalize her presence to extinguish the statutory basis for her removal. The population of aliens in this situation that is, aliens whose presence in the United States violates the INA, referred to here as "unlawfully present aliens" currently numbers between ten million and twelve million, according to some recent estimates. About 80% of unlawfully present aliens have been in the United States for more than ten years, according to a study by the Department of Homeland Security (DHS). The issue of whether and to what extent to legalize or provide other relief from removal to unlawfully present aliens is a frequent topic of debate in Congress. The issue is sometimes called the "third leg of the stool" of immigration reform, after the issues of border enforcement and legal admissions. Many (but not all) proposals for comprehensive immigration reform include provisions that would create pathways to lawful permanent residence for unlawfully present aliens in significant numbers. These bills generally follow a model for one-time legalization programs exemplified by the Immigration Reform and Control Act of 1986, which offered the prospect of lawful permanent resident (LPR) status to much of the unlawfully present population in the United States at that time. Other bills would create legalization programs for discrete segments of the unlawfully present population; the various Dream Act proposals, for example, would offer relief to many childhood arrivals. These legislative proposals contemplate ad hoc legalization measures: they would offer relief to extant populations of unlawfully present aliens, but the proposals would not change generally applicable law concerning legalization going forward. The version of the DREAM Act recently passed by the House of Representatives, for example, would create a pathway to LPR status for some unlawfully present childhood arrivals who entered the United States at least four years before enactment; the bill would not, however, change the INA's approach to future childhood arrivals. This report covers the current law that underlies the ad hoc legalization debate. It reviews the limited extent to which, under the INA, an unlawfully present alien can obtain a legal immigration status that extinguishes the statutory basis for removal. In other words, the report explains the narrow circumstances in which unlawfully present aliens can legalize under current law. As used here, "legalization" means the acquisition of a lawful immigration status by an unlawfully present alien so that he or she is no longer subject to removal under the INA. Because the INA takes a restrictive approach to legalization, the term is often used synonymously with ad hoc legalization to refer to proposals for programs of one-time relief. This report, in contrast, focuses on legalization under current law. To the exclusion of other issues, this report focuses on the circumstances in which the INA allows acquisition of legal status notwithstanding unlawful presence. Many of the statutory provisions discussed that allow legalization in limited circumstances such as adjustment of status, asylum, and cancellation of removal apply to lawfully present aliens as well, but those aspects of the statutes are not explored here. Further, most of the statutory provisions treated here have requirements that disqualify aliens with certain criminal convictions or immigration violations. Those requirements are referenced but not analyzed here; another CRS report discusses them in more depth. <2. Overview of INA Regulation of Unlawful Presence> The INA takes three primary approaches to regulating the unlawfully present population: removal, deterrence, and to a lesser extent legalization. First, unlawfully present aliens are subject to removal for as long their presence violates the INA; no statute of limitations applies. This regime of perpetual removability has been a feature of U.S. immigration law since 1924. Under it, aliens who enter the country surreptitiously or overstay nonimmigrant visas may be removed even after many years in the United States, whether or not they have committed other crimes or offenses. Enforcement of this legal regime comes with a well-known catch: the federal government does not allocate enough resources to make the removal of all unlawfully present aliens possible. According to DHS estimates and removal statistics, the agency's resources allow it to pursue removal each year of only a small fraction of the approximately ten million to twelve million unlawfully present aliens in the United States. There is an enforcement gap, in other words. In response, executive branch administrations have, to varying degrees, established enforcement priorities to focus their removal resources on aliens who have committed crimes or who meet other criteria. But the point remains that unlawfully present aliens face perpetual risk of removal under the INA, even if only a small percentage are actually placed in removal proceedings each year. Second, the INA seeks to deter the arrival or continued presence of unlawfully present aliens. It criminalizes some immigration violations, such as illegal entry and reentry, and bars most aliens who lack lawful immigration status from working or receiving federal public benefits. The INA renders aliens who commit some immigration violations inadmissible (i.e., ineligible for admission), either for a specified time period or for life. Aliens who are unlawfully present in the United States for one year or more, for example, are inadmissible for ten years once they depart, subject to some waiver provisions. Aliens who reenter the country illegally after being removed are inadmissible for life, also subject to limited waiver. Finally, legalization: as this report explains, the INA offers limited opportunities for unlawfully present aliens to acquire legal immigration status that extinguishes the statutory basis for their removal. An alien who overstays a nonimmigrant visa and later marries a U.S. citizen (or otherwise becomes the immediate relative of a U.S. citizen) can legalize through the adjustment of status process, so long as he or she has not committed certain crimes and does not fall within other eligibility bars. Beyond that notable exception, the legalization mechanisms in the INA exist mainly to relieve specific types of hardships such as persecution abroad (asylum) or the extreme hardship that U.S. citizens or LPRs would suffer due to the removal of their parents (cancellation of removal). Where these forms of relief do not apply, unlawfully present aliens may seek to legalize by leaving the country and applying for an immigrant visa abroad on the basis of a qualifying family relationship or in an employment or diversity category. In most cases, however, their prior unlawful presence in the United States will make them ineligible to return for ten years. As such, under current law, it is generally more difficult for unlawfully present aliens in the United States to obtain legal immigration status on generally applicable grounds, such as qualifying family relationships, than it is for aliens abroad applying to immigrate on the same grounds. <3. Early Legalization Law: Registry for Long-Standing Presence> U.S. immigration law developed its current stance toward the unlawfully present population in the middle period of the twentieth century, when Congress strengthened removal statutes and allowed the primary legalization statute known as the registry statute, which provided for legalization based on long-standing presence to become obsolete. Illegal immigration emerged as a significant issue in the United States with the advent of quantitative immigration restrictions in the 1920s. Until 1875, the only restrictions on immigration into the United States came from state laws providing for the exclusion or expulsion of convicts, paupers, and people with contagious diseases. The Page Act of 1875 imposed the first federal restrictions when it barred convicts and prostitutes. Additional qualitative restrictions, including bars against Chinese laborers and aliens "likely to become public charges," followed in the ensuing decades, culminating in the imposition of a literacy test in 1917. The first numerical restrictions on immigration were not imposed until 1921, when the temporary measures of the Emergency Quota Act capped new admissions by nationality (at 3% of the foreign-born population of each nationality, as reflected in the census of 1910). Congress established a permanent and generally more restrictive system of national origins quotas in the Immigration Act of 1924, also known as the Johnson-Reed Act. Numerical limitations of some form have remained a fixture of U.S. immigration law ever since. Some illegal immigration had existed during the regime of qualitative restrictions that began in 1875, but it increased with the introduction of numerical caps. The 1924 Act, beyond establishing a permanent quota system, was also notable for its removal provisions. The act rendered aliens who entered or remained in the country in violation of its restrictions subject to deportation "at any time after entering," which meant that no limitations period applied and even long-standing unlawfully present aliens could be deported. This marked a significant change from earlier deportation statutes, which had imposed limitations periods of between one and five years for the removal of illegal entrants. Aliens physically present for longer than the limitations period could not be deported under those laws on the ground that their presence violated the immigration statutes. The 1924 Act eliminated this limitations period going forward. Yet soon after U.S. immigration law settled upon this regime of perpetual deportability of unlawfully present aliens, the law also developed a mechanism called "registry" for such aliens to legalize on the basis of long-standing presence. Congress enacted the first registry statute in 1929 and revised it periodically thereafter. Generally speaking, the registry statute authorized immigration officials to grant lawful permanent residence to aliens who entered the United States before a date specified in the statute and who resided in the country continuously after entry. To qualify, aliens also had to demonstrate "good moral character" and not be ineligible on certain grounds that changed over time (e.g., not have certain criminal convictions). Unlawful presence whether as a result of surreptitious entry or the overstay of a visa was not a bar to registry. In plain terms, then, the registry statute provided for the legalization of unlawfully present aliens who had been in the United States since a given cutoff date. The first cutoff date, under the 1929 statute, was June 3, 1921. Congress apparently sought to provide relief to aliens who entered the United States before the first numerical restrictions went into effect in 1921 and before immigration officials began systematically recording alien admissions at ports of entry. In 1939, Congress advanced the cutoff date to 1924. About 200,000 aliens appear to have legalized through registry between 1929 and 1945. A few more changes to the cutoff date followed in later decades. A 1958 law advanced the date from 1924 to 1940; a 1965 law moved it up to 1948; and in 1986, the Immigration Reform and Control Act (IRCA) set the current date of 1972. Under current law, the registry statute remains in effect, but the 1972 cutoff date renders it mostly obsolete. Registry applications surged on the heels of the 1986 update that set the date at 1972, but applications dwindled to a trickle as the date grew more distant. In 2004, the last year for which DHS published separate statistics on registry in its statistical yearbook, 205 aliens became LPRs through registry. Thus, while the concept of registry persists in U.S. law as a legalization mechanism based on long-standing presence, few (if any) unlawfully present aliens qualify to legalize through registry because few have been present since the 1972 cut-off date. <4. Legalization for Aliens Eligible to Immigrate> Perhaps the most significant body of legalization principles in the INA governs the extent to which unlawful presence disqualifies an alien from obtaining LPR status through family relationships or on other generally applicable grounds. With the registry statute effectively obsolete, federal law no longer provides for the legalization of unlawfully present aliens based on the duration of their presence in the country alone. But unlawfully present aliens often come within the generally applicable criteria that the law uses to select aliens for immigration to the United States. The INA allocates immigrant visas to three major categories of aliens: family-based immigrants, employment-based immigrants, and diversity-based immigrants. Family-based immigrants account for about two-thirds of permanent immigration to the United States each year; employment-based immigrants account for about 12%; and diversity-based immigrants account for about 4% (refugees, asylees, and some other categories account for the remainder). An unlawfully present alien would come within one of these categories, to give some examples, by marrying a U.S. citizen, having a U.S. citizen son or daughter who turns twenty-one, obtaining an offer of employment that qualifies for an employment-based immigrant visa, or entering and winning a visa slot in the diversity lottery program. The law's approach to aliens in this situation that is, aliens who become eligible for an immigrant visa while living in the United States in violation of the INA is to impose two interlinking obstacles to their acquisition of LPR status. First , current law prohibits most (but not all) such aliens from obtaining LPR status unless they depart the United States to apply for the immigrant visa at a U.S. consulate abroad. As discussed below, exceptions to this prohibition allow some groups of unlawfully present aliens who are eligible for immigrant visas to become LPRs by adjusting their status from within the United States. The most notable exception benefits those aliens who enter on a nonimmigrant visa, overstay, and then marry a U.S. citizen or otherwise become the immediate relative of a U.S. citizen. Second , most unlawfully present aliens who depart the United States to apply for immigrant visas abroad will face a bar on readmission of three years from the date of their departure (for aliens unlawfully present for more than 180 days) or ten years from the date of their departure (for aliens unlawfully present for one year or more). Unless they receive a discretionary waiver of the ineligibility a remedy with narrow eligibility criteria they generally must wait out the bars abroad. In general, then, the INA imposes a double barrier to the legalization of unlawfully present aliens who come within an immigrant visa category: the law prohibits such aliens from seeking LPR status unless they apply from abroad (the first barrier) and then bars their readmission for three or ten years once they depart the United States (the second barrier). Crucially, the three- and ten-year bars on readmission apply only if the alien departs the United States following the period of unlawful presence. The law that governs an alien's eligibility to adjust status from within the United States that is, to obtain LPR status without departing is therefore hugely important, because in most cases it determines whether an unlawfully present alien in an immigrant visa category must face the three- and ten-year bars before obtaining legal status. In many cases, a grant of advance parole essentially, an assurance from DHS that it will allow an alien to reenter the country on immigration parole after a trip abroad can help an unlawfully present alien become eligible to adjust status, as discussed further below. <4.1. Adjustment of Status: Legalization without Departing the United States> Adjustment of status under INA 245 is the legal mechanism that makes it possible for an alien who is present in the United States and qualifies for an immediately available immigrant visa to acquire LPR status without leaving the country. Like most immigration benefits, adjustment of status is a discretionary remedy: the INA authorizes but does not require immigration authorities to grant it to eligible aliens. This mechanism did not exist in federal immigration statute until 1952. Its inexistence before that date sometimes forced creative administrative maneuverings. In the early 1940s, people fleeing German-occupied Europe who entered the United States on temporary visas or on immigration parole, and who qualified for and had the government's support to acquire LPR status, could gain such status only by departing the country to apply for U.S. immigrant visas. A special arrangement between the U.S. and Canadian governments facilitated such persons' entry into Canada to apply for the visas at the U.S. embassy there, with the understanding that they would return to the United States as LPRs. In 1945, President Truman issued a presidential declaration to exempt from this exit-to-enter procedure which he considered "wasteful" a group of about 1,000 displaced persons who had been brought from camps in Italy to a War Relocation Camp near Oswego, New York. The first version of the adjustment of status statute was enacted seven years later. Under current law, an alien seeking to adjust to LPR status within the United States must meet several requirements, two of which have outsize implications for the unlawfully present population: (1) the alien must have been "inspected and admitted or paroled into the United States ," and (2) the alien must have maintained "lawful status," including by not accepting unlawful employment after entry. Accordingly, aliens who entered the United States surreptitiously generally cannot adjust status, because they were neither "inspected and admitted" nor "paroled" into the United States, and also because they have not maintained lawful status after entry. Similarly, aliens present in the United States after overstaying their nonimmigrant status generally cannot adjust: although they were "inspected and admitted," they failed to maintain lawful status by overstaying. Exceptions exist to both requirements, however, as do administrative procedures that provide relief from them, as explained below. Perhaps most notably, the second requirement maintenance of lawful status does not apply to the immediate relatives of U.S. citizens. One significant statutory provision INA 245(i) changed the adjustment of status framework by lifting the lawful entry and maintenance of status requirements for aliens eligible for family-based or employment-based immigrant visas, provided they paid a $1,000 fine and met certain other requirements. INA 245(i) thus cleared the way for many unlawfully present aliens, including unlawful entrants, to adjust status. However, the provision has a cutoff date it applies only to aliens for whom a visa petition or application for labor certification was submitted before April 30, 2001 that makes it inapplicable to most cases today. Accordingly, under current law, aliens generally may adjust status only if they meet the lawful entry and maintenance of status requirements or fall within an exception to those requirements. <4.1.1. Lawful Entry Requirement: Exceptions and Significance of Parole Programs> Exceptions to the lawful entry requirement (i.e., the requirement that an alien must have been "inspected and admitted or paroled" in order to adjust status) exist for victims of domestic violence, certain statutorily defined "special immigrants" who are juveniles or have affiliations with the U.S. Armed Forces, and aliens who meet the INA 245(i) cutoff date. To illustrate with a domestic violence example, if an alien enters surreptitiously and suffers domestic violence in the United States at the hands of an immediate relative who is a U.S. citizen or LPR, the alien may apply to adjust status notwithstanding the surreptitious entry. Some (but not all) federal courts have held that aliens who acquire Temporary Protected Status (TPS) meet the lawful entry requirement, even if they are present in the United States following a surreptitious entry. Where none of these narrowly drawn exceptions applies, however, a grant of immigration parole from DHS can enable an alien who entered the country surreptitiously to adjust status. In other words, a grant of parole can function as a work-around for the bar that unlawful entry typically poses to adjustment of status. This is because, even if the alien was not "inspected and admitted," the alien can qualify to adjust status by being "paroled." DHS most commonly exercises the parole power to permit entry to aliens not yet on U.S. territory who are (or may be) inadmissible. In some circumstances, however, DHS also grants parole to unlawfully present aliens. Grants of parole to aliens physically present in the U.S. come in two forms: (1) "parole in place," which confers parole status on physically present aliens without requiring them to leave and come back; and (2) "advance parole," which allows unlawfully present aliens to depart the United States with an assurance that they will be permitted to reenter on parole. Both varieties of parole satisfy the lawful entry requirement for adjustment of status, even when granted to an alien present following a surreptitious entry, although for advance parole the alien must actually leave and be paroled back into the country. The eligibility criteria for both of these parole programs are set by DHS and recorded in internal memoranda and agency manuals; no statute or regulation spells out which aliens may qualify for parole in place or advance parole. Accordingly, it can sometimes be difficult to track DHS's practice in granting these forms of relief. The agency appears, however, to place narrow parameters on both programs. Agency materials state that parole in place is granted "only sparingly" and affirmatively endorses granting it only to the immediate relatives of members of the U.S. armed forces. When DHS does grant parole in place to an unlawfully present alien, however, the primary purpose is apparently to help the recipient to adjust status. Advance parole, according to agency materials, is available to unlawfully present aliens who receive many types of discretionary reprieves from removal (such as TPS and Deferred Enforced Departure), although DHS sometimes makes clear that it grants advance parole only for a narrow set of travel purposes, including to visit ill family members or attend their funeral. DHS does not appear to grant advance parole for the purpose of facilitating adjustment of status applications by unlawful entrants, but advance parole has that effect. An unlawfully present alien who receives a grant of advance parole and then leaves and reenters the United States pursuant to that grant is not subject to the three- or ten-year bar for unlawful presence. Those bars apply only to aliens who "depart" the United States after the period of unlawful presence, and under current case law, a trip abroad pursuant to a grant of advance parole does not count as a "departure" for purposes of those bars. The applicability of these forms of parole to unlawfully present aliens has generated controversy on both sides of the immigration debate. Some Members of Congress have criticized advance parole and its facilitation of adjustment of status applications as a loophole that subverts enforcement of the statutory bars for unlawful presence. The former INS, pursuing a similar theory, issued a regulation in 1997 that made many parolees ineligible for adjustment of status under INA 245(a), but multiple federal appellate courts struck down the regulation as incompatible with the statute and DHS repealed the regulation in 2006. On the other side of the debate, some immigration advocates have called for the expansion of parole in place and advance parole as a way to clear a path to legalization for a large segment of the unlawfully present population (namely, those eligible for immigrant visas on the basis of family relationships or other grounds). <4.1.2. Maintenance of Lawful Status Requirement: INA 245(c)(2)> Even if the lawful entry requirement is met, INA 245(c)(2) generally bars aliens from adjusting status if they fail to maintain lawful status in any of three ways: (1) if they are "in unlawful immigration status on the date of filing the application for adjustment"; (2) if they have failed "to maintain continuously a lawful status since entry into the United States"; or (3) if they have engaged in "unauthorized employment." As such, 245(c)(2) generally bars unlawfully present aliens from adjusting status, even if they satisfy the lawful entry requirement, due to their lack of lawful immigration status. The 245(c)(2) bar does have exceptions, however. It does not apply to the immediate relatives of U.S. citizens. Thus, as already mentioned, if an alien overstays a nonimmigrant visa and then marries a U.S. citizen, the alien's failure to maintain lawful status does not bar an application for adjustment. Under other exceptions, the bar for failure to maintain lawful status also does not apply to certain domestic violence victims, certain "special immigrants," applicants for employment-based immigrant visas with a lapse or lapses in status not exceeding 180 days in the aggregate, and aliens who meet the April 30, 2001, cutoff date of INA 245(i). <4.2. Application for Immigrant Visa Abroad: Three- and Ten-Year Bars for Unlawful Presence> As the prior section explains, many unlawfully present aliens who are eligible to immigrate based on family relationships or other grounds do not qualify for adjustment of status because of the statutory requirements concerning lawful entry and maintenance of lawful status. These aliens, therefore, cannot obtain LPR status from within the United States. Such aliens may still pursue LPR status by departing the country and applying for an immigrant visa at a U.S. consulate abroad. Most unlawfully present aliens who take this route, however, encounter a significant obstacle: their departure from the United States triggers the three-year unlawful presence bar (for those who were unlawfully present for between 180 and 365 days) or the ten-year unlawful presence bar (for those who were unlawfully present for more than year). Aliens qualify for a discretionary waiver of these bars only if (1) they are the "spouse or son or daughter" of a U.S. citizen or LPR the parents of U.S. citizens or LPRs do not qualify; and (2) their inability to return to the United States during the applicable time bar (three or ten years from the date they departed the United States) would "result in extreme hardship" to their U.S. citizen (or LPR) parent or spouse. DHS interprets extreme hardship to mean "more than the usual level of hardship that commonly results from family separation or relocation." Aliens who do not receive discretionary waivers must remain outside the United States for the duration of the bar, unless DHS grants them parole or they receive a discretionary waiver on a future visa application. Although the eligibility criteria for the unlawful presence waivers are narrow, DHS allows unlawfully present aliens to apply for the waivers from within the United States, before they depart for their visa interviews abroad, so long as the aliens are not inadmissible on other grounds and meet other requirements. This "provisional waiver" program mitigates the uncertainty that unlawfully present aliens face as to how long they will have to remain abroad if they leave the United States to apply for an immigrant visa. DHS introduced the provisional waiver program in 2013, but immigration authorities provided relief of a similar nature as early as 1935, when the Immigration and Naturalization Service (INS) began the practice of "pre-examining" unlawfully present aliens domestically before channeling them into immigrant visa application procedures in Canada. <4.3. Illustrations> The following hypotheticals are intended to demonstrate how the INA provisions described in this section work in practice. Each hypothetical assumes that the alien (1) has not departed the United States after entry and (2) is not inadmissible to the United States for reasons other than unlawful entry or unlawful presence (such as a conviction for a crime of moral turpitude). 1. An alien is admitted to the United States on a B-2 tourist visa for six months. He overstays. Ten years later, he marries a U.S. citizen, who obtains an approved immigrant visa petition on his behalf. Even though the alien has been out of legal status for ten years, he is eligible to adjust to LPR status. He will not face the ten-year unlawful presence bar unless he departs the United States before obtaining LPR status. 2. Same facts as the previous example, except that the alien enters the United States surreptitiously rather than on a visitor visa. Even with an approved immigrant visa petition as the spouse of a U.S. citizen, he is not eligible to adjust status because of his unlawful entry. To obtain LPR status, he must apply for an immigrant visa at a U.S. consulate abroad. His departure from the country will trigger the ten-year unlawful presence bar. He may apply for a provisional waiver of the bar before departing, but he must show "extreme hardship" to his spouse to succeed on the application. 3. An alien enters the United States surreptitiously and subsequently has a daughter. After the daughter (a U.S. citizen) turns twenty-one, she obtains an approved immigrant visa petition for her mother. The mother is not eligible to adjust status due to her unlawful entry. To obtain LPR status, she must apply for an immigrant visa at a U.S. consulate abroad. Her departure from the country will trigger the ten-year unlawful presence bar, and she is not eligible for a waiver. 4. Same facts as the previous example, except that the U.S. citizen daughter is in the military. Her mother may qualify for parole in place, which would make her eligible to adjust status. In that scenario, the mother would not face the ten-year unlawful presence bar unless she departs the United States before obtaining LPR status. 5. An alien enters the United States surreptitiously at age eight. At age twenty-two, he receives a grant of Deferred Action for Childhood Arrivals (DACA). At age twenty-three, he marries a U.S. citizen, who obtains an approved immigrant visa petition on his behalf. The alien is not eligible to adjust status due to his unlawful entry. To obtain LPR status, he must apply for an immigrant visa at a U.S. consulate abroad. His departure from the country will trigger the ten-year unlawful presence bar. He may apply for a provisional waiver of the bar before departing, but he must show "extreme hardship" to his spouse to succeed on the application. 6. Same facts as the previous example, except that the alien, after receiving DACA and after the immigrant visa petition is approved, was granted advance parole to visit a sick family member abroad. Upon being paroled back into the United States following his trip abroad, he became eligible to adjust status. He will not face the ten-year unlawful presence bar unless he departs the United States before obtaining LPR status. <5. Legalization in Cases of Hardship to U.S. Relatives: Cancellation of Removal> The INA's cancellation of removal provision authorizes immigration judges to grant LPR status to some unlawfully present aliens who are in removal proceedings and who have lived in the United States for at least ten years. Aliens qualify, however, only if, aside from meeting other requirements, they show that their removal would cause "exceptional and extremely unusual hardship" to immediate relatives who are U.S. citizens or LPRs. The lineage of this form of relief extends back at least to 1935, when two members of President Franklin Roosevelt's cabinet, frustrated by the lack of a statutory mechanism to grant relief from deportation in hardship cases, used bureaucratic ingenuity to implement "a two-step procedure whereby the secretary [of labor] granted [an] illegal alien a waiver from deportation and allowed him or her to depart to Canada and to reenter the United States as a legal permanent resident." In 1940, Congress rendered this arrangement unnecessary by enacting the first clearly delineated statutory form of relief from deportation in hardship cases, which was called "suspension of deportation" until 1996. The Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 replaced "suspension of deportation" with "cancellation of removal," a more restrictive form of relief due in part to its higher threshold for qualifying hardship and its omission of hardship to the alien (as opposed to the alien's U.S. family) as a basis for relief. Under the current version of the INA, one form of cancellation of removal exists for LPRs in removal proceedings, and one exists for non-LPRs, including unlawfully present aliens. To qualify for non-LPR cancellation of removal, aliens must have been physically present in the United States for the ten years preceding their application, and, critically, they must make the requisite showing of "exceptional and extremely unusual hardship" to their U.S. citizen or LPR immediate relatives. "Exceptional and unusual hardship" means a level of hardship to an immediate relative that is "'substantially' beyond the ordinary hardship that would be expected when a close family member leaves this country." The paradigmatic case involves "a U.S. citizen child with a serious medical condition who, if [cancellation of removal] is denied, would be either involuntarily separated from her parent or relocated to a country where adequate medical treatment is not available." Aliens also must show good moral character and not have certain types of criminal convictions. Like adjustment of status, cancellation of removal is a discretionary form of relief, meaning that immigration judges retain discretion to deny it even to aliens who meet the statutory criteria. The INA caps cancellations of removal for non-LPRs at 4,000 per year, although the cap does not apply to some groups. If the cap has been reached in a particular fiscal year but the immigration judge determines that a cancellation of removal application should be granted, the judge must reserve decision until a subsequent fiscal year when cap spaces are available. Finally, cancellation of removal is available only as a defense to removal, meaning that aliens can apply for cancellation only if they are in removal proceedings. They cannot apply for relief affirmatively (i.e., outside of removal proceedings). When an immigration judge grants cancellation of removal to an unlawfully present alien, the alien becomes an LPR. Some commentators have thus called cancellation of removal a mechanism for "case-by-case legalization." But the major parameters for this mechanism the annual cap, the fact that aliens cannot apply for it affirmatively but instead only in removal proceedings, and the required hardship showing sharply limit its availability. The lack of an affirmative channel for requesting cancellation of removal, in particular, has prompted some aliens who believe they clearly qualify for cancellation to proactively prompt DHS to initiate removal proceedings against them. The aliens do this, through their counsel, by making a special request to DHS or by filing an affirmative application for asylum, which upon denial triggers an automatic referral to removal proceedings. This strategy has pitfalls, however: it affirmatively triggers proceedings that could end in removal, and, in any event, immigration judges have discretion to dismiss the proceedings without granting cancellation upon determining that the alien filed "a meritless asylum application with the USCIS for the sole purpose of seeking cancellation of removal in the Immigration Court." <6. Legalization as Relief from Persecution or Other Harms: Asylum and Other Protections> Other mechanisms in the INA provide for the legalization of unlawfully present aliens who suffer particular types of harms. Asylum offers the prospect of LPR status to unlawfully present aliens who would face a risk of persecution if returned to their countries of origin, while the related protections of withholding of removal and relief under the Convention against Torture (CAT) offer more limited relief from persecution or torture. A series of nonimmigrant visas, including the U visa, offer the prospect of relief to unlawfully present aliens who are the victims or witnesses of certain crimes. <6.1. Asylum> Unlawfully present aliens may qualify for asylum, a lawful immigration status with a pathway to LPR status and citizenship, if they have suffered persecution in their country of origin or have a well-founded fear of suffering such persecution upon returning to that country. The general eligibility criteria for asylum include a requirement that the persecution be on account of an enumerated statutory ground (race, religion, nationality, membership in a particular social group, or political opinion). Aliens who have persecuted others or committed "serious crimes" are not eligible. The law of asylum is a broad subject that in most respects is conceptually distinct from the issue of legalization. Asylum is a general remedy for aliens in or at the threshold of the United States who suffer persecution, not a form of relief designed specifically for the unlawfully present population. However, asylum can work as a legalization mechanism in some cases. Lawful entry and maintenance of lawful status are not prerequisites to asylum. Periods of unlawful presence do not affect an alien's eligibility. Put differently, aliens present within the United States may qualify for asylum regardless of surreptitious entry or unlawful presence. Thus, for those unlawfully present aliens who have suffered persecution and meet the other statutory requirements, asylum, much like cancellation of removal, offers a path to LPR status. Unlike cancellation of removal, however, unlawfully present aliens may apply for asylum affirmatively. As relevant here, a few aspects of asylum law bear directly on the nature and availability of this form of relief to unlawfully present aliens. First, eligibility to apply for asylum is time-restricted. Although aliens may apply for asylum either affirmatively (i.e., on their own accord, even if the government is not seeking to remove them) or defensively (i.e., as a defense in removal proceedings), generally they must apply within one year of arriving in the United States. Thus, asylum is not available to most unlawfully present aliens who have been in the United States for long periods of time. Second, asylum offers a secure form of relief to unlawfully present aliens. Asylees are not subject to removal unless their status is terminated for a specified statutory reason; their spouses and minor children may apply to join them in the United States in asylee status; asylees are authorized to work; and, as already mentioned, they have a direct pathway to LPR status and therefore to citizenship. <6.1.1. Related Protections: Withholding of Removal and Convention Against Torture Relief> Unlawfully present aliens who do not obtain asylum may qualify for a more limited form of relief under the INA's provision for "restriction on removal" (commonly called "withholding of removal"), which prohibits the removal of aliens to a country where their "life or freedom would be threatened" on account of "race, religion, nationality, membership in a particular social group, or political opinion." Somewhat similarly, statutory and regulatory provisions implementing the Convention Against Torture prohibit the removal of aliens to any country in which there is substantial reason to believe they could be tortured. Unlike asylum, these two forms of relief do not create an avenue to LPR status and do not confer many of the other advantages typically associated with lawful immigration status, such as the ability to seek admission to the United States following a trip abroad or the ability to sponsor family members for admission. As such, withholding of removal and CAT protection arguably do not constitute legalization mechanisms, although they do confer a defense to removal and work authorization on recipients. Withholding and CAT protection also have a stricter burden of proof than asylum. In a different vein, unlike asylum, which is a discretionary form of relief, these two forms of relief are mandatory immigration judges must grant them to eligible aliens. Nor do withholding of removal or CAT relief have one-year application deadlines. <6.2. Nonimmigrant Visas for Victims and Witnesses of Certain Crimes> The INA authorizes DHS to grant three special nonimmigrant statuses to unlawfully present aliens who are victims or witnesses of certain crimes and who provide assistance to law enforcement. First and most broadly, aliens who suffer "substantial physical or mental abuse" from certain crimes committed against them in the United States (including rape, domestic violence, and kidnapping, among other qualifying offenses) and who assist in the investigation or prosecution of those crimes may qualify for nonimmigrant U visa status. Second, victims of sex trafficking or slavery trafficking who comply with "reasonable requests for assistance" from law enforcement may qualify for nonimmigrant T visa status if removal would cause them "extreme hardship." Third, aliens willing to provide "critical reliable information" about criminal or terrorist organizations may qualify for nonimmigrant S visa status. The INA caps U visas at 10,000 per year, T visas at 5,000 per year, and S visas at 250 per year across two subcategories (these caps do not apply to immediate family members who qualify derivatively). Recipients of each of the three statuses may adjust to LPR status if they satisfy specific statutory requirements. Of these three nonimmigrant statuses, U visa status has the broadest eligibility criteria and, as such, is the most frequently sought by unlawfully present aliens and also the most frequent subject of litigation and commentary. DHS has reached the statutory cap of 10,000 U visas in every fiscal year since 2010 and, as of the first quarter of FY2019, had a backlog of 234,114 pending U visa applications. Unlawfully present aliens on the waiting list for a U visa typically receive a discretionary reprieve from removal deferred action or parole. However, it takes an average of four years for DHS to vet applicants for eligibility before placing them on the waiting list and granting them deferred action or parole. <7. Other Approaches to Legalization> Although the legalization mechanisms in the INA are narrow, U.S. immigration law has used two other methods to confer legal immigration status or other protections from removal on segments of the unlawfully present population: (1) ad hoc legalization laws that, rather than reforming the INA's generally applicable legalization provisions going forward, offer one-time relief or offer relief only for discrete populations, and (2) discretionary reprieves from removal, such as deferred action, that confer weaker protection sometimes described as "quasi-legal status." <7.1. Ad Hoc Legalization Laws> In the second half of the twentieth century, Congress enacted a major one-time legalization program and also enacted other ad hoc legalization measures for narrowly defined populations. The Immigration Reform and Control Act (IRCA) of 1986 contained two primary legalization measures that offered the prospect of LPR status to much of the population of aliens without legal status in the United States at that time. These were one-time legalization measures: they benefited only those aliens without legal status who had been in the United States since 1982 or who had performed agricultural work in the United States for at least ninety days between May 1985 and May 1986. The law specified a limited application period for both programs. The major rationale appears to have been that one-time legalization relief would not undermine and might even advance the deterrence of future illegal immigration, which was another major goal of IRCA. In other words, Congress appears to have reasoned that a one-time legalization program for aliens already in the United States, unlike a legalization mechanism baked into the regular framework of the INA, would not encourage aliens to enter or remain in the country in violation of the INA in the future. Aside from IRCA, Congress also enacted other legalization laws in the second half of the twentieth century that targeted particular nationalities rather than aliens present at a particular juncture. For example, the Cuban Adjustment Act of 1966, the Nicaraguan Adjustment and Central American Relief Act, and the Chinese Student Protection Act of 1992 all created special mechanisms for some aliens without legal status of particular nationalities to acquire LPR status or to seek LPR status under less exacting criteria than those generally applicable under the INA. A more recent law created a special permanent resident status for long-time residents of the Commonwealth of the Northern Mariana Islands facing revocation of immigration parole. Somewhat like IRCA, these laws created targeted relief for aliens who fell within specific parameters but did not alter the INA's generally restrictive approach to legalization for all other aliens. Proposed legalization legislation in the 21st century has generally followed the ad hoc mold of offering relief only to aliens who were unlawfully present in the United States during a specified time period or who fit within narrowly defined groups, or both. The various Dream Act proposals to create a pathway to LPR status for aliens without legal status who were brought to the United States as children, for example, would cover aliens who entered the United States before a particular date (usually several years before enactment) and who have resided in the United States since entry. Legalization provisions in comprehensive immigration reform bills that the Senate passed in 2006 and 2013, beyond providing for relief to childhood arrivals, also would have provided for relief to many or most unlawfully present aliens who lived in the United States during a specified time period and to certain agricultural workers. Other bills would create special adjustment of status mechanisms for recipients of TPS and Deferred Enforced Departure. All of these ad hoc proposals stand in contrast to less common proposals to amend the generally applicable legalization mechanisms in the INA going forward, such as proposals to advance the cutoff date for registry under INA 249 or for the adjustment of status mechanism for unlawfully present aliens in INA 245(i). <7.2. Discretionary Reprieves from Removal ("Quasi-Legal" Statuses)> In recent decades immigration authorities have increasingly exercised their enforcement discretion to grant unlawfully present aliens temporary reprieves from removal, such as deferred action, DACA, or TPS. These and other types of discretionary reprieves from removal, which are covered at more length in another CRS report, have thus become a significant aspect of the federal government's regulation of the unlawfully present population. Two events, in particular, did much to increase the number of aliens receiving discretionary reprieves: (1) the enactment of the TPS statute in 1990, which created a discretionary reprieve program for nationals of countries that the Secretary of DHS designates as unsafe for return because of armed conflict, natural disaster, or other extraordinary conditions, and (2) the executive branch's implementation of the DACA program in 2012 for certain unlawfully present aliens brought to the United States as children. Together, TPS and DACA appear to cover more than one million aliens whose presence in the United States violates the INA, although that figure may well decline in the near term as a result of recent executive branch efforts to terminate or curtail these reprieve programs. The grant of a discretionary reprieve constitutes an assurance from DHS that the recipient does not face imminent removal. Discretionary reprieves are not legalization mechanisms because they do not extinguish the basis of the alien's removability under the INA. They therefore do not offer steadfast protection from removal. For example, if an alien overstays a nonimmigrant visa and then receives a grant of deferred action from DHS, the risk remains that DHS will decide to pursue the alien's removal in the future. Yet discretionary reprieves typically confer other advantages, including eligibility for work authorization and the nonaccrual of unlawful presence during the duration of the reprieve. Legal scholars use an array of terms for the peculiar sort of relief that discretionary reprieves provide: "quasi-legal status," "liminal" or "twilight" status, and the "status of nonstatus." <8. Conclusion> The INA subjects the more than ten million unlawfully present aliens in the United States to removal without a limitations period and gives them few opportunities to legalize. Political views of this generally restrictive approach to legalization differ: some favor creating expanded, mostly ad hoc pathways to legalization; others find the extant pathways to legalization too permissive and seek to curtail them. The debate is informed by the INA's current approach to legalization. The INA does not provide an avenue for an appreciable number of unlawfully present aliens to obtain lawful status based on long-standing presence, as the registry statute once did. The INA's penalties for unlawful entry and unlawful presence make it difficult for unlawfully present aliens to obtain lawful status based on qualifying family relationships (except, most notably, for nonimmigrant overstays who become immediate relatives of U.S. citizens). And it allows legalization on hardship grounds only in cases of truly extreme hardship to immediate relatives who are U.S. citizens or LPRs. Forms of humanitarian relief from persecution and other harms, such as asylum and the U visa program, do not exclude unlawfully present aliens from their reach but nonetheless have specific objectives and tailored eligibility criteria. Meanwhile, discretionary reprieves from removal and the quasi-legal status they confer upon unlawfully present aliens have become major components of the U.S. immigration system.

The population of unlawfully present aliens in the United States numbers between ten million and twelve million, according to recent estimates. The Immigration and Nationality Act (INA) takes three primary approaches to regulating this population: removal, deterrence, and—to a lesser extent—legalization. Legalization, as used here, means the granting of a lawful immigration status to an unlawfully present alien so that he or she is no longer subject to removal under the INA. Put differently, an unlawfully present alien "legalizes" by obtaining lawful permanent resident status (LPR or "green card" status) or any other status (such as a nonimmigrant status) that extinguishes the statutory basis for his or her removal. The INA takes a generally restrictive approach to legalization. During much of the 20th century, a statutory provision called "registry" allowed unlawfully present aliens to obtain LPR status based on their long-standing presence in the United States. If unlawfully present aliens had entered the United States before a fixed cutoff date and satisfied other requirements, such as a lack of certain types of criminal convictions, they could apply to the Attorney General for LPR status. The registry statute is now effectively obsolete because its cutoff date, which Congress last updated in 1986, remains fixed at 1972. The most consequential body of legalization principles in the INA governs when unlawfully present aliens may obtain LPR status through qualifying family relationships or on other qualifying grounds. In general, the INA imposes barriers to the acquisition of LPR status for unlawfully present aliens who come within one of the three major categories that the law uses to select aliens for immigration to the United States: family-based immigrants, employment-based immigrants, and diversity immigrants. Specifically, most unlawfully present aliens who come within these categories must pursue LPR status by departing the United States to apply for an immigrant visa abroad (rather than applying to adjust status within the United States), and their departure typically triggers a ten-year bar on readmission to the United States. There are important exceptions to this general framework, however. In particular, an alien who overstays a nonimmigrant visa and then becomes the immediate relative of a U.S. citizen (through marriage, for example) may generally apply to adjust to LPR status without leaving the country and without facing any time bars on admission. Other INA provisions allow for legalization on hardship or humanitarian grounds. Cancellation of removal allows for legalization where the removal of an unlawfully present alien would cause hardship to immediate relatives who are U.S. citizens or LPRs, but the hardship must be "exceptional and extremely unusual." Cancellation of removal also is generally only available as a defense in removal proceedings (aliens cannot apply for it affirmatively), is subject to an annual cap, and, among other requirements, is only available to unlawfully present aliens who have been in the United States for at least ten years. As for humanitarian relief, asylum creates a pathway to LPR status for unlawfully present aliens who have a well-founded fear of persecution or suffered past persecution in their countries of origin. However, aliens generally must apply for asylum within one year of arriving in the United States (unless an exception applies), so asylum is not available to most unlawfully present aliens who have been in the country for long periods of time. Subsidiary protections from persecution and torture—withho lding of removal and protection under the Convention Against Torture (CAT)—do not have the one-year application deadline, but they offer more limited relief that arguably does not qualify as lawful immigration status. Separately, a series of nonimmigrant statuses, including the U visa, offer the prospect of lawful immigration status to unlawfully present aliens who are victims or witnesses of certain crimes. U.S. immigration law has also taken other approaches to legalization, separate and apart from the narrow legalization provisions in the INA. First, Congress occasionally has enacted ad hoc legalization laws that, rather than reforming the INA's generally applicable provisions going forward, have offered one-time relief or relief only for discrete populations. Second, executive branch agencies have exercised enforcement discretion to grant unlawfully present aliens discretionary reprieves from removal, such as deferred action or the Deferred Action for Childhood Arrivals (DACA) initiative, which have conferred a weaker form of protection than lawful immigration status. This weaker form of protection is sometimes known as "quasi-legal status" and, although it typically confers work authorization and gives an unlawfully present alien an assurance that immigration authorities will not pursue his or her removal during a certain time, it does not extinguish the statutory basis for the alien's removal.

crs_R45939

crs_R45939_0

<1. Background> The increasing complexity and automation of flight control systems pose a challenge to federal policy regarding aircraft certification and pilot training. Over the past 30 years, pilot confusion in the face of unintended or unanticipated behaviors of cockpit automation has been implicated in a number of accidents and safety incidents. High-profile accidents overseas in 2018 and 2019 led to the grounding of the worldwide fleet of Boeing 737 Max aircraft and prompted investigations and policy inquiries regarding the design and certification of commercial airplanes. These inquiries have focused on three key policy issues: 1. the adequacy of standards and regulations pertaining to the design of cockpit interfaces between pilots and aircraft systems and to pilot training; 2. appropriate policies, standards, and regulations regarding the safety design of aircraft systems and sensors to ensure adequate fault and error detection, fault tolerance, and redundancy; and 3. the certification process for new aircraft technologies, and the roles of the Federal Aviation Administration (FAA) and other national regulators in certification. Modern jet airliners rely on numerous automated features to assist and alert pilots as well as to prevent aircraft from getting into precarious and potentially dangerous situations. In many cases, pilots' lack of understanding or familiarity with the design and operation of these automated features has led to inappropriate use of automation or inappropriate responses when cockpit automation has gone awry. In other cases, latent flaws and unintended consequences of highly complex automated flight control systems designs have been implicated in commercial airplane accidents. The complexity of these automated systems has also raised questions about the manner in which new aircraft flight control system designs are evaluated and certified. Two crashes involving the recently introduced Boeing 737 Max airplane prompted the grounding of the worldwide fleet of that model. The ensuing investigations into the process for certifying the Boeing 737 Max have triggered broader discussions about aircraft certification practices in general and also about global training, qualification, and flight currency standards for pilots flying commercial airplanes. The focus on aviation safety surrounding the Boeing 737 Max grounding has highlighted a number of long-standing challenges associated with systems design, failure and risk analysis, human-interface design of automated cockpits, aircraft-specific pilot training, and oversight of the certification processes under which these challenges are addressed in the design of new aircraft. These subjects are now the focus of a global policy debate. <1.1. Commercial Airline Safety Record> The two 737 Max crashes notwithstanding, the safety record of commercial airlines operating transport category airplanes is unsurpassed among modern transportation systems. Worldwide, the accident rate among scheduled commercial passenger operations for the 10-year period from 2008 through 2017 was 0.44 accidents per 100,000 flight departures, or roughly one accident in every 227,272 departures. The fatal accident rate was 0.16 per 100,000 departures, or roughly one fatal accident for every 625,000 departures. In Europe, Canada, and the United States, accident rates are even lower. <1.2. 1996 White House Commission> The recent safety record of U.S. air carriers demonstrates a marked improvement from the decade of the 1990s, which saw a spate of U.S. air carrier accidents, including several fatal crashes (see Appendix A ). In 1996, the crash of Valujet flight 592 raised congressional concerns over airline safety and FAA oversight of air carriers. In response, the Federal Aviation Reauthorization Act of 1996 ( P.L. 106-264 ) eliminated FAA's role in promoting civil aeronautics and air commerce and mandated safety as its top priority. The legislation also established a framework of legal protections for voluntary safety reporting programs designed to encourage individuals to report safety concerns with protection from retribution. Also in 1996, following the crash of TWA flight 800, a Boeing 747 en route from New York to Paris, President Clinton established the White House Commission on Aviation Safety and Security. The commission was chaired by Vice President Gore and is commonly referred to as the Gore Commission. The commission urged policymakers to make aviation safety, as well as aviation security, a national priority. In particular, it set a goal of "reducing the rate of accidents by a factor of five within a decade," and advocated for "a re-engineering of the FAA's regulatory and certification programs to achieve that goal." The plan included recommendations for establishing standards for continuous safety improvement and targeting regulatory resources based on performance against those standards; developing vigorous certification standards, and the development of additional certification tools and processes to encourage the introduction of new technologies; establishing performance-based regulations rather than dictating procedures in order to "break the regulatory logjam"; emphasizing human factors and training to "address issues relating to human interaction with changing technologies"; developing standard databases of safety information that can be shared openly while protecting trade secrets and protecting industry employees who voluntarily disclose information about safety violations; and developing better quantitative models and analytic techniques to inform management decisionmaking. Of particular note, the Gore Commission emphasized the streamlining of certification processes and regulations to accelerate the adoption of new aircraft technologies in the hope that this would bring operational safety improvements. <1.3. Safety Improvements over the Past Two Decades> Commercial airline safety in the United States improved following the Gore Commission report, despite some major commercial airline accidents in the late 1990s and early 2000s. Fatal accidents involving major U.S. passenger airlines during this period included the June 1, 1999, crash of American Airlines at Little Rock, AR; the Alaska Airlines crash off the coast of California on January 31, 2000; and the crash of American Airlines flight 587 near JFK International Airport in New York on November 12, 2001 . Commercial aviation safety data since 2002 show a marked improvement compared to the 1990s, particularly among major U.S. airlines ( Figure 1 ). In more recent years, attention has shifted to the safety of the regional airlines that operate almost half of all scheduled domestic flights in the United States. In the 2000s, there were six regional airline accidents involving passenger fatalities, resulting in a total of 149 deaths , in addition to several crashes not involving passenger fatalities. Four of the six regional accidents resulting in passenger fatalities during the 2000s were attributed to human factors affecting flight crews, including pilots' failure to adhere to proper procedures, deficiencies in training, and fatigue. Following the crash of a regional turboprop near Buffalo, NY, in February 2009 that killed all 45 on board, the Airline Safety and Federal Aviation Administration Extension Act of 2010 ( P.L. 111-216 ) was enacted on August 1, 2010. That legislation mandated revised regulations generally requiring pilots to accumulate 1,500 hours of total flight time before being eligible to be a first officer aboard a commercial airliner in the United States. It also required pilots to accumulate an additional 1,000 hours of flight time in commercial airline operations before becoming a captain and serving as pilot in command. The legislation directed FAA to order improvements to airline training programs, including formal mentoring, leadership, and professional development programs for pilots; institute reforms to flight time and rest rules for pilots; and require that airlines establish formal approaches to safety management. Following the February 2009 crash, more than nine years passed before U.S. air carriers suffered another passenger fatality. On April 17, 2018, a passenger was killed when uncontained engine failure on a Southwest Airlines Boeing 737 damaged the fuselage and broke a cabin window, causing a rapid depressurization of the aircraft cabin. Other incidents resulting in serious passenger injuries aboard U.S. air carrier flights in recent years have most often been linked to inflight turbulence. The small number of domestic air carrier accidents in the United States over the past decade has made it difficult for safety experts to identify meaningful accident trends without examining the safety performance of aviation systems in other countries. Low accident rates have also prompted researchers to look beyond accident data to trends in safety incidents and reported unsafe practices to identify and remediate safety deficiencies. <1.4. Worldwide Aviation Safety Trends> Worldwide aviation safety metrics point to continual improvements in commercial flight safety, corresponding to the trend in the United States. Worldwide, fatal accident rates for commercial airliners have dropped from about 4.2 per million flights in 1977 to less than 0.4 per million flights in 2017. Between 2014 and 2018, the fatal accident rate globally was 0.21 per million flights, but it was considerably lower in North America, Europe, and North Asia ( Table 1 ). While airline safety has shown overall improvements over time, safety indicators in certain regions remain a considerable concern to some. In particular, both the International Civil Aviation Organization (ICAO), a United Nations agency, and the International Air Transport Association (IATA), an industry group, have expressed concern about safety in Africa and the Asia-Pacific region. IATA found that, between 2014 and 2018, both the overall accident and the fatal accident rates for airlines in Africa were more than five times the worldwide average at 6.04 accidents and 1.03 fatal accidents per million flights. Between 2014 and 2018, the Asia-Pacific region stood out as having the highest number of airline accidents and the highest number of accident-related fatalities among world regions, accounting for 77 accidents and 748 fatalities over this period. While the region includes countries like Australia and New Zealand that have safety records on par with North America and Europe, it also includes the Philippines, Indonesia, and other countries in Southeast Asia that lag on aviation safety performance. In both Africa and the Asia-Pacific region, lax regulatory oversight and poor flight crew performance have been identified as primary contributors to comparatively high accident rates. Worldwide commercial airline safety has come under scrutiny following two high-profile crashes overseas involving the recently introduced Boeing 737 Max variant in 2018 and 2019. These accidents prompted the grounding of the entire worldwide fleet of 737 Max aircraft. Because FAA has the principal authority for certifying this aircraft, the crashes drew attention to FAA's certification process for that aircraft and raised broader questions about aircraft type certification practices for transport category aircraft. <2. Aircraft Complexity and Systems Safety> Many aviation safety experts attribute the safety advancements in commercial aviation over the past three decades, at least in part, to improvements in aircraft systems technology and flight deck automation. Paradoxically, these same factors have been implicated as causal or contributing factors in several aviation accidents and incidents. Modern aircraft flight systems incorporate advanced autopilot systems as well as traditional flight controls that interface with computers instead of directly actuating flight control surfaces, such as the rudders, ailerons, and elevators that control an airplane's movement in flight (see Figure 2 ). Flight data computers aboard the aircraft continuously analyze pilot inputs, aircraft states, and environmental factors, like winds, to maneuver the aircraft safely and efficiently. When the autopilot is engaged, flight control computers will command inputs to the flight control surfaces and aircraft engines to achieve the desired inputs in a manner that is optimized for efficiency. When pilots are flying manually, displays such as a flight director provide visual aids to pilots to achieve desired states of flight (e.g., a particular altitude, airspeed, or heading) most efficiently. The flight computers also continuously monitor pilot or autopilot inputs, aircraft states, and environmental states (e.g., winds) to ensure that the airplane continues to fly safely. These systems and displays are designed to enhance safety by improving pilot situation awareness, reducing pilot workload, and monitoring aircraft and aircraft system states to prevent unsafe operations such as flying at too high of a pitch angle or at too steep of a bank. However, the complexity of the modern cockpit can present considerable challenges to pilots, potentially leading to confusion and errors, particularly in high-workload situations. If these errors go undetected or if they are compounded by other mistakes or other situational factors, they can potentially lead to a serious incident or accident under rare and unusual circumstances. Worldwide, the most common causes of commercial jet accidents are (1) loss of control in flight and (2) controlled flight into terrain, two categories that often involve incomplete pilot situation awareness, poor judgment, and human errors in interaction with complex aircraft systems. The third most common type of accident, runway excursions (i.e., aircraft running off the end or side of a runway), also typically can be traced back to pilot performance and pilot understanding of aircraft performance, environmental factors, and flight control systems. Pilots require advanced training to understand the various features, modes, capabilities, and limitations of advanced flight control systems under various flight conditions. <2.1. Fly-by-Wire Systems> Airbus was the first manufacturer to incorporate computer interfaces between pilots and flight controls, commonly known as fly-by-wire technology, into commercial transport airplanes with the introduction of the A320, which entered service in 1988. In a fly-by-wire system, various sensors provide data to the flight control computers, which they, in turn, assess and analyze. The computers are linked to actuators, such as servo motors, that operate the flight controls and also to displays that provide pilots with information and alerts about aircraft performance and aircraft system states. Fly-by-wire technology offers a number of advantages over flight control systems operated using direct mechanical linkages between cockpit controls and the aircraft's control surfaces. First, the reduction in the number of mechanical parts and linkages can reduce aircraft weight considerably. Additionally, the systems can incorporate additional redundancies without adding as much weight as would be required with redundant mechanical systems. <2.1.1. Redundancy> Redundancy is achieved in a fly-by-wire system through multiple sensors and multiple flight data computers that can cross-check each other. Typically, triple redundancy is built into fly-by-wire flight control systems: three flight control computers continuously monitor pilot inputs and aircraft sensor data and cross-check for any anomalies in information or in computations based on inputs. <2.1.2. Flight Control Laws> The flight data computers also incorporate what engineers refer to as "flight control laws," logic embedded in the firmware and software that govern flight dynamics. These flight control laws can be designed to simplify the training required for a pilot to transition between different variants of an aircraft model and even different aircraft models. This is achieved by programming the flight control systems of an updated model of aircraft to perform similarly to those of existing aircraft despite differences in weight, power, and other factors that affect the aerodynamic performance. Minimizing handling differences between aircraft and designing cockpits of different models to have a similar look and feel can save airlines considerable time and money in training pilots to fly new aircraft. For this reason, manufacturers often seek to design aircraft to minimize the training requirements to transition to the new aircraft, known in the industry as "differences training." Another often-cited advantage of fly-by-wire system flight control laws is the capability to protect the aircraft from operating outside a defined envelope of parameters (such as limits with respect to pitch, bank, and airspeed) that define the boundaries of safe flight operation. <2.1.3. Flight Envelope Protection> An airplane's flight envelope refers to its performance limitations and design capabilities with respect to aircraft attitude, airspeed, and aerodynamic loads. In fly-by-wire aircraft, logic is built into the flight control computer systems to inhibit maneuvers that might place the aircraft outside this envelope of safe operational conditions. The flight envelope is multidimensional and is affected by factors such as aircraft weight, center-of-gravity, airspeed, altitude, and winds. It also depends on the aircraft's configuration (e.g., whether it is configured for takeoff, for landing, or for cruise flight, and the position of aircraft flaps and slats). For this reason, the flight envelope protection logic involves continuous monitoring of the state of the aircraft with respect to its flight envelope. Flight control computers continuously receive and analyze data from airspeed sensors that take inputs from pitot tubes and static ports, angle-of-attack indicators that take data from vanes attached to the side of the fuselage, inertial units, gyroscopes, and accelerometers that sense aircraft attitude along all three axes (pitch, roll, and yaw) and acceleration along these axes, and, of course, altimeters and temperature sensors. Sensors also monitor engine thrust, fuel flow, and various other engine performance parameters, as well as aircraft configuration, including the position of various aircraft control surfaces like ailerons, vertical stabilizers, trim tabs, and wing flaps and slats. Every input made by the pilots when the airplane is being flown manually is also captured by sensors linked to the flight control computers. The manner in which the flight control automation responds to information from the various aircraft sensors depends, in part, on the manner in which the aircraft is being flown. If the airplane is being operated on autopilot and with autothrottles engaged, then the computers will largely operate directly to control the airplane to achieve objectives that the pilots have entered on a control panel, including things such as desired altitude, desired heading or course, airspeed, and climb or descent rates. If, on the other hand, pilots are operating the flight controls manually, the computers will provide them with information to guide maneuvers, and the flight envelope protections will override unsafe pilot actions such as commanding too much pitch up or too steep of a bank. Under normal conditions, these flight envelope protections will limit pilots' actions. However, in some situations, the computers may disable some of these protections by switching the flight control systems to what are referred to as alternate or secondary laws, direct laws, and mechanical backup modes. In these alternative states there are fewer flight envelope protections, and the pilots have progressively more direct control over the airplane. Pilot understanding of these various flight envelope protections and, particularly, awareness of how flight control systems behave in the various modes has been a critical safety consideration in the design of fly-by-wire systems and highly automated cockpits. <2.2. Impact of Cockpit Automation on Aviation Safety> The implications of modern flight deck automated systems design have been an issue of concern for more than two decades. In 1996, a human factors team convened by FAA released a comprehensive study of interfaces between flight crews and highly automated aircraft systems with a focus on interfaces affecting flight path management. The study was prompted by the April 26, 1994, crash of a China Airlines Airbus A300-600 at Nagoya, Japan, that stalled while attempting to perform a go-around during its landing approach, killing 264 of the 271 occupants. The event was triggered by the inadvertent activation of an autothrottle takeoff/go-around button, located on the throttle lever, during the approach to landing, and the flight crew's apparent lack of understanding as to how to disengage and override the autothrottle. The plane's autothrottle software had not been upgraded to disengage if certain manual inputs, including forward yoke movement, were made. This differed from the behavior of a training simulator that the accident pilot practiced on as well as the Boeing 747 that he had spent most of his career flying. The FAA human factors team found that pilots often lacked adequate understanding of automated systems and were often surprised by the behavior of automated flight control features. Moreover, flight crew situation awareness suffered from a lack of complete understanding of what modes or states automated features were in and the behavior of automated features in these states. It also was affected by poor understanding of current status regarding flight path and aircraft attitude, terrain clearance, and airspeed. The team made recommendations regarding design and certification of automated systems; pilot training; flight crew situation awareness, communication, and coordination; and ways to encourage and measure safety enhancements. The work prompted FAA to revise its certification requirements for flight guidance systems in 2006. Specifically, under 14 C.F.R. 25.1329, the design must incorporate quick disengagement controls for the autopilot and autothrust functions, and the effects of disengaging automatic features must be minor. Similarly, sensors or mode selections may not cause anything beyond a minor transient change to the aircraft's flight path under normal conditions. Automated flight guidance systems must also provide protections to avoid unsafe speeds or pitch or bank attitudes, and under no circumstances should the systems be capable of executing maneuvers that would produce hazardous forces or loads on the airplane. The regulations also require that controls be clearly labeled and designed to minimize flight crew errors and confusion. Additionally, flight crews must be alerted when automated flight guidance features disengage, and autopilot systems must not create potential hazards when overridden by manual flight control inputs. Despite the changes made to address human factors issues in flight guidance system design, the interface between pilots and automated flight guidance systems remains at the crux of commercial aviation safety. This issue has been highlighted in several high-profile international aviation accidents that have occurred over the past decade. <2.2.1. Air France Flight 447> Air France flight 447, an Airbus A330, crashed in the Atlantic Ocean on June 1, 2009, en route from Rio de Janeiro, Brazil, to Paris, France, killing all 228 on board. After lengthy efforts to locate the wreckage and recover the flight data and cockpit voice recorders, found lying on the ocean floor at a depth of about 13,000 feet, a detailed investigation was launched to determine the circumstances and safety implications of the crash. The investigation, led by the French Bureau d'Enqu tes et d'Analyses pour la S curit de l'Aviation Civile (BEA), found that icing on the airplane's pitot tubes resulted in a temporary inconsistency in airspeed measurements that caused the flight computers to disconnect the autopilot and switch the flight control logic into a different mode, known as an alternate law, in which normal protections against aerodynamic stalls and steep banks were disabled. Investigators concluded that the pilots failed to properly assess the situation and instead made inappropriate control inputs that destabilized the airplane, resulting in an aerodynamic stall. The crew failed to detect the stall and consequently did not make control inputs to recover from it. Investigators identified several factors that likely contributed to the flight crew's confusion and lack of appropriate response, including the lack of a clear display in the cockpit indicating airspeed inconsistencies identified by the computers, transient stall warnings that may have been considered spurious, the absence of visual information to confirm an approach-to-stall, possible confusion with an overspeed situation that, like a stall, could be accompanied by airframe buffeting, and difficulty in recognizing the shift to an alternate control law with no angle-of-attack protections. Several aviation experts cautioned that the Air France flight 447 disaster might be a harbinger of the latent dangers of highly complex, highly automated flight control designs. <2.2.2. Asiana Airlines Flight 214> On July 6, 2013, a Boeing 777 operated by Asiana Airlines descended below the visual approach path and hit a seawall short of the runway at San Francisco International Airport. The impact tore the fuselage in two and ignited a post-crash fire. Three passengers were fatally injured and another 40 passengers, along with 9 crew members, suffered serious injuries. Others suffered less serious injuries. The National Transportation Safety Board (NTSB) determined that the complexities of the airplane's autopilot and autothrottle systems contributed to the accident. The NTSB noted that Boeing documentation describing those systems and the airline's training in the use of those systems were inadequate and increased the likelihood of a mode error , a situation in which the pilots misunderstood the state of the automated system and its operation during the approach. Specifically, the flight crew interacted with the autopilot and throttles in a manner that put the system into a state in which the autothrottle no longer controlled the airplane's airspeed. However, the flight crew apparently failed to understand that this mode or state was contributing to a continual decrease in airspeed that, coupled with too steep an approach, left the airplane flying too low and too slowly. The NTSB made a number of recommendations to improve flight crew understanding of the Boeing 777 autothrottle system and modes. It also called for a broader examination of the functionality of automated flightpath management systems and of the documentation and training guidance on the use of these systems. <2.2.3. Lion Air Flight 610 and Ethiopian Airlines Flight 302> On October 29, 2018, Lion Air flight 610, a Boeing 737 Max 8 aircraft, crashed into the Java Sea shortly after takeoff from Jakarta, Indonesia, killing all 189 on board. A preliminary report on that crash noted that on the accident flight and on a flight by the same aircraft the previous day, flight data indicated discrepancies between the angle-of-attack sensor on the left side of the aircraft, which had been replaced two days prior to the accident, and the sensor mounted on the right side of the aircraft. Multiple automatic nose-down trim commands occurred during the last six to seven minutes of the accident flight, which the pilots attempted to counteract unsuccessfully by applying nose-up pitch trim commands. At the end of the recorded flight data, the vertical stabilizer had moved to almost the full nose-down position, and the airplane was in a steep dive. The second accident occurred on March 10, 2019, when Ethiopian Airlines flight 302 crashed shortly after departure from Addis Ababa, Ethiopia, killing all 157 on board. The preliminary report from that accident reveals several similarities to the Lion Air flight 610 crash. Notably, immediately upon takeoff and for the short duration of the flight, the left angle-of-attack sensor indicated an extremely high pitch (roughly 75 degrees nose up), while the angle-of-attack sensor on the right side appeared to report normal pitch variations of a few degrees consistent with a takeoff climb. Over the next few minutes the aircraft experienced a series of automatic aircraft nose-down trim commands. The flight data from the accident similarly ends with the pitch trim at almost a full nose-down position with the aircraft in a steep descent. <2.3. The Boeing 737 Max Grounding> The circumstances of the two Boeing 737 Max crashes led authorities in several countries, including China and the European Union (EU), to ground 737 Max airplanes as the crashes and the aircraft systems involved were investigated. Initially, FAA, Boeing, and U.S. air carriers did not follow suit. One day after the Ethiopian Airlines crash, FAA instead notified international civil aviation authorities that it anticipated mandatory design changes to be instituted no later than April 2019. However, on March 13, 2019, FAA issued an emergency order grounding all 737 Max aircraft. That order remains in place as Boeing seeks to fix identified flight control system issues in ways acceptable to FAA and safety regulators in other countries. The concerns center on how the Boeing 737 Max flight control systems were implemented to counteract high angle-of-attack conditions that could result in unsafe high-pitch situations and potential aerodynamic stalls and the single sensor Boeing relied on to detect these high angle-of-attack conditions. Designers of the Boeing 737 Max took a different approach to designing high angle-of-attack protection systems because the use of larger-diameter engines compared to earlier 737 models necessitated mounting those engines further forward and higher. Under certain conditions, high engine power from these further forward-slung engines could pitch the aircraft up. To address this, Boeing engineered an automated feature, called the Maneuvering Characteristics Augmentation System (MCAS), to counteract such undesirable and potentially unstable pitch up events. <2.3.1. The Maneuvering Characteristics Augmentation System Design> The MCAS system, as equipped on the two accident airplanes, reportedly receives aircraft angle-of-attack data from only one of the airplane's two angle-of-attack sensors. The sensors are essentially sensitive wind vanes affixed to the side of the fuselage that precisely measure the relative airflow and thereby convey information about the aircraft's pitch angle relative to the airflow around it. On November 7, 2018, following the Lion Air flight 610 crash, FAA issued an emergency directive ordering U.S. operators of Boeing 737 Max airplanes to apply runaway stabilizer procedures, that is, approved pilot actions to address an uncommanded pitch-down event, in situations involving erroneous high angle-of-attack indications that might trigger repeated nose-down trim commands by the MCAS. In December 2018, FAA expanded the scope of the airworthiness directive, ordering the procedural change for all Boeing 737 Max airplanes worldwide. The control laws for the MCAS have been described as being separate from and not integrated with the other flight control laws and logic embedded in the 737 Max air data computers. In engineer-speak, the MCAS is characterized as a federated systems architecture, that is one packaged in a self-contained unit that carries out its own unique functions. The MCAS control laws as originally designed only received inputs from a single angle-of-attack sensor located on either the left or right side of the aircraft, although the airplanes were equipped with two such sensors, one on each side. The MCAS was added to the Boeing 737 Max as a means to address longitudinal (pitch) stability requirements. Reportedly, the system is only needed and will only activate in highly unusual circumstances. Under most normal flight conditions, the MCAS should not be needed. However, on both Lion Air flight 610 and Ethiopian Airlines flight 302, it is suspected that the MCAS did engage because it received faulty data from the angle-of-attack sensor falsely indicating that the aircraft was in a nose-high attitude. In response to sensor data indicating a nose-high pitch, the MCAS would actuate a nose-down pitch trim command. Moreover, if the pilots counteracted this nose-down actuation with a nose-up pitch trim, the MCAS would reset after five seconds, then repeat the nose-down pitch command again, and would repeat this cycle for as long as it continued to sense that the aircraft was in a nose-high attitude, even if based on errant sensor data. Much of the engineering work done to address the safety concerns that led to the Boeing 737 Max grounding has focused on fixes to the MCAS system design and control laws. Where the original MCAS design relied on input from a single angle-of-attack sensor, the redesigned system will rely on two. Additionally, the new MCAS system will reportedly perform additional checks for reasonableness of data based on average values and for low-to-high data transitions that might indicate a catastrophic failure of the sensor. Boeing refers to this as a triple-validity check of the angle-of-attack sensor data. All 737 Max aircraft reportedly will also be fitted with angle-of-attack sensor disagree warnings to alert pilots when a sensor might be providing errant data. In addition to the redundancies being built into the MCAS sensor inputs, the MCAS control logic is reportedly being revised to limit the manner in which it applies nose-down stabilizer trim commands. Whereas the original system continued to apply repeated nose-down trim commands even if pilots tried to counteract it, the new system reportedly will not reset after a pilot makes electric pitch trim inputs. Also, the redesigned MCAS will not continue to trim the nose down to values close to the stabilizer trim limits, but instead will leave adequate nose-up pitch trim authority for pilots to work with. <2.3.2. Scrutiny of the Boeing 737 Max Certification Process> The Boeing 737 Max grounding has prompted broader inquiries regarding the entire certification process for that aircraft and the steps being taken to certify Boeing's proposed design changes to sensors and the flight control system. FAA stated that it "is following a thorough process, not a prescribed timeline, for returning the Boeing 737 Max to passenger service. The FAA will lift the aircraft's prohibition order when we deem it safe to do so." FAA has convened a technical advisory board to review Boeing's MCAS software update and systems safety assessment and provide recommendations for steps needed to certify Boeing's changes and return the aircraft to service. Regulators in several other countries are pursuing reviews independently. In April 2019, FAA convened a multinational Joint Authorities Technical Review (JATR) chaired by former NTSB Chairman Christopher Hart to conduct a comprehensive review of the Boeing 737 Max aircraft's automated flight control system certification. The JATR is composed of experts from FAA, the National Aeronautics and Space Administration (NASA), and foreign aviation authorities and was convened to "evaluate aspects of the 737 Max automated flight control system, including its design and pilots' interaction with the system, to determine its compliance with all applicable regulations and to identify future enhancements that might be needed." Representatives from air safety authorities in Canada and the European Union, as well as experts from Australia, Brazil, China, Japan, Indonesia, Singapore, and the United Arab Emirates, are participating on the JATR. The findings of the JATR review may help to develop international consensus regarding pilot interaction with Boeing 737 Max automated flight control systems and associated pilot training. The panel's work is separate from and not a required input to FAA and Boeing's ongoing work to address safety concerns identified by the two accidents and certify the aircraft for a return to service. Separately, the Department of Transportation Office of Inspector General announced on March 27, 2019, that it was initiating an audit of FAA's oversight of the Boeing 737 Max certification. The focus of the audit is on FAA's process for certifying the Boeing 737 Max series of aircraft based on a detailed factual history of the activities that culminated in the aircraft's certification. Additionally, the Department of Justice has reportedly launched a criminal probe based on a broad subpoena issued by a Washington, DC, grand jury immediately following the Ethiopian Airlines crash in March 2019. In June 2019, it was reported that the criminal investigation had expanded beyond the Boeing 737 Max to include certification work done on the Boeing 787 "Dreamliner," Boeing's most recent entirely new type design, which first entered commercial service in 2011. The Boeing 787 fleet was grounded by FAA for roughly a three-month period in early 2013, following a number of in-flight fires and electrical problems tied to lithium ion batteries installed on the airplane. This marked the first time an entire fleet of a particular aircraft type was grounded since 1979, when the entire fleet of McDonnell Douglas DC-10s was grounded over a problematic cargo door design. The grounding of the Boeing 787 prompted an NTSB investigation that questioned the certification process for and testing of lithium ion batteries and other emerging technologies, resulting in a series of certification recommendations, including a recommendation that panels of expert consultants be included early in the certification process for new technologies installed on aircraft. In September 2019, NTSB issued a number of safety recommendations to FAA and to Boeing urging action to address design assumptions about pilot response to uncommanded flight control system events like an MCAS activation in the certification process. NTSB urged Boeing to ensure that assessments of the 737 Max consider the effect of all possible cockpit alerts and indications on pilot recognition and response and incorporate these factors into cockpit design changes as well as pilot procedures and training. It similarly urged FAA to change certification standards to ensure that cockpit designs are evaluated to ensure that cockpit warnings and indicators are assessed for pilot recognition and response and this information is incorporated into procedures and training requirements. NTSB also recommended that FAA develop and implement evaluation tools, based on input from industry and human factors experts, to help inform aircraft design certification regarding pilot response to safety-significant failure conditions. <2.4. Sensor Data and Flight Control Automation as Factors in Aircraft Mishaps> In many accidents and incidents, including the crash of Air France flight 447 and possibly including the Boeing 737 Max crashes, faulty sensor data set off a chain of subsequent events that ended in tragedy. Faulty sensor data can give automated systems and pilots inaccurate or incomplete information about airspeed, altitude, pitch, bank, and other aircraft parameters that can result in inappropriate flight commands and a loss of situation awareness. Design considerations during aircraft development, including engineering assessments of potential fault conditions, may not adequately take the risk of sensor failures into account. In the Air France flight 447 crash, airspeed data became unreliable after all three pitot tubes that measure air flow iced over, but a simple cross-check of the airplane's groundspeed based on Global Positioning Satellite (GPS) sensor readings coupled with computer models of winds at the airplane's altitude could have served as a means to detect the anomalies in the airspeed data and provide a rough approximation of what the actual airspeed was. Some researchers argue that certain critical systems on aircraft rely on data from too few sensors and fail to adequately aggregate and integrate available sensor data. Advances in sensor fusion, that is, taking and analyzing data from a more robust set of onboard sensors, may offer opportunities to improve sensor fault detection and flight control system recovery techniques. <2.5. Implications for Human Factors and Pilot Training> Automation-related aviation accidents such as those involving the 737 Max have brought complex human-systems interaction to the forefront of public policy. As noted, a number of accidents have also involved either failures of automated systems or pilot confusion over the operation of automated features resulting in improper interaction with these systems. Research has shown that piloting skills associated with maneuvering aircraft using manual controls decline as a consequence of flying highly automated aircraft. Studies indicate that pilots often do not understand how automated features operate and the modes and states of automation in the cockpit. Additionally, some research has shown that pilots may overestimate their ability to take over and safely maneuver the aircraft in situations when automation fails, particularly given the likelihood of unanticipated distractions in the cockpit during a system failure. These studies have raised questions about approaches to training pilots on highly automated aircraft. Complicating matters further, automated systems on modern air transport airplanes are highly adaptable. As a consequence, different air carriers and individual pilots use various different automated features and modes to suit their particular operational needs and personal preferences. For example, some pilots might minimize the use of automation to stay more engaged with piloting the aircraft and avoid boredom and complacency, while others might rely more heavily on automation to reduce workload. Experts continue to debate whether greater standardization of operations and training is desirable. In January 2016 a DOT Office of Inspector General audit found that while FAA had established certain requirements governing airline use of flight deck automation, it lacked a process to ensure that airline training and proficiency standards adequately addressed pilot monitoring capabilities. In response, Section 2102 of the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) directed FAA to develop a process for verifying that air carrier flight crew training programs incorporate automated systems monitoring and manual flying skills when autopilot or autoflight systems are not engaged. It also required FAA to establish metrics to gauge pilot proficiency, and issue guidance for implementing and overseeing enhanced pilot training. Subsequently, the Air Carrier Training Aviation Rulemaking Committee, established by FAA in response to NTSB recommendations issued in the wake of the Asiana Airlines flight 214 crash, has made a number of recommendations addressing training elements pertaining to pilot monitoring, as well as training and procedures to enhance operational mode awareness and manually recover from unintended autoflight states. FAA is incorporating these recommendations into its guidance for airline training programs and is considering rulemaking to address the design of flight crew interfaces and cockpit alerting systems. <2.6. Implications for Aircraft Type Certification> Aircraft type certification refers to the process of reviewing engineering data and performing inspections and tests to certify compliance with regulatory requirements and minimum standards for aircraft design and airworthiness. In addition to certifying new aircraft types, FAA inspects and tests variants of existing aircraft types to assess whether they can be covered under an existing aircraft type certification or whether the changes in design, power, thrust, or weight are so extensive as to require a new type design. These are primarily responsibilities of the FAA Aircraft Certification Service. This process typically involves extensive examinations, inspections, engineering tests and evaluations, and flight tests in which an aircraft designer or manufacturer must satisfactorily demonstrate that the aircraft and its systems and components meet safety standards and are safe for flight. Type certification is the first step in bringing a new aircraft or new aircraft technologies incorporated into the design of an existing aircraft to market. Once an aircraft design is type certified, a manufacturer must demonstrate that it can reliably reproduce that aircraft type to receive production certification to build deliverable aircraft. Upon final assembly, every completed aircraft must undergo examinations, inspections, and tests before it receives airworthiness certification and can begin routine operations for an airline or other operator (see Figure 3 ). Airworthiness certification has long been a delegated function carried out largely by FAA designees, be they employees of the manufacturer or consultants. After an aircraft is delivered, FAA maintains oversight responsibility to identify operational or maintenance difficulties. Under normal circumstances, safety deficiencies involving aircraft in operational use are addressed through the continued airworthiness process. That process involves FAA working with manufacturers and operators to identify safety deficiencies, approve fixes, and issue airworthiness directives ordering operators to address safety concerns through inspections, repairs, and/or replacements of faulty components. For electronic systems this might involve hardware replacements or software or firmware updates. FAA oversees aircraft type certification for aircraft designed in the United States. Other regulatory entities oversee type certification for products designed in other countries. Notably, the European Union Aviation Safety Agency (EASA) oversees the type certification process for aircraft and aircraft products designed in EU member countries and in several other European countries. The FAA's Aircraft Certification Service (AIR), which grants type certification approval, has a staff of about 1,330, mostly engineers and inspectors, who oversee product development phases, the manufacturing processes covered under production certification, and the airworthiness certification of all completed aircraft. FAA's aircraft certification workforce is augmented by FAA designees, employees from aircraft and aircraft component design and manufacturing organizations, and consultants who carry out certain certification functions, such as tests and inspections, on FAA's behalf. Delegation of certification functions to manufacturing employees and engineering consultants is a long-standing practice, but over the last decade FAA has established new regulations governing the manner in which it oversees and interacts with entities to which it has delegated some of these responsibilities (see " Delegation of FAA Certification Functions " below). Once a type certificate is issued, it typically remains valid indefinitely. In rare cases a type certificate can be voluntarily surrendered, or it can be suspended or revoked by FAA. As technology advances, type-certified airplane designs are updated and amended or supplemental type certifications may be granted to address modifications of the aircraft. Whether a new type certificate is required or an amended type certificate will suffice is governed by 14 C.F.R 21.19, which leaves it up to FAA to determine whether the proposed change "is so extensive that a substantially complete investigation of compliance with the applicable regulations is required." <2.6.1. Addressing Pilot Training in the Context of Aircraft Certification> Whereas FAA's Air Certification Service is responsible for aircraft certification, the FAA Flight Standards Service prescribes the standards for aircraft operations and verifies that operators, such as airlines, meet those standards. For each aircraft type design, the Flight Standards Service sets up an aircraft evaluation group to determine required training and operational procedures. Flight standardization boards are the functional elements of aircraft evaluation groups that deal specifically with the training and flight operational procedures of particular aircraft. A flight standardization board has primary responsibility for determining pilot training standards and requirements for a particular aircraft. This includes determinations regarding the requirement for a pilot to obtain an aircraft type rating, and minimum training recommendations and requirements for establishing initial flight crew member competency for the aircraft. For variants of an existing aircraft type, the flight standardization board may develop Master Difference Requirements tables that outline the specific differences among the various aircraft covered by the type certification as well as similar aircraft produced by the manufacturer of that aircraft. These tables form the basis for evaluating an operator's differences training curriculum for pilots who transition from one variant of an aircraft type to another or between aircraft with similar characteristics. The tables specify the training needed to learn and understand the differences between related aircraft types. The FAA operations inspector assigned to a particular airline or operator may then use this, along with more detailed flight standardization board reports, as a guide for review and approval of an operator's proposed training plan. FAA Advisory Circular 120-53B provides guidance to flight standardization boards on evaluating training requirements for newly manufactured or modified aircraft, including differences training requirements for pilots transitioning between similar aircraft or aircraft variants. The guidance sets standards for assessing proposed pilot training programs, delineating training resource and training device needs and available alternatives, and encourages manufacturers to include common characteristics in related aircraft. The advisory circular discusses the need to assure pilot understanding of differences between aircraft variants. It also instructs FAA inspectors how to evaluate each aircraft operator's application of flight standardization board recommendations in its training program, including evaluation of operational differences among aircraft in a mixed fleet and the effects of those differences on training needs. <2.6.2. Potential Controversies Related to the Boeing 737 Flight Standardization Board> On April 16, 2019, the Boeing 737 flight standardization board issued a draft report for public comment. Notably, the draft report documented findings regarding the aircraft's MCAS based on studies and reexaminations of the system following the Boeing 737 Max grounding; prior Boeing 737 flight standardization board reports had not included information on the MCAS system. The master difference requirements updates associated with the introduction of the Boeing 737 Max had specified only computer-based, oral, or written instruction and testing on other new features of the Boeing 737 Max, with no requirement for simulator or in-flight training or testing for Boeing 737 type-rated pilots to qualify to fly the Boeing 737 Max. FAA has required no training of any type pertaining to the MCAS. The draft report included language mandating that training on the MCAS system be incorporated into ground training for initial, upgrade, transition, differences, and recurrent training for pilots. It specified that this training must include a description of the MCAS system, its functionality, associated failure conditions, and flight crew alerting. The draft report stated that this training could be provided in the form of aided instruction, such as tutorial computer-based instruction, and that required checking may be accomplished by self-tests administered during this computer-based instruction, or through oral or written exam. The draft report, however, did not call for any flight simulator or in-flight instruction or checking related to the MCAS system. On April 17, 2019, one day after the draft report was released, Canada's Transport Minister, Marc Garneau, said he favored simulator training over computer-based instruction. However, at the present time Canadian transportation authorities have not determined whether they will require simulator training related to the MCAS system for Boeing 737 Max pilots. Nonetheless, media coverage suggested that Garneau's comments signaled a growing rift between the United States and Canada over appropriate steps to address Boeing 737 Max training and operations. It was also reported that Air Canada, the only airline in North America that had a 737 Max simulator on hand, had already incorporated MCAS scenarios into its simulator training, even though such training has not been specifically mandated by Transport Canada. Once finalized, the Boeing 737 flight standardization board report will form the primary basis for establishing and approving U.S. air carrier training programs regarding the automated flight control features of the Boeing 737 Max, including transition training between the 737 Max and other 737 variants. Historically, other countries have generally followed FAA guidance in establishing training programs for U.S. manufactured aircraft, but the controversies surrounding the Boeing 737 Max grounding have raised questions as to whether other countries will indeed adopt FAA's training recommendations or whether they will insist on more stringent training requirements. Additional controversy over the Boeing 737 Max flight standardization board emerged following a U.S. Office of Special Counsel finding that numerous FAA safety inspectors, including inspectors assigned to the operational review of the 737 Max, were not sufficiently qualified to carry out those duties and that FAA had provided misleading information regarding FAA inspector qualifications and training in response to congressional inquiries. FAA, however, has reasserted its position that all inspectors who participated in the Boeing 737 Max flight standardization board were fully qualified to do so. <2.7. The Role of Industry Consensus Standards> Industry advisory groups and standards organizations play important roles in setting industry norms, best practices, and consensus standards that form the basis for aircraft design and production certification. The development of consensus standards represents a significant facet of industry input into the manner in which aircraft and aircraft systems are designed and the criteria against which they are evaluated for certification purposes. In some cases, consensus standards might be incorporated by reference into regulatory requirements. In other cases they might be referenced as means of compliance with specific FAA regulations. Often they serve as a preferred means of compliance because they have been broadly endorsed by industry experts and represent the approaches that are most often pursued and most familiar to FAA regulators. The International Organization for Standardization (ISO), an independent nongovernmental organization, is responsible for developing internationally accepted standards. ISO Technical Committee (TC) 20 is responsible for establishing international standards for air and space vehicles, including vehicle materials and components, as well as equipment used in servicing and maintaining aircraft and space vehicles. SAE International, initially established as the Society of Automotive Engineers, provides input from U.S. experts to ISO TC 20 technical advisory groups on matters pertaining to aircraft design. Within SAE, the Aerospace Council houses technical committees that address all facets of aircraft and aircraft systems design, including avionics, instruments, and flight controls. SAE Technical Committee S-7 addresses issues related to flight deck design and aircraft handling qualities for transport category aircraft. The work of the committee encompasses flight deck panels, controls, and displays; flight deck safety equipment; and flight control systems and their handling qualities. Given the increased importance of software in the design and operation of modern aircraft, another important industry consensus group is the Forum for Aeronautical Software. The forum was formed under a partnership between RTCA, a nonprofit organization founded in 1935 as the Radio Technical Commission for Aeronautics, and EUROCAE, the European Organization for Civil Aviation Equipment. The forum has developed a number of key guidance documents pertaining to the development of aviation software, including DO-178C, which serves as the primary reference for designing and evaluating software-based flight control and avionics systems. FAA Advisory Circular 20-115D recognizes DO-178C as acceptable guidance for meeting the type certification requirements for software aspects of airborne systems and equipment. Manufacturers can pursue alternative means of compliance to meet type certification requirements, but most follow the DO-178C guidance or parallel documents that are used for certification compliance in Europe. The RTCA/EUROCAE guidance is recognized worldwide as an industry standard for developing and certifying software for airborne systems. <2.8. Industry Input into FAA Oversight and Rulemaking> Besides developing industry consensus standards, companies provide direct input to FAA rulemaking by acting in an advisory capacity to FAA advisory and rulemaking committees. Advisory groups are established under the terms of the Federal Advisory Committee Act (FACA), which sets the legal framework for committees, task forces, and working groups to assist executive-branch policymaking. The FAA Aviation Rulemaking Advisory Committee (ARAC) provides FAA with information, advice, and recommendations concerning rulemaking activities. Under the ARAC, FAA has developed numerous taskings related to air carrier operations and aircraft certification procedures since the 1990s. The ARAC comprises representatives from aviation associations, aviation industry, public interest and advocacy groups, and foreign civil aviation authorities. Engineers employed by manufacturers, representatives of airlines and other operators, and pilots and mechanics representing various labor organizations participate in the ARAC and its working groups. FAA also convenes a number of rulemaking committees that are exempt from FACA requirements but generally must adhere to Administrative Procedures Act requirements in performing work related to rulemaking. FAA personnel carry out the administrative functions of these committees and the subcommittees and working groups formed under them . <3. Delegation of FAA Certification Functions> Congress has generally supported increased utilization of FAA's delegation and designation authorities in order to engage design and manufacturing organizations and their employees more directly in the aircraft certification process, often working as proxies for FAA and its aircraft certification inspector workforce. Nonetheless, legislative language in the 2012 FAA reauthorization ( P.L. 112-95 ) and the 2018 FAA reauthorization ( P.L. 115-254 ) has sought reviews of these practices to assess the efficiency and safety implications of these practices. FAA explains that because it does not have the resources to perform all the necessary certification activities and keep up with an expanding aviation industry, it must rely on delegating certain certification functions to qualified individuals and entities. FAA asserts that using designees for routine, well-established certification tasks allows it to focus its limited resources on safety-critical certification issues as well as new and novel technologies. Since the 1920s, federal aviation safety agencies have relied on private individuals to participate in examination, inspection, and testing of aircraft during the product certification process. In the 1940s, programs were established to appoint designees to perform certain product certification approvals. These included designated engineering representatives and designated manufacturing inspection representatives employed by aircraft, aircraft engine, and aircraft component manufacturers. In the 1980s, FAA established a designated airworthiness representative (DAR) program that expanded the role of individuals in performing airworthiness certification functions, and allowed organizations to serve as DARs under a program known as Organizational Designated Airworthiness Representatives (ODARs). These actions were taken under FAA's long-standing authority under 49 U.S.C. 44702(d), which allows for the delegation of activities related to aircraft type certification, production certification, and airworthiness certification, including examination, testing, and inspection necessary to issue a certificate, and certificate issuance to a private person. In this context, "person," as defined in 1 U.S.C. 1, includes corporations, companies, partnerships, and other business entities in addition to individuals. FAA notes that "[w]hen acting as a representative of the Administrator, these persons or organizations are required to perform in a manner consistent with the policies, guidelines, and directives of the Administrator. When performing a delegated function, designees are legally distinct from and act independent of the organizations that employ them." Under 49 U.S.C. 44702(d), FAA has the authority to rescind a delegation issued to a private person at any time for any appropriate reason. Moreover, any person affected by the action of an entity delegated certain FAA certification functions may petition FAA for reconsideration, and FAA may, at its own initiative, consider the actions of a delegated entity at any time. If FAA determines that the delegated entity's actions are unreasonable or unwarranted, it may change, modify, or reverse them. <3.1. Organization Designation Authorization> FAA formally established the Organization Designation Authorization (ODA) program in 2005. This prompted a significant change in the manner in which FAA delegates its certification functions and the manner in which it oversees aircraft and aircraft systems certification activities. The ODA program serves as a formal framework under which FAA may delegate authority to organizations or companies, including aircraft manufacturers such as Boeing; engine manufacturers such as Pratt and Whitney, General Electric, and Rolls Royce; and avionics and flight control systems suppliers such as Honeywell and Collins Aerospace. <3.1.1. Rulemaking Advisory Committee and Delegation of Certification Functions> In the 1990s, the Aircraft Certification Procedures Issues tasking for the Aviation Rulemaking Advisory Committee sought industry input regarding FAA's delegation of aircraft and aircraft system certification activities. In 1998, the Aviation Rulemaking Advisory Committee recommended that FAA establish Organization Designation Authorization (ODA), generally authorizing companies to conduct a broad array of delegated functions on behalf of FAA. The ARAC recommendation, similar to one issued by the Gore Commission two years earlier, was based on a draft developed by the Delegation Systems Working Group, which was chaired by a Boeing employee. <3.1.2. Evolution of the ODA Program> Over the past 15 years, the ODA program has been expanded. Based on recommendations from the certification process committee and mandates from the 2012 FAA Modernization and Reform Act ( P.L. 112-95 ), FAA adopted several initiatives for improving and expanding the ODA program. In a 2015 statement, the Government Accountability Office (GAO) observed that, while industry stakeholders favored expanding the ODA program, employee unions raised concerns that FAA lacked adequate resources to implement and oversee ODA expansion. However, two years later in March 2017, GAO reported that FAA had carried out its ODA action plan, launched an audit training initiative for personnel supervising ODA inspections, and had expanded delegation under ODA to authorize designees to approve instructions for continued airworthiness, emissions data, and noise certification. According to GAO, FAA, in collaboration with industry, had also developed an ODA scorecard to measure outcomes related to its ODA initiatives, including manufacturer compliance with standards set for delegated activities and FAA oversight. Following oversight hearings during the 115 th Congress, Congress expressed general support for the ODA framework, but included in the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) extensive language directing FAA to further improve the efficiency and effectiveness of the ODA program, expanding upon the reform efforts that were initiated in part by provisions in the 2012 FAA reauthorization act. While policymakers have had a long-standing interest in certification reforms under the ODA framework, following the Boeing 737 Max grounding and crashes, FAA certification oversight and the ODA program specifically have been brought into the public spotlight. In some instances, journalists have characterized the ODA process as a mechanism for aircraft and aircraft component manufacturers to "self-certify" that their products meet applicable safety regulations and certification standards, a view that FAA officials say grossly distorts how the program was designed and how it functions in practice. <3.2. Aircraft Certification Reforms> In response to the mandates in the 2012 law, P.L. 112-95 , FAA chartered two aviation rulemaking committees, one to address certification processes and the other to examine regulatory consistency. Among the recommendations set forth by the Certification Process Committee was expanding delegation under ODA to include processes for certifying aircraft noise and emissions and for approving instructions regarding continued airworthiness of delivered aircraft. The recommendations also included initiatives to address FAA tracking of certification activities, updating certification regulations, and improving consistency of regulatory interpretations. The 2018 FAA act, P.L. 115-254 , mandated a number of aircraft certification reforms. The law directed FAA to establish an advisory committee, the Safety Oversight and Certification Advisory Committee, to develop policy recommendations for the aircraft certification process and for FAA safety oversight of certification activities. It also directed FAA to establish performance objectives and metrics for aircraft certification that both streamline the certification process and increase transparency and accountability for both FAA and the aviation industry. Among these objectives, the law seeks full utilization of FAA's delegation and designation authorities as well as full implementation of risk management principles and a systems safety approach. Following the Boeing 737 Max grounding, however, FAA's delegation and designation authorities in particular have come under scrutiny. Lawmakers have also questioned certain aircraft manufacturing practices and, in particular, have sought to curtail a perceived practice of marketing certain aircraft safety enhancements and features as options available at additional cost. Notably, the Safety is Not for Sale Act of 2019 ( S. 1178 ), introduced by Senator Markey, would require aircraft manufacturers to include certain nonrequired safety-enhancing equipment at no additional charge in the sale of new aircraft to U.S. air carriers. Equipment included under this proposal would include attitude indicators, traffic alerting systems, terrain advisories and warnings, weather advisories, aircraft configuration advisories, supplemental cockpit indicators, enhancements that improve aircraft crashworthiness, monitoring and detection systems, aircraft stability and control enhancements or alerts, and fire extinguishing systems. The legislation also would require FAA to establish performance standards for angle-of-attack indicators, angle-of-attack disagree alerts, and backup fire suppression systems for airliners. <3.3. Interrelationships Between FAA and the Aerospace Industry> The interrelationships between FAA and manufacturers are complex and extend well beyond delegation of certification functions and the ODA program (see Table 2 ). In the case of manufacturers, companies like Boeing exert considerable influence over the development of industry standards as well as influencing regulatory changes through participation in standards organization committees and FAA advisory and rulemaking committees. Additionally, through delegation authority and the ODA program, manufacturers and their employees carry out certain certification functions on behalf of FAA. Through these channels, manufacturers can offer their knowledge and expertise to the safety regulation and certification processes. While FAA retains oversight of all of these activities, the perception of industry "self-regulation" may reflect broader concerns about FAA capabilities and resources to conduct adequate oversight of the certification process and related standards development activities and industry practices. <4. International Coordination on Certification and Training Oversight> Under international air safety agreements and a framework set forth by ICAO, other countries generally accept the airworthiness determinations of and the safety certifications issued by FAA for aircraft, aircraft engines, and other aircraft components designed or manufactured in the United States. These agreements are usually reciprocal: FAA typically accepts similar determinations made by its overseas counterparts for aviation products developed outside the United States. Because Boeing, based in Chicago, and Airbus, based in Toulouse, France, jointly control a large majority of worldwide sales of commercial passenger jets, FAA and the European Union Aviation Safety Agency (EASA) fulfill important roles in certifying passenger airliners operated worldwide. FAA generally accepts EASA certification of commercial aircraft manufactured by Airbus, and, reciprocally, European countries under EASA accept FAA certification of U.S.-manufactured aircraft, such as those built by Boeing. While the two regulatory agencies, like the industry giants that they regulate, generally cooperate on safety matters, they sometimes hold differing views regarding safety design. Following the Boeing 737 Max grounding, some international groups and observers have questioned FAA's certification processes and its extensive use of designees to conduct certification work, although similar programs are in place in Europe. FAA, EASA, and other civil aviation oversight entities have working arrangements with respect to each other's certification and safety oversight activities. For example, FAA might insist on certain additional testing or engineering evaluations to demonstrate safety of a modification to an aircraft design type certified by EASA. In such an instance, FAA would negotiate with EASA and the developer to specify the details of the additional testing and engineering analysis and, if agreed to, may send observers to witness tests and review engineering work. The continuing controversy surrounding the Boeing 737 Max is testing these international arrangements. Aviation authorities in other countries might insist on design fixes, inspections and validation tests, and documentation and training different from what FAA agrees to before allowing airlines to resume Boeing 737 Max operations. While the multinational Joint Authorities Technical Review (JATR) was formed to develop international consensus on these matters, differing views among major international aviation safety organizations could have significant implications for how these agencies cooperate moving forward, both on review of the Boeing 737 Max and on future aircraft certification activities. EASA has already insisted on an independent review of proposed design changes to the Boeing 737 Max, and if its conclusions differ significantly from those of FAA, evidence of a schism between key international regulators could create further uncertainty for both aircraft manufacturers and operators. There is less international coordination in regulating pilot qualifications. In the United States, pilots must hold an Airline Transport Pilot (ATP) certification to be hired by an airline. This certification usually requires 1,500 hours of total flight time to attain. In contrast, some foreign airlines hire individuals with little or no experience through ab initio programs that provide training to become an airline pilot. Under these programs, pilots can begin flying as first officers once they receive a commercial pilot certification that can be attained with around 250 hours of total flight time, and it is not unusual for entry-level first officers to have only a few hundred hours of total flight experience. Although the captain of Ethiopian Airlines flight 302 had more than 8,000 hours of total flight experience, the flight's first officer had less than 400. Questions concerning pilot experience have significant implications for how aircraft manufacturers address pilot interface design issues and training requirements for highly automated jet airplanes. If even experienced pilots might struggle to understand information presented to them and maneuver the airplane to expected professional standards when faced with a non-normal condition or emergency situation, pilots with limited experience may lack the training to handle potential failure scenarios. A central consideration in designing cockpits and cockpit procedures is how much detailed systems information pilots should be given to handle possible in-flight failures. On one end of the spectrum, some aircraft designers might argue that pilots can get by mainly with just procedural knowledge of the actions to take when faced with an urgent situation or event. On the other end of the spectrum, some aviation safety experts advocate providing pilots with more thorough knowledge of aircraft systems, particularly critical flight control systems, to help them make better-informed choices when working through a novel event or condition. This debate has important implications for how automated cockpit systems are developed and the training pilots receive. ICAO sets general training and licensing standards for pilots internationally, but it is up to individual countries to set formal requirements for their pilots. The strong demand for airline pilots in countries where air travel is growing rapidly has resulted in some airlines hiring pilots without extensive training and experience to operate revenue passenger flights. In general, international standards for multi-crew and commercial pilot licenses call for a minimum of 240 flight hours of experience, much lower than the 1,500 now required to fly for an airline in the United States. Economic factors make it unlikely that requirements and standards similar to those applicable to U.S. pilots will be implemented worldwide in the near future. While FAA has some limited regulatory authority over airlines that fly into the United States, it does not have minimum pilot experience requirements for foreign flight crews and defers to the country of aircraft registry in these matters. FAA also has limited influence over aircraft-specific training requirements of countries whose airlines purchase airplanes from Boeing and other U.S. manufacturers. Nonetheless, FAA has asserted its position that foreign pilots have become too dependent on cockpit automation. FAA has urged ICAO to address perceived pilot training deficiencies and recommended that ICAO update standards and guidance to include additional training to prepare airline pilots to operate aircraft manually when automated systems fail. Appendix A. U.S. Air Carrier Accidents in the 1990s Involving Passenger Fatalities During the 1990s there was a spate of U.S. air carrier accidents including several fatal crashes involving passenger flights: the February 1, 1991, runway collision between USAir flight 1493, a Boeing 737, and Skywest Airlines flight 5569, a commuter turboprop, at Los Angeles International Airport; the March 3, 1991, crash of United Airlines flight 585, a Boeing 737, on approach to Colorado Springs, CO; the April 5, 1991, crash of an Atlantic Southeast Airlines turboprop on approach to Brunswick, GA; the January 3, 1992, crash of a CommutAir turboprop on approach to Saranac Lake, NY; the March 22, 1992, crash of USAir flight 405, a Fokker F28 jet, taking off from LaGuardia Airport in New York, NY; the June 7, 1992, crash of American Eagle flight 5456, a turboprop on approach to Mayaguez, Puerto Rico; the June 8, 1992, crash of a GP Express turboprop on approach to Anniston, AL; the December 1, 1993, crash of Northwest Airlink flight 5719, a turboprop on approach to Chisolm-Hibbing, MN; the January 7, 1994, crash of United Express flight 6291, a turboprop on approach to Columbus, OH; the July 2, 1994, crash of USAir flight 1016, a McDonnell Douglas DC-9 on approach to Charlotte, NC; the September 8, 1994, crash of USAir flight 427, a Boeing 737 on approach to Pittsburgh, PA; the October 31, 1994, crash of American Eagle flight 4184, an ATR 72 turboprop, near Roselawn, IN; the August 21, 1995, crash of an Atlantic Southeast Airlines turboprop near Carrollton, GA; the December 20, 1995, crash of American Airlines flight 965, a Boeing 757, on descent into Cali, Colombia; the May 11, 1996, crash of ValuJet flight 592, a McDonnell Douglas DC-9, in the Florida Everglades after departing from Miami International Airport; the July 6, 1996, uncontained engine failure aboard Delta Airlines flight 1288, a McDonnell Douglas MD-88, during takeoff at Pensacola, FL; the July 17, 1996, crash of TWA flight 800, a Boeing 747, shortly after departure from John F. Kennedy International Airport in New York, NY; the November 19, 1996 runway collision between United Express flight 5925, a turboprop and a privately owned turboprop at Quincy Regional Airport, IL; the January 9, 1997 crash of Comair flight 3272 near Ida, MI, en route from Cincinnati, OH, to Detroit, MI; and the June 1, 1999, crash of American Airlines flight 1420, a McDonnell Douglas MD-82 landing at Little Rock, AR.

The increasing complexity and automation of flight control systems pose a challenge to federal policy regarding aircraft certification and pilot training. Despite significant commercial aviation safety improvements over the past two decades, flight control automation and aircraft complexity have been cited as contributing factors in a number of major airline accidents, including two high-profile crashes overseas involving the recently introduced Boeing 737 Max variant in 2018 and 2019. These crashes have directed attention to Federal Aviation Administration (FAA) oversight of aircraft type certification and pilot training practices for transport category aircraft, particularly as they pertain to complex automated flight control systems. As aircraft systems have evolved over the past three decades to incorporate new technologies, Congress has mandated FAA to streamline certification processes, with the primary motivation being to facilitate the development of new safety-enhancing technologies. Modern commercial aircraft rely on "fly-by-wire" flight control technologies, under which pilots' flight control inputs are sent to computers rather than through direct mechanical linkages to flight control systems. The fly-by-wire software contains flight control laws and logic that, in addition to optimizing performance efficiency, protect the aircraft from commanded actions that could put the airplane in an unsafe state. Automated flight control systems have largely been viewed as having a positive effect on safety, and accident rates have improved considerably over the past two decades. However, the increasing complexity of automated flight systems has sometimes caused confusion and uncertainty, contributing to improper pilot actions during critical phases of flight and in some cases leading pilots to unintentionally place an aircraft in an unsafe condition. Besides designing these systems in a manner that minimizes pilot errors and the consequences of those errors, aircraft designers and operators face challenges regarding maintaining piloting skills for flight crews to be able to take over and manually fly the aircraft safely if critical systems fail. They also face challenges regarding documentation and pilot training effectiveness in building accurate mental models of how these complex systems operate. The primary goals of ongoing efforts to address these challenges are to enhance pilot situation awareness when using automation and reduce the likelihood of mode errors and confusion, while at the same time not overburdening pilots with intricate systems knowledge beyond what is necessary. In the ongoing investigations of two Boeing 737 Max crashes, Lion Air flight 610 and Ethiopian Airlines flight 302, concerns have been raised about the design of an automated feature called the Maneuvering Characteristics Augmentation System (MCAS) and its reliance on a single angle-of-attack sensor even though the aircraft is equipped with two such sensors. These concerns led to the worldwide grounding of all Boeing 737 Max aircraft until the MCAS safety concerns can be resolved, significantly impacting both U.S. and foreign airlines that operate the aircraft. These recent aviation accidents have prompted reviews of the manner in which modern transport category aircraft are certified by FAA and its foreign counterparts, and in particular, the roles of regulators and manufacturers in the certification process. The challenges of certifying increasingly complex aircraft are largely being met by delegating more of FAA's certification functions to aircraft designers and manufacturers. This raises potential conflicts between safety and quality assurance on the one hand and competitive pressures to market and deliver aircraft on the other. Under Organization Designation Authorization (ODA), FAA can designate companies to carry out delegated certification functions on its behalf. Congress has supported the ODA framework and in recent FAA reauthorization legislation ( P.L. 115-254 ) directed FAA to establish performance objectives and metrics for aircraft certification that both streamline the certification process and increase transparency and accountability for both FAA and the aviation industry. However, the Boeing 737 Max grounding has prompted reviews of the certification process to identify potential gaps in oversight. Foreign authorities have also put pressure on FAA to review its certification delegation practices, although similar approaches are used in Europe. The inquiries have led to broader discussions about aircraft certification practices and also about global training, qualification, and currency standards for airline pilots.

crs_R45919

crs_R45919_0

<1. Introduction> This report focuses on selected ground electronic warfare (EW) systems. The Department of Defense (DOD) FY2020 budget requests funding for a number of ground EW systems associated with the Army and the Marine Corps. Generally, ground EW capabilities seek to use the electromagnetic spectrum to achieve one of three battlefield effects. First, ground EW systems can be used to defeat Improvised Explosive Devices (IED). This was the focus of the U.S. military's ground EW programs for the past decade and a half. A second role for ground EW can be to defeat Unmanned Aerial Systems (UAS). A third role, largely a legacy from the Cold War, can be to jam enemy communications and radars. An overall issue for Congress is whether to approve, reject, or modify DOD's proposals for ground EW programs. These programs also 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 balancing EW programs between counter-improvised explosive device missions and great power competition, potentially standardizing how different services approach EW funding, and the role new technologies may play in EW operations. <2. Background> <2.1. EW Overview2> Electronic warfare (EW) sometimes also called electromagnetic maneuver warfare (EMW) is an integral component of modern warfare, particularly in operations against technologically sophisticated potential adversaries such as Russia and China. EW generally refers to operations that use the electromagnetic spectrum (i.e., the "airwaves") to detect, listen to, jam, and deceive (or "spoof") enemy radars, radio communication systems and data links, and other electronic systems. EW also refers to operations for defending against enemy attempts to do the same. More formally, DOD defines electronic warfare as "[m]ilitary action involving the use of electromagnetic and directed energy to control the electromagnetic spectrum or to attack the enemy." As shown in Figure 1 , DOD divides EW into electronic warfare support, electronic protection, and electronic attack. Electronic warfare support , sometimes also referred to as electronic support measures (ESM), involves listening to an adversary's radar and radio transmissions in an attempt to detect, locate, and understand how to avoid, jam, or deceive those systems. Electronic protection involves limiting the electromagnetic signatures of one's own military equipment and hardening one's own military equipment against the effects of enemy EW operations. Electronic attack (EA) involves jamming and deceiving enemy radars and radio communications and data links. Developing ever-better EW systems is a component of the competition in military capabilities between major military powers. Because EW programs tend to be classified and are sometimes related to intelligence systems and capabilities, these systems are not frequently discussed publicly in much detail. Ground EW systems provide EW support, electronic protection, and electronic attack. For instance, the Marine Corps' Mobile Electronic Warfare Support System categorizes enemy radio signals. Many of the counter-improvised explosive device countermeasures serve in both a protection and attack role by emitting a signal to jam radio communications to "attack" communications while protecting soldiers and marines. Counter-unmanned aerial systems provide a similar function for drones. <3. U.S. Military Ground EW Programs> <3.1. Counter-Improvised Explosive Device (C-IED)> In the immediate post-Cold War era, electronic warfare gained prominence as a potential way to mitigate threats from improvised explosive devices (IEDs). During counter-insurgency operations in Iraq and Afghanistan, U.S. and allied ground forces suffered many casualties from IEDs. To detonate IEDs, insurgents learned to use cell phones, small two-way radios, and other basic radio communications to maximize the amount of damage. One C-IED method the DOD developed was for EW systems to jam IED communications radio frequencies to prevent them from detonating. From FY2006 through FY2011, the Joint IED Defeat Organization received $18 billion to develop C-IED technologies, including electronic warfare systems. These C-IED techniques included the development of a "man-portable" platform (see Figure 2 ), which supports U.S. forces on foot patrol, without the protection of a vehicle. However, due to power constraints, these types of C-IEDs provide jamming in a limited area; the jammers use batteries that are heavy and must be carried. DOD also procured C-IED jamming systems for vehicles, such as the Duke Version 3 system ( Figure 3 ), which can be installed on nearly any vehicle, though typically it is installed on the Humvee or the Mine-Resistant Ambush Protected Vehicle. Although these vehicular-based C-IED jammers are more powerful, because they draw power from the vehicle's engine, they are not able to accompany ground forces into buildings or in constricted areas such as alleyways. Thus ground forces require both systems, for mounted (travelling by vehicle) and dismounted (travelling by foot) operations. <3.2. Counter-Unmanned Aerial Systems (C-UAS)> The emergence of unmanned aerial systems (UAS), more commonly called drones, has created unique challenges for U.S. military forces. Both state and nonstate actors have employed drones for intelligence, surveillance, and reconnaissance (ISR) and certain strike capabilities (particularly large UAS platforms such as the MQ-9 Reaper for U.S. allies or the Wing Loong II developed by the People's Republic of China). Most UAS systems use radio frequencies to operate. Adversaries have used UAS to support ground operations in recent years. The Islamic State (IS, also known as Islamic State in Iraq and the Levant (ISIL)) modified commercial drones to perform reconnaissance and drop small explosives, such as hand-grenades and mortars, on unsuspecting personnel. The Russian military demonstrated its ability to pair EW drones with artillery fire, with devastating effects. According to U.S. intelligence sources, Russian forces used a single drone to provide intelligence for an artillery fire mission in July 2014 that resulted in the destruction of two Ukrainian battalions within minutes. Emerging concepts like "swarming," where many small drones work together to accomplish a task, are also being developed. In 2015, IS demonstrated swarming tactics to attack a Russian airbase in Syria though it is unclear how effective these swarming tactics were against Russian forces. As a result, DOD has developed EW techniques to deny potential adversaries the ability to use drone aircraft. These counter-UAS systems are divided into two categories: systems that detect UAS, and systems that interdict UAS systems kinetically or nonkinetically. Some counter-UAS systems are capable of both detection and attack. According to one analyst, as of February 2018 there were 235 counter-UAS products from 155 manufacturers. These counter-UAS products range from hand-held devices that can jam radio and global positioning system (GPS) signals for point defense (see Figure 4 ) to larger, ground-based systems that can defend larger areas (see Figure 5 ). The latest generation of counter-UASs by the Army and Marine Corps are being developed to destroy targets using directed energy such as lasers. The Army has recently developed vehicle-mounted lasers capable of engaging UAS. In 2018, the Army tested the Mobile Expeditionary High Energy Laser (MEHEL), a 5 kilowatt (kW) laser, which is placed on a Stryker-armored vehicle (see Figure 6 ). This laser has demonstrated being capable of destroying small drones in flight. The Army is planning to test a more powerful 10kW laser, and anticipates upgrading to a 50 kW laser, capable of destroying rockets, artillery, and mortars, by 2022. The Army plans to translate these technology demonstrators into future air defense systems by the mid-2020s. However, several challenges remain for the Army to field laser technologies. The first challenge is to develop a sufficient energy source that can fit into relatively small spaces. Some of the first lasers required a large power source housed in a semi-truck trailer a power system too large to be practical for operational forces. The second challenge is providing sufficient power so that a laser beam can travel long distance. Light quickly diffuses in the atmosphere, thereby limiting the range of the system, particularly for lower-powered lasers. Similarly to the Army, the Marine Corps is developing its own counter-UAS systems through the ground-based air defense (GBAD) program. In June 2019, the Marine Corps Warfighting Lab announced the first laser-approved operations, named the Compact Laser Weapons System (CLaWS) (see Figure 7 ). According to the Marine Corps, the CLaWS program is a rapid prototyping effort to provide an affordable solution for the C-UAS challenge. The Marine Corps is also procuring the Marine Air Defense Integrated System (MADIS) as part of its GBAD future weapons system. MADIS is a C-UAS system designed to be integrated onto the Joint Tactical Light Vehicle. In the FY2020 budget request, the Marines requested procurement funding to integrate 28 MADIS systems into the service's vehicle fleet. <3.3. Communications Jamming> Advances in networking sensors and computing power have made using the electromagnetic spectrum for communications an important task in any military operation. These networks allow a military to develop a comprehensive picture of the battlespace and enable forces to effectively coordinate attacks. Disrupting an enemy's communications systems limits their ability to command forces and maintain battlespace awareness. Both the Army and the Marine Corps have developed several programs to deny potential adversaries access to their communications networks. The Army's primary communications jammer is the EW tactical vehicle (EWTV), a modified mine-resistant ambush protected vehicle that incorporates a variant of the CREW Duke system (see Figure 8 ). According to the Army, the EWTV was "developed to provide Army EW Teams with the ability to sense and jam enemy communications and networks from an operationally relevant range at the brigade combat team level." The Army states that the EWTV is designed to provide electronic attack capabilities for brigade combat teams. To manage electronic attack and electronic support capabilities, the Army uses the EW planning and management tool (EWPMT). This system is often installed between the antennae and radio transceiver. The EWPMT allows operators to neutralize and exploit enemy signals through a computer program called Raven Claw. The software gives EW commanders a comprehensive view of the electromagnetic spectrum, allowing them to detect and jam enemy communications systems and radars. Marine Corps radio battalions primarily employ the Communication Emitter Sensing and Attack System (CESAS) II to jam communications systems. According to a project officer, the CESAS II "has the ability to operate in a larger frequency range, covering a much larger portion of the communications spectrum [high frequency, very high frequency, and ultra high frequency]." CESAS II comes in two variants: a vehicle-transportable version (see Figure 9 ) and a man-portable system. According to Marine Corps Systems Command, CESAS II reduces the weight of the vehicle jammer from 1,300 pounds to 670 pounds; the man-portable version weighs 180 pounds. The Marine Corps declared initial operational capability in July 2016 and plans to declare full operational capability in FY2021. The AN/MLQ-36 Mobile Electronic Warfare Support System (MEWSS) is another vehicle the Marine Corps uses to jam communications and other electronic transmissions such as radar. The Marine Corps fields 12 MEWSSs, which are modified light-armored vehicles procured in 1987. The MEWSS has received a series of upgrades, including a program called the MEWSS Product Improvement Program, which added a 9-meter extendable mast. <4. EW in the Current Strategic Environment> During the Cold War, competition in EW capabilities was an ongoing and significant component of the overall competition in military capabilities between the U.S.-led NATO alliance and the Soviet-led Warsaw Pact alliance. The end of the Cold War and the shift in the early 1990s to the post-Cold War era a period that featured reduced tensions between major powers and a strong U.S. military emphasis on countering terrorist and insurgent organizations may have led to a reduced emphasis in U.S. defense plans and programs involving EW related to so-called high-end warfare, meaning high-intensity warfare against technologically sophisticated adversaries. The perceived shift in the international security environment from the post-Cold War era to an era of renewed great power competition has led to a renewed focus on EW in U.S. defense planning and programming. In particular, U.S. defense planning has focused on aspects of EW related to high-end warfare, and to concerns among some observers that the United States needs to strengthen its EW capabilities as part of its overall effort to preserve U.S. qualitative military superiority over potential adversaries such as Russia and China. China and Russia have developed sophisticated anti-access/area denial (A2/AD) systems to deny U.S. military forces many advantages; Chinese and Russian EW systems are considered A2/AD systems that deny the U.S military access to their communication and command and control. DOD notes that Russia has emphasized EW in its military modernization effort. Russia reportedly has employed EW as part of its military operations in Ukraine and Syria. DOD similarly states that China recognizes the importance of EW in modern military operations and is developing its EW capabilities as an integral part of its broad-based military modernization effort. China encouraged greater integration between its civil and military technological and industrial bases, which may enable its EW capabilities to benefit from the sophistication of its extensive civilian electronics industry. <4.1. Overview of Russian EW Capabilities and Operations> For more than a decade, the Russian military has focused on modernizing its forces, with a particular emphasis on command, control, communications, and computers (C4) and intelligence, surveillance, and reconnaissance (ISR) systems, of which EW plays an important part. According to military analyst Robert McDermott, the Russian military views electronic warfare as a "type of armed struggle using electronic means against enemy C4ISR to 'change the quality of information,' or using electronic means against various assets to change the condition of the operational environment." McDermott describes a close relationship between Russian signals intelligence forces and EW forces, where several EW units perform signals intelligence (SIGINT) functions similar to U.S. ground force organizations such as the Marine Corps' Radio Battalions. What distinguishes Russian EW organizations, he claims, is also a close relationship with air defense and artillery. According to the Defense Intelligence Agency (DIA), the Russian military first tested its military modernization efforts in the Georgian war in 2008. DIA notes that "Russian military limitations were fully on display during the August 2008 "five-day war" with Georgia. Russian forces prevailed and defeated their relatively weak Georgian opponents, but after-action analysis by the Russian military highlighted many failings." Based on this operational experience, Russian forces began instituting what is termed the "New Look Program." According to the DIA, [p]artially-manned Soviet-style divisions were reorganized into what were planned to be fully-manned brigades; officer ranks were trimmed from 350,000 billets to initially 150,000, although later the number rose to 220,000; the contract manning effort was reshaped and reinvigorated, with a goal of 425,000 professional enlisted personnel in the force by 2017; the six extant military districts were reshaped initially into four joint strategic commands, which controlled all military assets in their areas in peace and war; and lastly, a massive state armaments program was initiated, allocating 1.1 trillion rubles over 10 years, aiming at fielding a Russian military with 70% new or modernized equipment by 2020. Investments in EW, through the New Look Program, have been significant. Since 2008, Russian military forces have continued to transform EW capabilities and organizations. There are some clues in the many statements by the defence ministry and senior EW officers that indicate the modernisation of EW is based on examining how such capability has been exploited by the US and NATO in military operations over the past two decades. There also appears to be some influence based on US Prompt Global Strike and developments in US and NATO high-precision weapons that is pushing the defence ministry to plan for countering these. At the outset, despite the opaque nature of the overall aims of the procurement processes, one statement that stands out is from the leadership of KRET, aware of the underlying drivers behind the need for modern EW systems in Russia's military. Indeed, by November 2016, the First Deputy General Director of KRET, Vladimir Mikheyev, referred to the "National Strategic EW System" as an "asymmetric response to the network centric system of combat operations" on the Murmansk -BN as a key part of the subsystem. The Murmansk -BN has a reported range of 5,000 km, is deployed on seven trucks, and monitors activity on airwaves, intercepting enemy signals with a broad jamming capability; it uses 32-metre-high antennas and has been deployed in Crimea. Mikheyev said the creation of the Russian EW strategic system can be called the "implementation of a network centric defence concept". Additionally, Russian forces have begun introducing EW forces into their main combat arms organizations. Both McDermott and the DIA indicate that each motorized brigade has at least one electronic warfare company numbering more than 100 personnel to provide desired tactical effects (as depicted in Figure 11 ). Appendix A provides an overview of the organization and types of equipment these EW companies use. <4.2. Overview of Chinese EW Capabilities> China has also seen a similar progression in EW capabilities over the past decade. Most defense analysts focus on Chinese aviation, maritime, and anti-space capabilities; however, the People's Liberation Army (PLA) has developed highly capable systems in the ground domain. China has developed a concept of "informationized warfare," which attempts to gain an advantage in information through robust ISR networks, while attempting to deny adversaries access to information thus preventing them the ability to command and control forces. To accomplish this goal, the PLA organizes EW functions in a new command called the Strategic Support Force, which includes cyber, psychological, information, and space forces. Most of the focus on Chinese EW operations has been on air, maritime, and the space domains. However, China has developed sophisticated capabilities to counter U.S. forces on the ground as well. According to Jane's Defence Weekly, China has invested substantial resources into science and technology initiatives focused on improving its network and electronic warfare capabilities. These investments include ground-based sensors and jammers, space-based intelligence assets, and a number of airborne jammers. China has also invested in many unmanned systems that can swarm to provide desired effects, including signals intelligence interceptions and electronic attack. <5. Potential Issues for Congress> Balance of Ground EW Capabilities . A potential oversight issue for Congress is the balance of EW capabilities the Army and Marine Corps are fielding and plan to procure. During the height of the conflicts in Iraq and Afghanistan, EW programming was weighted toward counter-IED programs rather than on countering great power competition. Although U.S. military forces continue to operate in high-threat IED areas as illustrated by recent casualties in Afghanistan these programs do not necessarily provide the necessary protection against potential Russian or Chinese weapons systems. Both services have acknowledged that they require new investments to support command and control in an electromagnetically contested environment. Congress may review how both the Marine Corps and Army allocate resources to counter the IED threat, while working to ensure that ground services are prepared to counter emerging threats. Part of the capabilities balance is overlapping programs between the Army and Marine Corps. As both the Army and Marine Corps have EW programs with similar functions. For instance, both services are developing competing C-UAS programs the Army MEHL and the Marine Corps CLaWS that appear to have similar capabilities. C-IED programs, on the other hand, are joint programs in which one service develops a solution that other services can procure (thus all DOD services use the same programs which can have efficiencies for sustainment). Congress may examine if it is worthwhile for the Army and Marine Corps to develop competing programs, or if funding competing programs allows technology research and development (R&D) to make greater progress. Funding of Programs . Funding for EW systems can be difficult to track due to the complexity and classification of EW programs. One challenge associated with ground EW funding is that both the Army and the Marine Corps use research and development appropriations to potentially fund procurement activities due to the relatively fast-paced changes to electronic components. A second, but related, challenge is tracking EW programs when they transition from development to procurement. Part of the challenge is that the procurement activities for EW systems can be relatively small compared with larger weapons systems. As a result, DOD procurement activities do not necessarily disclose these components from the larger acquisition, making it difficult to track both a breakout of EW components associated with larger systems (e.g., the M1 Abrams main battle tank) and the total dollar figure associated with EW procurement activities for the Army and Marine Corps. The Marine Corps and the Army use different funding policies to maintain EW programs. Many of the Army's EW capabilities, as either demonstrators or prototypes, receive R&D funding. As a result, funding for these programs is generally seen as inconsistent and lacking plans for sustainment. The Marine Corps' programs, on the other hand, are programs of record, receiving both R&D and procurement funding. By making these systems programs, the Marine Corps seeks to provide predictable funding for systems over long periods of time. However, these systems are developed through the acquisition system and therefore might not be at the forefront of technological advances. Emerging Technologies . Emerging technologies may change how the Army and Marine Corps conduct EW. Some experts argue that advances in electronics are already changing how ground forces perform electronic warfare, particularly with continuously improving active electronically scanned arrays and new software defined radios. Some argue that these advances in electronics, paired with artificial intelligence, could allow for some automated decision making. These algorithms could help manage the electromagnetic spectrum by making spectrum allocation decisions, determine when adversaries are jamming (or denying) a frequency band, and automatically develop a jamming plan to deny adversaries access by looking at trends in their electronic emissions. Artificial intelligence algorithms could also enable EW systems to locate and engage small unmanned aerial systems by using data sources to help identify radar contacts (versus environmental clutter from clouds or animals) and electronic emissions. Neither the Army nor the Marine Corps have publicly stated that they plan to use artificial intelligence for managing electromagnetic spectrum operations or electronic warfare. New materials are changing the size, weight, power, and cooling of electronics components and power supplies. Electronics are smaller and require less power, and therefore smaller batteries. These new electronics emit less heat because of their reduced consumption of energy, requiring less cooling to maintain ideal temperatures, further reducing energy consumption. Battery technology is improving energy density. These designs provide similar electrical power outputs while reducing their size and weight, making it easier to develop man-portable electronics (such as the Thor C-IED system and the CESAS II jammer). Furthermore, advances in electronics allow for new waveforms using advanced electronically scanned array (AESA) antennas and other designs. As new materials emerge, DOD may request additional funding to upgrade EW systems and potentially procure AESA technology to more effectively jam enemy communications and radar systems. Quantum technologies could potentially change electronic warfare. Emerging developments in quantum communications and quantum radars will likely change how the military communicates and observes enemies. Quantum technologies will likely have an impact on EW; however, the exact impact they will have on executing EW operations remains unclear. Appendix A. Russian EW Company Equipment

Ground electronic warfare (EW) is a group of programs directed by the Army and Marine Corp which are designed to effect ground forces use of the electromagnetic spectrum. The U.S. military has several ground EW programs that are used for different missions. These programs can broadly be categorized into counter-improvised explosive device (C-IED) systems, counter-unmanned aerial systems (C-UAS), and communications and radar jammers. Over the past several years, senior leaders in the Army and Marine Corps have testified about the need to improve EW capabilities. Role of EW in Ground Operations EW is a component of modern warfare, particularly in response to threats posed by potential adversaries such as Russia and China. EW refers to operations that use the electromagnetic spectrum (i.e., the "airwaves") to detect, listen to, jam, and deceive (or "spoof") enemy radars, radio communication systems, data links, and other electronic systems. EW also refers to operations that defend against enemy attempts to do the same. Ground EW programs have gained importance in an era of "great power competition." Countries like Russia and China have developed so-called anti-access/area denial (A2/AD) systems, some of which are designed to prevent U.S. military access to radio and satellite communications, and to deny the use of radars for artillery and air defense operations. Ground Forces EW Programs This report focuses on three categories of unclassified EW programs in the Army and Marine Corps, along with their respective programs and systems: C ounter -IED : the Thor and Duke Version III systems. C ounter -UAS : the Batelle Drone Defender, Blighter Counter-UAS system, the Mobile Expeditionary High Energy Laser, the Marine Air Defense Integrated System (MADIS), and the Compact Laser Weapons System (CLaWS). C ommunications and radar jammers : the EW Tactical Vehicle (EWTV), the EW Planning and Management Tool (EWPMT), the Communication Emitter Sensing and Attacking System II (CESAS II), and the Mobile EW Support System (MEWSS). Potential Oversight Issues for Congress Congress has continually shown interest in EW, and the decisions it makes regarding EW could affect future military capabilities and funding requirements. In particular, EW programs pose several potential issues for Congress: Is DOD's proposed mix of ground EW capabilities and investments appropriate? How do the Army and Marine Corps transition emerging technologies from demonstrations into programs, and are these programs funded adequately? What role might emerging technologies have in shaping current EW plans and programs?

crs_R46077

crs_R46077_0

<1. Overview> Local governments have traditionally played an important role in regulating cable television systems. Operators required municipal permission to place their cables above or beneath streets and other publicly owned land and to mount the cables on telephone/and or utility poles. Cities negotiated with cable operators over the services their systems would provide, including channels dedicated to public, educational, or government programming (PEG), and the payment of franchise fees. In exchange, the cable operators often received de facto exclusive local franchises to offer video distribution services. That changed in 1984, when Congress required local governments to allow competition. In the mid-2000s, as telephone companies (known as " telcos ") sought to obtain their own video services franchises, state governments got involved to streamline the franchising process, in several instances preempting municipalities' authority. The states applied these laws to incumbent cable operators as well as to new entrants, to ensure legal parity. As technological developments and changes in business strategies and consumer behavior have reshaped the telecommunications industry, the Federal Communications Commission (FCC) has taken several steps to limit local regulatory authority over cable and telco video service providers. Many of these regulatory changes have caused controversy. Some local governments assert that, among other things, the FCC's actions will limit their ability to protect the public interest and deprive them of revenue. This report examines the evolving relationship between federal, state, and local regulators and identifies related policy issues that may be of interest to Congress. <2. Regulation of Video Services> Cable television began operating in the 1940s as a means to receive broadcast signals in areas with trees or mountains that interfered with over-the-air signal transmission. Initially, municipalities, rather than states, made most decisions related to awarding cable franchises. As cable television developed, some states began to regulate the terms included in a cable franchise, or required state review or approval of a franchise agreement. The term local franchising authorities (LFAs) refers to municipal and/or state government entities that offer and negotiate video franchises. Today, agreements between LFAs and video service providers typically include provisions concerning the availability of channels for PEG programming; the amount of money due to the LFA in franchise fees, including in-kind contributions; and the rates charged to subscribers. <2.1. Developments Prior to 1984> The Communications Act of 1934 (referred to in this report as the Communications Act) created the FCC, but did not specifically set forth the FCC's authority to regulate cable. However, the U.S. Supreme Court found in 1968 that the agency's authority was sufficiently broad to do so. The FCC issued comprehensive regulations governing cable systems and cable franchising authorities in 1972. The FCC's rules directed cable operators to offer PEG services and LFAs to cap franchise fees. <2.1.1. Franchise Agreement Terms and Conditions> In the early days of cable television, a municipal government seeking to bring cable to its residents would, through a request for proposals, spell out the requirements that a cable operator would have to meet to win the franchise. Cable companies would bid against one another for the chance to wire the municipality. Renewal of an existing franchise might entail additional requirements. <2.1.1.1. PEGs> In 1972, the FCC directed cable operators to dedicate one channel for public access, one channel for educational use, and one channel for local government use by a certain date, and to add channel capacity if necessary to meet the requirement. Two years later, however, the commission reconsidered its stance, stating, Demands are being made not only for excessive amounts of free equipment but also free programming and engineering personnel to man the equipment. Cable subscribers are being asked to subsidize the local school system, government, and access groups. This was not our intent and may, in fact, hamper our efforts at fostering cable technology on a nationwide scale. Too often these extra equipment and personnel demands become franchise bargaining chips rather than serious community access efforts. We are very hopeful that our access experiment will work.... We do not think, however, that simply putting more demands on the cable operator will make public access a success. Access will only work, we suspect, when the rest of the community assumes its responsibility to use the opportunity it has been provided. Although the U.S. Supreme Court later struck down the FCC's rules requiring cable operators to set aside channels for PEGs, PEG access requirements became commonplace in local franchise agreements by the early 1980s. Congress encouraged this development. According to a 1984 report from the House Committee on Energy and Commerce Public access channels are often the video equivalent of the speaker's soapbox or the electronic parallel to the printed leaflet. They provide groups and individuals who generally have not had access to the electronic media with the opportunity to become sources of information in the electronic marketplace of ideas. PEG channels also contribute to an informed citizenry by bringing local schools into the home, and by showing the public local government at work. <2.1.1.2. Franchise Fees> In addition to requiring cable system owners to obtain a franchise before operating, municipalities also required cable system owners to pay a franchise fee . In its 1972 Cable Order, the FCC stated, [M]any local authorities appear to have extracted high franchise fees more for revenue-raising than for regulatory purposes. Most fees are about five or six percent, but some have been known to run as high as 36 percent. The ultimate effect of any revenue-raising fee is to levy an indirect and regressive tax on cable subscribers. Second, and of great importance to the Commission, high local franchise fees may burden cable television to the extent that it will be unable to carry out its part in our national communications policy.... We are seeking to strike a balance that permits the achievement of federal goals and at the same time allows adequate revenues to defray the costs of local regulation. To accomplish this balance, the FCC capped the franchise fees at 3%-5% of a cable operator's revenues from subscribers. For fees greater than 3% of an operator's subscriber revenues, the FCC required a franchising authority to submit a showing that the specified fee was "appropriate in light of the planned local regulatory program." <2.1.1.3. Rates Charged to Subscribers> When cable television first developed as essentially an antenna service to improve over-the-air broadcast television signal reception in rural and suburban areas, many municipalities regulated the rates charged to subscribers. The municipalities viewed rate regulation, tied to the systems' use of public streets, as a means of preventing cable operators from charging unreasonably high rates for what they viewed as an essential service. In the 1972 Cable Order, the FCC required franchising authorities to specify or approve initial rates for cable television services regularly furnished to all subscribers and to institute a program for the review and, as necessary, adjustment of rates. In 1976, the FCC repealed those rules and instead made LFA regulation of rates for cable television services optional. In 1974, the FCC preempted LFAs from regulating rates for other so-called "specialized services," including "advertising, pay services, digital services, [and] alarm systems." <2.2. Federal Regulatory Actions> <2.2.1. 1984 Cable Act> In the Cable Communications Policy Act of 1984 ( P.L. 98-549 , referred to in this report as the 1984 Cable Act), Congress added Title VI to the Communications Act to give the FCC explicit authority to regulate cable television. The 1984 Cable Act established the local franchising process as the primary means of cable television regulation. The act did not diminish state and local authority to regulate matters of public health, safety, and welfare; system construction; and consumer protection for cable subscribers. Congress enacted the 1984 Cable Act the same year that American Telephone and Telegraph Company (AT&T), which had an effective monopoly over most telecommunications services, spun off its regional operating companies as part of the settlement of a federal antitrust suit. The 1984 Cable Act generally prohibited telcos from providing video services in the same regions where they provided voice services. This prohibition prevented the former AT&T companies from competing with cable operators in communities where they controlled the local telephone system. <2.2.1.1. Franchise Fees and PEGs> The 1984 Cable Act confirmed the power of state and municipal governments to include requirements for PEGs, facilities and equipment, and certain aspects of program content within franchise agreements. It delineated federal limits on franchise fees, and restricted the FCC's power to regulate the amount of franchise fees or the use of funds derived from those fees. The law permits franchising authorities to charge franchise fees, but limits such fees to no more than 5% of the cable operators' gross revenues from "cable services." For the purposes of calculating gross revenues, the FCC included revenues from advertising and home shopping commissions, in addition to revenues from video service subscriptions. Subsequently, as described in " FCC Actions Affecting State and Local Video Service Franchising Terms and Conditions ," defining the costs that are subject to the 5% statutory limit on franchise fees became a point of repeated controversy. The 1984 Cable Act allows local franchising authorities to enforce any PEG access requirements in a franchise agreement. Such terms and conditions can include providing video production facilities and equipment, paying capital costs related to PEG facilities beyond the 5% franchise fee cap, and paying costs associated with support of PEG channel use. In addition, the 1984 Cable Act permitted LFAs to require cable operators to designate channels for PEGs on institutional networks (I-Nets) provided for public buildings and other nonresidential subscribers. <2.2.1.2. Rate Regulation> Section 623 of the 1984 Cable Act (47 U.S.C. 543) prohibits federal, state, or local franchising authorities from regulating the rates of cable operators that are "subject to effective competition," as defined by the FCC. The 1984 Cable Act directs the FCC to review its standards for determining effective competition periodically, taking into account developments in technology. <2.2.2. Redefining Effective Competition> In 1985, the FCC determined that cable systems generally were subject to "effective competition" if they operated in an areas where three or more broadcast television signals were either "significantly viewed" by residents or transmitted with acceptable signal quality (as defined by the FCC) to the cable systems' franchise areas. In accordance with the timetable set by the 1984 Cable Act, the "effective competition" rule became effective on December 29, 1986. This rule effectively deregulated cable prices in most communities. In 1991, the FCC adopted a new definition of "effective competition." The FCC deemed effective competition to exist if either: 1. six unduplicated broadcast signals were available to the cable operator's franchise area via over-the-air reception, or 2. another multichannel video service, such as a satellite service, was available to at least 50% of homes to which cable services were available (homes passed), and was subscribed to by 10% of the cable operator's homes passed. Under this more restrictive definition, most systems were still subject to effective competition and therefore not subject to rate regulation. <2.2.3. 1992 Cable Act> In the Cable Television Consumer Protection and Competition Act of 1992 ( P.L. 102-385 , referred to here as the 1992 Cable Act), Congress stated the policy goal of relying on market forces, to the maximum extent feasible, to promote the availability of a diversity of views and information through cable television and other video distribution media. Congress emphasized the importance of protecting consumer interests where cable systems are not subject to effective competition, and of ensuring that cable operators do not have undue market power vis- -vis video programmers and consumers. <2.2.3.1. New Entrants in Video Programming Distribution Markets> The 1992 Cable Act revised Section 621(a)(1) of the Communications Act to codify restraints on local franchise authorities' licensing activities. While local authorities retained the power to grant cable franchises, the law provided that "a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise." Congress gave potential entrants a judicial remedy by enabling them to commence an action in a federal or state court within 120 days after a local authority refused to grant them a franchise. <2.2.3.2. Rate Regulation> In addition, Congress made it easier for local authorities to regulate cable rates by adopting a more restrictive definition of "effective competition" than the FCC's. Pursuant to these changes, local authorities may not regulate cable rates if at least one of the following four conditions is met: 1. fewer than 30% of the households in the franchise area subscribe to a particular cable service; 2. within the franchise area, a. at least two unaffiliated multichannel video programming distributors (MVPDs) each offer comparable video programming to at least 50% of the households in the franchise area, and b. at least 15% of households subscribe to an MVPD other than the largest one; 3. an MVPD owned by the franchising authority offers video programming to at least 50% of the households in the franchise area; or 4. a telephone company offering local voice services (known as a "local exchange carrier" [LEC]) or its affiliate, "(or any multichannel video programming distributor using the facility of such carrier or its affiliate)" carries comparable video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator that is providing video service in that franchise area. Congress directed the FCC to publish a survey of cable rates annually. <2.2.4. 1996 Telecommunications Act> Even as the 1992 Cable Act took effect, a combination of technological, economic, and legal factors was enabling the convergence of the previously separate telephone, cable, and satellite broadcasting industries. Digital technology, particularly the ability to compress digital signals, enabled both direct broadcast satellite (DBS) services and cable operators to offer dozens of channels. In 1993, the telephone company Bell Atlantic successfully challenged, on First Amendment grounds, the 1984 ban on cross-ownership of telephone and cable companies in the same local market. In the meantime, several cable operators sought to gain economies of scale by consolidating local systems into regional systems. In the Telecommunications Act of 1996 ( P.L. 104-104 ), Congress permitted LECs to offer video services and cable operators to offer voice services. Because laws and regulations pertaining to cable systems were quite different from those pertaining to LECs, the prospect of greater competition between those two types of providers led Congress to revisit video market regulation. Moreover, Section 601 rescinded the 1982 consent decree that required the breakup of AT&T, thereby allowing LECs to consolidate further by subsequently merging with long-distance service providers and each other. The act stipulated that cable operators do not need to obtain approval of local authorities that regulate their video services in order to offer "telecommunications services," such as voice services. The Senate Commerce Committee noted that these changes did not affect existing federal or state authority with respect to telecommunications services. It stated that the committee intended that local governments, when exercising their authority to manage their public rights of way, regulate telecommunications services provided by cable companies in a nondiscriminatory and competitively neutral manner. Congress used the term "open video systems" (OVS) in the 1996 Telecommunications Act ( 653) to describe LECs that soughtto compete with cable operators. The act explicitly exempted OVS service from franchise fees and other 1992 Cable Act requirements, including the requirement to obtain a local franchise. In 1999, the U.S. Court of Appeals for the Fifth Circuit interpreted the provision to mean that, while the federal government could no longer require OVS operators to obtain a local franchise, state and local authorities could nevertheless do so. <3. State vs. Local Franchising of Video Services> In 2003, several telephone companies, most notably Southwestern Bell Company (now AT&T) and Verizon, began constructing fiber networks designed to bring consumers advanced digital services, including video. AT&T and Verizon branded these services as "U-Verse" and "FiOS," respectively. Neither company launched video services under the OVS rules, claiming that federal requirements and potential local franchise requirements were too costly. In 2006, a federal district court in California dismissed AT&T's claims that municipalities were violating federal law by attempting to exercise franchise authority over the company's video services. The court declined, however, to rule on whether video delivered over internet protocol, the technology used by LECs, met the federal definition of a cable service. Two bills introduced that year in the 109 th Congress, H.R. 5252 and S. 2686 , would have declared that video service enabled via internet protocol is subject only to federal regulation. Congress did not vote on either bill. <3.1. State-Level Franchising Authority> As the LECs sought to enter the video distribution market, they pursued statewide reforms to speed their entry, rather than seeking franchises in individual municipalities. The LECs' competitors, the incumbent cable operators, contended that state-level franchising would present new entrants with fewer obligations than cable companies had faced when they entered the market, specifically the obligation to build networks serving all parts of a community. In 2005, Texas became the first of several states to replace local franchising with a state-level regime for video service providers, with the express purpose of facilitating entry by new competitors. As Table 1 illustrates, many other states have since either replaced municipal franchising with state-level franchising or offered providers a choice. <4. FCC Actions Affecting State and Local Video Service Franchising Terms and Conditions> Since 2007, the FCC has repeatedly revisited the authority of states and LFAs to franchise and regulate video service providers. This process culminated in two orders issued in 2019. One (the "2019 LFA 3 rd R&O") sharply limits state and local authority over products offered by video service providers other than video programming. The other order (the "2019 Effective Competition Order") determined that AT&T's streaming service, AT&T TV NOW, meets the LEC test component of Congress's effective local competition definition and therefore provides effective competition to a local cable operator. <4.1. 2007 Order Addressing Local Franchising of New Entrants> In 2007, the FCC found that the local franchising process constituted an unreasonable barrier to new entrants in the marketplace for video services and to their deployment of high-speed internet service. The FCC adopted rules and guidance covering cities and counties that grant cable franchises. However, the agency stated that it lacked sufficient information regarding whether to apply the rules and guidance to state governments that either issued franchises at the statewide level or had enacted laws governing specific aspects of the franchising process. Consequently, the FCC stated that while it would preempt local laws, it would not preempt state laws covering video franchises. <4.1.1. Franchise Fee Cap> <4.1.1.1. In-Kind Contributions Unrelated to Cable Services Included in Cap> The FCC determined that unless certain specified costs, fees, and other compensation required by LFAs are counted toward the statutory 5% cap on franchise fees, an LFA's demand for such fees represents an unreasonable refusal to award a competitive franchise to a new entrant. In addition, the FCC found that some LFAs had required new entrants to make "in-kind" payments or contributions that are unrelated to the provision of cable services. The FCC stated that any requests by LFAs for in-kind contributions that are unrelated to the provision of cable services by a new competitive entrant are subject to the statutory 5% franchise fee cap. <4.1.1.2. Payments Made to Support PEG Operations Included in Cap> The FCC contended that disputes between LFAs and new entrants over LFA-mandated contributions in support of PEG services and equipment could lead to unreasonable refusals by LFAs to award competitive franchises. It determined that costs related to supporting the use of PEG access facilities, including but not limited to salaries and training, are subject to the 5% cap, but that capital costs "incurred in or associated with the construction of PEG access facilities" are excluded from the cap. <4.1.2. Treatment of Nonvideo Services by LFAs> The FCC stated that the LFAs' jurisdiction over LECs and other new entrants applies only to the provision of video services. Specifically, it stated that an LFA cannot use its video franchising authority to attempt to regulate a LEC's entire network beyond the provision of video services. <4.1.3. Additional Findings Regarding "Unreasonable" LFA Actions> In addition, the FCC found that the following LFA actions constitute an unreasonable refusal to award video franchises to new entrants: 1. failure to issue a decision on a competitive application within the time frames specified in the FCC's order; 2. refusal to grant a competitive franchise because of an applicant's unwillingness to agree to "unreasonable" build-out requirements; and 3. denying an application based upon a new entrant's refusal to undertake certain obligations relating to PEGs and I-Nets. <4.1.4. Court Ruling> In 2008, the U.S. Court of Appeals for the Sixth Circuit upheld the FCC's rules. <4.2. 2007 and 2015 Orders Addressing Local Franchising of Incumbent Cable Operators> In November 2007, the FCC issued a Second Report and Order that extended the application of several of these rules to local procedures to renew incumbent cable operators' franchises. Specifically, the FCC determined that the rules addressing LFAs' franchise fees, PEG and institutional network obligations, and non-cable-related services and facilities should apply to incumbent operators. It concluded, however, that FCC rules setting time limits on LFAs' franchising decisions and limiting LFA build-out requirements should not apply to incumbent cable operators. Several LFAs petitioned the FCC to reconsider and clarify its Second Report and Order. In 2015, the FCC issued an Order on Reconsideration in which it set forth additional details about its rules with the stated purposes of promoting competition in video services and accelerating broadband deployment. Following the 2015 Order on Reconsideration, the following policies were in place. <4.2.1. City and County LFAs Only> The FCC clarified that its rules and regulations on franchising applied to city and county LFAs only, not to state-level laws or decisions. The FCC stated that it lacked sufficient information about the state-level franchising process, and suggested that if parties wished the agency to revisit this issue in the future, they should provide evidence that doing so would achieve Congress's policy goals. <4.2.2. Franchise Fee Cap> <4.2.2.1. In-Kind Contributions Unrelated to Cable Services Included in Cap> The FCC included in-kind contributions from incumbent cable operators that were unrelated to the provision of video services within the statutory 5% franchise fee cap. Likewise, the FCC found that payments made by cable operators to support PEG access facilities are subject to the 5% cap, unless they fall under the FCC's definition of "capital costs" associated with the construction of PEG facilities. The FCC made in-kind contributions related to cable services subject to the cap on franchise fees for new entrants as well as for cable incumbents. <4.2.3. Treatment of Nonvideo Services by LFAs> The FCC determined that LFAs' jurisdiction to regulate incumbent cable operators' services is limited to video services, and does not include voice or data services. <4.2.4. Findings Applicable to New Entrants, but Not Incumbents> In addition, the FCC found the following LFA actions do not per se constitute an unreasonable refusal to award video franchises to cable incumbents, although they did for new entrants: 1. denying an application based upon an incumbent's refusal to undertake certain obligations relating to PEGs and institutional networks; 2. failure to issue a decision on a competitive application within the time frames specified in the FCC's order; and 3. refusal to grant a competitive franchise because of an applicant's unwillingness to agree to unreasonable build-out requirements. <4.2.5. Court Ruling> In 2017, the U.S. Court of Appeals for the Sixth Circuit addressed challenges by LFAs to the 2007 Second Report and Order and the 2015 Order on Reconsideration. The court found that the FCC had made sufficiently clear that its rules only apply to city and county LFAs and did not bind state franchising authorities. It determined that the FCC had correctly concluded that noncash contributions could be included in its interpretation of "franchise fee" subject to the 5% limit. However, the court held that the FCC had neither explained why the statutory text allowed inclusion of in-kind cable-related contributions within the 5% cap nor defined what "in-kind" meant. It found that the FCC offered no basis for barring local franchising authorities from regulating the provision of "non-telecommunications" services by incumbent cable providers. It directed the FCC to set forth a valid statutory basis, "if there is one," for applying its rule to the franchising of cable incumbents. The court used the term "non-telecommunications" service rather than "non-video" or "non-cable" service, differing from the distinctions the FCC made with respect to LFAs' authority. <4.3. 2019 FCC Rulemaking> The FCC responded to the court's directives in 2018, and once again proposed rules governing the franchising of cable incumbents. On August 1, 2019, the FCC adopted its Third Report and Order (R&O). The FCC stated that its rules would ensure a more level playing field between new entrants and incumbent cable operators and accelerate deployment of "advanced telecommunications capability" by preempting local regulations that "impose an undue economic burden" on video service providers. The FCC stated that the franchise fees rulings are prospective. That is, video operators may count only ongoing and future in-kind contributions toward the 5% franchise fee cap after September 26, 2019, the effective date of its rules. To the extent franchise agreements conflict with the FCC's rules, the agency encourages the parties to negotiate franchise modifications within a "reasonable timeframe," which it states should be120 days in most cases. Under the new regulations: The FCC oversees state franchising authorities for the first time. Cable-related in-kind contributions from both new entrants and incumbent cable operators are "franchise fees" subject to the 5% cap, with limited exceptions. Such contributions include any nonmonetary contributions related to the provision of video services by incumbent cable operators and LECs as a condition or requirement of a local franchise agreement. Examples include free and discounted cable video service to public buildings; costs in support of PEG access facilities other than capital costs; and costs associated with the construction, maintenance, and service of an I-Net. For purposes of calculating contributions toward the 5% franchise fee cap, video providers and LFAs must attach a fair market value to cable-related in-kind contributions, but the FCC declined to provide guidance on how to calculate fair market value. The definition of PEG "capital costs" subject to the 5% cap includes equipment purchases and construction costs, but does not include the cost of installing the facilities that LFAs use to deliver PEG services from locations where the programming is produced to the cable headend. Requirements that cable operators build out their systems within the franchise area and the cost of providing channel capacity for PEG channels may not be included under the 5% cap. Franchise authorities may not regulate nonvideo services offered over cable systems by incumbent cable operators. The services covered by this prohibition include broadband internet service, business data services, and Voice over Internet Protocol (VoIP) services. "[S]tates, localities, and cable franchising authorities are preempted from charging franchised cable operators more than five percent of their gross revenue from cable [video] services." Thus, LFAs may not include nonvideo service revenues when calculating the 5% cap. The communities of Los Angeles, CA, Portland, OR, and Eugene, OR, have filed a petition with the U.S. Court of Appeals for the Ninth Circuit challenging the FCC's rules. The Ninth Circuit has consolidated the various appellate court challenges, and in November 2019, granted an FCC motion to transfer the now-consolidated petition to the U.S. Court of Appeals, Sixth Circuit. <5. Potential Impact of FCC Rules> Table 1 , as well as the following two tables, illustrate how the FCC's rules could potentially affect the franchising process in several states. The FCC's decision to extend its franchising rule to state governments for the first time will subject each of the states listed in the first three columns of Table 1 (i.e., those that issue franchises at the state-level in all or some circumstances) to the FCC's rules. Moreover, the FCC's rules will cover states that oversee municipal franchises via either statute or state-level agencies. Thus, the FCC's franchising rules will affect more video service providers, viewers, and municipal governments than ever before. <5.1. Trade-Offs Between In-Kind Cable-Related Contributions and General Funds> Because the FCC is including cable-related in-kind contributions in its definition of franchise fees subject to the 5% cap, some states and municipalities may need to make a trade-off. Specifically, as Table 2 illustrates, several states require or allow LFAs to require video service providers to offer free and/or discounted video service to public buildings, support of PEG services (other than capital costs), and support of I-Nets. Affected states and municipalities may need to reevaluate the trade-off between in-kind cable-related contributions and general fund revenues. Note that Ohio and Wisconsin prohibit both PEG and I-Net contribution requirements, while Idaho prohibits I-Net contribution requirements. <5.2. Evaluation of Provider Revenues Subject to Franchise Fee Cap> <5.2.1. Video-Related Revenues> As Table 3 illustrates, some states define "gross revenues" more narrowly than the FCC, excluding, for example , revenues from advertising and home shopping commissions. In those states, as well as others in which municipal LFAs define gross revenues more narrowly than the FCC, PEGs may be able to continue to receive cable-related, in-kind contributions without reducing the monetary contributions they receive, while remaining within the 5% cap. As described in " Franchise Fees and PEGs ," the FCC has included revenues from advertising and home shopping commissions, in addition to revenues from video service subscriptions, in its definition of "gross revenues." LFAs that use similar definitions of "gross revenues," including those subject to state regulation, may already charge the maximum amount of franchise fees permitted by the FCC. Others, however, exclude these sources, and may therefore have more flexibility when evaluating whether or not to continue their cable-related in-kind contributions. Moreover, some states specifically exclude other items when calculating providers' revenue bases that are subject to the franchise fees. Several exclude government fees and/or taxes passed on to subscribers, while Missouri excludes fees and contributions for I-Nets and PEG support from its calculation. The FCC has not specifically addressed whether franchise authorities may include these items in their revenue base calculation. Thus, these states may also have more flexibility when evaluating whether to change video franchises' terms and conditions. <5.2.2. Nonvideo Revenues> Many states already exclude nonvideo revenues from the calculation of provider revenues subject to the franchise fee cap. New York, however, describes the gross revenues of a video provider subject to the franchising fees as including, among other things, "carrier service revenue." This section of the New York statute does not define "carrier service revenue." A current dispute between New York City and Charter Communications (d/b/a Spectrum) for service within Brooklyn concerns whether "carrier service revenue" received from "additional provided services" may be subject to franchise fees. The FCC's new rules may affect the outcome of this dispute. Moreover, in July 2019, the New York State Public Service Commission approved a settlement of a complaint that Charter has failed to comply with a requirement in its franchise agreement to expand high-speed service. Under the settlement, Charter may continue operating within the state, if it expands its high-speed internet service infrastructure to 145,000 residents in Upstate New York and invests $12 million in providing high-speed internet services to other areas of the state. If Charter contends that the FCC's rules preempt these provisions, it could seek to renegotiate the settlement. The FCC cited a decision by the Supreme Court of Oregon in City of Eugene v. Comcast as an example of states and localities asserting authority to impose fees and requirements beyond their authority. In the decision, the court upheld a local government's 7% license fee on revenue from broadband services provided over a franchised cable system. Thus, while states and municipalities may regulate both video and voice services of telcos, they may only regulate video services of cable operators. <5.2.3. Outlook for State and Municipal Franchise Fees> If a state or municipality may charge franchise fees to cable operators and telcos only with respect to video services, the total amount of fees received is likely to decrease over time. As Figure 1 indicates, the total number of U.S. households subscribing to cable and telco video services has declined over the past 10 years. In 2010, about 70.8 million households subscribed to either a cable operator or a telco, compared with about 60.1 million households in 2019. In place of cable, more households have elected to rely on video provided over broadband connections or broadcast transmission. For cable operators in particular, this substitution of alternative sources of programming has led to the pursuit of revenue from nonvideo services, such as voice and high-speed data. In 2010, video services represented about 63% of total cable industry revenue, whereas in 2019 video represented 46% of total industry revenue ( Figure 2 ). Pursuant to the FCC's proposed rules, these other sources of revenue are not subject to LFAs' jurisdiction. In addition, the U.S. Court of Appeals for the Eighth Circuit held that a cable operator's voice services are not a telecommunications service, and therefore not subject to state regulation. In October 2019, the U.S. Supreme Court denied the Minnesota Public Utility Commission's petition hear the case. In Missouri, the City of Creve Coeur and other municipalities filed a class action lawsuit against satellite operators DIRECTV, DISH Network, as well as online streaming services Netflix Inc., and Hulu LLC, claiming that the companies must pay a percentage of gross receipts from video services to the municipalities where they do business, pursuant to Missouri's Video Services Providers Act. The state law allows Missouri's political subdivisions to collect up to 5% of gross receipts from providers of video programming and requires providers to register before providing service in the state, according to court documents. The municipalities claim the defendants have not paid the required amounts. Other localities may follow suit. A bill before the Illinois General Assembly would impose a 5% tax (rather than a "franchise fee") on the video service revenues of direct broadcast satellite operators and online video services for the right to provide services to Illinois residents. Similarly, a bill before the Massachusetts House of Representatives would impose a 5% fee on revenues earned by streaming video services. Massachusetts would split the money collected from the fees between the state's general fund (20%), municipalities (40%), and PEG programmers (40%). If receipts from cable franchise fees continue to erode, more states and municipalities may respond by seeking alternative revenue sources. <5.3. Preemption of Rate Regulation> In 2014, Congress enacted the Satellite Television Extension and Localism Act Reauthorization Act (STELA Reauthorization Act; P.L. 113-200 ). Section 111 of the act directed the FCC to develop a streamlined process for the filing of "effective competition" petitions by small cable operators within 180 days of the law's enactment. A cable company filing such a petition bears the burden of proof to demonstrate that it faces effective competition for its video services. The FCC responded in 2015 by adopting a rebuttable presumption that cable operators are subject to effective competition. As a result, the FCC prohibited franchising authorities from regulating basic cable rates unless they can demonstrate that the cable system is not subject to effective competition. The FCC stated that the change in its effective competition definition was justified by the fact that direct broadcast satellite service was available as an alternative video services provider throughout the United States. Later in 2015, the FCC found that LFAs in two states, Massachusetts and Hawaii, demonstrated that cable systems in their geographic areas were not subject to effective competition, and permitted them to continue to regulate the rates of the basic tiers of cable services. However, in September 2018, Charter Communications (Charter), a cable provider, asked the FCC to find that AT&T's DIRECTV NOW, a streaming service that AT&T has since rebranded as AT&T TV NOW, provides effective competition to cable systems in Kauai, HI, and 32 Massachusetts communities. In October 2019, the FCC agreed and issued an order granting Charter's petition, finding for the first time that an online streaming service affiliated with a LEC meets the LEC test in Congress's definition of effective competition. The FCC found that [AT&T TV NOW] need not itself be a LEC and AT&T need not offer telephone exchange service in the franchise areas.... There is no requirement ... that a LEC provide telephone exchange service in the same communities as the competing video programming service. Thus, if even AT&T TV NOW's subscribers rely on internet service from Charter to receive AT&T TV NOW's programming, the FCC considers AT&T TV NOW to be a competitor to Charter with respect to the distribution of video programming. According to the FCC, Congress adopted the LEC test because LECs and their affiliates "are uniquely well-funded and well-established entities that would provide durable competition to cable," and not because [Congress was] focused on facilities-based competition. Meanwhile, some localities have enacted legislation with the goal of reducing prices consumers pay for video services. A 2019 Maine law would require video service providers to offer networks and programs on an a la carte basis instead of offering subscribers only bundles of channels. Several cable operators, broadcasters, and content providers have sued to overturn the law. In January 2020, a federal judge blocked the implementation of the law as the parties prepare for trial. <6. Considerations for Congress> These regulatory developments and industry trends raise several potential issues for Congress to consider. First, Congress could consider whether the FCC's interpretation of the Communications Act is consistent with the policy goals set forth in Section 601 of the Communications Act (47 U.S.C. 521) and Section 706 of the Telecommunications Act. Specifically, Congress could explore the extent, if any, to which state and local regulations designed to promote the availability of PEG programming and I-Nets. Second, Congress could evaluate whether to create regulatory parity with respect to local regulation of nonvideo services of cable and telcos. While states and municipalities may regulate both video and voice services of telcos, they may only regulate video services of cable operators. Congress could address regulatory parity by either deregulating traditional telcos' nonvideo services or regulating cable operators' nonvideo services. Third, as the FCC and local governments include online video providers in their definitions of video providers for the purposes of evaluating competition and/or imposing franchise fees, Congress could clarify whether these actions achieve its stated policy goals. For example, if, in contrast to the FCC's interpretation of the LEC test for effective competition, Congress intends to include only facilities-based video services in its definition of video service competition, it could delineate the definition in communications laws. Likewise, as online video services become more prevalent and states and municipalities target them for franchise fees, Congress could specify the authority, if any, to regulate them. Finally, while the FCC has determined that competition among video programming distribution services has eliminated the need for rate regulation of the basic tier of cable services, Maine enacted a law to enable consumers to pay only for video programming they choose, in lieu of bundles of channels. In the past, some Members of Congress have proposed statutory changes to require video programming distributors to offer individual channels to consumers in addition to bundles of channels, and Congress could consider revisiting this issue, or alternatively clarifying that states and local governments lack authority to enact such laws.

Local and state governments have traditionally played an important role in regulating cable television operators, within limits established by federal law. In a series of rulings since 2007, the Federal Communications Commission (FCC) has further limited the ability of local governments (known as local franchise authorities ) to regulate and collect fees from cable television companies and traditional telephone companies (known as telcos ) offering video services. In August 2019, in response to a ruling by a federal court of appeals, the FCC tightened restrictions on municipalities' and—for the first time—on states' ability to regulate video service providers. The Communications Act of 1934, as amended, still allows local governments to require video service operators to provide public, educational, and government (PEG) channels to their subscribers. The FCC's August 2019 order, however, sets new limits on local governments' ability to collect fees from operators to support the channels. In addition, the FCC ruled that local franchise authorities could not regulate nonvideo services offered by incumbent cable operators, such as broadband internet service, business data services, and Voice over Internet Protocol (VoIP) services. In October 2019, also for the first time, the FCC concluded that a video streaming service was providing "effective competition" to certain local cable systems, thereby preempting the affected municipalities' ability to regulate local rates for basic cable service. These rulings have caused controversy. The FCC has asserted that they fulfill a statutory mandate to promote private-sector investment in advanced telecommunications and information services and to limit government regulation when competition exists. State and local governments, however, have objected that the regulatory changes deprive them of revenue and make it harder for them to ensure that video providers meet local needs. Against this backdrop of federal government actions limiting cable service regulation at the local level, consumer behavior continues to change. Specifically, an increasing number of consumers are substituting streaming services for video services provided by cable companies and telcos. As a result, the amount of revenue state and local governments receive from cable and telco providers subject to franchise fees is declining, which also reduces the amount cable providers can be required to spend to support PEG channels. In response, some municipalities and states have attempted to impose fees on online video services, such as Netflix and Hulu. Courts have not yet ruled on the legality of such fees. These regulatory developments and industry trends raise several potential issues for Congress. First, Congress could consider whether the FCC's interpretation of the Communications Act with respect to local regulation of video service providers is consistent with Congress's policy goals. Specifically, Congress could explore the extent, if any, to which, if any, it encourages or permits state and local regulations designed to promote the availability of PEG programming as well as subsidized voice, data, and video services for municipal institutions. Second, Congress could evaluate whether to create regulatory parity with respect to local regulation of cable and telcos' nonvideo services. While states and municipalities may regulate both video and voice services of telcos, they may only regulate video services of cable operators. Congress could address regulatory parity by either deregulating traditional telcos' nonvideo services or regulating cable operators' nonvideo services. Third, as the FCC and local governments include online video streaming services in their definitions of video providers for the purposes of evaluating competition and/or imposing franchise fees, Congress could clarify whether these actions achieve its stated policy goals. Finally, given the FCC's actions to reduce local government rate regulation of cable services and the State of Maine's legislation to enable video subscribers to seek alternatives to bundled programming, Members of Congress could reconsider past proposed statutory changes to require video programming distributors to offer individual channels to consumers. Alternatively, Congress could clarify that states and local governments lack authority to enact such laws.

crs_R45784

crs_R45784_0

<1. Introduction and Issues for Congress> Many U.S. officials and Members of Congress consider Poland to be a key ally of the United States and one of most pro-U.S. countries in Europe. According to the U.S. State Department, areas of close bilateral cooperation with Poland include "NATO capabilities, counterterrorism, nonproliferation, missile defense, human rights, economic growth and innovation, energy security, and regional cooperation in Central and Eastern Europe." The Congressional Caucus on Poland is a bipartisan group of Members of Congress who seek to maintain and strengthen the U.S.-Poland relationship and engage in issues of mutual interest to both countries. Of the Central European and Baltic countries that have joined the North Atlantic Treaty Organization (NATO) and the European Union (EU), Poland is by far the most populous, has the largest economy, and is the most significant military actor. In 1999, with strong backing from the United States, Poland was among the first group of post-communist countries to join NATO. In 2004, again with strong support from the United States, it was among a group of eight post-communist countries to join the EU. Many analysts assert that Poland, more than many other European countries, continues to look to the United States for foreign policy leadership. Recently, developments related to Russia's resurgence and the attendant implications for U.S. policy and NATO are likely to have continuing relevance for Congress. A variety of factors make Poland a central interlocutor and partner for the United States in examining and responding to these challenges. Since Poland's 2015 parliamentary election, some Members of Congress also have expressed concerns about trends in the country's governance, discussed below. <2. Domestic Overview> <2.1. Political Dynamics> The government of Poland is led by Prime Minister Mateusz Morawiecki of the conservative-nationalist Law and Justice party (PiS). Law and Justice won the October 2015 parliamentary election with 37.6% of the vote, giving the party 235 of the 460 seats in the Sejm (lower house of parliament). This was the first time since the end of communist rule in 1989 that a single party secured an absolute majority in parliament. Law and Justice had spent the previous eight years in opposition after leading the government from 2005 to 2007. The center-right Civic Platform (PO) party, which led the government of Poland from 2007 to 2015, came in second place in the 2015 election with 24.1% of the vote, dropping from 207 to 138 seats in the Sejm . The next parliamentary election is due to take place in October or November 2019. Poland's president is Andrzej Duda, who was the Law and Justice-backed candidate in the May 2015 presidential election. Law and Justice gained momentum five months prior to the parliamentary election with Duda's unexpected victory over the Civic Platform-supported incumbent. The president, who serves a five-year term, is Poland's head of state and resigns party membership upon election. The president exercises functions including making formal appointments, overseeing the country's executive authority, influencing legislation, representing the state in international affairs, and acting as commander-in-chief of the armed forces. Jaros aw Kaczy ski is head of Law and Justice and a member of the Sejm . Despite his holding no formal post in the government, many observers assert that Kaczy ski remains the most powerful politician in Poland who, as party chairman, exerts considerable influence behind the scenes. Jaros aw Kaczy ski co-founded Law and Justice with his twin brother Lech in 2001. Lech Kaczy ski was the president of Poland from 2005 to 2010, when he died in an airplane crash in Russia that also killed 95 other people, including many high-ranking Polish officials. A number of factors contributed to the 2015 election outcome. Law and Justice tapped into public unease over surging non-European migration to Europe by criticizing Civic Platform's willingness to accept migrants under an EU relocation plan. Law and Justice also appeared to gain support by advocating increased public spending for social support programs benefitting families with children, lower-income citizens, and the elderly. During the campaign, the party argued that the benefits of Poland's economic development had fallen unevenly across society and failed to reach many ordinary citizens. At the same time, observers believe there was a sense of voter fatigue toward Civic Platform and, relatedly, public discontent with the country's political establishment. Civic Platform was damaged by a scandal in which secretly recorded conversations led to the resignation of several government officials in 2015. A changeover in leadership with the 2014 appointment of then-Prime Minister Donald Tusk, who co-founded Civic Platform, as President of the European Council in Brussels was also a factor in the party's decline. More broadly, the 2015 election and its aftermath appeared to confirm the observation that Polish politics have become characterized by an entrenched social divide between national-oriented social conservatives, represented by Law and Justice, and Western-oriented liberals, represented by Civic Platform. Since taking office, the Law and Justice-led government has implemented numerous reforms that have proved contentious and raised tensions with the EU as well as domestic opponents; these reforms also have elicited some concern from the United States. Many members of Law and Justice maintain that Poland's post-communist development has been based in part on flawed institutions and values, and Law and Justice leaders interpreted the 2015 election results as a mandate to enact substantial reforms to the country's political system and public institutions. Some argue, therefore, that the party seeks to reduce the influence on national institutions of so-called liberal and secular "European" values and to recast those institutions in ways that promote what the party and its supporters view as traditional national-patriotic values, including close ties with the Catholic Church. Law and Justice also fiercely condemns the communist era and those associated with it, and the party holds a nationalist-oriented worldview that includes enduring suspicion toward Russia and unresolved tensions with Germany. The results of regional elections in October 2018 and European Parliament (EP) elections in May 2019 indicate that support for the Law and Justice party has held relatively steady since Poland's 2015 election. In the 2018 regional elections, Law and Justice won 34% of the vote and the most seats in 9 out of the country's 16 regional assemblies (with an absolute majority in 6). Previously, Law and Justice controlled one regional government. Law and Justice did well among more rural and less affluent voters, while a coalition of opposition parties including Civic Platform did well among more liberal and urban voters. Law and Justice won 4 out of 107 municipal elections. The opposition won mayoral races in Poland's largest cities, including Warsaw, Krak w, Wroc aw, and Gda sk. In the May 2019 EP elections, Law and Justice came in first place, winning 27 seats with approximately 45% of the Polish vote. A coalition of opposition parties including Civic Platform won 22 seats with approximately 38% of the vote. Despite numerous public protests over the past three years against the government's reforms, critics observe that opposition parties including Civic Platform have struggled to offer an effective alternate message. Support for Law and Justice, meanwhile, appears to have been mostly unaffected by controversy over its domestic reforms or by a series of corruption scandals reported in late 2018 and early 2019. Given its close association with the Catholic Church, the party came under pressure prior to the EP election with the release of a documentary film about the sexual abuse of children by Polish priests and subsequent efforts to cover up those crimes. After the film was released, the government adopted increased prison sentences for those convicted of sexual abuse of a child. <2.2. Controversial Reforms and Tensions with the EU> The most prominent and controversial set of reforms undertaken by the Law and Justice-led government concerns the judicial system. Critics charge that several moves enacted since late 2015 subvert institutional checks and balances, undermine judicial independence and the rule of law, and place the country's courts under political control. The reforms have significantly increased executive and parliamentary powers to select and remove judges, decisions that previously were determined internally by professional bodies within Poland's judiciary. Law and Justice leaders, who blamed the courts for blocking many of the party's legislative priorities when it previously led the government (2005-2007), maintain that the judicial system needed extensive reform because it was slow and inefficient, judges were not properly re-vetted after the transition from communism to democracy, and procedures for selecting new judges lacked fairness and accountability. Beyond the judicial system, a law adopted in 2016 granted the government the power to hire and fire management of public broadcasting stations, a function previously performed by an independent media supervisory committee. The government maintained that the move was needed to correct political bias and restore balance in the public media. Critics argue that it compromises the independence of state media and relegates it to publicizing the government's official narrative. The government also has cut public funding to some civil society organizations, particularly those supporting migrants and refugees. Critics charged that this move was intended to stifle opponents of government policies. In 2018, Poland adopted reforms to the country's electoral system. The government asserted that these changes, expected to take effect after the 2019 parliamentary elections, would increase fairness and transparency. Opponents argued that they would politicize the administration of elections and were intended to advantage Law and Justice. The reforms replace seven of the nine members (currently all judges) of the National Electoral Commission (responsible for conducting and overseeing all elections in Poland) with new members chosen by the Sejm according to party proportion. The reforms also call for the National Electoral Commission to appoint new local election commissioners, who are no longer required to be independent of political parties. Overall, domestic political opponents and outside observers have expressed concern that the actions taken by the government amount to a rollback of Poland's democracy and a program to construct an "illiberal" state. Law and Justice leaders and supporters dispute this portrayal, alleging that their political opponents have crafted this narrative in an attempt to undo the results of the 2015 election and block the government's ability to implement its agenda. In 2016, the European Commission (the EU's executive institution) launched an inquiry into the effects of the judicial and public media reforms on the rule of law in Poland. The EU subsequently set a series of deadlines for Poland to respond to recommended amendments that would address EU concerns about the ability of the executive and legislature to interfere with the independence of the judiciary. In 2016 and 2017, the Polish government consistently rejected the EU's recommended measures, objecting that the EU was interfering with the country's sovereignty and did not fully understand the Polish legal system. In December 2017, the European Commission recommended the EU move toward imposing an "Article 7" sanction, under which Poland's voting rights in the Council of the EU could be suspended. The measure is unlikely to be enacted, however; Hungary, which has similar Article 7 issues with the EU, has said it would veto the imposition of such a sanction against Poland, which requires unanimity in the Council. The EU also has been developing plans to link the amount of regional funding allocated to Poland (and other countries, such as Hungary) to judicial independence and rule-of-law standards in the next EU budget framework. Poland is the largest beneficiary of funding from the EU budget. In the EU's 2014-2020 budget framework, 106 billion (approximately $120 billion) was allocated to Poland, with the majority of EU support funding regional and municipal infrastructure development. In October 2018, the Polish government complied with a ruling by the European Court of Justice (ECJ) ordering the suspension of a law that allowed the president to decide whether to retire Supreme Court judges over the age of 65. (The law affected 28 of 72 judges sitting on the appellate panels of the country's Supreme Court at the time it came into effect in July 2018.) The episode marked the first time Law and Justice backtracked on any major element of its controversial reform program. In April 2019, the European Commission launched a new complaint alleging that Poland's process for disciplinary proceedings against judges, enacted in 2017, infringes on EU requirements for judicial independence from political control. Migration policy has been another source of tension between Poland and the EU. Poland has been a leading opponent of EU policies attempting to relocate migrants and refugees throughout the member states. In 2015, the Civic Platform-led government voted to approve a mandatory EU relocation plan, agreeing to take in approximately 4,600 migrants from outside the EU. The agreement became a significant campaign issue in Poland's 2015 election, with debates about the migration crisis highlighting divisions in Polish society and politics. Law and Justice strongly criticized approval of the plan, and after the terrorist attacks in Paris in November 2015, the incoming Law and Justice-led government indicated that respecting the EU plan was not politically possible. Poland subsequently joined Hungary and the Czech Republic in defying the EU by refusing to the implement the plan, arguing that it infringed on their national sovereignty and that immigration policy was not a competence of the EU. In December 2017, the European Commission referred the three countries to the ECJ over their failure to implement the relocation plan. Despite these tensions, Jaros aw Kaczy ski has stated that Law and Justice does not intend to take Poland out of the EU. Surveys show that a large majority of the Polish public views EU membership as beneficial. <2.3. The Economy> Poland's economy is among the most successful in Central Europe. Starting with post-communist reform programs in the 1990s and continuing beyond Poland's accession to the EU in 2004, pro-market policies and stable institutions have underpinned strong economic growth, an expanding private sector, and a steady increase in per capita gross domestic product (GDP). Poland's economy was hurt by the 2008 global financial crisis and the ensuing Eurozone crisis but was less affected than most other EU members. The Polish economy was the only European economy to sustain growth in 2008-2009, and Poland avoided a domestic banking crisis. Although Poland joined the EU in 2004, it is not a member of the Eurozone. Poland continues to use the z oty (PLN) as its national currency, and the Eurozone debt crisis that began in Greece in 2009 dampened Polish enthusiasm for adopting the euro. Under the terms of its EU accession treaty, Poland is bound to adopt the euro as its currency eventually, but there is no fixed target date for doing so. Economic growth in Poland remains high compared to most other EU members. According to the International Monetary Fund (IMF), growth averaged 3.75% per year over the period 2014-2017 and reached 5.1% in 2018. Unemployment is low, decreasing from 10.3% in 2013 to an expected 3.6% in 2019. Forecasts project growth of 3.8% in 2019 and an average of 2.9% annually over the period 2020-2023. The main drivers of the Polish economy recently have consisted of strong private consumption, investment derived from EU funding, and increased demand for exports. (Nearly 80% of Poland's exports are to other EU countries, with more than a quarter to Germany. ) Near-term risks to growth include a potential reduction in EU funding in the next EU budget framework (2021-2027) and a broader economic slowdown in the EU that could decrease demand for Polish exports. After the Civic Platform-led government of 2011-2015 sought to consolidate public finances through tax increases and entitlement cuts, the Law and Justice-led government has taken steps to loosen fiscal policy in order to benefit lower-income households and families, encourage higher birth rates, and appeal to older voters. Under the "Family 500+" program, families are eligible to receive a tax-free monthly subsidy of PLN 500 (approximately $132) per month for their second child and every subsequent child, with lower-income families eligible starting with their first child. Additionally, the government reversed its predecessor's reform raising the retirement age to 67, returning it to 65 for men and 60 for women. Similar to EU-wide averages, the median age in Poland was approximately 38 years old in 2012 and is expected to be 51 years old in 2050. Declining birth rates and net emigration have been the main factors in demographic change in Poland. The aging of the country's population is expected to have challenging implications for Poland's health care and retirement systems. Concerns that increased government spending on child support and pensions (as well as on planned increases to defense spending) could negatively affect Poland's public finances have largely been balanced by the country's strong economic growth. The budget deficit was 0.6% of GDP in 2018 and is expected to be 2.2% of GDP in 2019. Public debt was approximately 43.6% of GDP in 2018, according to the IMF. (EU rules stipulate that deficits remain below 3% of GDP and that debt remain below 60% of GDP). <2.4. Defense Modernization> Poland has repeatedly been invaded by external powers throughout its history. These experiences continue to shape Poland's security perceptions. Territorial defense is the core mission of the Polish military, and Poland's current security strategy is focused primarily on deterring potential Russian aggression. Armed forces modernization, NATO membership, and close ties with the United States are the main components of this strategy. Poland has sought to build a multilayered security policy around this foundation, with participation in EU defense initiatives and cooperation with regional partners such as the Nordic and Baltic countries, the Visegr d Group, and the Bucharest Nine. Poland has the ninth-largest army in NATO, with 61,200 active personnel. In all, Poland has 117,800 total active military personnel across all branches of the armed forces. Poland ended military conscription in 2009. Poland is one of seven NATO countries meeting the alliance's recommendation of allocating 2% of GDP for defense spending. According to NATO, Polish defense expenditures were 2.05% of GDP ($12.156 billion) in 2018. The Polish government plans to raise defense spending to 2.1% of GDP in 2020 and to gradually increase defense spending to 2.5% of GDP by 2030. In 2016, the Polish Defense Ministry announced a revised "Technical Modernization Plan" prioritizing air defense, navy, cybersecurity, tanks and armored vehicles, and territorial defense capabilities. From 2017 to 2022, the plan called for approximately $14.5 billion in spending on weapons and equipment acquisition, including new air defense systems, helicopters, UAVs, coastal defense vessels, minesweeper ships, and submarines. In February 2019, the defense ministry announced that it had revised and expanded the plan to include approximately $49 billion in spending on armed forces modernization over the period of 2017-2026. Priorities in the revised plan include short-range anti-aircraft missiles, attack helicopters, submarines, cybersecurity, and the acquisition of fifth-generation combat aircraft. While foreign purchases continue to play a large role, the Polish government has linked the defense modernization program with efforts to develop Poland's defense-industrial base, seeking contracts and partnerships that include local manufacturing and technology transfers. Another initiative of the Law and Justice-led government has been the establishment of a new territorial defense force, intended to eventually consist of 53,000 volunteers trained and equipped for tasks such as critical infrastructure protection and unconventional warfare. <3. Relations with the United States> Since the end of the Cold War, Poland and the United States have had close relations. The United States strongly supported Poland's accession to NATO in 1999. Warsaw has been an ally in global counterterrorism efforts and contributed large deployments of troops to both the U.S.-led coalition in Iraq and the NATO-led mission in Afghanistan. Links between the United States and Poland are further anchored by extensive cultural ties; approximately 9.6 million Americans are of Polish heritage. The Law and Justice-led government has sought to cultivate ties with the Trump Administration. In a visit to the United States in September 2018, Polish President Duda suggested that a permanent U.S. military base in Poland might be named "Fort Trump." On February 13-14, 2019, Poland and the United States co-hosted the "Ministerial to Promote a Future of Peace and Security in the Middle East," a conference attended by Vice President Mike Pence and Secretary of State Michael Pompeo. President Trump earlier delivered a speech in Warsaw on July 6, 2017. The president's remarks on NATO, Russia, U.S.-Polish ties, and Poland's resilience throughout history were well received by many Polish observers, and especially by the Polish government and its supporters. At the same time, critics asserted that the tone of the President's visit, during which he apparently did not raise concerns about Poland's domestic policies, emboldened the government to move ahead with controversial new judicial bills shortly afterward. While relations between Poland and the United States remain largely positive, there have been points of tension over the past several years. Following President Trump's Warsaw speech, the U.S. State Department released a statement expressing concern about judicial independence and the rule of law in Poland. Some Members of Congress also have expressed concerns about the Polish government's judicial and media reforms. In February 2016, for example, Senators McCain, Durbin, and Cardin co-authored a letter urging Poland to "recommit to the core principles of the [Organization for Security and Cooperation in Europe] and the EU, including the respect for democracy, human rights, and rule of law." U.S. officials (along with many of their European and Israeli counterparts) objected to controversial Holocaust-related legislation (amendment to the Act on the Institute of National Remembrance) passed by Poland's parliament and signed by President Duda in early 2018. The legislation initially criminalized attributing responsibility for Nazi crimes to the Polish state or nation, potentially punishable by a prison sentence of up to three years, with exemptions for art and academic research. Under continued international pressure, the Polish government amended the law in June 2018, making violations a civil (rather than criminal) offense. In recent years, Polish officials have objected to instances in which commentators and press articles have referred to Auschwitz and other Nazi concentration camps on Polish soil as "Polish death camps," preferring such phrasing as "Nazi concentration camp in German-occupied Poland" (President Obama apologized after using the term "Polish death camp" in 2012). Scholars agree that the term "Polish death camp" is inaccurate and misleading and that the Polish state did not collaborate in the Nazi genocide against Jews. At the same time, historical research has documented instances in which some Poles committed atrocities against Jews during and after World War II. Critics fear the 2018 legislation may serve to stifle debate about such issues and whitewash the culpability of individual Poles in such cases. In November 2018, a leaked letter from U.S. Ambassador Georgette Mosbacher to Prime Minister Morawiecki reportedly angered some Polish officials by raising concerns about media freedom. The Polish government reportedly had contemplated prosecuting the Polish television station TVN, which is owned by U.S. company Discovery Communications, after it aired footage alleging to show a Polish neo-Nazi group celebrating Adolf Hitler's birthday. Following the murder of Gda sk Mayor Pawe Adamowicz in January 2019 by a mentally ill assailant, Representative Marcy Kaptur, a co-chair of the Congressional Caucus on Poland, expressed concern about whether Poland's divided political environment could have played a role in motivating the perpetrator. Adamowicz was a well-known liberal critic of the Law and Justice-led government. In February 2019, Representative Kaptur introduced the Pawe Adamowicz Democratic Leadership Exchange Act of 2019 ( H.R. 1270 ), a bill that would reauthorize the United States-Poland Parliamentary Exchange Program. <3.1. Defense Relations> Defense cooperation between Poland and the United States is especially close and extensive. Poland has been a focus of U.S. and NATO efforts to deter potential Russian aggression in the region. In the wake of Russia's aggression against Ukraine starting in 2014, Polish officials reemphasized their wish to permanently base U.S. forces on their territory, despite concerns by some U.S. and European officials that doing so could violate the 1997 NATO-Russia Founding Act. In May 2018, the Polish government released a proposal under which it would contribute $2 billion toward establishing such a base. In a House Armed Services Committee hearing on March 13, 2019, acting Assistant Secretary of Defense for International Security Affairs Kathryn Wheelbarger stated that the related negotiations with Poland were under way. Section 1280 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ) required the Secretary of Defense to report to the congressional defense committees on the "feasibility and advisability" of permanently stationing U.S. forces in Poland by March 2019. (With discussions between Poland and the U.S. Administration still in progress, the report had not been received as of June 2019.) As part of the United States' missile defense for Europe, an "Aegis-Ashore" site with radar and 24 SM-3 missiles is to become operational in Poland in 2020. Russian officials have characterized the establishment of U.S. missile defense installations in Europe as a "direct threat to global and regional security." Under the European Deterrence Initiative (EDI), launched in 2014 (originally called the European Reassurance Initiative), the United States has bolstered security in Central and Eastern Europe with an increased rotational military presence, additional exercises and training with allies and partners, improved infrastructure to allow greater responsiveness, enhanced prepositioning of U.S. equipment, and intensified efforts to build partner capacity for newer NATO members and other partners. Approximately 6,000 U.S. military personnel are involved in the associated Atlantic Resolve mission at any given time, with units typically operating in the region under a rotational nine-month deployment. The United States has not increased its permanent troop presence in Europe (currently about 67,000 troops, including two U.S. Army Brigade Combat Teams, or BCTs), but it has rotated additional forces into the region, including nine-month deployments of a third BCT based in the United States. The BCT is based largely in Poland, with units also conducting training and exercises in the Baltic states, Bulgaria, Hungary, and Romania. A combat aviation brigade supports the activities of the BCT. The 4 th Infantry Division Mission Command Element, based in Pozna , Poland, acts as the headquarters overseeing rotational units. Following a meeting between President Trump and President Duda in Washington, DC, on June 12, 2019, President Trump announced that an additional 1,000 troops would be added to the rotational U.S. deployments in Poland. The additional troops are expected to come from units based in Germany. The two sides also announced plans for the U.S. military to expand its logistical, administrative, and training infrastructure in Poland, boost the presence of special operations forces, and establish a squadron of aerial reconnaissance drones. At the 2016 NATO Summit in Warsaw, the alliance agreed to deploy multinational battle groups (approximately 1,100 troops each) to Poland and the three Baltic countries. These "enhanced forward presence" units are intended to deter Russian aggression by acting as a "tripwire" that ensures a response from the entire alliance in the event of a Russian attack. The United States is leading the multinational battalion based in Orzysz, Poland. NATO continues to resist calls to deploy troops permanently in countries that joined after the collapse of the Soviet Union. Accordingly, the enhanced NATO presence has been referred to as "continuous" but rotational. In recent years, Poland has made a number of significant defense purchases from the United States, and numerous elements of Poland's military equipment modernization plans are of interest and relevance to U.S. defense planners and the U.S defense industry: At a February 2019 press conference unveiling the updated Technical Modernization Plan for the Polish armed forces, Polish Defense Minister Mariusz B aszczak indicated that the procurement of fifth-generation fighter aircraft was a top priority. In May 2019, Poland send a formal letter of request to the United States for the purchase of 32 F-35 Joint Strike Fighters, made by Lockheed Martin. In February 2019, Poland announced plans to sign a $414 million contract for the purchase of 20 High Mobility Artillery Rocket System (HIMARS) launchers, produced by Lockheed Martin. Delivery is expected by 2023. In March 2018, Poland signed a $4.75 billion deal for the purchase of two batteries (four total fire units) of the Patriot integrated air and missile defense system, made by Raytheon. Delivery is expected in 2022. In December 2017, the U.S. State Department approved the sale to Poland of F-16 support and sustainment services worth up to $200 million, potentially supplied by a number of U.S. contractors. In November 2017, the U.S. State Department approved the sale to Poland of up to 150 AIM-120C-7 Advanced Medium Range Air-to-Air Missiles (AMRAAM), made by Raytheon, for an estimated cost of $250 million. In November 2016, the U.S. State Department approved the sale to Poland of 70 AGM-158B extended range Joint Air-to Surface Standoff Missiles (JASSM-ER), an air-launched cruise made by Lockheed Martin with a range of approximately 900 kilometers. The deal was worth up to $200 million. In 2014, Poland purchased 40 AGM-158A JASSMs (also made by Lockheed Martin) and associated Mid-Life Update (MLU) packages for its F-16C/Ds, reportedly worth about $250 million in total. The A-variant JASSMs have a range of approximately 370 kilometers. <3.2. Economic Ties> Trade between the United States and Poland has increased significantly over the past 15 years. In 2004, for example, U.S. goods exports to Poland were valued at approximately $929 million and imports from Poland were about $1.8 billion. In 2018, U.S. goods exports to Poland were more than $5.4 billion and imports from Poland were more than $8 billion. Leading categories of U.S. exports to Poland include aircraft, machinery, electrical and medical equipment, and vehicles. U.S. imports from Poland represent a wide range of items, including heavy machinery, chemicals, and agricultural products. In 2017, U.S. services exports to Poland were valued at approximately $3.1 billion and services imports from Poland were approximately $2.25 billion. In 2017, U.S. foreign direct investment in Poland was approximately $12.6 billion. U.S. affiliates employ nearly 200,000 people in Poland. U.S. companies with significant investment in Poland include JP Morgan Chase, Citigroup, Hewlett Packard, UPS, 3M, IBM, United Technologies, General Electric, and Discovery Communications. <3.3. Visa Waiver Program> Many Polish officials and citizens continue to express disappointment that the United States has not made Poland a Visa Waiver Program (VWP) country. Current U.S. visa policy requires Poles who wish to travel to the United States to apply for a visa by filling out an application, paying a $160 nonrefundable fee, and completing an interview at a U.S. embassy or consulate. These requirements are waived for citizens of most EU countries, since most of the countries qualify to be included in the VWP. The VWP allows for visa-free travel to the United States for up to 90 days. Under U.S. policy, Poland does not meet the VWP's qualifying criteria because its visitor visa refusal rate (the percentage of applications rejected by U.S. consular officers who cannot overcome the refusal) remains above the 3% limit. The refusal rate for Poland was 3.99% in FY2018 and 5.92% in FY2017. Nonimmigrant visas issued to Polish nationals increased nearly 60% from 2009 to 2018. Citing Poland's status as a close U.S. ally, some Members of Congress have attempted to change the law governing the VWP to allow Poland to qualify. In the 115 th Congress, Representative Mike Quigley introduced a bill ( H.R. 2388 , Poland Visa Waiver Act of 2017) that would have authorized the Secretary of Homeland Security to designate Poland a VWP country. Some opponents of extending the VWP to include Poland argue that such a step could allow a significant increase in the number of Poles who overstay their visas and remain illegally in the United States (i.e., become unauthorized aliens). Proponents of including Poland argue that such a move would increase U.S. tourism revenue, boost public diplomacy, and strengthen national security by extending the information-sharing elements of the VWP to Poland. <4. Relations with Russia> Historically, Poland has had a difficult relationship with Russia. Poland's view of Russia remains affected by the experience of Soviet invasion during World War II and Soviet domination during the communist era. In more recent years, Polish leaders have consistently expressed warnings about the nature of Vladimir Putin's government in Russia, tending to view Russia as a potential threat to Poland and its neighbors. This perception predates Russia's invasion of Georgia in 2008, but events in Ukraine since 2014 have sharpened Polish concerns about Russia's intentions and have put security at the top of Poland's national agenda. The Law and Justice-led government has maintained a hard line in its approach to Russia and entrenched Poland's position as one of the EU's most hawkish countries on Russia policy. Poland has been one of the leading advocates for adopting and maintaining robust EU sanctions against Russia in response to its actions in Ukraine, although it has been one of the countries most affected by Russian retaliatory sanctions. One area of particular relevance to Poland's security is Kaliningrad, a 5,800-square-mile Russian exclave wedged between Poland and Lithuania (see Figure 1 ). Ceded to Russia by Germany following World War II, Kaliningrad is a key strategic territory for Russia, allowing it to project military power into NATO's northern flank. The territory has a heavy Russian military presence, including the Baltic Fleet and two airbases. Russia has repeatedly deployed Iskander short-range nuclear-capable missiles in Kaliningrad, and reports indicated that a 2018 deployment could be permanent. According to NATO officials, Russia is using Kaliningrad to pursue an anti-access/area denial (A2/AD) strategy that involves layering surface-to-air missiles to potentially block off access to the Baltic states and much of Poland. Kaliningrad's geographic isolation also allows for a scenario in which Russia tries to seize the Suwa ki Gap, the 100-kilometer border between Poland and Lithuania that separates Kaliningrad from Russia's ally Belarus. <5. Energy Security> Poland has been a leading opponent and critic of the Nord Stream 2 pipeline that would allow Germany to increase the amount of natural gas it imports directly from Russia via the Baltic Sea. Poland argues that the completion of Nord Stream 2 would allow Gazprom, Russia's state-owned gas company, to further consolidate its monopoly over the Central European gas market, as Gazprom would have full control of all gas transmission routes and Russian gas would dominate the European network hubs in Germany and Austria. Poland maintains that Russia would further gain geopolitical leverage because it could arbitrarily shift supply corridors in Europe, giving it the ability to continue supplying European markets through Germany while restricting or completely halting gas transit through Poland and/or Ukraine. Polish officials have expressed the view that U.S. involvement, including the adoption of sanctions, is crucial for efforts to oppose construction of the pipeline. While approximately two-thirds of the natural gas and most of the oil consumed in Poland comes from Russia, Poland continues to rely on domestically produced coal for much of its electricity generation. Russian gas accounts for less than 10% of Poland's primary energy supply. Successive Polish governments have prioritized efforts to diversify the country's energy sources. Poland has been taking steps to expand pipeline interconnectivity with its neighbors, including plans to develop the Baltic Pipe project, expected to be operational in 2022, which would connect Poland's gas infrastructure via Denmark to Norwegian supplies. Poland's supply contract with Gazprom expires in 2022, and Poland is unlikely to seek its renewal. Poland also has developed the ability to reverse the flow of gas in the Polish section of the Yamal pipeline, which runs from Russia to Germany via Belarus and Poland, in order to import natural gas from the west in the case of a crisis involving a cut-off of Russian gas from the east. A liquefied natural gas (LNG) terminal on the Baltic Sea coast near the German border ( winouj cie) became operational in 2015, and in October 2018 the Polish state energy company signed a 20-year contract to purchase LNG from a U.S. supplier. The Polish government also has been a leading advocate for a stronger EU energy policy that reduces collective dependence on Russia. Poland has been active in projects that enhance regional energy security by interconnecting national gas networks through the construction of new pipelines. The construction of new connectors with Slovakia and the Czech Republic is underway, and the planned Gas Interconnection Poland-Lithuania (GIPL), expected to become operational by 2022, would link the natural gas grid of the Baltic countries to the rest of the EU. Many U.S. officials and Members of Congress have regarded European energy security as a U.S. interest. In particular, there has been concern in the United States over the influence that Russian energy dominance could have on the ability to present a united transatlantic position when it comes to other issues related to Russia. Successive U.S. administrations have encouraged EU member states to reduce energy dependence on Russia through diversification of supply and supported European steps to develop alternative sources and increase energy efficiency. In the 116 th Congress, related bills include the European Energy Security and Diversification Act 2019 (House-passed H.R. 1616 and S. 704 ) and the Protect European Energy Security Act ( H.R. 1081 ). Introduced by Representative Adam Kinzinger and Senator Christopher Murphy, the European Energy Security and Diversification Act 2019 aims to prioritize and enhance U.S. efforts to encourage European countries to diversify energy sources and supply routes and increase regional energy security. Introduced by Representative Denny Heck, the Protect European Energy Security Act would require reports to Congress by the Secretary of State, Secretary of the Treasury, and the Director of National Intelligence detailing U.S. diplomatic efforts to oppose the construction of Nord Stream 2 and to promote European energy security and decrease European dependence on Russian energy. <6. Conclusion> Poland appears likely to remain a strong U.S. ally and an increasingly important U.S. security partner in Europe. Many analysts believe that close cooperation between the United States and Poland will continue for the foreseeable future in areas such as efforts to deter potential Russian aggression, the future of NATO, energy security, and economic issues. Statements by Polish leaders suggest that Poland is likely to continue looking to the United States for leadership on foreign policy and security issues. During the 116 th Congress, the issue of establishing a permanent U.S. military base in Poland or increasing the size of the U.S. military presence in Poland may remain of interest to Members of Congress. Contracted and prospective U.S. arms sales to Poland, including major items such as the F-35 and Patriot missile systems, also may be of congressional interest. Some Members may wish to consider Poland's status with regard to the U.S. Visa Waiver Program. Poland is likely to be of continuing importance in the area of European energy security. Members of Congress also may wish to remain informed about legislative, governance, and rule-of-law issues in Poland, including with regard to the numerous controversial domestic reforms enacted over the past several years. Members of Congress may have an interest in monitoring political developments in relation to the Polish parliamentary election due to occur in October or November 2019.

Over the past 30 years, the relationship between the United States and Poland has been close and cooperative. The United States strongly supported Poland's accession to the North Atlantic Treaty Organization (NATO) in 1999 and backed its entry into the European Union (EU) in 2004. Poland has made significant contributions to U.S.- and NATO-led military operations in Iraq and Afghanistan, and Poland and the United States continue to work together closely on a range of foreign policy and international security issues. Domestic Political and Economic Issues The 2015 Polish parliamentary election resulted in a victory for the conservative-nationalist Law and Justice party (PiS), which won an absolute majority of seats in the lower house of parliament ( Sejm ). Mateusz Morawiecki (PiS) is Poland's prime minister and head of government. The center-right Civic Platform (PO) party led the government of Poland from 2007 to 2015. Since winning the election, Law and Justice has made changes to the country's judicial system and enacted other reforms that have generated concerns about backsliding on democracy and triggered an EU rule-of-law investigation. Poland's next parliamentary election is due to occur in October or November 2019. European Parliament and regional election results indicate that support for Law and Justice remains strong, and the party is favored to win the 2019 election. Law and Justice candidate Andrzej Duda won Poland's 2015 presidential election. The president is Poland's head of state and exercises a number of limited but important functions. The next presidential election is due to occur in May 2020. Poland was one of the few EU economies to come through the 2008-2009 global economic crisis without major damage. As an EU member Poland is obligated to adopt the euro as its currency, but it has not set a target date for adoption and continues to use the złoty as its national currency. Defense Modernization Poland has been implementing an armed forces modernization plan since 2013, and it intends to spend approximately $49 billion on military equipment acquisitions and upgrades over the period 2017-2026. Completed and prospective purchases from U.S. suppliers, including advanced Patriot missiles and F-35 Joint Strike Fighters, have a large role in this initiative. Poland is one of seven NATO members to meet the alliance's benchmark of spending at least 2% of gross domestic product (GDP) on defense, and it plans to reach 2.5% of GDP by 2030. Defense Cooperation Under the United States' European Deterrence Initiative (EDI) and the U.S. military's Operation Atlantic Resolve, as well as NATO's Enhanced Forward Presence mission, U.S. forces have expanded their presence in Poland since 2014 and increased joint training and exercises with their Polish counterparts. While U.S. forces participate in these missions on a rotational basis, the Polish government has proposed the establishment of a permanent U.S. base on Polish territory. Visa Waiver Program Although relations between Poland and the United States are largely positive, Poland's exclusion from the U.S. Visa Waiver Program (VWP) has been a point of contention for many years. Some Members of Congress have advocated extending the VWP to include Poland. Relations with Russia Relations between Poland and Russia have long been tense, and Polish leaders have tended to view Russian intentions with wariness and suspicion. Poland remains a leading advocate for forceful EU sanctions against Russia over its 2014 annexation of Ukraine's Crimea region and fostering of separatist conflict in eastern Ukraine. Energy Security Poland has promoted European energy integration, including projects to expand pipeline and electric grid interconnectivity in order to decrease reliance on Russia. Poland is a leading critic of Nord Stream 2, a Russian-owned pipeline project that would allow Germany to increase the amount of natural gas it imports directly from Russia via the Baltic Sea. Outlook and Issues for Congress Given its role as a close U.S. ally and partner, Poland and its relations with the United States are of continuing congressional interest. The main areas of interest include defense cooperation, energy security, and concerns about rule-of-law and governance issues.

crs_R46327

crs_R46327_0

<1. Introduction> Congress established the Office of Technology Assessment (OTA) in October 1972 in the Technology Assessment Act of 1972 (P.L. 92-484) to provide competent, unbiased information concerning the physical, biological, economic, social, and political effects of [technological] applications" [to be used as a] "factor in the legislative assessment of matters pending before the Congress, particularly in those instances where the Federal Government may be called upon to consider support for, or management or regulation of, technological applications. The agency operated for more than two decades, producing approximately 750 full assessments, background papers, technical memoranda, case studies, and workshop proceedings. In 1995, amid broader efforts to reduce the size of government, Congress eliminated funding for the operation of the agency. Congress appropriated funding for FY1996 "to carry out the orderly closure" of OTA. Although the agency ceased operations, the statute authorizing OTA's establishment, structure, functions, duties, powers, and relationships to other entities was not repealed. Since OTA's defunding, some Members of Congress, science and technology advocates, and others have sought to reestablish OTA or to establish similar analytical functions in another agency or nongovernmental organization. This report describes the OTA's historical mission, organizational structure, funding, staffing, operations, and perceived strengths and weakness. The report concludes with a discussion of issues and options surrounding reestablishing the agency or its functions. The report also includes three appendices. Appendix A provides a historical overview of discussions about the definition of "technology assessment," a topic fundamental to OTA's mission and to any organization that would seek to fulfill OTA's historic role. Appendix B describes selected trends and factors that may contribute to a perceived need for technology assessment. Appendix C provides a history of legislative efforts to reestablish OTA or its functions since the agency was defunded. Appendix D provides a list of technology assessment products produced from 2002 to 2019 by the Government Accountability Office (GAO). Congress's guidance to GAO on technology assessment during this period is provided in the section " Congress, GAO, and Technology Assessment ." <2. Overview of Science and Technology Advice to Policymakers> Groundbreaking emerging technologies in fields such as artificial intelligence, quantum computing, gene editing, hypersonics, autonomy, and nanotechnology are widely anticipated to have substantial economic and social impacts, affecting the ways people work, travel, learn, live, and engage with others and the surrounding world. The impacts are likely to be felt by people of all ages, across most industries, and by government. Science, technology, and innovation have been of interest to government leaders throughout the nation's history. The federal government has looked to people and organizations with expertise in the development and application of new technologies to gain insights into their implications and potential public policy responses both to accelerate and maximize their expected benefits and to reduce or eliminate expected adverse effects. Such policies may include, among other things the funding of research and development (R&D) to accelerate the arrival and deployment of technologies and to identify their uses and potential implications; infrastructure policies, such as "smart" highways and cities, focused on creating environments where new technologies can flourish; regulations to guide and govern the development and use of technologies to ensure human health and public safety and to protect the environment; tax policies and other incentives to encourage investment in technology development and adoption; trade policies to maximize the global economic and societal potential of new technologies by fostering market access and eliminating tariff and nontariff barriers; intellectual property policies to protect the interests of those investing in technology development and commercialization; and education and training programs to promote U.S. leadership in innovation and ensure the adequacy of the science and technology workforce, as well as to help those who are displaced by new technologies to attain the knowledge and skills needed for other jobs. In some cases, a specific science or technology outcome may be the primary objective of a proposed policy, while in other cases science and technology may play a role in a broader policy effort to achieve other societal goals, such as environmental quality, public health and safety, economic competitiveness, or national security. Science and technology activities, programs, and sectors can be affected by tradeoffs resulting from multiple policy objectives. For example, U.S. trade policy for high technology goods and services may involve complementary and competing policy objectives related to intellectual property protection, expansion of markets, protection of U.S. national security, and advancement of geopolitical objectives. U.S. government efforts to obtain guidance on scientific and technical issues and their policy implications extend back to the nation's founding. Some of these efforts were informal, with Presidents, Members of Congress, and executive branch officials seeking out insights of knowledgeable individuals on an ad hoc basis. Presidents and congressional leaders also relied on more formal advice from scientific and technical societies, and business and professional organizations for insights and guidance on science, technology, and innovation-related issues. A number of organizations and their members helped fill this role in the early years of the country's development, including the American Philosophical Society, co-founded by Benjamin Franklin in 1743; the American Academy of Arts and Sciences, founded in 1780 in Boston, whose charter members included John Adams and Samuel Adams; the Academy of Natural Sciences of Philadelphia, founded in 1812; the Smithsonian Institution, established by an act of Congress in 1846; and the American Association for the Advancement of Science, founded in 1848. In 1863, Congress chartered the National Academy of Sciences and directed that "the academy shall, whenever called upon by any department of the Government, investigate, examine, experiment, and report upon any subject of science or art, the actual expense of such investigations, examinations, experiments, and reports to be paid from appropriations which may be made for the purpose, but the Academy shall receive no compensation whatever for any services to the Government of the United States." Three related entities were subsequently formed to complement the knowledge and capabilities of the National Academy of Sciences: the National Academy of Engineering, the National Academy of Medicine, and the National Research Council. These four organizations are collectively referred to as the National Academies of Science, Engineering, and Medicine (NASEM) or simply, the National Academies. They are nonprofit, nongovernmental entities. In addition, throughout the 20 th century, Congresses and Presidents, using statutory and executive authorities, respectively, established executive branch organizations to provide scientific insight and advice to the President, as well as informing Congress and federal departments and agencies. Advisory and coordinating organizations included the National Advisory Committee for Aeronautics (NACA, est. 1915), the Science Advisory Committee (SAC, est. 1951), the President's Science Advisory Committee (PSAC, est. 1956), the Intergovernmental Science, Engineering, and Technology Panel (ISETAP, est. 1976), the President's Committee on Science and Technology (PCST, est. 1976), and the President's Council of Advisors on Science and Technology (PCAST, est. 1990). Other organizations were established in statute. For example, the National Science Board (NSB, which oversees the National Science Foundation) was established by the National Science Foundation Act of 1950; a key statutory mandate of the NSB is to "render to the President and to the Congress reports on specific, individual policy matters related to science and engineering and education in science engineering, as Congress or the President determines the need for such reports." In addition, many science and technology agencies in the executive branch have deep expertise across a wide spectrum of technologies; several of these have policy-oriented offices or programs. While Congress had its own science and technology advisory resources including the Congressional Research Service (CRS) and the General Accounting Office (GAO, now the Government Accountability Office ) prior to the establishment of OTA, many federal science and technology advisory organizations and agencies were under the authority and direction of the President. Accordingly, during the decade preceding the establishment of OTA, a number of lawmakers expressed a need for Congress to have its own agency to conduct detailed science and engineering analyses and provide information tailored to legislative needs and the legislative process to supplement the functions performed by GAO and CRS. For example, in a 1963 hearing, Representative George Miller, chairman of the House Committee on Science and Astronautics, stated We are concerned with whether or not hasty decisions are handed down to us, but one of our difficulties is how to evaluate these decisions. We have to take a great deal on faith. We are not scientists [but] I want to say that in our system of government we have our responsibility. We are not the rubber stamps of the administrative branch of Government [We] recognize our responsibility to the people and the necessity for making some independent judgments [but] we do not particularly have the facilities nor the resources that the executive department of the government has. In August 1963, Senator Edward L. Bartlett, introduced a bill to establish in the legislative branch a congressional Office of Science and Technology: The scientific revolution proceeds faster and faster and the President, in requesting authority for these vast scientific programs undertaken by the Government, has available to him the full advice and counsel of the scientific community . The Congress has no such help. The Congress has no source of independent scientific wisdom and advice. Far too often congressional committees for expert advice rely upon the testimony of the very scientists who have conceived the program, the very scientists who will spend the money if the program is authorized and appropriated for. Congress as a body must equip itself to legislate on technological matters with coherence and comprehension. In December 1963, Senator Bartlett testified at a hearing of the Committee on House Administration Subcommittee on Accounts on the establishment of a congressional science advisory staff: Faceless technocrats in long, white coats are making decisions today which rightfully and by law should be made by the Congress. These decisions dealing with the allocation of our scientific and technical resources must be made . I think the Congress should make these decisions. I think they should be made in a rational manner. I think they should be made by an informed legislature which understands the implications, the costs, and the priorities of its judgments. Similarly, in a 1970 hearing of the House Subcommittee on Science, Research, and Development on H.R. 17046 (91 st Congress), a bill to establish OTA, subcommittee chair Representative Emilio Daddario stated This Subcommittee has recognized a need to pay more attention to the technological content of legislative issues. Since 1963, a large portion of the Subcommittee efforts have been to develop avenues of information and advice for the Congress with outside groups, We have recognized the important need for developing Independent means of obtaining necessary and relevant technological Information for the Congress, without having to depend almost solely on the Executive Branch. In my view, it is only with this capability that Congress can assure its role as an equal branch in our Federal structure. During the 1972 House debate on establishing OTA, Representative Chuck Mosher reiterated the need for Congress to have its own science and technology advisory responsive solely to Members of Congress and congressional committees: Let us face it, Mr. Chairman, we in the Congress are constantly outmanned and outgunned by the expertise of the executive agencies. We desperately need a stronger source of professional advice and information, more immediately and entirely responsible to us and responsive to the demands of our own committees, in order to more nearly match those resources in the executive agencies. Many, perhaps most, of the proposals for new or expanding technologies come to us from the executive branch; or at least it is the representatives of those agencies who present expert testimony to us concerning such proposals. We need to be much more sure of ourselves, from our own sources, to properly challenge the agency people, to probe deeply their advice, to more efficiently force them to justify their testimony to ask sharper questions, demand more precise answers, to pose better alternatives. Peter Blair, author of Congress' Own Think Tank: Learning from the Legacy of the Office of Technology Assessment, asserts that this perspective contributed to the establishment of OTA and other congressional science and technology analytical functions: [Many] viewed the creation of OTA, as well as the subsequent creation of CBO, and the expansion of [the Congressional Research Service] and [General Accounting Office] at around the same time, as part of a congressional reassertion of authority responding to Richard Nixon's presidency. While advocates for the creation of OTA asserted that its functions would be complementary to GAO and CRS, others expressed concerns about the costs of setting up another bureaucracy and suggested that the roles envisioned for OTA might be done by the existing agencies, perhaps at a lower cost. Some proposed, instead, that the functions intended for OTA be given to CRS or GAO. <3. The Office of Technology Assessment> For several years in the late 1960s and early 1970s, Congress explored and deliberated on the need for, and value of, technology assessment as an aid in policymaking decisions. In 1972, Congress enacted the Technology Assessment Act of 1972 (P.L. 92-484, codified at 2 U.S.C. 471 et seq.), establishing the Office of Technology Assessment as a legislative branch agency. The meaning of the term "technology assessment" is fundamental to the types of research and analysis that OTA or a successor organization might perform. There is no single authoritative definition of the term. In practice, an implicit definition is provided in the Technology Assessment Act of 1972: The basic function of the Office shall be to provide early indications of the probable beneficial and adverse impacts of the applications of technology and to develop other coordinate information which may assist the Congress. In the act, Congress found and declared that technological applications were "large and growing in scale; and increasingly extensive, pervasive, and critical in their impact, beneficial and adverse, on the natural and social environment." Accordingly, Congress deemed it "essential that, to the fullest extent possible, the consequences of technological applications be anticipated, understood, and considered in determination of public policy on existing and emerging national problems." Further, Congress found that existing legislative branch agencies were not designed to provide Congress with independently developed, adequate, and timely information related to the potential impact of technological applications. For these reasons, Congress authorized the establishment of OTA to "equip itself with new and effective means for securing competent, unbiased information concerning the physical, biological, economic, social, and political effects of such applications." The information provided by OTA would serve "whenever appropriate, as one factor in the legislative assessment of matters pending before the Congress, particularly in those instances where the Federal Government may be called upon to consider support for, or management or regulation of, technological applications." In assigning functions, duties, and powers to OTA, Congress further refined its concept of technology assessment; these are described later in this report. For a discussion of the history and varying perspectives on the meaning of the term, see Appendix A . <3.1. Statutory Organization and Authorities> As previously noted, the authorization for OTA's existence, structure, and functions remains in effect. This section provides an overview of OTA's structure, function and duties, powers, components and related organizations, and other information, as articulated in the agency's organic statute and codified at 2 U.S.C. 471-481. Because these authorities remain in effect, despite the fact that OTA itself no longer exists, this section describes the authorities using the present tense. <3.1.1. Structure, Functions, and Duties> The Technology Assessment Act of 1972 authorizes the establishment of an Office of Technology Assessment, composed of a Director and a Technology Assessment Board (TAB). The TAB is to "formulate and promulgate the policies" for OTA to be carried out by the Director. OTA's functions and duties include identifying existing or probable impacts of technology or technological programs; ascertaining cause-and-effect relationships, where possible; identifying alternative technological methods of implementing specific programs; identifying alternative programs for achieving requisite goals; making estimates and comparisons of the impacts of alternative methods and programs; presenting findings of completed analyses to the appropriate legislative authorities; identifying areas where additional research or data collection is required to provide adequate support for its assessments and estimates; and undertaking such additional associated activities as directed by those authorized to initiate assessments (see below). <3.1.2. Powers> The statute authorizes OTA "to do all things necessary" to carry out its functions and duties including, but not limited to making full use of competent personnel and organizations outside of OTA, public or private, and forming special ad hoc task forces or making other arrangements when appropriate; entering into contracts or other arrangements for the conduct of the work of OTA with any agency of the United States, with any state, territory, or possession, or with any person, firm, association, corporation, or educational institution; making advance, progress, and other payments which relate to technology assessment; accepting and utilizing the services of voluntary and uncompensated personnel necessary for the conduct of the work of OTA and providing transportation and subsistence for persons serving without compensation; acquiring by purchase, lease, loan, or gift, and holding and disposing of by sale, lease, or loan, real and personal property necessary for exercising the OTA's authority; and prescribing such rules and regulations as it deems necessary governing the operation and organization of OTA. The act also authorizes OTA "to secure directly from any executive department or agency information, suggestions, estimates, statistics, and technical assistance for the purpose of carrying out its functions." It also requires executive departments and agencies to furnish such information, suggestions, estimates, statistics, and technical assistance to OTA upon its request. Other provisions prohibit OTA from operating any laboratories, pilot plants, or test facilities, and authorize the head of any executive department or agency to detail personnel, with or without reimbursement, to assist OTA in carrying out its functions. <3.1.3. Technology Assessment Board> Under the act, the Technology Assessment Board (TAB) is to consist of 13 members: six Senators (three from the majority party and three from the minority party), six Members of the House of Representatives (three from the majority party and three from the minority party), and the OTA Director. The Director is to be a nonvoting member. The Senate members are to be appointed by the President pro tempore of the Senate; House members are to be appointed by the Speaker of the House of Representatives. The act authorizes the TAB to "formulate and promulgate the policies" of OTA. It also authorizes the TAB, upon majority vote, to "require by subpoena or otherwise the attendance of such witnesses and the production of such books, papers, and documents, to administer such oaths and affirmations, to take such testimony, to procure such printing and binding, and to make such expenditures, as it deems advisable." It authorizes the TAB to make rules for its organization and procedures and authorizes any voting member of the TAB to administer oaths or affirmations to witnesses. The chair and vice chair of the TAB are to alternate between the House and Senate each Congress. During each even-numbered Congress, the chair is to be chosen from the House members of the TAB, and the vice chair is to be chosen from the Senate members. In each odd-numbered Congress, the chair is to be chosen from the Senate members of the TAB, and the vice chair is to be chosen from among the House members. No TAB was established after the 104 th Congress. The House did not formally appoint members in the 104 th Congress, but Senate membership in the TAB was continuous and therefore the Senate members served as OTA's board until the agency ceased operations in 1995. <3.1.4. Director, Deputy Director, and Other Staff> Under the act, the TAB is to appoint the OTA Director for a term of up to six years. The act authorizes the Director to exercise the powers and duties provided for in the act, as well as such powers and duties as may be delegated to the Director by the TAB. The TAB has the authority to remove the Director prior to the end of the six-year term. The act authorizes the Director to appoint a Deputy Director. The Director and the Deputy Director are prohibited from engaging in any other business, vocation, or employment; nor is either allowed to hold any office in, or act in any capacity for, any organization, agency, or institution with which OTA contracts or otherwise engages. The Director is to be paid at level III of the Executive Schedule and the Deputy Director is to be paid at level IV. The act authorizes the Director to appoint and determine the compensation of additional personnel to carry out the duties of OTA, in accordance with policies established by the TAB. <3.1.5. Initiation of Technology Assessment Activities> Under the act, OTA may conduct technology assessments only at the request of the chair of any standing, special, or select committee of either chamber of Congress, or of any joint committee of the Congress, acting on his or her own behalf or at the request of either the ranking minority member or a majority of the committee members; the TAB; or the Director, in consultation with the TAB. <3.1.6. Technology Assessment Advisory Council> Under the act, OTA is to establish a Technology Assessment Advisory Council (TAAC). The TAAC shall, upon request by the TAB, review and make recommendations to the TAB on activities undertaken by OTA; review and make recommendations to the TAB on the findings of any assessment made by or for OTA; and undertake such additional related tasks as the TAB may direct. Under the act, the TAAC is to be composed of 12 members: 10 members from the public, to be appointed by the TAB, who are to be persons "eminent in one or more fields of the physical, biological, or social sciences or engineering or experienced in the administration of technological activities, or who may be judged qualified on the basis of contributions made to educational or public activities"; the Comptroller General, who heads GAO; and the Director of the Congressional Research Service. The public members of the TAAC are to be appointed to four-year terms. They are to receive compensation for each day engaged in the actual performance of TAAC duties at the highest rate of basic pay in the General Schedule. The law authorizes reimbursement of travel, subsistence, and other necessary expenses for all TAAC members. Under the act, a TAAC member appointed from the public may be reappointed for a second term, but may not be appointed more than twice. The TAAC is to select its chair and vice chair from among its appointed members. The terms of TAAC members are to be staggered, according to a method devised by the TAB. <3.1.7. Services and Assistance from CRS and GAO> The act authorizes the Librarian of Congress to make available to OTA such services and assistance of the Congressional Research Service as are appropriate and feasible, including, but not limited to, all of the services and assistance which CRS is otherwise authorized to provide to Congress. The Librarian is authorized to establish within CRS such additional divisions, groups, or other organizational entities as necessary for this purpose. Services and assistance made available to OTA by CRS may be provided with or without reimbursement from OTA, as agreed upon by the TAB and the Librarian. Similarly, the act directs the Government Accountability Office to provide to OTA financial and administrative services (including those related to budgeting, accounting, financial reporting, personnel, and procurement) and such other services. Such services and assistance to OTA include, but are not limited to, all of the services and assistance that GAO is otherwise authorized to provide to Congress. Services and assistance made available to OTA by GAO may be provided with or without reimbursement from OTA, as agreed upon by the TAB and the Comptroller General. <3.1.8. Coordination with the National Science Foundation> Under the act, OTA is to maintain a continuing liaison with the National Science Foundation with respect to grants and contracts for purposes of technology assessment, promotion of coordination in areas of technology assessment, and avoidance of unnecessary duplication or overlapping of research activities in the development of technology assessment techniques and programs. <3.1.9. Information Disclosure> The act requires that OTA assessments including information, surveys, studies, reports, and related findings shall be made available to the initiating committee or other appropriate committees of Congress. In addition, the act authorizes the public release of any information, surveys, studies, reports, and findings produced by OTA, except when doing so would violate national security statutes or when the TAB deems it necessary or advisable to withhold such information under the exemptions provided by the Freedom of Information Act. <3.1.10. Other> The act requires OTA's contractors and certain other parties to maintain books and related records needed to facilitate an effective audit in such detail and in such manner as shall be prescribed by OTA. These books and records (and related documents and papers) are to be available to OTA and the Comptroller General, or their authorized representatives, for audits and examinations. <3.2. Funding> Congress appropriated funds for OTA from FY1974 to FY1996 in annual legislative branch appropriations acts. Funding was provided mainly through regular appropriations acts, but additional funding was provided in some years through supplemental appropriations acts. In some fiscal years, Congress reappropriated unused OTA funds from earlier appropriations, essentially carrying the funds over to the next year. In some years, appropriations were reduced through sequestration or rescission. OTA's funding grew steadily throughout its existence, from an initial appropriation of $2 million in FY1974 ($8.6 million in constant FY2019 dollars) to a current dollar peak of $21.3 million in FY1995 ($33.4 million in constant FY2019 dollars). See Figure 1 (current dollars) and Figure 2 (constant FY2019 dollars). OTA's budget peaked in constant dollars in FY1992 at $35.1 million in constant FY2019 dollars. OTA received $3.6 million ($5.6 million in constant FY2019 dollars) in FY1996 to close out its operations. According to the Office of Management and Budget, OTA was not funded beyond February 1996. <3.3. Staffing> CRS was unable to identify a consistent measurement of OTA staffing that spans the period during which Congress appropriated funds for the agency. Figure 3 includes OTA staffing levels using three different characterizations that were consistent during parts of this time period. The data are from the Budget of the United States Government for fiscal years 1976-1998. Using these measures, staffing was first reported for FY1974 at 42, and rose to 151 in FY1977. Staffing then fell through 1980 before rising again, but remained between 123 and 143 from FY1978 to FY1991. In FY1992, reported staffing jumped to 193, and rose to a reported 210 in FY1993. In FY1994, staffing fell to a reported 197 and continued to drop through the end of the agency's funding in FY1996. During most years of OTA's operations, Congress included an annual cap on the agency's total number of "staff employees" in annual appropriations laws, beginning with a cap of 130 in the FY1978 Legislative Branch Appropriations Act ( P.L. 95-94 ). This cap was included in subsequent appropriations bills through FY1983. Congress increased the cap to 139 staff employees for FY1984, then increased it again to 143 for FY1985 and maintained this level through FY1995. The cap established a maximum limit on the number of OTA staff employees. In addition to full-time and temporary staff employees, OTA made extensive use of contractors. As shown in Figure 3 , OTA reported the statutory maximum of 143 employees from FY1985 to FY1991. In FY1992, a change in practice may have led to the reporting of contractors in its staffing level, resulting in the reported number of total compensable workyears exceeding total authorized (143) positions. Contractors supplemented the knowledge base of staff employees and were seen by OTA management as critical to the agency's ability to deliver authoritative products on emerging scientific and technological fields, especially with respect to OTA's technology scanning products that sought to characterize possible future science and technology paths and their potential implications. <4. Observations on OTA's Design and Operations> Peter Blair, in Congress' s Own Think Tank , noted that OTA was designed with the intention of serving the unique needs of Congress: The agency's architects intended the reports and associated information OTA produced to be tuned carefully to the language and context of Congress. OTA's principal products technology assessments were designed to inform congressional deliberations and debate about issues that involved science and technology dimensions but without recommending specific policy actions. Supporters, critics, and analysts have offered a variety of views on the strengths and weaknesses of OTA. Some have found OTA's work to be professional, authoritative, and helpful to Congress. For example, in a 1979 hearing of the Senate Committee on Appropriations, Subcommittee on Legislative Branch Appropriations, Representative Morris Udall, serving as chairman of the OTA Technology Assessment Board, testified that The usefulness of the OTA is clear. The office has a place in the legislative process . During my tenure on the Board, I have enjoyed watching OTA develop and building this record to the point where it is now on a decisive and effective course. Others offered a variety of criticisms, including issues related to uniqueness/duplication, timeliness, objectivity, and other factors, which likely helped to lay a foundation for its defunding. These are discussed below. <4.1. Uniqueness and Duplication> Some supporters of OTA asserted that the agency served a unique mission, complementary to those of its sister congressional agencies. A 1978 report of the House Committee on Science and Technology Subcommittee on Science, Research, and Technology reporting on its 1977-1978 oversight hearings on OTA stated OTA has been set up to do a job for the Congress which is: (a) essential, (b) not capable of being duplicated by other legislative entities, and (c) proving useful and relied upon. OTA should retain its basic operating method of depending to a large extent on out-of-house professional assistance in performing its assessments. Continued congressional support for OTA is warranted. Subcommittee chairman Representative Ray Thornton subsequently stated that this report "doesn't leave much doubt that the office is a valuable asset to the Congress." However, some critics asserted that the OTA mission and the work it did were already performed, or could be performed, by other organizations such as GAO (then the General Accounting Office), CRS, or the National Academies. This perspective was expressed by Senator Jim Sasser, chairman of the Senate Committee on Appropriations Subcommittee on the Legislative Branch, in a 1979 hearing: I am, frankly, troubled by the Office of Technology Assessment. This letter from Chairman Magnuson is just one more example of the type and tenor of questioning I receive from my colleagues and others about the Office of Technology Assessment. Frankly this recurring questioning raises doubts in my mind about the need for the Office of Technology Assessment. From time to time I hear that OTA very often duplicates studies conducted by the three other congressional analytical agencies, that is, the General Accounting Office, the Congressional Research Service and the Congressional Budget Office, or [by] executive branch agencies, such as the National Science Foundation. Concerns about duplication continued. During House floor debate on the Legislative Branch Appropriations Act, 1995, that eliminated funding for OTA, Representative Ron Packard, chairman of the Legislative Branch Subcommittee, stated In our efforts in this bill we have genuinely tried to find where there is duplication in the legislative branch of Government. This is one area where we found duplication, serious duplication. We have several agencies that are doing very much the same thing in terms of studies and reports. I am aware of the invaluable service of OTA, but there are other agencies that do the same thing. The CRS has a science division of their agency. GAO has a science capability in their agency. They can do the same thing as OTA . We ought to eliminate those agencies where duplication exists. This is one of those areas. In 2006, Carnegie Mellon University professor Jon M. Peha asserted that, while nonfederal organizations produce high-quality work similar to that performed by OTA, their work is not necessarily duplicative of the type of work OTA was established to perform as the characteristics of their analyses (e.g., directive recommendations, timeliness, format) are qualitatively different and their motivations may be subject to question: There still are more sources of information outside of government. These tend to be inappropriate for different reasons. The National Academies sometimes are an excellent resource for Congress, but for a different purpose. The National Academies generally attempt to bring diverse experts together to produce a consensus recommendation about what Congress should do. In many cases, Members of Congress do not want to be told what to do. Instead, they want a trustworthy assessment of their options, with the pros and cons of each, so they can make up their own minds. Universities and research institutes also produce valuable work on some important issues, but it rarely is generated at a time when Congress most needs it, or in a format that the overworked generalists of Congress can readily understand and apply. Moreover, Members of Congress must be suspicious that the authors of any externally produced report have an undisclosed agenda. <4.2. Timeliness> Congress established OTA to help it anticipate, understand, and consider "to the fullest extent possible, the consequences of technological applications in determination of public policy on existing and emerging national problems." To do this effectively, Congress needs information, analysis, and options on a timetable with the development and consideration of legislation. OTA supporters have noted that in recognizing the need for timeliness, the agency sought to inform congressional decisionmaking through a number of other mechanisms beyond its formal assessments. In addition to its formal assessments and summaries, OTA used the following additional mechanisms to inform Congress: technical and other memoranda, testimony, briefings, presentations, workshops, background papers, working papers, and informal discussions. Representative Rush Holt commented in 2006 that OTA's reports "were so timely and relevant that many are still useful today." While OTA reports were often lauded for being authoritative and comprehensive, some critics asserted that the time it took for OTA to define a report, collect information, gather expert opinions, analyze the topic, and issue a report was not consistent with the faster pace of legislative decisionmaking: Probably the most frequent criticism of OTA from supporters and detractors alike is that it was too slow; some studies took so long that important decisions already were made when the relevant reports were released. In its early years, some criticized OTA for producing too many short analyses; later others criticized the agency for concentrating on long-range studies and neglecting committee needs. In 2001, the former chairman of the House Committee on Science Robert Walker noted Too often the OTA process resulted in reports that came well after the decisions had been made. Although it can be argued that even late reports had some intellectual value, they did not help Congress, which funded the agency, do its job. Georgetown Law's Institute for Technology Law and Policy published a report on a June 2018 workshop on strategies for improving science and technology policy resources for Congress. Several participants asserted that "OTA's model often failed to deliver timely information to Congress, as the comprehensiveness of the studies and the rigor of the peer review process meant that reports could take 18 months or more to publish." <4.3. Quality and Utility> Some criticisms related to the quality and utility of OTA reports to the legislative process. This concern, and others, were reflected in a 1979 statement by Senator Jim Sasser, chairman of the Senate Appropriations Subcommittee on the Legislative Branch: The accusations are leveled that OTA studies are mediocre, and they are not used in the legislative process, but rather, most of them end up in the warehouse gathering dust, as so many government studies do . I am not being personally critical of you at all, but it falls to me to respond to these criticisms which I hear from my colleagues and others. In 1984 the Heritage Foundation, a think tank, published a paper, Reassessing the Office of Technology Assessment , lauding the agency's independence and quality: OTA performs an important function for Congress. In an increasingly complex age, Congress needs the means to conduct analyses independent of those produced by industry, lobbies, and the executive branch. The quality control procedures of OTA, as a whole, seem as careful and complete as those of its sister agencies, the General Accounting Office and the Congressional Budget Office. <4.4. Objectivity> There was and is a consensus that objectivity is essential to technology assessment if it is to serve as a foundation (among others) for congressional decision making. However, not all agree that objectivity is necessary to technology assessment, or even possible. Some assert OTA's work to have been objective. This perspective is reflected in comments by Representative Mark Takano who has stated, "The foundation for good policy is accurate and objective analysis, and for more than two decades the OTA set that foundation by providing relevant, unbiased technical and scientific assessments for Members of Congress and staff." Similarly, Representative Sean Casten has stated, "OTA gave us an objective set of truths. We may have creative ideas about how to deal with that truth, but let's not start by arguing about the laws of thermodynamics." A report for the Woodrow Wilson International Center for Scholars by Richard Sclove asserted that OTA's work implied a misleading presentation of objectivity: The OTA sometimes contributed to the misleading impression that public policy analysis can be objective, obscuring the value judgments that go into framing and conducting any [technology assessment] study . In this regard an authoritative European review of [technology assessment] methods published in 2004 observes that [OTA] represents the 'classical' [technology assessment] approach.... The shortcomings of the classical approach can be summarized in the fact that the whole [technology assessment] process needs relevance decisions, evaluations, and the development of criteria, which is at least partially normative and value loaded. Another scholar framed concerns about objectivity as a structural issue arising, in part, from single-party control of Congress during OTA's existence. The author noted the need for careful bipartisan and bicameral oversight to overcome perceptions and accusations of bias: Some Members of Congress raised noteworthy concerns. The most serious allegation was bias. It is not surprising that the party in the minority (before 1995) would raise concerns about bias, given that the other party had dominated Congress throughout OTA's existence . Bias or the appearance of bias can be devastating. An organization designed to serve Congress must be both responsive and useful to the minority, as well as the majority. Representatives of both parties and both houses must provide careful oversight, so that credit or blame for the organization's professionalism is shared by all. Some critics have asserted that OTA was responsive principally to the TAB, "limiting its impact to a very narrow constituency." While the TAB membership was bipartisan and bicameral, this criticism implied that OTA's objectivity was affected to some degree by the perspectives of those serving on the TAB, adding to the notion of structural challenges faced by OTA in achieving objectivity or the appearance of objectivity. In the 1980 book, Fat City : How Washington Waste s Your Taxes , author Donald Lambro, a Washington Times reporter, criticized OTA's work as partisan: Many of OTA's studies and reports concentrated on issues that were of special concern to [Senator Ted Kennedy]. The views expressed in them were always, of course, right in line with Kennedy's views (or any liberal's, for that matter) . The agency's studies have proven to be duplicative, frequently shoddy, not altogether objective, and often ignored. The 1984 Heritage Foundation paper Reassessing the Office of Technology Assessment asserted that despite OTA's quality control procedures, balance and objectivity concerns remained: Enough questions have been raised about OTA's procedures and possible biases, therefore, to warrant a thorough congressional review of OTA. This was particularly the case, according to the Heritage paper, for products not requested or reviewed by OTA's congressional oversight board, the TAB. The paper singled out for criticism OTA's assessment of the Strategic Defense Initiative (SDI), President Reagan's plan for a weapon system that would serve as a shield from ballistic missiles. The Heritage Foundation paper asserted that the OTA report on SDI was marred by intentional political bias: In the [SDI] study, for example, at least one OTA program division placed the political goal of discrediting SDI ahead of balanced and objective analysis. Further, the Heritage paper asserted It is also difficult to believe that the flaws in Carter's study and its disclosure of highly sensitive information are the result of naivete and misunderstanding on the part of the OTA. The evidence that some OTA staffers oppose the Administration's Strategic Defense Initiative seems clear and compelling." The Heritage report notes that experts from the SDI office and from Los Alamos National Laboratory questioned the technical accuracy of the report. The report then notes that three analysts selected by OTA Director Jack Gibbons to review the report (described in the report as having been "unsympathetic to strategic defense") commended Carter's study and told Gibbons that he should not withdraw the report. In 1988, citing the controversy over the OTA SDI report, Senator Jesse Helms asserted that OTA's work was not objective: OTA has been obsessed with proving that President Reagan's strategic defense initiative is both wrongheaded and dangerous almost since the very moment Mr. Reagan announced it in 1983. OTA has long ago lost its pretense that it is an objective scientific analysis group. By and large its reports are useless or irrelevant, but it has demonstrated over and over again that its work on SDI is both pernicious and distorted. In 2016, Representative Rush Holt disagreed with the assertion of bias in OTA's SDI report asserting, "When it came to missile defense, it was pretty clear to [OTA] that [the technology] wouldn't work as claimed, so they said so." A 2004 article in the journal The New Atlantis, "Science and Congress," stated that "the most significant reason for Republican opposition [to reestablishing OTA] is the belief that OTA was a biased organization, and that its whole approach was misguided: a way of giving a supposedly scientific rationale for liberal policy ideas and prejudices." The author offered several examples which, if viewed "through Republican eyes" support this belief. According to a report published by Georgetown Law's Institute for Technology Law and Policy, participants in a June 2018 workshop identified "the perception of partisanship" as one of two OTA weaknesses. <4.5. Costs> The issue of the costs of OTA studies was a factor in early oversight of OTA by Congress. On behalf of the chairman of the Senate Appropriations Committee, the chairman of the Legislative Branch subcommittee raised concerns about "allegations that OTA had either cost or time overruns on a large number of their contracts" in a 1979 appropriations hearing. OTA responded that contract overruns had stemmed primarily from modification of the scope of contracts. The agency asserted that its operation was based on the extensive use of outside talent, and that contractors were engaged early in an assessment to help OTA staff and supporting panels to define in more detail the nature of the assessment. This could lead to additional contractor work assignments, requiring modifications to contracts or additional contracts to enable completion of assessments. <4.6. Public Input> When OTA was established, analysts argued that public input into the technology assessment process was important. The efficacy of the OTA process for gaining such input has been a topic of debate. Some have asserted in retrospect that OTA did not have an effective mechanism for taking in public comments. Some former OTA staff have disputed this perception. One characterized the charge that OTA lacked citizen participation as "outrageous . The OTA process was nothing if not participatory." Another former OTA staffer, Fred Wood, recognized OTA's efforts in seeking public participation, but lamented that these efforts fell short at times: Public participation [by representatives of organized stakeholder groups] was one of the bedrock principles of the OTA assessment process.... Yet this aspect of OTA's methodology could be time consuming and still fall short of attaining fully balanced participation, while leaving some interested persons or organizations unsatisfied. The TAAC served as one vehicle for nongovernmental input into OTA's work. However, in a 1977 hearing, former Representative Emilio Daddario, who introduced the legislation first proposing the creation of an Office of Technology Assessment, testified that the TAAC had been invented in "a hurried effort to provide for some new method of public input into OTA activities, even though unfortunately its role was ill-defined." <4.7. Other Criticisms> Some have offered other criticisms of OTA. For example, a Wilson Center report identified the following additional criticisms of OTA: inconsistency in fully identifying and articulating technologies' ethical and social implications; failure to identify social repercussions that could arise from interactions among complexities of seemingly unrelated technologies; a lack of elucidation of circumstances in which a technology can induce a cascade of follow-on socio-technological developments; and failure to develop a "capacity to cultivate, integrate or communicate the informed views of laypeople." <5. Congressional Perspectives on Technology Assessment Expressed During OTA Defunding Debate> At the time of OTA's defunding, some Members of Congress expressed views on which other agencies and organizations might serve the functions performed by OTA or however much of those functions was still deemed necessary. The following excerpts from the House and Senate reports accompanying the Legislative Branch Appropriations Act, 1996 ( H.R. 1854 , 104 th Congress) and from floor debate on the bill provide insight into these post-OTA perspectives: The report of the House Committee on Appropriations on H.R. 1854 directed that following the defunding of OTA, any of its necessary functions would be performed by other agencies, such as CRS and GAO, and that supplemental information would be provided by nongovernment organizations: If any functions of OTA must be retained, they shall be assumed by other agencies such as Congressional Research Service or the General Accounting Office. Alternatively, the National Academy of Sciences, university research programs, and a variety of private sector institutions will be available to supplement the needs of Congress for objective, unbiased technology assessments. In its report on the bill, the Senate Committee on Appropriations report stated its disagreement with the House's intent to transfer OTA functions to CRS. The report asserted a variety of differences between OTA and CRS and stated that assigning OTA functions to CRS would harm CRS: During consideration of the bill by the House of Representatives, an amendment was adopted transferring the functions of the Office of Technology Assessment to the Congressional Research Service. The Committee disagrees with this proposal. The purposes, procedures, methodologies, management, and governance of the CRS and the OTA are quite different, and the Committee believes the merger of the two would substantially harm the Congressional Research Service. In debate on the Senate version of the bill, Senator Daniel Inouye asserted that OTA filled a unique and important role for which other legislative branch agencies were not suited: Some of my colleagues have suggested that we don't need an OTA.... How many of us are able to fully grasp and synthesize highly scientific information and identify the relevant questions that need to be addressed? The OTA was created to provide the Congress with its own source of information on highly technical matters. Who else but a scientifically oriented agency, composed of technical experts, governed by a bipartisan board of congressional overseers, and seeking information directly under congressional auspices, [can give] the Congress and the country accurate and essential information on new technologies? Can other congressional support agencies and staff provide the information we need? I am second to none in my high regard for these agencies, but each has its own distinct role. The U.S. General Accounting Office is an effective organization of auditors and accountants, not scientists. The Congressional Research Service is busy responding to the requests of members for information and research. The Congressional Budget Office provides the Congress with budget data and with analyses of alternative fiscal and budgetary impacts of legislation. Furthermore, each of these agencies is likely to have its budget reduced, or to be asked to take on more responsibilities, or both, and would find it extremely difficult to take on the kinds of specialized work that OTA has contributed. Representative Ron Packard, chair of the House Appropriations Committee's Legislative Branch subcommittee, described the elimination of OTA as "legislative rightsizing" and asserted the availability of other congressional agencies to fill OTA's role: In our efforts in this bill we have genuinely tried to find where there is duplication in the legislative branch of Government. This is one area where we found duplication, serious duplication. We have several agencies that are doing very much the same thing in terms of studies and reports . I am aware of the invaluable service of OTA, but there are other agencies that do the same thing. The CRS has a science division of their agency. GAO has a science capability in their agency. They can do the same thing as OTA. We evaluated how to best consolidate, and it was our conclusion as a committee that to eliminate OTA and absorb the essential functions into some of these other agencies that are going to continue was the best way to go . I admit OTA has done a good job. They have good, solid professionals, but those professionals can work with other agencies that will do those same functions, if they are essential. We also have the CRS, GAO, and other agencies, such as the National Academy of Sciences. There are many alternatives, or this work can even be privatized and contracted out for the services. But we do not need this agency that has now outgrown its usefulness has now increased its mission to other areas beyond science. In the House, Representative Henry Hyde stated his support for an amendment submitted by Representative Amo Houghton that would have transferred most of the funds and analysts to CRS: [The amendment] cuts 50 of 190 jobs. It cuts the budget by 32 percent, from $22 million down to $15 million. And it folds its functions into the Congressional Research Service. So we cut down on the money, we cut down on the personnel, we downsize to the bone, but we do not lose the function. It just seems to me in this era of fiber optics and lasers and space stations, we need access to an objective, scholarly source of information that can save us millions and billions. The amendment to transfer funds and personnel to CRS was not passed. <6. Congress, GAO, and Technology Assessment> Following the defunding of OTA, Congress sought help from other organizations to fill a gap for scientific and technical information that previously would have been performed by OTA. According to one analysis, Congress initially increased its use of the National Academies for obtaining such information, though shortly thereafter its usage of the National Academies returned to pre-OTA defunding levels. Another option employed by Congress for technology assessment capabilities has been reliance on the GAO. Beginning in the early 2000s, GAO undertook efforts to develop and improve its technology assessment capabilities. Some of these efforts were initiated by GAO itself, other efforts were initiated at Congress's direction. Congress has not given GAO statutory authority to conduct technology assessments. Rather, Congress provided GAO guidance with respect to its technology assessments and related activities in the form of reports accompanying annual Legislative Branch Appropriations bills since at least 2001. In 2000, five years after Congress defunded OTA, GAO established the Center for Technology and Engineering in its Applied Research and Methods team. This center, led by GAO's Chief Technologist, later became GAO's Center for Science, Technology, and Engineering. Shortly thereafter, Congress began to task GAO with technology assessment activities. In 2001, conferees on the Legislative Branch Appropriations Act, 2002 directed in report language that up to $500,000 of GAO's appropriation be obligated to conduct a technology assessment pilot project and that the results be reported to the Senate by June 15, 2002. The conference report did not authorize an assessment topic, but three Senators requested GAO to assess technologies for U.S. border control together with a review of the technology assessment process. At the same time, six House Members wrote to GAO supporting the pilot technology assessment project. After consulting congressional staff, GAO agreed to assess biometric technologies. It used its regular audit processes and also its standing contract with The National Academies to convene two meetings that resulted in advice from 35 external experts on the use of biometric technologies and their implications on privacy and civil liberties. The resulting report was issued in November 2002 as Technology Assessment: Using Biometrics for Border Security (GAO-03-174). The FY2003 Senate legislative branch appropriations report noted the utility of GAO's work and said that it was providing $1 million for three GAO studies in order to maintain an assessment capability in the legislative branch and to evaluate the GAO pilot process. However, this language was not included in the Senate bill ( S. 2720 , 107 th Congress); the House bill ( H.R. 5121 , 107 th Congress) or the accompanying report; or in P.L. 108-7 , which included as Title H, the Legislative Branch Appropriations Act, 2003. Although funds were not provided for a study, GAO conducted a technology assessment that was published in May 2004 as Cybersecurity for Cri tical Infrastructure Protection . For FY2004, the Senate Committee on Appropriations recommended $1 million for two or three technology assessments by GAO, but directed the agency only to conduct this technology assessment work if it was consistent with GAO's mission. The conference report for the Legislative Appropriations Branch, 2004 ( P.L. 108-83 ) noted that For the past two years the General Accounting Office (GAO) has been conducting an evaluation of the need for a technology assessment capability in the Legislative Branch. The results of that evaluation have generally concluded that such a capability would enhance the ability of key congressional committees to address complex technical issues in a more timely and effective manner. Further, the conferees directed GAO to report by December 15, 2003, to the House and Senate Committees on Appropriations "the impact that assuming a technology assessment role would have on [GAO's] current mission and resources." In 2004, a bill was introduced in the Senate ( S. 2556 , 108 th Congress) to establish a technology assessment capability within GAO. The bill would have authorized the Comptroller General to initiate technology assessment studies or to do so at the request of the House, Senate, or any committee; to establish procedures to govern the conduct of assessments; to have studies peer reviewed; to avoid duplication of effort with other entities; to establish a five-member technology assessment advisory panel; and to have contracting authority to conduct assessments. In addition, the bill would have authorized $2 million annually to GAO to conduct assessments. The bill was referred to the Committee on Governmental Affairs and no further action was taken. A similar bill was introduced in the House ( H.R. 4670 , 108 th Congress) and referred to the House Committee on Science; no further action was taken. For FY2005, GAO requested $545,000 in appropriations for four new full-time equivalent (FTE) positions and contract support to establish a baseline technology assessment capability that would allow the agency to conduct one assessment per year. In its report, the House Appropriations Committee did not address funding for GAO for technology assessment, but encouraged GAO to "... retain its core competency to undertake additional technology assessment studies as might be directed by Congress." An amendment to add $30 million to GAO's FY2005 appropriations for the purpose of establishing a Center for Science and Technology Assessment was rejected by the House. The Senate Committee on Appropriations report on the Legislative Branch Appropriations Act, 2005 ( S. 2666 , 108 th Congress) provided additional guidance to GAO with respect to its technology assessment activities, limiting future technology assessments to those having the support of leadership of both houses of Congress and to technology assessments that "are intended to address significant issues of national scope and concern." In addition, the report directed the GAO Comptroller General to consult with the committee "concerning the development of definitions and procedures to be used for technology assessments by GAO." In 2007, the House Committee on Appropriations recommended $2.5 million for GAO for technology assessments in FY2008, stating that as technology continues to change and expand rapidly it is essential that the consequences of technological applications be anticipated, understood, and considered in determination of public policy on existing and emerging national problems. The Committee believes it is necessary for the Congress to equip itself with effective means for securing competent, timely and unbiased information concerning the effects of scientific and technical developments and use the information in the legislative assessment of matters pending before the Congress. That same year, the Senate committee report on the Legislative Branch Appropriations Act, 2008 ( S. 1686 , 110 th Congress) recommended $750,000 and four FTE employees to establish a permanent technology assessment function in the GAO. The report also stated that the committee had "decided not to establish a separate entity to provide independent technology assessment for the legislative branch owing to budget constraints." Further, it asserted that GAO's focus on "producing quality reports that are professional, objective, fact-based, fair, balanced, and nonpartisan is consistent with the needs of an independent legislative branch technology assessment function." In addition, the committee directed GAO "to define an operational concept for this line of work, adapted from current tested processes and protocols," and to report to Congress on the concept. Conferees on the Consolidated Appropriations Act, 2008 ( H.R. 2764 , 110 th Congress; P.L. 110-161 ) agreed to provide $2.5 million for GAO for technology assessments in FY2008, asserted the importance of technology assessment to Congress's public policy deliberations, and directed the Comptroller General to ensure that "GAO is able to provide effective means for securing competent, timely and unbiased information to Congress regarding the effects of scientific and technical developments." For FY2009, conferees continued funding for GAO's technology assessment and reminded the agency that "for the assessments to be of benefit to the Congress, GAO must reach out and work with both bodies of Congress regarding these studies." For FY2010, the House Committee on Appropriations recommended continuing GAO technology assessment funding at the FY2009 level. The conference report on Legislative Branch Appropriations Act, 2010, endorsed the chamber reports. No direction was given by Congress to GAO in House, Senate, or conference appropriations reports regarding technology assessment for FY2011, FY2012, FY2013, or FY2014. In its report on the Legislative Branch Appropriations Act, 2015 ( H.R. 4487 , 113 th Congress), the Senate Committee on Appropriations commended GAO for the technology assessment advice it provided to Congress for a decade, but asserted that the scale and scope of that work has been limited due to budget constraints. The committee recommended an increase in GAO funding to enhance the agency's technology assessment capabilities and directed GAO to submit a strategic plan for its technology assessment program. The strategic plan was to include proposed solutions to challenges constraining the GAO's technology assessment capabilities, approaches to increase responsiveness to congressional needs and priorities, and strategies to improve technology assessment procedures and methodologies, as well as identify additional authorities and resources that may be needed. In its report on the Legislative Branch Appropriations Act, 2016 ( H.R. 2250 , 114 th Congress), the Senate Committee on Appropriations commended GAO for implementing a new strategic plan for its technology assessment program that expanded the scale and scope of its assessment analysis. Additionally, the committee encouraged GAO to focus hiring efforts on increasing technology assessment staff capacity. Conferees on the Consolidated Appropriations Act, 2017 ( H.R. 244 , 114 th Congress) lauded GAO's technology assessment work and encouraged GAO to increase its scientific and technical capacity as its work portfolio requires: GAO's work is recognized in the area of technology assessment, since being tasked with this responsibility in 2002. GAO has produced highly technical and scientific reports in response to Congressional requests and statutory requirements. These reports have included technology assessments (TA), and other reports to Congress that incorporate analysis of scientific, technological and engineering issues in their evaluations of federal programs. GAO has also produced best practice guides for use across government on the topics of lifecycle cost estimating, project scheduling, and technology readiness assessment. GAO's work in these areas is led by GAO's Center for Science, Technology, and Engineering (CSTE). GAO's CSTE provides wide-ranging technical expertise across all of GAO's areas of work, including support to various studies of federal programs with science and technology elements, such as cybersecurity, nuclear and environmental issues, and major technical systems acquisitions, among others. Also noted is the work of CSTE's e-Security laboratory and Cost Engineering Sciences groups which conduct computer and network security evaluations and advanced operations research analyses (including cost, schedule, and technical performance), respectively. GAO has provided direct support to the Congress via congressional testimony, review of draft legislation, and the adoption of various report recommendations by Executive Branch agencies. GAO is commended for providing key direct technical support to various congressional committees on technology-focused topics such as the U.S. Capitol Police radio systems acquisition. It is noted that GAO is using rigorous methods in its technical reports, including engaging key external technical experts via group meetings conducted in partnership with the National Academies, cost-benefit analysis, risk analysis, technology maturity assessment, and scenario-based trend identification. Given the persistent and growing demand for this technical work, the Comptroller General is commended for his strategic initiative to build the scientific and technical capacity within GAO and encouraging further growth as the work portfolio requires. GAO is encouraged to continue a communication effort with Congress to ensure lawmakers are aware of these services. No direction was given by Congress to GAO in FY2018 appropriations report language regarding technology assessment. Conferees on the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019, directed GAO to expand its technology assessment capacity by reorganizing its S&T function and to create a more prominent office for this purpose within GAO. Congress directed GAO to provide, within 180 days, a plan and timetable for how the new office could expand and enhance GAO's capabilities in scientific and technological assessments: Technology Assessment : There is general support in Congress to bolster capacity of and enhance access to quality, independent science and technological expertise. Since 2002, GAO has provided direct support to Congress in the area of technology assessment through objective, rigorous, and timely assessments of emerging science and technologies. The Center for Science, Technology, and Engineering (CSTE) within GAO has developed such a capacity, providing wide-ranging technical expertise across all of GAO's areas of work. However, because the scope of technological complexities continues to grow significantly, the conferees seek opportunities to expand technology assessment capacity within the Legislative Branch. The conferees encourage GAO to reorganize its technology and science function by creating a new more prominent office within GAO. GAO is directed to provide the Committees a detailed plan and timeline describing how this new office can expand and enhance GAO's capabilities in scientific and technological assessments. This plan should be developed in consultation with internal stakeholders of the Legislative Branch such as congressional staff and Members of Congress in addition to external stakeholders, including nonprofit organizations and subject matter experts knowledgeable in the field of emerging and current technologies. Further, such a plan should include a description of the revised organizational structure within GAO, provide potential cost estimates as necessary, and analyze the following issues: the appropriate scope of work and depth of analysis; the optimum size and staff skillset needed to fulfill its mission; the opportunity and utility of shared efficiencies within GAO; and the opportunities to increase GAO's engagement and support with Congress. GAO is directed to submit this report to the Committees within 180 days of enactment. In January 2019, GAO announced plans to double the size of its current combined science and technology workforce. It also announced the establishment of a new Science, Technology Assessment, and Analytics (STAA) team focused on technology assessments and technical services for the Congress; auditing federal science and technology programs; compiling and utilizing best practices in the engineering sciences; and establishing an audit innovation lab to explore, pilot, and deploy new advanced analytic capabilities, information assurance auditing, and emerging technologies expected to affect auditing practices. In April 2019, GAO issued its expansion and enhancement plan, GAO Science, Technology Assessment, and Analytics Team: Initial Plan and Considerations Moving Forward. According to the plan, the new GAO STAA office would perform the agency's existing science- and technology-focused work, as well as its new technology assessment activities. The GAO plan states that the number of STAA staff will increase from 49 to 70 by the end of FY2019 under the plan. STAA staff would eventually grow to as many as 100-140, depending on congressional requests for technology assessments and technical assistance. Functions to be performed by STAA include providing technology assessments and technical assistance to Congress; evaluation of S&T programs within the federal government; best practices guides in the engineering sciences, including cost, schedule, and technology readiness assessments; and an audit innovation lab. From 2002 through April 14, 2020, GAO published 16 technology assessment reports, including two in 2019. Appendix D provides a complete list of GAO technology assessments. <7. National Academy for Public Administration Study on Congress's Need for Additional Science and Technology Advice and Technology Assessment> In 2018, conferees on the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( H.R. 5895 , P.L. 115-244 ) noted recent testimony and requests for restoring funding for OTA and the need for Congress to have "deep technical advice necessary to understand and tackle the growing number of science and technology policy challenges." <7.1. Congress's Charge to NAPA> In this regard, Congress directed CRS to contract with the National Academy of Public Administration (NAPA) 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. In 2018, CRS engaged NAPA to conduct the study and produce a report. In October 2019, NAPA published its report, Science and Technology Policy Assessment: A Congressionally Directed Review . NAPA articulated its mission in addressing the congressional direction as threefold: to detail the current resources available to Members of Congress within the legislative branch regarding science and technology policy, including GAO; to 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, such as the former Office of Technology Assessment; and to address whether the creation of a separate legislative branch entity would duplicate services already available to Members of Congress. <7.2. Assessment of Congressional Need for Additional Science and Technology Advice and Resources Available> In evaluating Congress's need for additional S&T advice, the NAPA study found that "The range, speed, and impact of technical developments suggest a greater congressional need for internal expertise on S&T related issues," but that "nearly every indictor of congressional capacity is moving the wrong way." The report identified three types of congressional clients that need such information: Members of Congress, personal office staff, and committee staff. Broadly, NAPA found that most Members are reliant on staff and legislative support agencies (e.g., CRS, GAO) for science and technology policy support, but that the number of committee and personal office staff available for S&T policy work has decreased. NAPA also noted reductions in the number of CRS and GAO staff over 35 years. <7.2.1. Members of Congress> The report noted that Members typically do not have professional backgrounds in science and technology and states that Members "often do not have the subject matter expertise to understand fast-moving, complex S&T issues." Therefore, Members without S&T backgrounds, "rely on expert advisors like personal and committee staff and on legislative branch support agencies like the CRS and the GAO to help them understand technical policy issues." The report also cites a 2016 survey of senior congressional staff by the Congressional Management Foundation that found that "Senators and Representatives lack the time and resources they need to understand, consider, and deliberate public policy and legislation." <7.2.2. Committee Staff> NAPA found that committee staff are a critical source of policy expertise, but that the number of committee staff fell by 38% between 1981 and 2015, and by even more in some committees engaged in S&T policy matters. The report also noted the number of hearings which NAPA describes as an opportunity to "build subject matter expertise" fell by 63% between the 96 th Congress and 114 th Congress. <7.2.3. Personal Staff> NAPA found that congressional offices are "overwhelmed by constituent communication" due to growth in digital communications and increases in population, and noted a finding by the Congressional Management Foundation that "Congressional offices are devoting more resources to managing the growing volume of constituent communications." NAPA asserts that this trend, combined with fixed budgets, means that fewer staff are available for policy work. In its report, NAPA concluded that "as the Nation experiences accelerated S&T developments, certain indicators of Congress' ability to absorb, understand, analyze, and deal with the developments have declined." <7.3. Options Identified by NAPA> The report posited three options that it considered to address the gaps it had identified: Option 1. Enhance Existing Entities Enhance the capabilities of existing Legislative Branch support agencies, including GAO and CRS, including potential changes to current models; Option 2. Create a New Agency Create a separate agency to fill any existing gaps, with attention given to avoiding duplication of effort; and Option 3. Enhance Existing Entities and Create an Advisory Office Both enhance existing entities and create an S&T advisory office, led by a Congressional S&T Advisor, which focuses on strengthening the capacity of Congress to absorb and utilize science and technology policy information provided by GAO, CRS, and other sources. <7.4. NAPA Recommendations> The NAPA report recommended option 3 with the following elements: GAO should further develop the capability of its Science, Technology Assessment, and Analytics mission team to meet some of the supply gaps identified in the NAPA report, including the need for technology assessments, and make appropriate changes in its organization and operating policies to accommodate the distinctive features of technology assessments and other foresight products. CRS should enhance and expand its quick-turnaround and consultative services in S&T-related policy issues. Congress should create an Office of the Congressional S&T Advisor (OCSTA), which would focus on efforts to build the absorptive capacity of Congress, to include supporting the recruitment and hiring of S&T advisors for House and Senate committees with major S&T oversight responsibilities. OCSTA would also be responsible for horizon scanning. Congress should create a Coordinating Council to be led by the Advisor and that includes representatives from CRS and GAO's STAA, and a National Academies ex officio member with the objective to limit duplication and coordinate available resources to most benefit the Congress. <7.5. Technology Assessment and Horizon Scanning> In its report, NAPA differentiates between technology assessments and "horizon scans." NAPA states that horizon scans are reports 20-60 pages in length that seek to identify S&T issues that might arise in the future, including broad developments and important innovations, as well as estimating the timeframes for such developments. NAPA asserts that such information would allow Congress to know whether it is positioned to be successful in responding to such issues in terms of its structure, activities, and agenda. NAPA also states that horizon scanning can serve as an effective early warning system. While the NAPA report asserts that "no agency expressly claims responsibility for preparing horizon scanning reports as distinct products for Congress," it later offers several examples of horizon scanning efforts undertaken by GAO and argues that these efforts "provide a foundation to further expand capacity in this area." <7.6. NAPA Evaluation of Whether to Reestablish OTA> Following release of the report, NAPA panel members stated that it did not evaluate the need for reestablishing the Office of Technology Assessment. In this regard, NAPA asserted that it believed Congress had made clear its intent over the last two decades for technology assessment to be a mission of GAO. In testimony, panel member Michael McCord asserted that the inability of Congress to reach a consensus about reestablishing OTA for more than two decades shaped the panel's perspective on considering the option. He further asserted that the absence of a consensus in this regard could undermine a reestablished OTA's ability to fulfill the mission its advocates seek. In response to a Member's question as to why the NAPA report did not recommend reinstating OTA or something similar, McCord responded We did not recommend [reestablishing OTA]. [However,] it would be, I think, incorrect to say that [NAPA] would think it's a terrible idea if Congress did that. But you can't help but notice that for 25 years Congress has chosen not to do that. So the question whether the support is there to go that route and sustain it, that's a serious question for us, the viability of doing something that you consistently have chosen not to do . You could go that route eventually. <8. Other Perspectives and Recommendations on OTA and the Adequacy of S&T Advice to Congress> In addition to NAPA, other organizations have produced reports on the value of reestablishing OTA and the broader question of the adequacy of S&T advice to Congress. In 2018, the R Street Institute (R Street), a nonprofit, nonpartisan, public policy research organization, proposed reestablishment of OTA in its report Bring i n the Nerds: Reviving the Office of Technology Assessmen t . The report identifies and addresses a number of rationales that have been put forth by others as to why OTA should not be reestablished, including cost, political loss of face, perception by some of an ideological bias in OTA's work, providing a foundation for encouraging additional government intervention, and adding another governmental expert bureaucracy. The report concludes that "Congress can most easily bolster its technology policy knowledge by reviving the OTA." In September 2019, the Belfer Center for Science and International Affairs of Harvard's Kennedy School published a report, Building a 21 st Century Congress: Improving Congress's Science and Technology Expertise , focused on providing an overview of Congress's S&T-relevant needs and resources identifying potential actions to address what it perceives as gaps in meeting Congress's needs. The Belfer Center report asserted that "Congress is one of the most advised bodies in the world." In this regard, Belfer identifies internal resources available to Members including GAO, CRS, and personal and committee staff as well as external resources, such as executive branch agencies, think tanks, universities, civil society and nonprofit organizations, lobbyists, industry associations, and the National Academies. Yet, even though Congress is provided with such advice and resources, Belfer asserted that significant gaps remain that hinder Congress's ability to produce timely, thoughtful, and comprehensive legislation on S&T issues. This results in a multitude of negative and many times public outcomes, such as ineffective or absent S&T legislation. The report concluded that "the core of the problem is a divide between what Congress can absorb and what information it receives." This finding is similar to that asserted by NAPA in its October 2019 report, Science and Technology Policy Assessment: A Congressionally Directed Review , on the need for improving the "absorptive capacity of Congress" (discussed in the previous section). To address these gaps, the Belfer Center report proposed four actions: (1) Congress should create a legislative support body focused on S&T issues; (2) Congress should hire additional S&T talent in personal offices and committees; (3) Congress should provide committee and support agencies with increased funding to allow them to hire additional staff and pay a more competitive salary; and (4) external information providers should produce information in formats that are useful to Congress, generally products that are short, concise, customized for the audience, consistently offered, and timely. An earlier report by the Belfer Center describes a "widening gap between responsive lawmaking in Congress and the deepening complexity of advancements in science and technology" and that "certain weakened capabilities have atrophied the organization's absorptive capacity , or the ways by which it recognizes the value of, assimilates, and makes use of knowledge outside of itself." The report called for the establishment of a Congressional Futures Office that it describes as "a new and deeply embedded internal support body" that would gradually strengthen its "capabilities through open-ended product-service design and dispersed global networks of expertise." A 2019 report, Evaluating the 2019 NAPA Report on S&T Policy Assessment and Resources for Congress , by the Lincoln Network and Demand Progress lauded the NAPA report for recognizing that Congress's S&T capacity gap is broader than just technology assessment and recognizing Congress's need for a mechanism to increase what NAPA referred to as Congress's absorptive capacity. The report agreed with NAPA with respect to its praise of GAO's outreach and transparency in its technology assessments activities. However, the report questioned "whether GAO's culture will be able to adapt to effectively cover the full range of OTA's work (particularly that part concerning non-technical values and horizon scanning)." In addition, the Lincoln Network and Demand Progress report was critical of the absence of details on key features of NAPA's recommendation for an Office of the Congressional S&T Advisor (OCSTA). In particular, the report questioned how OCSTA would pick topics; how it would integrate new resources into committees; how it would engage in horizon scanning; issues related to OCSTA's oversight, statutory powers, and mechanism for coordinating with other legislative support agencies; and whether OCSTA is the right organization for the horizon scanning function. The Lincoln Network and Demand Progress also recommended additional analysis on reviving and modernizing OTA, and on evaluating political considerations related to the feasibility of building congressional S&T capacity and the viability of maintaining it. Further, the report noted that NAPA recommended "beefing up CRS in several areas," but noted that NAPA did "not assess CRS's current capacity for S&T work versus the volume and type of congressional demands." The report cited assertions by one former CRS employee that CRS is risk-averse and increasingly politicized, leading to a loss of talent, and by another former CRS employee who asserted that CRS has moved from a policy of nonpartisan advice to one of neutrality which, in his view, has undermined CRS's analytical capabilities. The report recommended additional analysis of any CRS institutional challenges prior to making significant new investments in CRS. <9. Options for Congress> Since 1995, several Members of Congress have undertaken numerous legislative efforts to restore funding for OTA or to affirm the need for an OTA-like technology assessment function. Appendix C , "OTA/Technology Assessment-Related Legislation in the 107 th -116 th Congresses," describes each of these efforts. Options for Congress, if it chooses to reestablish an organizational capability with statutory authorization for conducting technology assessments, include reestablishing OTA without any changes to its statute, reestablishing OTA with changes to its statute, charging an existing legislative branch agency with new or expanded technology assessment authority and duties, or seeking technology assessments on a contractual basis from a nongovernmental organization such as the National Academies of Science, Engineering, and Medicine (National Academies). Alternatively, Congress could choose to rely on existing sources of scientific and technological analysis and technology assessment. Such sources include, but are not limited to, CRS, GAO federal executive branch agencies, federally chartered advisory committees, federally funded research and development centers, the National Academies, academic researchers, industry and trade associations, professional organizations, businesses, not-for-profit organizations, advocacy groups, think tanks, and labor organizations. This section analyzes these options and their purported advantages and disadvantages. <9.1. Option: Reestablish OTA Without Changes to Its Statute> Though OTA was defunded, its statutory authorities remain law. If Congress opts to reestablish OTA without changes to its statutory authority, it may be able to do so solely by appropriating funds to the agency. However, given past report language about closure and abolition, Congress might choose to provide an explicit statement of its intent to reestablish OTA and/or guidance on its reestablishment. Since 1995, some Members of Congress have undertaken a variety of legislative efforts seeking to reestablish OTA by authorizing or appropriating funding for OTA or to express a "sense of the House" or a "sense of the Senate" that OTA should be reestablished. Most recently, in the 116 th Congress, the House approved appropriations of $6 million for OTA in the Legislative Branch Appropriations Act, 2020 ( H.R. 2779 ); these funds were not included in the final legislative branch appropriations act for FY2020 ( P.L. 116-94 ). While OTA's statutory authorities remain in law, the appropriations act in which it was defunded referred to the "orderly closure" of OTA and the "abolition of the Office of Technology Assessment," and provided for the disposition of "all records and property of the Office (including the Unix system, all computer hardware and software, all library collections and research materials, and all photocopying equipment)" If Congress intends to rely on the existing statute to reestablish OTA, then in addition to providing funds for its establishment and operations it might wish to reaffirm that it intends for the office to operate in accordance with the statute as it existed prior to the enactment of P.L. 104-53 . Also, because OTA and certain entities currently exist only in statute, the organization would need to be reestablished as provided for in the statute. For example, Congress would face the need to reestablish and appoint members of the TAB. The TAB would need to appoint an OTA Director. The OTA Director would need to hire OTA analysts and support staff, and possibly contract for additional analytical work. In addition, the newly formed organization would need to obtain office space, acquire assets such as furniture and equipment, and secure information and communications services, among other things. A chief advantage of this approach is simplicity, as it would simply require an appropriation and possibly a statement of Congress' intent to restart the agency and guidance regarding aspects of the restarting of the agency. Another potential advantage of this approach is that it might make the agency operational more quickly by avoiding lengthy and possibly contentious debate regarding new or revised authorities or other topics. Disadvantages of this approach include reliance on the original design of OTA, including its structure, management, and performance, without taking efforts to address past and contemporary analyses and criticisms of the agency. An OTA reestablished without addressing these critiques might be subject to criticism from congressional and external skeptics about the need for such an agency and its ability to effectively fulfill its statutory duties. Fiscal constraints may also continue to be a concern to some Members of Congress. Reestablishing OTA at a size comparable to the time of its defunding would require annual appropriations of tens of millions of dollars; OTA funding in FY1995 was $33.4 million in FY2018 dollars. OTA could be established over time with initial funding provided for office space, equipment, management, operational costs, and a small staff of analysts. Congress could gradually provide additional resources to grow the agency's analytical capabilities (e.g., additional analysts, management, contractors) as necessary to meet congressional demand for technology assessment products. For example, Congress defunded the Administrative Conference of the United States (ACUS), like OTA, in 1995. ACUS was reestablished in 2009 through an appropriation of $1.5 million. In FY2019, Congress appropriated $3.1 million for ACUS. Congress could provide funding for the reestablishment of OTA through several mechanisms, for example by allocating additional budget authority to Legislative Branch Appropriations that could be appropriated to OTA or by reallocating funding in the budget and appropriations process from one or more executive branch or legislative branch agency to OTA. <9.2. Option: Reestablish OTA with Changes to Its Statute> A second option for Congress is to reestablish OTA by providing funding while also reauthorizing the agency with amendments to its organic statute to address past or contemporary criticisms (" Observations on OTA's Design and Operations "). In such an undertaking, Congress might consider statutory changes that address past criticisms of OTA by helping to ensure that, for example OTA provides a unique function, differentiated from similar functions performed by other agencies; OTA delivers information, analysis, and options in a timely manner, consistent with the pace of legislative decisionmaking; OTA's technology assessments are relevant to the development and consideration of legislation; OTA's technology assessments are authoritative, thorough, and of high quality; the agency's composition of career civil servants, temporary staff, and contractors aligns with the needs of OTA over the short term and longer term; the public has appropriate opportunity for input; and OTA selects topics and conducts technology assessments in an objective manner, free from potential ideological, political, or other bias. Congress may wish to consider the merits of changes in the following areas: The definition of technology assessment. A topic of intense discussion and debate in the period prior to OTA's establishment, the definition of technology assessment in general and specifically with regard to advice for policymakers remains a topic of discussion today. Congress might take into consideration past and current dialogue and analysis on this topic and whether there is a need to clarify the definition of the term in the context of the work to be performed by OTA. Appendix A provides a sampling of historical congressional and public discussion of the meaning of technology assessment. I nternal organization al structure . A number of the criticisms of OTA were, in part, related to structural issues. For example, as mentioned earlier, some have criticized OTA's focus on meeting the objectives of the TAB as greatly narrowing the agency's constituency. Others have noted that long-term, one-party control of both houses of Congress, regardless of which party is in control, can result in members of the minority party feeling that OTA's work favors the party in power. Congress may wish to consider structural changes that provide for broader input from outside the TAB or mechanisms for bipartisan approval of decisions on reports to be undertaken. Also, the current statute provides for a Director to be appointed by the TAB, and a Deputy Director to be appointed by the Director with TAB approval. Congress may wish to consider whether the positions, appointment processes, and powers of each are appropriate and adequate for accomplishing the mission of OTA. OTA conducted technology assessments on a wide range of topics, making it cost prohibitive to have permanent staff with deep expertise on each topic. OTA met its needs for specialized expertise for particular assessments through the use of contractors with specialized expertise. ( Figure 3 provides a quantitative window into the balance of staff effort and contractor effort at OTA for FY1992-FY1995.) Congress might opt to provide additional guidance to OTA on the composition of the agency's staff (full-time and part-time), the use of contractors (individuals and organizations), and approaches to managing the conduct of technology assessments. External structure . The current statute establishes the TAB, composed of equal numbers of House and Senate members from each party, to formulate and promulgate OTA policies. Congress may wish to consider whether the TAB is the best approach for this function or whether it might be performed by existing committees or subcommittees of Congress, by House and Senate leadership, by agency management, or through another mechanism. The current statute also establishes a TAAC to provide OTA access to external scientific, technical, and management expertise. Congress might consider whether the TAAC was effective in this role, other roles the TAAC might play (e.g., in reviewing proposed technology assessments), and the potential use of other mechanisms to obtain external expertise. Public participation. Some have suggested that OTA lacked a strong public input mechanism and have asserted that modern information and communication technology could be used to facilitate a much broader range of public input than was possible in 1995. The Wilson Center's report, Reinventing Technology Assessment: A 21 st Century Model, suggested that a reestablished U.S. technology assessment agency employ an approach used by a number of parliamentary technology assessment agencies in Europe known as participatory technology assessment (pTA): Participatory technology assessment (pTA) enables laypeople, who are otherwise minimally represented in the politics of science and technology, to develop and express informed judgments concerning complex topics. In the process, pTA deepens the social and ethical analysis of technology, complementing the expert-analytic and stakeholder-advised approaches to [technology assessment] used by the former OTA. Initiation of technology assessments . The current statute authorizes the following officials and organizations to initiate a technology assessment: the chair of any standing, special, or select committee of either chamber of Congress, or of any joint committee of the Congress, acting on their own behalf or at the request of either the ranking minority member or a majority of the committee members; the TAB; or the Director, in consultation with the TAB. Congress might opt to expand this list to include any Member of Congress or at the request of a certain number of Members of Congress; reduce the list to include only some or one of those currently authorized; or to authorize the OTA Director to initiate assessments without any additional approval. Congress might also provide guidance to the OTA Director on prioritization of requests for technology assessment. Administrative provisions. The statute currently provides a variety of administrative authorities in areas such as personnel; contracting; real and personal property acquisition; recordkeeping; cooperation with executive and legislative branch agencies; and a proscription on operating laboratories, pilot plants, and test facilities. Congress may wish to review the existing authorities with respect to possible modifications, eliminations, or additions to these provisions. Potential advantages of this approach include the opportunity to address previously identified OTA issues, to improve agency performance, and to address concerns during debate on reestablishment. One disadvantage to this approach may be an inability to achieve a consensus on how the OTA statute should be revised, reducing the likelihood of the agency's reestablishment. For those who see an immediate need for OTA-type analyses, a second disadvantage is that the agency's reestablishment could be delayed by hearings or studies on proposed changes, as well as consideration of amendments that might be offered to the revisions. <9.3. Option: Charge an Existing Agency or Agencies with New or Expanded Technology Assessment Authorities and Duties> At the time OTA was defunded, some Members of Congress anticipated that one or more government agencies might expand their capabilities to meet Congress's need for technology assessments. This section describes options for establishing technology assessment functions within two legislative agencies, GAO and CRS. <9.3.1. Expand the Government Accountability Office's Technology Assessment Function> In FY2002, at the direction of Congress, GAO began developing a technology assessment capability, publishing reports intended to "explain the consequences that certain technology will have on the federal government and on society as a whole." Congress might leverage or authorize these efforts. One advantage of this approach is that it would build on an existing capability within the legislative branch. At Congress's direction, GAO has produced technology assessments since 2002 and has recently established a new STAA team with a growing staff of science and technology experts. Another advantage would be GAO's reputation for high quality analytical work. One potential disadvantage is that, unlike the singular focus of OTA on technology assessment, this would be only one of several functions of GAO. A Washington Post editorial in 2018 noted that GAO has an institutional culture centered on audits and investigations, and asserted that it lacks "a larger permanent staff of subject experts with whom legislators can build relationships, as well as the independence to better compete for resources." An analysis of technology assessment options for Congress written by the American Action Forum, a not-for-profit organization, identified other potential weaknesses. The analysis asserted that GAO reports do not feature many policy options, unlike OTA reports; GAO lacks the in-house expertise OTA had, limiting its ability to counsel Members of Congress; and GAO's consultancy services "arguably the most important part of any technology assessment program, given the fast pace of technology policy" need reform. The analysis suggested, however, that GAO could potentially address these shortcomings with additional congressional direction and resources. <9.3.2. Create a Technology Assessment Function in the Congressional Research Service> The Congressional Research Service, a service unit of the Library of Congress, provides comprehensive research and analysis on all legislative and oversight issues of interest to Congress. CRS has a staff of about 600, including approximately 320 analysts and attorneys and 100 information professionals. CRS has expertise in a variety of policy fields, including many fields of science, engineering, and technology as well as S&T policy. Much of CRS's work is provided in the form of consultancy in response to inquiries from Members of Congress, their personal staff, and congressional committee staff. Most of the analytical work of CRS experts is short-term in nature measured in hours, days, or weeks and conducted to meet specific requests of staff working on legislative or oversight issues. Some of CRS's longer and more analytically complex reports may take several months to produce. In contrast, OTA reports generally took 18 months or longer to produce. CRS does not have a statutory mission to perform technology assessments, nor has CRS otherwise received direction from Congress to conduct technology assessments. CRS has a statutory mission to prepare and provide information, research, and reference materials and services to Congress to include House and Senate committees, joint committees of Congress, and Members of the Senate and House of Representatives. CRS serves Congress and not the public. At the time Congress defunded OTA, some Members of Congress, including those on the House Appropriations Committee, anticipated that the Congressional Research Service might undertake some of the work performed by OTA. In 1999, CRS reorganized its operational structure and embedded science and technology analysts in CRS units in which science and technology issues were an important part of broader issue areas (e.g., energy, environment, health, defense). A smaller cadre of analysts in a discrete science and technology unit focused primarily on science and technology policy issues writ-large (e.g., policies associated with research and development funding and activities, technology transfer, innovation). Some have asserted that this change diminished CRS's ability to fill the gap left by OTA's closure. In his book, Congress's Own Think Tank , Peter Blair asserted that The unintended result was a significant dilution of CRS's capability to cover science and technology policy issues. It was never realistic to presume that CRS was in a position to fill the void left by OTA's closure. Alternatively, CRS management and some policy analysts believed that the reorganization improved CRS's ability to provide more comprehensive analysis to Congress. Potential advantages of using CRS to conduct technology assessments might include CRS's reputation for providing Congress with authoritative, confidential, objective, timely, and nonpartisan analysis in support of congressional legislative and oversight activities, as well as CRS's current cadre of experts in science, engineering, technology, and S&T policy. Disadvantages include CRS's lack of experience and expertise in conducting in-depth technology assessments of the type historically performed by OTA. While CRS could potentially acquire such experience and expertise, this approach would require a departure from CRS's current work and organizational culture. It might also require additional financial resources, expanded facilities, the hiring of additional management and staff, and potentially the establishment of a new organizational unit within CRS devoted to technology assessment. While current staff with science, engineering, and technology expertise could contribute to the establishment of such a unit within CRS, that might detract from their ability to provide the analyses and services the agency currently provides to Congress. <9.4. Option: Use the National Academies for Technology Assessment> Since its founding under a congressional charter in 1863, the National Academies have been an authoritative source of high-quality expertise on science, engineering, and health matters for Congress and the nation. The National Academies produces analyses in seven major program areas: Behavioral and Social Sciences and Education, Earth and Life Studies, Engineering and Physical Sciences, Gulf Research, Health and Medicine, Policy and Global Affairs, and Transportation Research. Members of each component of the National Academies the National Academy of Sciences, National Academy of Engineering, and National Academy of Medicine elect new members based on outstanding and continuing achievements in their fields. Academy members, together with other experts, serve pro bono on committees conducting National Academies studies and reports: Each year more than 6,000 of the world's foremost scientists, engineers, and health professionals volunteer their time to address some of society's toughest challenges by serving on the hundreds of study committees that are convened to answer specific sets of questions. Our peer-reviewed reports present the evidence-based consensus of these committees of experts. At the time of OTA's defunding, some policymakers and analysts postulated that the National Academies (as well as other nongovernmental organizations such as universities) might undertake technology assessments. Representative Jack Kingston, chairman of the Subcommittee on Legislative Branch Appropriations, reiterated this perspective in House floor debate on FY2005 legislative branch appropriations: In 1995 on a bipartisan level, we eliminated [OTA], and the belief at that time was that there were other committees that we could turn to to get technology studies and technology assessment. Some of these, for example, are the National Academy of Sciences, the National Academy of Engineering, the Institute of Medicine, and the National Research Council. All of them have hundreds of people who are technically educated. However, according to author Peter Blair, while the National Academies saw a short-term increase in congressional requests for reports following the closure of OTA, demand returned to its previous levels shortly thereafter: The increased use of the [National Academies], however, was short-lived, lasting only one year the number of congressionally mandated or requested [National Academies] reports doubled in the 105 th Congress (1997-1998) to 59, up from the historical average of about 22 studies (e.g., in the 104 th Congress [1995-1996] as OTA was closing down), but interestingly then dropped back to the historical average by the 107 th Congress (2001-2002). It is unclear why the number of requests for National Academies fell after the initial increase. Among the possibilities: a decrease in demand for science and technology information and advice; a perception that such reports were not meeting Congress's needs in terms of factors such as relevance, timeliness, or actionability; and increased fiscal constraints. The National Academies study process is highly structured, methodical, and deliberate. The process includes four major stages: defining the study; committee selection and approval; committee meetings, information gathering, deliberations, and drafting of the report; and report review. This process includes checks and balances "at every step in the study process to protect the integrity of the reports and to maintain public confidence in them." Accordingly, some assert that the National Academies is not structured to respond to congressional needs in a timeframe consistent with the pace of legislative decisionmaking a criticism also made of OTA. In 2006, Peter Blair, in his capacity as executive director of the National Academy of Sciences' Division of Engineering and Physical Sciences, testified at a House Science Committee hearing on scientific and technical advice for Congress. In his written statement, Blair cited timeliness and cost as factors that could impede the National Academies' utility to legislative decisionmakers. With respect to timeliness, Blair stated that the average time for completion of a National Research Council (NRC) study was 18 months, but that it can take longer. He attributed this lengthiness to the study process (described above), coordination of the schedules of busy study committee members, and the time required for peer review, editing, production, and release. Blair noted further that, before a study can even begin, each congressionally mandated National Academies study must be defined and funded under negotiated contracts with federal agency sponsors: [It] often takes six to nine months [to move] through a government procurement process to initiate an NRC study even after a mandated study has been enacted in law (or included in report language). For those studies mandated by Congress, an additional delay often results from the time needed to enact the relevant legislation. With respect to cost, Blair noted a widely held perception that the cost of National Academies studies was high, attributing this in part to the negotiation of separate contracts "for each study, unlike the central funding for agency advisory committees." Further, Blair noted that it is difficult for an organization to serve many different types of needs: Like any process designed to serve many needs, the NRC study process is not perfectly tuned to serve all government needs. For example, our process is less well equipped, currently, to go beyond technical analysis, to gauge the broader policy implications of alternative actions, especially those implications that may involve fundamental value judgments or tradeoffs for which it may be difficult or impossible to achieve consensus. To address some of these perceived shortcomings, Blair suggested the potential utility of establishing a sub-unit of the National Academies that would employ "a study process specifically adapted to congressional needs, adopting more of an OTA-like study model with base support and contracting capability as well as a task-order like funding mechanism." Potential advantages of using the National Academies to perform technology assessments include the organization's long-standing credibility and strong reputation for technical expertise and authoritative, objective, high-quality scientific and technical analysis; its congressional charter to help inform public policymakers on matters of science and technology; and its members' depth and breadth of knowledge across the spectrum of science and engineering disciplines. As discussed above, potential disadvantages of relying on the National Academies to provide technology assessments to Congress include concerns about its cost, timeliness, and ability to assess and advise on implications involving non-scientific, non-technical value judgements and trade-offs. Ultimately, the National Academies serves Congress as a private, nonprofit corporation negotiating a contract with the government with all the advantages and disadvantages that process involves and does not serve as a part of the legislative branch. <9.5. Option: Rely on a Broad Range of Existing Organizations for Scientific and Technical Analysis and Technology Assessment> While some identify a need for an organization to produce the types of technology assessments previously produced by OTA, others assert that Congress already has access to all of the scientific and technical advice it needs. Still others assert that the issue is not a lack of S&T information, but rather whether Congress uses existing sources effectively when making policy decisions. Congress may obtain scientific and technical analysis (and, in some cases, advice and recommendations) from a wide array of entities, including federal executive branch agencies, GAO, CRS, federally chartered advisory committees, federally funded research and development centers, the National Academies, academic researchers, industry and trade associations, professional organizations, businesses, not-for-profit organizations, advocacy groups, think tanks, labor organizations, and others. The types of information and analysis these organizations provide, and their authoritativeness, objectivity, independence, timeliness, and cost, vary widely. A key advantage of relying on existing agencies is that the infrastructure, people, and processes are currently in place, reducing the time and logistical complexities (e.g., hiring, acquiring space, establishing processes and procedures) associated with establishing new organization. In addition, relying on existing organizations may also reduce legislative hurdles associated with establishing a new organization. The primary disadvantage of this approach, according to some, is that the information some of these entities currently provide to Congress may lack authoritativeness, objectivity, or independence. A key factor in the creation of OTA in 1972 was a perceived need for Congress to have its own, independent source of scientific and technical expertise, capable of providing in-depth technology assessments, provided by an institution responsive to the needs and timing of the legislative process. Some of the entities identified above, and the analysis they perform, may not embody all these characteristics. <10. Science and Technology Advice to Congress: Identifying Needs and Avoiding Duplication in Meeting Them> Congress uses information and analysis about science and technology and its implications to inform its deliberations and decisions that affect the U.S. economy, national security, quality of life, standard of living, public health and well-being, and other matters of national policy. A wide range of organizations provide science and technology information and analysis directly and indirectly to Congress. Some of these organizations are public, some private, and some quasi-governmental. Among the public organizations, some are part of the executive branch and others are in the legislative branch (i.e., CBO, CRS, and GAO). Some in Congress believe that there is a need to re-create OTA or an OTA-like organization, or to assign OTA-like responsibilities to an existing organization to meet Congress's unique information needs and produce analysis not currently being provided by existing organizations; others disagree. Some believe that a new organization should be established to handle some or all of the science and technology information and analysis services OTA was authorized to provide. Duplication of capabilities has been a concern expressed by some within Congress and external observers during debate about the establishment of OTA, during debate about the defunding of OTA, and during subsequent debate and discussions about reestablishing OTA or OTA-like capabilities. Most parties agree on the need to prevent the creation of duplicative organizations or functions, and to eliminate (or at least minimize) duplicative organizations, duplicative functions within organizations, and duplicative work, along with the costs associated with them. To avoid duplication and meet its information and analysis needs, Congress may wish to further the process of identifying the science and technology analysis it needs to support its deliberative processes and decisions; determining which federally funded organizations (e.g., federal agencies, quasi-public, and other nonprofit organizations) are currently charged with addressing the identified needs and how effectively the organizations address these needs; identifying areas of overlap or duplication of authorities and activities of the organizations and their components; identifying areas of need that are not being addressed by these organizations; and determining whether such needs can best be met by an existing organization or organizations; whether the identified needs merit the creation of a new organization, organizations, or the extension of the capabilities of an existing organization; or whether the costs of obtaining additional science and technology information and analysis outweighs the need. Appendix A. An Historical Overview of the Definition of Technology Assessment The definition of the term technology assessment has a long history of discussion and debate. Much of this discussion occurred in the late 1960s and early 1970s during the efforts that ultimately led to the establishment of the Office of Technology Assessment in 1972. This appendix offers a variety of perspectives on the meaning of technology assessment in the context of public policy. In the House of Representatives, the Committee on Science and Astronautics' Subcommittee on Science, Research, and Development played a leading role in the exploration of technology assessment to assist policymakers. In 1969, Representative Emilio Q. Daddario, chairman of the subcommittee, stated that technology assessment was identified as a major activity of the subcommittee in 1965. In 1967, Representative Daddario introduced H.R. 6698 (90 th Congress) to establish a Technology Assessment Board for the purpose of identifying the potentials of applied research and technology and promoting ways and means to accomplish their transfer into practical use, and identifying the undesirable by-products and side-effects of such applied research and technology in advance of their crystallization and informing the public of their potential in order that appropriate steps may be taken to eliminate or minimize them. That same year, Representative Daddario put forth in a written statement, published as a committee print, the following definition of technology assessment: Technology Assessment is a form of policy research which provides a balanced appraisal to the policymaker. Ideally, it is a system to ask the right questions and obtain correct and timely answers. It identifies policy issues, assesses the impact of alternative courses of action and presents findings. It is a method of analysis that systematically appraises the nature, significance, status, and merit of a technological program. The method may well vary from case to case . Technology Assessment is designed to uncover three types of consequences desirable, undesirable, and uncertain. The benefits that accrue from technology are naturally the driving force for its application. Economic growth is fostered by more convenient and efficient services or by new and less expensive goods. Society benefits when technology is developed around some value or goal, consistent with democracy. Undesirable consequences, sometimes played down by calling them harmful side effects, can be expected with most innovations. Technology means change change to the natural environment, change in personal habits and behavior, change in social and economic patterns, and not infrequently, change in the legal and political processes. While many of these changes are beneficial, many are disruptive and dislocative. They change situations more rapidly than the pace at which individuals can adjust. The well-known cultural lag finds its logical beginnings in the phenomena. Assessment of the risks is a necessary concomitant to assessment of the benefits. Uncertain consequences are the third type to be identified and assessed. Available information may point out early that an effect will occur and can give no idea of the degree of impact. When the severity of impact is not known further research is often warranted . In general, experimentation and pilot projects are required to determine what proscriptions might be necessary before the technology is able to successfully diffuse through society. If assessment is a method of policy research that identifies the amount and type of change for alternative course of action and provides a balanced appraisal of each alternative, then what is the scope of technology assessment? What will it try to measure? What timeframe will it consider? What yardsticks will be used? How does assessment differ from other methods of analysis? Answers to these questions will more concisely define Technology Assessment and more closely show its relationship to the policymaking process. Technology Assessment for the Congress will deal for the most part with applications in the United States. It is worth noting though, that the entire world, and even outer space, is the system with which we are concerned . The international aspects of Technology Assessment will become more important as the power and ubiquity of man-made forces continue to increase . To assess technology one has to establish cause and effect relationships from the action or project source to the locale of consequences. A direct or immediate effect is easy to spot and assess. The direct effects, in turn, will cause other consequences indirect or derivative effects. As the scope of assessment moves outward in time the derivative effects become the result of many causes and not of one specific technological change . The function of technology assessment is to identify all of these [impacts and trends] both short-term and long range. The emphasis though will be on the short-term impacts that can be measured by natural science parameters. That is, the focus of Technology Assessment will be on those consequences that can be predicted with a useful degree of probability. Possible changes in values, attitudes, or motivations are important but not easily predicted. These changes are usually long term and fall beyond the primary focus of Technology Assessment. Therefore, because of their slow evolution, present human values and political motivations will serve as the frame of reference for purposes of measurement and appraisal. Assessment is a form of policy research and is not technological forecasting or program planning. It is a balanced analysis of how a technological program could proceed with the benefits and risks of each policy alternative carefully described. It incorporates prediction and planning, but only to expose the potential consequences of the program. Assessment is an aid to, and not a substitute for, judgment. Technology Assessment provides the decision maker with a list of future courses of action backed up by systematic analysis of the consequences. In this sense it is an analytical study that could be prepared by anyone. Its utility would be enhanced if it was undertaken for a particular policymaking group that could sketch in the nature of the problem for the study team beforehand. In a broader sense, assessment is part of the legislative process. Our subcommittee will gather and assess information before we can make any judgments. Part of this information will be actual assessment studies prepared for the subcommittee by scientific community and the Science Policy Research Division [of the Legislative Research Service, later renamed the Congressional Research Service]. When viewed as either a method of research or a part of the legislative process, Technology Assessment serves to provide information tailored to the constraints and needs of the policymaking process. Shortly after assuming office in 1969, President Richard Nixon established the National Goals Research Staff, "a small, highly technical staff, made up of experts in the collection, correlation and processing of data relating to social needs, and in the projection of social trends." The announcement of its formation offers a perspective on the Nixon Administration's view of the importance and role of technology assessment: We can no longer afford to approach the long-term future haphazardly. As the pace of change accelerates, the processes of change become more complex. Yet at the same time, an extraordinary array of tools and techniques has been developed by which it becomes increasingly possible to project future trends and thus to make the kind of informed choices which are necessary if we are to establish mastery over the process of change. The functions of the National Goals Research Staff will include forecasting future developments, and assessing the long-range consequences of present social trends; measuring the probable future impacts of alternative courses of action, including measuring the degree to which changes in one area would likely affect another; estimating the actual range of social choice that is, what alternative sets of goals might be attainable, in light of the availability of resources and possible rates of progress; developing and monitoring social indicators that can reflect the present and future quality of American life, and the direction and rate of its change; and summarizing, integrating, and correlating the results of related research activities being carried on within the various Federal agencies, and by State and local governments and private organizations. The National Goals Research Staff was directed to produce a report by July 4, 1970, "to help illuminate a possible range of national goals for [the U.S. Bicentennial]." In July 1970, the organization released its first (and only) report, Towards Balanced Growth: Quantity with Quality , describing technology assessment: Advanced technology of all sorts produces unexpected and often unwanted indirect consequences. A movement called "technology assessment" now advocates a more pervasive and systematic assessment of the social costs and benefits of both new and existing technology. The main issues are: To what extent should the use of new and old technology be restricted because of adverse side effects? What institutional mechanisms might assess and regulate technology? What effect would such a policy have on economic growth and on the size and nature of our technological and scientific establishments? In short, what is meant by technology assessment is nothing more than a systematic planning or forecasting process that delineates options and costs, encompassing economic, environmental, and social considerations (both external and internal) and with special focus on technology-related "bad," as well as "good," effects. In moving toward the establishment of the Office of Technology Assessment, Congress sought and received input from a number of sources about technology assessment in the context of public policy. At the request of the House Committee on Science and Astronautics, reports on technology assessment were delivered by the National Academy of Sciences (NAS) and the National Academy of Engineering (NAE) in 1969, and the National Academy of Public Administration (NAPA) in 1970. The National Academy of Sciences' report, Technology: Processes of Assessment and Choice , emphasizes the absence of a unitary concept of technology assessment and emphasizes that different views vary with the interests and perspectives of the proponent: The choice is between technological advance that proceeds without adequate consideration of its consequences and technological change that is influenced by a deeper concern for the interaction between man's tools and the human environment in which they do their work. For those who hold this more balanced view, the expression "technology assessment" may acceptably describe what occurs when the likely consequences of a technological development are explored and evaluated. Their objective is to improve the quality of such efforts at exploration and evaluation of our technological order. But the concept of improved technology assessment is by no means a unitary one; it suggests different things to different people. The contents and focus of the notion vary with the vital interests and perspectives of its many proponents. To some, concerned primarily with the preservation and enhancement of environmental quality , technology assessment suggests evaluation of technical changes or applications from the perspective of their likely impact on various environmental goals and resources or the exploration of how particular environmental objectives might be affected, beneficially or adversely, by the growth and speed of various technologies . To others, concerned with the measurement of social change as a step toward the achievement of broad national goals, technology assessment connotes the use of new tools to monitor the impacts on society of technical changes (among others) and to improve the quality of feedback from social effects to technological (and other) developments . Yet another group is concerned broadly with the need for greater foresight and planning to guide technological change with more timely and comprehensive balancing of total costs against total benefits. To this group, technology assessment means an attempt to project the likely growth and probable impacts of specific technologies. Another group, concerned with improving the allocation of public resources, views technology assessment as a means of identifying and measuring the possible uses of technologies generated by federally supported research and development activities. Of special concern to this group is the supposed transfer of space and defense technology and management techniques to the civilian sector, particularly for the solution of major social problems related to urbanization, such as housing, crime, transportation, and municipal services. And to still others, whose concerns lie with better program and policy evaluation and who do not restrict their attention to resource allocation, technology assessment represents one component of planning-programming-budgeting (PPB). Their emphasis is upon developing more precise definitions of program objectives as they related to national goals and priorities; more specific and unbiased criteria for assessing program potentiality and performance in cost-benefit terms; and more successful ways of modifying old programs or proposing new programs with the help of such analytic devices. The National Academy of Engineering's report, A Study of Technology Assessment , states that one of its underlying concerns entering the study a concern expressed by a number of technology assessment skeptics was that the outcome of such assessments would primarily be to impede technology commercialization. Nevertheless, the NAE report concluded that technology assessment could prove a useful tool for legislators: When the Committee on Public Engineering Policy first undertook its assignment to explore the concept of technology assessment, we were concerned about the concept's utility and practicality. Prior to our feasibility studies, we felt perhaps as others may have that results from such assessments might become primarily impediments to the uses of technology. We can now reflect on the collective experience of nearly 50 participants in this work, which is summarized in this report. First of all, we now feel that useful methodologies are available for technology assessment and that more adequate ones can be developed through practice. Second, our experiences show that task forces of experts specifically constituted for particular technology assessments can accumulate data and develop insight on the potential impacts of technology on society. Third, our preliminary work shows that such task forces can propose a variety of national strategies for modulating the effects of technology or society, thereby providing the legislator with a better base for his judgments on the role of government in influencing technology. The National Academy of Public Administration's report, A Technology Assessment System for the Executive Branch , noted that assessment at that time had only dealt with narrow first-order effects within the assessing agency's scope of interest, and only technical and economic second-order effects. The report advocates a wider, systemic, and more complex perspective approach to technology assessments: Simply stated, technology assessment is the evaluation of the impacts of new, developing, or established technologies, including, but not limited to, those which the Federal Government may support or regulate . Most assessments of the consequences of introducing a technology are incomplete, if not superficial. Commonly, they include few first-order consequences outside the assessing agency's program interests or statutory responsibility, and only technical and economic analyses of second-order consequences. Good assessments should consider the interactions of population, environment, technology, society, and the economy. The House Subcommittee on Science, Research, and Development also requested a report from the Legislative Reference Service (LRS, later the Congressional Research Service) of the Library of Congress, which was delivered in 1971. The report, Technical Information for Congress, included the following description of technology assessment: Before, during, and after the building of a technological system, it is necessary to identify and study the consequences of its operation. The objective is to improve the management of the total technological society, including the minimizing of consequences which are unintended, unanticipated, and unwanted. Assessment includes forecasting and prediction, retroactive evaluation, and current monitoring and analysis. Measurements involve non-economic, subjective values as well as direct, tangible quantifications. Above all, assessment requires that catastrophic consequences of each proposed new technology be foreseen and avoided before the new technology becomes entrenched in the socioeconomic complex of human organization. During this period, other organizations offered their views of technology assessment. In December 1971, The Futurist, a bi-monthly magazine with articles on technological, societal, and public policy trends, offered this definition: [Technology assessment is] a reasoned response to the stress that a rapidly changing and expanding technology puts on our complex and increasingly industrialized, urbanized, and densely populated society. It attempts to make the process of coping with technological development more systematic and rational. Technology assessment can be viewed as a mixture of early warning signals and visions of opportunity. Or as a device for protecting man from his own technological creativity. Or as a formal mechanism for allocating scientific resources, setting technological priorities, and seeking more benign alternatives for technologies already in use. Or as an attempt to control and direct emerging technologies so as to maximize the public benefits while minimizing public risks. In the act establishing OTA in 1972 (P.L. 92-484), Congress implicitly defined technology assessment in its findings and declaration of purpose for the agency: As technology continues to change and expand rapidly, its applications are large and growing in scale and increasingly extensive, pervasive, and critical in their impact, beneficial and adverse, on the natural and social environment. Therefore, it is essential that, to the fullest extent possible, the consequences of technological applications be anticipated, understood, and considered in determination of public policy on existing and emerging national problems.... [I]t is necessary for Congress to equip itself with new and effective means for securing competent, unbiased information concerning the physical, biological, economic, social, and political effects of such applications; and utilize this information, whenever appropriate, as one factor in the legislative assessment of matters pending before the Congress, particularly in those instances where the Federal Government may be called upon to consider support for, or management or regulation of, technological applications. In 1973, the Congressional Research Service, in response to a request from the House Subcommittee on Science, Research, and Development of the Committee on Science and Astronautics, prepared Science Policy: A Working Glossary . This glossary, published as a committee print, included the following definition for technology assessment: A generalized process for the generation of reliable, comprehensive information about the chain of technical, social, economic, environmental, and political consequences of the substantial use of a technology, to enable its effective social management by decisionmakers. Initially advanced as an instrument to provide advice to political decisionmakers, the concept has been increasingly accepted as a policy service within corporate management of private businesses. In one of its first reports, Requirements for Fulfilling a National Materials Policy , published in August 1974, the Office of Technology Assessment stated its mandate as being directed to provide early indication of the probable benefits and adverse impacts of technology and to develop other coordinate information which assists the Congress. Among other specific functions the OTA is charged with identifying impacts of technology, ascertaining cause and effect relationships, identifying alternate technological methods, identifying alternate programs, comparing the impacts of alternate programs, presenting analysis to appropriate legislative bodies, and identifying areas where additional research or data collection is required. In 1975, the American Bar Association's Section of Science and Technology held a program on "Technology Assessment Legal and Policy Implications" at the organization's annual meeting. In his opening statement, the chair of the section, Ronald A. May, relied on the definition of technology assessment used in a survey conducted on behalf of the National Science Foundation: Technology Assessment is "the process of identifying actual or potential secondary effects of a technological development (or of a set of interrelated technological developments) on social, political, economic, and/or environmental values or institutions." In his remarks, May posed the question: What does technology assessment mean for lawyers? In response to this question, May noted that Ten times as many [technology assessments] that were studied in this survey were "problem initiated" as opposed to "technology initiated." In other words, only one out of ten [technology assessments] had been done because somebody developed a new technology and decided they wanted to assess its impact. Stated conversely, in nine out of ten [technology assessments] there was a problem, and the technology was studied on that account. Lawyers are problem solvers, so this is significant. May also observed that while technology assessments were performed for the purpose of influencing executive decisions in corporations and to influence agency and legislative decisionmakers, "very little [technology assessment] was done to influence judicial decision-making." In 1995, during the period in which Congress was considering whether to discontinue funding for OTA, one critic reflected back to the time leading up to the establishment of OTA, noting concerns held by some that technology assessments would become a tool to stifle innovation and technological commercialization. Alan Porter, director of the Georgia Tech Technology Policy and Assessment Center, noted both the ambiguity of the term technology assessment and those concerns: It should not shock us that two general, widely used, and ambiguous terms 'technology' and 'assessment' when combined, do not yield a singular meaning. Nonetheless, we can track and even, perhaps, make sense of the usage of 'technology assessment'. The initiation of [technology assessment] in the late 1960s in the USA engendered lively discussion along two distinct streams. The more direct sought to devise an effective policy analysis mechanism to help the U.S. Congress better cope with executive branch proposals. The other, philosophical in bent, concerned the broad roles of technology in society, seeking to help society better manage technology. Both streams struck fear in those committed to technology-based free enterprise, as expressed in charges that TA meant 'technology arrestment.' In a 1970 House Subcommittee on Science, Research, and Development field hearing to explore the relationship between technology assessment and environmental problems, one academic critic asserted that technology assessment as proposed by subcommittee chairman Representative Emilio Daddario was "conceptually impossible" and that instead market forces should be used to guide and control technology: I feel I cannot let pass unchallenged the assumption that technology assessment of the type described [by the chairman] is a useful or even a harmless exercise, or is, indeed, possible . I am not suggesting a less ambitious role for Congress because I think the impact of technology on society is unimportant, but precisely because I think it is extremely important so important in fact that it should be not left to the Congress of the United States to assess and control technology. The first problem confronting anyone who attempts technology assessment is that it can't be done. It is conceptually and practically impossible to determine what the impact of any particular technological gadget will be, let alone evaluate these effects and find benefit/cost or benefit/risk ratios. Even if our foresight were as good as our hindsight it would be impossible . The world, and especially human societies, are just too complex and interrelated for anyone, or any committee, to determine the direct and derivative effects of technology, even in the past . Everybody knows, of course, that technology assessment is at best a very difficult task; I am suggesting it is more than difficult, it is conceptually impossible . [However,] technology can be and has been guided and controlled, by social institutions which encourage its development and application in socially desirable ways. The primary social institution which has guided technology has been the market . On the whole, this system has worked very well, without the need for any official body to assess all the long-term effects of each new technological process as it appeared. More recent definitions of technology assessment are also varied and echo the same themes present in the definitions from the 1960s and 1970s. Appendix B. Selected Trends and Factors That May Contribute to a Perceived Need for Technology Assessment A variety of reports published in 2019, together with proposals by some Members of Congress and others outside of Congress, have asserted that Congress needs a bolstered technology assessment capability to inform its policy decisions. This section describes selected trends and factors that may contribute to this perspective, including the rapid pace of technological change, the globalization of R&D, the role of science and technology (S&T) in the U.S. economy, the role of S&T in national security, the increasing complexity of technology, the advent of new information and communications technologies, and the role of S&T in other aspects of public policy. The role of new and powerful technologies in industry, national security, society, and the global balance of power may have important implications for congressional policy decisions, including policies related to their development and application, as well as in preventing, mitigating, and remediating potential adverse effects. Rapid Pace of Technological Change Technology the application of scientific and other knowledge for practical purposes is advancing rapidly, and by some measures it is growing at an accelerating pace. This growth is fueled, in part, by increased public and private investments in R&D. A variety of technologies have seen rapid growth magnetic data storage, DNA sequencing, wired and wireless data transmission technologies some continuing this growth over multiple decades. For example, as illustrated in Figure B-1 , the number of transistors on a microchip since 2001 has grown exponentially. While this chart only shows data since 1971, the rapid growth can be traced back to the invention of the integrated circuit. Similarly, Figure B-2 shows rapid growth in the number of human genome base pairs that can be sequenced per dollar. (Note: Figure B-1 and Figure B-2 show growth on a logarithmic scale where each increment on the y-axis represents a 10-fold increase. A logarithmic scale is often used when analyzing a large range of data.) Countries are aggressively pursuing R&D directed at goals such as innovation, competitiveness, economic growth, wealth creation, productivity improvements, national security, and quality of life. Companies are pursing R&D for innovations that yield new and better products and processes, market advantage, and cost reductions, enabling them to serve new and existing markets and increase their profitability. Since OTA was defunded, total global gross expenditures on research and development (GERD) have grown rapidly. In 2017 total GERD was $1.9 trillion, more than 3.9 times its level in 1996 ($504 billion), measured in current purchasing power parity dollars. Measured in constant dollars, the real purchasing power of global R&D increased more than 150% between 1996 and 2017. (See Figure B-3 .) These growing global investments in R&D are delivering new technologies, products, and services with potentially substantial societal implications. Some of these advances are evolutionary offering incremental improvements on the technologies, products, and services already in use while other advances are revolutionary with the potential, according to some analysts, to disrupt markets, companies, industries, occupations, and the balance of economic and military power. Figure B-4 shows the number of utility patents ("patents for inventions") granted by the U.S. Patent and Trademark Office each year from its establishment in 1790 to 2015, another metric illustrating rapid growth in the development of new technology. It took more than 200 years for USPTO to issue its 5 millionth patent; 27 years later, on June 19, 2018, the USPTO issued its 10 millionth patent. While there is consensus on the rapid growth in technology, not all agree that the pace of technological change is accelerating. For example, considering technological change through the lens of technology adoption, one information technology expert notes that The time it takes for a new technology to be used in 50 percent of U.S. homes has long been used as a comparative adoption benchmark. By this standard, both radio and television were accepted faster than personal computers or mobile phones. More importantly, most Internet of Things (IoT) technologies Fitbits, smart watches, 3D printers are being adopted even more slowly. Globalization of Research and Development The United States' share of global R&D expenditures fell from 69% in 1960 to 28% in 2017 as other countries increased their R&D investments, both public and private, some quite substantially. In recent years, China has accounted for a large share of global R&D growth. Between 1996 and 2016, China increased its investments from $14.2 billion to $451.2 billion (measured in current PPP dollars), an increase of more than 3,000%, to become the world's second largest funder of R&D, behind only the United States. (See Table B-1 .) During the same period, U.S. R&D grew 158%. In constant 2010 PPP dollars, between 1996 and 2017 China's R&D investment grew by 2,279% while investment by the U.S. in R&D measured in constant 2010 PPP dollars grew by 86%. In addition to developing new technologies, nations around the world are adopting and deploying these technologies to meet their economic, social, and military objectives. This development, adoption, and deployment may have significant implications for not only their own countries, but for the United States as well. On the one hand, for example, the adoption of these technologies could increase the prosperity of other countries, creating potential new markets for American products and services. On the other hand, the indigenous development of technological capabilities in countries other than the United States and its allies may limit the United States' ability to control access to military technologies and may reduce the influence of the United States in the establishment of standards for the ethical and safe use of new technologies. The United States might also lose its technology leadership in key fields, long considered a key component in the strength of the U.S. economy. Role of Science and Technology in the U.S. Economy Economists have long maintained that advances in science and technology play an important role in U.S. and global economic growth, productivity, job creation, and standard of living. These benefits flow from factors such as new and improved products, improvements in manufacturing technologies, the reorganization of work, and enabling and improving services. For example, S&T discovery has played an important role in extracting and exploiting America's energy resources through the advancement of fracking, horizontal drilling, and sonic imaging technologies used in oil and gas production and in reducing the cost and improving the performance of alternative energy sources such as solar and wind. Role of Science and Technology in National Security Science and technology have played a central role in U.S. national security and military strength from the weapons systems developed during World War II (e.g., nuclear weapons, radar, sonar, microelectronics) to those developed during the Cold War period and after (e.g., advanced nuclear weapons, intercontinental ballistic missiles (ICBMs), multiple independently targetable reentry vehicles (MIRVs), satellites, stealth fighter and bomber aircraft, nuclear-powered naval vessels, precision targeting, and information- and network-centric systems for intelligence, surveillance, and reconnaissance). Military strategists and analysts anticipate future U.S. defense capabilities are likely to rely heavily on advances in leading-edge technologies such as artificial intelligence, autonomy, nanotechnology, advanced computing and communications, augmented reality, and hypersonics. Increasing Complexity of Technology Innovation has become increasingly multidisciplinary. Some of the most promising fields involve the intersection of two or more powerful technologies, such as artificial intelligence and autonomy (e.g., driverless cars, package delivery by drones); high-speed computing, big data, and biotechnology (e.g., personalized medicine, synthetic biology, epidemiology, identifying the relationships between genes and particular diseases); and sensors and the internet (e.g., supply chain management and optimization, health self-monitoring, persistent scientific observation). The marriage of disparate technologies may lead to powerful and unanticipated new technologies with widespread societal implications. Role of Science and Technology in Other Aspects of Public Policy Science and technology also play key roles in many other aspects of public policy. For example, biomedical R&D contributes to the development of new drugs and treatments for illness, disease, and other medical issues. Advances in science and technology in the biomedical field may contribute to human longevity, healthiness, and quality of life. Consequently, they may have implications for a wide array of federal programs. Similarly, advances in science and technology in a variety of fields may contribute to meeting a wide range of public policy objectives: in agriculture, advances could contribute to ensuring national and global food and nutrition needs are met; in transportation, advances may help to save lives and reduce the environmental impacts of automobiles, trucks, trains and other modes of transportation; in energy, advances may help to make energy sources less costly and more abundant, to cost-efficiently tap renewable sources of energy, and to reduce the environmental impacts of its use; advances in understanding weather and climate may help reduce the loss of lives, the cost of property damage, and the time required for recovery; in criminal justice, advances may help to quickly and more accurately identify criminals and to prevent the prosecution of the innocent; and in industrial applications, advances may contribute to economic growth and job creation. At the same time, advances in science and technology can also raise complex societal, ethical, and legal challenges with which legislators grapple. Appendix C. OTA/Technology Assessment-Related Legislation in the 107 th -116 th Congresses 116 th Congress The House Select Committee on the Modernization of Congress voted out recommendations that included "reestablishing and restructuring an improved Office of Technology Assessment." This specific recommendation was not included in the recommendations included in the Moving Our Democracy and Congressional Operations Towards Modernization Resolution ( H.Res. 756 ) which was passed by the House on March 10, 2020. The Legislative Branch Appropriations Act, 2020 ( H.R. 2779 ) would have provided $6.0 million in initial funding to reestablish the Office of Technology Assessment. The House Committee on Appropriations reported the bill on May 16, 2019, accompanied by H.Rept. 116-64 , which states As requested by a number of Members of Congress, the Committee bill includes $6,000,000 in initial funding to reestablish the Office of Technology Assessment (OTA). This Legislative Branch agency was created in 1972 and operated until funding was discontinued in 1995. 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. P.L. 116-94 , the Further Consolidated Appropriations Act, 2020, which included the Legislative Branch Appropriations Act, 2020, as Division E, was enacted December 20, 2019. The act did not include an appropriation for reestablishing OTA. On September 19, 2019, Representative Mark Takano introduced H.R. 4426 , the Office of Technology Assessment Improvement and Enhancement Act. On the same day, Senator Thom Tillis introduced S. 2509 , a nearly identical bill with the same title. Both bills bill would amend OTA's statute in a variety of ways, including renaming OTA as the Congressional Office of Technology (the office); directing that the work of the office "be provided as expeditiously, effectively, and efficiently as possible while maintaining a forward-looking, holistic, and rigorous approach to the assessment of the impacts of technology"; expanding office reporting to Congress from "completed analysis" to "completed analyses, as well as preliminary findings of ongoing analyses"; adding three additional duties of the office: "provide information to Members and committees of Congress in the form of briefings, informal conversations, documents, and similar formats which may be provided expeditiously on the basis of existing research and staff expertise without the need for review by the Board; provide technical assistance to Members of Congress on legislation related to science and technology which may be provided expeditiously on the basis of existing research and staff expertise without the need for review by the Board; and, when requested, provide objective policy options to Members on how Members may achieve goals with respect to science and technology policy"; expanding the list of who may initiate assessment activities to include any Member of Congress, including a Delegate or Resident Commissioner, and providing the office the authority to determine whether to undertake an assessment according to a number of specified criteria; requiring completed analyses be made available to the public, subject to certain restrictions; authorizing the director of the office to make limited term or temporary appointments scientists, engineers, and other technical and professional personnel on leave of absence from academic, industrial, or research institutions to work for the office; requiring the office to coordinate with CRS and GAO to avoid unnecessary duplication or overlapping of research activities; changing the authority for House and Senate appointments to the Technology Assessment Board to be made jointly by leaders of the majority and minority parties in each body; and requiring the TAB to hold at least one meeting each year at which Members of Congress may appear and present information to the TAB about any technology assessment activities the Members would like the TAB to undertake, and requiring an annual report by the TAB to the Subcommittees on the Legislative Branch of the Committees on Appropriations of the House of Representatives and Senate on the activities of the office during the year, including a description of the technology assessment activities undertaken during the year. H.R. 4426 was referred to the House Committee on House Administration; no further action had been taken at the time of this report. S. 2509 was referred to the Senate Committee on Rules and Administration; no further action had been taken at the time of this report. 115 th Congress In September 2018, H.Rept. 115-929 , accompanying the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ), provided direction to both CRS and GAO on matters related to providing science and technology policy support and technology assessment to Congress. In the report, Congress directed CRS to engage with the National Academy of Public Administration (NAPA) or another external organization to produce a report that identifies resources available to Congress on science and technology policy; assesses the need for a separate entity to provide nonpartisan advice on issues of science and technology to Congress; determines whether such an organization would duplicate services already available to Members. In H.Rept. 115-929 , Congress also expressed its interest in GAO growing its current capabilities to provide expanded technology assessment capacity by reorganizing its technology and science function by creating a new more prominent office within GAO. Congress directed GAO to provide within 180 days a plan and timetable for how the new office could expand and enhance GAO's capabilities in scientific and technological assessments. Other amendments and resolutions introduced in the 115 th Congress also sought to provide funding to reestablish OTA or to affirm the need for its reestablishment: Representative Mark Takano introduced H.Amdt. 219 to H.R. 3219 , the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, on July 26, 2017. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the Architect of the Capitol's Capital Construction and Operations Account. The amendment was not agreed to. Representative Mark Takano introduced H.Amdt. 761 to H.R. 5895 , the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019, to reinstitute OTA, offset by funds from an administrative account within the Architect of the Capitol. The amendment was not agreed to. Representative Bill Foster introduced H.Res. 849, a resolution "expressing the sense of the House of Representatives that the Office of Technology Assessment should be reestablished," on April 26, 2018, with 21 cosponsors. The resolution would have expressed the sense of the House of Representatives that "the legislative process would greatly benefit from once again having an office dedicated to giving nonpartisan, technical advice to Congress; the Office of Technology Assessment represents a cost-effective improvement to the governance of the United States; and funding should be restored for the Office of Technology Assessment." The resolution was referred to the House Committee on Administration. No further action was taken. Earlier Congresses In the 107 th -114 th Congresses, there were a number of efforts to reestablish OTA by authorizing or appropriating funding. Other legislative efforts have sought to express a "sense of the House" or "sense of the Senate" that OTA should be reestablished. A summary of each of these efforts is provided below, in reverse chronological order: In the 114 th Congress, Representative Mark Takano introduced H.Amdt. 117 to H.R. 5325 , the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act, on June 10, 2016. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the Architect of the Capitol's Capital Construction and Operations Account. The amendment was not agreed to by the House, by a vote of 179-223. In the 114 th Congress, Representative Bill Foster introduced H.Res. 605, a resolution "expressing the sense of the House of Representatives that the Office of Technology Assessment should be reestablished," on February 4, 2016, with 14 cosponsors. The resolution would have expressed the sense of the House of Representatives that "the legislative process would greatly benefit from once again having an office dedicated to giving nonpartisan, technical advice to Congress; the Office of Technology Assessment represents a cost-effective improvement to the governance of our country; and funding should be restored to the Office of Technology Assessment." The resolution was referred to the House Committee on Administration. No further action was taken. In the 113 th Congress, Representative Rush Holt introduced H.Amdt. 649 to H.R. 4487 , the Legislative Branch Appropriations Act, 2015, on May 1, 2014. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the House Historic Buildings Revitalization Trust Fund. The amendment was not agreed to. In the 112 th Congress, Representative Rush Holt introduced H.Amdt. 711 to H.R. 2551 , the Legislative Branch Appropriations Act, 2012, on July 22, 2011. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the House Historic Buildings Revitalization Trust Fund. The amendment was not agreed to. In the 110 th Congress, S. 1602 , the Clean, Reliable, Efficient and Secure Energy Act of 2007, was introduced by Senator Chuck Hagel on June 12, 2007. Title V, Subtitle C of the bill would have renamed the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2007, and would have authorized appropriations of $25 million per year for OTA for FY2008 through FY2013. The bill was referred to the Senate Committee on Energy and Natural Resources. No further action was taken. In the 108 th Congress, H.R. 125 , a bill "to reestablish the Office of Technology Assessment," was introduced by Representative Rush Holt on January 7, 2003, with 65 cosponsors. The bill would have renamed the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2003, and would have authorized appropriations of $20 million per year for OTA for FY2004 through FY2009. The bill was referred to the House Committee on Science's Subcommittee on Space and Aeronautics. No further action was taken. In the 107 th Congress, H.R. 2148 , a bill "to reestablish the Office of Technology Assessment," was introduced by Representative Rush Holt on June 13, 2001, with 87 cosponsors. The bill would have renamed the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2001, and would have authorized appropriations of $20 million per year for OTA for FY2002 through FY2007. The bill was referred to the House Committee on Science's Subcommittee on Space and Aeronautics. No further action was taken. A CRS search of Congress.gov identified no legislation seeking to reestablish OTA during either the 105 th Congress or 106 th Congress. Appendix D. GAO Technology Assessments 2019 /2020 Artificial Intelligence in Health Care: Benefits and Challenges of Machine Learning in Drug Development , GAO-20-215SP, December 20, 2019. (This product was reissued with revisions on January 31, 2020.) Irrigated Agriculture: Technologies, Practices, and Implications for Water Scarcity , GAO-20-128SP, November 12, 2019. 2018 Critical Infrastructure Protection: Protecting the Electric Grid from Geomagnetic Disturbances , GAO-19-98, December 19, 2018. Technology Assessment: Artificial Intelligence: Emerging Opportunities, Challenges, and Implications , GAO-18-142SP, March 28, 2018. Chemical Innovation: Technologies to Make Processes and Products More Sustainable , GAO-18-307, February 8, 2018. 2017 Medical Devices: Capabilities and Challenges of Technologies to Enable Rapid D iagnoses of I nfectious D iseases , GAO-17-347, August 14, 2017. Internet of Things: Status and Implications of an Increasingly Connected W orld , GAO-17-75, May 15, 2017. 2016 Technology Assessment: Municipal F reshwater S carcity: Using T echnology to I mprove D istribution S ystem E fficiency and T ap N ontraditional W ater S ources , GAO-16-474, April 29, 2016. 2015 Technology Assessment: Water in the Energy Sector: Reducing Freshwater Use in Hydraulic Fracturing and Thermoelectric Power Plant Cooling , GAO-15-545, August 7, 2015. Technology Assessment: Nuclear Reactors: Status and Challenges in Development and Deployment of New Commercial Concepts , GAO-15-652, July 28, 2015. 2011 Technology Assessment: Neutron Detectors: Alternatives to Using Helium-3 , GAO-11-753, September 29, 2011. Technology Assessment: Climate Engineering: Technical Status, Future Directions, and Potential Responses , GAO-11-71, July 28, 2011. 2010 Technology Assessment: Explosives Detection Technologies to Protect Passenger Rail , GAO-10-898, July 28, 2010. 2005 Technology Assessment: Protecting Structures and Improving Communications D uring Wildland Fires , GAO-05-380, April 26, 2005. 2004 Technology Assessment: Cybersecurity for Critical Infrastructure Protection , GAO-04-321, May 28, 2004. 2002 Technology Assessment: Using Biometrics for Border Security , GAO-03-174, November 15, 2002.

Congress established the Office of Technology Assessment (OTA) as a legislative branch agency by the Office of Technology Assessment Act of 1972 (P.L. 92-484). OTA was created to provide Congress with early indications of the probable beneficial and adverse impacts of technology applications. OTA's work was to be used as a factor in Congress' consideration of legislation, particularly with regard to activities for which the federal government might provide support for, or management or regulation of, technological applications. The agency operated for more than two decades, producing approximately 750 full assessments, background papers, technical memoranda, case studies, and workshop proceedings spanning a wide range of topics. In 1995, amid broader efforts to reduce the size of government, Congress eliminated funding for the agency. Although the agency ceased operations, the statute authorizing OTA's establishment, structure, functions, duties, powers, and relationships to other entities (2 U.S.C. §§471 et seq.) was not repealed. Since OTA's defunding, there have been several attempts to reestablish OTA or to create an OTA-like function for Congress. During its years of operations, OTA was both praised and criticized by some Members of Congress and outside observers. Many found OTA's reports to be comprehensive, balanced, and authoritative; its assessments helped shaped public debate and laws in national security, energy, the environment, health care and other areas. Others identified a variety of shortcomings. Some critics asserted that the time it took for OTA to define a report, collect information, gather expert opinions, analyze the topic, and issue a report was not consistent with the fast pace of legislative decisionmaking. Others asserted that some of OTA's reports exhibited bias and that the agency was responsive only to a narrow constituency in Congress, that reports were costly and not timely, that there were insufficient mechanisms for public input, and that the agency was inconsistent in its identification of ethical and social implications of developments in science and technology. In debate leading to OTA's defunding, a central assertion of its critics was that the agency duplicated the work of other federal agencies and organizations. Those holding this position asserted that other entities could take on the technology assessment function if directed to do so by Congress. Among the entities identified for this role were the Government Accountability Office (then the General Accounting Office), the Congressional Research Service, the National Academies, and universities. Congress has multiple options for addressing its technology assessment needs. Congress could opt to reestablish OTA by appropriating funds for the agency's operation, potentially including guidance for its reestablishment in the form of report language. If it pursues this option, Congress would need to reestablish two related statutorily mandated organizations: the Technology Assessment Board (TAB), OTA's bipartisan, bicameral oversight body; and the Technology Assessment Advisory Council (TAAC), OTA's external advisory body. In 2019, the House included $6.0 million for OTA in the House-passed version of the Legislative Branch Appropriations Act, 2020 ( H.R. 2779 ); no funding was provided in the final act. Congress might also opt to amend OTA's authorizing statute to address perceived shortcomings; to revise its mission, organizational structure, or process for initiation of technology assessments; or to make other modifications or additions. Alternatively, Congress could choose to create or develop an existing technology assessment capability in another legislative branch agency, such as the Government Accountability Office (GAO) or Congressional Research Service. Since FY2002, Congress has directed GAO to bolster its technology assessment capabilities. From 2002 to 2019, GAO produced 16 technology assessments. In 2019, GAO, at the direction of Congress, created a new office, Science, Technology Assessment, and Analytics (STAA), and announced plans to increase the number of STAA analysts over time from 49 to 140. In addition, Congress could increase its usage of the National Academies of Science, Engineering, and Medicine by funding an expanded number of congressionally mandated technology assessments. Alternatively, Congress could opt to take no action and instead rely on current sources of information—governmental and nongovernmental—to meet its needs. In 2018, Congress directed CRS to contract with the National Academy of Public Administration (NAPA) for a study to "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." The NAPA study recommended bolstering the science and technology policy efforts of CRS and GAO, as well as the establishment of an Office of the Congressional Science and Technology Advisor (OCSTA) and a coordinating council. NAPA stated that it did not evaluate the option of reestablishing OTA due to Congress' efforts since 2002 to build a technology assessment capability within GAO.

crs_R46328

crs_R46328_0

<1. Introduction> Significant recent coastal and riverine flood events, as well as concerns about changing hydrologic conditions, have prompted interest in using a suite of approaches to reduce flood risk and improve flood resilience , which is the ability to adapt to, withstand, and rapidly recover from floods. Traditional options to reduce flood risk include constructing levees and dams. Some stakeholders and Members of Congress support protecting, restoring, and enhancing natural features and processes to reduce flood and storm damages. Examples include floodplains that can store excess water and coastal wetlands that may attenuate storm surge. Congress has directed the U.S. Army Corps of Engineers (USACE) the primary federal agency constructing projects to reduce flood risks to evaluate the use of natural and nature-based features (NNBFs) when conducting its flood risk reduction activities along the nation's rivers and coasts. As part of a USACE authority, Congress defined a nature-based feature as "a feature that is created by human design, engineering, and construction to provide risk reduction by acting in concert with natural processes." It defined a natural feature as a feature "created through the action of physical, geological, biological, and chemical processes over time." Although NNBFs may provide flood risk reduction and resilience benefits in some circumstances, they may be unable to replicate the risk reduction provided by traditional structural and nonstructural measures for some communities. How to effectively incorporate natural features and processes into planning of and investments in reliable flood risk management is an area of evolving policy and research. Part of the challenge is to identify where to use NNBFs and to determine how much flood risk reduction NNBFs can provided either on their own or in combination with structural and nonstructural measures. Whether to adjust and, if so, how USACE's consideration and use of NNBFs for flood risk reduction is an ongoing policy issue. Although Congress has authorized consideration of NNBFs, examples of USACE using NNBFs in its flood risk reduction activities remain limited. In November 2019, the Subcommittee on Water Resources and Environment of the House Transportation and Infrastructure (T&I) Committee held a hearing as part of preparations for developing water resource authorization legislation. At the hearing, multiple witnesses referenced interest in facilitating the use of NNBFs for managing flood risks and improving resilience. Congress has requested various reports related to NNBFs, but the reports have not been delivered to the authorizing committees. When available, these reports may inform congressional deliberations on NNBFs as part of authorization and appropriations legislation. USACE considers NNBFs to include wetlands, such as salt marshes and certain submerged aquatic vegetation; oyster, mussel, and coral reefs; maritime forests/shrubs; and the combination of these natural features with engineered components, such as rock gabions (i.e., a basket or other container filled with rocks or other hard materials), stone toes (i.e., stones placed on the lower portion of an eroding streambank), and concrete reef balls (which are shown in Figure 1 along with other NNBFs). In some contexts, NNBFs that stabilize banks and shores also may be referred to as living shorelines . Efforts to enhance natural management of floodwaters often include attempts to restore disturbed natural features. For example, the ability of coastal mangroves, wetlands, and reefs to function as buffers of erosion or storm surge may be reduced if these features are degraded or improved if they are protected or restored. This report introduces NNBFs in the context of USACE flood risk reduction activities. It first discusses how NNBFs relate to USACE authorities for structural and nonstructural measures. It next discusses the primary flood-related activities for which USACE has NNBF-related authority: (1) federal flood risk reduction projects and (2) a program for the repair of damaged nonfederal flood control works. The report then addresses challenges and opportunities for use and incorporation of NNBFs within USACE's flood risk reduction and resilience efforts. It concludes with questions pertinent to the future of use of NNBFs as part of USACE's flood risk reduction activities. <2. Natural and Nature-Based Features (NNBFs) in the USACE Flood Risk Reduction Context> <2.1. Evolution of the USACE Authorities> USACE has been involved in efforts to reduce the nation's flood risk for over a century. The agency's early efforts involved building dams and levees along rivers. In the mid-20 th century, Congress began directing USACE involvement in coastal storm risk reduction projects, which have primarily consisted of engineered dunes and beaches, and in some instances, storm surge gates and levees. Congressional direction on USACE flood risk reduction activities has evolved to include authorities to use other means to reduce flood risk. Congress expanded USACE authorities related to nonstructural alternatives; then, starting in the mid-2010s, it directed the consideration of NNBFs. Since 1974, Congress has required that USACE evaluate nonstructural alternatives, such as elevation of structures and acquisition of floodplain lands, during its planning of flood risk reduction projects. Following widespread flooding in the Midwest in 1993, many experts encouraged USACE, other agencies, and policy decisionmakers to support greater use of nonstructural approaches to mitigate flooding. In 1996, Congress amended USACE's authority to repair damage to certain nonfederal flood control works to allow use of nonstructural alternatives in lieu of repairs. In 2016, in the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322 ), Congress defined such nonstructural alternatives to the repair of nonfederal flood control works to include restoring and protecting natural resources (e.g., floodplains, wetlands, and coasts), if those alternatives reduce flood risk. Although nonstructural measures (including natural features as part of nonstructural measures) have been part of the discussion of and authorities for USACE flood risk reduction for decades, the focus on natural processes and use of terms such as NNBF or natural infrastructure are more recent developments. USACE began its Engineering With Nature initiative in 2010 to explore ways to align natural and engineering processes in USACE project planning. In 2015, USACE incorporated NNBF concepts into its North Atlantic Coast Comprehensive Study , which Congress required as part of the agency's response to Hurricane Sandy. In 2016 in the WIIN Act, Congress altered USACE authorities to specifically direct the agency to consider NNBFs in its planning of water resource projects. This was Congress's first use of the terms natural feature and nature-based featu res in USACE authorities. In the WIIN Act, Congress directed USACE to evaluate NNBFs as part of the agency's planning of flood risk reduction and ecosystem restoration projects. Congress required that USACE consider each of the following: natural features; nature-based features; nonstructural measures; and structural measures. In 2018, Congress also required that USACE feasibility reports for flood risk reduction projects "consider the use of both traditional and natural infrastructure alternatives, alone or in conjunction with each other, if those alternatives are practicable." <2.2. NNBFs in the Context of Nonstructural and Structural Authorities> Congress has included references to nonstructural alternatives and measures in USACE authorities since at least 1974. Nonstructural measures generally are those that alter the human exposure or vulnerability to flooding with little effect on the characteristics of the flood (e.g., elevating a structure, floodproofing the lowest floor of a structure, or purchasing a structure for purposes of removing it which is referred to as a buyout ). S tructural measures are those that alter a flood's characteristics and reduce the probability of flooding at the location (e.g., a levee or berm that diverts flood water away from a community). Congress has not identified NNBFs as structural or nonstructural features for purposes of USACE planning of federal water resources projects and federal and nonfederal sharing of project costs. Current USACE practice considers measures that change the character of the flood as structural measures, which may include most NNBFs. However, in the agency's role in repairing nonfederally operated flood control works damaged by floods, Congress has included the following definition: Nonstructural alternatives defined. - In this subsection, the term 'nonstructural alternatives' includes efforts to restore or protect natural resources, including streams, rivers, floodplains, wetlands, or coasts, if those efforts will reduce flood risk. Therefore, some NNBFs may fall within Congress's definition of nonstructural alternatives for the repair program. It is unclear if the classifications of NNBFs as structural or nonstructural are consistent across the two sets of USACE activities that may use NNBFs for flood risk reduction the USACE repair program and USACE's planning of projects. For purposes of planning a USACE flood risk reduction project, an NNBF may be structural or nonstructural, depending on whether the NNBF affects the character of the flood. USACE considers most NNBFs to be structural measures because the NNBFs alter the flood hazard and are cost shared as structural measures (see " Cost Sharing of USACE Flood Risk Reduction Measures "). Nonstructural NNBFs could include the restoration or expansion of a floodplain through acquisition of structures and lands, especially when combined with an aquatic ecosystem restoration project. Engineered dunes and beaches also have a role in NNBF discussions. USACE considers engineered dunes and beaches as NNBFs. However, traditional engineered dunes and beaches and other types of NNBFs may not face the same challenges when it comes to being incorporated into USACE planning and construction as more novel NNBFs, such as living shorelines. USACE has more than half a century of involvement in constructing engineered dunes and beaches (sometimes referred to as dune-and-berm beach nourishment systems ) as components of coastal storm risk reduction projects. The agency has long-standing approaches for calculating the flood risk reduction benefits of engineered dunes and beaches, which is not the case for other NNBFs (see section entitled " Evaluation of NNBFs' Benefits "). In addition, unlike other NNBFs, engineered dunes and beaches often are not designed to rely primarily on natural processes (e.g., engineered dunes and beaches often require regular renourishment of sand to maintain storm damage reduction benefits). Additionally, while engineered dunes and beaches may support habitat for certain species, some researchers and stakeholders have raised concerns about the potential for environmental harm associated with some engineered dune and beach projects (see " Incorporating More Natural Processes in Engineered Dunes and Beaches " for further discussion). Where appropriate, this report differentiates between the more novel applications of NNBFs and the more traditional engineered dunes and beaches. Levee setbacks are an example of combining a structural element the levee with natural features a wider floodplain to reduce flood risk. USACE considers levee setbacks as structural alternatives for purposes of its projects and its repairs to certain damaged nonfederal levees because levees alter the extent of the flood hazard. The extent to which USACE would classify some levee setbacks as NNBFs (e.g., levee setbacks that augment natural storage and reduce peak flows) is unclear. Where appropriate, this report discusses levee setbacks activities that would include natural features and processes to reduce flood risks. <3. USACE Projects and NNBFs> Through the Engineering With Nature initiative and comprehensive studies such as the post-Hurricane Sandy North Atlantic Coast Comprehensive Study , USACE has identified ways in which NNBFs could be incorporated into flood risk reduction and resilience efforts. Incorporating NNBFs into USACE feasibility reports and their recommended plans for flood risk reduction is a step that would move NNBFs from concepts into potential USACE project features. Statutory direction in 2016 and 2018 requires that NNBFs be considered as part of feasibility studies and their reports. The discussion below provides examples of how USACE has incorporated NNBFs into completed feasibility reports and how NNBFs are evaluated and cost shared as part of USACE flood risk reduction projects. <3.1. Evaluation of NNBFs in USACE Project Planning> USACE has an extensive planning process for its flood risk reduction projects; part of the process consists of an evaluation of whether the project is economically justified as a federal investment. Generally, federal involvement in flood risk reduction projects is limited to projects that are determined to have national economic benefits exceeding their costs or to projects that address a public safety concern. As previously noted, Congress has required the evaluation of NNBFs as part of USACE flood risk reduction project planning. Under current Administration guidance, USACE's evaluation of NNBFs as part of a feasibility study is tailored to each project (i.e., it is not standardized but case-by-case). <3.1.1. Economic Justification for Flood Risk Reduction Investments> The Principles and Guidelines (P&G) broadly guide the planning process and the decision criteria for identifying the recommended plan in a USACE feasibility report. The P&G indicate that USACE is to select the plan with the greatest net economic benefit consistent with protecting the environment (referred to as the national economic development plan , or NED plan), unless the Assistant Secretary of the Army for Civil Works (ASACW) grants an exception. The P&G have been in effect for USACE since 1983. For a discussion of the status of the P&G and a set of guidelines developed to replace the P&G, see the box titled "Planning Guidance for Federal Water Resource Studies and Investments." According to the U.S. Government Accountability Office (GAO), the flood damage reduction of structures continues to dominate the evaluation of economics and the NED plan remains the main means for identifying the recommended plan for flood risk reduction alternatives. The effect is that most flood risk reduction projects are subject to a benefit-cost analysis. This means that for an NNBF to be found economically justified as a stand-alone flood risk reduction feature, the NNBF's effect on economic benefits (which for flood risk reduction projects is principally quantified as reduced flood damages to structures) would have to be quantified and found to exceed the cost of the NNBF. Part of the attraction of NNBFs is that they may provide some risk reduction benefits without some of the costs of traditional structures. NNBFs, compared with structures such as storm surge gates, levees, or dams, may not require as much investment in long-term maintenance in order to continue their flood risk reduction functions. In addition, NNBFs generally would not require replacement or removal at the end of their use. The consistency with which USACE is incorporating these reduced costs into the comparison of NNBFs with other alternatives in feasibility reports is unclear. <3.1.2. Environmental and Social Benefits of NNBFs> Another attraction of NNBFs is that they may support species habitat, water quality, or recreation, among other environmental and social benefits. Statute requires and the P&G and USACE planning guidance allow the agency's feasibility reports for flood risk reduction projects to include information on the environmental and other social benefits of NNBFs. Nonetheless, under the P&G, unless an exception is granted by the ASACW, USACE is directed to select the plan with the greatest net economic benefit consistent with protecting the environment (the NED plan) in its feasibility reports for flood risk reduction projects. For a discussion of how this approach to identifying recommended plans and evaluating the benefits of alternatives may be shaping the adoption of NNBFs, see the discussion under " Evaluation of NNBFs' Benefits ." The P&G have been the primary document guiding USACE planning and plan recommendations since 1983. In April 2020, the Administration described its plans to replace USACE's use of the P&G with new planning guidance. The new guidance is referred to as the Principles, Requirements, and Guidelines (PR&G) for federal water resource investments. Under the PR&G, USACE would strive to maximize public benefits relative to public costs. Public benefits encompass environmental, economic, and social goals, with no hierarchy among the three goals. In the interim, USACE continues to implement the P&G. For more details on the evolution of water resource planning guidance, see the text box titled "Planning Guidance for Federal Water Resource Studies and Investments." <3.2. Examples of NNBFs in USACE Flood Risk Reduction Projects> USACE is proposing using NNBFs (other than engineered dunes and beaches) often in combination with traditional structural measures. For example, the following USACE projects incorporate NNBFs as elements of broader flood risk reduction projects using structural elements. New York's East Rockaway Inlet to Rockaway Inlet and Jamaica Bay Reformulation Project . The recommended plan includes NNBFs consisting of stones and larger rocks with associated vegetative planting to attenuate wave action and reduce erosion ( Figure 2 ) as part of traditional structural measures. The feasibility report indicates that the NNBF was evaluated based on its cost effectiveness, rather than a benefit-cost analysis. That is, the cost of the NNBF per linear foot was compared to the cost per linear foot of a floodwall. The entire recommended plan, which consists of various components in addition to the NNBFs, was subject to a benefit-cost analysis and was found to be economically justified. Virginia's Norfolk Coastal Storm Risk Management Project . The feasibility report recommends NNBFs in combination with traditional structural measures, such as storm surge barriers and pump stations, and nonstructural features, such as elevation, floodproofing, and buyout of structures ( Figure 3 ). The NNBFs include "living shorelines to increase resiliency." According to the feasibility report, the recommended NNBFs are "economically justified by their ability to reduce maintenance costs associated with structural features of the [recommended plan]," as well as other benefits, such as recreation and education identified. A benefit-cost analysis was performed on the combined NNBFs and structural features, and the investment was found to be economically justified. The above projects use NNBFs as support for traditional structural features or in combination with traditional structural features. USACE has proposed several projects where the key components are traditional engineered dunes and beaches, which USACE considers to be NNBFs. The Congressional Research Service (CRS) has not identified a final USACE feasibility report in which NNBFs other than engineered dunes and beaches are the dominant means to reduce flood risk. <3.3. Cost Sharing of USACE Flood Risk Reduction Measures> Congress has established that USACE involvement in a flood risk reduction project generally requires both congressional study authorization and congressional construction authorization. Congress also has established that the planning and construction costs for most USACE projects are shared with a nonfederal sponsor, such as a municipality or levee district for flood risk reduction projects. Table 1 provides information on the nonfederal cost shares for USACE flood risk reduction, coastal storm damage reduction, and ecosystem restoration projects. Information about ecosystem restoration projects is included in Table 1 because some USACE projects may have dual purposes of flood risk reduction and ecosystem restoration. Nonfederal project sponsors are generally required to provide all real estate interests needed for a flood risk reduction project, such as the land, easements, rights-of-way, relocations, and disposal (LERRD). The value of the LERRDs are applied toward the nonfederal cost share. At times, these real estate costs may exceed the standard minimum nonfederal cost share established by Congress for the USACE project type. As shown in Table 1 , Congress has established different means for addressing LERRD costs that exceed the required nonfederal contribution for structural features and for nonstructural features. For some types of projects, Congress also has required that part of the nonfederal cost share must include a cash contribution, as shown in Table 1 . That is, the nonfederal share must consist of more than LERRDs and in-kind contributions. For structural measures, Congress has generally established that the maximum nonfederal construction cost share is 50% if the nonfederal LEERDs exceed the 35% minimum. For nonstructural projects, if the nonfederal costs exceed 35%, the remainder of the costs are federal. Although Congress has established how costs of structural and nonstructural measures are to be shared, Congress has not enacted cost sharing that applies specifically to NNBFs. USACE considers most NNBFs to alter the flood hazard and treats those features as structural measures in its planning processes. Therefore, the cost-sharing requirements for structural measures apply to the use of most NNBFs, like those in the coastal storm risk reduction projects in Norfolk, VA, and East Rockaway Inlet to Rockaway Inlet and Jamaica Bay. Some stakeholders have expressed interest in having NNBFs be eligible for nonstructural cost sharing. Congress has authorized numerous coastal storm damage reduction projects that use engineered dunes and beaches and the periodic renourishment of these features, which consists of multiple cycles of sand placement on beaches, dunes, or both. Statute allows for periodic nourishment over 50 years, with possibilities for extension, to be cost shared as shown in Table 1 . <4. NNBFs in Program to Repair Damaged Nonfederal Flood Control Works> USACE is authorized to fund the repair of certain nonfederal flood control works (e.g., levees, dams) and federally constructed hurricane or shore protection projects that are damaged by factors other than ordinary water, wind, or wave action (e.g., storm surge rather than high tide). To receive this assistance, damaged flood control works must be eligible for and active in the agency's Rehabilitation and Inspection Program (often referred to as the USACE P.L. 84-99 program or RIP) and have been in an acceptable condition at the time of damage, as determined by regular USACE inspections. The P.L. 84-99 program does not fund repairs associated with regular operation, maintenance, repair, and rehabilitation. As of 2018, around 1,200 nonfederal entities operating roughly 2,000 levee systems participate in the P.L. 84-99 program, and the nonfederal levees in the P.L. 84-99 program cumulatively span nearly 10,000 miles. Congress funds the P.L. 84-99 program and USACE's flood-fighting efforts through the agency's Flood Control and Coastal Emergencies (FCCE) account. In 1996, Congress amended the P.L. 84-99 program to authorize USACE to implement nonstructural alternatives for reducing flood risk previously the authority was limited to the repair or restoration of the flood control structures. Congress made the nonstructural alternative authority available only if a nonfederal entity requests the nonstructural alternative. That is, USACE does not include nonstructural alternatives in its evaluation of repair alternatives unless requested to do so by the nonfederal sponsor. In 2014, Congress extended the nonstructural alternative option to authorized coastal storm damage reduction projects. In 2016, Congress defined the nonstructural alternative for the P.L. 84-99 program authority as including "efforts to restore or protect natural resources, including streams, rivers, floodplains, wetlands, or coasts, if those efforts will reduce flood risk." Congress also required USACE to notify and consult with the nonfederal sponsor about "the opportunity to request implementation of nonstructural alternatives to the repair or restoration of a flood control work" under P.L. 84-99 program. Table 2 provides information on how USACE shares the costs for the program. Under the P.L. 84-99 program, the costs for all LERRDs are 100% nonfederal. Most repairs would require few or no new LERRDs. Nonstructural alternatives may require significant new LERRD acquisition by the nonfederal sponsor. Also, if a nonstructural alternative is pursued, USACE will provide no further flood-related assistance anywhere within the formerly protected area, except for rescue operations, with some exceptions. For repairs under the P.L. 84-99 program, USACE primarily follows Engineer Regulation (ER) 500-1-1 from 2001, and updated agency policies for how to return coastal storm damage reduction projects to design levels of protection (e.g., how to reconstruct and renourish with sand and engineered dune and beach to the design level of protection). ER 500-1-1 includes nonstructural alternatives to repair, pursuant to the 1996 amendment to the repair authority, but, in practice, the P.L. 84-99 program appears to remain a "repair-in-place" program or for minor adjustments in levee alignments to avoid repeated erosive damage to a levee segment often referred to as scour . Repair-in-place planning often is more expeditious for USACE than the planning required for a nonstructural alternative. USACE does not appear to track the use of the nonstructural alternative authority within the P.L. 84-99 program. Selected uses of the nonstructural alternative authority include examples following the 1997 floods in California and the 2008 floods in the upper portion of the Mississippi River. In the P.L. 84-99 program, USACE may setback a damaged levee segment; USACE considers the setback a structural realignment of the levee to restore the damaged levee system. USACE does not consider levee setbacks as nonstructural alternatives. Because levee setbacks are considered as structural realignments for the repair of the damaged levee, the levee setbacks as part of the P.L. 84-99 program are designed for purposes of the levee's functioning and integrity (e.g., to decrease scour) rather than to enhance floodplain capacity or reduce peak flows. If a nonfederal entity pursues a nonstructural alternative, such as the acquisition of floodplain lands, the nonfederal sponsor also may choose to setback the levee. It appears that USACE would consider the setback of the levee not as part of the nonstructural alternative but as a complementary investment by the nonfederal entity. USACE and other federal agencies also may own and operate levees and other flood control projects. USACE is responsible for rebuilding flood-damaged levees that it operates. USACE has no authority to evaluate and implement nonstructural alternatives (or NNBFs) for congressionally authorized USACE-operated infrastructure. <5. Challenges and Opportunities for NNBFs as Flood Risk Reduction Measures> Some contend that traditional structural measures are institutionally easier for USACE to implement, which disadvantages use of NNBFs, especially in situations and contexts that favor expediency or are time-constrained. Although USACE has decades of experience planning and constructing structural levees and dams, and the authorities and policies to guide those measures, the agency's guidance and experience with NNBFs are less well-developed. For example, implementing NNBFs may require USACE to work with more federal and nonfederal agencies, landowners, and other stakeholders than the agency would with structural measures. Two factors that may shape the further adoption of NNBFs as part of USACE flood risk reduction activities are (1) the availability of information and evaluation procedures for using NNBFs as flood risk reduction measures and (2) the classification of some NNBFs as structural measures for flood risk management. Identifying whether and, if so, how to incorporate NNBF concepts more fully into USACE's engineered dunes and beaches presents another challenge. <5.1. Evaluation of NNBFs' Benefits> USACE's actions pursuant to congressional modifications to its NNBF authorities since the mid-2000s have led to the development of new procedures to evaluate the flood risk reduction benefits of NNBFs and to questions about what USACE is able to count as benefits. An attraction of NNBFs as flood risk reduction measures is that by using natural processes, NNBFs also may support species habitat, water quality, or pubic enjoyment, among other environmental and social benefits. Whether and if so, how to incorporate the environmental and social benefits of NNBFs into USACE decisionmaking remains an ongoing question. The discussion below first reviews the challenges related to evaluating the flood risk reduction benefits and then discusses the role of environmental and other social benefits in evaluating investments in NNBFs as flood risk reduction measures under the P&G. Under the P&G, which USACE has followed since 1983, flood risk reduction projects whether they use traditional structural measures, nonstructural measures, or NNBFs are to be economically justified based on the NED benefits from the reduced flood risk. The P&G requires the selection of the NED plan for USACE flood risk reduction projects, unless a waiver is provided by the ASACW. The P&G allows for USACE to document the environmental and social benefits; however, these benefits are not explicitly included in the agency's identification of the recommended plan for a project. In April 2020, the Administration indicated that during 2020 it plans to develop documents required for USACE to replace its use of the P&G with the PR&G. Unlike the NED-focused decision criteria of the P&G, the PR&G would direct USACE to strive to maximize public benefits toward environmental, economic, and social goals relative to public costs. <5.1.1. Economic Benefits of NNBFs' Flood Risk Reduction> In some circumstances, NNBFs may not be effective as flood risk reduction measures or provide the level of protection sought by a community. In circumstances where NNBFs may be able to reduce flood risk, NNBFs may be effective alone or in combination with traditional flood risk reduction measures. They also may assist with adjustments to changing hydrologic conditions (e.g., coastal wetlands adjustment to sea level rise) and provide a suite of environmental and social benefits (e.g., additional species habitat, water quality improvements, and recreation opportunities). Stakeholders and others have noted that knowledge gaps may affect USACE's ability to support federal NNBF investments. For example, in 2019, GAO found The Corps faces challenges in developing cost and benefit information for some types of natural infrastructure and has initiated some steps to address this. For example, a 2015 Corps report identified knowledge gaps in understanding how natural coastal infrastructure, such as wetlands may perform during coastal storms. These knowledge gaps make it challenging for the Corps to develop cost and benefit information for some natural infrastructure alternatives and compare them to other alternatives, such as those that use hard infrastructure. For USACE, the procedures to evaluate the potential benefits, limitations, and economic costs of traditional flood risk reduction structures are developed and standardized through various procedures and models. As GAO identified, this is not the case for NNBFs. GAO's report indicated that USACE was developing a research strategy to address some of the knowledge gaps. Although USACE has not finalized the strategic research plan referenced by GAO, USACE has research activities directed toward improving understanding of NNBF performance, directly or indirectly. Several of these research programs are developing numerical and analytical tools that can estimate performance (e.g., reduced erosion, wave impacts, and flood/storm surge inundation) for NNBF so trade-offs can be estimated in the planning, design, and maintenance process in the future. In addition to USACE, other researchers are attempting to document NNBFs' flood risk reduction benefits, limitations, and costs. Under the Administration's current guidance for the NNBF authority, the identification, evaluation, and justification of NNBF alternatives (other than engineered dunes and beaches) appears to remain a case-by-case process. Part of the challenge is how a feature's location may affect an NNBF's performance, which consequently may influence the NNBF's benefits and costs. Congress may consider how USACE's case-by-case approach to evaluating NNBFs may shape consideration and adoption of the features (e.g., adapting the NNBFs to local conditions) in a planning process that is constrained by time and funding. Another challenge to valuing the flood risk reduction benefits of NNBFs may be NNBFs' dynamic nature as the result of their use of natural processes, as compared to traditional flood control structures. For example, NNBFs consisting of mangroves or other wetlands may shift their extent and location in response to changing conditions. Other NNBFs may change over time as the living components such as vegetation or oyster reefs mature or their area expands or contracts. Floods or storms may temporarily or permanently damage some NNBFs and lessen their role in reducing flood risks. USACE is participating in interagency and international efforts aiming to fill knowledge gaps and develop best practices and concepts for NNBFs and to understand their benefits and limitations. For example, USACE is leading an international effort to develop and publish international guidelines on NNBFs, as discussed in the box titled "International and Interagency Efforts on Natural and Nature-Based Features." The extent to which the agency may be able to incorporate into its own planning some of the international guidance remains to be seen and may depend on the extent to which the guidance helps address questions of performance and economic benefits in various environmental and flood/storm conditions. <5.1.2. Environmental and Social Benefits of NNBFs> As previously noted, USACE may document environmental and social benefits of NNBFs, but its decision criteria under the P&G for flood risk reduction project remains the NED plan. The PR&G-based planning process may require greater consideration of environmental and social benefits; the impact of those additional considerations on USACE's development and selection of plans that use NNBFs is unknown. The question of whether to incorporate, in the planning process and related decisions, certain environmental and social benefits and costs of flood risk reduction measures is a recent development in a long-standing debate on federal water resource investments. USACE has adapted its project planning process before to meet changes in the agency's authorities. In the late 1990s, following Congress's enactment of various authorities for USACE ecosystem restoration projects, the agency developed procedures to evaluate ecosystem restoration investments (see box titled "Evaluation of an Ecosystem Restoration Project"). Whether and to what extent consideration of environmental and social benefits and costs of NNBFs, or for flood risk reduction projects more broadly, may be considered in the USACE planning and decision process is unclear. In addition to the use of NNBFs as part of USACE flood risk reduction activities, the agency, through its regulatory program, has authorized a general permit for the use of one NNBF type coastal living shorelines. The permitted activities are not performed or funded by USACE; they are performed by the entities that apply for the permit, such as a town or a landowner. As more nonfederal entities use NNBFs such as living shorelines, USACE may draw additional knowledge, data, and experience from these nonfederal and non-USACE projects. For information on the living shoreline general permit, see the box titled "Facilitating Approval of Natural and Nature-Based Features: Living Shoreline Nationwide Permit." <5.2. NNBFs as Structural Measures in USACE Planning> As previously noted, current USACE practice in the planning of flood risk reduction projects is to consider measures that change the character of the flood as structural measures, which may include most NNBFs. NNBFs classified as structural measures are cost shared differently than those classified as nonstructural measures. Some stakeholders have proposed that legislation require NNBFs to be cost shared as nonstructural measures regardless of the NNBFs' effect on the flood hazard. This would cap the nonfederal construction costs at 35% rather than up to 50% for structural measures, thereby shifting more of the NNBF costs to the federal government. Levee setbacks, although not generally categorized as NNBFs by USACE, illustrate some of the challenges for NNBFs that are classified as structural measures. Examples of USACE's use of setback levees as part of the agency's flood risk reduction projects remain limited. Many potential levee setback projects do not have a sufficient benefit-cost ratio to be an economically justified investment as a structural measure for flood risk reduction, in part because of the costs associated with the additional land and other real estate interests that would need to be acquired. Nonfederal project sponsors generally would be responsible for 100% of these LERRD costs. The designation of an NNBF as a structural measure could require the nonfederal sponsor to pay a greater share of the cost than if the NNBF were considered nonstructural (as shown in Table 1 ). Classification of an NNBF as a structural measure also results in a difference between the cost sharing for the NNBF and the cost sharing for nonstructural measures (e.g., elevating structure in the floodplain). <5.3. Incorporating More Natural Processes in Engineered Dunes and Beaches> As discussed above, USACE has long-standing approaches for calculating the flood risk reduction benefits of engineered dunes and beaches. Traditional USACE engineered dunes and beaches may not face the same challenges of being incorporated into USACE planning and construction as other features that USACE classifies as NNBFs. Although traditional engineered dunes and beaches may have social benefits and provide habitats for some species, engineered dunes and beaches have been shown in some circumstances to have some negative effects. For example, the construction and replenishment of these features can disrupt existing biological communities, such as benthic, fish, and shorebird communities, at the project site and where the sand is sourced. The cumulative effect of the projects and resulting environmental changes remains poorly understood. USACE has taken some steps to address these effects (e.g., the agency considers the compatibility of some sand characteristics, and for some projects, it avoids nourishing during ecologically significant periods), but some suggest that engineered dunes and beaches could incorporate natural processes or elements with more environmental benefits. For example, some researchers have suggested leaving gaps in sand placement or nourishing smaller areas at a time to allow species to recolonize from the edges of the nourishment area. Efforts to integrate resilience into approaches to flood risk reduction can raise questions about the role of traditional engineered dunes and beaches that rely heavily on regular renourishment through the engineered placement of sand on the beaches and dunes. NNBFs generally are intended to be developed by or to use natural processes. NNBFs are meant to be as self-sustaining as possible; that is, they are expected to recover, often without or with minimal human intervention, following a flood event. For example, natural dune and beach systems may experience large waves during storm events, which move sediment from the front of the beach (the foreshore) to the back of the beach system, effectively maintaining or raising the elevation behind the dune over time. The foreshore is built up by normal wave activity over time, thereby maintaining through natural processes the dune system, including its potential flood risk reduction benefits. Some dune and beach systems may recover quickly after a damaging storm; however, others may take decades to rebuild to previous heights and widths through natural processes. Conversely, engineered dunes are often built to not be overtopped and moved. Some engineered dunes also have cores or components that provide stability (e.g., synthetic membranes or clay) and may not allow for dune migration. To allow this natural movement to continue, some stakeholders have suggested that USACE consider constructing lower dunes and providing space behind dunes to accommodate sand movement. Other options may include designing dunes to be naturally shaped by the wind while decreasing overall sand loss by using features such as vegetation, screens made of natural materials, and variations in terrain elevation. Furthermore, dunes could be designed to specifically include habitat features, such as those that enable wetland development. Some stakeholders argue that USACE and its nonfederal partners could consider other ways to promote natural processes and their benefits into USACE coastal storm risk reduction projects, such as by allowing dune systems to spread out, limiting the raking or grading of incipient dunes, and restricting driving on the beach. These measures would allow dunes to widen or for additional dunes to form in front or behind the primary dune, providing some environmental and social benefits (e.g., greater protection for structures behind dunes and greater variety in available habitats) but could limit other social benefits (e.g., space for beach recreation). Although USACE has long-standing approaches for calculating the flood risk reduction benefits of engineered dunes and beaches, the agency's procedures for incorporating more natural processes and features (e.g., vegetation) into engineered dunes and beaches are being reconsidered in the context of the additional NNBF considerations. Incorporating more natural processes into engineered dunes and beaches may require additional efforts to secure the LERRDs for a dune that shifts. Statute not only allows for federally cost-shared periodic nourishment of USACE-constructed dunes and beaches over 50 years but also provides for the possibility of extending renourishment for an additional 15 years. It is unclear if USACE's evaluations for extending a project's federally cost-shared renourishment timeframe consider the role of more natural processes and elements (e.g., vegetation) in future renourishments. It also remains unknown whether more natural processes would be considered a reformulation, requiring congressional authorization, rather than an administrative extension. Similarly, the extent to which P.L. 84-99 program-funded repairs of coastal storm protection projects have been used to incorporate more natural processes into the designs of engineered dunes and beaches remains unknown. <6. Congressionally Directed Reports Related to NNBFs> Congress has directed that the Administration produce two reports that may provide information on NNBFs to decisionmakers and planners. One report relates to how USACE complies with the WIIN Act requirement to evaluate NNBFs as part of USACE flood risk reduction projects. The other report focuses on USACE's authorities related to repair of nonfederal flood control works, including the use of the authority to support a nonstructural alternative in lieu of repairing the damage. <6.1. Report on NNBFs in USACE Projects> In 2016, Congress directed the Secretary of the Army to evaluate NNBFs, nonstructural features, and structural features in its planning of flood risk reduction projects and ecosystem restoration projects. At that time, Congress also required the Secretary of the Army to report on the statute's implementation to the House T&I Committee and Senate Committee on Environment and Public Works (Senate EPW) by February 1, 2020 (and 5 and 10 years thereafter). At a minimum, the report was to include a description of the guidance or instructions issued, and other measures taken, by the Secretary and the Chief of Engineers to implement the requirement to evaluate NNBFs, nonstructural features, and structural features in the planning of flood risk reduction and ecosystem restoration projects; an assessment of the costs, benefits, impacts, and trade-offs associated with measures recommended by the Secretary for coastal risk reduction and the effectiveness of those measures; and a description of any statutory, fiscal, or regulatory barriers to the appropriate consideration and use of a full array of measures for coastal risk reduction. The committees have not received the report as of April 2020; however, USACE indicates that it has initiated development of the report. USACE implementation guidance from 2017 and 2018 indicates that the agency was making efforts at that time to collect data for the report. <6.2. Report on NNBFs in Program to Repair Nonfederal Flood Control Works> In June 2014, Congress required that the Secretary of the Army review the use and performance of the emergency authority for repairs of nonfederal flood control works. Congress required that a report on the findings of the review be delivered within 18 months to the House T&I Committee and Senate EPW Committee and for the report to be publicly available. USACE implementation guidance for the provision indicates that the agency would undertake the review when Congress provided funding for it. Congress has not yet funded the review. The Secretary is to, among other actions, review and evaluate the historic and potential uses, and economic feasibility for the life of the project, of nonstructural alternatives, including natural features such as dunes, coastal wetlands, floodplains, marshes, and mangroves, to reduce the damage caused by floods, storm surges, winds, and other aspects of extreme weather events, and to increase the resiliency and long-term cost-effectiveness of water resources development projects. <7. Conclusion> In 2010, USACE ramped up its efforts to identify opportunities to incorporate natural processes into its flood risk reduction activities with its Engineering With Nature initiative. Starting in the mid-2010s, Congress has authorized the consideration of NNBF alternatives in circumstances where NNBFs can reduce flood risk. The reliance on natural processes in NNBFs may provide flood resilience advantages compared with traditional structural measures or when used in combination with traditional structural measures. However, various challenges to the adoption of NNBFs as part of USACE projects remain. Among recently completed feasibility reports, USACE has recommended a few flood risk reduction projects that use NNBFs. Typically, the recommendation is to use the NNBFs in combination with structural measures if the combined alternative can be economically justified. The limited use of NNBFs in USACE flood risk reduction activities to date is shaped by various factors ranging from what is known about NNBF performance to how NNBFs are evaluated. In some circumstances, NNBFs may not be able to provide levels of flood risk reduction similar to traditional structural and nonstructural measures. In other circumstances, NNBFs may be able to reduce flood risks, but the ability to quantify the effectiveness and reliability of NNBFs as flood risk reduction measures in different environmental conditions and for different flood and storm conditions remains limited. In circumstances where NNBFs may be effective alone or in combination with traditional flood risk reduction measures, they can provide a suite of environmental and social benefits. The extent to which USACE considers NNBFs' environmental and social benefits, as well as their flood risk reduction potential, in agency feasibility reports and their recommendations and in decisions on repairing damaged flood control works remains unclear. USACE's evaluations and recent applications of NNBFs have raised questions about how environmental and social benefits are considered in USACE planning and the potential opportunities and limitations for USACE's use of NNBFs. Some questions related to NNBFs relevant to decisions about USACE authorities and policies include the following: What are the remaining knowledge gaps regarding the benefits and limitations of NNBFs in flood risk reduction? What are the options for decisionmakers to direct USACE or other federal agencies to address these gaps or otherwise support research that addresses these gaps? What is the impact of current decisionmaking processes on the accounting of NNBFs' benefits, costs, and performance over time? How do statutes, Administration guidance, and agency practice create disincentives and incentives for NNBF adoption for USACE and nonfederal project sponsors? The congressionally directed reports discussed in the previous section may inform USACE decisionmakers' and planners' understanding of the circumstances in which use of NNBFs may be beneficial. They also may inform congressional deliberations on whether and, if so, how to support use of NNBFs as part of USACE flood risk reduction and resilience efforts.

The U.S. Army Corps of Engineers (USACE) is the primary federal agency involved in federal construction to help reduce community flood risk. Congressional direction on USACE flood risk reduction activities has evolved from primarily supporting levees, dams, and engineered dunes and beaches. Since 1974, Congress has required that USACE evaluate nonstructural alternatives, such as elevation of structures and acquisition of floodplain lands, during its planning of projects. Since the mid-2010s, Congress also has directed the consideration of natural and nature-based features (NNBFs). Examples of potential NNBFs for reducing flood risk include wetlands; oyster, mussel, and coral reefs; and the combination of these natural features with hard components, such as rock and concrete. Various factors are shaping how USACE is incorporating NNBFs into its flood risk reduction projects and post-flood repair activities. NNBFs in Flood Risk Reduction Projects Congress specifically included NNBFs as a planning requirement for USACE flood risk reduction projects in 2016. In 2018, Congress required that USACE feasibility reports for flood risk reduction projects consider using traditional and natural infrastructure, alone or in conjunction with each other. In recent feasibility reports, USACE primarily has proposed using NNBFs (other than engineered dunes and beaches) in combination with traditional structural measures rather than having the NNBFs as the primary means for reducing flood risk. To be recommended for congressional construction authorization, a USACE flood risk reduction project generally must have national flood risk reduction benefits that exceed the project's costs. Under current Administration guidance, USACE's evaluation of NNBFs is tailored to each project (i.e., it is case-by-case rather than standardized). NNBFs in Program to Repair Damaged Nonfederal Flood Control Works In 1996, Congress amended USACE's program to repair damage to certain nonfederal flood control works. Congress allowed for the program to fund nonstructural alternatives in lieu of USACE making repairs if a nonfederal entity requests and assumes responsibility for the nonstructural alternative. In 2016, Congress defined the program's nonstructural alternatives to include restoring and protecting natural resources (e.g., floodplains, wetlands, and coasts), if those alternatives reduce flood risk. In practice, the program continues to predominantly repair the damaged flood control works. That is, there remain a limited number of nonfederal entities pursuing nonstructural alternatives under this program. Identifying Challenges and Opportunities for NNBFs as Flood Risk Reduction Measures Quantifying the effectiveness and reliability of NNBFs as flood risk reduction measures in different environmental conditions and for different floods and storms is an area of ongoing research. In some circumstances, NNBFs may provide flood risk reduction and a suite of environmental and social benefits. In other applications, NNBFs may be unable to replicate the level of flood risk reduction provided by traditional structural and nonstructural measures. Congress may consider the following issues for NNBFs in USACE flood risk reduction activities: knowledge gaps in measuring the benefits and limitations of NNBFs and the research to fill these gaps; how USACE processes account for NNBFs' benefits, costs, and performance; and effects of agency practice, Administration guidance, and statutory authority on the consideration and adoption of NNBFs for flood risk reduction. Congress has requested two reports related to NNBFs from USACE. These reports, when available, may inform congressional deliberations on whether—and, if so, how—to support the use of NNBFs as part of USACE flood risk reduction efforts.

crs_R46367

crs_R46367_0

<1. Overview> On February 10, 2020, the Trump Administration proposed its FY2021 budget for the Department of State, Foreign Operations, and Related Programs (SFOPS) accounts, totaling $44.12 billion (including $158.90 million in mandatory retirement funds). SFOPS funding typically represents about 1% of the annual federal budget and supports a wide range of U.S. activities around the world, including the operations of U.S. embassies, diplomatic activities, educational and cultural exchanges, development, security, and humanitarian assistance, and U.S. participation in multilateral organizations. Figure 1 shows funding for different SFOPS components based on FY2020 budget authority estimates, relative to each other and to the broader federal budget. The Administration's request is about 3% higher than the FY2020 request for SFOPS accounts but nearly 23% below the FY2020 SFOPS funding level enacted by Congress, including supplemental funds to help combat the COVID-19 epidemic globally. The Trump Administration has consistently requested far less SFOPS funding than Congress has appropriated. This is a reversal from the Obama Administration, when Congress typically provided less total SFOPS funding than was requested, though the gap narrowed over time during Obama's terms ( Table 1 ). If enacted, the requested SFOPS funding level would be the lowest in over a decade ( Figure 2 ). <1.1. The Budget Control Act and Overseas Contingency Operations> Since FY2012, the appropriations process has been shaped by the discretionary spending caps put in place by the Budget Control Act of 2011 (BCA; P.L. 112-25 ). Congress has since sought ways to manage the constraints imposed by the BCA and has repeatedly amended the BCA to raise the caps, most recently by the Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37 ). The BBA 2019 raised discretionary spending limits set by the BCA for FY2020 and FY2021, the final two years the BCA caps are in effect. In addition to raising the caps, Congress has worked around the BCA limits by using Overseas Contingency Operations (OCO) funding, which is excluded from BCA discretionary budget limits. Congress began appropriating OCO in the SFOPS budget in FY2012, having previously provided OCO funds for the Department of Defense (DOD). Originally used to support shorter-term, contingency-related programming in Afghanistan, Iraq, and Pakistan that was not considered part of the "base" or "core" budget, OCO's use expanded considerably in level and scope between FY2012 and FY2017. Global SFOPS OCO funding peaked at $20.80 billion in FY2017 (nearly 35% of SFOPS funds that year), at which point it was used to support 18 different SFOPS accounts, ranging from USAID operating expenses and the Office of Inspector General to International Disaster Assistance and Foreign Military Financing. This broad use has led many observers to question whether the OCO designation makes a meaningful distinction between core and contingency activities, with some describing OCO (in both SFOPS and Defense appropriations) as a slush fund. The Administration has not requested OCO funds for SFOPS since FY2018, though it has continued to request OCO funds in the DOD budget. Nevertheless, Congress designated $8.00 billion of enacted SFOPS funding in both FY2019 and FY2020 as OCO, continuing a downward trend in the use of OCO since the FY2017 peak. FY2020 SFOPS funding also included $2.37 billion in supplemental emergency funding to help combat the COVID-19 pandemic abroad. Like OCO-designated funding, emergency-designated funding does not count toward the BCA discretionary spending caps and may therefore be used as an alternative to the OCO designation. Before the use of OCO in SFOPS, funding for contingency activities was often provided through supplemental emergency appropriations. <2. Congressional Action on FY2021 SFOPS Legislation> Congressional action on SFOPS and other FY2021 appropriations has been delayed to an uncertain degree by disruption of congressional activity related to the Coronavirus Disease 2019 (COVID-19) pandemic. Congress held some hearings on the FY2021 budget request before all hearings were postponed in March 2020. Subcommittee allocations have not been formally established, nor has SFOPS legislation been introduced for FY2021. <3. State Department Operations and Related Agency Highlights> The FY2021 request would cut funding for the Department of State and Related Agency appropriations accounts to $14.03 billion, down 18.9% from an enacted FY2020 level of $17.31 billion (including $588 million in COVID-19 supplemental funds). The Administration's request does not include funds to support the State Department's response to the COVID-19 pandemic. To date, Congress has provided all State Department operations funding for COVID-19-related matters through two FY2020 supplemental appropriations acts ( P.L. 116-123 and P.L. 116-136 ). The Administration's stated priorities for funding provided via Department of State and Related Agency accounts in FY2021 include supporting the Indo-Pacific Strategy; countering Chinese, Russian, and Iranian malign influence; protecting U.S. government personnel, facilities, and data assets; and maintaining American leadership in international organizations while asking other nations to increase their support. Table 2 provides a comparative breakout of the Administration's State Department and Related Agency request, by account. <3.1. Selected Programs and Priorities> Consistent with its previous requests, the majority (87.1%) of the funding the Administration is requesting for the Department of State and Related Agency appropriations accounts is for diplomatic programs, diplomatic security and embassy construction, and contributions to international organizations and international peacekeeping activities. For FY2020, such programs composed approximately 88.1% of the Administration's request and 84.8% of the enacted appropriations Congress provided for these accounts. Some of the Administration's priorities within these areas, as identified by the Department of State in its Congressional Budget Justification, are detailed below. <3.1.1. Diplomatic Programs> The Diplomatic Programs account is the State Department's principal operating appropriation and serves as the source of funding for several key functions. These include most domestic and overseas State Department personnel salaries; foreign policy programs administered by State Department regional bureaus, the Bureau of Conflict and Stabilization Operations, and others; public diplomacy programs; and the operations of the department's strategic and managerial units, including the Bureaus of Administration, Budget and Planning, and Legislative Affairs as well as the Office of the Chief of Protocol. The Administration's FY2021 request for Diplomatic Programs totals $8.49 billion, around 12.6% less than the $9.71 billion Congress provided for this account in FY2020 (this amount includes $588 million Congress provided for Diplomatic Programs in FY2020 supplemental COVID-19 funds; see text box for more detail). The Administration's request seeks $138 million for the Global Engagement Center (GEC), which is responsible for leading interagency efforts to recognize, understand, expose, and counter foreign state and non-state propaganda and disinformation efforts aimed at undermining U.S. interests, including those carried out from Russia, China, and Iran. The Administration maintains that this request, which would constitute a $76 million increase in annual funding for the GEC provided through SFOPS, would alleviate the need for DOD to transfer funds for GEC operations. Some Members of Congress and other observers have expressed concern regarding past DOD transfers, arguing that DOD has not transferred funding to the State Department in an expeditious manner or at funding levels that reflect congressional intent. The Administration's request also includes a realignment of personnel and funding from the Bureau of Global Talent Management (formerly the Bureau of Human Resources); the Bureau of Arms Control, Verification, and Compliance; and the Office of the Coordinator for Cyber Issues to establish a new Bureau for Cyber Security and Emerging Technologies (CSET). The State Department first notified Congress of its intent to create this new bureau in June 2019. It will be responsible for supporting "foreign policies and initiatives to promote U.S. cyber and emerging technology policies and deter adversaries from malicious and destabilizing behavior in their use and application of such technologies." Some observers have expressed criticism over elements of the State Department's plan for CSET, arguing that additional cyber-related matters such as global internet governance should be included in the bureau's remit. However, it appears that this issue and related matters will instead remain under the purview of the Bureau of Economic and Business Affairs. <3.1.2. Diplomatic Security> For FY2021, the Administration requests around $5.38 billion for the State Department's key diplomatic security accounts: $3.70 billion for the Worldwide Security Protection (WSP) allocation within the Diplomatic Programs account and $1.68 billion for the Embassy Security, Construction, and Maintenance (ESCM) account. The Administration's request represents a decrease of 11.4% from the FY2020 enacted funding level (see Table 3 ). The Administration is proposing that Congress decouple WSP from Diplomatic Programs and establish a standalone WSP account (see text box). WSP funds the Bureau of Diplomatic Security (DS), which is responsible for implementing the department's security programs to protect U.S. embassies and other overseas posts, diplomatic residences, and domestic State Department offices. In addition, WSP supports many of the State Department's security and emergency response programs, including those pertaining to operational medicine and security and crisis management training. The ESCM account funds the Bureau of Overseas Building Operations (OBO), which is responsible for providing U.S. diplomatic and consular missions overseas with secure, functional, and resilient facilities and managing nonmilitary U.S. government property abroad. The Administration's WSP-funded priorities for FY2021 include the hiring of an additional 110 special agents at DS, which the Administration maintains is necessary to address critical overseas vacancies. In addition, the Administration intends to deploy High Definition Secure Video Systems (HDSVS) at overseas posts worldwide. The Administration has stated these systems will provide enhanced monitoring capabilities at overseas posts, including greater video resolution and enhanced nighttime visibility. At the same time, the Administration has proposed a cut of $109 million for DS operations in Afghanistan, which it says is consistent with the consolidation of DS-managed locations in the country and a corresponding reduction in costs for guard services and logistical support. The Administration's ESCM request includes $866.67 million for the State Department's share of the Capital Security Cost Sharing and Maintenance Cost Sharing Programs, which are the sources of funding for the planning, design, construction, and maintenance of the United States' overseas diplomatic posts. The Administration maintains that this request, when combined with funds contributed by other agencies with personnel at overseas posts and visa fee revenues, will fund these programs at the $2.20 billion level recommended by the Benghazi Accountability Review Board. Construction projects the Administration is seeking to fund through this request include a new embassy compound in Riyadh, Saudi Arabia, and new consulate compounds in Adana, Turkey, and Rio de Janeiro, Brazil. <3.1.3. Assessed Contributions to International Organizations and Peacekeeping Missions> The Contributions to International Organizations (CIO) account is the funding vehicle for the United States' payments of its assessed contributions (membership dues) to over 40 organizations. These include the United Nations (U.N.) and its specialized agencies (among them, the World Health Organization, or WHO), inter-American organizations such as the Organization of American States, and the North Atlantic Treaty Organization (NATO), among others. U.S. funding to international organizations is also provided through the various SFOPS multilateral assistance accounts, as described in the " Foreign Operations Highlights " section of this report. Separately, the United States pays its assessed contributions to most U.N. peacekeeping missions through the Contributions for International Peacekeeping Operations (CIPA) account. For FY2021, the Administration is requesting a combined $2.05 billion for these accounts. If enacted, this funding level would mark a 31.8% cut from that provided by Congress for FY2020. Table 4 shows recent funding levels for each account. Similar to previous budget requests, the Administration's CIO request prioritizes paying assessments to international organizations "whose missions substantially advance U.S. foreign policy interests" while proposing funding cuts to those organizations whose work it says either does not directly affect U.S. national security interests or renders unclear results. With these intentions in mind, the Administration proposed to eliminate funding to the Organization of Economic Cooperation and Development (OECD), while decreasing U.N. regular budget and specialized agency funding by more than one-third. The request intends to maintain near-recent-year levels of U.S. funding for other organizations, including the International Atomic Energy Agency (IAEA). For CIPA, the Administration's FY2021 request reflects its ongoing commitment to reduce costs for U.N. peacekeeping missions by reevaluating their respective mandates, design, and implementation. The Administration has stated that its request, when combined with the application of U.N. peacekeeping credits (excess funds from previous U.N. peacekeeping missions), would allow the United States to provide 25% of all assessed global funding for U.N. peacekeeping missions, which is equal to the statutory cap established by Congress. However, the current U.S. assessment for U.N. peacekeeping (last negotiated in 2018) is 27.9%, meaning that around $345 million of anticipated U.S. assessed funding would be carried over into arrears. This practice has resulted in the accumulation of over $900 million in U.S. peacekeeping arrearages since FY2017. <4. Foreign Operations Highlights> The foreign operations accounts in the SFOPS appropriation compose the majority of U.S. foreign assistance included in the international affairs budget; the remainder is enacted in the agriculture appropriation, which provides funding for the Food for Peace Act, Title II and McGovern-Dole International Food for Education and Child Nutrition programs. The Administration's FY2021 foreign operations request totals $30.09 billion, representing a 3.7% increase from the Administration's FY2020 request and a 25.7% decrease from FY2020-enacted levels. Total foreign assistance requested for FY2021, including the food assistance funds provided in the agriculture appropriation, would represent a 29.1% reduction from FY2020-enacted levels. The Administration's budget request articulates five primary goals for U.S. foreign assistance that are meant to align with both the National Security Strategy and the State-USAID Joint Strategic Plan: prioritize global strategic challenges, including countering Chinese, Russian, and Iranian influence; support strategic partners and allies, including Israel, Egypt, Jordan, Colombia, and Venezuela; enhance commitment to long-term development; strengthen key areas of U.S. leadership, to include global health and humanitarian assistance; and advance U.S. national security and economic interests. These goals are also meant to guide the Administration's regional thematic priorities (see " Country and Regional Assistance "), as well as how funds are allocated across assistance types. The Administration's FY2021 budget request proposes cuts in nearly all assistance types ( Table 5 ). The only exception is export promotion assistance, which would see a significant increase. This increase is largely due to proposed funding for the new U.S. Development Finance Corporation (DFC), which the Administration states represents an "expansion of the role of development finance in advancing U.S. interests around the world," and an estimated increase in offsetting collections from the Export-Import Bank. <4.1. Key Sectors> Consistent with prior year funding and the FY2020 enacted levels, proposed funding for global health programs, humanitarian assistance, and security assistance comprises approximately two-thirds of the $30.09 billion FY2021 foreign operations budget request ( Figure 3 ). <4.1.1. Global Health Programs> The total FY2021 request for the Global Health Programs (GHP) account is nearly $6.00 billion, representing a 5.4% reduction from the FY2020 budget request and a 37.5% reduction from the FY2020-enacted level, including supplemental appropriations. When compared with FY2020-enacted levels before enactment of supplemental funding for COVID-19, all but one GHP subaccount would be reduced under the budget proposal ( Table 6 ). Budget documents indicate that the increase to pandemic influenza funding (when compared with FY2020-enacted appropriations prior to the COVID-19 supplemental funding) would include a $25.00 million deposit of nonexpiring funds to replenish the Emergency Reserve Fund for rapid response to infectious disease outbreaks. Observers have expressed concern about the potential cessation of USAID's PREDICT-II pandemic preparedness program in March 2020. The Administration does not indicate in the budget request, nor has it specified in any public fora, whether PREDICT-II will be continued. However, the University of California, Davis one of PREDICT-II's implementing organizations has reportedly received additional funding from USAID to extend PREDICT-II and continue related work through the "One Health Workforce Next Generation" project. Requested cuts to GHP subaccounts range from 8.0% for malaria programs to 100% for USAID's HIV/AIDS and vulnerable children subaccounts. The Administration asserts that despite its proposed reduction to HIV/AIDS funding, the requested level would be sufficient to maintain treatment for all current recipients. The proposal also reflects the Administration's effort to limit U.S. contributions to the Global Fund an international financing mechanism for efforts to combat AIDS, tuberculosis, and malaria to 25% of all donations, rather than the 33% limit that the United States has provided since the George W. Bush Administration. As noted above, the Administration's FY2021 request does not include funds for COVID-19, because the request was prepared prior to the outbreak. Congress enacted, and the President signed into law, three supplemental appropriations acts for COVID-19 preparedness and response in March ( P.L. 116-123 , P.L. 116-127 , and P.L. 116-136 ). As of this report's publishing, the Administration has not submitted a request for additional FY2021 funds to combat the virus. <4.1.2. Humanitarian Assistance> The FY2021 budget request for humanitarian assistance is nearly $6.27 billion, roughly equivalent to the FY2020 request but down 40.1% from the FY2020-enacted level of $10.46 billion. In successive years, the Administration has requested levels of humanitarian assistance far lower than those enacted the prior year, at times reflecting the fact that humanitarian assistance funds may be carried over from year to year and unobligated balances from prior years may still be available. On a bipartisan basis, for many years, Congress has consistently supported global humanitarian efforts through appropriation levels well above the budget request ( Figure 4 ). In addition to the proposed $6.27 billion in new funding for humanitarian assistance, the Administration's request assumes $2.80 billion in carryover funding from past-year humanitarian assistance. The Administration asserts that the FY2021 request, combined with the estimated carryover, totals close to $9.00 billion, which would allow the United States "to program well above the second highest level ever, and is sufficient to address the needs for Syria, Yemen, and other crisis areas." <4.1.2.1. Proposed Humanitarian Account Consolidation> For FY2021, as in FY2020, the Trump Administration proposes to fund all humanitarian assistance through a single International Humanitarian Assistance (IHA) account managed through USAID's new Bureau for Humanitarian Assistance (BHA). The Administration has justified the restructuring as necessary "to optimize humanitarian assistance, prioritize funding, and use funding as effectively and efficiently as possible." The proposal would effectively move the administration of overseas refugee and migration assistance funding currently funded through the Migration and Refugee Assistance (MRA) and Emergency Refugee and Migration Assistance (ERMA) accounts from the State Department to USAID. In FY2020, enacted funding for these accounts totaled $3.78 billion. The budget request would eliminate the ERMA account and significantly reduce funding to MRA, with none for overseas needs. Within USAID, the BHA is in the process of combining the functions of the Offices of U.S. Foreign Disaster Assistance and Food for Peace. The budget request would eliminate the International Disaster Assistance (IDA) account (FY2020-enacted funding totaled $4.95 billion), as well as Food for Peace Act, Title II emergency food assistance funding, the latter of which is currently appropriated through the agriculture appropriation but administered by USAID (FY2020-enacted funding totaled $1.73 billion). Funds previously requested in these accounts would be consolidated into the IHA account. <4.1.3. Security Assistance> The Administration is requesting $7.73 billion in international security assistance for FY2021, an increase of 4.3% from the FY2020 request and 14.3% below the FY2020-enacted level. The greatest cuts to security assistance accounts would be to Peacekeeping Operations (PKO, -36.6%) and International Military Education and Training (IMET, -27.4%) ( Figure 5 ). Consistent with prior year requests and appropriations, the majority of security assistance ($5.19 billion) would be for Foreign Military Financing (FMF) to the Middle East, including $3.30 billion in grants to Israel. As in the Trump Administration's past three budget proposals, the FY2021 request seeks flexibility to provide FMF assistance through a combination of grants and loans, including loan guarantees, rather than the current use of FMF on an almost exclusive grant basis. The Administration asserts that this authority would both "expand the tools available to the United States to help NATO and Major-Non NATO allies purchase more American-made defense equipment and related services" and "increase burden sharing by asking these partners to contribute more national funds to foreign military sales cases." <4.2. Development Assistance and Export Promotion> The remaining third of the FY2021 foreign operations request proposes to allocate funds to development sectors other than those related to global health, independent agencies, multilateral assistance, and export promotion agencies. <4.2.1. Development Assistance> The FY2021 budget request would reduce funding from FY2020-enacted levels in a number of development sectors ( Table 7 ). Environment-focused aid, for example, would be cut by 86.3%, while funding for education and water and sanitation would fall by 61.2%. As with the FY2020 request, the FY2021 request includes a significant increase from prior year-enacted levels to programming that seeks to promote women in developing economies, largely due to a proposed $200.00 million for the Women's Global Development and Prosperity Initiative (W-GDP). <4.2.1.1. Proposed Economic Support and Development Fund> Under the FY2021 request, most development accounts Development Assistance (DA); Economic Support Fund (ESF); Assistance to Europe, Eurasia and Central Asia (AEECA); and the Democracy Fund (DF) would be combined into a single new Economic Support and Development Fund (ESDF). The Administration asserts that this consolidated account would streamline the deployment of resources, increasing efficiency in foreign assistance. Because the consolidated account would incorporate what are now both core and shared USAID accounts, it remains unclear what portion of the new account USAID would manage or implement. The Administration made a similar request in the FY2018, FY2019, and FY2020 budget requests, but Congress did not enact the proposals. The FY2021 budget request nestles the Relief and Recovery Fund (RRF) and a proposed new Diplomatic Progress Fund (DPF) both previously requested as separate budget items under the proposed ESDF account. According to the justification, the DPF would "allow the State Department and USAID to respond to new opportunities arising from progress in diplomatic and peace efforts around the world." While Congress provided funds for the RRF in previous fiscal years, Congress has not accepted the Administration's proposal for the DPF. <4.2.2. Independent Agencies> The Administration's FY2021 request would reduce funding to the Peace Corps (-19.5%) and the Millennium Challenge Corporation (-11.6%). The request also proposes eliminating the Inter-American Foundation (IAF) and the U.S African Development Foundation (USADF), and incorporating staff and small grant activities of the two foundations into USAID's new Bureau for Development, Democracy, and Innovation. The Administration maintains that this consolidation would allow USAID to "capitalize on the existing expertise, capacity, relationships, and tools that USADF and IAF provide, including their regional and market segment emphases, in order to reinforce U.S. government bilateral development efforts." To implement the shuttering of the IAF and USADF, the Administration requests $3.85 million and $4.66 million, respectively. <4.2.3. Multilateral Assistance> SFOPS multilateral assistance accounts provide for U.S. payments to multilateral development banks and international organizations that pool funding from multiple donors to finance development activities. The Administration's FY2021 request would reduce these accounts by 28.9% from FY2020-enacted levels. As in the Trump Administration's three previous requests, the proposal would eliminate funding for the International Organizations and Programs (IO&P) account, which funds U.S. voluntary contributions to international organizations, primarily United Nations entities such as UNICEF. Congress appropriated $390.50 million for IO&P in FY2020. The Administration also proposes eliminating funds for the Global Environment Facility (GEF) and the International Fund for Agricultural Development (IFAD). For the GEF, the Administration asserts that carryover funds from FY2019 and FY2020 appropriations are sufficient to meet the U.S. pledge to the GEF's seventh replenishment. <4.2.4. Export Promotion> The FY2021 request includes an increased investment in the U.S. Development Finance Corporation (DFC), established in 2019 to implement the BUILD Act. However, the Administration would eliminate funding for the U.S. Trade and Development Agency the request includes $12.11 million for the agency's "orderly closeout" and an 8.3% reduction from FY2020-enacted levels for the Export-Import Bank of the United States' Operations account. As in previous years, the Administration assumes that all export promotion expenditures would be offset by collections. In the FY2021 request, the Administration assumes $711.20 million and $496.00 million in offsetting collections from the Export-Import Bank and the DFC, respectively. <4.3. Country and Regional Assistance> The Administration organizes much of its country and regional assistance into six thematic priorities ( Figure 6 ). These priorities are also meant to reflect the broader foreign operations goals outlined in " Foreign Operations Highlights ." Top country recipients under the FY2021 request remain consistent with prior year funding allocations. Israel, Egypt, and Jordan would remain the top three recipients of foreign assistance though Egypt would move ahead of Jordan when compared with FY2019 actual funding largely due to the proposed levels of military aid for those three countries. Other countries that the Administration maintains are strategically significant, including Afghanistan and Ukraine, also remain top country recipients in the FY2021 request, as do several African countries that would receive high levels of global health and development aid ( Table 8 ). Regionally, the Middle East and Africa would receive the largest shares of aid in the FY2021 request together comprising about 71.5% of total aid allocated by country or region consistent with FY2019 year actuals ( Figure 7 ). Proposed funding for Europe and Eurasia and, separately, the Indo-Pacific, come to 3.9% and 9.2%, respectively. Notably, the distribution of assistance within regions vary significantly. For example, Africa receives a majority of GHP funding (58.1% in FY2019 and a proposed 66.7% for FY2021), but accounts for a small proportion of INCLE funding (5.2% in FY2019 and a proposed 4.1% for FY2021). In comparison, the Western Hemisphere region accounts for a small percentage of GHP (2.5% in FY2019 and a proposed 2.2% for FY2021) and a large proportion of INCLE funds (37.7% in FY2019 and a proposed 44.8% for FY2021). Appendix A. SFOPS Funding, by Account Appendix B. International Affairs Budget The International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs (SFOPS) appropriation; in particular, international food assistance programs (Food for Peace Act (FFPA), Title II and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations. In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account. Appendix C. SFOPS Organization Chart

Each year, Congress considers 12 distinct appropriations measures to fund federal programs and activities. One of these is the Department of State, Foreign Operations, and Related Programs (SFOPS) bill, which includes funding for U.S. diplomatic activities, cultural exchanges, development and security assistance, and participation in multilateral organizations, among other international activities. On February 10, 2020, the Trump Administration submitted to Congress its SFOPS budget proposal for FY2021, totaling $44.12 billion (including $158.90 million in mandatory State Department retirement funds). Consistent with Administration requests since FY2018, none of the requested SFOPS funds were designated as Overseas Contingency Operations (OCO) funds; nevertheless, Congress has enacted OCO funds for SFOPS each year during this period. The Administration's FY2021 request is about 3% higher than its FY2020 request for SFOPS accounts but nearly 24% below the FY2020 SFOPS funding level enacted by Congress (including COVID-19 supplemental funds). Within these totals, funding is divided among two main components: Department of State and Related Agency accounts. These funds, provided in Title I of the SFOPS appropriation, primarily support Department of State diplomatic and security activities and would be reduced by 18.9% from FY2020-enacted levels. Noteworthy cuts are proposed for the Educational and Cultural Exchange Programs (-57.6%), International Organizations (-31.8%) accounts, and the Diplomatic Programs account (-12.6%), which funds many of the State Department's day-to-day operations. The Foreign Ope rations accounts, funded in Title II-VI of the SFOPS bill, fund most foreign assistance activities. These accounts would see a total reduction of 25.7%, with particularly steep cuts proposed for global health programs (-37.5%), peacekeeping operations (PKO, -36.6%), multilateral aid (-28.9%), and humanitarian assistance (-28.3%, not including food aid programs funded through the agriculture appropriation). This report provides an overview of the FY2021 SFOPS budget request, discusses trends in SFOPS funding, and highlights key policy issues. An account-by-account comparison of the FY2021 SFOPS request and enacted FY2020 SFOPS appropriations is presented in Appendix A . Appendix B provides a similar comparison, focused specifically on the International Affairs budget. Appendix C depicts the organization of the SFOPS appropriation. The report will be updated to reflect congressional action. This report is designed to track SFOPS appropriations, with a focus on comparing funding levels for accounts and purposes across enacted FY2020 SFOPS appropriations, FY2021 Administration requests, and FY2021 SFOPS legislation as it moves through the legislative process. It does not provide significant analysis of international affairs policy issues. For in-depth analysis and contextual information on international affairs issues, please consult the wide range of CRS reports on specific subjects, such as global health, diplomatic security, and U.S. participation in the United Nations.

crs_R45783

crs_R45783_0

<1. Introduction> Intercity passenger rail in America dates to the rail industry's origins in the 19 th century. As common carriers engaged in interstate commerce, railroad companies built hundreds of thousands of miles of track across the country offering both freight and passenger transportation, making the distinction between a freight railroad and a passenger railroad a relatively recent one. Federal regulation was important in the industry's development. The Hepburn Act of 1906 (34 Stat. 584) authorized the Interstate Commerce Commissi on (ICC) to regulate maximum interstate passenger fares to ensure that they were "just and reasonable." The Transportation Act of 1958 (P.L. 85-625, 72 Stat. 571) gave the ICC authority to allow a railroad to discontinue passenger service on a line while continuing freight service. By the mid-20 th century, passenger services faced increased competition from jet airliners offering faster travel times and private automobiles offering convenient access to a network of new federally funded highways. The rail industry's worsening financial health meant that infrastructure conditions also worsened as maintenance was deferred, contributing to reduced speeds and reliability. With ridership declining, the ICC permitted railroads to discontinue many passenger services and focus on carrying freight. In an effort to shore up flagging passenger rail service, Congress passed the High Speed Ground Transportation Act of 1965 (P.L. 89-221), creating an office in the Department of Commerce to foster research and development of new transportation technologies (the Department of Transportation did not yet exist). This contributed to the establishment of the nation's fastest rail service, the Metroliner, on the Washington, DC, to New York City portion of the Northeast Corridor (NEC), when that line was still under private ownership. In the years since, Congress has taken an active role in preserving and improving passenger rail service. Although ridership is much lower than in the heyday of long-distance trains, the federal government continues to support passenger rail through a variety of grants, loans, and tax preferences. There continues to be debate over whether federal subsidies for passenger rail are justified, given competing alternatives by air or highway that dominate most intercity travel markets (though these alternatives may also receive subsidies). The Trump Administration has called for "the end of the [federal] Government subsidizing operating losses" on passenger trains, shifting decisionmaking and cost responsibility to states. <2. The Federal Role in Passenger Rail> As several freight railroads, including the Pennsylvania Central, the nation's largest, entered bankruptcy in 1970, Congress created Amtrak officially, the National Railroad Passenger Corporation to preserve a basic level of intercity passenger rail service, while relieving private railroad companies of the obligation to run passenger trains that had lost money for decades. Amtrak is structured as a private company, but virtually all of its shares are held by the U.S. Department of Transportation (U.S. DOT). Amtrak owned no infrastructure at the time of its creation. It was originally structured as a contracting agency, and Amtrak trains were operated by private railroads over tracks they owned. Under the Railroad Revitalization and Regulatory Reform Act (4R Act) of 1976, ownership of the NEC was transferred from the bankrupt Penn Central Railroad to Amtrak. At the same time, Congress initiated the Northeast Corridor Improvement Program, which required travel times of 3 hours and 40 minutes between New York and Boston, and of 2 hours and 40 minutes between New York and Washington, by 1981. While the act funded many improvements along the corridor, these goals were not achieved. The law that created Amtrak also stipulated that Amtrak pay host railroads for the incremental costs specific to Amtrak's usage of tracks for instance, the additional track maintenance costs required for passenger trains. Amtrak is not required to contribute to a freight railroad's overhead costs. Then, in 1973, Congress granted Amtrak "preference" over freight trains in using a rail line, junction, or crossing ( P.L. 93-146 , 10(2), 87 Stat. 548), but Amtrak has been unable to enforce this preference to ensure that host railroads operate its trains on schedule. Several railroads continued to operate long-distance passenger services after 1970 rather than contracting with Amtrak. The last of these services was discontinued in 1983. Amtrak itself discontinued a number of the routes it originally operated, but has been required by Congress to maintain a "national network" of long-distance trains. Amtrak has received federal funds to cover operating losses and capital expenditures since its creation. <2.1. Federally Designated High-Speed Rail Corridors> In 1991, the Intermodal Surface Transportation Efficiency Act (ISTEA, P.L. 102-240 ) empowered the Secretary of Transportation to designate up to five high-speed rail corridors. These were required to be "rail lines where railroad speeds of 90 miles per hour are occurring or can reasonably be expected to occur in the future" ( 1010). ISTEA created an annual set-aside of $5 million from a highway funding program to fund railway-highway crossing safety improvements on these corridors. As the presence of grade crossings can restrict how fast trains can travel, this provision funded projects that had the potential to boost maximum speeds. The Transportation Equity Act for the 21 st Century (TEA-21, P.L. 105-178 ) increased the number of high-speed rail corridors to 11 (see Table A-1 ). These have a total length of roughly 9,600 miles, less than half the length of the current Amtrak network. Several of the designated "corridors" are in fact networks of interlocking or diverging lines. For example, the Midwest high-speed rail corridor, as initially designated, consisted of lines radiating outward from Chicago to Milwaukee, St. Louis, and Detroit; further extensions to these lines have since been added to the corridor designation, which now goes by the name of the Chicago Hub Network. Most corridors were designated at the discretion of U.S. DOT, but three the Gulf Coast, Keystone, and Empire State corridors were designated by statute. Almost all corridors are between 100 and 500 miles in length, the distance range in which rail is expected to be competitive with other modes. Most federally designated corridors already receive some intercity passenger rail service, and roughly half of all federally designated corridors are served by Amtrak's NEC or state-supported routes. Approximately 1,500 miles of federally designated high-speed rail corridors currently receive no intercity passenger rail service of any kind. Some of these segments were regularly served by Amtrak trains as recently as 2005; others have not seen intercity passenger rail service since before Amtrak initiated operations in 1971. There is no longer a dedicated funding program for this network as there had been under ISTEA, but federal designation was incorporated into later efforts to improve passenger rail as discussed below. <2.2. Rail Corridor Improvement Grants> The Passenger Rail Investment and Improvement Act (PRIIA, P.L. 110-432 , Division B), enacted in 2008, created discretionary grant programs to expand or otherwise improve passenger rail service. Sections 301, 302, and 501 of PRIIA authorized up to $3.725 billion in grants to states to develop intercity passenger rail service. One of these new programs, which authorized $1.5 billion specifically for high-speed rail corridor improvements, explicitly defined "corridor" as a federally designated corridor established by ISTEA or TEA-21. With PRIIA in effect, the 111 th Congress appropriated a total of $10.6 billion to develop intercity passenger rail services in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) and the FY2009 and FY2010 Department of Transportation Appropriations Acts (Division A, Title I, P.L. 111-117 ), well in excess of authorized levels. That same year, the Federal Railroad Administration (FRA) published its High-Speed Rail Strategic Plan, which outlined the Obama Administration's priorities to improve intercity passenger rail service using the programs created by PRIIA and the infusion of funds provided by ARRA. This document indicated that the federally designated high-speed rail corridors were to be prioritized in the coming solicitations for intercity passenger rail grant funds. FRA ultimately used this money to award 158 grants under the new High-Speed Intercity Passenger Rail (HSIPR) Grant Program. Some 80% of the funding went to a relatively small number of large-scale projects, each within a federally designated priority corridor. These included multi-billion-dollar grants to California and Florida for new high-speed rail lines; Florida subsequently turned down its grant. Most grants funded projects that made incremental improvements to existing services, rather than the establishment of new lines (with the notable exception of California's high-speed rail project, discussed later in this report). HSIPR also offered grants for passenger rail planning, which previously had not been addressed by departments of transportation in some states. The 112 th Congress rescinded $400 million of the $10.6 billion previously appropriated and did not adopt the Obama Administration's requests for additional funding. No subsequent HSIPR funding has been provided. Several states ultimately declined HSIPR grants to improve or expand intercity passenger rail service. That funding was reallocated to other states. Some of the remaining projects encountered delays in delivery, meaning their effects on passenger rail service have only recently begun to be felt. Other projects are still years away from completion, and still others funded planning and engineering work that requires additional funding for construction. Specific improvements in rail service brought about by these grants are discussed in later sections of this report. <2.3. Intercity Passenger Rail in the FAST Act> Authority for passenger rail programs lapsed when PRIIA expired at the end of 2013. After a gap of two years, passenger rail programs were reauthorized by the Passenger Rail Reform and Investment Act of 2015, enacted as Title XI of the Fixing America's Surface Transportation Act (FAST Act, P.L. 114-94 ). In the FAST Act, Congress did not continue the approach taken in PRIIA of authorizing large sums for capital grants to implement or improve passenger rail service over entire corridors. The FAST Act did, however, contain a number of measures intended to improve passenger rail in other ways. The collective effect of these programs has been to advance some passenger rail projects initiated under PRIIA, but on a comparatively smaller scale. Some intercity passenger rail projects have also been advanced using funds from U.S. DOT's TIGER/BUILD grant program, a discretionary program that supports infrastructure investments deemed to have significant local or regional impact. <2.3.1. Consolidated Rail Infrastructure and Safety Improvements Program (CRISI)> Section 11301 of the FAST Act created this grant program, which merged eligibility from several programs, including the Intercity Passenger Rail and Congestion Reduction programs created by Sections 301 and 302 of PRIIA. A total of $1.103 billion was authorized for this program from FY2016 through FY2020; to date, $916 million has been appropriated by Congress. The program has not yet resulted in any increases in speed or frequency within the intercity passenger rail system. However, it has been used to fund implementation of Positive Train Control (PTC) systems in many areas. PTC is primarily a crash-avoidance technology, but in certain cases it can allow trains to travel faster. <2.3.2. Federal-State Partnership for State of Good Repair Program> In Section 11302 of the FAST Act, Congress created the Federal-State Partnership for State of Good Repair program to fund the rehabilitation or replacement of aging infrastructure used for passenger rail service. A total of $997 million was authorized for this program; to date, $675 million has been appropriated. By statute, preference is given to grant applications with at least a 50% nonfederal share of project costs, to applications submitted jointly by multiple applicants, and to projects sponsored by other entities than Amtrak alone. The Partnership program is more explicitly directed to intercity passenger rail projects by statute, but similarly to CRISI it is primarily designed to fund the replacement or rehabilitation of aging infrastructure rather than to implement new or dramatically improved passenger rail service. <2.3.3. Restoration and Enhancements Grant Program> In Section 11303 of the FAST Act, Congress created the Restoration and Enhancements program to cover the operating costs of reinitiating passenger rail services that have been suspended. This sets it apart from other grant programs administered by FRA, which generally fund capital grants for infrastructure improvements. Many corridors are potentially eligible for these funds, as many passenger routes have been discontinued by Amtrak since its creation, but the program was primarily aimed at restoring service along the coast of the Gulf of Mexico. A section of Amtrak's long-distance Sunset Limited ran between New Orleans and Orlando from 1993 until it was suspended after sustaining damage during Hurricane Katrina in 2005. Funding was made available for the program in FY2017, which did not result in any successful applications. However, a $33 million CRISI grant was awarded to the Southern Rail Commission (a multi-state coalition formed to promote passenger rail in Southern states) in 2019 for capital improvements necessary to reinstate service between New Orleans and Mobile. Such a service would be eligible to receive Restoration and Enhancements grant funding to support its operating costs. <2.4. Improvements to Rolling Stock> The federal government has taken several steps to improve passenger rail by supporting the acquisition of new rail cars and locomotives. Rail equipment can have an effect on the speed and frequency of rail service. Older equipment may not be capable of running at high speeds or be compatible with modern train control systems or accessibility laws. Amtrak periodically rehabilitates and expands its own fleet of rail cars and locomotives, although some states have purchased specialized rail equipment to supplement Amtrak's existing fleet. Section 305 of PRIIA tasked Amtrak with creating a Next Generation Corridor Equipment Pool Committee to design, develop specifications for, and procure standardized rail equipment for use on state-supported short distance corridors. The committee developed specifications for diesel locomotives and bi-level passenger cars. Five states California, Illinois, Michigan, Missouri, and Washington agreed to jointly procure a total of 130 passenger cars and 32 locomotives for use on their state-supported rail corridors. They did so using a mix of state funds, federal funds awarded for corridor improvements, and a $268 million HSIPR grant awarded specifically for equipment procurement. The locomotive procurement was awarded to Siemens, and Siemens-built "Charger" diesel locomotives are now in service on several Amtrak routes, with the potential for additional follow-up orders. The regional passenger car procurement was awarded to Sumitomo Corporation of America, and subcontractor Nippon Sharyo was to assemble the cars at a newly expanded factory in Rochelle, IL. However, a prototype car failed an important structural test, and the requisite design changes would have delayed the project beyond certain deadlines imposed by the federal funding agreement. Ultimately, Nippon Sharyo was replaced by Siemens, and the procurement was modified to substitute single-level rail cars for the bi-levels originally contracted. The delays resulted in a portion of the $268 million grant expiring and being returned to the Treasury. Procurement of new rail equipment can be constrained by certain federal regulations. Purchases of rail equipment using federal funds are subject to "Buy America" requirements for domestic content and final assembly. FRA safety standards require passenger rail cars that operate in mixed traffic with freight trains to be able to withstand certain crush forces. This makes most passenger rail equipment designed for use in Europe or Asia impossible to deploy in the United States without major modifications, increasing unit production costs. The safety standards also make passenger rail equipment heavier, which in turn makes it more difficult for trains to accelerate and decelerate quickly, increasing trip times. Regulations promulgated by FRA in 2018 attempt to address this, creating a category of Tier III passenger rail equipment permitted to operate at speeds up to 220 miles per hour (mph) on dedicated tracks or up to 125 mph on lines also used by freight trains. The regulation also modifies certain crashworthiness and occupant-protection requirements on Tier I equipment (designed for speeds below 125 mph) to permit a greater variety of train car designs to operate on the U.S. network. <2.5. Federal Loans for Passenger Rail Projects> Passenger rail projects are eligible under two federal loan programs, the Railroad Rehabilitation and Improvement Financing (RRIF) program and the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. Neither of these programs was designed with passenger rail specifically in mind; RRIF was intended for use primarily by freight railroads, and TIFIA has primarily been used for toll road and transit projects. Because loans require a revenue source to establish creditworthiness (the ability to repay a loan), and because passenger rail lines rarely generate an operating profit, these programs have seen limited application to intercity rail. However, Amtrak has used RRIF loans to purchase new locomotives for the Northeast Corridor, which does generate an operating profit. Amtrak's two active RRIF loans, totaling over $3 billion, now represent almost 60% of total nominal RRIF loan amounts. <2.6. Metrics and Standards to Improve Performance> Only 73% of Amtrak trains arrived at all stations on time in 2018, and Amtrak routes often fall short of internal on-time performance goals. Among trains on long-distance routes, half arrived at their final destinations within 15 minutes of the scheduled time in 2018. The freight lines used by most Amtrak services may have little incentive to give priority to Amtrak trains at the expense of their own more profitable operations. However, trains on the Amtrak-owned NEC also reached their final destinations late on one trip out of five. Figure 1 below illustrates the fluctuations in endpoint on-time performance for Amtrak's three business lines over the last 15 years. In general, reliability on state-supported routes and on the NEC has been relatively stable compared to long-distance routes. Where state-supported routes used to lag behind the NEC, they are now more or less equal in terms of reliability, though both have dipped from their historic highs. Amtrak has made forceful statements blaming host railroads for poor on-time performance. In one recent example from February 2019, a Twitter account used by Amtrak to alert riders of service issues identified host railroad Norfolk Southern by name as the cause of a delay. In response, Norfolk Southern issued a letter disputing the cause of the delay, accusing Amtrak of damaging Norfolk Southern's reputation, and threatening further action. Amtrak's response continued to blame Norfolk Southern, listing additional delays it attributed to the company and suggesting that it take "immediate action to improve the on-time performance of Amtrak trains on your railroad." The 110 th Congress attempted to address on-time performance in Section 207 of PRIIA. This section directed FRA, Amtrak, and the Surface Transportation Board (STB), which regulates competition in the rail industry, to develop minimum performance standards, incorporate those standards into rail service contracts, and resolve disputes arising from these standards in arbitration. Another section in PRIIA, Section 213, gave STB enforcement power over railroads that failed to meet their performance standards. Final metrics and standards went into effect in 2010. The Association of American Railroads, an industry group representing freight rail companies, sued to block the metrics and standards in 2011, asserting that Congress improperly gave Amtrak, defined in statute as a private entity, the power to regulate other private entities and that exercising such power deprived host railroads of their right to due process. A series of federal court decisions culminated in a unanimous Supreme Court ruling that Amtrak could be considered part of the government for the purposes of deciding the case. The 2010 standards were suspended during much of the legal proceedings, and Amtrak on-time performance has decreased since reaching a systemwide high of roughly 80% in 2012. On July 20, 2018, the U.S. Court of Appeals for the District of Columbia Circuit ruled that without an arbitrator to enforce the standards, Amtrak is not exercising undue coercive power over its competitors. The Supreme Court declined AAR's appeal of this decision on June 3, 2019, allowing the federal government's power to set performance standards to remain in place. The 2010 standards remain vacated, but FRA is free to establish new standards with Amtrak's input. <3. Recent Improvements to the Existing Network> Most recent attempts to improve intercity passenger rail have involved making improvements to infrastructure and equipment on existing routes, rather than the planning and implementation of new routes. However, the geography of existing lines can constrain efforts to increase speeds, and the freight railroads that control most of the lines Amtrak uses have little incentive to allow higher speeds or more frequent passenger service without concessions in return, such as capital improvements that also serve to improve freight flows. This section describes federally funded programs to improve Amtrak's route network in order to extend the life of existing infrastructure, improve reliability, increase service frequency, and/or reduce scheduled trip times. <3.1. The Northeast Corridor> The Northeast Corridor (NEC), already the busiest intercity passenger rail line in the nation at the time of PRIIA's enactment, received nearly $1 billion in HSIPR funds divided among several projects. Some of these projects resulted in the construction of infrastructure intended to improve train service or prevent its deterioration, while others completed prerequisite environmental and engineering studies for large projects that remain unfunded. <3.1.1. NEC Future> Apart from funding specific infrastructure projects, PRIIA also called for a corridor improvement plan for the NEC. The planning project, NEC Future, has identified goals for rail service along the corridor and recommended specific infrastructure investments necessary to bring about the desired level of service. A corridor-level Environmental Impact Statement evaluated several alternatives, from maintaining the corridor at what are essentially current service levels to building a brand new corridor adjacent to the existing one capable of much faster trips but at a considerably higher capital cost. The Selected Alternative, approved in a Record of Decision (ROD) issued in July 2017, fell in between these two options, improving speed and capacity on existing infrastructure without building an entirely new parallel route. One limitation of the existing Northeast Corridor is the path taken by trains along the coast of Long Island Sound in southeastern Connecticut. The tight curves along the shore reduce speeds and lengthen trip times. NEC Future planners initially recommended the construction of new tracks set farther inland along a straighter path, but this was met with opposition from local groups that objected to the construction of new rail lines in their towns. The Selected Alternative considered in the Final Environmental Impact Statement recommended further study of this segment of the corridor. <3.1.2. The Gateway Program> Amtrak says that no further significant expansion of intercity service on the NEC is possible without increasing capacity into and through Manhattan. Also, the reliability of that service is threatened due to the aftereffects of the flooding of the rail tunnel under the Hudson River during Hurricane Sandy in 2012. The Gateway Program is a package of projects proposed to increase both reliability and capacity. The centerpiece is a new two-track tunnel under the Hudson River, supplementing the current tunnel, and conceived in the aftermath of the 2010 cancellation by the State of New Jersey of a similar tunnel project called Access to the Region's Core (ARC). The cost estimates for the entire program of work are in the range of $24 billion to $29 billion. One challenge facing the Gateway Program is that Amtrak, the infrastructure owner, and New Jersey Transit, the other primary beneficiary of the improvements, have limited ability to fund the improvements. New Jersey Transit does not earn a profit and needs several billion dollars for other projects. Amtrak earned an operating profit of $526 million on its NEC operations in FY2018, but at least a portion of its NEC operating profit is pledged starting in 2022 to repay a $2.45 billion federal loan Amtrak received in 2016 to purchase new train cars. Amtrak also has several billion dollars in other needs, including a backlog of projects to restore its infrastructure to a state of good repair. A second challenge facing the program is that while assistance may be sought from the federal government, current federal transportation grant programs are not structured to provide large amounts of funding to a particular project on a predictable basis over many years. Funding under discretionary programs depends on the amount that Congress appropriates each year. Since the Gateway Program would improve both intercity passenger rail service and commuter rail service, the individual projects that are part of the program could be eligible for assistance from federal programs that focus on either intercity passenger rail or public transit, but no program of either type currently provides multi-year funding in the amount sought by Gateway project sponsors. The two projects within the Gateway program that are farthest along in their planning and design phases the Portal North Bridge and Hudson Tunnel Projects are in project development for Federal Transit Administration (FTA) Capital Investment Grant (CIG) funding, but FTA has cast doubt on the strength of their local financial commitments. Sponsors of both projects have planned to use federal RRIF and TIFIA loans to be repaid with local funds as part of the nonfederal share of project costs, but FTA has not accepted this approach. <3.2. The National Network> Most federal grant funding to improve the existing passenger rail system has gone to routes on Amtrak's National Network, outside the Northeast Corridor. These routes do not routinely generate the operating surpluses found on the NEC and are generally operated over tracks owned by private freight railroads, so the HSIPR program involved spending public funds to improve privately owned rail infrastructure, or else to facilitate the purchase of that infrastructure by a public agency. One criticism of the HSIPR program has been that investments were spread out so thinly that they could fund only limited service improvements. Building a true high-speed rail line under HSIPR would have required FRA to concentrate considerable funding on a single project, something Congress did not direct FRA to do. Developing true high-speed passenger rail services with federal assistance will be challenging given the inevitable pressures to distribute federal funding widely. <3.2.1. State-Supported Routes> Half of all Amtrak trips are taken on state-supported routes, and state-supported routes have accounted for a large portion of the growth in Amtrak's ridership over the last two decades. To build on this growth, several states received infusions of federal funding to increase speeds, add additional frequencies, extend service to new stations, or generally improve reliability by replacing aging infrastructure. Table 2 below contains a list of selected improvements to state-supported routes to receive HSIPR grants. Some of these projects are already complete and have been successful; others, especially the larger and more complex corridor improvement projects, have encountered delays and have not yet delivered their intended benefits. Status updates for three of these projects appear beneath the table. <3.2.1.1. Chicago-St. Louis> The Chicago-St. Louis corridor improvement program, though it was dubbed Illinois HSR, did not have as its immediate objective the implementation of true high-speed rail along the corridor. Rather, a series of targeted investments was planned to create additional rail capacity, reducing interference from freight trains and allowing passenger trains to reach speeds of 110 mph. In 2012, 110-mph service was initiated on the 15-mile segment between Dwight and Pontiac, IL, but not on the remaining segments from Dwight to Joliet and Pontiac to Alton. Portions of the route from Chicago to Joliet, from St. Louis to Alton, and passing through Springfield are congested with freight and/or commuter traffic and impose lower speed limits, further hampering efforts to reduce trip time. A federally funded environmental study identified alternatives for double-tracking the entire corridor, including the segments not improved by the HSIPR corridor development grant. These alternatives would double existing service levels to eight round trips daily, and have the potential to reduce end-to-end travel times by nearly two hours. The corridor-level study estimated the costs of implementing these alternatives at between $4.9 billion and $5.2 billion, including building new tracks in the congested areas in Springfield and just outside Chicago and St. Louis. A project in Springfield that would reroute passenger and freight trains onto separate tracks is under construction with the support of TIGER grants, but the environmental reviews for the Chicago-Joliet and Granite City-St. Louis segments were suspended in November 2018. FRA indicated that the project sponsors did not want to pursue the environmental reviews at that time. <3.2.1.2. Chicago-Detroit> Freight railroad Norfolk Southern no longer wished to maintain a 135-mile section of the corridor from Kalamazoo, MI, to Dearborn, MI, to the standards necessary to run passenger trains at 79 mph, meaning speeds would have decreased and trip times would have increased without outside intervention. The State of Michigan used HSIPR grant funds to purchase the section from Norfolk Southern, bringing it into public ownership and making improvements that would allow top speeds of 110 mph. In 2012, 110-mph service was initiated on a separate 97-mile segment from Porter, IN, to Kalamazoo, the result of upgrades paid for with ARRA funds awarded directly to Amtrak, which owns that segment. As of 2019, the cumulative effect of these improvements has been to reduce average trip times between Chicago and Detroit by approximately 25 minutes. Further reductions may be possible as additional segments are upgraded to 110 mph. A federally funded environmental study for the corridor resulted in a Draft Environmental Impact Statement that identified alternatives for further improvements on the route, increasing service to six or 10 daily round trips (from the existing three) and making further reductions to trip time. Key among these improvements would be the selection of a new route from Chicago to Michigan City, IN. On November 30, 2018, FRA announced it was rescinding the Notice of Intent issued as part of this environmental review, effectively halting the planning process before reaching the Final EIS or Record of Decision stage. However, FRA also noted that planning work completed to that point could be reused in future projects, given sufficient interest and funding. <3.2.1.3. Portland-Seattle> On December 18, 2017, a southbound Amtrak Cascades train derailed near DuPont, WA, killing three and injuring 62. The train was the first in regular service to use the Point Defiance Bypass, an inland rail route upgraded using some of Washington State's HSIPR funds. The Bypass was to reduce travel times between Seattle and Portland by 10 minutes without raising the maximum allowable speed on the track. In the aftermath of the derailment, Amtrak has been operating trains on its original route and schedule. On May 21, 2019, the National Transportation Safety Board (NTSB) published an abstract of its final report and recommendations following an investigation of the 2017 derailment. NTSB recommended that Amtrak no longer operate the route with a certain type of passenger car. Amtrak and the Washington State Department of Transportation (WSDOT) have announced they will comply with the recommendation, reducing the fleet of usable cars. <3.2.2. Long-Distance Routes> Some efforts to put Amtrak on more stable financial footing have centered on reforming the long-distance routes that Amtrak operates as part of the National Network. These routes require the largest operating subsidies, have the lowest on-time performance of Amtrak's three business lines, and make many stops at small communities that are not major generators of passenger traffic. At the same time, those communities may see Amtrak service as an important link to other cities or as a point of local pride. This has led to the federal government pursuing policies, sometimes simultaneously, that preserve existing long-distance train service while pushing Amtrak to reduce or eliminate operating losses. <3.2.2.1. Grants to Improve or Retain Existing Long-Distance Routes> Congress has supported long-distance routes primarily through annual appropriations to the National Network, which help cover operating subsidies and some capital projects necessary to maintain service. The FAST Act authorized gradual increases in grants to the National Network, from $1 billion in FY2016 rising to $1.2 billion in FY2020. Appropriators have generally met or exceeded these authorized levels. For FY2019, appropriations to the National Network included $50 million to support capital grants necessary to maintain long-distance service over tracks where "Amtrak is the sole operator on a host railroad's line and a positive train control system is not required by law or regulation." These funds were allowed by statute to be used as nonfederal matching funds for competitive discretionary grants that would lead to such projects. This measure was instrumental in sustaining operations of the Southwest Chief route that runs from Chicago to Los Angeles. A segment of the route, between La Junta, CO, and Lamy, NM, receives no freight service; track owner BNSF Railway did not wish to pay to maintain the tracks for Amtrak's exclusive benefit, instead offering to reroute the train on different tracks between Kansas and New Mexico. Local communities along the route applied for and received federal TIGER grants, which required $3 million in matching funds from Amtrak. In 2018, Amtrak signaled it would not contribute these matching funds and would instead consider replacing trains with buses in certain areas. However, the $50 million set-aside from FY2019 appropriations funded the remaining share of project costs, allowing the project to proceed and train service to continue along the entirety of the route. <3.2.2.2. Proposals to Convert Long-Distance Routes to State-Supported Corridors> Both the Administration and Amtrak itself have proposed changes to long-distance train service. These changes closely parallel Amtrak's plan, ultimately suspended, to replace a section of the Southwest Chief with bus service. In its FY2020 budget request, the Administration proposed eliminating operating support for long-distance trains and a corresponding reduction in National Network grants, but an increase in funding to the Restoration and Enhancements grant program. To replace federal operating support for a route, states would be eligible to apply for Restoration and Enhancements funding to bridge the funding gap until funds could be raised locally to support the service. Federal funding would be gradually phased down over the five-year duration of a grant agreement, with the states concerned assuming full responsibility for operating costs on the route by FY2024. States could potentially negotiate with Amtrak about changes to schedules or service levels, or about retaining certain segments while discontinuing others. Trains could be replaced with bus service or discontinued if a state did not wish to support rail service on the route. In its own FY2020 grant request, Amtrak has shown some willingness to alter how long-distance routes are funded and operated, stating that "a modernization of the National Network, with the right level of dedicated and enhanced federal funding, would allow Amtrak to serve more passengers efficiently while preserving our ability to maintain appropriate Long Distance routes" (emphasis added). In a recent letter to Senator Moran, Amtrak CEO Richard Anderson stated, While we strongly believe that there is a permanent place for high-quality long-distance trains in our network, the time to closely examine the size and nature of that role is upon us for numerous reasons. ...[Congress] will need to decide whether to continue to fund the operation of all existing long-distance trains with funding to buy new rolling stock and increased levels of financial support or consider changes to the network that could either enhance transportation value or reduce capital and operating expenses. Nevertheless, the FY2019 Consolidated Appropriations Act contained a Sense of Congress that "long-distance passenger rail routes provide much-needed transportation access for 4,700,000 riders in 325 communities in 40 states and are particularly important in rural areas; and long-distance passenger rail routes and services should be sustained to ensure connectivity throughout the National network." While there were 4.7 million trips on long-distance routes in 2017, and 4.5 million in 2018, many stations that receive only long-distance train service have very few daily boardings and alightings. <3.2.2.3. Long-Distance Competitive Pilot Program> One way Congress has attempted to control or reduce operating subsidies for passenger rail is to open the network to a greater degree of competition. This has proven to be difficult given Amtrak's advantages over other operators, including a statutory requirement that freight railroads grant Amtrak trains preference in using their tracks, and another requiring Amtrak to be charged only the incremental cost of using another railroad's tracks. Section 214 of PRIIA required FRA to implement a program that would allow other operators to submit competing bids to take over certain routes operated by Amtrak. This program would be open to any of the railroad companies that serve as hosts to Amtrak long-distance routes, with Amtrak able to respond to any outside bid with one of its own. FRA would then select a winning bidder, which would be entitled to receive an annual operating subsidy of no more than the prior fiscal year's subsidy amount, adjusted for inflation. Up to two routes could be operated in this manner for up to five years, selected from among the worst-performing routes according to a classification system contained elsewhere within PRIIA. FRA promulgated its final rule establishing this program in 2011, but no bids were submitted. The program was revisited in the FAST Act, which increased the number of available routes from two to three, reduced the operation period from five years to four with the possibility of reapplication for a second four-year term, and capped operating subsidies at 10% below its level in the prior fiscal year. The list of eligible bidders was also expanded to include not just host railroads, but also to one or more states, and to partnerships between a state and a host railroad. FRA promulgated its final rule reestablishing this program in 2017, but again no bids have been submitted. <4. High-Speed Rail and Other New Lines> Projects to retain or improve existing Amtrak services, as described in the previous section, routinely require investments amounting to tens or hundreds of millions of dollars. High-speed rail systems of the type in use in Europe and Asia, which can make only limited use of infrastructure designed for conventional rail, require significant investments in new infrastructure. Even when built for conventional rail equipment compatible with existing lines, establishing new rail service is a capital-intensive, time-consuming process. For example, a federally funded study of rail options in New York State estimated that instituting 125-mph service from New York City to Albany and Buffalo would require $14.7 billion in capital funding. A list of active or recently completed corridor plans and their cost estimate ranges can be found in Appendix B . <4.1. California High-Speed Rail> The California High-Speed Rail (CAHSR) program is a project led by the State of California with the goal of implementing a true high-speed rail system, capable of speeds in excess of 200 mph, between Los Angeles and San Francisco via the Central Valley cities of Fresno and Bakersfield. Ground was broken on the Central Valley section on January 6, 2015. Since that time, the California High-Speed Rail Authority (CHSRA) has completed civil works such as construction of viaducts or grade separations along the route. Construction of the full "Phase 1" system connecting San Francisco to Los Angeles, originally anticipated to be completed in 2028, is now expected to take until 2033. Funding for CAHSR has never been committed in sufficient quantities to cover the entire projected cost of construction. In 2008, California voters approved ballot measure Proposition 1A, which authorized the state to issue $9 billion in bonds. At the time Proposition 1A was approved, California assumed a level of federal and private sector support that ultimately never materialized. The project did receive a total of $3.9 billion in federal HSIPR grants, some from ARRA and some from FY2010 appropriations. While estimates for the cost of the project have fluctuated, the 2018 business plan estimates the capital cost of the Central Valley segment alone at $10.6 billion, and the Phase 1 system at $77.3 billion. In February 2019, California Governor Gavin Newsom announced in his State of the State Address that there "simply isn't a path" to complete the full system without additional funding. He later clarified that his comments were not intended to convey that the project was canceled; the section under construction is expected to result in improved passenger rail service in the central valley, and may still result in improved connections to San Francisco once other infrastructure projects are complete. The federal government has taken steps to reclaim federal grant money awarded to the project, on the grounds that the scope of the project has changed too much to be an eligible recipient of federal funding under the terms of the grant agreement. California is challenging these efforts in court; of the two largest grants CHSRA received, a $2.6 billion grant has already been fully spent in accordance with a federal deadline, while a second $929 million grant that has no such deadline remains untouched. <4.2. All Aboard Florida/Brightline/XpressWest/Virgin Trains USA> After the State of Florida turned down a federal HSIPR grant and canceled its Tampa-Orlando rail project, the private company All Aboard Florida (AAF) began making plans to initiate a new intercity passenger rail line between Miami and Orlando via West Palm Beach. That service, which would come to be called Brightline, does not use the same tracks used by Amtrak, instead using tracks owned by a regional freight railroad, Florida East Coast Industries (FECI; AAF and FECI were at the time both owned by asset management firm Fortress Investment Group). The diesel-powered trains are expected to provide faster service than Amtrak's route between Miami and Orlando, which currently provides two daily long-distance trains in each direction with poor on-time performance. All Aboard Florida initially sought a $1.6 billion federal RRIF loan to finance construction of the portion of the route between West Palm Beach and Orlando, but no loan was authorized. Instead, AAF applied to U.S. DOT for allocations to sell $600 million of qualified private activity bonds to finance work on the Miami-West Palm Beach segment and another $2.25 billion for the West Palm Beach-Orlando segment. The interest on these bonds is exempt from federal income tax; hence, the federal government is subsidizing the project by allowing it to borrow money at a lower interest rate than it would have to pay without the federal tax exemption. Brightline rail service between Fort Lauderdale and West Palm Beach began on January 13, 2018, with service expanding to Miami by May 19 of that year. Service to Orlando is expected to begin in 2022. In 2018, All Aboard Florida acquired XpressWest, a private company planning to build and operate a passenger rail service between Las Vegas, NV, and the Los Angeles area. XpressWest had been in the early stages of applying for a RRIF loan that was ultimately not issued. XpressWest was to be a true high-speed rail line with a connection to the California HSR system in Palmdale, and it is not clear whether California Governor Gavin Newsom's changes to the CAHSR plan will have repercussions for the project. In 2019, British based Virgin Group announced a partnership with All Aboard Florida, rebranding both Brightline and XpressWest as Virgin Trains USA. Other Virgin Group subsidiaries have operated intercity trains in the United Kingdom since the 1990s. Virgin Trains USA announced in January 2019 it would sell stock in an initial public offering, but in February the share offering was postponed. On May 30, Virgin Trains announced that construction of the Las Vegas-Southern California line would be delayed for two years. <4.3. Texas Central Railway> A private company, Texas Central Partners, is moving forward with plans to construct a true high-speed rail line between the cities of Dallas and Houston. The project, which has the backing of a Japanese rail operator and would use Japanese high-speed rail technology and equipment, would reach top speeds of 186 mph and take 90 minutes end-to-end. There is currently no direct rail service of any kind linking Dallas and Houston. Although the sponsors have stated, "This project is not backed by public funds," news reports have indicated that the project is likely to depend on long-term loans from the federal government's RRIF and TIFIA programs. The project is not yet under construction. One obstacle has been the acquisition of land on which to build the new tracks. There have been conflicting county-level court rulings on whether Texas Central can take the land it needs using eminent domain. Despite these legal issues, the company has stated it could begin construction on the line in 2019 or 2020. <5. Issues for Congress> <5.1. Corridor Plans Outstrip Historical Funding Availability> Many HSIPR grants funded studies of new or improved passenger rail corridors. A few of these studies were ultimately canceled before reaching completion, but others have resulted in near-finished plans to enhance intercity passenger rail. These plans often feature capital cost projections in the billions of dollars, even for projects with comparatively conservative speed and frequency objectives. The federal government's current approach to funding passenger rail differs from its approach to funding highways and transit. Although PRIIA and the FAST Act set authorized spending levels over multi-year periods, Amtrak funding is subject to the annual appropriations process, while many highway and transit programs are funded automatically out of Highway Trust Fund balances. Likewise, the HSIPR program lacked predictable funding in part because there was no dedicated revenue source for the program. In the context of the federal appropriations process it is difficult to provide significant amounts of funding on a predictable basis to a grant program that depends on the Treasury general fund, as it must compete with many other programs for funding each year. This problem is exacerbated by the limits on overall discretionary spending that were imposed by the Budget Control Act of 2011. Supporters of passenger rail service have long called for a dedicated funding source for rail projects, and previous administrations have echoed such calls. To date, however, Congress has not taken such a step. <5.2. Rail Plans Are Not Always Coordinated> Rail planning in the United States is not centralized, relying on project sponsors (usually states) to formulate their own plans. Congress and several presidents have, at times, identified corridors as investment priorities or set out trip time goals for certain routes, but these have usually not been backed by any financial commitment or implementation plan. The lack of reliable funding for passenger rail capital projects and operations is one obstacle to rail planning, as some states may not wish to invest time and resources into a plan that may not be achievable without additional federal support. PRIIA contained a requirement for FRA to develop a National Rail Plan (NRP), which has not taken the form of a standalone document. Instead, FRA has issued guidance for states to follow when drafting their own rail plans, as well as cost estimation and cost-benefit analysis guidance for project sponsors to follow when planning new or improved rail lines. FRA has also worked with groups of states to create regional rail plans, identifying service goals and rough cost estimates for passenger rail service between major cities. A rail study in the Southwest is complete, while rail studies in the Midwest and Southeast are ongoing. Regional rail plans are nonbinding and have no construction funding attached. Follow-on policies, including new dedicated funding for rail investment programs, were contained within U.S. DOT legislative proposals that were not enacted. <5.3. Legal and Regulatory Hurdles to Competition> The short-lived experiment contracting with an equipment provider for the Hoosier State and the failure of the long-distance competitive pilot program to generate any applications show that efforts to foster competition have not resulted in improvements to intercity passenger rail. Part of this may be attributed to the de facto monopoly status enjoyed by Amtrak since its private sector competitors ended their passenger businesses. Amtrak has statutory privileges that currently would not extend to startup passenger rail operating companies hoping to compete over existing routes. Under current laws and regulations, a new entrant to passenger rail not wishing to negotiate with Amtrak or freight railroads for track access must either have a prior affiliation with an existing freight railroad (as with All Aboard Florida) or must plan to construct its own tracks (as with Texas Central). Congress could re-impose some obligation to accommodate passenger service on freight railroads. The freight rail industry would likely be opposed to such a step. Appendix A. Federally Designated HSR Corridors Appendix B. New, Improved, and Planned Intercity Passenger Rail Lines

The federal government has been involved in preserving and improving passenger rail service since 1970, when the bankruptcies of several major railroads threatened the continuance of passenger trains. Congress responded by creating Amtrak—officially, the National Railroad Passenger Corporation—to preserve a basic level of intercity passenger rail service, while relieving private railroad companies of the obligation to maintain a business that had lost money for decades. In the years since, the federal government has funded Amtrak and, in recent years, has funded passenger-rail efforts of varying size and complexity through grants, loans, and tax subsidies. Efforts to improve intercity passenger rail can be broadly grouped into two categories: incremental improvement of existing services operated by Amtrak and implementation of new rail service where none currently exists. Efforts have been focused on identifying corridors where passenger rail travel times would be competitive with driving or flying (generally less than 500 miles long) and where population density and intercity travel demand create favorable conditions for rail service. Improving existing routes: On the busy Northeast Corridor line owned by Amtrak, several projects to modernize or extend the life of existing infrastructure have been completed using federal grants overseen by the Federal Railroad Administration (FRA). Amtrak has also received annual appropriations above authorized levels for use on the Northeast Corridor in recent years, but proposed projects to add capacity or reduce trip times require a level of investment that outstrips existing options for passenger rail funding. Federal grants have enabled state-supported routes off the Northeast Corridor to add additional trains per day and/or to reduce trip times (whether by increasing speeds or rerouting trains onto more direct alignments). Some grant funds have also preserved service on Amtrak's long-distance lines, which account for under 15% of ridership but incur the largest operating subsidies. State-supported and long-distance routes generally operate over tracks owned and maintained by freight railroads (called "host" railroads), which can interfere with existing service and complicate plans to add trains to already congested freight lines. Interference by freight trains has been cited by Amtrak as a major contributor to its trains' poor on-time performance, although freight railroads sometimes dispute this. A federal law passed in 2008 was designed to hold host railroads to new performance standards, but has been the subject of court challenges for nearly a decade. While legal issues surrounding on-time performance standards may be resolved in the short term, on-time performance has fallen from its system-wide high of 80% (four trains out of five arriving at all stops on time) achieved in 2012 and has been slow to rebound. New rail services: Amtrak has partnered with several states to extend existing routes beyond their former termini to serve new stations, sometimes using additional federal grant money. A high-profile project to build a truly high-speed rail system in California was awarded nearly $4 billion out of the roughly $10 billion appropriated for intercity rail projects in 2009-2010, but projected costs exceed earlier estimates and current funding is sufficient to build only an initial segment. The Trump Administration is now seeking the return of some federal grants. A smaller and less technically complex project to introduce new rail service connecting Chicago, IL, and Iowa City, IA, received federal funding but was delayed at the state level, and it is not clear when or if it will be completed. Meanwhile, several efforts are under way in the private sector to bring intercity passenger rail to major urban corridors. One of these, the Brightline service in Florida, has already begun serving Miami and West Palm Beach on a line that will eventually reach Orlando. While privately funded and operated, these projects do benefit from public assistance in other ways, as Brightline was allowed to issue tax-subsidized qualified private activity bonds to finance construction. Pilot programs to allow private railroads to compete for the right to serve existing Amtrak routes have been less successful. Rail programs were included in the most recent surface transportation authorization, which expires at the end of FY2020. Issues in reauthorization include whether and how to fund plans to build new infrastructure for improved rail services, especially on the federally owned Northeast Corridor; federal support for operating intercity rail services; the process by which rail lines are planned; the obligations of freight railroads to carry passenger trains; and whether other opportunities exist for the private sector to build or operate passenger rail services.

crs_R45804

crs_R45804_0

<1. Background> In recent years, the Trump Administration and Congress have grappled with how to address the substantial number of migrants from the Northern Triangle countries of El Salvador, Guatemala, and Honduras arriving to the U.S. Southwest border. Many observers have criticized what they label as "catch and release," a colloquial phrase used to describe the process by which apprehended asylum seekers who lack valid documentation are subsequently released into the U.S. interior while they await their immigration hearings. This occurs because of growing backlogs in the immigration court system leading to wait times for immigration hearings now often lasting two years or more, and a lack of appropriate detention space for families due to the limitations imposed by the Flores Settlement Agreement, which restricts the government's ability to detain alien minors. Such observers argue that many apprehended aliens who are released into the United States do not appear for their immigration hearings and become part of the unlawfully present alien population. In light of these circumstances, Department of Homeland Security (DHS) Alternatives to Detention (ATD) programs are generating increased congressional interest as a way to monitor and supervise foreign nationals who are released while awaiting their immigration hearings. Proponents of ATD programs cite their substantially lower daily costs compared with detention, the high compliance rates of ATD participants with immigration court proceedings, and what they characterize as a more humane approach of not detaining low-flight-risk foreign nationals, many of whom are asylum applicants (particularly family units). Critics contend that ATD programs provide opportunities for participants to abscond (e.g., evade removal proceedings and/or orders) and create incentives for migration by allowing people to live in the United States for extended periods while awaiting the resolution of their case. They also question the effectiveness of these types of monitoring programs as a removal tool (i.e., as a means to remove participants ordered removed from the United States). DHS, for its part, states that nothing compares to detention for ensuring compliance. However, existing capacity to hold aliens is limited. Immigration statistics indicate that while the total number of individuals apprehended at the Southwest border has generally declined over the past two decades, the demographic profile of those apprehended has shifted toward a population more likely to be subject to detention. Historically, most unauthorized aliens apprehended at the Southwest border have been adult Mexican males who are considered to be "economic" migrants because they are primarily motivated by the opportunity to work in the United States, and who can be more easily repatriated without requiring detention. However, over the past five years, apprehensions of aliens from the Northern Triangle countries many of whom are reportedly fleeing violence and seeking asylum in the United States have exceeded those from Mexico. Since 2017, U.S. Customs and Border Protection (CBP) has reported a sharp increase in the number of apprehensions at the Southwest border, especially among members of family units and unaccompanied alien children (UAC). Together, persons in family units and UAC currently make up more than two-thirds of apprehensions. In May 2018, the number of apprehensions by the U.S. Border Patrol plus the number of aliens determined inadmissible by CBP's Office of Field Operations (OFO) totaled 22,000; in April 2019, that number was 100,569, a 357% increase. In contrast, the number of single adults who were apprehended or found inadmissible rose from 24,493 to 43,637, a 46% increase, during the same time period. Foreign nationals from the Northern Triangle are requesting asylum at high rates that are DHS officials say are overwhelming the ability of federal agencies to process their detention, adjudication, and removal. <2. Laws Governing Aliens Arriving at the U.S. Border> The U.S. Border Patrol is responsible for immigration enforcement at U.S. borders between ports of entry (POEs). CBP's Office of Field Operations (OFO) handles the same responsibilities at the POEs. Foreign nationals seeking to enter the United States may request admission legally at a POE. In some cases, aliens attempt to enter the United States illegally, typically between POEs on the southern border. If apprehended, they are processed and detained briefly by Border Patrol; placed into removal proceedings; and, depending on the availability of detention space, either transferred to the custody of Immigration and Customs Enforcement (ICE) or released into the United States. Removal proceedings take one of two forms (streamlined or standard) depending on how the alien attempted to enter the United States, his/her country of origin, whether he/she is an unaccompanied child or part of an arriving family unit, and whether he/she requests asylum. If the alien is determined by an immigration officer to be inadmissible to the United States because he/she lacks proper documentation or has committed fraud or willful misrepresentation in order to gain admission, the alien may be subject to a streamlined process known as expedited removal. Expedited removal allows for the alien to be ordered removed from the United States without any further hearings or review. UAC, however, are not subject to expedited removal. Instead, if they are subject to removal, they are placed in standard removal proceedings and transferred to the Department of Health and Human Services' (HHS') Office of Refugee Resettlement (ORR) pending those proceedings. Although most aliens arriving in the United States without valid documentation are subject to expedited removal, they may request asylum, a form of relief granted to foreign nationals physically present within the United States or arriving at the U.S. border who meet the definition of a refugee. During CBP's initial screening process, if the alien indicates an intention to apply for asylum or a fear of persecution in his/her home country, the alien is interviewed by an asylum officer from DHS's U.S. Citizenship and Immigration Services (USCIS) to determine whether she/he has a "credible fear of persecution." If the alien establishes a credible fear, she/he is placed into standard removal proceedings under Immigration and Nationality Act (INA) 240 and may pursue an asylum application at a hearing before an immigration judge. Those who receive a negative credible fear determination may request that an immigration judge review that finding. If the immigration judge overturns the negative credible fear finding, the alien is placed in standard removal proceedings; otherwise, the alien remains subject to expedited removal and is usually deported. Aliens may be detained or granted parole while in standard removal proceedings. During these proceedings, immigration judges within the Department of Justice's (DOJ's) Executive Office for Immigration Review (EOIR) conduct hearings to determine whether a foreign national is subject to removal or eligible for any relief or protection from removal. While immigration judges have the authority to make custody decisions, ICE makes the initial decision whether to detain or release the alien into the United States pending removal proceedings. Most asylum seekers who are members of family units are currently being released into U.S. communities to await their immigration hearings. <3. Detention in the Immigration System> The INA authorizes DHS to arrest, detain, remove, or release foreign nationals subject to removal. Enforcement and Removal Operations (ERO) is the office within ICE that is charged with detention and removal of aliens from the United States. Generally, aliens may be detained pending removal proceedings, but detention is discretionary if the alien is not subject to mandatory detention. Detention is mandatory for certain classes of aliens (e.g., those convicted of specified crimes) with no possibility of release except in limited circumstances. During the intake process, an ERO officer uses the ICE Risk Classification Assessment (RCA), a software tool that attempts to standardize custody decisions across all ERO offices, to evaluate whether a foreign national should be detained or released on a case-by-case basis. The factors used to make the detention decision include, but are not limited to, criminal history, alleged gang affiliation, previous compliance history, age (must be at least 18), community or family ties, status as a primary caregiver or provider to family members, medical conditions, or other humanitarian conditions. Typically, an alien may be released from ICE custody on an order of recognizance, bond, or parole on humanitarian grounds. For example, aliens initially screened for expedited removal who request asylum are generally subject to mandatory detention pending their credible fear determinations, and, if found to have a credible fear, pending their standard removal proceedings; however, DHS has the discretion to parole the alien into the United States pending those proceedings. Pursuant to a court settlement agreement, alien minors may be detained by ICE for only a limited period, and must be released to an adult sponsor or a non-secure, state licensed child welfare facility pending their removal proceedings. Due to these legal restrictions and a lack of appropriate facilities for family units, DHS typically releases family units with accompanying minors, if they are subject to removal, pending their removal proceedings because there are not enough licensed shelters available to detain the number of family units arriving at the Southwest border. Thus, if family units entering the United States request asylum and receive a positive credible fear determination, they typically will not be detained throughout their removal proceedings. In addition, as noted previously, UAC are generally transferred to the custody of ORR pending the outcome of their removal proceedings. Thus, like family units, UAC typically are released from DHS custody and placed in the non-detained docket during those proceedings. All aliens released from ICE custody into the U.S. interior are assigned to the non-detained docket and must report to ICE at least once a year. ICE's non-detained docket currently has approximately 3 million cases. Some portion of those in the non-detained docket are enrolled in an ATD monitoring program, but all aliens in the non-detained docket are awaiting a decision on whether they should be removed from the United States. The number of initial "book-ins" to an ICE detention facility (by ICE and CBP combined) has exceeded 300,000 annually in recent years, peaking in 2014 at 425,728, and reaching nearly 400,000 in FY2018. Even though there were nearly 400,000 admissions to detention in FY2018, the number of book-ins does not describe the population of aliens who are in a detention facility on any given day. Instead, the number of aliens in detention on a given day is determined by the number of book-ins, the length of stay in detention, and the number of beds authorized by Congress. In FY2019, the number of detention beds authorized by Congress was set at 45,274, up nearly 5,000 from the previous year, and more than 10,000 greater than FY2016. ICE reported that 54,082 aliens were currently detained on June 22, 2019. <4. ICE Caseload Size and ATD Participants> Figure 1 shows the ICE caseload, which consists of all detained and non-detained aliens that ICE must supervise as part of its docket management responsibilities. As mentioned above, non-detained aliens include those released from ICE custody on various types of orders, including orders of recognizance, parole, and bond, and those who were never detained. The ICE non-detained docket also includes aliens in state or federal law enforcement custody and at-large aliens with final orders of removal (e.g., fugitives). Those released from ICE custody are required to report to ERO at least once annually, but the frequency is at the discretion of ERO. The non-detained docket caseload is monitored as aliens move through immigration court proceedings until their cases close. Aliens in ATD have secured a legal means of release (i.e., bond or parole); participating in ATD is a condition of their release. As noted, ICE's full non-detained caseload was approximately 3 million foreign nationals on June 22, 2019. On that same date, ICE reported that there were 54,082 detained aliens, less than 2% of the entire ICE caseload. Included in the ICE non-detained caseload are 101,568 aliens, approximately 3% of all cases (See Figure 1 ), enrolled in ISAPIII. The goal of the ICE ATD program is to monitor and supervise certain aliens in removal proceedings more frequently relative to those released with annual supervision. Those in ATD are required to report to ERO annually as well, but they are also subject to varying degrees of supervision and monitoring at more frequent intervals on a case-by-case basis (see description of " Alternatives to Detention (ATD) Programs "). More broadly, DHS maintains that ATD programs should not be considered removal programs or a substitute for detention. Instead, according to DHS, these programs have enhanced ICE's ability to monitor more intensively a subset of foreign nationals released into communities. <5. Alternatives to Detention (ATD) Programs> <5.1. Intensive Supervision Appearance Program III (ISAP III)> ICE's Intensive Supervision Appearance Program III (ISAP III) is the third iteration of the ATD program started by the agency in 2004. It is the only ATD program currently operated by ERO. To be eligible for this program, participants must be 18 years of age or older and at some stage of their removal proceedings. The most recent publicly available data show that there were 101,568 active participants enrolled in ISAP III, which is a 283% increase over the 26,625 enrollees in FY2015. Those enrolled in ISAP III are supervised largely by BI, Inc., a private company that provides ICE with case management and technology services in an attempt to ensure non-detained aliens' compliance with release conditions, attendance at court hearings, and removal. ERO ATD officers determine case management and supervision methods on a case-by-case basis. Case management can include a combination of face-to-face and telephonic meetings, unannounced visits to an alien's home, scheduled office visits by the participant with a case manager, and court and meeting alerts. Technology services may include telephonic reporting (TR), GPS monitoring (via ankle bracelets), or a relatively new smartphone application (SmartLINK) that allows enrolled aliens to check in with their case workers using facial recognition software to confirm their identity at the same time that their location is monitored by the GPS capabilities of the smartphone. As of June 22, 2019, approximately 42% of active participants in the ISAP III program used telephonic reporting, 46% used GPS monitoring, and 12% used SmartLINK. According to a 2014 Government Accountability Office (GAO) report, enrollees in ICE ATD programs are closely supervised at the beginning of their participation. If they are compliant with the terms of their plans in the first 30 days, the level of supervision may be lowered. Various compliance benchmarks are tracked in order to make decisions about whether supervision should be reduced or increased. If a final order of removal is issued, supervision usually increases until resolution of the case. ICE typically ends an alien's participation in the program when they are removed, depart voluntarily, or are granted relief from removal through either a temporary or permanent immigration benefit. <5.1.1. Who is in the ISAP III program?58> Statistics obtained from ERO show that of the 87,384 enrollees in ISAP III on August 31, 2018, approximately 61% were female and 56% were members of family units (at least one adult with at least one child). Approximately 61% of participants were between the ages of 18 and 34, another 38% were 35-54, and 2% were 55 and older. Seventy-one percent of ISAP III enrollees were from the Northern Triangle countries of Guatemala, Honduras, and El Salvador ( Figure 2 ). Participants from Mexico made up 17% of the total, and the remaining 12% were from all other countries ( Figure 2 ). Ninety percent had no record of a criminal conviction ( Figure 3 ). Although all foreign nationals in ISAP III are in removal proceedings, most (86%) did not yet have a final order of removal on the date that these data were made available. Fourteen percent had a final order of removal; 19% of these aliens had appealed their removal order. <5.1.2. Evaluating ATD> In 2014, GAO evaluated ISAP III's predecessor program, ISAP II, during the FY2011 to FY2013 period. This iteration of the program had two supervision options, "full service" and "technology only," thus the results of the GAO evaluation of ISAP II have limited utility for better understanding the effectiveness of ISAP III (which has not been similarly evaluated). The GAO evaluation of ISAP II noted that ICE had established two program performance measures to assess the effectiveness of the program: ensuring compliance with court appearance requirements and securing removals from the United States. However, GAO stated that limitations in data collection interfered with its ability to assess overall program performance. GAO found high rates of compliance with court appearances among full service ISAP II enrollees in the FY2011-FY2013 time period: 99% of participants appeared at their court hearings, dropping to 95% if it was their final removal hearing. Similar data was not collected for participants enrolled in the technology-only component, which amounted to 39% of the total participants in 2013. GAO subsequently reported that ICE, through its contractor, began collecting court compliance data for approximately 88% of the total participants, who were managed by either ICE or the contractor. According to ICE officials, as reported by GAO, ICE added a performance measure based on removals in 2011 because "the court appearance rate had consistently surpassed 99 percent and the program needed to establish another goal to demonstrate improvement over time." GAO found that ICE met its ISAP II program goal for the number of removals for FY2012 and FY2013. For each of these years, the removal goal was a 3% increase in the number of removals from the previous fiscal year. In FY2012, the removal goal was 2,815, and ICE met it by removing 2,841 program participants from the United States. In FY2013, the removal goal was increased to 2,899, and ICE removed 2,901 program participants from the United States. Even though GAO was able to report on ISAP II removal and court compliance performance measures, it determined that data collection limitations hampered its ability to fully evaluate ISAP II's performance. For example, as described above, data collection on court appearance rates was inconsistent and incomplete for over one-third of program participants. ICE's performance measures were based on data collected at the time of an alien's termination from ISAP II, but ICE could not determine whether the alien complied with all of the terms of his/her release while participating in the program or absconded, due to incomplete record keeping and limited resources to maintain contact. GAO concluded that these performance measures and rates provided an incomplete picture of enrollees who were terminated from ISAP II prior to receiving final disposition of immigration proceedings, making it impossible to know how many were removed, departed voluntarily, or absconded. <5.2. The Family Case Management Program (FCMP)> The Family Case Management Program (FCMP), which operated from January 2016 until June 2017, was an ATD pilot program for families with vulnerabilities not compatible with detention. An ICE review of the program published in March 2017 showed that although the rates of compliance for the FCMP were consistent with other ICE monitoring options, FCMP daily costs per family unit were higher than ISAP III. The program was discontinued. The FCMP prioritized families with young children or pregnant or nursing women, individuals with medical or mental health considerations (including trauma), and victims of domestic violence. The program was designed to increase compliance with immigration obligations through a comprehensive case management strategy supported by established community-based organizations (CBOs). A private contractor, GEO Care, Inc., entered into agreements with local CBOs that provided case management and other services. The program operated as follows. Each family was assigned to a case manager and offered three sets of services. First, participants were offered "initial stabilization" services, such as referrals for legal assistance, medical and food assistance, and English language training, based on the premise that stable families are more likely to comply with immigration requirements. Second, participants were required to attend legal orientation programs, which included presentations about immigration proceedings, obligations of participants, and legal representation. These programs were also designed to orient enrollees in understanding basic U.S. laws covering issues such as child supervision, domestic violence, and driving while intoxicated. Third, the program was specifically intended to reinforce information pertinent to aliens' cases through frequent reporting requirements, typically monthly office and home visits with case managers and monthly appointments with ERO. Ongoing relationships with case workers were developed to build trust in the immigration system and set clear expectations of the legal process, as well as to provide planning assistance for the eventuality of return, removal, or an immigration benefit that would offer relief from removal. Individualized and interactive oversight of cases and a flexible monitoring plan (similar to ISAP III) were implemented to provide a range of supervision options supervision was typically high while families stabilized their situations, and lower (conducted by ERO only) once they were considered stabilized. <5.2.1. Who was enrolled in the FCMP?> The program enrolled 952 heads of households with 1,211 children, for a total of 2,163 individuals in five metropolitan areas around the country. According to a 2018 ICE internal close-out report, most of the families in the program (92%) were headed by women; and most of the participants (95%) were from the Northern Triangle countries El Salvador (44%), Honduras (32%), and Guatemala (19%) ( Figure 4 ). Overall, 55% of the program participants were children under the age of 18; 21% of children were under age 6. Twenty-one percent of program participants were between the ages of 26 and 35, 13% were 18-25, 9% were 36-45, and 2% were 46 or older ( Figure 5 ). All participants enrolled in the FCMP were individually assessed for vulnerabilities and needs. Seventy-three percent had experienced some kind of trauma, 11% were victims of domestic violence, 6% were pregnant, 6% were nursing, and 4% had mental health concerns ( Figure 6 ). <5.2.2. Evaluating FCMP> ICE conducted an evaluation of the FCMP that focused on three metrics: attendance at ERO appointments, attendance at appointments with community-based organizations, and attendance at court hearings. Data on compliance of the relatively small number of families that completed the program prior to its termination reported it to be high across all locations, with 99% attendance at immigration court proceedings and 99% compliance with ICE monitoring requirements. About 4% of program participants absconded during the life of the program. In total, 65 families left the program: 7 were removed from the United States by ICE, 8 left the country on their own, 9 were granted some form of immigration relief, and 41 absconded. The rest of the families remained in the program; however, because of its short duration the ICE evaluation of the FCMP is limited the majority of the participants were still in immigration proceedings when it was terminated. It is unknown what the program's success rates would have been if participants were allowed to remain in the program through the final outcome of their cases. When ICE discontinued the program in June 2017, the agency stated that rates of compliance for the FCMP were consistent with its other ATD program (i.e., ISAP III). In addition to compliance rates, another important factor in evaluating the program is its cost. The FCMP cost approximately $38.47 per family per day in FY2016, versus approximately $4.40 per person per day for ISAP III. By comparison, family detention costs an estimated $237.60 per day and adult detention in the same cities that the FCMP operated in cost $79.57 on average per day in FY2016. The FCMP is more expensive than ISAP III due to the comprehensive case management and services available to its participants, the more vulnerable family populations targeted, and the smaller caseload per case manager (which allowed for more time with each participant household). For example, FCMP case managers were expected to have a high level of experience, used outreach (not just referrals) to connect participants with community resources, had Spanish language ability or accessed interpretation services, and developed individualized plans for families, including children. The evaluation indicated that FCMP families made use of the services offered to them: the most common referrals made by case workers were for legal services, medical attention, and food aid. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) includes $30.5 million to resume the FCMP. The conference report states that the FCMP "can help improve compliance with immigration court obligations by helping families access community-based support of basic housing, healthcare, legal and educational needs." The conference report also directs ICE to prioritize the use of ATD programs, including the FCMP, for families. In addition, the report instructs ICE to brief the relevant committees, within 90 days of the date of enactment, on a plan for a program within the FCMP managed by nonprofit organizations that have experience in connecting families with community-based services. The ICE ERO Detention Management website mentions a new program, Extended Case Management Services (ECMS). It states, "as instructed by Congress, ICE recently incorporated many of the Family Case Management Program (FCMP) principles into its traditional ATD program. These principles were incorporated into the current ATD ISAP III through a contract modification and are known as Extended Case Management Services (ECMS). These same services are available through the ECMS modification as they were available under FCMP with two distinct differences: ECMS is available in a higher number of locations and available at a fraction of the cost. While ECMS is a new program, ICE continues to identify and enroll eligible participants." As of June 22, 2019, ICE reported that 57 family units and 59 adults are enrolled in ECMS. <6. Why have alternatives to detention?> Supporters of ATD programs cite several reasons for their use. First, the number of foreign nationals currently being taken into custody far exceeds the capacity of existing detention facilities. As noted above, in FY2018 the number of book-ins to ICE facilities was nearly 400,000. As of July 12, 2018, ICE's detention capacity was approximately 45,700 beds; of these, approximately 2,500 were for family units housed in family residential centers. Second, many foreign nationals who are in removal proceedings are not considered security or public safety threats, nor are they an enforcement priority as outlined in guidance to DHS personnel regarding immigration enforcement. Third, some foreign nationals who are found deportable or inadmissible may not be removed because their countries of citizenship refuse to confirm an individual's identity and nationality, issue travel documents, or otherwise accept their physical return. A U.S. Supreme Court ruling from 2001, Zadvydas v. Davis , limits the federal government's authority to indefinitely detain aliens who have been ordered removed and who have no significant likelihood of removal in the reasonably foreseeable future. Those who promote using ATD programs also cite the relatively low cost compared with detention. ICE spent an average of $137 per adult per day in detention nationwide in FY2018. The cost of enrolling foreign nationals in the ISAP III program depends on the method of management, but the average daily cost per participant in FY2018 (through July 2018) was $4.16. GAO utilized two methods of determining the cost of ATD (ISAP II) relative to detention in FY2013 (at that time, the average daily cost of ISAP II was $10.55, while daily detention was an average of $158). First, given the average daily costs of ATD and detention, and the average length of time an alien spent in detention awaiting an immigration judge's final decision, GAO found that the cost of maintaining an enrollee in ISAP II would surpass the costs of detention only if the enrollee were in the program for 1,229 days, which would be 846 days longer than the average number of days a participant typically spent in it. Second, given the average cost of ATD and detention, and the average length of time an alien spent in detention regardless of whether a final decision on her/his case was rendered, GAO determined an individual would have to spend, on average, 435 days in ISAP II before they exceeded the cost of the average length of detention (29 days in FY2013). There are also arguments against using ATD programs. Of primary concern is that the programs, in comparison to detention, create opportunities for aliens in removal proceedings to abscond and become part of the unauthorized population who are not allowed to lawfully live or work in the United States. Because immigration judges must prioritize detained cases, ATD enrollees must often wait several years before their cases are heard, during which time they may abscond. They may also fall out of contact with ERO for other reasons. For example, an alien may move within the United States and fail to provide updated contact information to ERO. If they do not receive communication from ICE or the immigration court system, they could miss court dates that have changed in the interim. If they fail to show up for a removal hearing, for example, they can be ordered removed in absentia , which would render them inadmissible for a certain period (at least 5 years if they are an arriving alien, and at least 10 years for all other aliens) and ineligible for certain forms of relief from removal for 10 years. Another concern is that asylum-seeking families are often placed into ATD, and this creates incentives for others to travel to the United States with children, request asylum, and receive similar conditions of release into the United States. DHS has expressed concern over adults using children as a "human shields" to avoid detention after illegally entering the United States. Those without bona fide family relationships may travel with children and file fraudulent claims or do harm to children. Recent reports of children being "recycled" crossing into the United States with an adult or a family, only to be returned across the border to travel with another migrant has prompted DHS to take biometric data, such as fingerprints, from children. Additional arguments against using ATD programs include that reliable measures of their effectiveness are limited, as discussed above in " Evaluating ATD " and "Evaluating FCMP," and for the FCMP pilot, that the feasibility of scaling up a small pilot program to accommodate the large number of families requesting asylum remains an open question.

Since FY2004, Congress has appropriated funding to the Department of Homeland Security's (DHS's) Immigration and Customs Enforcement (ICE) for an Alternatives to Detention (ATD) program to provide supervised release and enhanced monitoring for a subset of foreign nationals subject to removal whom ICE has released into the United States. These aliens are not statutorily mandated to be in DHS custody, are not considered threats to public safety or national security, and have been released either on bond, their own recognizance, or parole pending a decision on whether they should be removed from the United States. Congressional interest in ATD has increased in recent years due to a number of factors. One factor is that ICE does not have the capacity to detain all foreign nationals who are apprehended and subject to removal, a total that reached nearly 400,000 in FY2018. (ICE reported an average daily population of 48,006 aliens in detention for FY2019, through June 22, 2019.) Other factors include recent shifts in the countries of origin of apprehended foreign nationals, increased numbers of migrants who are traveling with family members, the large number of aliens requesting asylum, and the growing backlog of cases in the immigration court system. Currently, ICE's Enforcement and Removal Operations (ERO) runs an ATD program called the Intensive Supervision Appearance Program III (ISAP III). On June 22, 2019, program enrollment included more than 100,000 foreign nationals, who are a subgroup of ICE's broader "non-detained docket" of approximately 3 million aliens. Those in the non-detained docket include individuals the government has exercised discretion to release—for example, they are not considered a flight risk or there is a humanitarian reason for their release (as well as other reasons). (Others who are not detained include aliens in state or federal law enforcement custody and absconders with a final order of removal.) Individuals in the non-detained docket, and not enrolled in the ISAP III program, receive less-intensive supervision by ICE. Those in ISAP III are provided varying levels of case management through a combination of face-to-face and telephonic meetings, unannounced home visits, scheduled office visits, and court and meeting alerts. Participants may be enrolled in various technology-based monitoring services including telephonic reporting (TR), GPS monitoring (location tracking via ankle bracelets), or a recently introduced smart phone application (SmartLINK) that uses facial recognition to confirm identity as well as location monitoring via GPS. From January 2016 to June 2017, ICE also ran a community-based supervision pilot program for families with vulnerabilities not compatible with detention. The Family Case Management Program (FCMP) prioritized enrolling families with young children, pregnant or nursing women, individuals with medical or mental health considerations (including trauma), and victims of domestic violence. The program was designed to increase compliance with immigration obligations through a comprehensive case management strategy run by established community-based organizations. FCMP offered case management that included access to stabilization services (food, clothing, and medical services), obligatory legal orientation programing, and interactive and ongoing compliance monitoring. An ICE review of FCMP in March 2017 showed that the rates of compliance for the program were consistent with other ICE monitoring options. The program was discontinued due to its higher costs as compared to ISAP III. Even with the higher costs, there is considerable congressional interest in the effectiveness of FCMP as a way to maintain supervision for families waiting to proceed through the backlogged immigration court system. While DHS upholds that ISAP III is neither a removal program nor an effective substitute for detention, it notes that the program allows ICE to monitor some aliens released into communities more closely while their cases are being resolved. Supporters of ATD programs point to their lower costs compared to detention on a per day rate, and argue that they encourage compliance with court hearings and ICE check-ins. Proponents also mention the impracticalities of detaining the entire non-detained population of roughly 3 million aliens. The primary argument against ATD programs is that they create opportunities for participants to abscond (e.g., evade removal proceedings and/or orders). Other concerns include whether the existence of the programs provides incentives for foreign nationals to migrate to the United States with children to request asylum, in the hope that they will be allowed to reside in the country for several years while their cases proceed through the immigration court system, or that it provides incentives—such as community release—for adults without bona fide family relationships to travel with children and file fraudulent asylum claims or do children harm.

crs_R45943

crs_R45943_0

<1. Overview and History> Agriculture-based renewable energy can take several forms, including biofuels such as corn-based ethanol or soy-based biodiesel, wind-driven turbines located on farmland or in rural areas, anaerobic digesters that convert animal waste into methane and electric power, or biomass harvested for burning as a processing fuel or to generate heat as part of an industrial activity. Since the late 1970s, U.S. policymakers at both the federal and state levels have adopted a variety of incentives, regulations, and programs to encourage the production and use of agriculture-based renewable energy (mostly biofuels). Over the years, the two most widely used biofuels ethanol produced primarily from corn starch and biodiesel produced primarily from soybean oil have received significant federal support in the form of tax incentives, loans and grants, and regulatory programs. Many of these support programs originate in legislation outside of the farm bill. For instance, the Energy Tax Act of 1978 ( P.L. 95-618 ) provided an exemption for ethanol from the excise tax on motor fuels. By executive order the Bioenergy Program was established in 1999 and in FY2001 began making payments from the U.S. Department of Agriculture's (USDA's) Commodity Credit Corporation (CCC) to eligible producers of ethanol and biodiesel based on year-to-year production increases in these fuels. The Biomass Research and Development Act of 2000 ( P.L. 106-224 ) directed USDA and the U.S. Department of Energy (DOE) to cooperate and coordinate research and development activities for biobased industrial products, including biofuels. The 2002 farm bill ( P.L. 107-171 ) authorized several new biofuel programs and added an energy title, Title IX. The 2008 farm bill ( P.L. 110-246 ) subsequently extended and expanded the programs promoting renewable energy, emphasizing particularly those utilizing biomass feedstock. The 2014 farm bill ( P.L. 113-79 ) extended the programs through FY2018. The 2018 farm bill, the Agriculture Improvement Act of 2018 ( P.L. 115-334 ), continues federal support for the programs through FY2023. Motivations cited for these legislative initiatives include energy security concerns, reduction of greenhouse gas emissions from fossil fuel combustion, and raising domestic demand for U.S.-produced farm products. Congress has enacted temporary tax incentives for biofuels, specifically tax credits for biodiesel and second generation (formerly cellulosic) biofuel and a tax credit for small producers. Some of these temporary tax incentives have been extended numerous times. Most recently, the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123 ) retroactively extended the tax incentive for biodiesel and renewable diesel of $1.00/gallon through the end of 2017. In addition to these types of tax incentives, the Renewable Fuel Standard (RFS) mandates a minimum level of renewable fuel usage. Historically, there has been a revenue cost associated with tax incentives for ethanol and biofuels. The Volumetric Ethanol Excise Tax Credit (VEETC) provided a tax credit of $0.45/gallon before it expired at the end of 2011. From FY1980 through FY2013, excise tax credits and incentives for ethanol reduced federal tax revenue by a cumulative estimated total of $46.9 billion. In FY2011, the fiscal year immediately preceding the VEETC's expiration, its cost was an estimated $6.5 billion. Excise tax incentives for biodiesel producers have reduced federal excise tax revenue by an estimated $17.3 billion between FY2008 and FY2018. In FY2018, excise tax receipts were reduced by $3.4 billion due to biodiesel producer credits (the reduction in FY2018 excise tax receipts is associated with tax credit claims made for biodiesel production in calendar year 2017). Title IX of the 2018 farm bill continues long-standing congressional support for the production of renewable energy from agriculturally sourced materials. This report focuses on those policies contained in the 2018 farm bill that support agriculture-based renewable energy. The introductory sections of this report briefly describe how USDA bioenergy policies evolved and how they fit into the larger context of U.S. biofuels policy. Then, each of the bioenergy provisions of the 2018 farm bill are defined in terms of their function, goals, administration, funding, and implementation status. In an appendix at the end of this report, Table A-1 presents data on 2018 farm bill budgetary authority for energy provisions, while Table A-2 , Table A-3 , and Table A-4 present the original budget authority for Title IX programs under the previous 2014 farm bill, the 2008 farm bill, and the 2002 farm bill, respectively. <1.1. Non-USDA/Non-Farm Bill Programs and Authorizations> Renewable energy production plays a key role not just in agricultural policy, but also in energy, tax, and environmental policy. As a result, many of the federal programs that support renewable energy production in general, and agriculture-based energy production in particular, are outside the purview of USDA and have origins outside of omnibus farm bill legislation. For example, the three principal federal biofuels policies of the past decade were all established outside of farm bills: The Renewable Fuel Standard (RFS) mandates an increasing volume of biofuels use and has its origins in the Energy Policy Act of 2005 ( P.L. 109-58 ). The RFS was expanded in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140 ) and divided into four distinct, but nested biofuel categories total, advanced, cellulosic, and biodiesel each with its own mandated volume. The VEETC, originally established in the American Jobs Creation Act of 2004 ( P.L. 108-357 ), provided a tax credit that varied in value over the years. It was $0.45 per gallon of pure ethanol blended with gasoline when it expired on December 31, 2011. The ethanol import tariff was intended to offset the ethanol tax incentives and was originally established by the Omnibus Reconciliation Act of 1980 ( P.L. 96-499 ). The ethanol import tariff also expired on December 31, 2011. In addition to the RFS, VEETC, and the ethanol import tariff, several other tax credits that originated outside of farm bills were available for biodiesel production as well as for small producers (less than 60 million gallons per year per plant) of ethanol and biodiesel. A substantial number of federal programs also support renewable energy sources other than biofuels. In addition to federal programs, many states offer additional support to biofuels producers, blenders, and consumers. An awareness of the non-USDA federal programs is important for appreciating the role envisioned for the energy title of both the 2018 farm bill and previous farm bills. The farm bill programs were designed to provide incentives for the research and development of new agriculture-based renewable fuels, especially second-generation biofuels (those based on non-food crop biomass such as cellulose and algae), and to expand their distribution and use. A summary of the evolution of these programs follows. <1.2. 2002 Farm Bill First Energy Title> The 2002 farm bill (Farm Security and Rural Investment Act of 2002; P.L. 107-171 ) was the first omnibus farm bill to explicitly include an energy title (Title IX). The energy title authorized grants, loans, and loan guarantees to foster research on agriculture-based renewable energy, to share development risk and to promote the adoption of renewable energy systems. Since enactment of the 2002 farm bill, interest in renewable energy has grown rapidly, due in large part to periods of steep increases in domestic and international petroleum prices and a dramatic acceleration in domestic biofuels production (primarily corn-based ethanol). <1.3. 2008 Farm Bill Refocus on Non-Corn-Based Biofuels> Annual U.S. ethanol production expanded rapidly between 2002 and 2007, rising from approximately 2 billion gallons to over 6.5 billion gallons during that period. Similarly, corn use for ethanol grew from an 11% share of the U.S. corn crop in 2002 to an estimated 23% share of the 2007 corn crop. During the 2008 farm bill debate, government and industry projections had ethanol's corn-use share rising rapidly, sparking concerns about unintended consequences of the policy-driven expansion of U.S. corn ethanol production. Dedicating an increasing share of the U.S. corn harvest to ethanol production evoked fears of higher prices for all grains and oilseeds that compete for the same land, which could lead to higher livestock feed costs, higher food prices, and lower U.S. agricultural exports. In addition, several environmental concerns emerged regarding water impacts, and the expansion of corn production onto nontraditional lands, including native grass and prairie land, among other things. In response, policymakers sought to refocus biofuels policy initiatives in the 2008 farm bill (the Food, Conservation, and Energy Act of 2008; P.L. 110-246 ) in favor of non-corn starch feedstock, especially cellulosic-based feedstock, by introducing a number of programs aimed at facilitating the production and use of bioenergy from nonfood feedstock. The 2008 farm bill became law six months after the enactment of the EISA. A key component of EISA was a significant expansion of the RFS, which in part mandates the increasing use of "advanced biofuels" (i.e., non-corn starch biofuels), whose minimum use was scheduled to increase from zero gallons in 2008 to 21 billion gallons by 2022. The energy provisions of the 2008 farm bill were intended to reinforce EISA's program goals via a further refocusing of federal incentives toward non-corn-based sources of renewable energy. These advanced biofuel goals in particular for the RFS have proven difficult to meet. <1.4. 2014 Farm Bill Extends Most Programs with New Funding> Funding for the majority of the energy programs from the 2008 farm bill expired at the end of FY2012 and lacked baseline funding going forward. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ) extended most of the renewable energy provisions of the 2008 farm bill and provided new mandatory funding, with some notable exceptions. Again, most of the 2014 farm bill energy programs lacked a mandatory funding baseline going forward beyond FY2018. The 2014 farm bill included some key changes to select programs including Section 9007, the Renewable Energy for America Program (REAP), which precludes the use of REAP funding for any mechanism for dispensing energy at the retail level (e.g., blender pumps). The 2014 farm bill repealed one program and two studies Section 9011, the Forest Biomass for Energy Program; Section 9013, the Biofuels Infrastructure Study; and Section 9014, the Renewable Fertilizer Study. Additionally, the 2014 farm bill did not address the Rural Energy Self-Sufficiency Initiative of the 2008 farm bill. <1.5. 2018 Farm Bill Less Mandatory Funding> The 2018 farm bill (Agriculture Improvement Act of 2018; P.L. 115-334 ) extends most of the 2014 farm bill energy title programs through FY2023 and provides new mandatory funding. It establishes one new program the Carbon Utilization and Biogas Education Program. It repeals one program and one initiative the Repowering Assistance Program and the Rural Energy Self-Sufficiency Initiative. A key point of the 2018 farm bill is that it provides less mandatory funding than previous farm bills for energy title programs. For instance, the 2018 farm bill energy title programs mandatory funding level ($375 million) is approximately 46% less than the mandatory funding provided in the 2014 farm bill ($694 million). On the other hand, the total discretionary authorization provided by the 2018 farm bill ($1.7 billion) is approximately 13% more than what was authorized in the 2014 farm bill ($1.5 billion) for the energy programs. However, most energy title programs did not receive discretionary appropriations under previous appropriation acts. The 2018 farm bill energy title programs are described in more detail in the section below entitled " Major Energy Provisions in the 2018 Farm Bill ." <2. Funding for Agriculture-Based Energy Programs> In general, two types of funding are authorized by Congress in a farm bill mandatory and discretionary. Some farm bill programs receiving mandatory funds are automatically funded at levels "authorized" in the farm bill unless Congress limits funding to a lower amount through the appropriations or legislative process. For many of these programs, mandatory funding is provided through the borrowing authority of USDA's Commodity Credit Corporation (CCC). The farm bill may also specify some discretionary funding as "authorized to be appropriated" such discretionary funding is actually determined each year through the annual appropriations process and may or may not reflect the funding level suggested in the authorizing legislation. <2.1. Funding Under the 2002 Farm Bill> The 2002 farm bill ( P.L. 107-171 ) provided mandatory funding of $801 million and identified discretionary authorizations of $294 million for the farm bill energy programs for FY2002-FY2007 ( Table A-4 ). The Section 9010 Continuation of the Bioenergy Program (7 U.S.C. 8108) which was the predecessor to the Bioenergy Program for Advanced Biofuels received approximately 75% of the mandatory appropriations. The Section 9006 Renewable Energy Systems and Energy Efficiency Improvements program (7 U.S.C. 8106) which became a part of REAP when it was created in the 2008 farm bill received approximately 15% of the mandatory appropriations. The entirety of the $294 million in discretionary authorizations went to Section 9008 Biomass Research and Development (26 U.S.C. 7624). <2.2. Funding Under the 2008 Farm Bill> The 2008 farm bill authorized slightly over $1.0 billion in mandatory funding and nearly $1.5 billion in discretionary appropriations to Title IX energy programs for FY2008-FY2012 ( Table A-3 ). Mandatory authorizations included $320 million for the Biorefinery Assistance Program, $300 million for the Bioenergy Program for Advanced Biofuels, and $255 million for the Rural Energy for America Program (REAP). The Biomass Crop Assistance Program (BCAP) was authorized to receive such sums as necessary (i.e., funding is open-ended and depends on program participation); however, limits were later set on BCAP outlays under the annual appropriations process beginning in FY2010. The $1.5 billion of discretionary funding authorization included $600 million for the Biorefinery Assistance Program, and $100 million for both the Bioenergy Program for Advanced Biofuels and REAP. However, actual discretionary appropriations through FY2012 to all Title IX energy programs were substantially below authorized levels. As regards mandatory funding, all of the bioenergy provisions of Title IX with the exception of Section 9010, the Feedstock Flexibility Program for Bioenergy Producers, which is authorized indefinitely had mandatory funding only for the life of the 2008 farm bill, FY2008 through FY2012. As a result, all of the bioenergy provisions in Title IX of the 2008 farm bill, with the exception of the Feedstock Flexibility Program for Bioenergy Producers ( 9010), expired on September 30, 2012. <2.2.1. Funding Under Continuing Resolutions for FY2013> The 112 th Congress did not complete action on any of the regular FY2013 appropriations bills during 2012. Instead, a continuing resolution (CR) for the first half of FY2013 ( P.L. 112-175 ) was signed into law on September 28, 2012. This was followed by a second CR to provide appropriations for the second half of FY2013 ( P.L. 113-6 ). The Rural Energy for America Program was the sole Title IX bioenergy program that received an appropriation of discretionary funds ($3.4 million) in FY2013. <2.2.2. Funding Under ATRA The 2008 Farm Bill Extension> Many of the 2008 farm bill programs were extended through September 30, 2013, by Section 701 of the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) signed into law by President Obama on January 2, 2013. Under ATRA, discretionary funding was authorized to be appropriated at the rate that programs were funded under the 2008 farm bill. <2.3. Funding Under the 2014 Farm Bill> The five-year reauthorization period (FY2014-FY2018) of the 2014 farm bill ( P.L. 113-79 ) contained a total of $694 million in new mandatory funding and authorized $1.5 billion to be appropriated for the various farm bill renewable energy programs ( Table A-2 ). Under the 2014 farm bill, Congress acted through annual appropriations bills to lower the amount of mandatory funding available to four of these programs (i.e., the Biorefinery Assistance Program, the Repowering Assistance Program, the Bioenergy Program for Advanced biofuels, and the Biomass Crop Assistance Program) and did not appropriate discretionary funding for most of these programs. Programs that did receive discretionary funding under the 2014 farm bill include the Rural Energy for America Program and the Rural Energy Savings Program. <2.4. Funding Under the 2018 Farm Bill> The 2018 farm bill reauthorizes the energy title programs for a five-year term, FY2019-FY2023. It contains $375 million in new mandatory funding and authorizes to be appropriated $1.7 billion ( Table A-1 ). Of the four farm bills since 2002, the 2018 farm bill gives the least amount of mandatory funding for energy title programs. The amount of discretionary authorization is comparable to what was provided in the 2014 farm bill. In short, under the 2018 farm bill, Congress has reduced the number of energy programs that receive mandatory funding, and reduced the amount of mandatory funding, while keeping both the number of discretionary programs and the discretionary funding similar to levels found in the 2014 farm bill. Further, some programs that received mandatory funding under the 2014 farm bill are now authorized to receive only discretionary funding under the 2018 farm bill (i.e., the Biodiesel Fuel Education Program, the Biomass Research and Development Initiative, and the Biomass Crop Assistance Program). Details of the funding levels provided in the 2018 farm bill and the 2014, 2008, and 2002 farm bills are provided in the discussion of individual provisions below and are summarized in the appendix tables. <3. Major Energy Provisions in the 2018 Farm Bill> Like the three preceding farm bills, the 2018 farm bill ( P.L. 115-334 ) contained a distinct energy title (Title IX) that extends many of the previous bioenergy programs. What follows is a summary of the bioenergy-related authorities found in the 2018 farm bill, including (where applicable) a brief description of each program, 2018 farm bill funding levels, and the status of program implementation, including any noteworthy legislative changes. This section provides a description for all sections listed under 7 U.S.C. Ch. 107 Renewable Energy Research and Development, which includes those sections that are under other titles of the 2018 farm bill. <3.1. 7 U.S.C. 8101: Definitions> The 2018 farm bill made three substantive modifications to bioenergy-related definitions as follows (7 U.S.C. 8101): 1. "biobased product" similar to prior law except it expands the term to include renewable chemicals; 2. "biorefinery" defined as a facility that converts renewable biomass or an intermediate ingredient or feedstock of renewable biomass into biofuels, renewable chemicals, or biobased products and may produce electricity; and 3. "renewable energy system " defined as a system that produces useable energy from a renewable source, including the distribution components necessary to move energy produced by the system to the initial point of sale, and other components and ancillary infrastructure such as a storage system, but not any mechanism for dispensing energy at retail (e.g., a blender pump). The first two modifications were designed to expand access to federal support for renewable chemicals and intermediate ingredients or feedstocks of renewable biomass, respectively. The last modification was designed to expand access to federal support for ancillary infrastructure (e.g., storage system) associated with a renewable energy system. <3.2. 7 U.S.C. 8102: Biobased Markets Program> Administered by: Rural Business and Cooperative Service, Rural Development Agency (RD), USDA. Program Overview : The Biobased Markets Program was originally established under the 2002 farm bill as a federal procurement preference program that required federal agencies to purchase biobased products under certain conditions (7 U.S.C. 8102). The 2008 farm bill renamed the federal biobased procurements preference program as the Biobased Markets Program. USDA refers to the program as the BioPreferred Program. The BioPreferred Program promotes biobased products those derived from marine and forestry materials through two initiatives: (1) a mandatory purchasing requirement for federal agencies and their contractors and (2) a voluntary labeling initiative for biobased products. Products that meet the minimum biobased content criteria may display the USDA Certified Biobased Product label. Under the Biobased Markets Program, federal agencies and their contractors are generally required to purchase biobased products from 109 categories of goods among which are cleaners, carpets, lubricants, office supplies, and paints when an agency procures $10,000 or more worth of an item within these categories during the course of a fiscal year, or where the quantity of such items or of functionally equivalent items purchased during the preceding fiscal year was $10,000 or more. Changes in 2018 Farm Bill: The 2018 farm bill ( P.L. 115-334 ) extended the Biobased Markets Program through FY2023, while adding some new implementation requirements. It requires the Secretary to update the eligibility criteria for determining which renewable chemicals will qualify for a "USDA Certified Biobased Product" label. The farm bill requires the Secretary and the Secretary of Commerce to develop North American Industry Classification System (NAICS) codes for both renewable chemical manufacturers and biobased product manufacturers, and for the Secretary to establish a national registry of testing centers for biobased products. The bill also requires USDA to establish an expedited approval process for products to be determined eligible for the procurement program and to receive a biobased product label. The farm bill prohibits a procuring agency from establishing procurement guidelines for biobased products that are more restrictive than what the Secretary has established. Funding: The 2018 farm bill authorized mandatory CCC funding of $3 million for each of FY2019-FY2023 for biobased products testing and labeling. Discretionary funding of $3 million was authorized to be appropriated for each of FY2019-FY2023. However, through FY2019 no discretionary funding has been appropriated for the Biobased Markets Program. <3.3. 7 U.S.C. 8103: Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program> Administered by: Rural Business and Cooperative Service, Rural Development Agency (RD), USDA in consultation with DOE. Program Overview : Originally called the Biorefinery Assistance Program (BAP) as authorized in the 2008 farm bill, this program assists in the development of new and emerging technologies for advanced biofuels, renewable chemicals, and biobased products. Competitive grants and loan guarantees are available for construction and/or retrofitting of demonstration-scale biorefineries to demonstrate the commercial viability of one or more processes for converting renewable biomass to advanced biofuels. Biorefinery grants can provide for up to 30% of total project costs. Each loan guarantee is limited to $250 million or 80% of project cost (7 U.S.C. 8103). Mandatory funds are used for the loan guarantee portion of BAP, whereas discretionary appropriations are to be used to fund grants. With no appropriation of discretionary funds for BAP during the life of the 2008 farm bill, Congress permitted USDA to move forward with only the loan guarantee portion of BAP. Rural Development administers the program under 7 C.F.R. 4279, Subpart C, and 7 C.F.R. 4287, Part D. For loan guarantees, project lenders (not prospective borrowers) must submit the application. Each loan guarantee application undergoes at least three rounds of review, including review by the Rural Development Agency, USDA; the National Renewable Energy Laboratory (NREL), DOE; and the Office of the Chief Economist (OCE), USDA. Changes in 2018 Farm Bill: The 2018 farm bill ( P.L. 115-334 ) extended the program through FY2023. It expanded the definition of eligible technology to include technologies that produce one or more of the following, or a combination thereof: an advanced biofuel, a renewable chemical, or a biobased product. Funding: The 2018 farm bill authorized mandatory CCC funding of $50 million for FY2019 and $25 million for FY2020 for the cost of loan guarantees. Discretionary funding of $75 million was authorized to be appropriated for each of FY2019-FY2023. No discretionary funds have been appropriated through FY2019. <3.4. 7 U.S.C. 8104: Repowering Assistance Program (RAP) (Repealed)> Administered by: Rural Business and Cooperative Service, RD, USDA. Program Overview : The Repowering Assistance Program (RAP) was originally established under the 2008 farm bill to encourage biorefineries to replace fossil fuels with renewable biomass as the feedstock. RAP made payments to eligible biorefineries (i.e., those in existence on the date of enactment of the 2008 farm bill, June 18, 2008) to encourage the use of renewable biomass as a replacement for fossil fuels used to provide heat for processing or power in the operation of these eligible biorefineries. Changes in 2018 Farm Bill: The Repowering Assistance Program was repealed. <3.5. 7 U.S.C. 8105: Bioenergy Program for Advanced Biofuels> Administered by: Rural Business and Cooperative Service, RD, USDA. Program Overview : Originally created by a 1999 executive order during the Clinton Administration, the bioenergy program provided mandatory CCC incentive payments to biofuels producers based on year-to-year increases in the quantity of biofuel produced. The 2008 farm bill established a new Bioenergy Program for Advanced Biofuels to support and expand production of advanced biofuels that is, fuel derived from renewable biomass other than corn kernel starch under which USDA would enter into contracts with advanced biofuel producers to pay them for production of eligible advanced biofuels. The policy goal is to create long-term, sustained increases in advanced biofuels production. Payments are of two types: one based on actual production, and a second based on incremental production increases. Not more than 5% of the funds in any year can go to facilities with total refining capacity exceeding 150 million gallons per year ( 7 C.F.R. Part 4288, Subpart B ). Changes in 2018 Farm Bill: The 2018 farm bill ( P.L. 115-334 ) extended the program through FY2023. It modifies the equitable distribution portion of the program by limiting the amount of payments for advanced biofuel produced from a single eligible commodity to not exceed one-third of the total program funding available in a fiscal year. Funding: The 2018 farm bill authorized mandatory CCC funding of $7 million for each of FY2019-FY2023. Discretionary funding of $20 million was authorized to be appropriated for each of FY2019-FY2023. However, no discretionary funding has been appropriated for the Bioenergy Program for Advanced Biofuels program through FY2019. <3.6. 7 U.S.C. 8106: Biodiesel Fuel Education Program> Administered by: National Institute of Food and Agriculture (NIFA) and Office of Energy Policy and New Uses (OEPNU), OCE, USDA. Program Overview : Originally established under the 2002 farm bill, the Biodiesel Fuel Education Program was extended by the 2008, 2014, and 2018 farm bills (7 U.S.C. 8106). The Biodiesel Fuel Education Program awards competitive grants to nonprofit organizations that educate governmental and private entities that operate vehicle fleets, and educates the public about the benefits of biodiesel fuel use. The program is implemented by USDA through continuation grants. The final rule for the program was published on September 30, 2003 (68 Fed eral Reg ister 56137). Changes in 201 8 Farm Bill : Extended the Biodiesel Fuel Education Program from FY2019 through FY2023 without changes to program implementation other than new funding levels. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $2 million is authorized to be appropriated for each of FY2019-FY2023. However, through FY2019 no discretionary funding has been provided. <3.7. 7 U.S.C. 8107: Rural Energy for America Program (REAP)> Administered by: Rural Business and Cooperative Service, Rural Development, USDA. Program Overview: The 2008 farm bill combined elements of two existing programs from the 2002 farm bill the Energy Audit and Renewable Energy Development Program and the Renewable Energy Systems and Energy Efficiency Improvements Program into a single program renamed the Rural Energy for America Program (REAP) (7 U.S.C. 8107). REAP provides various types of financial assistance under a cost-share arrangement for the following purposes: grants, guaranteed loans, and combined grants and guaranteed loans for the development and construction of renewable energy systems (RES) and for energy efficiency improvement (EEI) projects (eligible entities include rural small businesses and agricultural producers); grants for conducting energy audits and for conducting renewable energy development assistance (eligible entities include state, tribe, or local governments; land-grant colleges and universities; rural electric cooperatives; and public power entities); and grants for conducting renewable energy systems (RES) feasibility studies (eligible entities include rural small businesses and agricultural producers). The cost share feature of REAP limits the government's contribution to no more than 75% of eligible project costs for RES systems and EEI funding for combined grant and loan guarantees, and to no more than 25% for grants. Under energy audit and renewable energy development assistance grants, a grantee must pay a minimum of 25% of the cost of the energy audit. RES systems include those that generate energy from biomass (but excluding any mechanism for dispensing energy at retail e.g., a blender pump), anaerobic digesters, geothermal, hydrogen, solar, wind, and hydropower. EEI projects typically involve installing or upgrading equipment to significantly reduce energy use. REAP operates under regulations published under 7 C.F.R. Part 4280, subpart B. Changes in 2018 Farm Bill: The 2018 farm bill extends the program through FY2023. It amends the financial assistance for energy efficiency improvements and renewable energy systems section to include certain limitations for loan guarantees to purchase and install energy-efficient equipment or agricultural production or processing systems. Additionally, it limits funds for loan guarantees for energy-efficient equipment to agricultural producers to not exceed 15% of the annual funding provided to the program. Funding: The 2018 farm bill retains mandatory CCC funding of $50 million for FY2014 and each fiscal year thereafter (thus, unlike other farm bill renewable energy programs, REAP's mandatory funding authority does not expire with the 2018 farm bill). Mandatory funds are to remain available until expended. Discretionary funding is authorized to be appropriated at $20 million annually for each of FY2019-FY2023. Discretionary funding of $335,000 was appropriated for FY2019. <3.8. 7 U.S.C. 8107a: Rural Energy Savings Program> Administered by: Rural Utilities Service, Rural Development, USDA. Program Overview : The Rural Energy Savings Program (7 U.S.C. 8107a) provides loans to qualified consumers to implement durable cost-effective energy-efficiency measures. The program was established in the 2014 farm bill. Loans are to be made to eligible entities that agree to use the loan funds to make loans to qualified consumers. Eligible entities include public power districts and public utility districts, among other entities. Loans to eligible entities are offered with no interest. Loan repayment by an eligible entity may not exceed 20 years from the loan's closing date, with an exception for special advances for start-up activities. A qualified consumer is a consumer served by an eligible entity with the ability to repay the loan. Changes in 2018 Farm Bill: The 2018 farm bill extends the program through FY2023. It modifies the definition of energy-efficiency measures to include cost-effective on- or off-grid renewable energy or energy storage systems. It amends the program such that the debt incurred by a borrower under this program may not be included when determining the borrower's eligibility for loans under programs authorized by the Rural Electrification Act of 1936. It requires the Secretary to streamline the accounting requirements on borrowers. Loans from eligible entities to qualified consumers may bear interest, not to exceed 5%, and must be used for certain purposes (e.g., to establish a loan loss reserve). Additionally, it requires the Secretary to publish an annual report containing the number of program applications received, the number of loans made to eligible entities, and the recipients of the loans. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $75 million is authorized to be appropriated for each of FY2019-FY2023. The program received $10 million in discretionary funding for FY2019. <3.9. 7 U.S.C. 8108: Biomass Research and Development Initiative (BRDI)> Administered by: National Institute of Food and Agriculture (NIFA), USDA, and DOE, jointly. Program Overview : BRDI created originally under the Biomass Research and Development Act of 2000 (BRDA; P.L. 106-224 ) seeks to foster significant commercial production of biofuels, biobased energy innovations, development of biobased feedstocks, and biobased products and processes, including cost-competitive cellulosic ethanol. To this end, the program provides competitive funding in the form of grants, contracts, and financial assistance for research, development, and demonstration of technologies and processes. Eligibility is limited to institutions of higher learning, national laboratories, federal or state research agencies, private-sector entities, and nonprofit organizations. BRDI provides for coordination of biomass research and development, including life-cycle analysis of biofuels, between USDA and DOE by creating the Biomass Research and Development Board to coordinate government activities in biomass research, and the Biomass Research and Development Technical Advisory Committee to advise on proposal direction and evaluation. The 2008 farm bill moved BRDA in statute to Title IX of the 2008 farm bill and expanded the BRDI technical advisory committee (7 U.S.C. 8108). Since 2002 USDA and DOE jointly have announced annual solicitations and awards of funding allocations under BRDI. Pursuant to the 2008 farm bill, applicants seeking BRDI funding must propose projects that integrate science and engineering research in the following three technical areas that are critical to the broader success of alternative biofuels production: feedstock development, biofuels and biobased products development, and biofuels development analysis. A minimum of 15% of funding must go to each area. The minimum cost-share requirement for demonstration projects was increased in the 2018 farm bill to 50%, and for research projects to 20%. Changes in 2018 Farm Bill: The 2018 farm bill extends the program through FY2023. It amends the definition of biobased product to include carbon dioxide, and it requires the initiative's technical advisory committee to include an individual with expertise in carbon capture, utilization, and storage. Further, it expands the objectives of the initiative to include the development of high-value biobased products that permanently sequester or utilize carbon dioxide. It also expands the technical areas of the initiative to include the biofuels and biobased products development of technologies that permanently sequester or utilize carbon dioxide. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $20 million is authorized to be appropriated for each of FY2019-FY2023. However, no discretionary funding has been appropriated for BRDI through FY2019. <3.10. 7 U.S.C. 8109: Rural Energy Self-Sufficiency Initiative (Repealed)> Administered by: Rural Business and Cooperative Service, RD, USDA. Program Overview : The 2008 farm bill authorized the Rural Energy Self-Sufficiency Initiative to assist rural communities with community-wide energy systems that reduce conventional energy use and increase the use of energy from renewable sources. Grants were to be made available to assess energy use in a rural community, evaluate ideas for reducing energy use, and develop and install integrated renewable energy systems. Grants were not to exceed 50% of the total cost of the activity (7 U.S.C. 8109). No funding was ever appropriated, and regulations were never announced for this program. No provision was included in the 2014 farm bill for the Rural Energy Self-Sufficiency Initiative, with the result that program funding authority expired after FY2013. Changes in 2018 Farm Bill: The Rural Energy Self-Sufficiency Initiative was repealed. <3.11. 7 U.S.C. 8110: Feedstock Flexibility Program (FFP) for Bioenergy Producers> Administered by: Farm Service Agency (FSA), USDA. Program Overview : Under the 2008 farm bill, the FFP required that USDA establish and administer a sugar-for-ethanol program using sugar intended for food use but deemed to be in surplus. USDA would subsidize the use of sugar for ethanol production through federal purchases of surplus sugar for resale to ethanol producers. USDA would implement the program only in those years where purchases are determined to be necessary to ensure that the sugar program operates at no cost to the federal government (7 U.S.C. 8110). The intent of the FFP is to provide the CCC a tool for avoiding sugar forfeitures. Under the sugar program, domestic sugar beet or sugarcane processors may borrow from the CCC, pledging their sugar production as collateral for any such loan, and then satisfy their loans either by repaying the loan on or before loan maturity, or by transferring the title for the collateral to the CCC immediately following loan maturity, also known as ''forfeiture'' of collateral (as specified in 7 C.F.R. 1435). The CCC is required to operate the sugar program, to the maximum extent practicable, at no cost to the federal government, by avoiding forfeitures to CCC. If domestic sugar market conditions are such that market rates are less than forfeiture level (i.e., forfeitures appear likely), current law requires CCC to use FFP to purchase sugar and sell such sugar to bioenergy producers to avoid forfeitures. The FFP became effective upon publication of the final rule by USDA in the Federal Register on July 29, 2013. By late July 2013, U.S. sugar prices were below effective federal support levels, compelling USDA to activate FFP on August 15, 2013, and use an estimated $148 million of CCC funds to avoid possible sugar forfeitures. No outlays have been required since 2013. Changes in 201 8 Farm Bill : Extended the FFP through FY2023 with no changes to program implementation. Funding: The 2018 farm bill extends the mandatory funding authority of such sums as necessary through FY2023. The CBO baseline does not project any outlays for the program. Discretionary funding is not authorized for the program. <3.12. 7 U.S.C. 8111: Biomass Crop Assistance Program (BCAP)> Administered by: Farm Service Agency (FSA), USDA. Program Overview : BCAP provides financial assistance to owners and operators of agricultural land and nonindustrial private forest land who wish to establish, produce, and deliver biomass feedstocks to eligible processing plants. BCAP provides two categories of assistance: 1. establishment and annual payments , including a one-time payment of up to 50% of the cost of establishment for perennial crops, and annual payments (i.e., rental rates based on a set of criteria) of up to five years for nonwoody and 15 years for woody perennial biomass crops; and 2. matching payments , at a rate of $1 for each $1 per ton provided, up to $20 per ton, for a period of two years, which may be available to help eligible material owners with collection, harvest, storage, and transportation (CHST) of eligible material for use in a qualified biomass conversion facility. Establishment and annual payments are available to certain producers who enter into contracts with USDA to produce eligible biomass crops on contract acres within designated BCAP project areas. Eligible land for BCAP project area contracts includes agricultural land and nonindustrial private forestland, but does not include federal or state-owned land, or land that is native sod. Lands enrolled in existing land retirement programs for conservation purposes the Conservation Reserve Program (CRP) or the Agricultural Conservation Easement Program (ACEP) also become eligible during the fiscal year that their land retirement contract expires. Generally, crops that receive payments under Title I (the commodity title) of the farm bill (e.g., corn, wheat, rice, and soybeans) and noxious weeds or invasive species are not eligible for annual payments. Matching payments are available to eligible material owners who deliver eligible material to qualified biomass conversion facilities. Eligible material must be harvested directly from the land and separate from a higher-value product (e.g., Title I crops). Invasive and noxious species are considered eligible material, and land ownership (private, state, federal, etc.) is not a limiting factor to receive matching payments (7 U.S.C. 8111). The 2014 farm bill changed enrolled land eligibility by including land under expiring CRP or ACEP easement contracts. It also included residue from crops receiving Title I payments as eligible material, but extended exclusion to any whole grain from a Title I crop, as well as bagasse and algae. One-time establishment payments were limited to no more than 50% of cost of establishment from 75% previously, not to exceed $500 per acre ($750 per acre for socially disadvantaged farmers or ranchers). CHST matching payments may not exceed $20 per dry ton (down from $45 per dry ton) and are available for a two-year period. CHST funding shall be available for technical assistance. Not less than 10% or more than 50% of funding may be used for CHST. Not later than four years after enactment of the 2014 farm bill, USDA is to submit to the House and Senate Agriculture Committees a report on best practices from participants receiving assistance under BCAP. Changes in 2018 Farm Bill: The 2018 farm bill extends the program through FY2023. The 2018 farm bill expands the definition for eligible material to include algae. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $25 million is authorized to be appropriated for each of FY2019-FY2023. No discretionary funding was provided for FY2019. <3.13. 7 U.S.C. 8112: Forest Biomass for Energy (Repealed)> Administered by: Forest Service, USDA. Program Overview : The 2008 farm bill authorized the Forest Biomass for Energy program to function as a research and development program to encourage use of forest biomass for energy. The Forest Service, other federal agencies, state and local governments, Indian tribes, land-grant colleges and universities, and private entities were to be eligible to compete for program funds. Priority was to be given to projects that use low-value forest byproduct biomass for the production of energy; develop processes to integrate bioenergy from forest biomass into existing manufacturing streams; develop new transportation fuels; and improve the growth and yield of trees for renewable energy (7 U.S.C. 8112). In the end, the Forest Service never announced any regulations for this program. Changes in 201 4 Farm Bill : The Forest Biomass for Energy program was repealed. <3.14. 7 U.S.C. 8113: Community Wood Energy and Wood Innovation Program> Administered by: Forest Service, USDA. Program Overview : The 2008 farm bill authorized the Community Wood Energy Program to provide matching grants up to $50,000 and subject to a match of at least 50% to state and local governments to acquire community wood energy systems for public buildings. Under the 2008 and 2014 farm bills, participants were to implement a community wood energy plan to meet energy needs with reduced carbon intensity through conservation, reduced costs, utilizing low-value wood sources, and increased awareness of energy consumption (7 U.S.C. 8113). The 2014 farm bill defined a Biomass Consumer Cooperative and authorized grants of up to $50,000 to be made to establish or expand biomass consumer cooperatives that would provide consumers with services or discounts relating to the purchase of biomass heating systems or products (including their delivery and storage); and required that any biomass consumer cooperative that received a grant match at least the equivalent of 50% of the funds toward the establishment or expansion of a biomass consumer cooperative. Changes in the 2018 Farm Bill: The 2018 farm bill extends the program through FY2023. The 2018 farm bill changes the name to the Community Wood Energy and Wood Innovation Program, and modifies the scope of the program and participant requirements. The program provides financial assistance for the installation of community wood energy systems or building an innovative wood product facility. In short, the 2018 farm bill defines a community wood energy system as a system that produces thermal energy or combined thermal energy and electricity, services public facilities owned or operated by state or local governments, and uses woody biomass. The capacity of the community wood energy system shall not exceed 5 megawatts of thermal energy or combined thermal and electric energy. In short, an innovative wood product facility is defined as a manufacturing or processing plant or mill that produces building components that use large panelized wood (including mass timber), wood products from nanotechnology, or other innovative wood products that use low-value, low-quality wood. The 2018 farm bill removes the requirements for participants to implement a community wood energy plan and the requirements for biomass consumer cooperatives. Cost-share grants may cover up to 35% of the capital cost of the system or facility, and, for special circumstances, up to 50%. The Secretary is required to take into account certain selection criteria for awarding grants (e.g., energy efficiency, cost effectiveness, displacement of fossil fuel generation). The Secretary is to give priority to grant applicants that use the most stringent control technology for a wood-fired boiler; would be carried out in a location where markets are needed for low-value, low-quality wood; would be carried out in a location with limited access to natural gas pipelines; would include the use or retrofitting of existing sawmill facilities that meet certain conditions; and would be carried out in a location where the project will aide with forest restoration. A maximum of 25% of the funds for the program for a fiscal year may go toward grants for innovative wood facilities, unless the Secretary has received an insufficient number of community wood energy system proposals. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $25 million is authorized to be appropriated for each of FY2019-FY2023. No funds have been appropriated through FY2019. <3.15. 7 U.S.C. 8114: Sun Grant Program> Administered by: NIFA, USDA. Each regional Sun Grant center manages the programs and activities within its region, although a process based on peer and merit review is used to administer grants. Program Overview: Created under the 2008 farm bill, the Sun Grant Initiative (SGI) is a national network of land-grant universities and federally funded laboratories coordinated through regional Sun Grant centers. The centers receive funding to enhance national energy security using biobased energy technologies, to promote diversification and environmental sustainability of agricultural production through biobased energy and product technologies, to promote economic diversification in rural areas through biobased energy and product technologies, and to enhance the efficiency of bioenergy and biomass research and development programs. Competitive grants are available to land-grant schools within each region to be used toward integrated, multistate research, extension, and education programs on technology development and implementation. The Sun Grant Program is an offshoot of the Sun Grant Research Initiative Act of 2003 ( 778, Consolidated Appropriations Act, 2004; P.L. 108-199 ), which was created subsequent to the 2002 farm bill. The initiative was originally established with five Sun Grant research centers based at land-grant universities, each covering a different region, to enhance coordination and collaboration among USDA, DOE, and land-grant universities in the development, distribution, and implementation of biobased energy technologies. The 2008 farm bill established the Sun Grant Program and added a sixth regional center (7 U.S.C. 8114). NIFA administers the program under 7 C.F.R. part 3430. The 2014 farm bill extended the Sun Grant Program with its discretionary funding authority (i.e., subject to appropriations) of $75 million annually through FY2018. It also consolidated and amended the Sun Grant Program to expand input from other appropriate federal agencies and replace authority for gasification research with bioproducts research and makes the program competitive by removing designation of certain universities as regional centers. Changes in 201 8 Farm Bill: Extended the Sun Grant Program through FY2023 with no changes to program implementation. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $75 million is authorized to be appropriated for each of FY2019-FY2023. The program received $3 million in discretionary funding for FY2019. <3.16. 7 U.S.C. 8115: Carbon Utilization and Biogas Education Program> Administered by: USDA, in consultation with DOE. Program Overview: The 2018 farm bill establishes a carbon utilization and biogas education program. It requires the Secretary to award competitive grants to eligible entities for two purposes: (1) education to the public and biogas producers about the benefits of carbon utilization and sequestration, and (2) education about the opportunities to aggregate multiple sources of organic waste into a single biogas system. Changes in 2018 Farm Bill: The program was established in the 2018 farm bill. Funding: The 2018 farm bill provides no mandatory funding for the program. Discretionary funding of $2 million is authorized to be appropriated for each of FY2019-FY2023. No funds have been appropriated through FY2019. <3.16.1. Appendix. Supplementary Tables>

Title IX, the energy title, of the 2018 farm bill (Agriculture Improvement Act of 2018; P.L. 115-334 ) contains authority for the energy programs administered by the U.S. Department of Agriculture (USDA). USDA energy programs incentivize research, development, and adoption of renewable energy projects, including solar, wind, and anaerobic digesters. However, the primary focus of USDA energy programs has been to promote U.S. biofuels production and use—including corn starch-based ethanol (the predominant biofuel produced and consumed in the United States), cellulosic biofuels, and soybean-based biodiesel. The USDA energy programs via the farm bill are separate from the Renewable Fuel Standard (RFS) and tax incentives contained in separate energy and tax legislation. Four farm bills have contained an energy title: 2002, 2008, 2014, and 2018. For all four farm bills, the majority of the energy programs expire and lack baseline funding. Many of the energy title programs are authorized to receive both mandatory and discretionary funding. Historically, mandatory funding has been the primary support for these programs, as appropriators have not provided funding for most of the discretionary authorizations. The programs that have received discretionary authorizations under the 2018 farm bill are the Rural Energy for America Program, the Rural Energy Savings Program, and the Sun Grant Program. The 2018 farm bill extended most of the energy provisions of the 2014 farm bill with new funding authority. There are two exceptions, as the 2018 farm bill repealed both the Repowering Assistance Program and the Rural Energy Self-Sufficiency Initiative. Additionally, the 2018 farm bill established one new program—the Carbon Utilization and Biogas Education Program. The 2018 farm bill contains initiatives that address noncorn feedstocks (e.g., cellulosic feedstocks). The most important programs to this end are the Bioenergy Program for Advanced Biofuels, which pays producers for production of eligible advanced biofuels; the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (formerly the Biorefinery Assistance Program), which assists in the development of new and emerging technologies for advanced biofuels; and the Renewable Energy for America Program (REAP), which has funded a variety of biofuels-related projects. Over the five-year reauthorization period (FY2019-FY2023), the 2018 farm bill contains a total of $375 million in new mandatory funding and authorizes discretionary funding (i.e., subject to annual appropriations) of $1.7 billion for the various farm bill energy programs. This discretionary total includes discretionary authorizations for the Sun Grant Program and the Rural Energy Savings Program. The mandatory funding provided for the energy programs under the 2018 farm bill is approximately 46% less than what was provided in the 2014 farm bill, which had authorized $694 million in mandatory funding over the five-year period of FY2014-FY2018. Conversely, the 2018 farm bill provides discretionary authorizations that are approximately 13% more than what was provided in the 2014 farm bill ($1.5 billion) for the energy programs (although, as noted above, farm bill energy programs generally have not received discretionary appropriations). At issue for Congress is oversight of the energy programs and the future of annual funding for these programs. This report provides an overview and funding summary of the various energy titles contained in the farm bills from 2002 to the present, and provides a description of the 2018 farm bill energy programs including their funding levels, program implementation status, and any changes made to the programs by the 2018 farm bill.

crs_R45918

crs_R45918_0

The statutory language governing patent-eligible subject matter that is, the types of inventions that may be patented has remained remarkably constant over the nearly 250-year history of U.S. patent law. Under the Patent Act of 1793, which Thomas Jefferson authored, "any new and useful art, mac hine, manufacture or composition of matter, or any new and useful improvement [of the same]" was patentable. Current law Section 101 the Patent Act of 1952 permits the patenting of "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Through these four expansive statutory categories, Congress sought to ensure that nearly "anything under the sun made by man" is patentable if it meets all the requirements for patentability, such as novelty, enablement, and nonobviousness. Consistent with the broad statutory language, Section 101 permits patenting in fields of applied technology such as pharmaceuticals, biotechnology, chemistry, computer hardware and software, electrical engineering, agriculture, mechanical engineering, and manufacturing processes. However, the Supreme Court has long read Section 101 to categorically prohibit patents on three types of discoveries: "laws of nature, natural phenomena, and abstract ideas." Even if "not required by the statutory text" of Section 101, the Court has held that these three judicial exceptions "define[] the reach of the statute as a matter of statutory stare decisis going back 150 years." In a recent series of decisions, the Supreme Court relied on Section 101 to reject patent claims on a method for hedging price-fluctuation risks in commodity markets; a method for measuring metabolites in human blood for the purpose of calibrating the dosage of particular drug; isolated human DNA segments; and a method of mitigating settlement risk in financial transactions using a computer. These decisions established a two-step test for patentable subject matter sometimes called the " Alice/Mayo test" or the " Alice / Mayo framework." These cases have been widely recognized to effect a significant change in the scope of patentable subject matter, restricting the sorts of inventions that are patentable in the United States. The Alice / Mayo framework has thus shifted, for better or worse, the balance between providing incentives to innovate and the social costs of exclusive rights that is at the heart of patent law. The effects of this change have been particularly pronounced in the fields of computer technology and biomedical technology. As a result, there is a significant and ongoing debate about the effects of Alice / Mayo framework, with a number of patent law stakeholders raising concerns about recent patentable subject matter rulings. Critics argue that the Alice/Mayo framework is vague, unpredictable, and not administrable ; muddies patent law by confusing patent eligibility with distinct patent law concerns, such as nonobviousness ; reduces incentives to innovate and invest in particular industries, such as biotechnology; or puts the U.S. industry at a disadvantage with respect to international competitors. Other stakeholders defend the Alice / Mayo framework, arguing that the Court's recent decisions are a part of the ordinary common law development of Section 101; an important tool for combating unmeritorious litigation or preventing overbroad or otherwise harmful patents ; or beneficial to American consumers by lowering prices. In response to the concerns of some stakeholders, there have been several significant recent administrative and legislative developments that aim to clarify and/or reform the law of Section 101. On January 7, 2019, the Patent and Trademark Office (PTO) issued Revised Patent Subject Matter Eligibility Guidance designed to assist PTO patent examiners in determining patent eligibility with greater clarity and predictability. On April 17, 2019, Senators Thom Tillis and Chris Coons, along with Representatives Doug Collins, Hank Johnson, and Steve Stivers, released a "bipartisan, bicameral framework" for legislative Section 101 reform. On May 22, 2019, following feedback on their first draft framework, the same group of Members released a "bipartisan, bicameral draft bill" to reform Section 101. After the release of the draft bill, the Senate Judiciary Committee's Intellectual Property Subcommittee held a series of three public hearings on Section 101 reform, soliciting the views of 45 patent law stakeholders. Senators Tillis and Coons continue to seek input from stakeholders following the hearings, and are expected to make further changes before introducing a formal bill. This report provides the necessary background and context to understand the legal and practical effects that these legislative reforms would have if enacted. First, the report reviews the basic legal principles of the U.S. patent system. Second, it examines the historical development and current state of patentable subject matter law. Third, it reviews several articulated rationales for Section 101 and theoretical options for Section 101 reform. Finally, it examines the specifics of the PTO guidance and proposed legislative reforms to Section 101. <1. Patent Law Background> Congress's authority to grant patents derives from the Intellectual Property (IP) Clause of the U.S. Constitution, which grants Congress the power "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries." Patents are generally available to any person who "invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Patent rights do not arise automatically. Rather, to obtain patent protection under the Patent Act, an inventor must formally apply for a patent with the PTO, beginning a process called patent prosecution. During prosecution, a patent examiner at the PTO evaluates the patent application to ensure that it meets all the applicable legal requirements to merit the grant of a patent. To be patentable, an invention must be (1) directed at patent-eligible subject matter, (2) useful, (3) new, (4) nonobvious, and (5) adequately disclosed and claimed in the patent application. If the PTO finds these requirements met, it will issue (i.e., grant) the patent. Patents typically expire 20 years after the date of the initial patent application. The current law of patent-eligible subject matter will be discussed separately in detail below. The remainder of this section briefly reviews the other requirements for patentability, the scope and effect of patent claims, and the legal rights granted to the holder of a valid patent. <1.1. Requirements for Patentability> <1.1.1. Section 101: Utility> In addition to subject matter requirements, Section 101 also contains a requirement that a patented invention must be "useful." In particular, courts have held that an invention must have both a specific and substantial utility to be patentable. The utility requirement derives from the Constitution's command that patent laws exist to "promote the Progress of . . . useful Arts." The constitutional purpose of patent law thus requires a "benefit derived by the public from an invention with substantial utility," where the "specific benefit exists in currently available form." This standard for utility is relatively low, however, requiring only that the claimed invention have some "significant and presently available benefit to the public" that "is not so vague as to be meaningless." <1.1.2. Section 102: Novelty> Perhaps the most fundamental requirement for patentability is that the claimed invention must be new . Specifically, the PTO will not issue a patent if "the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention." In other words, if every limitation of the claimed invention is already disclosed in the "prior art" the information available to the public at the time of the patent application then the alleged inventor "has added nothing to the total stock of knowledge," and no valid patent may issue to her. <1.1.3. Section 103: Nonobviousness> Even if a claimed invention is novel in the narrow sense that it is not "identically disclosed" in a prior-art reference (such as an earlier patent or publication), the invention must further be nono bvious to be patentable. Specifically, an invention cannot be patented if "the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious . . . to a person having ordinary skill" in the relevant technology. When determining obviousness, courts may evaluate considerations such as "commercial success, long felt but unsolved needs, [or] failure of others . . . to give light to the circumstances surrounding the origin of the subject matter sought to be patented." By its nature, obviousness is an "expansive and flexible" inquiry that cannot be reduced to narrow, rigid tests. Nonetheless, if an invention merely combines "familiar elements according to known methods," yielding only "predictable results," it is likely to be obvious. <1.1.4. Section 112(a): Written Description, Enablement, Best Mode> Finally, the Patent Act imposes several requirements relating to the technical disclosures in the patent application. These provisions are intended to ensure that the patent adequately describes the invention such that the public can use the invention after the expiration of the patent term. Section 112(a) of the Patent Act requires that patents must contain a "specification" that includes a written description of the invention , and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to . . . make and use the same, and shall set forth the best mode contemplated by the inventor or joint inventor of carrying out the invention. This statutory language yields three basic disclosure requirements for patentability. First, to satisfy the written description requirement , the specification must "reasonably convey[] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date" of the patent application. Second, to satisfy the enablement requirement , the specification must contain enough information to teach a person skilled in the art how "to make and use the invention without undue experimentation." Finally, to satisfy the best mode requirement , if the inventor knew of a preferred way of practicing her invention at the time of the patent application, the specification must disclose that "preferred embodiment[]" of the invention. <1.2. Patent Claims> <1.2.1. Section 112(b): Definiteness> If granted, the legal scope of the patent is defined by the patent claims , a sequence of statements that formally defines the legal scope of the patentee's asserted rights. In essence, while the specification explains the invention in a technical sense, the claims set forth the legal effect of the patent. Much as a deed may describe the boundaries of a tract of land, the claims define the "metes and bounds" of the patent right. Patent claims must be sufficiently definite to be valid that is, they must "particularly point[] out and distinctly claim[] the subject matter which the inventor . . . regards as the invention." In other words, when the claims are read in context, they must "inform, with reasonable certainty, those skilled in the art about the scope of the invention." <1.2.2. Section 112(f): Functional Claiming> For the most part, the current Patent Act uses a system of peripheral claiming , in which the patent claims formally set out the outer boundaries of the patentee's rights. However, the Patent Act still retains elements of its former system of central claiming , in which the patentee would describe the core principles or examples of what he had invented, but need not formally delineate the outer boundaries of his rights. For example, under the doctrine of equivalents, an accused infringer may be found liable even if his product does not literally meet every element of the patent claims, if the differences between a claim element and its alleged equivalent in the accused product are "insubstantial." A potential danger of a peripheral claiming system is that patentees may seek to claim more than they invented by couching the patent claims in broad, functional language that is, by claiming a result or goal without limitation to any specific structure or device that accomplishes the result. In Halliburton Oil Well Cementing Co. v. Walker , the Supreme Court limited this practice, invalidating as indefinite a "functional" patent claim, in which the invention an apparatus for determining the location of an obstruction in an oil well was claimed not in terms of specific machinery, but instead as a "means for" performing various functions. Functional claims (also known as "means-plus-function" claims) such as those in Halliburton may be convenient for the patentee, who can express a claim element in terms of a general end, as opposed to an "exhaustive list" of every possible apparatus that could be used to perform that goal. On the other hand, as Halliburton recognized, functional claims may be overbroad and ambiguous, or permit the patentee to claim more than he actually invented. In the Patent Act of 1952, Congress enacted current Section 112(f) as a compromise for functional claims, overruling Halliburton but providing a standard to make functional claims more definite. Under Section 112(f), a patentee may opt to express a claim element as "a means or step for performing a specified function without the recital of structure, material, or acts in support thereof." If the patentee chooses to claim functionally, however, the claim is construed not to cover all possible means of performing the function, but only "the corresponding structure, material, or acts described in the specification and equivalents thereof." Courts have held that a patentee is presumed to invoke Section 112(f) when the term "means" is used in the claims. Conversely, there is a presumption that the patentee does not invoke Section 112(f) if she does not use the term "means," but that presumption may be overcome, such that Section 112(f) will apply to any claim that fails to recite a "sufficiently definite structure" for performing a function. <1.3. Rights of Patent Holders> With some exceptions, a patent is generally granted "for a term beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed." The Patent Act includes provisions that may modify the 20-year term, including to account for excessive delays in patent examination at the PTO, or delays associated with obtaining marketing approval from other federal agencies. Once granted, the holder of a valid patent has the exclusive right to make, use, sell, or import the invention in the United States until the patent expires. Any other person who practices the invention (i.e., makes, uses, sells, offers to sell, or imports it) without permission from the patent holder infringes the patent and is potentially liable for monetary damages and injunctive relief if sued by the patentee. To obtain relief from infringement, the patentee must generally sue in court. Patent law is an area of exclusive federal jurisdiction, and the traditional forum for most patent disputes is federal district court. Although patent suits may be filed in any district court across the country with jurisdiction over the defendant and proper venue, a single specialized court, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit), hears all appeals in patent cases. <1.4. Defending Against Patent Suits> Parties accused of patent infringement may defend on several grounds. First, although patents benefit from a presumption of validity, the accused infringer may assert that the patent is invalid . To prove invalidity, the accused infringer must show, by clear and convincing evidence, that the PTO should never have granted the patent because it failed to meet the requirements for patentability. Thus, for example, the accused infringer may argue that the invention lacks novelty, is obvious, or claims nonpatentable subject matter; that the patent fails to enable the invention; or that the patent claims are indefinite. Second, the accused infringer may claim an "absence of liability" because of noninfringement . In other words, even presuming the patent is valid, the patentee may fail to prove that the activities of the accused infringer fall within the scope of the patent claims that is, the accused infringer is not making, using, selling, or importing the patented invention. Finally, the accused infringer may argue that the patent is unenforceable based on the inequitable or illegal activities of the patent holder, such as obtaining the patent through fraud on the PTO. Following the passage of the 2011 Leahy-Smith America Invents Act (AIA), the Patent Trial and Appeal Board (PTAB) has become an increasingly important forum for patent disputes. The AIA created several new administrative procedures for challenging patent validity, including (1) post-grant revie w (PGR), which allows any person to challenge patent validity based on any of the requirements of patentability if the PGR petition is filed within nine months of the patent's issuance; (2) inter partes review (IPR), which allows any person other than the patentee to challenge patent validity on limited grounds (novelty or obviousness based on prior patents or printed publications) at any time after nine months following the patent's issuance; and (3) a transitional program for covered business method patents (CBM), a PGR-like process limited to certain patents claiming "business methods" that will be available only through September 2020. Of these procedures, IPR is by far the most widely used. <2. The Current Law of Section 101> At the most general level, there are two basic requirements for an invention to claim patent-eligible subject matter. First, the invention must fit into one or more of the four statutory categories in Section 101 the claimed invention must be a (1) process, (2) machine, (3) manufacture, or (4) composition of matter. Given the (intentionally) expansive nature of these terms, nearly all claimed inventions will satisfy this requirement. Nonetheless, exceptions to this rule do exist. For example, in In re Nuijt en , the Federal Circuit held that a transitory electromagnetic signal was neither a process, manufacture, machine, or composition of matter, and was therefore not patent-eligible subject matter. Because most claimed inventions fit into one of the four statutory categories, the second requirement tends to be more practically important, and receives most of the attention. The second patentable subject matter requirement is that the invention cannot claim one of the judicially created categories of ineligible subject matter the claimed invention must not be a (1) law of nature; (2) natural phenomenon; or (3) abstract idea. As explained below, the modern Supreme Court has articulated a two-step test for this second requirement, known as the Alice / Mayo framework. The Supreme Court has justified the three ineligible categories as necessary to prevent patent monopolies on the "'basic tools of scientific and technological work,'" which "might tend to impede innovation more than it would tend to promote it." Thus, the Court has explained that "a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc 2 ; nor could Newton have patented the law of gravity." At the same time, the Court has said that even if a mathematical formula or law of nature is not patentable "in the abstract," a practical application of such a principle or law "to a new and useful end" is patent-eligible. Beyond such broad illustrations, it is not easy to precisely define what an "abstract idea," "law of nature," or "natural phenomenon" is. Because these exceptions to patent-eligible subject matter are judicially created, they have no formal statutory definition; their meaning has instead been developed through two centuries of "common law" case-by-case adjudication in the federal courts. As such, the scope of patentable subject matter has waxed and waned over time, depending on the trends of recent judicial decisions. This section overviews the leading Supreme Court cases addressing patent-eligible subject matter, beginning with formative cases from the 19th century and culminating in the series of recent Supreme Court decisions that have led some to call for legislative reform of Section 101. Table 1 summarizes the facts and holdings of the major cases. <2.1. Historical Development of the Judicial Exceptions to Patent-Eligible Subject Matter> <2.1.1. Nineteenth Century> The 1853 case of Le Roy v. Tatham , the "fountainhead" of American patentable subject matter jurisprudence, concerned a patent on machinery to manufacture metal pipes that exploited a newly developed property of lead. Although the Court ultimately did not decide the case on subject matter grounds, Le Roy relied on influential English patent cases to set forth a basic distinction between abstract "principles" and natural laws (which may not be patented) and practical applications of those principles (which may be patented). The Court stated that "[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right." On the other hand, a "new property discovered in matter, when practically applied, in the construction of a useful article of commerce or manufacture, is patentable," for the "invention is not in discovering [the natural principles], but in applying them to useful objects." In its next term, the Court applied this rule in the famous case of O'Reilly v. Morse , concerning Samuel Morse's patent on the telegraph. Although the Court found that Morse was the first inventor of the telegraph and sustained much of his patent, the Court rejected Morse's eighth claim to any "use of the motive power of the electric or galvanic current . . . however developed for marking or printing intelligible characters, signs, or letters, at any distances, being a new application of that power of which I claim to be the first inventor or discoverer." Observing that "the discovery of a principle in natural philosophy or physical science, is not patentable," Chief Justice Taney's majority opinion held that Morse's eighth claim was "too broad" because he had not discovered "that the electric or galvanic current will always print at a distance, no matter what may be the form of the machinery" used, but only that the specific "complicated and delicate machinery" disclosed in the patent specification would do so. In the second half of the nineteenth century, the Court issued a series of important decisions on the patentability of processes. The end result of these cases was a move away from an earlier rule that prohibited "pure" method patents as ineligible (i.e., a process claimed independently of the specific machinery used to accomplish the method) either by construing nominal process patents as claiming a machine or limiting the process patents to the machinery disclosed and its equivalents. In Cochrane v. Deener , which involved a patent on an improved manufacturing process for flour, the Court defined a patentable process as "a mode of treatment of certain materials to produce a given result. It is an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing." Cochrane held that such methods are patentable "irrespective of the particular form of the instrumentalities used." Similarly, in Tilghman v. Proctor , the Court held that a method for separating fat into glycerin and fatty acids using water, pressure, and heat was patentable. In The Telephone Cases , the Court distinguished Morse to allow Alexander Graham Bell's patent claim on a "method of and apparatus for transmitting vocal or other sounds telegraphically, as herein described, by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sounds, substantially as set forth." Chief Justice White interpreted Morse as holding that "the use of magnetism as a motive power, without regard to the particular process with which it was connected in the patent, could not be claimed, but that its use in that connection could." The Court found that Bell's claim, in contrast to Morse's, did not reach uses of electricity to transmit speech that are "distinct from the particular process with which it is connected in [Bell's] patent," and upheld the claim, so construed. <2.1.2. Twentieth Century> In the first half of the 20th century, the Court decided two major cases on the patentability of natural phenomena. In American Fruit Growers v. Brogdex Co. , the Court rejected patent claims on citrus fruit treated with a solution of borax to render it resistant to mold. The Court held that treated fruit was not a "manufacture" under Section 101, but a patent-ineligible "natural article"; treatment with borax did not "change in the name, appearance, or general character of the fruit" or imbue it with a "new or distinctive form, quality, or property." In Funk Brothers Seed Co. v. Kalo Inoculant Co. , the Court rejected patent claims on an inoculant for leguminous plants consisting of multiple species of bacteria, where the particular bacterial strains were selected so as not to inhibit each other (as prior multispecies combinations had). Because the patentee's combination "produces no new bacteria [and] no change in the six species of bacteria," Justice Douglas's majority opinion held that it was only "the discovery of some of the handiwork of nature and hence is not patentable." From 1972 to 1981, the Supreme Court decided four patentable subject matter cases. In Gottschalk v. Benson , the Court held that an algorithm for converting binary-coded decimal numerals into pure binary numerals (either by hand, or, more practically, on a computer) was patent-ineligible. Justice Douglas reasoned that "one may not patent an idea" and that upholding this patent would "wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Second, in Parker v. Flook , the Court rejected a patent on a method for updating alarm limits during catalytic conversion of hydrocarbons (such as petroleum), which relied in part on a mathematical formula, because the only novel feature of the method was the mathematical formula. Third, in Diamond v. Chakrabarty , the Court upheld a patent on a genetically engineered bacterium useful in breaking down oil (e.g., in cleaning up oil spills). Chief Justice Burger distinguished American Fruit Growers and Funk Brothers because this bacterium, although a living organism, was human-made and possessed "markedly different characteristics from any [bacteria] found in nature." Finally, in Diamond v. Diehr , the Court distinguished Flook to uphold a patent on a process for molding synthetic rubber that relied on a mathematical formula (the Arrhenius equation). Justice Rehnquist's majority opinion reached back to Cochrane v. Deener , holding that the process at issue was patentable because it transformed an article (uncured rubber) into a different state or thing. Even though the method used a mathematical formula, the patent in Diehr did not claim the formula itself and would not "pre-empt the use of that equation" in other fields. After Diehr , the Court did not decide a major patentable subject matter case for nearly 30 years. Development of the patent-eligible subject matter law was primarily left to the Federal Circuit, whose decisions generally expanded patentable-eligible subject matter, such that by the late 1990s Section 101 became perceived as "a dead letter." <2.2. The Modern Alice/Mayo Framework> In 2010, the Supreme Court reentered the field of patent-eligible subject matter, deciding four cases on the issue within five years. These cases established the two-step Alice / Mayo test for patentable subject matter. The first step of the Alice / Mayo test addresses whether the patent claims are "directed to" an ineligible concept: a law of nature, a natural phenomenon, or an abstract idea. The inquiry at step one focuses on the "claim as whole." To be "directed to" an eligible concept at step one of Alice / Mayo , the claims must not simply inv olve a patent-ineligible concept. Rather, the "focus on the claims" must be a patent-ineligible concept, as opposed to the improvement of a technological process. If the patent claims are not directed to an ineligible concept, then the subject matter is patent-eligible. If the claims are directed to an ineligible category, then the invention is not patentable unless the patent claims have an "inventive concept" under the second step of the Alice / Mayo test. Step two of Alice / Mayo considers the elements of each patent claim both individually and as an ordered combination in the search for an "inventive concept" additional elements that "transform the nature of the claim" into a patent-eligible application of an ineligible concept. To have an "inventive concept," the patent claims must contain elements "sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself." Claim limitations that are "conventional, routine and well understood," such as generic computer implementation, cannot supply an inventive concept. Bilski v. Kappos , the Supreme Court's first modern foray into patentable subject matter doctrine, concerned a patent on a business method for hedging against price-fluctuation risks in energy and commodity markets. The Federal Circuit had held that this method was not patentable as a "process" under Section 101 because it failed the "machine-or-transformation test" that is, it was neither "tied to a particular machine or apparatus" nor "transform[ed] a particular article into a different state or thing." All nine members of the Supreme Court agreed with that result that the business method at issue was not patent-eligible but differed significantly as to their reasoning. Writing for five Justices, Justice Kennedy held that the machine-or-transformation test was not the "sole test" for determining whether a process is patent-eligible but nonetheless "a useful and important clue." While the majority rejected the "atextual" notion that business methods were categorically unpatentable under Section 101, it relied on Benson and Flook to conclude that this particular patent attempted to claim an unpatentable abstract idea: the "concept of hedging risk." Concurring only in the judgment, Justice Stevens wrote for four Justices who would have held, based on the history of the Patent Act and its constitutional purpose, that business methods were categorically patent-ineligible. In Mayo Collaborative Services v. Prometheus Laboratories , the Court addressed the scope of the "law of nature" exception. The patent in Mayo claimed a method for measuring metabolites in human blood in order to calibrate the dosage of thiopurine drugs in the treatment of autoimmune disorders. Writing for a unanimous Court, Justice Breyer's opinion held that the patent claims were addressed to a law of nature: "namely, relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm." Because the claims were little "more than an instruction to doctors to apply the applicable laws when treating their patients," the patent lacked any inventive concept and was held to be patent-ineligible. The next case, Association for Molecular Pathology v. Myriad Genetics, Inc. , concerned the applicability of the "natural phenomena" exception to the patentability of human DNA. The inventor in Myriad had discovered the precise location and genetic sequence of two human genes associated with an increased risk of breast cancer. Based on this discovery, the patentee claimed two molecules associated with the genes: (1) an isolated DNA segment and (2) a complementary DNA (cDNA) segment, in which the nucleotide sequences that do not code for amino acids were removed in the laboratory. Justice Thomas's unanimous opinion in Myriad held that isolated DNA segments were nonpatentable products of nature because the patent claimed naturally occurring genetic information. The Court concluded, however, that cDNA, as a synthetic molecule distinct from naturally occurring DNA, was patentable even though the underlying nucleotide sequence was dictated by nature. Most recently, Alice Corp. v. CLS Bank International examined the scope of the "abstract idea" category of nonpatentable subject matter. Alice concerned a patent on a system for mitigating "settlement risk" the risk that only one party to a financial transaction will pay what it owes using a computer as an intermediary. The Court first held, relying on Bilski , that the invention was directed at "the abstract idea of intermediated settlement." Although this idea was implemented on a computer (which is, of course, a physical machine), the patent lacked an inventive concept because the claims merely "implement[ed] the abstract idea of intermediated settlement on a generic computer." Table 1 summarizes the facts and holding of the Supreme Court's major patentable subject matter cases, in reverse chronological order. <3. The Debate Over Alice/Mayo and Section 101 Reform> A substantial group of patent law stakeholders, including inventors, academics, industry representatives, patent attorneys, current and former Federal Circuit judges, and former PTO officials, has criticized the Alice / Mayo framework on various grounds. However, other patent law stakeholders defend the Supreme Court's recent Section 101 decisions. <3.1. Criticisms of the Alice/Mayo Framework> Generally, critics of the Court's recent patentable subject matter jurisprudence raise four principal concerns. First, the Alice / Mayo framework is criticized as excessively vague, subjective, and/or unpredictable in application. For example, the Federal Circuit has indicated that when determining whether a patent claim is "directed to" an ineligible concept at step one, the court must determine whether the "focus" of the claims is on that concept. At the same time, the Federal Circuit has cautioned that this "focus" must be articulated "with enough specificity to ensure the step one inquiry is meaningful." But the appropriate level of specificity can vary from patent to patent and from judge to judge. Thus, in the view of many stakeholders, the Supreme Court's patentable subject matter case law and the Federal Circuit's implementation of the Alice / Mayo framework fail to articulate "objective, predictable criteria" for making patent-eligibility determinations. Key terms, such as what an "abstract idea" is, or precisely how claim elements can make an invention "significantly more" than an ineligible category (the "inventive concept"), are largely left undefined, making it difficult for patent applicants and litigants to know whether their patent claims will survive judicial scrutiny. Moreover, the Federal Circuit has explicitly recognized that the two steps of the analysis are not clearly defined and may overlap. As a result, many observers characterize the court's Section 101 jurisprudence as a "highly subjective," "I know it when I see it" approach. This subjectivity, in the view of critics, injects unpredictability and uncertainty into whether an invention is of a type that is patentable. Second, the Alice / Mayo framework is criticized as legally flawed on various grounds. Some stakeholders argue that the Alice / Mayo framework misinterprets Section 101, imposing "extra-statutory" requirements for patent eligibility, contrary to congressional intent or the constitutional purpose of patent law. Others argue that Mayo 's requirement of an "inventive concept" rests on a historically inaccurate understanding of 19th century English patent law, first imported into American jurisprudence in cases such as Le Roy and Morse . Finally, many commentators and stakeholders argue that the Alice / Mayo framework confuses patent law by conflating eligibility under Section 101 with policy concerns such as the obviousness of the invention and claim breadth that are better addressed by other provisions in the Patent Act, such as Sections 102, 103, and 112. For example, patent claims have been found to lack an inventive concept at Alice / Mayo step two where they implement an abstract idea on conventional computer hardware. Issues about what was "conventional" or "well-understood" at the time of the invention, however, are questions usually reserved for novelty or nonobviousness analysis. Third, the Alice / Mayo framework is alleged to have detrimental effects on incentives to innovate, especially in the biotechnology and computer software industries. Given the patent claims at issue in Alice (a computer-implemented business method), Myriad (an isolated human DNA segment), and Mayo (a drug dose optimization method), most observers agree that these two industries have been the most affected by the Supreme Court's recent Section 101 rulings. In the biotechnology industry, stakeholders argue that the Alice / Mayo framework has limited their ability to obtain patents on diagnostic methods and kits, personalized medicine, and isolated natural substances. Views in the computer industry are "sharply divided," but at least some stakeholders argue that Alice has devalued their patents and/or created uncertainty for their business. In both fields, some stakeholders argue that the law of Section 101 is reducing incentives to innovate in these areas and driving investment elsewhere. Finally, the uncertainty and unpredictability caused by Alice/Mayo is alleged to put the United States at a disadvantage relative to international competitors. Some stakeholders argue that U.S. competitiveness may be harmed because a lack of patent availability will drive investment in certain industries to other countries where such inventions are more clearly patent-eligible. Others argue that one effect of Alice / Mayo is a loss of any patent protection for certain inventions, which will enable competitors to "free ride" off of American innovation. <3.2. Defenses of the Alice/Mayo Framework> Defenders of the current law of Section 101 respond that these criticisms of Alice / Mayo are overstated, and/or that the Supreme Court's reinvigoration of Section 101 has important benefits for the patent system. As to the subjective or unpredictable nature of Section 101 doctrine, there is some indication that the Alice / Mayo framework is not quite as unpredictable as is sometimes claimed. Some commentators also observe uncertainty in patentable subject matter law is hardly a new phenomenon, and may even be "inevitable." A subjective or "amorphous" approach to patentable subject matter, on this view, may have certain benefits, including flexibility and adaptability to new technologies. Moreover, even if one views the current state of the law as unacceptably vague, courts may eventually clarify or change Section 101 doctrine in line with the long history of common law development in this area. As to legal correctness of Alice / Mayo , defenders of the framework note that while the judicially created categories are not directly grounded in the text of Section 101, they have been treated as part of the law "as a matter of statutory stare decisis going back 150 years." As to Mayo 's reliance on 19th century English patent law, some commentators defend the Supreme Court's "inventive application" requirement as a faithful reading of this precedent. Finally, although the Alice / Mayo framework may overlap with other patent law doctrines, several commentators and judges of the Federal Circuit argue that Section 101 serves purposes that are distinct from Sections 102, 103, and 112. For example, even if the invention in Myriad an isolated human DNA sequence discovered to be associated with increased breast cancer risk was novel, nonobvious, and sufficiently disclosed, some commentators would still argue that the invention should not be patented based on detrimental effects for future innovation or moral concerns about patenting human DNA. As to the alleged detrimental effects of the Court's recent Section 101 law on innovation, some stakeholders point to countervailing benefits in either certain industries or more generally. In particular, some stakeholders in industries (such as computer software) affected by litigation by patent assertion entities argue that Section 101 is a useful and important tool for weeding out overly broad or vague patents at the outset of litigation. Other commentators point to general utilitarian or moral benefits of robust exclusions for patents on basic discoveries in science and nature. As to concerns about the Alice / Mayo framework's effect on international competitiveness, some commentators view these changes as good for the United States as a geopolitical matter. In particular, restricted patent-eligibility standards may benefit U.S. consumers if a lack of patent protection leads to increased competition and lower prices for certain products without harming innovation. <3.3. Potential Rationales for Section 101> More broadly, there is a long-running and thoughtful debate over the functions and purposes that Section 101 serves in the patent system. For its part, the modern Supreme Court has largely settled on the "preemption rationale" for the judicially created subject matter exclusions. Recent decisions assert that abstract ideas, laws of nature, and natural phenomena should not be patentable because permitting a monopoly on the "'basic tools of scientific and technological work' . . . might tend to impede innovation more than it would tend to promote it," in that such patents would "significantly impede future innovation." The gist of the preemption rationale is that Section 101 functions to prevent patents that reach so broadly that they "threaten downstream innovation" by preempting all uses of a natural law, abstract idea, or fundamental research tools. The preemption rationale is not the only potential justification for Section 101, however. Although a complete survey of the various rationales proffered for Section 101 is beyond the scope of this report, at least four broad categories of rationales for Section 101 have been proposed. First, some commentators argue that Section 101's purpose is to identify certain patents or categories of patents that should not be granted because their economic harms exceed their benefits that is, their net social costs are negative with respect to innovation, or more generally. Preemption theory, which claims that certain overbroad patents should be denied patent protection under Section 101 because of their negative effects on downstream innovation, is an example from this group. Second in what is in some sense a special case of the first rationale other commentators assert that Section 101's purpose is to identify and deny patents to categories of inventions that would have been developed even without a patent incentive. For example, several commentators have argued the patents on business methods should be excluded under Section 101 either because they affirmatively harm innovation and the economy, or because they are simply unnecessary because sufficient incentives to create business methods would exist even if patents are unavailable. Third, some commentators assert that Section 101 (or elements of Section 101 doctrine) are based not on economic considerations but on moral or ethical concerns. For example, the judicial prohibition on patenting products of nature such as human DNA sequences may be motivated by noneconomic, deontological notions of human dignity, or the inviolability of natural creation. Finally, some commentators believe that Section 101 serves no independent purpose in patent law not already better served by other patentability requirements. On this view, Section 101's judicially created exceptions to patentable subject matter should simply be eliminated as an independent requirement for patentability, in favor of a rigorous application of the other patentability requirements in Sections 102, 103, and 112 of the Patent Act. <3.4. Potential Options for Section 101> Before examining the particular approaches introduced by the PTO and in the 116th Congress, this section will review some of the general ways in which Section 101 may or may not be reformed. These different paths are introduced to contextualize the current Section 101 reform proposals within the universe of possible reforms. This list is not exhaustive, nor are each of these options necessarily mutually exclusive. At a general level, most of the proposed paths forward for Section 101 fall into one of four categories. First, some oppose any legislative intervention, proposing instead to allow the courts to continue to develop and refine the standards for patent eligibility. Second, some propose replacing the Alice / Mayo framework with an explicit list of subject matter that is patent-eligible or -ineligible, perhaps along the lines of an approach that is used for European patents. Third, some propose replacing the Alice / Mayo framework with a different, usually lower, standard for patent eligibility, such as a requirement that the invention result from human effort, exist outside the human mind, or contribute to the technological arts. Fourth, some propose to do away with any limitations on patentable subject matter, beyond the four statutory categories and other existing statutory patentability requirements. <3.4.1. Continued Common Law Judicial Development> One option is for Congress to leave Section 101 as it is, and allow the courts (and/or the PTO) to continue developing the law of patent-eligible subject matter. Stakeholders and commentators may support this option for several different reasons. Some may disagree that the Alice / Mayo framework is as indeterminate or as harmful to innovation as the critics claim. Other commentators, even if they accept the criticisms directed at Alice / Mayo , may nonetheless believe that the courts will eventually refine, clarify, or otherwise improve the law of patentable subject matter given more time for judicial development. Still other commentators support the current law of Section 101 as affirmatively good for innovation and society because it precludes property rights in fundamental aspects of science, nature, and ideas, or serves as an important mechanism to weed out overly broad patents or obtain early dismissal of unmeritorious patent litigation. Supporters of continued judicial development may point to the recent administrative guidance put forth by the PTO and significant Section 101 decisions of the Federal Circuit over the past five years as promising steps in the administrative and common law development of Section 101 after the Alice , Mayo , and Myriad decisions. Opponents of maintaining the legal status quo, for their part, observe that the Supreme Court has not shown much interest in revisiting its Section 101 jurisprudence despite many opportunities, and that several current and former Federal Circuit judges have called for legislative amendment of Section 101. <3.4.2. Specific Statutory List of Included or Excluded Subject Matter Categories> Another potential route for reform would be to amend Section 101 to replace the Alice / Mayo framework with a more specific list of subject matter that is patent-eligible and/or patent-ineligible. Currently, Section 101 contains a broad list of included subject matter categories (processes, machines, manufactures, and compositions of matter), but most of the doctrine focuses on the three judicially created ineligible categories: laws of nature, natural phenomena, and abstract ideas. The "laundry list" approach would seek to make Section 101 clearer and more predictable by specifically defining categories of eligible and/or ineligible subject matter. Depending on how this sort of proposal is structured, it would retain the notion of ineligible classes of subject matter, but define such categories differently, more precisely, and perhaps more narrowly than the common law exceptions under the Alice / Mayo framework. The European Patent Convention's (EPC's) approach to patent eligibility offers a potential model for this type of approach. Under EPC article 52(1), patent-eligible subject matter reaches "all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application." However, EPC article 52(2) defines specific subject matter that is not patentable when claimed "as such": (a) discoveries, scientific theories and mathematical methods; (b) aesthetic creations; (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers; (d) presentations of information. EPC article 53 further denies patents on inventions that are "contrary to [public order] or morality," or that claim "plant and animal varieties," or "methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practised on the human or animal body." Assuming that the new statutory categories are more clearly delineated than existing judicial categories like the "abstract idea" exception, a potential virtue of the laundry-list approach is greater clarity and predictability in the sort of inventions that are patentable. This approach would also more firmly ground subject matter determinations in explicit statutory language. On the other hand, the list-of-specific-exclusions approach would potentially be less flexible and less able to adapt to unforeseen new technologies than other reform options. It might also, to some degree, replace case-by-case judicial judgments of eligibility with more categorical legislative ones, which may be a virtue or a vice depending upon one's perspective. <3.4.3. Replace Judicial Exceptions with a Different Standard> A third group of proposed Section 101 reforms seeks to replace the Alice / Mayo framework with a new statutory standard for assessing patent eligibility. Proposals in this category are fairly diverse, but common elements in proposed new standards would limit patent eligibility to inventions that result from human effort; contribute to the technological arts; have practical utility or application; cannot be solely performed in the human mind; do not preempt all practical uses of a law of nature, abstract idea, or natural phenomenon. Usually, the proposed new patentability standard would supersede the three judicially created subject matter exclusions and the two-step Alice / Mayo test. Several proposed new standards blend more than one of these elements. For example, the American Intellectual Property Law Association has submitted a Section 101 reform proposal that replaces the Alice/Mayo framework with a single exception to patent eligibility if an invention "exists in nature independently of and prior to any human activity" or "is performed solely in the human mind." A 2017 proposal by the American Bar Association would explicitly allow patenting "practical applications" of laws of nature, natural phenomena, and abstract ideas, so long as the patent claim does not "preempt the use by others of all practical applications of the law of nature, natural phenomenon, or abstract idea." It is difficult to generalize given the significant differences among the various proposals in this category, but commentators may debate whether proposed new standards would provide greater clarity and predictability in patent-eligibility law, while still being flexible enough to adapt to new technologies. <3.4.4. Eliminate Implied Patentable Subject Matter Limits> A final option is to eliminate the Alice / Mayo framework and judicially created exceptions to patent eligibility altogether, without replacing them with a new standard. Several commentators have argued that patent-eligibility doctrine serves no purpose that is not already served by the existing statutory patentability requirements of utility, novelty, obviousness, written description, definiteness, and enablement. On this view, the appropriate course would be for Congress to simply eliminate the nonstatutory eligibility requirements (i.e., the judicial prohibitions on patenting laws of nature, natural phenomena, and abstract ideas) in favor of "rigorous" application of the patentability requirements of Sections 102, 103, and 112 of the Patent Act. Supporters of this approach argue that it advances the underlying policy concerns motivating Section 101 law, but does so in a "more consistent and more rigorous" manner. Opponents argue that Section 101 serves important purposes that are distinct from the other patentability requirements, which would be lost if the judicial exceptions were entirely eliminated. <4. Proposed Reforms to Section 101> The Supreme Court's recent patentable subject matter jurisprudence has inspired a number of proposed Section 101 reforms from academics, practitioners, and other stakeholders. The specifics of many of these proposals have been reviewed elsewhere. This section examines two major developments in this area in 2019. First, it reviews the PTO's Revised Subject Matter Eligibility Guidance, which seeks to offer clearer guidelines to PTO patent examiners in making Section 101 determinations. Second, this section examines a series of draft legislative proposals put forth by a bipartisan and bicameral group of legislators, which have been the subject of a series of roundtables and congressional hearings on patentable subject matter reform. <4.1. PTO's 2019 Patent Subject Matter Eligibility Guidance> On January 7, 2019, the PTO issued Revised Patent Subject Matter Eligibility Guidance (the PTO's Revised Guidance) to assist PTO patent examiners in determining subject matter eligibility for patent applications. The PTO noted that the "legal uncertainty" surrounding the Alice / Mayo framework "poses unique challenges" for the agency, which has thousands of patent examiners who must make patent-eligibility determinations on hundreds of thousands of applications each year. Accordingly, the PTO issued revised guidance to its patent examiners to provide "more clarity and predictability" in their Section 101 determinations. The PTO's Revised Guidance made two major changes to how patent examiners evaluate whether a patent application claims patent-ineligible subject matter. First, the guidance attempts to provide a clearer definition of what constitutes an ineligible "abstract idea." Previously, examiners would make that determination by comparing the patent claim at issue to those found to be ineligible "abstract ideas" in previous judicial cases. The PTO found that this approach had become "impractical" because of an expanding volume of sometimes contradictory Section 101 case law. The PTO's Revised Guidance "synthesizes" the case law into three categories that examiners will treat as "abstract ideas": (a) Mathematical concepts mathematical relationships, mathematical formulas or equations, mathematical calculations; (b) Certain methods of organizing human activity fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions); and (c) Mental processes concepts performed in the human mind (including an observation, evaluation, judgment, opinion). Under the Revised Guidance, patent claims that do not recite matter that falls into one of these three groupings should not be treated as an "abstract idea" except in "rare circumstance[s]." Second, the PTO's Revised Guidance clarifies when examiners will treat a patent claim as "directed to" an ineligible category (abstract ideas, laws of nature, or natural phenomena) under step one of the Alice / Mayo test. In particular, the PTO will not treat a claim as "directed to" an ineligible concept if "the claim as a whole integrates the recited judicial exception into a practical application of the exception ." If the claim does integrate such a practical application such as improving the functioning of a computer, effecting a particular treatment for a disease, or implementing the exception into a particular machine or manufacture then the PTO will treat the claim as patent-eligible, without having to examine the patent application for an "inventive concept" under step two of the Alice / Mayo framework. PTO's Revised Guidance was generally perceived as lowering Section 101 barriers to patentability, especially with respect to computer-related inventions. Some commentators praised the Revised Guidance for providing greater clarity to patent examiners, while other stakeholders criticized the guidance as inconsistent with the Supreme Court's Section 101 decisions. Although the PTO's Revised Guidance changes how PTO examiners review new patent applications, it is important to note that the guidance, unlike judicial decisions or statutory reforms, lacks formal legal force that is, the guidance is not binding on the courts when patents are challenged in litigation. The PTO lacks general substantive rulemaking authority, and Revised Guidance itself states that it is only a "tool for internal [PTO] management" that lacks "the force and effect of law." Although the Federal Circuit has issued somewhat contradictory signals on this point, the Guidance would receive, at the most, "some deference" if a court found its reasoning to be persuasive. <4.2. Legislative Efforts in the 116th Congress: The Tillis-Coons Proposals> <4.2.1. The First Tillis-Coons Proposal> On April 17, 2019, Senators Tillis and Coons, along with Representatives Collins, Johnson, and Stivers, released a "bipartisan, bicameral framework" for legislative Section 101 reform (the First Tillis-Coons Proposal). The framework's release followed multiple roundtables with patent law stakeholders on Section 101 and the impact of the Alice/Mayo framework on, for example, innovation in artificial intelligence, medical diagnostics, and personalized medicine. The First Tillis-Coons Proposal would have retained the four statutory categories of patentable inventions, but removed the requirement that the invention or discovery be "new and useful" from Section 101. Patent eligibility would have instead been determined "by considering each and every element of the claim as a whole and without regard for considerations properly addressed by [Sections] 102, 103 and 112 [of the Patent Act]." In place of the judicially created exceptions to patent eligibility, which the First Tillis-Coons Proposal would have abrogated by statute, the proposal would have defined, "in a closed list," five "exclusive" categories of patent-ineligible subject matter: (1) fundamental scientific principles; (2) products that exist solely and exclusively in nature; (3) pure mathematical formulas; (4) economic or commercial principles; and (5) mental activities. Effectively, this would have codified the judicial exceptions in a narrower form, with the first two ineligible categories roughly corresponding to the "law of nature" and "natural product" judicial exceptions, and the final three to the types of "abstract ideas" identified by the PTO in its 2019 Guidance. The Proposal would have narrowed the construction of these ineligible categories by creating a "practical application" test, presumably along the lines of the ABA proposal to expressly permit patenting of a practical application of ineligible subject matter. However, "simply reciting generic technical language or generic functional language" would have been insufficient to "salvage an otherwise ineligible claim." The First Tillis-Coons Proposal thus blended elements of the PTO's 2019 Revised Guidance with a "laundry list" approach of specific ineligible categories, plus new statutory standards for how to apply the list of exceptions to patentable subject matter. The overall effect would be to lower Section 101 barriers to patentability, while still retaining more narrowly defined classes of ineligible subject matter. Reactions to the First Tillis-Coons Proposal were mixed. Some argued that the draft proposal was a promising start for much-needed congressional intervention. On the pro- Alice side of the debate, the Electronic Frontier Foundation, for example, criticized the First Tillis-Coons Proposal as a "disaster" for innovation because it would eliminate a powerful tool to combat bad patents and patent troll litigation. On the other side of the debate, critics of the Alice/ Mayo framework argued that the First Tillis-Coons Proposal did not go far enough, and urged elimination of any ineligible categories of patentable subject matter. <4.2.2. The Second Tillis-Coons Proposal> On May 22, 2019, following feedback on their first draft framework, the same group of Members released a "draft bill" to reform Section 101 (the Second Tillis-Coons Proposal). The Second Tillis-Coons Proposal was released in advance of a series of three hearings held in June before the Senate Judiciary Committee's Subcommittee on Intellectual Property, which were designed to solicit feedback on the draft legislative language. In the subsequent hearings, 45 witnesses testified over three days, with representatives from industry, academia, bar associations, and trade groups; former Federal Circuit Judges and PTO officers; and other patent law stakeholders expressing various views on Section 101 reform. As compared to the first proposal, the Second Tillis-Coons Proposal, generally speaking, would make more sweeping changes to Section 101 to expand patent eligibility. Like the First Tillis-Coons Proposal, the draft bill has several provisions that would attempt to separate the Section 101 inquiry from other patentability requirements. Specifically, the draft bill would strike the word "new" from Section 101 and establish that patent subject matter eligibility must be determined "considering the claimed invention as a whole" and without regard to "considerations relating to section 102, 103, or 112 of [the Patent Act]." The Second Tillis-Coons Proposal would further provide that eligibility determinations shall not depend on the "manner in which the claimed invention was made; whether individual limitations of a claim are well known, conventional or routine; the state of the art at the time of the invention." The draft bill also explicitly provides that Section 101 "shall be construed in favor of eligibility." Instead of codifying and narrowing the judicial exceptions to patentability, the Second Tillis-Coons Proposal would eliminate them altogether. The draft bill provides that No implicit or other judicially created exceptions to subject matter eligibility, including "abstract ideas," "laws of nature," or "natural phenomena," shall be used to determine patent eligibility under section 101, and all cases establishing or interpreting those exceptions to eligibility are hereby abrogated. This language would appear to overturn by statute not only the Alice / Mayo framework, but over two centuries of judicial decisions interpreting the "common law" exceptions to Section 101. The Second Tillis-Coons Proposal would replace the judicial exceptions with a new statutory definition of utility that incorporates elements of various prior proposals for a new Section 101 standard. To be patent-eligible subject matter under the Second Tillis-Coons Proposal, the invention would need to fit into one of the four statutory categories of eligible subject matter (which remain unchanged) and be "useful." To be "useful," an invention or discovery would need to provide "specific and practical utility in any field of technology through human intervention." Finally, to combat overbroad patent claims, the Second Tillis-Coons Proposal would alter the functional claiming rules under Section 112(f), which permits patentees to claim their invention in functional terms as opposed to reciting specific physical structures. In particular, the draft bill provides that if any patent claim element is "expressed as a specified function without the recital of structure, material, or acts in support thereof," then that claim element will be limited to the "corresponding structure, material, or acts described in the specification" and their equivalents. Consistent with a recent decision of the Federal Circuit, this language would clarify that Section 112(f) applies to any claim element that fails to sufficiently recite a structure for performing a function. This change would arguably make it more difficult for a patentee to avoid the limiting effects of Section 112(f), even if the words "means for" are not used in the claim language. As with the first proposal, reactions to the Second Tillis-Coons Proposal from patent law stakeholders were mixed. Critics of the Alice/Mayo framework generally applauded the draft bill as bringing much needed clarity and certainty to the law of patent eligibility, particularly with respect to biotechnology innovation. Opponents of the draft bill expressed concern that changes to the Alice / Mayo framework would eliminate an important tool against unmeritorious patent litigation. Critics also questioned the necessity and advisability of such a sweeping change to Section 101 law. Both supporters and opponents raised concerns about potential ambiguities in the proposed definition of "useful," particularly the terms "human intervention," "practical utility," and "field of technology." Stakeholders also debated the specific practical effects of the legislative changes at the hearings, such as the effect of elimination of the judicial exceptions on basic scientific research. One notable concern, raised by the American Civil Liberties Union in opposition to the draft bill, was that the Second Tillis-Coons Proposal, by abrogating the Myriad decision, would permit the patenting of human genes. Several witnesses denied that the draft bill would lead to that result because of the bill's "human intervention" requirement or other patent law principles. For their part, Senators Tillis and Coons made clear that they have "no intention" of overruling the holding of Myriad that no one may patent "genes as they exist in the human body." Following the hearings, Senators Tillis and Coons indicated that what they heard reinforced their view that "patent eligibility is broken and desperately needs to be repaired," and that there is a "necessity for Congress to intervene" to bring greater clarity to Section 101. Moving forward, they indicated they were "considering a provision that would exempt research and experimentation from infringement liability" in response to concerns about inhibiting scientific research. The Senators also indicated that they would continue to welcome input from all stakeholders and would seek to "clarify" the proposal regarding the eligibility of gene patents, and potentially "sharpen the 'field of technology' requirement to ensure that critical advances like artificial intelligence and medical diagnostics qualify [as patent-eligible]." At the same time, the Senators expressed their view that certain concepts should remain patent-ineligible under a revised Section 101, such as "economic transactions or social interactions." Observers expect a revised formal bill reflecting these provisions this fall.

The statutory definition of patent-eligible subject matter under Section 101 of the Patent Act has remained essentially unchanged for over two centuries. As a result, the scope of patentable subject matter—that is, the types of inventions that may be patented—has largely been left to the federal courts to develop through "common law"-like adjudication. In the 20th century, the U.S. Supreme Court established that three main types of discoveries are categorically patent-ineligible: laws of nature, natural phenomena, and abstract ideas. Recent Supreme Court decisions have broadened the scope of these three judicial exceptions to patent-eligible subject matter. Over a five-year period, the Supreme Court rejected, as ineligible, patents on a business method for hedging price-fluctuation risk; a method for calibrating the dosage of a particular drug; isolated human DNA segments; and a method of mitigating settlement risk in financial transactions using a computer. These cases established a new two-step test, known as the Alice / Mayo framework, for determining whether a patent claims ineligible subject matter. The first step of the Alice / Mayo test addresses whether the patent claims are "directed to" a law of nature, natural phenomenon, or abstract idea. If not, the invention is patentable. If the claims are directed to one of the ineligible categories, then the second step of the analysis asks whether the patent claims have an "inventive concept." To have an inventive concept, the patent claim must contain elements that transform the nature of the claim into a patent-eligible application of the ineligible concept, so that the claim amounts, in practice, to something "significantly more" than a patent on the ineligible concept itself. If the invention fails the second step of Alice / Mayo , then it is patent-ineligible. The Supreme Court's decisions have been widely recognized to effect a significant change in the scope of patentable subject matter, restricting the sorts of inventions that are patentable in the United States. The Alice / Mayo test has been the subject of criticism, with some stakeholders arguing that the Alice / Mayo framework is vague and unpredictable, unduly restricts the scope of patentable subject matter, reduces incentives to invest and innovate, and harms American industry's competitiveness. In particular, the Alice / Mayo test has created uncertainty in the computer technology and biotechnology industries as to whether innovations in medical diagnostics, personalized medicine, methods of treatment, computer software, and artificial intelligence are patent-eligible. As a result, some patent law stakeholders, including academics, bar associations, industry representatives, judges, and former Patent and Trademark Office (PTO) officials, have called for the Supreme Court or Congress to act to change the law of patentable subject matter. However, other stakeholders defend the legal status quo, arguing that the Alice / Mayo framework provides an important tool for combating unmeritorious patent litigation, or that the revitalized limits on patentable subject matter have important benefits for innovation. Recently, there have been several substantial administrative and legislative efforts to clarify or reform patent-eligible subject matter law. In January 2019, the PTO issued revised guidance to its patent examiners with the aim of clarifying and improving predictability in how PTO patent examiners make Section 101 determinations. In April and May of 2019, a bipartisan and bicameral group of Members released draft legislative proposals that would abrogate the Alice / Mayo framework and transform the law of Section 101 and related provisions of the Patent Act. Following a series of hearings in June 2019, many expect a bill to reform Section 101 to be introduced this fall. These proposed changes could have significant effects as to the types of technologies that are patentable. The availability of patent rights, in turn, affects incentives to invest and innovate in particular fields, as well as consumer costs and public access to technological innovation. Understanding the legal background and context can aid Congress as it debates the legal and practical effects that legislative Section 101 reforms would have if enacted.

crs_R46312

crs_R46312_0

The global carbon cycle is the biogeochemical process by which the element carbon (C) moves in a balanced exchange between the atmosphere (i.e., air), terrestrial biosphere (i.e., land), ocean, and Earth's crust (i.e., rocks, fossil fuel deposits). Within those pools , carbon exists in different inorganic (i.e., nonliving, such as carbon dioxide) and organic (i.e., living, such as plant tissue) forms. When carbon moves out of one pool, it is recycled into one or more of the other pools; this movement is known as a flux . The flux of carbon into the atmosphere, particularly as the greenhouse gas (GHG) carbon dioxide (CO 2 ), is the dominant contributor to the observed warming trend in global temperatures. Consequently, climate mitigation strategies have generally focused on both reducing emissions of GHGs into the atmosphere and removing more carbon out of the atmosphere. Forests are a significant part of the global carbon cycle. The forest carbon cycle consists primarily of the movement of carbon between the atmosphere and the terrestrial biosphere. Trees and other plants convert atmospheric carbon (in the form of CO 2 ) into terrestrial organic carbon, which is stored as biomass (e.g., vegetation). This process of carbon uptake and storage is referred to as sequestration . Trees also release (or emit) carbon back into the atmosphere. Over time, however, forests accumulate significant stores of carbon, both above and below ground. Thus, forest ecosystems uptake, store, cycle, and release carbon. Congressional debates over climate policy have often included ideas for optimizing carbon sequestration in forests as a potential mitigation strategy for global warming. To facilitate those debates, this report addresses basic questions concerning carbon sequestration in forests. The first section describes the carbon cycle in forests, with an overview of where carbon is stored and how carbon moves through the forest ecosystem. The second section provides a snapshot of data on carbon in U.S. forests and an overview of the methodologies used for estimating and reporting those measurements. The third section discusses some of the broad issues and challenges associated with managing forests for carbon optimization. Figure 1 introduces some of the terms and units used for measuring and reporting carbon. In addition, the Appendix contains a more comprehensive glossary of relevant terms used throughout the report. An accompanying report, CRS Report R46313, U.S. Forest Carbon Data: In Brief , provides data on carbon in U.S. forests and will be maintained with annual updates. Figure 1. Carbon Terms and UnitsSource: CRS, adapted from Maria Janowiak et al., Considering Forest and Grassland Carbon in Land Management, U.S. Department of Agriculture (USDA) Forest Service, GTR-WO-95, June 2017, p. 4.Notes: Because much of the data for this report are based on international standards, this report uses the metric system for consistency purposes. Forest carbon stocks are reported as measures of carbon, whereas greenhouse gas emissions and removals (e.g., sequestration) are reported as measures of carbon dioxide or carbon dioxide equivalents (to facilitate comparisons with other greenhouse gases). As a chemical element, the mass of carbon is based on its molecular weight. Carbon dioxide (CO2) is a compound consisting of one part carbon and two parts of the element oxygen (O). The conversion factor between C and CO2 is the ratio of their molecular weights. The molecular weight of carbon is 12 atomic mass units (amu), and the molecular weight of CO2 is 44 amu, which equals a ratio of 3.67. The same method is used to convert measurements of other greenhouse gases to carbon dioxide equivalents (CO2 eq.). <1. The Forest Carbon Cycle> Forests are a significant part of the global carbon cycle, in that they contain the largest store of terrestrial carbon and are continuously cycling carbon between the terrestrial biosphere and the atmosphere. Through photosynthesis, trees use sunlight to sequester carbon from the atmosphere and accumulate organic carbon-based molecules in their plant tissue (i.e., leaves, flowers, stems, and roots) above and below ground. Trees also respire: they use oxygen to break down the molecules they created through photosynthesis, and in the process they emit CO 2 to the atmosphere. The balance between photosynthesis and respiration varies daily and seasonally. Over time, individual trees and forests accrue significant stores of carbon. When trees die, the accumulated carbon is released, some into the soil (where it may be stored for millennia) and the rest into the atmosphere. This release can occur quickly, through combustion in a fire, or slowly, as fallen trees, leaves, and other detritus decompose. Some of the woody biomass from a tree may continue to store carbon for extended periods of time after death, due to long decomposition times or because it was removed (e.g., harvested) from the forest ecosystem and used, for example, in construction or in manufactured products. The carbon in harvested wood products eventually will be released, but the time scale varies considerably. The amount of carbon sequestered in a forest is constantly changing with growth, death, and decomposition of vegetation. If the total amount of carbon released into the atmosphere is greater than the amount of carbon being sequestered in the forest, the forest is a net source of CO 2 emissions. If the forest sequesters more carbon than it releases into the atmosphere, the forest is a net sink of CO 2 . Whether a given forest is a net source or sink, however, depends on the time and spatial scale (e.g., geographic boundaries) considered. Globally, forests are estimated to be a net carbon sink, with regional variations. The following sections describe in more detail where carbon is stored and how it moves in a forest ecosystem, as well as how ecological events and anthropogenic (i.e., human-caused) activities and changing land uses can influence the balance and cycle of carbon (e.g., the forest carbon budget). <1.1. Forest Carbon Pools: Where Carbon Is Stored in a Forest> In a forest ecosystem, carbon is stored both above and below ground and exists in living and nonliving forms. All parts of a tree the leaves, limbs, stems, and roots contain carbon. The proportion of carbon in each part varies, depending on the species and the individual specimen's age and growth pattern. The U.S. Environmental Protection Agency (EPA) consistent with international guidelines for measuring and accounting for carbon reports forest carbon in seven different pools (see Figure 2 ). Five of these pools are part of the ecosystem pool : Aboveground biomass includes all living biomass above the soil, including stems, stumps, branches, bark, seeds, and foliage. Aboveground biomass also includes living understory plants. Belowground biomass includes all living root biomass of trees or understory plants, for roots thicker than two millimeters in diameter. Deadwood includes all dead woody biomass either standing, down (i.e., lying on the ground), or in the soil. Forest floor litter includes leaves, needles, twigs, and all other dead biomass with a diameter less than 7.5 centimeters, lying on the ground. This includes small-sized dead biomass that is decomposed but has not yet become part of the soil. Soil carbon includes all carbon-based material in soil to a depth of one meter, including small roots. EPA divides this category further into mineral (based on rocks) and organic (based on decomposed organic matter) soils. In addition to the ecosystem carbon pools, EPA includes two additional pools in measuring forest carbon, consisting of products made of harvested wood at different stages of use. The carbon in these pools was once forest ecosystem carbon, which was then transported out of the forest ecosystem. These pools are sometimes called the product pool or referred to as harvested wood products (HWP s ) : Harvested wood products in use, or products made from harvested wood (e.g., paper, beams, boards, poles, furniture, etc.) that are currently being used. Wood also may be harvested for energy purposes (e.g., wood chips, wood pellets, firewood, etc.). Harvested wood products in solid waste disposal sites, or harvested wood products that are in a landfill or other waste disposal site, where they may eventually break down and release their stored carbon or remain intact for significant periods of time. Carbon is stored within the different forest ecosystem and product pools at different time scales. A tree's life span tree can range from decades to thousands of years. Carbon in leaf litter may be released into the atmosphere or decay into soil within months or years, whereas carbon in bark or wood may remain for decades to centuries after the tree dies. Soil carbon may persist in the pool for years to millennia. Thus, the carbon turnover , or length of time carbon stays in each pool or the forest ecosystem broadly, varies for several reasons, such as the climate, hydrology, nutrient availability, and forest age and type, among others. The amount of carbon stored (e.g., carbon stock ) in the different pools also varies. For various research or reporting purposes, the forest carbon pools are sometimes combined in different ways. In particular, the forest ecosystem pools are combined into categories such as aboveground versus belowground, or living and nonliving, or dead pools. This is especially useful when examining how various activities influence the flow of carbon between the ecosystem pools. In addition, some of the pools may be further categorized into smaller pools. For example, the aboveground biomass pool may be further classified into the amount of carbon stored in trees versus understory plants, or the amount of carbon stored in tree components (e.g., leaves, branches, and trunks). As another example, the deadwood pool may be further classified into standing dead and downed dead, in part to reflect the variation and relative importance of each in different forest types. See Table 1 for a crosswalk of terminology and classifications used in this report. However, these categories are not always comprehensive or mutually exclusive. <1.1.1. Global Forest Area and Carbon Distribution> Because of variations in carbon turnover, climate, hydrology, and nutrient availability (among other factors), carbon sequestration and release vary substantially by forest. The proportion of carbon stored in the various pools varies by forest type (e.g., tree species) and age class. Nonetheless, some broad generalizations are possible because of the relative similarity of forests in specific biomes tropical, temperate, and boreal forests (see Figure 3 ). Tropical forests represent around half the global forest area and store more than half the global forest carbon. The carbon in tropical forests is relatively evenly distributed between living and dead biomass, though more is contained in living biomass. Boreal forests represent around 29% of global forest area and store about one-third of the global forest carbon. Most of the carbon in boreal forests is in the belowground dead pools, particularly soil. Globally, temperate forests store the least amount of forest carbon and represent the smallest area, although most forests in the United States fall within the temperate zone. (Some of the forests in Alaska are in the boreal zone.) Carbon in temperate forests is also relatively evenly stored between the living and dead pools, but more is contained in the dead pools, also mostly in the soil. Because of where the carbon is stored in the different types of forest biomes, the drivers affecting the carbon balance in tropical, temperate, and boreal forests vary considerably. <1.2. Forest Carbon Dynamics: How Carbon Moves Through a Forest> The essence of the forest carbon cycle is the sequestration and accumulation of atmospheric carbon with vegetative growth and the release of carbon back into the atmosphere when the vegetation dies and decomposes or during a wildfire. This section discusses how carbon flows between the atmosphere and the different forest carbon pools (see Figure 4 ) and some of the factors that affect the cycle. Carbon enters the forest ecosystem through photosynthesis and accumulates in living biomass both above and below ground. Carbon leaves the forest ecosystem and returns to the atmosphere through several processes: respiration, combustion, and decomposition. Respiration occurs from living biomass both above and below ground (where it is known as soil respiration ). Combustion (e.g., fire) immediately releases carbon from living and dead pools. Decomposition occurs after the tree dies and slowly releases carbon to both the atmosphere and the soil. Decomposition rates are influenced by several factors (e.g., precipitation, temperature), and trees may remain standing for several years after death before falling to the ground and continuing to decay. In addition, human activities facilitate the flux of carbon out of the forest ecosystem. For example, timber harvests remove carbon from the forest ecosystem (and move it into the product pool). This carbon remains stored in the harvested product while the product is in use, but it will eventually return to the atmosphere in most cases. The delay between harvest and release could be relatively instantaneous if the wood is used for energy, for example, or the delay could be more than a century if the wood is used for construction and then disposed in a landfill, where it could take several decades to even partially decompose. The difference between carbon sequestration and release (e.g., emissions) determines if a forest is a net source of carbon into the atmosphere or a net sink absorbing carbon out of the atmosphere. Forest ecosystems are dynamic, however, and the balance of carbon pools and carbon flow varies over different time and spatial scales. These forest carbon dynamics are driven in large part by disturbances to the forest ecosystem. Anthropogenic disturbances are planned activities, such as timber harvests, prescribed wildland fires, or planned land-use conversion. E cological disturbances are unplanned and include weather events (e.g., hurricanes, ice storms, droughts), insect and disease infestations, and naturally occurring wildfires. Ecological disturbances are a natural part of forest ecosystems, though anthropogenic factors may influence their severity and duration. The type, duration, and severity of the disturbance contribute to the extent of its impact on carbon cycling. Most disturbances result in some levels of tree mortality and associated carbon fluxes. Disturbances may have additional impacts if the land cover changes. Post-disturbance, forests will often regenerate with trees (e.g., reforestation ) or other vegetation. In this case, the disturbance influences carbon fluxes and stocks in the short to medium term. If the land changes from forest to grassland, or if the area is intentionally developed for agricultural production or human use (e.g., houses), then the effects on the forest carbon cycle are more permanent (e.g., deforestation ). The following sections explore the forest carbon dynamics related to both anthropogenic and ecological disturbances and land-use changes in more detail. <1.2.1. Disturbances> Generally, disturbances result in tree mortality and thus transfer carbon from the living pools to the dead pools and eventually to the atmosphere. The impacts to the forest carbon budget, however, occur over different temporal and spatial scales. For example, the onset of a disturbance's effects may be immediate (e.g., through combustion) or delayed (e.g., through decomposition). Regardless, since there is less living vegetation, the rate of photosynthesis decreases and reduces the amount of carbon sequestered on-site. At the same time, more carbon is released into the atmosphere as the dead vegetation decays. Because of this, many forests may be net sources of carbon emissions in the initial period after a disturbance. Over time, however, the carbon impacts from most disturbances will begin to reverse as the forest regenerates and gradually replaces the carbon stocks (e.g., the amount of carbon in a pool). The lagging recovery and associated increase in carbon uptake and storage are sometimes referred to as legacy effects. Forest carbon stocks in the United States, for example, have been increasing related in part to legacy effects from past disturbances (e.g., harvests). In other words, "a sizeable portion of today's sequestration is compensating for losses from yesterday's disturbances." Forest carbon dynamics are also influenced by disturbances over different spatial scales. Disturbances generally occur at the stand level (i.e., a group of trees) within a forest, but they rarely occur across an entire forest at the same time. For example, a wildfire may result in significant mortality in one stand, moderate mortality in another stand, and no mortality in a third stand, all within the same forest. That same wildfire may not burn across other areas within the same forest at all. This means that at any given time, different stands within a forest may be in various stages of post-disturbance recovery. Because disturbance effects vary both temporally and spatially, they can be in relative balance. This means that forest carbon stocks are generally stable over large areas and over long time scales, assuming the sites are reforested (see Figure 5 ). A shift in the overall pattern of disturbance events, however, could have long-term impacts to forest carbon dynamics. Disturbances are generally increasing in frequency and severity throughout the United States. (with regional variations). For example, a pattern of increasing frequency and severity of disturbances could result in lower sequestration rates and less forest carbon stocks over time. This is in part because disturbance events can interact and compound with each other. For example, drought can make trees more susceptible to insect or disease infestations or to sustaining greater damage during a wildfire. After a wildfire, drought may prevent or delay regeneration. These interactions would then have associated impacts to the forest carbon cycle. In the United States, disturbances account for the loss of about 1% of the carbon stock from the aboveground biomass pool annually. However, timber harvests account for the majority of that change, meaning that some of this "loss" enters the product pool. Wildfire, wind or ice storms, bark beetles, drought, and other disturbances account for the remainder of the loss. However, little research exists on the carbon-related impacts of insect and disease infestations generally or on the impacts of specific insects other than bark beetles. In addition, the effects of disturbances on other carbon pools soil carbon in particular are not well understood. Thus, the current understanding may not accurately estimate the degree of these impacts. The following sections discuss the specific carbon-related effects and issues associated with several types of disturbances, listed in order of decreasing impacts to the forest carbon budget. <1.2.1.1. Timber Harvests> Timber harvests are a planned management activity, and as such they represent an anthropogenic disturbance. Timber harvests result in the direct transfer of carbon from the aboveground, living biomass pool to other pools. Although some carbon remains on-site as deadwood or litter, a portion of the carbon is removed from the forest ecosystem entirely and becomes part of the product pool. Carbon in the product pool eventually will be released, but the lifecycle varies considerably based on end-use and disposal methods. The carbon that remains on-site as deadwood or litter will decompose and eventually be released into the atmosphere (and some may be absorbed into the soil). In addition, timber harvests have the potential to degrade or damage soils, which also could release carbon into the atmosphere. End-uses of harvested wood products include lumber, paper, panels, and wood used for energy purposes. Energy is derived from wood through combustion, so the carbon in that product pool is released almost immediately. In contrast, lumber used for housing construction may remain in use for nearly a century before being discarded. In some areas, wood products are incinerated upon disposal, releasing the stored carbon into the atmosphere. In the United States, however, most wood products are discarded in solid waste disposal sites (e.g., landfills). In those environments, paper products may take several years and wood products may take several decades to decompose and release the stored carbon into the atmosphere. In some cases, products may decompose only partially, so some carbon may persist in discarded wood products indefinitely. The flux of carbon into the product pool does not consider any emissions related to the harvesting process or the transporting of the wood product. <1.2.1.2. Wildfires> Although most wildfires are unplanned ecological disturbances, some may occur as a planned forest management activity (e.g., prescribed fire ). Wildfires result in the immediate release of some carbon dioxide and other GHGs through combustion. There is also a transfer of carbon from living to dead pools, where carbon continues to be released over time (or some may be absorbed into the soil). The severity of the fire influences the extent of tree mortality and has implications for the timing and type of post-fire recovery. For example, forest regeneration may take longer if the soil damage is severe. More wildfires occur in the eastern United States (including the central states), but the wildfires in the West are larger and burn more acreage. Although wildfire activity varies widely in scale and severity, wildfires have been increasing in frequency and size, particularly in the western United States. <1.2.1.3. Other Disturbances: Insect and Disease Infestations, Wind, Drought> Other ecological disturbances, such as insect and disease infestations, wind events, and droughts, have similar effects on forest carbon dynamics: transferring carbon from the live pools to the dead pools and releasing the carbon into the atmosphere over time. The carbon effects from insect and diseases vary considerably, depending on the type of infestation. Some infestations result in widespread tree mortality, similar to other disturbance events. In cases when the infestation is species- or site-specific, the forest may regenerate with a different species mix, altering the forest composition and carbon storage potential. Other infestations, however, may primarily result in defoliation (e.g., loss of leaves). Defoliation increases the amount of forest litter and reduces the rate of carbon uptake but does not necessarily result in a large loss of forest carbon stocks. Indirectly, defoliation may weaken trees and make them more susceptible to impacts from other disturbances. Little research is available on the carbon-related effects of insect and disease infestations generally or on the impacts of specific insects other than bark beetles, so the current understanding may not accurately estimate the degree of this impact. A hurricane or other wind event may uproot, knock over, or break trees (e.g., windthrow or blowdown) increasing the amount of deadwood and forest litter, which could then hasten the spread of a wildfire. These impacts may occur across individual trees or across significantly larger areas. Ice storms have similar effects. Although the carbon cycling effects of a single event may be significant, there is considerable annual variability and the net effect usually is mitigated over time as the site regenerates. Droughts are prolonged events with direct and indirect effects on forest carbon. Droughts can weaken individual trees, reducing carbon uptake, and can lead to tree mortality. Droughts also can prolong regeneration and/or facilitate the shift to a different species mix. Indirectly, weakened trees may be more susceptible to damage or death from other disturbance events. In this way, droughts can enhance or exacerbate other disturbance events. <1.2.2. Land-Use Change> What happens to a site after a disturbance influences the longer-term effect of that disturbance on the global carbon cycle. Reforestation occurs if the site regenerates with trees (naturally or through manual seeding or planting). In this case, the effects on the carbon cycle would be generally mitigated over time. If the site converts to a different land cover or land use, however, more significant and longer-term impacts to the carbon cycle may occur. Land-use changes may occur with or without a separate precipitating disturbance event or, in the case of planned land-use changes, may be the disturbance event. Deforestation occurs when the site converts to a non-forest use; it generally results in the loss of significant amounts of carbon at one time. In most cases, deforestation means the sudden removal of all aboveground carbon, followed by a more gradual loss of belowground carbon. Deforestation also results in the loss of carbon sequestration potential. Deforestation frequently occurs through deliberate human intervention (e.g., to clear the land for development or agricultural purposes). However, deforestation also may occur without human intervention, most commonly when grasses or shrubs populate a post-fire site and prohibit the succession of tree species. Afforestation is the conversion of non-forestland to forestland. It results in the potential for new or increased ecosystem carbon storage and sequestration. Afforestation may occur through deliberate human intervention (e.g., planting, irrigation, fertilization) or through natural ecological succession, as trees begin to grow or encroach into grasslands and rangelands. Afforestation is most successful on sites that were previously forested. In the United States, for example, afforestation frequently occurs on abandoned cropland that had been forested prior to clearing. Globally, forest area generally has been declining since the 1990s. The rate of decline, however, has slowed in recent years, and there is considerable regional variation. Most of the net loss is occurring in tropical forests, whereas most of the net gains have been in temperate forests. In the United States, for example, forest area had been expanding for several decades and now is remaining steady, with variation at the region and state levels. This trend is generally a result of net afforestation, after accounting for some deforestation (~0.12% per year) and reforestation. In 2018, however, slightly more land converted out of forest use (1.29 million hectares) than converted to forest use (1.27 million hectares) in the United States. In general, most deforestation in the United States is the result of development or conversion to grassland. Conversely, however, more grassland converts to forestland annually and is the largest contributor to afforestation in the United States. <2. U.S. Forest Carbon Data> The following sections provide data on the annual amount of carbon stored in U.S. forest pools (e.g., carbon stocks ) and the net amount of carbon that flows in or out of U.S. forests annually (e.g., carbon flux ). First, however, is a brief discussion of the methodology used to estimate and measure forest carbon. The data are primarily derived from EPA's annual Inventory of U.S. Greenhouse Gas Emissions and Sinks ( Inventory ) for 2020. For purposes of this report, the data are intended only to provide context and complement the understanding of carbon dynamics in U.S. forests generally. As such, the data in this report will not be updated in accordance with the publication of the annual Inventory . Rather, an accompanying report, CRS Report R46313, U.S. Forest Carbon Data: In Brief , will be updated to reflect the annual data published in the Inventory and other sources. Because the methodologies used to estimate carbon measurements are constantly being refined, future iterations of the Inventory may result in different stock and flux estimates for the years discussed in this report. <2.1. Forest Carbon Accounting Methods> This section describes the forest carbon accounting methodology specific to EPA's annual Inventory . EPA has been publishing the annual Inventory since the early 1990s. Among other purposes, the Inventory fulfills the reporting commitments required of the United States as a signatory to the United Nations Framework Convention on Climate Change. As such, these methods are in accordance with the standards established by the International Panel on Climate Change (IPCC), which is the United Nations body responsible for assessing the science related to climate change. Federal agencies, including those within the U.S. Department of Agriculture (USDA), contribute data and analysis to the Inventory . Specifically, much of the data on forests and forest carbon is based on methodologies developed and data collected by the Forest Inventory and Analysis (FIA) Program administered by the USDA Forest Service (FS). As the following sections describe, the forest carbon figures reported in the Inventory are derived from estimates of forestland area and carbon stocks. Carbon flux is then measured by comparing changes in forest carbon stocks over time. <2.1.1. Estimating Forestland Area> The Inventory measures the net greenhouse gas flux associated with all land uses and types in the United States, in the Land Use, Land-Use Change, and Forestry (LULUCF) sector (see Figure 6 ). In addition to forestland, LULUCF includes the carbon flux associated with existing agricultural lands, grasslands, wetlands, and developed areas (referred to as settlements ). The Inventory also captures the carbon flux associated with changes in land uses, such as grasslands converting to forestland (e.g., afforestation ). These converted lands are reflected in the "converted" LULUCF category for 20 years, after which they are counted with the existing LULUCF land-use categories. Forests represent about one-third of the area included in the sector (see Figure 6 ), but they generally contain the most carbon stocks and are responsible for most of the carbon sink associated with the sector. This report focuses only on carbon stocks and fluxes associated with forestland. For the Inventory, forestland includes "land at least 120 feet wide and at least 1 acre (0.4 hectares) in size with at least 10 percent cover (or equivalent stocking) by live trees including land that formerly had such tree cover and that will be naturally or artificially regenerated." This definition does not include forested areas completely surrounded by urban or developed lands, which are classified as settlements . This definition also does not include woodlands, which are included in the grassland category. The Inventory reflects lands that are considered managed, (i.e., direct human intervention has influenced their condition). In contrast, unmanaged land is composed largely of areas inaccessible to society; the carbon associated with those lands is not reflected in the Inventory . For the United States, managed forests are those that are designated for timber harvests and/or with active fire protection, which includes all forestland within the conterminous U.S. and significant portions of forestland in Alaska. As of 2020, the Inventory did not include forestland in Hawaii and the U.S. territories as part of the carbon stock and flux estimates, although Hawaii forestland was included in some estimates of forestland use. Land area estimates are derived from a combination of FIA data and other sources. See Figure 6 and Table 3 . The Inventory reports carbon stocks for total managed forest area, but it accounts for carbon flux across two different categories: F orest l and R emaining F orest l and (FRF) and L and C onverted to F orest l and (LCF). FRF captures the carbon flux associated with existing forestland or forests that have been forestland for at least 20 years. LCF captures the carbon flux associated with land that has been converted to forestland within the past 20 years. In other words, this category captures the carbon flows associated with afforestation . Land area data on forestland converted to other uses (e.g., deforestation ), such as grassland, settlements (e.g., development), and agriculture uses, are captured in the respective new land-use category as reported in the LULUCF sector. <2.1.2. Estimating Forest Carbon Stocks and Fluxes> To generate estimates of the carbon stocks in the Inventory, estimates of forestland area are combined with site-specific estimates of forest carbon. These estimates are based primarily on the data collected through the FS's FIA Program, its continuous census of the U.S. forests. The FIA uses remote sensing data and field data collected from a series of permanently established research sites (called plots), which cover most forested lands of the United States. Field data include a variety of tree measurements, such as height and species. Additional measurements of downed deadwood, litter, and soil variables are taken on a subset of plots. The data are collected through a three-stage, systematic sample, as follows: 1. FS uses remotely sensed data to classify land cover as forest or non-forest and chooses a systematic sample of forested plots for field data collection. 2. FS collects field data at one forest plot for every 6,000 acres. The data include forest type, tree species, size, and condition. It also collects site attributes, such as slope and elevation. 3. FS collects a broad suite of forest health data from a subset of Phase 2 plots, such as understory vegetation, deadwood, woody debris, soil attributes, and others. The data are collected through an annualized sampling process in which a representative sample of plots in each state is surveyed at regular intervals, with the goal of each plot being sampled every 5 to 10 years. After field collection, FS applies mathematical conversion factors or models to calculate carbon content for each ecosystem pool. The conversion factors and models generally are species-specific and based on other research or internationally accepted methodologies based on peer-reviewed research. They relate data that are easily collected to data that are difficult (or impossible) to collect in the field. For example, FS calculates aboveground carbon by using species-specific equations that give aboveground carbon estimates from simple field data, such as tree height and diameter. It uses similar principles to derive estimates of carbon in belowground biomass, soils, litter, and deadwood. For the Inventory, the site-specific FIA data are scaled up to derive state and national forest carbon estimates using measures of forestland area. Carbon in the product pool, or in harvested wood products (HWPs), is calculated according to a mathematical model with conversion factors for several variables. These variables include the amount of carbon in various HWPs, the length of time HWPs remain in active use, and how long it takes for HWPs to decompose and release carbon based on the method of disposal. Other variables account for how many HWPs are imported and exported out of the United States annually, with adjustments for the associated carbon estimates. The Inventory reports annual GHG emissions (i.e., sources) and removals (i.e., sinks), expressed in terms of CO 2 equivalents, aggregated to millions of metric tons (MMT CO 2 eq.). CO 2 equivalents convert an amount of another GHG to the amount of CO 2 that could have a similar impact on global temperature over a specific duration (100 years in the Inventory ). This common measurement can help to compare the magnitudes of various GHG sources and sinks. See Figure 1 for information on calculating CO 2 equivalents. The Inventory measures net flux by comparing the annual difference in forest carbon stocks for existing forestlands as well as carbon sequestered as land converts to forestland. Specifically, net carbon flux is estimated by subtracting carbon stock estimates in consecutive years. Comparing the annual difference in carbon stocks reflects any carbon stock changes associated with disturbances, although it does not attribute any changes to specific disturbance events. The net effect of disturbances are reflected in the different total carbon stocks measures and in how the distribution of carbon between the stocks changes annually. For example, a timber harvest removes carbon from the forest ecosystem and transfers some carbon from the living pools to the dead and product pools. Annual estimates of carbon stock changes would reflect the loss of carbon from the aboveground biomass pool and transfer to the deadwood, litter, and product pools. The Inventory also reports emissions of other GHGs, particularly those associated with wildfires, fertilizer application, and other soil emissions (all accounted for in CO 2 equivalents). <2.2. U.S. Forest Carbon Stocks> According to the Inventory , U.S. forests stored 58.7 billion metric tons (BMT) of carbon in 2019 (see Table 3 and Figure 7 for data from 1990, 2000, 2010, and 2019). The majority of forest carbon was stored in the forest ecosystem pools (95%); the remainder was stored in the product pool (e.g., HWP). The largest pool of carbon was forest soils, which contained approximately 54% of total forest carbon in 2019. The next-largest pool was aboveground biomass, which contained approximately 26% of total. Each of the other pools stored less than 6% of the total carbon. Since 1990, U.S. forest carbon stocks have increased 10%. Nearly all forest pools have gained more carbon as of 2019. The exceptions are the litter and soil pools, which each continue to store around the same amount of carbon as they did in previous years. Forest carbon stocks have increased annually, meaning U.S. forests have been a net carbon sink, absorbing more carbon out of the atmosphere than they release (carbon flux data are discussed in the " Carbon Emissions and Sinks from U.S. Forests " section below). <2.2.1. Regional Variations> About one-third of the United States is forested. These forested areas vary considerably by location, climate, vegetation type, and disturbance histories, among other factors. Because of this variation, U.S. forests contain varying amounts of carbon, stored in varying proportions across the different forest pools. See Figure 8 for an example of how c arbon density , or the amount of carbon within a certain area, varies across the 48 conterminous states. Excluding Alaska, the forests in the Pacific Northwest and Great Lakes regions contain the highest carbon density. The distribution of the carbon across different pools differs between those two regions, however. In the Pacific Northwest and along the West Coast generally, most of the carbon is stored in the living biomass pools; in the Great Lakes region, most of the carbon is stored in the soil. Forests in New England, the Great Plains, and along the Southeastern Coast also store most of their carbon in soil, whereas the forests along the Appalachian Mountains store most of their carbon in live biomass. In some areas of the Rocky Mountains, most of the carbon is stored in live biomass; in other areas of the Rocky Mountains, most of the carbon is stored in the deadwood and litter pools. The carbon balance and dynamics in Alaska are not as comprehensively inventoried as those in other states in the conterminous United States. However, Alaska is estimated to contain significant carbon stocks, with the vast majority in the soil. Alaska includes multiple biomes: temperate forests along the southeast coast, boreal forests in the state's interior, and areas of tundra in the north. <2.3. Carbon Emissions and Sinks from U.S. Forests> Carbon flux is the annual change in carbon stocks. The flux estimate for any given year (e.g., 2018) is the change between stock estimates for that year (2018) and the following year (2019). Negative values indicate more carbon was sequestered than was released in that year (e.g., net carbon sink); positive values indicate more carbon was released than was sequestered in that year (e.g., net carbon source). According to the Inventory , U.S. forests were a net carbon sink in 2018, having sequestered 774 MMT CO 2 equivalents (or 211 MMT of C) that year (see Table 4 and Figure 9 for flux data from 1990, 2000, 2010, and 2018). This represents an offset of approximately 12% of the gross GHG emissions from the United States in 2018. The net sink reflects carbon accumulation on existing forestland and carbon accumulation associated with land converted to forestland within the past 20 years, though most of the sink is associated with existing forests (86%). Within the carbon pools, most of the flux is associated with aboveground biomass (58%). The carbon flux into the living biomass pools (above and below ground) reflects net carbon accumulation from the atmosphere; the carbon flux into the other pools represents the net of the flux of carbon from the living biomass pools into the dead pools relative to the flux of carbon out of those pools. Although soils store significant amounts of carbon, the carbon accumulates slowly over long periods, so the annual flux is minimal. In some years, soils are a net source of carbon to the atmosphere. Overall, the annual net flux of carbon into U.S. forests is small relative to the amount of carbon they store. For example, U.S. forests gained an additional 211 MMT of carbon between 2018 and 2019, but that represents only a 0.3% increase to the total forest carbon stock (58.7 BMT of carbon). In addition, the total stock of carbon stored in forests is equivalent to the sum of several decades of U.S. GHG emissions. Over the time series (1990 to 2018), U.S. forests have been a net carbon sink. However, the net amount of carbon sequestered by U.S. forests varies annually, depending in large part on disturbance activity and location in any given year. For example, wildfire activity in Alaska drives a significant portion of the interannual variability. This is due in part to fluctuations in the size of the area affected by wildfire each year and because more of the carbon in Alaska is stored in pools that are likely to be combusted in a fire (e.g., litter) as compared to other states. Although the Inventory reflects the net carbon flux associated with forest disturbances through annual changes in the carbon stock, recent iterations of the Inventory also have included the estimated emissions specifically associated with wildfires. The Inventory reports that wildfires, including prescribed fires, resulted in emissions of 170 MMT CO 2 equivalents in 2017, the most recent year available. Annual forest carbon emissions vary significantly, because wildfire activity varies annually. For example, the Inventory reports that wildfire-related emissions in the previous year (2016) were significantly lower: 51 MMT CO 2 equivalents. <3. Considerations for Forest Carbon Management> This section discusses policy issues related to managing forest carbon. Forests are generally managed for multiple reasons, often simultaneously. For example, the Forest Service manages the National Forest System under a congressional mandate to provide sustained yields of multiple uses, some of which may compete and require tradeoffs. In many cases, optimizing carbon sequestration and storage could be one of many forest management objectives. There are three primary strategic approaches for optimizing forest carbon sequestration and storage: (1) maintain or increase the area of forestland, (2) maintain or increase forest carbon stocks, and (3) increase the use of wood products. The applicability of each approach will vary depending on existing site characteristics and land management objectives. In addition, each of these approaches comes with varying levels of uncertainty related to effectiveness, potential for co-benefits, and tradeoffs. Maintai n or increase forest land area . This approach involves avoiding and reducing deforestation and maintaining or increasing afforestation. (This approach also could include increasing tree cover in urban areas, although the overall carbon benefits would be uncertain and likely highly variable based on site-specific characteristics.) Increasing forest area could provide a range of co-benefits (e.g., watershed protection, wildlife habitat), but in some cases it also could require substantial resources (e.g., fertilization, irrigation). In addition, increasing forest area could require economic tradeoffs, such as income loss from reduced agricultural production in areas of increased afforestation, for example. Maintain or increase forest carbon stocks . This approach involves managing forests to maximize tree growth potential, rehabilitating degraded forests, or otherwise mitigating potential carbon losses. This could involve activities such as extending the time between timber harvests and/or implementing harvesting methods to increase the protection of remaining trees and soils. This also could include restoring degraded forests whose biomass and soil carbon densities are less than their maximum potential value. Forest restoration could have additional benefits in terms of improving forest resilience to and recovery from ecological disturbances (e.g., mitigating the risk of catastrophic wildfires). These activities all could require substantial resources (e.g., forest thinning, fertilization, irrigation) and economic tradeoffs (e.g., loss of timber-related income). Increase use of wood products . To have net impacts on the carbon balance, this approach requires substituting wood products as an alternative to materials that are more carbon intensive to produce (e.g., steel) or using wood as a substitute for fossil fuel. In some cases, these measures could require significant technological advances. Generally, a full lifecycle accounting of both products likely would be necessary to determine whether the use of wood generates net carbon benefits. Increasing the use of wood products could result in increased economic activity that incentivizes wood product innovation. It also could result in forest management activities that reduce overall carbon storage potential (e.g., increasing, rather than decreasing, harvest cycles). The above strategies share certain implementation issues and challenges. One of the most fundamental challenges is determining whether an activity actually results in a net carbon benefit, which depends largely on the time and spatial scale of analysis. Any approach will encounter issues related to: P ermanence . In this context, permanence means the extent the activities are reversible. For example, is there potential for a new landowner to reverse previous management decisions and to nullify or reverse the carbon benefits of these practices? This is especially an issue for private lands, which may change ownership status more frequently than public lands and forests. Ecological factors, such as a site's ability to recover post-disturbance, also may influence permanence. L eakage . The potential for changes in land management in one area to result in offsetting changes in another area is referred to as leakage. For example, the afforestation of cropland in one area may result in the conversion of forestland to cropland in another to make up for the loss of agricultural production. A dditional it y . Additionality is the extent the activity and associated carbon benefit would not have happened anyway. For example, preserving an area to avoid deforestation is not additional if the forestland was not under threat of deforestation. Finally, all of these considerations are in the context of the uncertainty related to the future effects of changing climatic conditions on forests broadly. The general scientific consensus is that, under most climate change scenarios, U.S. forests overall would likely continue to serve as a net carbon sink. However, the strength of that sink would diminish over time and, under some scenarios, could reverse. Regionally, some forests could be net sources of carbon at various times. Part of the uncertainty related to how forests may adapt to climate change is because many of the potential effects are interrelated (particularly in terms of ecological disturbances) and because, in some scenarios, the various effects could amplify or counteract each other. For example, more CO 2 in the atmosphere could increase forest growth but also could result in drought conditions, which would inhibit forest growth. Another source of uncertainty is the maximum extent of U.S. forests. After expanding steadily for several decades, the extent of U.S. forest area may have begun to plateau. If forest area begins to decrease, then a net amount of carbon could be lost and U.S. forests would be expected to sequester less carbon annually. If forest area expands further, however, then U.S. forests might be able to sequester more carbon moving forward. Finally, the carbon flux associated with U.S. forests is small relative to the amount of carbon stored in those forests, though U.S. forests offset 12% of GHG emissions in 2018. If U.S. forests sequester less carbon annually in the future, as predicted by some models, then U.S. forests would offset less GHG emissions and could potentially become a source of GHG emissions. Under such a scenario, even if GHG emissions were to remain constant at today's levels, the amount of atmospheric carbon would still increase. Thus, even minor shifts in carbon flux have the potential to significantly affect the nation's carbon balance and the overall global carbon cycle. <3.1. Appendix. Glossary of Selected Terms> Below is a glossary of selected terms used throughout this report. Most of the definitions are derived from several, interrelated sources, as listed below. Some terms may have a broad definition established through various international standards, which allow for the definition to be narrowed to fit national specifications. In some cases, the definition has been edited for clarity. Food and Agriculture Organization of the United Nations, Global Forest Resources Assessment 2020: Terms and Definitions , Working Paper 188, 2018. International Panel on Climate Change (IPCC, which is the United Nations body for assessing the science related to climate change), IPCC Guidelines for National Greenhouse Gas Inventories , 2006. U.S. Environmental Protection Agency (EPA), EPA Inventory, 2020 , Chapter 6, "Land Use, Land-Use Change, and Forestry (LULUCF)," April 13, 2020. Forest Service, The U.S. Forest Carbon Accounting Framework: Stocks and Stock Change, 19902016 , GTR-NRS-154, November 2015.

The global carbon cycle is the process by which the element carbon moves between the air, land, ocean, and Earth's crust. The movement of increasing amounts of carbon into the atmosphere, particularly as greenhouse gases, is the dominant contributor to the observed warming trend in global temperatures. Forests are a significant part of the global carbon cycle, because they contain the largest store of terrestrial (land-based) carbon and continuously transfer carbon between the terrestrial biosphere and the atmosphere. Consequently, forest carbon optimization and management strategies are often included in climate mitigation policy proposals. The forest carbon cycle starts with the sequestration and accumulation of atmospheric carbon due to tree growth. The accumulated carbon is stored in five different pools in the forest ecosystem: aboveground biomass (e.g., leaves, trunks, limbs), belowground biomass (e.g., roots), deadwood, litter (e.g., fallen leaves, stems), and soils. As trees or parts of trees die, the carbon cycles through those different pools, from the living biomass pools to the deadwood, litter, and soil pools. The length of time carbon stays in each pool varies considerably, ranging from months (litter) to millennia (soil). The cycle continues as carbon flows out of the forest ecosystem and returns to the atmosphere through several processes, including respiration, combustion, and decomposition. Carbon also leaves the forest ecosystem through timber harvests, by which it enters the product pool . This carbon is stored in harvested wood products (HWPs) while the products are in use but eventually will return to the atmosphere upon the wood products' disposal and eventual decomposition, which could take several decades or more. In total, there are seven pools of forest carbon: five in the forest ecosystem and two in the product pool (HWPs in use and HWPs in disposal sites). Carbon is always moving through the pools of forested ecosystems (known as carbon flux ). The size of the various pools and the rate at which carbon moves through them vary considerably over time. The amount of carbon sequestered in a forest relative to the amount of carbon that forest releases into the atmosphere is constantly changing with tree growth, death, and decomposition. If the total amount of carbon released into the atmosphere by a given forest over a given period is greater than the amount of carbon sequestered in that forest, the forest is a net source of carbon emissions. If the forest sequesters more carbon than it releases into the atmosphere, the forest is a net sink of carbon. These forest carbon dynamics are driven in large part by different anthropogenic and ecological disturbances . Anthropogenic disturbances are planned activities, such as timber harvests, whereas ecological disturbances are unplanned, such as weather events (e.g., hurricanes, droughts), insect and disease infestations, and wildfires. Generally, disturbances result in tree mortality, causing the transfer of carbon from the living pools to the deadwood, litter, soil, and product pools, and/or eventually to the atmosphere. If a disturbed site regenerates as forest, the carbon releases caused by the disturbance generally are offset over time. If, however, the site changes to a different land use (e.g., agriculture), the carbon releases may not be offset. The U.S. Environmental Protection Agency (EPA) measures forest carbon annually using data collected by the Forest Inventory and Analysis Program in the U.S. Forest Service. According to EPA, U.S. forest carbon stocks contained 58.7 billion metric tons (BMT) of carbon in 2019 across the seven pools, the majority of which was stored in soil (54%). The aboveground biomass pool stored the next-largest portion of forest carbon stocks (26%). The pools' relative size varies considerably across U.S. forests, however. EPA estimates that, for the forest carbon flux, U.S. forests were a net sink of carbon, having sequestered 221 million metric tons (MMT) of carbon in 2018—an offset of approximately 12% of the gross annual greenhouse gas emissions from the United States for the year. The net sink reflects carbon accumulation on existing forestland and carbon accumulation associated with land converted to forestland within the past 20 years. Within the carbon pools, most of the annual flux is associated with aboveground biomass (58%). In general, the annual net flux of carbon into U.S. forests is small relative to the amount of carbon they store (e.g., 221 MMT of carbon is 0.3% of the 58.7 BMT of total carbon stored in U.S. forests in 2019). There are three primary strategic approaches for optimizing forest carbon sequestration and storage: (1) maintain and increase the area of forestland, (2) maintain and increase forest carbon stocks, and (3) increase the use of wood products as an alternative to more carbon-intensive materials or as a fuel. In many cases, optimizing carbon sequestration and storage may compete with other forest management objectives and require tradeoffs. As such, the applicability of each approach will vary, depending on existing site characteristics and other objectives. In addition, each of these approaches comes with varying levels of uncertainty related to effectiveness and potential for co-benefits. All of these considerations are in the context of the uncertainty related to the future effects of changing climatic conditions on forests broadly.

crs_R45810

crs_R45810_0

<1. Introduction> President Trump and various U.S. lawmakers have expressed concerns about U.S. reliance on critical mineral imports and the vulnerability to critical mineral disruptions of supply chains for various end uses, including defense and electronics applications. Chinese export quotas on a type of critical minerals referred to as rare earth elements (REEs) and China's curtailment of rare earth shipments to Japan over a maritime dispute in 2010 represented a wakeup call for the United States on China's near-monopoly control over global REE supply. The actions of the Chinese led to record high prices for REEs and, as a result, began to shine a light on the potential supply risks and supply chain vulnerability for rare earths and other raw materials and metals needed for national defense, energy technologies, and the electronics industry, among other end uses. U.S. legislators have introduced and deliberated on bills that would address the potential supply risk and vulnerability with respect to rare earth supply and bills that would promote domestic rare earth mine development. After 2010, decisionmakers were faced with various policy questions, including is a domestic supply chain necessary to address potential supply risk; and would an RRE alternative supply chain outside China among allies provide reliable and less risky access to RREs? As events unfolded during the 2010s, it became clear that providing an upstream supply outside China was not enough, and that access to and the reliability of entire supply chains for rare earths and other minerals essential for the economy and national security also were vulnerable. The concern among many in Congress has evolved from rare earths and REE supply chains, to also include other minor minerals or metals that used in small quantities for a variety of economically significant applications. These minor metals are used in relatively small amounts in everyday applications such as laptops, cell phones and electric vehicles, and renewable energy technologies, in addition to national defense applications. In December 2017, the Presidential Executive Order (E.O.) 13817, "A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals," tasked the Department of the Interior (DOI) to coordinate with other executive branch agencies to publish a list of "critical minerals." DOI published a final list of 35 critical minerals in May 2018. <1.1. From 2010 to Present> Initially after China's actions in 2010 contributed to prices for the various elements increasing, the focus in Congress was on rare earth supply (e.g., where in the United States new REE production could begin). Since 2010, several bills have been introduced that would use a variety of policy options and approaches from streamlining the permitting framework for rare earth elements and other mining and processing projects on federal land, to the additions of REEs to the National Defense Stockpile. Sections 1411 and 1412 of the National Defense Authorization Act for FY2014 ( P.L. 113-66 ) contained language for Department of Defense to begin studies of rare earth materials and to require purchases of heavy REEs for the national defense stockpile. In 2010 the sole U.S. rare earth mine located in Mountain Pass, CA, owned by Molycorp, Inc., was dormant. From the mid-1960s through the 1980s, Molycorp's Mountain Pass mine was the world's dominant source of rare earth oxides. However, by 2000, nearly all of the separated rare earth oxides were imported, primarily from China. Because of China's REE oversupply and lower-cost production, as well as a number of environmental (e.g., a pipeline spill carrying contaminated water) and regulatory issues at Mountain Pass, Molycorp, Inc. ceased production at its mine in 2002. Between 2010 and 2012, there was some optimism but also criticism over Molycorp Inc.'s approach to reopen the only rare earth mine in the United States and establish a vertically integrated operation including oxide separation, production of metal alloys, and permanent magnet production. A few important questions relevant to a vertically integrated approach were raised then as they are now How can a fully integrated supply chain be developed domestically? Is a domestic supply chain necessary to address potential supply risk?; and With China in a near-monopoly position in all aspects of the rare earth supply chain, would an alternative supply chain outside China among allies provide reliable and less risky access to needed rare earth elements? Another immediate concern focused on the investment and skill level needed to build-out a reliable supply chain outside of China. In 2012, Molycorp, Inc., reopened its Mountain Pass mine, and the Lynas Corporation, Ltd. began production in Australia which added more REEs to the global mix albeit most of the production was in light rare earth elements (LREEs), not the heavy rare earth elements (HREEs) are needed for permanent magnets the fastest growing use for rare earth elements at the time. Permanent magnets are important parts for national defense missile systems, wind turbines, and automobiles. With higher prices came lower demand as some companies began to use less REEs, try substitutes, or diversify their source of raw material supply outside of China. With China's production (including illegal production), there was more supply than demand for many of the REEs and prices declined. As a result of rapidly falling prices and Molycorp's debt, the Mountain Pass mine was not economically sustainable. Molycorp filed for Chapter 11 bankruptcy protection in June 2015. In June 2017, MP Mine Operations LLC (MPMO) purchased the Mountain Pass mine for $20.5 million. MPMO is an American-led consortium of which the Chinese-owned Leshan Shenghe Rare Earth Company has a 10% nonvoting minority share. In 2018, MMPO reportedly restarted production at Mountain Pass. See Table 1 for Molycorp's timeline. In March 2019, the Chinese government announced a reduction in REE production quotas and suggested that the REE produced in China would be sold only in China for its domestic manufacturing activity. As previously noted, the vulnerability concerned expanded from RREs to critical minerals. Assessments using a criticality matrix identified minerals (such as REEs, cobalt, and tantalum, among others) that could face supply restrictions and result in vulnerabilities to the economy and national security. Broad criticality assessments were prepared by the National Research Council, the Department of Energy (DOE), and the Massachusetts Institute of Technology (MIT) early in the recent discussion of mineral supply risk and potential mineral demand from the energy technology sector. Many others, such as Nassar, Du, and Graedel, have weighed in since 2010 on the criticality and supply risk question, providing a variety of models that examine the supply risk and vulnerabilities associated with these minerals. It is beyond the scope of this report to evaluate those models. <1.2. Congressional Interest> Proposed Congressional findings mentioned in a number of bills introduced since the 111 th Congress on critical minerals include: Emerging economies are increasing their demand for REEs as they industrialize and modernize; A variety of minerals are essential for economic growth and for infrastructure; The United States has vast mineral resources but at the same time is becoming more dependent on imports; Mineral exploration dollars in the United States are approximately 7% of the world total (compared to 19% in the early 90s); Heavy rare earth elements are critical to national defense; China has near-monopoly control over the rare earth value chain, and there has been a transfer of technology from U.S. firms and others to China in order to gain access to rare earths and downstream materials; Thorium regulations are a barrier to rare earth development in the United States; A sense of Congress that China could disrupt REE and other critical mineral supplies to the United States; It is important to develop the domestic industrial base for the production of strategic and critical minerals; and The United States must accept some risk in the form of aiding domestic investment opportunities. The Senate Committee on Energy and Natural Resources held a hearing on S. 1317 , the American Mineral Security Act, on May 14, 2019, "Examining the Path to Achieving Mineral Security." Two congressional hearings were held on critical minerals in the 115 th Congress: one on December 12, 2017, by the House Natural Resources Subcommittee on Energy and Mineral Resources on "Examining Consequences of America's Dependence on Foreign Minerals," and a second on July 17, 2018, by the Senate Committee on Energy and Natural Resources to examine the final list of critical minerals. Public resource and minerals policy options are among the options for creating reliable supply chains of these minerals and metals. The Administration and many in Congress have combined concerns over import dependence and developing domestic supply into a number of policy proposals that would aim to streamline the permitting process for domestic critical mineral production and possibly open more public lands to mineral exploration. A 2017 U.S. Geological Survey (USGS) report, Critical Mineral Resources of the United States , presents its mineral assessments of 23 critical minerals for the nation as a whole, but does not break out what might be available on federal lands, where many of the legislative proposals are directed. Others in Congress want to be sure that if a more efficient permitting process is put in place, all the mechanisms for environmental protection and public input are left intact, if not enhanced. <1.3. The Scope of This Report> This report examines the process by which the critical minerals list was drafted, why these minerals are being classified as critical, where production is taking place, and countries holding the largest reserves of critical minerals. There is a brief review of materials required for lithium-ion batteries and solar and wind energy systems, and a discussion of supply chains for rare earth elements and tantalum. This report also presents the statutory and regulatory framework for domestic mineral production, legislative proposals, and congressional and executive branch initiatives (and actions), as well as an overview of U.S. critical mineral policy. There are a number of policy issues related to U.S. critical minerals, such as trade policy (particularly with China) and conflict minerals, just to name two. Treatment of these issues is beyond the scope of this report. <2. Brief History of U.S. Critical Minerals and Materials Policy> Minerals for national security have long been a concern in the United States. For example, there were concerns over shortages of lead for bullets during the early 1800s. There were material shortages during WWII and the Korean War that contributed to the formation of the National Defense Stockpile. The current stockpile of strategic and critical minerals and materials was developed to address national emergencies related to national security and defense issues; it was not established as an economic stockpile. In 1939, after Germany invaded Poland, the Strategic Materials Act of 1939 (50 U.S.C. 98, P.L. 76-117) provided the authority for the United States to establish a strategic materials stockpile. Then in 1946, the Strategic and Critical Materials Stockpiling Act was enacted so that the United States would be prepared for national military emergencies and to prevent material shortages. The 1946 Act (P.L. 79-520) set a target of $2.1 billion of materials to be spent for the stockpile. Congress increased funding for supplying the stockpile to $4 billion over four years (1950-1953). The Defense Production Act of 1950 (50 U.S.C. 4501, P.L.81-774) added $8.4 billion to expand supplies of strategic and critical materials. In 1951, President Truman formed the Materials Policy Commission (also known as the Paley Commission) which recommended a stockpile for strategic materials and the use of lower cost foreign sources of supply. President Eisenhower established long term stockpile goals during a national emergency as a way to prevent the shortages that occurred during World War II and the Korean War. The initial time frame for the duration of the emergency the stockpile was intended to cover was three years, but later reduced to one year. However, with the passage of the 1979 Strategic and Critical Minerals Stockpiling Revision Act ( P.L. 96-41 ), a three-year military contingency was reestablished as a criterion for stockpile goals. Funding for the stockpile was subsequently increased to $20 billion. During the Cold-War era, the National Defense Stockpile (NDS) had an inventory of large quantities of strategic and critical materials. In the early 1990s, after the Cold War with the Soviet Union, the U.S. Congress supported an upgrade and modernization of the strategic materials stockpile. By FY1993, the National Defense Authorization Act (NDAA) for Fiscal Year 1993 ( P.L. 102-484 ) authorized a major sell-off of 44 obsolete and excess materials in the stockpile such as aluminum metal, ferrochromium, ferromanganese, cobalt, nickel, silver, tin, and zinc. The majority of these materials were sold to the private sector. Proceeds of these sales were transferred to other federal or Department of Defense (DOD) programs. <2.1. The Modern Day Stockpile> In 1988, the Secretary of Defense delegated the management of the stockpile to the Undersecretary of Defense for Acquisition, Technology, and Logistics and operational activities of the NDS to the Director of the Defense Logistics Agency (DLA). Among other duties, the DLA manages the day-to-day operations of the stockpile program. The current stockpile contains 37 materials valued at $1.152 billion. Much of the materials are processed metals or other downstream products such as, columbium (niobium) metal ingots, germanium metal, tantalum metal, metal scrap, beryllium rods, quartz crystals, and titanium metal. Congressional action starting in 2014 led to the acquisition of REEs and other materials for the NDS. The DLA is acquiring six materials based on the NDAA for FY2014: Ferro-niobium; dysprosium metal; yttrium oxide; cadmium-zinc-telluride substrates; lithium-ion precursors; and triamino-trinitrobezene. In FY2016, the DLA made progress on its FY2014 goals for high-purity yttrium and dysprosium metal. The NDS initiated a program to develop economical methods to recycle REEs from scrap and waste. The goal was to investigate technologies to determine whether recycling is feasible in the United States. Work on this project goal is ongoing. In addition to acquisitions and upgrades, Congress approved a DOD proposal to sell materials determined to be in excess of program needs as part of the FY2017 NDAA ( P.L. 114-328 ). <3. Initiatives and Actions on Critical Minerals> <3.1. Development of the Critical Minerals List> E.O. 13817, "A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals," published on December 20, 2017, tasked the Department of the Interior (DOI) to coordinate with other executive branch agencies in establishing a draft list of critical minerals published in the F ederal R egist er 60 days from the initial order. On December 17, 2017, the Secretary of the Interior issued Secretarial Order (No. 3359, "Critical Mineral Independence and Security") directing the U.S. Geological Survey (USGS) and Bureau of Land Management (BLM) to develop the list. DOI agencies, with cooperation from others (e.g., DOD, DOE, and members of the National Science and Technology Council Subcommittee on Critical and Strategic Mineral Supply Chains [CSMSC]), developed using specific criteria an unranked list of 35 minerals. The Secretary of the Interior issued the final list of critical minerals in May 2018. The USGS used the critical mineral early warning methodology developed by the CSMSC as its starting point for the draft list. One of the metrics used was the Herfindahl-Hirschman Index which measures the concentration of production by country or company. Another metric used was the Worldwide Governance Index, which was used to ascertain the political volatility of a country and is based on six indicators. The early warning methodology is a two-stage process. The first stage uses the geometric mean of three indicators to determine if the mineral is potentially critical: supply risk (production concentration), production growth (change in market size and geological resources), and market dynamics (price changes). The second stage uses the results of the first stage to determine which of the potentially critical minerals require an in-depth analysis. In developing the list, the USGS also relied on its net import reliance data; its Professional Paper 1802, (referenced in footnote 14 of this report); NDAA FY2018 ( P.L. 115-91 ) from DOD; U.S. Energy Information Administration (EIA) data on uranium; and the input of several subject matter experts. The USGS established a threshold above which the minerals were deemed to be critical. Some minerals below the threshold that had critical applications were also included on the list. The USGS used a supply chain analysis to include some metals, such as aluminum, because the United States is 100% import reliant on bauxite, the primary source mineral for aluminum production. The unranked list of 35 minerals does not indicate the levels of criticality for some versus others. This is of note because some earlier studies had shown that the supplies of platinum group metals, REEs, niobium, and manganese are potentially far more vulnerable than lithium, titanium, and vanadium. Further, the REEs are not broken out by element. Some of the heavy rare earth elements have been shown to be more critical and vulnerable to supply shortages than some of the lighter elements. <3.2. Other Federal Critical Minerals Actions> In addition to developing a critical minerals list, Congress and various executive branch entities have invested in other actions related to critical minerals. Investment in research and development (R&D) is considered by many experts (e.g., DOE, MIT, and elsewhere) to play a critical role in the support for and development of new technologies that would address three primary areas: greater efficiencies in materials use; substitutes or alternatives for critical minerals; and recycling of critical minerals. Below is a summary of selected current federal R&D, and information and analysis activities on critical minerals at federal agencies. <3.2.1. Department of Energy30> <3.2.1.1. Critical Materials Hub> DOE's FY2019 budget request included funding for R&D on rare earth and other critical materials. DOE's "Critical Materials Hub" is conducting R&D on a number of critical material challenges, including "end of life" recycling to help mitigate any possible supply chain disruptions of REEs. Funding for the program was at $25 million, each year, for the past three fiscal years (FY2017-FY2019), as FY2019 is the third year of its second five-year research phase. Congress approved this level of support despite the Trump Administration's proposal to eliminate the program in FY2019 and FY2020. The Critical Materials Hub is funded under the Advanced Manufacturing R&D Consortia within DOE's Energy Efficiency and Renewable Energy Program. <3.2.1.2. REEs from Coal> Additionally, in FY2019 DOE proposed to launch its Critical Materials Initiative within the Fossil Energy R&D program under the Advanced Coal Energy Systems program to examine new technologies to recover REEs from coal and coal byproducts. Congress had appropriated funding for this project under the National Energy Technology Lab (NETL) R&D program during the Obama Administration, despite no request for funding. For FY2019, the Trump Administration requested $30 million in funding for the Critical Materials Initiative; Congress elected to support the initiative at $18 million. <3.2.1.3. Critical Minerals Report> In December 2010 and December 2011, DOE issued Critical Materials Strategy reports. These reports examine and provide demand forecasts for rare earths and other elements required for numerous energy and electronic applications. An update on this research is forthcoming, according to DOE. <3.2.2. Department of the Interior> The National Minerals Information Center housed within the USGS provides an annual summary of critical mineral activity in its Mineral Commodities Summaries report and Minerals Yearbook. The USGS also provides mineral resource assessments and has in 2017 published a study on 23 mineral commodities, all of which have been listed as critical by the Administration. In 2010, the USGS released a report on the rare earth potential in the United States. A 2017 collaboration between the USGS and the State of Alaska issued a report on critical and precious minerals in Alaska and conducted a geospatial analysis identifying critical mineral potential in Alaska. The results of the analysis provided new information on areas of Alaska that might contain deposits of critical minerals. <3.2.3. Department of Defense> In a DOD-led assessment of the U.S. manufacturing and defense industrial base and supply chain resiliency, there are sections on critical minerals and impacts on national security. The DOD continues to fulfill its stockpile goals for various critical materials and has funded small R&D projects related to rare earths. In 2009, the Office of Industrial Policy reviewed the rare earth mineral supply chain. The Office of the Secretary of Defense reviewed its National Defense Stockpile and issued a report titled: Reconfiguration of the National Defense Stockpile Report to Congress . As part of the Ike Skelton National Defense Authorization Act for FY2011 (Section 843 of P.L. 111-383 ), the DOD was required by Congress to prepare an "Assessment and Plan for Critical Rare Earth Materials in Defense Applications" and report to a number of congressional committees by July 6, 2011. A DOD assessment and congressional appropriations supported new stockpile goals for HREEs. In an April 2012 interview with Bloomberg News , the DOD head of industrial policy stated that DOD uses less than 5% of the rare earths used in the United States, and that DOD was closely monitoring the rare earth materials market for any projected shortfalls or failures to meet mission requirements. <3.2.4. White House Office of Science and Technology Policy> In 2010, the White House Office of Science and Technology Policy (OSTP) formed an Interagency Working Group on Critical and Strategic Minerals Supply Chains. The group's focus is to establish critical mineral prioritization and to serve as an early warning mechanism for shortfalls, to establish federal R&D priorities, to review domestic and global policies related to critical and strategic minerals (e.g., stockpiling, recycling, trade, etc.), and to ensure the transparency of information. The White House National Science and Technology Council Subcommittee on Critical and Strategic Mineral Supply Chains produced a report describing a screening methodology for assessing critical minerals. The "early warning screening" approach for material supply problems was first included as a U.S. policy goal in the National Materials and Minerals Policy, Research and Development Act of 1980 (30 U.S.C. 1601) ( P.L. 96-479 ). <4. Supply: Critical Minerals Production and Resources> <4.1. Production/Supply> According to the 2019 USGS Mineral Commodity Summaries report, China ranked as the number one producer of 16 minerals and metals listed as critical. While there are no single monopoly producers in China, as a nation China is a near-monopoly producer of yttrium (99%), gallium (94%), magnesium metal (87%), tungsten (82%), bismuth (80%), and rare earth elements (80%). China also produces roughly 60% or more of the world's graphite, germanium, tellurium, and fluorspar. In 2017, the United States had no primary production of 22 minerals and byproduct production of five minerals on the critical minerals list. There is some U.S. primary production of nine minerals, and the United States is a leading producer of beryllium and helium (see Table 2 , Figure 1 ). China had gains in production that far outpaced the rest of the world. By 2003, China had already dominated in the production of graphite, indium, magnesium compounds, magnesium metal, REEs, tungsten, vanadium, and yttrium; it solidified its number one producing status of these minerals about a decade later. Chinese producers are seeking not only to expand their production capacity at home but to continue to negotiate long-term supply agreements or create equity partnerships around the world, particularly in Africa (cobalt and tantalum), Australia (lithium), and South America (lithium). The dominant producing region for chromium, manganese, platinum group metals, tantalum, and cobalt is southern Africa. Brazil produces 88% of the world's niobium, and Australia accounts for 58% of the world's lithium production, according to USGS data. According to USGS data, critical minerals dominated by a single producing country include: niobium from Brazil, cobalt from the Democratic Republic of the Congo (DRC), platinum group metals from South Africa, REEs (including yttrium), and tungsten from China. <4.1.1. Production of Minerals and Mineral Resource Potential on Federal Land> Current mineral production information on federal land is not available from the DOI. The Government Accountability Office (GAO) noted in a 2008, report that the DOI does not have the authority to collect information from mine operators on the amount of minerals produced or the amount of mineral reserves on public lands, and there is no requirement for operators to report production information to the federal government. However, previous DOI and GAO reports completed in the early 1990s reported that gold, copper, silver, molybdenum, and lead were the five dominant minerals produced on federal lands under the General Mining Law of 1872 (30 U.S.C. 21-54). Currently, the vast majority of mining activity on federal lands is for gold in Nevada, based on past DOI information. The DOI report also showed that federal lands mineral production represented about 6% of the value of all minerals produced in the United States. There is uncertainty over how much production of minerals occur on federal lands. Most minerals listed as critical are locatable on U.S. federal lands under the General Mining Law of 1872; comprehensive information on which minerals are located and produced on federal land remains incomplete. An unanswered question is the extent that critical mineral resource potential exists on federal land. Until more is known through mineral resource assessments of federal land, it will be hard to determine the impact of opening federal land to development that is now withdrawn from mineral development. Some mining advocates support developing domestic supply chains in critical minerals. Other stakeholders support a diversified portfolio of reliable suppliers, particularly if foreign sources are more economic or if domestic production (or manufacturing) is uneconomic, not technically feasible, or environmentally unacceptable. <4.1.2. Byproduct Supply> There are six critical minerals that are classified as byproducts: indium, tellurium, gallium, germanium, cobalt, and rhenium. There are important differences between main product and byproduct supply. Byproduct supply is limited by the output of the main product. For example, the amount of indium recoverable in zinc cannot be more than the quantity of indium in the zinc ore. As production of the main product continues, the byproduct supply may be constrained because a higher price of the byproduct does not increase its supply in the immediate term. Even in the long run, the amount of byproduct that can be economically extracted from the ore is limited. That is, byproduct supply is relatively inelastic (i.e., not particularly responsive to price increases of the byproduct). For byproducts, it is the price of the main product, not the byproduct that stimulates efforts to increase supply. But a high enough byproduct price may encourage new technologies that allow for greater byproduct recovery from the main product. There may be occasions when the main product supply contains more byproduct than is needed to meet demand. If this were the case, byproduct processing facilities would need to be expanded so that byproduct processing capacity would not be a limiting factor in byproduct supply. Another important difference between byproduct and main product is that only costs associated with byproduct production affect byproduct supply. Joint costs (costs associated with production of both products) are borne by the main product and do not influence byproduct supply. Byproducts are typically available at lower costs then the same product produced elsewhere as a main product, (e.g., REEs produced as a byproduct of iron ore in China would have lower production costs than would REEs produced elsewhere in the world as a main product). Byproducts, typically, are not free goods, meaning that there are costs associated with their production. Byproducts could be without cost if two conditions are met: (1) production of main product must require the separation of the byproduct, and (2) no further processing of the byproduct is required after separation. <4.1.3. Global Mineral Production> Table 2 provides data on the global production of critical minerals and the leading producing countries. The data shows that production for nearly all of the critical minerals has increased since 2000, many of which have doubled (e.g., chromium, indium, lithium, manganese, niobium, and tantalum) or tripled (e.g., cobalt, gallium, and tellurium) in the amount produced. <4.2. Secondary Recovery of Critical Minerals in the United States> Secondary recovery can occur from waste products during the metal refining and manufacturing process or from discarded end use products. As indicated in Table 3 , in the United States, there is little to no production or reserves and little to no secondary recovery currently for many (but not all) of the critical minerals of high net import reliance. There is a significant amount of secondary recovery in the United States of nine critical minerals according to the USGS Mineral Commodity Summaries: aluminum, chromium, cobalt, gallium, indium, magnesium metal, platinum group metals, tin, and titanium. While U.S. capacity for secondary recovery of metals and other materials has not grown much between 1997 and 2016, rates of recovery have fluctuated annually. Steel is the most recycled material in the United States. There are well established infrastructures, for old and new scrap, for selected metals such as steel, copper, aluminum, cobalt, and chromium. For many other metals, such as manganese, REEs, and niobium, little-to-no recycling takes place in the United States because it is either economically or technically not viable. Countries in the European Union, Japan, and South Korea are strengthening their efforts in secondary recovery as emerging markets (e.g., China and India) seek to secure greater access to primary materials. The quantity of most metal and materials available for recycling will likely continue to meet a fraction of demand, particularly if demand is rising. The rate of availability (i.e., based on the useful life of the product) puts a limit on how much can be recycled. According to the National Research Council, the primary impediment facing secondary recovery in the United States is the lack of clear policies and programs at all levels of government to embrace the recovery of materials. Without a national mandate, the National Research Council report indicates that state and local governments are likely to continue a "patchwork" of programs and policies. Table 3 illustrates the point that there is very little secondary recovery of critical minerals and metals in the United States. The data could indicate that there is a lack of infrastructure for secondary recovery of critical minerals and metals. Economic and technological factors must also be evaluated as to whether the benefits outweigh the costs for recovering certain materials, particularly the small amounts of critical minerals that may be available for secondary recovery (from manufacturing waste or end use products). Additional R&D may be needed to determine whether secondary recovery of the most import-dependent minerals could be increased to reduce U.S. import reliance. In 2018, the USGS reports that for base metals and precious metals the recycling rate is much different. For example, the recycling rates were 28% for aluminum, 35% for copper, 52% for nickel, 18% for silver, and 25% for zinc. In 2014, steel in the auto industry was recycled at 106% more steel than was used for domestic manufacturing. The recycling rate of steel is 90% for appliances containing steel and 67% for steel cans. <4.3. Reserves and Resources> There is a distinction between what is described when using the terms reserves and resources in the context of minerals. Reserves are quantities of mineral resources anticipated to be recovered from known deposits from a given date forward. All reserve estimates involve some degree of uncertainty. Proved reserves are the quantities of minerals estimated with reasonable certainty to be commercially recoverable from known deposits under current economic conditions, operating methods, and government regulations. Current economic conditions include prices and costs prevailing at the time of the estimate. Estimates of proved reserves do not include reserves appreciation. Resources are concentrations in the earth's crust of naturally occurring minerals that can conceivably be discovered and recovered. Undiscovered technically recoverable resources are minerals that may be produced as a consequence of natural means, or other secondary recovery methods, but without any consideration of economic viability. They are primarily located outside of known deposits. <4.3.1. U.S. Critical Mineral Reserves and Resources> Regarding reserves, the USGS lists little to no reserves in all 35 of the critical minerals except for helium and beryllium and significant resource potential in only tungsten, lithium, vanadium, uranium, and REEs. Of the 14 critical minerals listed as 100% import dependent, the USGS lists some reserves for two: REEs and vanadium (see Table 4 and Figure 2 ). Regarding resources, USGS identifies some resource potential for cesium, manganese, and niobium. There are byproduct resources of cobalt, germanium, tellurium, and rhenium that are associated with main products such as copper, zinc, and bauxite (see Table 4 ). The USGS is uncertain about U.S. and global reserves of several critical minerals as not enough data are available according to the USGS. <4.3.2. Global Critical Mineral Reserves and Resources> According to the USGS, at the global level, there are significant or abundant resource potential for the critical minerals for which the agency has data, which is some but not all of the critical minerals. Global resource potential is either unknown or uncertain for bismuth, cesium, germanium, indium, and tellurium. Most of the germanium, indium, and tellurium are obtained as byproducts of base metal production. China leads the world in reserves in seven critical minerals, including antimony, REEs, strontium, tellurium, tin, tungsten, and vanadium (see Table 4 ). China is among the top three reserve holders in barite, fluorspar, graphite, magnesium compounds, and titanium. Table 4 provides available information on global resources of critical minerals, as well as information on the size of the reserves. Figure 2 provides information on the regional distribution of the reserves. <4.4. Mineral Exploration> Exploration expenditures for minerals in the United States have been rising since 2001. The United States has maintained about 8% of the annual exploration budget for minerals worldwide from 1997 to 2017. In 2017, these expenditures in the United States were at 225 exploration sites (out of 2,317 exploration sites worldwide); 41% of the U.S. sites were in Nevada, 14% in Alaska, and 11% in Arizona. It can take many years for mining firms to find and bring an economic deposit into production. Thus, it is important for the industry to keep mineral projects in the exploration-development process. In general, mineral exploration in the United States remains focused on a few minerals, most of which not considered critical. Exploration activity in the western states is primarily for gold, copper, molybdenum, silver, tungsten, and uranium. There had been some reported interest in expanding silica sand operations in Nevada, developing a copper-cobalt-gold project in Idaho on Forest Service land, and thorium production on federal lands along the Idaho/Montana border. Globally, Canada leads with the most active exploration sites, mostly for gold and base metals (over 500 sites), followed by Australia (about 500 sites) with investments mostly in gold, base metals, and uranium. <4.4.1. Locations and Minerals Being Explored> The locations and minerals being explored can be shape how critical mineral supply chains are or may evolve. These supply chains have relevance to various policy questions, including what is the long-term investment strategy in the United States to develop mineral extraction and downstream metal and manufacturing capacity; and, if the focus is on building a reliable supply chain, what part of that supply chain makes sense to develop in the United States? There have been recent new additions to the annual USGS mineral exploration review. Data on lithium, niobium, rare earth elements, and tungsten are now included. Data for other minerals such as scandium, vanadium, and yttrium have been compiled since 2014. The big global exploration story is about lithium. In 2016, global exploration dollars for lithium, cobalt, and gold rose significantly. The lithium exploration expenditures increased four-fold since 2015 and active exploration sites rose from 56 in 2012 to 167 sites in 2017. Lithium exploration expenditures, for example, rose from $22 million in 2015 to $128 million in 2017 as the number of lithium exploration companies grew from 23 in 2015 to 125 in 2017. The price of lithium rose by more than 150% from 2007 to 2016 and sits at 83% higher than its 10-year average. The number of cobalt sites rose by 121% since 2016. In the United States in 2017, gold remains in the top spot for the number of exploration sites (47%) followed by copper (12%), then lithium with 7% of the sites. USGS noted that there is continued interest in graphite, REEs, and tungsten in the United States, but the most notable sites are in gold exploration. Overall, 54% of the sites actively explored in the United States are for gold and silver and 22% for base metals. Worldwide, gold or silver accounts for 84% of the sites actively explored. The USGS reported that the United States has accounted for about 7% to 8% of overall global exploration budget over the past 10 years (about $611 million in 2017). However, the annual review is not exactly a country-by-country comparison because the USGS uses regions such as Latin America and Africa to compare with individual countries such as Canada, Australia, and the United States. The mineral exploration budget directed at U.S. mineral deposits is above that of China (5%), Russia (4%), and many countries in Latin America. Latin America attracts the most exploration dollars with $2.4 billion, most of which are for gold and silver (58%) followed by base metals at 22% of exploration expenditures. Chile has seen the most investment in Latin America, followed by Peru. Latin America is home to 70% of the world's known lithium deposits, known as the "lithium triangle" consisting of Chile, Argentina, and Bolivia. In Argentina, lithium exploration sites account for 44% of exploration expenditures followed by gold/silver at 42%, and copper at 9%. Lithium is most developed in Chile because of its superior infrastructure for mining. Most exploration projects in Chile are for copper (49%) and gold (29%). There has been an uptick in lithium exploration in Australia as well. China invested $650 million (in U.S. dollars) in Australia in 2016, looking for lithium and gold, primarily. As ore grades decline at known reserve locations, many exploration companies are searching for high-grade deposits in remote locations, including the ocean floor. <5. Demand: Critical Mineral End Uses and U.S. Import Reliance> <5.1. Demand for Critical Minerals> The demand for mineral commodities is a derived demand which differs from consumer goods demand. Minerals are used as inputs for the production of goods and services. For example, the demand for rare earth elements is derived from the production of their end-use products or use, such as flat panel displays, automobiles, or catalysts. As a result, the demand for critical minerals depends on the strength of the demand of the final products for which they are inputs. An increase in the demand for the final product will lead to an increase in demand for critical minerals (or their substitutes). In the case of derived demand, when mineral and metal prices rise, the extent to which the quantity of a material declines depends largely on the degree to which its price increase can be passed on to the final consumer, as well as the proportion of the final good's price that is accounted for by the mineral/metal commodity. That is, it might depend on the amount of critical mineral or metal used per unit of output. The major variables that determine the growth in demand for consumer goods are price and income growth. <5.1.1. U.S. and Global Demand> U.S. demand has declined for some critical minerals, and for others, demand has increased but not as much (in relative terms) as the increase in global supply. For example, over the past 20 years consumption fell for aluminum, chromium, manganese, platinum group metals, REEs, titanium, and tantalum, among others, and demand grew slowly for lithium, germanium, and graphite. Only for tellurium, niobium, and indium did the United States experience rapid demand growth (relative to supply). Some of the demand drivers in recent decades for critical minerals include permanent magnets using REEs, batteries using cobalt and lithium, automobiles and electronics using tantalum and niobium, and vanadium for steel production. Global demand data for each of the minerals listed as critical were not available at the time of this writing. Global demand data could shed more light on where the minerals are being used for metal alloying, the manufacturing of component parts, and final products. Embodied metals (those that are imported as final products) are not counted as demand. Many critical minerals, (e.g., manganese, tungsten, and vanadium) are used for steelmaking and infrastructure projects, such as roads, housing, rail lines, and electric power grids. Others (e.g., REEs, lithium, indium, tantalum, gallium, and germanium) are used in the manufacturing of high-value electronic products, such as laptops and batteries, renewable energy systems, and other consumer goods, such as automobiles and appliances (see Table 5 ). <5.1.2. Demand for Critical Minerals in China> There has been a surge in demand for critical minerals in China. China's demand for natural resources rose to historic levels and may continue to rise over the long term, even with a slowing economy. In the recent past, China has been the fastest growing market for niobium, and in 2010 accounted for 25% of world niobium consumption. Manganese consumption rose from about 2,200 metric tons (mt) in 2003 to about 9,000 mt in 2008. China's demand for vanadium paralleled that of steel demand and rose 13% annually from 2003 to 2009. In general, vanadium demand in China is projected to double from 2010 to 2025 because of its continued use in steelmaking (including new steel-hardening requirements) and because of the potential for application in new battery technology used for large-scale renewable energy storage (e.g., vanadium-redux flow battery-VRFB). In 2010, China accounted for 85% of chrome ore import demand and is the world's leading producer of steel (accounting for over half the world's production in 2017 based on the most recent data). Chromium is a major production input for stainless steel. China's chrome imports will likely continue to increase as stainless steel demand at the global level remains a big part of China's high-valued exports, urbanization, and future industrial practices. Overall, in 2017, China's cobalt smelters accounted for 60% of global supply, and 77% of cobalt demand in China went into batteries. In 2017, China accounted for about 25% of platinum demand, primarily used in jewelry making, and 26% of palladium demand, much of which is used in catalytic converters in automobiles. In order for this increasing demand scenario in China to play out, the cities would need to fill up with enough people who are making high enough wages to support the economic growth that China is seeking. It is uncertain whether such a high level of consumer demand will materialize. China's economic growth has slowed considerably in the recent past from around 10% annually in the first decade of the 2000s, to around 6% in 2014. However, China's demand for minerals will continue to put pressure on U.S. access to reliable supplies. <5.2. U.S. Imports of Strategic and Critical Minerals> Aside from a small amount of recycling, the United States is 100% import reliant on 14 minerals on the critical minerals list, minerals that provide critical support for the U.S. economy and national security such as, graphite, manganese, niobium, rare earths, and tantalum, among others. The United States is more than 75% import reliant on an additional 10 critical minerals, including antimony, barite, bauxite, bismuth, potash, rhenium, tellurium, tin, titanium concentrate, and uranium. The United States has increased its mineral imports from China over the past 20 years. Although the United States has diversified its sources for some of its material requirements since 1997, the United States imports significant quantities of critical minerals and metals and is dependent on China as either a primary or major provider of raw materials and several metals as of 2017 (see Table 5 and Figure 3 ). While import reliance may be a cause for concern (and high levels of import reliance potentially a security risk), high import reliance is not necessarily the best measure, or even a good measure, of supply risk. A more relevant measure may be the reliability of the suppliers. The supply risk for potash or bauxite, for example, may not be the same as that for REEs or niobium due to the multiplicity of potential sources. There are a number of factors that affect the availability of mineral supplies that may have little to do with import reliance. A company that is the sole supplier, or a single country as a primary source, with export restrictions, would likely constitute supply risks. But any number of bottlenecks that might arise among both domestic and foreign producers, such as limited electric power, skilled labor shortages, equipment shortages, labor unrest, weather or transportation delays, and opposition on environmental policy grounds, could also pose supply risks. Any of these above-mentioned potential supply disruptions could raise costs or prices, and exacerbate the tightness of supplies. For other minerals, such as iron ore and molybdenum, the United States is self-sufficient. For aluminum, uranium, potash, cesium, and rubidium, the United States' chief trading partner is Canada, a stable ally. Also, U.S. companies have invested in overseas operations for example, copper and bauxite mines and, thus, U.S. supply sources for some materials are diversified, of higher quality, or lower cost, and located in countries that have extensive reserves and production capacity. Such conditions may not always exist in the United States, even when resources are present. <6. Materials Analysis of Critical Minerals Content in Finished Products and Systems> Materials analysis is a useful tool to better understand various aspects of mineral demand. For example, such analysis can provide information on how material inputs are used in component parts and how components are used in larger systems such as solar arrays, wind turbines, and automobiles. Using a material analysis, an analyst can obtain information on the material intensity of a unit of production. This analysis can lead to manufacturing efficiencies (i.e., getting the same or better performance using fewer materials) or show where and how material substitution, if possible, could occur. Manufacturing firms could then make short-term or long-term adjustments to their production processes. Even with materials efficiencies, where less metal is used per unit of output, overall demand growth and lack of short-term supply capacity often drives up mineral prices. For example, households in some countries are likely to have multiple units of a variety of products such as laptops, flat panel televisions, and cell phones, etc. And because the materials intensity (small amounts per unit output) of critical minerals is relatively low for most end-use applications, low-cost manufactured goods may contain some high-cost materials. The remainder of this section of the report provides information on the materials content of lithium-ion batteries, solar energy arrays, wind technologies, and permanent magnets, with a more detailed discussion of the material requirements for wind and solar energy systems. <6.1. Lithium-Ion Batteries> The use of lithium-ion batteries for the rapidly growing electric vehicle market is expected to transform the material requirements for battery technology. Material analysis of lithium-ion batteries would bring to light useful insights on materials composition, cost, technologies, and supply chains. In the case of the lithium-ion (li-ion) battery for electric vehicles, what is the material composition of the battery? In other words, how much cobalt, lithium, nickel, and other materials are needed per battery, how much are the material costs for each battery, and what percent of the total battery manufacturing cost do the materials represent? Then, further, what is the battery cost per electric vehicles? Analysts would want to know the point at which material price increases would warrant a shift in the use of those materials. Other useful insights in materials analysis would be to understand the suite of battery technologies being developed, their manufacturing capacity, and the ownership structure of the supply chain for the materials and the batteries. A 2017 study by a group of battery technology researchers examined the supply risks associated with lithium-ion batteries and other battery technologies to examine the implication for a carbon-reduced environment. The authors posed the question: What are the material requirements for the battery? They identified features of a li-ion battery, e.g., low cost, high energy, and long life. They examined the raw material requirements for li-ion batteries, secondary supply potential, and supply risks associated with an exhaustible resource (e.g., mineral extraction may become uneconomic), the structure of the industry (e.g., whether there is a cartel or a monopoly producer involved), and a surge in demand. They used supply risk indicators discussed earlier, such as the risk of supply reduction, the risk of a surge in demand, market concentration, political stability, substitutability, and recyclability. The researchers' second step was to determine the supply risk score on the technology level, for each of the six battery types. There is a lithium-cobalt oxide battery which has a high energy density but also a high cobalt content and price. The steep country risk associated with cobalt production in the Democratic Republic of the Congo (DRC) led researchers to look for alternative suppliers and materials that would provide high energy density and long life with less or no cobalt. One example would be to use a manganese-oxide battery, wherein cobalt is partially replaced by nickel and manganese. They pointed out that there are several new battery types that use combinations of lithium, aluminum, cobalt, iron, nickel, copper, graphite, phosphate, titanium, and manganese. The researchers identified lithium as needed for all battery types and graphite used for all except the lithium-iron-phosphate (LFP-LTO) type, which uses titanium instead. They reported that with a market breakthrough (by 2035) in the use of electric vehicles containing lithium battery technology , an annual growth rate of 7.5% is needed for lithium supply and 3% growth rate in cobalt supply to meet electric vehicle demand. <6.2. Solar Energy Arrays and Wind Technologies> In the case of solar arrays and wind turbine technologies, USGS Minerals Information Center conducted a technical analysis of byproduct minerals that are contained in solar energy systems: silver, cadmium, tellurium, indium, gallium, selenium, germanium, and four of the REEs used in wind technologies (dysprosium (Dy), neodymium (Nd), terbium (Te), and praseodymium (Pr)), using Clean Power Plan (CPP) and no-CPP scenarios. USGS concluded that regardless of the scenario, the transition to renewables is very likely to accelerate in the coming decades and that a number of minor metals are likely to be constrained; thus rates of production of those metals would need to be increased to meet demand unless there are manufacturing shifts. The analysis concluded that the supply of heavy REEs used in permanent magnets (currently used in some of the new wind turbines) will not keep pace with demand from multiple end uses. The USGS assumed an aggressive electric vehicle market, the increased use of the magnets in electric vehicles, and new wind turbines' use of permanent magnets containing REEs. There is some disagreement over whether significant increases in REEs for magnets that would be used in wind energy systems will occur. Additionally, USGS concluded that the growth in demand for byproduct metals in solar and wind energy systems would compete with usage in electric and hybrid vehicles, and consumer electronics. The report asserts that a key uncertainty is net material intensity, i.e., the quantity of the byproduct metal required per unit of installed electric generating capacity, minus the amount of recycled material. For solar cells, net material intensity per generating capacity is dependent on the conversion efficiency of solar cells. Related questions are: Where are the wind turbines and solar arrays being manufactured and which countries and firms would be impacted the most by any disruption in critical mineral supply for these end uses? <6.3. Permanent Magnets> REEs in permanent magnets is another example of how materials analysis for end uses may inform understanding of critical minerals vulnerability. For example, some of the pertinent questions that might be raised with respect to permanent magnets include: How much Dy, Nd, Te, and Pr go into a neodymium-iron-boron (NdFeB) permanent magnet and what fraction of the total cost is each element? What are permanent magnet unit production costs and what portion of the total costs of a wind turbine or an automobile do the permanent magnets represent? And what is the likelihood and the economics of substitution? <6.4. Materials Review of Wind and Solar Energy Systems> Below are simplified examples of material requirements for wind and solar systems. <6.4.1. Materials for Wind Energy> Based on the Department of Energy Report, 20% Wind Energy by 2030 , wind power installations consist of four major parts: wind tower, rotor, electrical system, and drivetrain (e.g., generator, gearbox, and motor). Most of the common large wind turbines have tower heights over 200 feet and rotor blades as long as 150 feet. The average rated capacity of an onshore wind turbine is between 2.5 megawatts (MW) and 3 MW. DOE lists the following as the most important materials for large-scale manufacturing of wind turbines: steel, fiberglass, resins (for composites and adhesives), core materials, permanent magnets, and copper. Some aluminum and concrete is also required (see Table 6 below). DOE considers the raw materials for large-scale wind turbines to generally be in ample supply. Turbine manufacturing, however, would be 100% dependent on permanent magnet imports, primarily from China, as that country produces 75% of the world's permanent magnets which contain REEs (assuming certain drivetrains are used). But DOE and other wind power analysts also identify, as a potential concern, the need for increased manufacturing capacity for fiberglass and other components such as generators, and gear boxes. Wind power development trends at the time of the 20% Wind Energy by 2030 study were moving towards lighter-weight materials and high-strength composites such as glass fiber-reinforced plastic and carbon fiber-reinforced plastic. Increased production of fiberglass, commercial-grade carbon fiber, and permanent magnets (containing REEs) would be necessary if the United States were to achieve 20% wind energy by 2030. Recent analysis indicates that the offshore wind industry could be a major driver for increasing REE demand. There are indications that the larger turbines which are better suited for offshore locations, which also contain REEs, may be more reliable and require less maintenance than onshore turbines. <6.4.2. Materials for Solar Energy> There are two major types of photovoltaic (PV) cells: crystalline silicon cells (most widely used) and thin film solar cells. The silicon based PV cells are combined into modules (containing about 40 cells) then mounted in an array of about 10 modules. Ethylene-vinyl acetate and glass sheets typically frame the PV module with additional aluminum frames for added protection. Thin-film solar cells use layers of ultra-thin semi-conductor materials that can serve directly in rooftop shingles, roof tiles, and building facades. Thin-film PV cells have been noted to use cadmium-telluride or copper-indium-gallium-diselenide (see Table 7 below). A separate category of solar technology is concentrating solar power; these systems use mirrors to convert the sun's energy into heat and then into electricity. <7. Selected Supply Chain Analysis> With a supply chain analysis, it is just as important to know where new downstream capacity (processing, refining, and metals alloying) is being built or likely to be built in the world as it is to know the likely investors in upstream production capacity for critical minerals. When looking at the complete supply picture it could be more easily determined where the potential risks are and what mitigation efforts may be available. Below, two illustrative supply chains are described: rare earth elements and tantalum. <7.1. Rare Earth Elements> <7.1.1. REE Supply> Rare earth elements often occur with other elements, such as copper, gold, uranium, phosphates, and iron, and have often been produced as a byproduct. The lighter elements, such as lanthanum, cerium, praseodymium, and neodymium, are more abundant and concentrated and usually make up about 80%-99% of a total deposit. The heavier elements gadolinium through lutetium and yttrium are scarcer but very "desirable," according to USGS commodity analysts. Most REEs throughout the world are located in deposits of the minerals bastnaesite and monazite. Bastnaesite deposits in the United States and China account for the largest concentrations of REEs, while monazite deposits in Australia, South Africa, China, Brazil, Malaysia, and India account for the second-largest concentrations of REEs. Bastnaesite occurs as a primary mineral, while monazite is found in primary deposits of other ores and typically recovered as a byproduct. Over 90% of the world's economically recoverable rare earth elements are found in primary mineral deposits (e.g., in bastnaesite ores). <7.1.2. REE Supply Chain> The supply chain for rare earth elements generally consists of mining, separation, refining, alloying, and manufacturing (devices and component parts). A major issue for REE development in the United States is the lack of refining, alloying, and fabricating capacity that could process any rare earth production. An April 2010 GAO report illustrates the lack of U.S. presence in the REE global supply chain at each of the five stages of mining, separation, refining oxides into metal, fabrication of alloys, and the manufacturing of magnets and other components. According to the 2010 GAO report, China produced about 95% of the REE raw materials and about 97% of rare earth oxides, and was the only exporter of commercial quantities of rare earth metals (Japan produced some metal for its own use for alloys and magnet production). About 90% of the metal alloys were produced in China, and China manufactures 75% of the NdFeB magnets and 60% of the samarium cobalt (SmCo) magnets. Thus, even as U.S. rare earth production ramps up, without significant supply chain investments, much of the processing and metal fabrication would likely occur in China. In the case of rare earths, it is not enough to develop REE mining operations outside of China alone without building the value-added refining, metal production, and alloying capacity that would be needed to manufacture component parts for end-use products. According to rare earth analyst Jack Lifton, vertically integrated companies may be more desirable. It may be the best way to secure investor financing for REE production projects. Joint ventures, consortiums, and cooperatives could be formed to support production at various stages of the supply chain at optimal locations around the world. Each investor or producer could have equity and offtake commitments. Where U.S. firms and U.S. allies invest may contribute to meeting the goal of providing a secure and stable supply of REEs, intermediate products, and component parts needed for the assembly of end-use products. In 2019, rare earth analyst James Kennedy of ThREE Consulting writes that China's dominance and "absolute advantage" in the rare earth space is fundamentally reflected in its R&D efforts at its national labs and the Baotou Research Institute of Rare Earths in the fields of basic sciences, materials science, and rare earth metallurgy. ThREE Consulting has shown that China has filed more rare earth patents than the rest of the world combined and Kennedy states that patents acquired in the rare earth space are likely a proxy for next generation rare earth-related technology. China's whole-of-government approach in the field of rare earths and other critical minerals may keep China in its position of dominance for the foreseeable future. <7.2. Tantalum> Tantalum is a metallic element contained in the mineral tantalite and is extracted from primary and placer mineral deposits. It often occurs with niobium but is also present with other minerals such as rare earths, uranium, and cassiterite (tin ore). Tantalum has been produced as a primary product, a co-product, and as a byproduct of other ores. Tantalum's high melting point (3,000 degrees Centigrade) and corrosion resistance makes it super-capacitive, (i.e., characterized by a high capacity to store and release electrical charges). This metal, which is used in numerous high-tech electronic devices, is produced and traded in conflict areas in Central Africa; thus, in certain instances, tantalum is classified as a conflict mineral and subject to disclosure rules promulgated from the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 , 15 U.S.C. 78). Section 1502 of the law includes a sense of the Congress that conflict minerals in the Democratic Republic of the Congo or adjoining countries are financing extreme levels of violence in the DRC. <7.2.1. Tantalum Supply> There are four major sources of tantalum market supplies: primary production (industrial and artisanal ); tin slag processing; scrap reprocessing and recycling; and byproduct production (also referred to as secondary concentrate). Primary production accounts for about 70% of global supply. Historically, tantalum obtained from tin slag (waste) was primarily produced in Malaysia, Thailand, and Brazil. Tantalum has also been a byproduct of niobium, titanium, tin, and uranium produced in Malaysia, Brazil, China, and Russia. Recycled tantalum contributes to 30% of global supply, mostly recovered from "pre-consumer scrap" at the manufacturing plant. The United States and Mexico account for 61% of tantalum scrap recovery and it is estimated that scrap could provide 50% of global tantalum supply by 2025. Based on USGS data , Brazil, Canada, Mozambique, and Nigeria were countries that led in primary tantalum production during the 1970s. Brazil and Canada continued to be the major producing countries in the 1980s. Australia took over the top spot in the late 1980s and 1990s, followed by Brazil until 2009, after which no primary production was reported for Australia by the USGS. The Australian mines were closed following the 2008 recession, reopened in 2012, but closed again shortly thereafter in 2012. Since about 2009, it has been noted by several sources that the DRC, with tens of thousands of artisanal miners, is a leading producing country (see Table 4 ). Recorded production for tantalum by the USGS indicates a shift in production at least what has been reported since 2000 from Australia and Brazil, to the DRC and Rwanda. Over the past several decades, there were material gaps in the publically available data for tantalum; production data reported has been much less than processor receipts. In one example, the average producer's supply to total processor's receipts gap measured over six quarters was 73%. On average, reported production represents about 27% of total processors' receipts over the period. There was an average material difference of 381 metric tons. Part of the explanation for such reporting patterns may be the highly unregulated nature of tantalum ore production and trade in Central Africa. High production in the unreported (informal) sector of the mining community drove prices down and forced many of the major production regions to close their operations. With low prices, investor interest is limited; investors are thus constrained by high risk in greenfield projects, (i.e., new projects or work that does not follow previous work). The USGS data does not reflect the amount of production from unauthorized (often illegal) mining operations usually artisanal mining operations. The USGS collects its data from a variety of sources but considers the tantalum industry as operating under "a shroud of secrecy" with incomplete access to data and not very transparent. Generally, there is insufficient data to make definitive determinations on the true production, capacity, and reserve levels for tantalum on a global basis. There are several reasons for this supply/demand material difference, including the following: Nonreporting or under-reporting all forms of supply (primary, byproduct, tin slag, and scrap) through the Tantalum-Niobium International Study Center (TIC) or elsewhere. High inventories. Several analysts have noted that since the recession of 2008 many companies were selling from their above-ground stocks. Illicit mining and trading. There are well-established networks for smuggling tantalum and other minerals out of Central Africa (and elsewhere) and into the marketplace. Dependence on Africa's supply and that disruption could have consequences, e.g., price rises. Africa provides 80% of the primary tantalum production (60% from the DRC and Rwanda) as China dominates downstream processing and manufacturing capacity. The illicit mining component in the tantalum market makes it vulnerable and possibly unsustainable because it prevents large-scale producers from entering the market. Illegal tantalum trade has long-term implications for the entire supply chain leading to lower investment in all phases of the supply chain. In 2016, the USGS listed Australia and Brazil as having 85% of the world's tantalum reserves, but the USGS regularly states that data is not available for other countries or is just unknown. The USGS lists Australia, Brazil, and Canada as having the majority of the world identified tantalum resources. <7.2.2. The Tantalum Supply Chain> In 2017, Mancheri, et al., published a study that assessed the tantalum supply chain for regional production dependence, the potential for supply disruptions, and mechanisms to prevent disruptions using a "resiliency" of supply model. This method examines four resilience of supply indicators: diversity of supply, material substitution, recycling, and stockpiling, and is dependent on three factors: resistance, rapidity, and flexibility. Mancheri's study concludes that the tantalum market is flexible and resilient based on its handling of unreported and presumably illegal trade along with its impact on conventional large-scale tantalum producers. Mancheri's study concluded that stockpiling and substitution can mitigate some supply disruption. Generally, tantalum follows the following supply chain steps: The primary ore is crushed and milled into an ore concentrate which is further refined into oxides (metal or powder) or K-Salt (which is reduced to tantalum metal), which is used for the manufacture of capacitors, wire, super alloys, and other fabricated forms. Downstream manufacturers use these materials for parts that are used by consumer product manufacturers and others. China has 16 tantalum processing plants; the United States has one, according to the Mancheri study. There are four processing plants in Germany and four in Japan. The metal or powder form is then used by electronics manufacturers to produce capacitors and other products. The manufactured parts are shipped to consumer product producers such as Motorola, Sony, Apple, Dell, and others. China dominates the production of capacitors. <8. Current Policy Framework> <8.1. U.S. Mineral Policy> As noted in two key statutes, the current goal of U.S. mineral policy is to promote an adequate, stable, and reliable supply of materials for U.S. national security, economic well-being, and industrial production. U.S. mineral policy emphasizes developing domestic supplies of critical materials and encourages the domestic private sector to produce and process those materials. But some raw materials do not exist in economic quantities in the United States, and processing, manufacturing, and other downstream ventures in the United States may not be cost competitive with facilities in other regions of the world. However, there have been public policies enacted or executive branch measures taken (for example, the percentage depletion allowance for U.S. mining operations and royalty-free production on public domain lands) to offset the U.S. disadvantage of its potentially higher-cost operations. The private sector also may achieve lower-cost operations with technology breakthroughs. Based on this policy framework, Congress has held numerous legislative hearings on the impact of the U.S. economy's high import reliance on many critical materials, and on a range of potential federal investments that would support the development of increased domestic production and production from reliable suppliers. There has been a long-term policy interest in mineral import reliance and its impact on national security and the U.S. economy. <8.1.1. General Mining Law of 1872: Mining on Federal Lands> Mining of locatable minerals (also referred to as hardrock minerals) on federal lands is governed primarily by the General Mining Law of 1872 (30 U.S.C. 21-54). The original purposes of the Mining Law were to promote mineral exploration and development on federal lands in the western United States, offer an opportunity to obtain a clear title to mines already being worked, and help settle the West. The Mining Law grants free access to individuals and corporations to prospect for minerals on open public domain lands, and allows them, upon making a discovery, to stake (or "locate") a claim on the deposit. A valid claim entitles the holder to develop the minerals. The 1872 Mining Law originally applied to all valuable mineral deposits except coal (17 Stat. 91, 1872, as amended). Public domain lands are those retained under federal ownership since their original acquisition by treaty, cession, or purchase as part of the general territory of the United States, including lands that passed out of but reverted back to federal ownership. "Acquired" lands those obtained from a state or a private owner through purchase, gift, or condemnation for particular federal purposes rather than as general territory of the United States are subject to leasing only and are not covered by the 1872 Law. Acquired lands are governed under the authority of the Mineral Leasing for Acquired Lands Act of 1947. Under the General Mining Law, mineral claims may be held indefinitely without any mineral production. Once lands were patented to convey full title to the claimant, the owner could use the lands for a variety of purposes, including nonmineral ones. However, using land under an unpatented mining claim for anything but mineral and associated purposes violates the General Mining Law. Critics believe that many claims are held for speculative purposes. However, industry officials argue that a claim may lie idle until market conditions make it profitable to develop the mineral deposit. Congress has placed a moratorium on patenting lands since 1994 under annual appropriation bills. The vast majority of mineral production in the United States occurs on private land and is regulated by the states which may use a leasing and permitting framework. The regulatory framework described below applies primarily to minerals produced on federal land but has implications for the entire U.S. mining industry. There is debate over whether streamlining the permitting process on federal lands would make investing in mining in the United States more attractive or would incentivize investors. Proponents of streamlining the framework maintain that mining firms would be more likely to invest in the United States given a more rapid turnaround of the mine permitting process. However, mining firms have multi-factor decision making processes; they go to where the minerals are, and they often look for low political and country risk (good governance) and a sense of certainty of the regulatory environment, as well as low-cost production opportunities. A debate has emerged over the past several decades over whether the federal government should impose a royalty on the value of minerals produced on public lands, as is the practice on other lands in the United States (i.e., state lands and private lands) and other parts of the world. Further discussion of this debate is beyond the scope of this report. <8.2. Federal Land Management and Mineral Development: Regulatory Framework for Mineral Development on Federal Land> Mineral development activities in the United States are subject to a suite of federal regulatory requirements. The specific statutes and regulations that will apply and how compliance is accomplished will vary depending on the specific mineral development project (e.g., specific actions may be required for compliance with federal law if the mining project may affect a federally protected species). That is, for mining on federal lands, there are various federal regulatory requirements that may apply in addition to the Federal Mining Law of 1872. These requirements encompass environmental reviews, adequate proof of financing, permits, surface management requirements, bonding, and public participation, among other requirements. The Appendix provides a list of the selected statutes and regulations related to mineral development on federal land. A discussion of the regulatory compliance process and the various federal, state, and other entities that may be involved is beyond the scope of this report. The following discussion focuses on the regulatory framework associated with management of and access to minerals for development on federal land. During the 1960s and 1970s, the Multiple Use Sustained Yield Act (16 U.S.C. 528-531), Wilderness Act of 1964 (16 U.S.C. 1131-1136), National Forest Management Act of 1976 (43 U.S.C. 1701 et seq.), National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. 4321 et seq.), and Federal Land Policy Management Act (FLPMA) (43 U.S.C. 1701 et seq.) addressed environmental protection, multiple use, and management of federal land generally. By imposing requirements on agency actions, these acts have affected mineral development under both the leasing system and the General Mining Law of 1872 claim-patent system. The General Mining Law contains no direct environmental controls, but mining claims are subject to all general environmental laws as a precondition for development. The Bureau of Land Management (BLM) administers the mineral program on all federal land but other land managing agencies, such as the Forest Service (FS) must approve surface disturbing activity on its land. BLM and FS use the mine plan review process (which includes mining methods and reclamation plans) to determine the validity of the mine proposal and to determine how extensive of an environmental review is required under the Federal Land Policy and Management Act of 1976. <8.2.1. Federal Land Policy Management Act> Under the Federal Land Policy and Management Act of 1976, Resource Management Plans (RMPs) are required for tracts or areas of public lands prior to development. BLM must consider environmental impacts during land-use planning when RMPs are developed and implemented. RMPs can cover large areas, often hundreds of thousands of acres across multiple counties. Through the land-use planning process, BLM determines which lands are open for mining claims and potential development. Regarding land use plans FLPMA states: "the Secretary [of the Interior] shall with public involvement and consistent with the terms and conditions of this Act, develop, maintain and, when appropriate, revise land use plans which provide by tracts or areas for the use of the public lands." Current planning regulations require preparation of an environmental review document for the land use plans under the National Environmental Policy Act. FLPMA requires that RMPs reflect diverse uses such as timber, grazing, wildlife conservation, recreation, and energy and consider the needs of present and future generations . Impacts of various uses are identified early in the process so that they can be weighed equitably against one another by the BLM. The plans are also intended to weigh the various benefits associated with public lands. <8.2.2. Withdrawals from Mineral Entry and Access to Federal Land> The President and executive branch agencies historically issued executive orders, secretarial orders, and public land orders to withdraw federal lands from mineral entry and other uses under what was viewed as the President's authority, including certain statutory authorities such as the Antiquities Act (34 Stat. 225). Since 1976 executive withdrawals are governed by FLPMA. FLPMA repealed earlier land withdrawal authorities. Withdrawals of parcels exceeding 5,000 acres require congressional approval. A withdrawal pursuant to FLPMA restricts the use of land under the multiple-use management framework, typically segregating the land from some or all public land laws as well as some or all of the mining and mineral leasing laws for a period of 20 years. Initially, the area is segregated for two years during which time an environmental review is conducted to determine whether a longer-term withdrawal of 20 years is warranted. The longer-term withdrawal is often subject to renewal by the Department of the Interior. The withdrawal can be temporary or permanent. Under this section of the code the Secretary of the Interior may make, modify, extend, or revoke withdrawals. Generally, federal land withdrawals are subject to valid existing rights, meaning that the minerals rights holder may develop those minerals subject to terms of the federal land-managing agency (e.g., the National Park Service, BLM, or the Forest Service). Mineral industry representatives maintain that federal withdrawals inhibit mineral exploration and limit the reserve base even when conditions are favorable for production. Thus, they state that without new reserves or technological advancements mineral production costs may rise. They further contend that higher domestic costs may lead to greater exploration on foreign soil, potentially boosting U.S. import dependence. Critics of U.S. mineral development state that mining often is an exclusive use of land inasmuch as it can preclude other uses, and that in many cases there is no way to protect other land values and uses short of withdrawal of lands from development under the General Mining Law. They point to unreclaimed areas associated with previous hardrock mineral development, Superfund sites related to past mining and smelting, and instances where development of mineral resources could adversely affect or destroy scenic, historic, cultural, and other resources on public land. Congressional debate has been ongoing for decades over how much federal land should be available for the extractive industries or other uses and how much should be set aside (e.g., off limits or restricted) for conservation or environmental purposes. <9. Selected Critical Minerals-Related Legislation in the 115th and 116th Congresses> <9.1. 116th Congress> H.R. 2531 , National Strategic and Critical Minerals Production Act , introduced by Representative Mark E. Amodei on May 7, 2019, and referred to House Committee on Natural Resources. The bill would define critical and strategic minerals and seeks to streamline the federal permitting process for domestic mineral exploration and development. It would establish responsibilities of the "lead" federal agency to set mine permitting goals, minimize delays, and follow time schedules when evaluating a mine plan of operations. The review process would be limited to 30 months, and the bill would establish the priority of the lead agency maximizing the development of the mineral resource while mitigating environmental impacts. H.R. 2500 , National Defense Authorization Act (NDAA) for Fiscal Year 2020 , reported in the House. The bill would require the Secretary of Defense to provide guidance on acquiring items containing rare earth elements and guidance on establishing a secure rare earth materials supply chain within the United States. The bill provides authority for the Secretary to acquire rare earth cerium and lanthanum compounds and electrolytic manganese metal. And further, for DOD purposes, the bill would prohibit the acquisition of tantalum from nonallied foreign nations. The reported Senate version ( S. 1790 ) of the FY2020 NDAA does not contain similar language. S. 1317 , American Mineral Security Act , introduced by Senator Murkowski on May 2, 2019, and referred to the Senate Committee on Energy and Natural Resources. The bill would define what critical minerals are, but also would request that the Secretary of the Interior establish a methodology that would identify which minerals qualify as critical. The Secretary of the Interior would be required to maintain a list of critical minerals. The bill would establish an analytical and forecasting capability on mineral/metal market dynamics as part of U.S. mineral policy. The Secretary of the Interior would be required to direct a comprehensive resource assessment of critical mineral resource potential in the United States, assessing the most critical minerals first. The bill would require that an agency review and report be intended to facilitate a more efficient process for critical minerals exploration on federal lands, and specifically would require performance metrics for permitting mineral development activity and report on the timeline of each phase of the process. The bill would require that the Department of Energy establish an R&D program to examine the alternatives to critical minerals and explore recycling and material efficiencies through the supply chain. The Department of the Interior would be required to produce an Annual Critical Minerals Outlook report that would provide forecasts of domestic supply, demand, and price for up to 10 years. The Secretary of Labor, in consultation with the National Science Foundation and other relevant institutions, would be required to assess the availability of domestic technically trained personnel in the exploration production, manufacturing, recycling, forecasting, and analysis of minerals critical to the United States, noting, among other things, skills in short supply now, and those projected to be in short supply in the future. The Secretary would be required to design an interdisciplinary curriculum study on critical minerals and further, establish a competitive grants program for new faculty positions, internships, equipment needs, and research related to critical minerals. There would be $50 million authorized to carry out this act each year for fiscal years 2020-2029. <9.2. 115th Congress> H.R. 520 , National Strategic and Critical Minerals Production Act , introduced by Representative Mark E. Amodei on January 13, 2017, and referred to House Committee on Natural Resources. This bill is similar to H.R. 2531 described above (in the 116 th Congress). H.R. 1407 , METALS Act , introduced by Representative Duncan Hunter on March 7, 2017, and referred to the House Committee on Armed Services. This bill would have established a strategic materials investment fund and allowed the Secretary of Defense to provide loans for domestic production and domestic processing of strategic and critical materials, and supported the development of new technologies for more efficient processing of strategic and critical materials. For fiscal years 2018 through 2023, 1/10 of 1% of the amounts appropriated for "covered programs" would have been deposited into the fund. Covered programs would have been all major defense acquisition programs for development or procurement of aircraft or missiles. The bill would have established a prohibition on sale of domestic rare earth mines to foreign firms. H.R. 5515 ( P.L. 115-232 ) , John S. McCain N ational D efense A uthorization A ct for F iscal Year 2019 , included a provision to direct the Secretary of Defense to purchase rare earth permanent magnets and certain tungsten, tantalum, and molybdenum from sources outside of China, Russia, North Korea, and Iran to the extent possible. S. 1460 , Energy and Natural Resources Act of 2017, Subtitle D Critical Minerals , introduced by Senator Murkowski on June 18, 2017, and referred to the Senate Committee on Energy and Natural Resources. This bill is similar to S. 1317 above (in the 116 th Congress). S. 145 , National Strategic and Critical Minerals Production Act (similar to H.R. 520 in the 115 th Congress), introduced by Senator Heller on January 12, 2017, and referred to the Senate Committee on Energy and Natural Resources. <9.3. Previous Congresses> Similar bills on critical minerals were introduced in earlier Congresses. For example, in the 113 th Congress, there was S. 1600 , Critical Minerals Policy Act of 2013, and H.R. 761 , the National Strategic and Critical Minerals Production Act of 2013, which passed the House on September 18, 2013. Another bill in the 113 th Congress, H.R. 4883 , the National Rare Earth Cooperative Act of 2014, proposed to advance domestic refining of heavy rare earth oxides and the safe storage of thorium for future uses using a cooperative ownership approach. Thorium is associated with certain rare earth deposits and waste materials. The cooperative would have operated under a federal charter composed of suppliers and consumers as owners. <10. Additional Policy Options> This section provides a discussion of selected policy options related to critical minerals that were included in legislation introduced in the 115 th and 116 th Congresses. In addition to weighing the advantages and disadvantages of the various policy options discussed above and below, policymakers have the option of maintaining the status quo of current policies. <10.1. Minerals Information Administration> The USGS could establish a Minerals Information Administration for information and analysis on the global mineral/metal supply and demand picture. Companies producing minerals on public lands could be required to report production data to the federal agency. <10.2. Greater Exploration for Critical Minerals> Encouragement of greater exploration for critical minerals in the United States, Australia, Africa, and Canada could be part of a broad international strategy. There are only a few companies in the world that can provide the exploration and development skills and technology for critical mineral development. These few companies are located primarily in the above four regions and China, and may form joint ventures or other types of alliances for R&D, and for exploration and development of critical mineral deposits worldwide, including those in the United States. Whether there should be restrictions on these cooperative efforts in the United States is a question for congressional deliberations. <10.3. Other Policy Options> Other action by Congress could include oversight of free trade issues associated with critical mineral supply. Two raw material issues associated with China export restrictions were taken up by the World Trade Organization (WTO). One case, settled in 2011, was filed by the United States against China and was related to restrictions on bauxite, magnesium, manganese, silicon metal, and zinc, among others (using export quotas and export taxes). The other case, resolved in 2012, was filed by the United States, Japan, and the European Union on export restrictions of rare earth oxides, tungsten, and molybdenum. The WTO ruled against China in both cases, concluding that China did not show the link between conservation of resources or environmental protection (and protection of public health) and the need for export restrictions. The United States could support more trade missions; support U.S. commercial delegations to China and other mineral-producing countries; and assist smaller and less-developed countries in improving their governance capacity. Although there are concerns that trade tariffs with China could impact the prices and availability of critical minerals and downstream metals imported from China, the effects would depend on the specifics of the tariffs as well as the particular mineral and metal involved. <10.4. Additional Considerations> In China and other emerging economies, economic development will continue to have a major impact on the world supply and availability of raw materials and downstream products. Various countries may be faced with making adjustments to secure needed raw materials, metals, and finished goods for national security and economic development. China, Japan, and others are already actively engaged in securing reliable mineral supplies. Many firms have moved to China to gain access to its market, raw materials, or intermediate products, and generally lower-cost minerals production. At the same time, China is seeking technology transfer from many of these firms to expand its downstream manufacturing capacity. Despite China's current overcapacity and increased exports of some commodities, in the long run it may be in China's interest to use its minerals (plus imports) for domestic manufacturing of higher-valued downstream products (e.g., component parts and consumer electronics). Higher-cost, inefficient facilities and mines may close, resulting in China seeking more imports as mining industry consolidations are implemented. The effects on China's dominance in the supply and demand of global raw materials could be addressed in part through consistent development of alternate sources of supply, use of alternative materials when possible, efficiency gains, aggressive R&D in development of new technologies, and comprehensive minerals information to support this effort. China is likely entering an era of fewer raw material exports which may instigate long-term planning by the private sector and government entities that want to meet U.S. national security, economic, and energy policy interests and challenges. Some stakeholders may seek to have some concerns addressed through the WTO. Additional questions that may be deliberated by Congress include how long would it take to develop the skill set in the United States for downstream manufacturing activities? Would an international educational exchange program with those countries already involved in the refining and recycling of critical minerals be appropriate? More analysis would be useful to investigate U.S. firms' capacity to adjust to supply bottlenecks such as restrictions in other countries' exports, underinvestment in capacity, materials use in other countries and domestically, single source issues, strikes, power outages, natural disasters, political risk, and lack of substitutes. Having such analysis and understanding may inform public policy. More information could inform deliberations as Congress and other policymakers evaluate the available policy options and their effectiveness at minimizing the risk of potential supply interruption of critical and strategic minerals and metals. <10.4.1. Appendix. Selected Statutes and Regulations Related to Mining on Federal Lands> Selected Statutes that May Impact Mining Activities on Federal Lands (in alphabetical order) American Indian Religious Freedom Act ( P.L. 95-341 ) Clean Air Act, 42 U.S.C. 7401 et seq. Clean Water Act, 33 U.S.C. 1251 et seq. Endangered Species Act, 16 U.S.C. 1531 et seq. Federal Land Policy and Management Act, 43 U.S.C. 1701-1784 Federal Mine Safety and Health Act of 1977 ( P.L. 95-164 ) General Mining Law of 1872, 30 U.S.C. 21-54 Historic Preservation Act (P.L. 89-665) Mineral Leasing For Acquired Lands Act of 1947, 30 U.S.C. 351-359 Mining and Minerals Policy Act of 1970, 30 U.S.C. 21a National Environmental Policy Act, 42 U.S.C. 4321 et seq. National Forest Management Act 16 U.S.C. 1600-1687 National Materials and Minerals Policy, Research, and Development Act of 1980, 30 U.S.C. 1601 Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. Toxic Substance Control Act ( P.L. 94-469 ) Mining-Specific Regulations Bureau of Land Management (BLM): 43 C.F.R. 3809 Regulations on surface management U.S. Forest Service (FS): 36 C.F.R. Part 228 Regulations on minerals

President Trump and various U.S. lawmakers have expressed concerns about U.S. reliance on critical mineral imports and potential disruption of supply chains that use critical minerals for various end uses, including defense and electronics applications. Chinese export quotas on a subset of critical minerals referred to as rare earth elements (REEs) and China's 2010 curtailment of REE shipments to Japan heightened U.S. vulnerability concern. In December 2017, Presidential Executive Order 13817, "A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals," tasked the Department of the Interior to coordinate with other executive branch agencies to publish a list of critical minerals. The Department of the Interior published a final list of 35 critical minerals in May 2018. The concern among many in Congress has evolved from REEs and REE supply chains to include other minor minerals and metals that are used in small quantities for a variety of economically significant applications (e.g., laptops, cell phones, electric vehicles, and renewable energy technologies) and national defense applications. Also, as time passed, concerns increased about access to and the reliability of entire supply chains for rare earths and other minerals. Congressional action (e.g., National Defense Authorization Act for FY2014, P.L. 113-66 ) has led to the acquisition of REEs and other materials for the National Defense Stockpile. In 2017, the United States had no primary production of 22 minerals and was limited to byproduct production of 5 minerals on the critical minerals list. In contrast, the United States is a leading producer of beryllium and helium, and there is some U.S. primary production of 9 other critical minerals. China ranked as the lead global producer of 16 minerals and metals listed as critical. Although there are no single monopoly producers in China, as a nation, China is a dominant or near-monopoly producer of yttrium (99%), gallium (94%), magnesium metal (87%), tungsten (82%), bismuth (80%), and rare earth elements (80%). The United States is 100% import reliant on 14 minerals on the critical minerals list (aside from a small amount of recycling). These minerals are difficult to substitute inputs into the U.S. economy and national security applications; they include graphite, manganese, niobium, rare earths, and tantalum, among others. The United States is more than 75% import reliant on an additional 10 critical minerals: antimony, barite, bauxite, bismuth, potash, rhenium, tellurium, tin, titanium concentrate, and uranium. The current goal of U.S. mineral policy is to promote an adequate, stable, and reliable supply of materials for U.S. national security, economic well-being, and industrial production. U.S. mineral policy emphasizes developing domestic supplies of critical materials and encourages the domestic private sector to produce and process those materials. But some raw materials do not exist in economic quantities in the United States, and processing, manufacturing, and other downstream ventures in the United States may not be globally cost competitive. Congress and other decisionmakers have multiple legislative and administration options to weigh in deliberating on whether, and if so how, to address the U.S. role and vulnerabilities related to critical minerals.

crs_R46192

crs_R46192_0

<1. Introduction> For several decades the federal government has funded efforts to explore the feasibility of mitigating the release of greenhouse gases (GHGs) while burning fossil fuels as a source of energy. Carbon capture and storage (CCS) the process of capturing manmade carbon dioxide (CO 2 ) at its source, such as a coal-fired power plant, and storing it underground instead of releasing into the atmosphere has been proposed as a technological solution for mitigating emissions while using fossil energy. Federal policies on CCS have received support in recent Congresses, including support for research and development (R&D) and expansion of tax credits for carbon storage. The U.S. Fourth National Climate Assessment, released in 2018, states that "the impacts of global climate change are already being felt in the United States and are projected to intensify in the future but the severity of future impacts will depend largely on actions taken to reduce greenhouse gas emissions and to adapt to the changes that will occur." This report focuses on federal policy regarding the underground carbon storage stage of CCS. Underground carbon storage is achieved through geologic sequestration and as an incidental benefit of enhanced oil recovery (EOR), which both use injection by well to place CO 2 into deep subsurface geologic formations. Geologic sequestration involves storing CO 2 by placing it permanently in an underground formation. This process is being tested in the United States and several other countries, including several large-scale late-stage R&D projects. EOR involves injecting CO 2 to produce additional oil and gas from underground reservoirs and has been used in the United States since the 1970s. Both geologic sequestration and EOR are regulated under the Safe Drinking Water Act (SDWA) for the purpose of protecting underground sources of drinking water (USDWs). The U.S. Environmental Protection Agency (EPA) and delegated states administer sections of SDWA relevant to underground injection and carbon storage. The U.S. Department of Energy (DOE) also engages in underground carbon storage through supporting R&D activities. Congress has supported carbon storage via underground injection through recent legislation directing DOE to expand R&D activity and increasing the federal tax credit for underground carbon storage. As Congress considers policies on underground carbon storage, including geologic sequestration and EOR, Members may wish to consider the current regulatory framework and status of federal and federally sponsored activities in this area. This report provides background on underground injection and geologic sequestration processes and related federal R&D. It then analyzes the federal framework for regulating land-based underground injection of CO 2 both for geologic sequestration and EOR. Finally, it includes a discussion of several policy issues for Congress and recent relevant federal legislation. Not covered in this report are research and management of CCS elements not directly related to underground injection, including carbon capture and the pipeline and transportation infrastructure for captured CO 2 . Regulation of geologic sequestration on federal land and offshore geologic sequestration of CO 2 are also beyond the scope of this report. For additional information on the technical aspects of CCS, see CRS Report R44902, Carbon Capture and Sequestration (CCS) in the United States , by Peter Folger. <2. Underground Carbon Storage Process> <2.1. Underground Injection> Underground injection has been used for decades to dispose of a variety of fluids, including oil field brines (salty water) and industrial, manufacturing, mining, pharmaceutical, and municipal wastes. Injection wells are also used to enhance oil and gas recovery; for solution mining; and, more recently, to inject CO 2 for geologic sequestration. As of 2018, EPA estimated that there were more than 734,000 permitted injection wells in the United States. According to one estimate, approximately 750 billion gallons (2.8 million tons) of oil field brine are injected underground each year in the United States. CO 2 injection wells are a type of deep injection well used for injection into deep-isolated rock formations. These wells can reach thousands of feet deep. More details on specific well types are provided later in this report. <2.2. Geologic Sequestration> Geologic sequestration is the long-term containment of a fluid (including a gas, liquid, or supercritical CO 2 stream) in subsurface geologic formations. The goal of geologic sequestration of CO 2 is to trap or transform CO 2 emitted from stationary anthropogenic sources permanently underground and ultimately reduce emissions of GHGs from these sources into the atmosphere. CO 2 for sequestration is first captured from a large stationary source, such as a coal-fired power plant or chemical production facility. Although CO 2 is initially captured as a gas, it is compressed into a supercritical fluid a relatively dense fluid intermediate to a gas and a liquid before injection and remains in that state due to high pressures in the underground formation. The CO 2 is injected through specially designed wells into geologic formations, typically a half a mile or more below the Earth's surface. These formations include, for example, large deep saline reservoirs (underground basins containing salty fluids) and oil and gas reservoirs no longer in production. Research shows that CO 2 could also be sequestered in deep ocean waters or mineralized. Impermeable rocks above the target reservoir, combined with high CO 2 pressures, keep the CO 2 in a supercritical fluid state and prevent migration into shallower groundwater or into other formations. The National Energy Technology Laboratory (NETL) estimates that the total onshore storage capacity in the United States ranges between about 2.6 trillion and 22 trillion metric tons (hereinafter tons in this report) of CO 2 . (For more details, see Appendix A .) By comparison, U.S. energy-related CO 2 emissions in 2018 totaled 5,269 million tons. Theoretically, the United States contains storage capacity to store all CO 2 emissions from large stationary sources (such as power plants), at the current rate of emissions, for centuries. For additional information on the technical aspects of CCS, see CRS Report R44902, Carbon Capture and Sequestration (CCS) in the United States , and CRS Report R41325, Carbon Capture: A Technology Assessment , by Peter Folger. <2.3. EOR> Use of wells to inject CO 2 builds on known processes. Much of the technology is adopted from well-established experience in the oil and gas industry, which as of 2014, injected approximately 68 million tons of CO 2 underground each year in a process known as EOR. Enhanced recovery is also used occasionally in natural gas development. EOR can significantly increase the amount of oil or gas produced from a reservoir. CO 2 is the most common injection agent used in EOR projects. CO 2 injected for EOR most commonly comes from natural sources, such as underground CO 2 reservoirs, but some is also captured from anthropogenic sources, such as natural gas production, ammonia production, and coal gasification facilities. In many cases, the CO 2 is transferred from the source to the injection site by pipeline. The CO 2 is typically injected into depleted oil or gas reservoirs using the existing well infrastructure from the original production process. The injected CO 2 travels through the pore spaces of the formation, where it combines with residual oil. The mixture is then pumped to the surface, where the CO 2 is separated from other fluids, recompressed, and reinjected. Through repeated EOR cycles, CO 2 is gradually stored in the reservoir. NETL reports that generally, between 30% and 40% of the CO 2 is stored in each injection cycle, depending on the reservoir characteristics, through what it terms "incidental storage." This portion of the CO 2 "will be contained indefinitely within the reservoir," according to NETL. In 2017, commercial CO 2 -EOR projects were operating in 80 oil fields in the United States, primarily located in the Permian Basin of western Texas. Some analysts project that the federal tax credit for carbon storage and the potential increased supply of CO 2 from carbon capture could lead to expansion in both the number and locations of CO 2 injection for EOR operations. <3. Federal Research and Development for Underground Carbon Storage> Over the last decade, the focus of federal carbon storage R&D efforts, including geologic sequestration and EOR, has shifted from small demonstration projects to exploration of its technical and commercial viability for storing large volumes of captured CO 2 . DOE leads the federal government's underground carbon storage R&D as part of the agency's fossil energy programs. DOE's work includes conducting fundamental laboratory research on wells, storage design, geologic settings, and monitoring and assessment of the injected CO 2 . In 2003, DOE created the Regional Carbon Sequestration Partnerships (RCSP) program a set of public-private partnerships across the United States to characterize, validate, and develop large-scale field testing of CO 2 injection and storage methods. The RCSP program supports these R&D projects, which include carbon storage through geologic sequestration and EOR, through partnerships with the petroleum and chemical industries and public and private research institutions. Congress has supported DOE's carbon storage work through appropriations and, beginning in 2005, through enacting legislation directing DOE to establish programs in this area. The Energy Policy Act of 2005 (EPAct, P.L. 109-58 ), Section 963, directed DOE to carry out a 10-year carbon capture R&D program to develop technologies for use in new and existing coal combustion facilities. Among the specified objectives of this program, Congress directed DOE, "in accordance with the carbon dioxide capture program, to promote a robust carbon sequestration program" and continue R&D work through carbon sequestration partnerships. EPAct Section 354 directed the agency to establish a demonstration program to inject CO 2 for the purposes of EOR while increasing the sequestration of CO 2 . The Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ) amended EPAct Section 963 and expanded DOE's work in carbon sequestration R&D and demonstration. EISA Title VII, Subtitle A, directed DOE to conduct fundamental science and engineering research in carbon capture and sequestration and to conduct geologic sequestration training and research. Subtitle A also specifically directed DOE to carry out at least seven large-scale projects testing carbon sequestration systems in a diversity of formations, which could include RCSP projects. Subtitle B directed DOE to conduct a national assessment for onshore capacity for CO 2 sequestration. To date in the United States, nine DOE-supported projects have injected large volumes of CO 2 into underground formations as part of CCS systems or related EOR R&D projects (see Appendix B ). Three of these active projects involve injection into saline formations for geologic sequestration (for demonstration purposes), five involve injection for EOR purposes, and one involves both sequestration and EOR. Four of these projects are currently injecting and/or storing CO 2 . The Petra Nova facility in Texas is the first operating industrial-scale coal-fired electricity generating plant with a CCS system in the United States. The captured CO 2 is transported by pipeline to an oil field where it is injected for EOR. The project is jointly owned by several energy companies and was partially funded by DOE. In Decatur, IL, ADM is injecting CO 2 from its ethanol production plant into an onsite sandstone formation for geologic sequestration. The Air Products Carbon Capture Project in Port Arthur, TX, has been injecting CO 2 captured from steam methane reformers since 2013 as part of EOR operations. Each of these projects received funds from the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ). The Michigan Basin Project in Otsego County, MI, is injecting CO 2 from a natural gas facility for EOR. DOE provides partial funding for this project through the RCSP program. All of the projects operate through collaborations among DOE, industry, and local research institutions. Five other projects that injected CO 2 were implemented through the RCSP program. The projects included sequestration into various underground formations and storage associated with EOR with volumes of CO 2 injected and stored ranging from a few hundred tons to over 1 million tons (considered commercial-scale). The RCSP program is currently in the development phase, which DOE defines as large-scale field testing of high volumes of CO 2 storage. These projects have completed injection and are now in the post-injection monitoring phase. All of the existing RCSP projects are scheduled to end by July 2022, but DOE is in the process of selecting additional projects for the program. In the United States, while numerous large-scale storage R&D projects are ongoing, none of the projects injecting CO 2 solely for geologic sequestration are operating in a commercial capacity. Worldwide, public-private partnerships have implemented several CO 2 geologic sequestration projects in diverse regions. There are two active projects, both in Norway, where facilities at the Sleipner Gas Field in the North Sea and Snohvit in the Barents Sea conduct offshore sequestration under the Norwegian continental shelf. Chevron's Gorgon Injection Project, a natural gas production facility in Australia, plans to begin sequestering CO 2 in 2020 and store a total of 100 million tons of CO 2 . Canada, Japan and Algeria have carried out smaller-scale CCS projects with sequestration in saline reservoirs. <4. Federal Framework for Regulating Geologic Sequestration of CO2 and EOR> This section provides an overview of the federal framework for regulating underground injection of CO 2 for both geologic sequestration and EOR. It describes the primary federal statute for underground injection control (UIC), the general federal and state roles in developing and implementing UIC regulations, and the UIC well classes. The section analyzes the differences between wells used solely for geologic sequestration and wells used for EOR. It also outlines the regulatory requirements for transitioning from EOR wells to geologic sequestration wells. <4.1. SDWA> SDWA is the primary federal statute governing underground injection activities in the United States, including those associated with geologic sequestration of CO 2 . SDWA Section 1421 directs EPA to promulgate regulations for state UIC programs to protect underground sources of drinking water and prohibits any underground injection activity except when authorized by a permit or rule. The statute defines underground injection as "the subsurface emplacement of fluids by well injection." <4.1.1. Federal and State Roles> EPA issues regulations for underground injection, issues guidance to support state program implementation, and in some cases, directly administers UIC programs in states. The agency has established minimum requirements for state UIC programs and permitting for injection wells. These requirements include performance standards for well construction, operation and maintenance, monitoring and testing, reporting and recordkeeping, site closure, financial responsibility, and (for some types of wells) post-injection site care. Most states implement the day-to-day program elements for most categories of wells, which are grouped into "classes" based on the type of fluid injected. Owners or operators of underground injection wells must follow the permitting requirements and standards established by the UIC program authorities in their states. SDWA authorizes EPA to delegate primary enforcement authority for UIC programs, known as primacy , to individual states (see Figure 2 ). Section 1422 mandates that states seeking primacy adopt and implement UIC programs that meet all minimum federal requirements under Section 1421. For wells other than certain oil- and gas-related injection wells, states must adopt laws and regulations at least as stringent as EPA regulations and meet other statutory requirements to be granted primacy. EPA grants a state primacy through a federal rulemaking process for one or more classes of wells. If granted primacy for a class of wells, a state administers that UIC program, develops its own requirements, and allows well injection by state rule or by issuing permits. If a state's UIC plan has not been approved or the state has chosen not to assume program responsibility, SDWA requires that EPA directly implement the program in that state. <4.1.2. UIC Well Classes> Under SDWA authority, EPA has established six classes of underground injection wells based on similarity in the fluids injected. Construction, injection depth, design requirements, and operating techniques vary among well classes. Some wells are used to inject fluids into formations below USDWs, while others involve injection into or above USDWs. EPA regulations set out specific permitting and performance standards for each class of wells. In 2010, EPA issued the first federal rule specific to underground injection of CO 2 , Federal Requirements Under the Underground Control (UIC) Program for Carbon Dioxide (CO 2 ) Geological Sequestration (Class VI Rule). In the rule, the agency promulgated regulations for underground injection of CO 2 for long-term storage and established UIC Class VI, a new class of wells for geologic sequestration of CO 2 . Prior to the Class VI rule's effective date in January 2011, injection of CO 2 was permitted under Class II if used for EOR or Class V if the well was experimental (e.g., DOE-supported research wells). Table 1 lists the classes of UIC wells. EPA has delegated UIC program primacy for well Classes I-V to 32 states (see Figure 2 ). EPA has delegated primacy for all six well classes to one state, North Dakota. Seven states and two tribes have primacy for Class II wells only. Including those states, a total of 40 states have primacy for Class II. For Class VI, EPA has direct implementation authority in 49 states and for all territories. For Classes I, III, IV and V only, the agency has delegated primacy for two states. EPA shares UIC implementation responsibility with seven states and two Indian tribes and implements the UIC program for all classes in eight states. Additional states are pursuing Class VI primacy: EPA is reviewing Wyoming's application for Class VI primacy, and Louisiana is in a pre-application phase. As with regulations for other well classes, the Class VI rule allows states to apply for primacy for Class VI wells without applying for primacy for other well classes. <4.1.3. Class VI Geologic Sequestration Wells> Underground injection for the purpose of long-term geologic sequestration of CO 2 is subject to SDWA UIC regulations for Class VI wells. Class VI requirements may also apply to CO 2 injection for EOR using Class II wells when EPA or the delegated state determines that there is an increased risk to USDWs. Two Class VI wells, both in Illinois, are currently permitted in the United States. EPA issued these final permits in 2017 for two wells injecting CO 2 into a saline aquifer at the ADM ethanol plant in Illinois. In 2015, EPA issued a final Class VI permit for the FutureGen project, but the permit expired after the project was cancelled without any CO 2 injection taking place. No state has issued a permit for a Class VI well. EPA requires that state primacy for Class VI wells would be implemented under SDWA Section 1422. <4.1.3.1. Unique Class VI Requirements> When developing minimum federal requirements for Class VI wells, EPA generally built upon Class I hazardous waste requirements. The agency added new requirements to address the unique properties of CO 2 and geologic sequestration in the Class VI rule. In the preamble to the Class VI rule, EPA noted that "tailored requirements, modeled on the existing UIC regulatory framework, are necessary to manage the unique nature of CO 2 injection for geologic sequestration." EPA bases the regulation of CO 2 injection as a separate class of wells on several unique risk factors to USDWs: the large volumes of CO 2 expected to be injected through wells; the relative buoyancy of CO 2 in underground geologic formations; the mobility of CO 2 within subsurface formations; the corrosive properties of CO 2 in the presence of water that can effect well materials; and the potential presence of impurities in the injected CO 2 stream. Due to all of these properties, Class VI requirements establish a larger injection site "area of review" compared to requirements for other classes. The area of review for Class VI wells "includes the subsurface three-dimensional extent of the carbon dioxide plume, associated area of elevated pressure, and displaced fluids, as well as the surface area above that delineated region." The requirements also obligate well owners or operators to track, model, and predict CO 2 plume movement. The monitoring and post-injection site care requirements in the regulations are based on estimates that commercial-scale CO 2 injection projects are expected to operate between 30 and 60 years. Appendix C compares the major permitting requirements and technical standards for Class II wells related to oil and gas production, which are used for EOR, and Class VI wells for geologic sequestration of CO 2 . To assist states and owner operators with the permitting process, EPA has also issued 11 technical guidance documents on Class VI wells. These documents are not legally enforceable but provide additional information on site characterization, area of review, construction, reporting and recordkeeping, site closure, financial responsibility, and other permit elements. <4.1.4. Class II Oil and Gas Related Wells> Class II wells are used to inject fluids associated with oil and gas production, including wells injecting CO 2 for EOR. EOR wells are the most common type of Class II wells. As of 2018, there were approximately 178,000 permitted Class II wells, approximately 135,600 (76%) of which were recovery wells. Most of these wells are located in California, Texas, Kansas, Illinois, and Oklahoma. Approximately 20% of Class II wells are disposal wells and hydrocarbon storage wells. States may request primacy for Class II oil- and gas-related injection operations under SDWA Section 1422 or Section 1425. Section 1422 mandates that state programs meet EPA requirements promulgated under Section 1421 and prohibits underground injection that is not authorized by permit or rule. EPA regulations under Section 1421 specify requirements for siting, construction, operation, monitoring and testing, closure, corrective action, financial responsibility, and reporting and recordkeeping. Sixteen states and three territories have Class II primacy under Section 1422. Section 1425 allows states to administer their own Class II UIC programs using state rules in lieu of EPA regulations provided a state demonstrates that it has an effective program that prevents underground injection that endangers drinking water sources. To receive approval under Section 1425's optional demonstration provisions, a state program must include permitting, inspection, monitoring, and recordkeeping and reporting requirements. Twenty-four states and two tribes have Class II primacy under Section 1425. Most oil- and gas-producing states have primacy for Class II under this section. Overall, nearly 99% of EOR wells are located in states with primacy under Section 1425. For the 10 states without Class II primacy, the District of Columbia, and most tribes, EPA directly implements the Class II program, and federal regulations apply. While both Class II and Class VI wells involve injection of CO 2 into underground reservoirs, the purposes and regulations of these two classes are different. Class II wells inject primarily into oil or gas fields for the purposes of enhancing production from an underground oil and gas reservoir. In Class II wells, only some of the CO 2 stays in the reservoir during each recovery cycle, gradually increasing the total volume of CO 2 stored. In Class VI wells, all of the injected CO 2 is intended to remain in the reservoir for sequestration. CO 2 sequestration in Class VI wells generally involves higher injection pressures, larger expected fluid volumes, and different physical and chemical properties of the injection stream compared to Class II wells. Given these differences between the two well classes, EPA Class II regulations specify different requirements than Class VI regulations. Generally, EPA Class II requirements impose less comprehensive performance requirements and provide longer time periods between mandatory testing and reporting compared to EPA Class VI requirements. Unlike EPA Class VI requirements, EPA Class II requirements do not include providing seismicity information, continuous monitoring of the injection pressure and CO 2 stream, monitoring of the CO 2 plume and pressure front, or monitoring of groundwater quality throughout the lifetime of the project. EPA Class II requirements also do not impose post-injection site care or emergency and remedial response requirements, which are included in EPA Class VI requirements. Class II wells can be granted a permit or authorized by rule by either a primacy state or EPA, while Class VI wells cannot be authorized by rule. See Appendix C for more information on EPA Class II well requirements. <4.1.5. Transition of Wells from Class II to Class VI Wells> Class II EOR wells have a different primary purpose than Class VI wells and must transition to a Class VI permit under certain conditions. EPA has determined that "owners or operators of Class II wells that are injecting carbon dioxide for the primary purpose of long-term storage into an oil or gas reservoir must apply for and obtain a Class VI permit where there is an increased risk to USDWs compared to traditional Class II operations." EPA recognizes that there may be some CO 2 trapped in the subsurface at EOR operations. However, if the Class VI UIC program director (either EPA or the primacy state) has determined that there is no increased risk to USDWs, then these operations would continue to be permitted under the Class II requirements. To date, no Class II wells have been transitioned to Class VI. <4.2. Other Federal Authorities> Regulations promulgated under most other federal environmental statutes have generally not applied to underground injection or geologic sequestration of CO 2 . If the well owner or operator constructs, operates, and closes the injection well in accordance with a UIC Class II or Class VI permit, the injection and storage would typically not be subject to other federal air quality, waste management, or environmental response authorities and related liability. For example, a release of a hazardous substance in compliance with a UIC permit would be exempt as a "federally permitted release" from liability and reporting requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Such federally permitted releases would also be exempt from emergency notification requirements of the Emergency Planning and Community Right-to-Know Act (EPCRA). During the development of the UIC Class VI final rule, some stakeholders in the CCS industry asked EPA for clarification on how hazardous waste requirements, established under the Resource Conservation and Recovery Act (RCRA), may apply to CO 2 streams that are geologically sequestered. In response, EPA promulgated a rule excluding CO 2 from RCRA's hazardous waste management requirements when injected into UIC Class VI wells. As a result, when geologically sequestered in compliance with a UIC Class VI well permit, CO 2 streams are not separately subject to RCRA requirements applicable to the management of hazardous waste. Certain federal regulations may apply to CCS processes or facilities that support CO 2 injection and sequestration, such as carbon capture and CO 2 transportation and compression. The regulatory frameworks of these activities are beyond the scope of this report. <4.2.1. Clean Air Act Greenhouse Gas Reporting Program> The Greenhouse Gas Reporting Program (GHGRP) established by EPA under the authority of the Clean Air Act, requires certain sources of GHGs to report emissions data. In 2010, EPA promulgated a rule to include injection and geologic sequestration of CO 2 in the GHGRP. In this rule, the agency determined that facilities that inject CO 2 for long-term sequestration and all other facilities that inject CO 2 underground fall within the GHGRP covered source categories. Therefore, reporting requirements apply to both Class VI wells and Class II wells that inject CO 2 . EPA's purpose for collecting this information is two-fold: to track CO 2 emissions and to quantify the amount of CO 2 being sequestered. Under the GHGRP Rule Subpart RR, facilities that inject a CO 2 stream for long-term containment (i.e., geologic sequestration) must develop and implement a monitoring, reporting, and verification plan. The purpose of this plan is to verify the amount of CO 2 sequestered and collect data on any CO 2 surface emissions from geologic sequestration facilities. Any facility holding a Class VI permit would be subject to Subpart RR and be required to report the mass of CO 2 that is received, injected into the subsurface, produced, emitted by surface leakage, emitted by leaks in equipment, and emitted by venting. Facilities must also report the mass of CO 2 sequestered in subsurface geologic formations. Subpart UU of the rule applies to Class II wells for the injection of CO 2 for EOR and for small and experimental sequestration projects exempted under Subpart RR. Subpart UU does not require a monitoring, reporting, and verification plan and sets forth different requirements for monitoring and reporting. <5. Issues for Congress> If Congress were to address carbon storage through underground injection, there are a variety of policy issues Members may consider. Several policy issues relate to the current SDWA UIC regulatory framework and what elements of CO 2 injection are covered under the statute's purpose and approach. Congress may also wish to consider other issues that may have implications for CO 2 injection and storage policy, including current pathways of federal support for CCS and underground carbon storage, project cost, and stakeholder perspectives on CCS and fossil fuels. <5.1. Scope of the SDWA UIC Regulatory Framework> SDWA currently serves as the major federal authority for regulating injection of CO 2 for geologic sequestration and carbon storage in general. However, the major purpose of the act's UIC provisions is to prevent endangerment of public water supplies and sources from injection activities. In the preamble to the proposed Class VI Rule, EPA states, "While the SDWA provides EPA with the authority to develop regulations to protect USDWs from endangerment, it does not provide authority to develop regulations for all areas related to GS [geologic sequestration]." The agency identified specific policy areas related to geologic sequestration that are beyond the agency's authority, including (but not limited to) capture and transport of CO 2 , managing human health and environmental risks other than drinking water endangerment, determining property rights, and transfer of liability from one entity to another. The agency acknowledges the challenge of balancing SDWA goals with broader efforts to support geologic sequestration. In the preamble to the Class VI Rule, EPA noted that the rule "ensures protection of USDWs while also providing regulatory certainty to industry and permitting authorities and an increased understanding of GS through public participation and outreach." <5.1.1. Potential Environmental Risks of Geologic Sequestration of CO2> Federal agencies, external analysts, and other stakeholders have expressed a variety of viewpoints on the potential risks associated with injection and geologic sequestration of CO 2 . EPA, the Interagency Task Force on Carbon Capture and Storage, and others have recognized that CO 2 injection and sequestration activities may convey risks to the environment and human health. Some of these risks involve potential endangerment of USDWs that would be covered by SDWA. Other potential impacts, however, are not covered by SDWA or the UIC implementing regulations. For groundwater-related risks, EPA has noted that expansion of CO 2 -EOR and associated CO 2 storage could increase the risk of endangerment to USDWs due to increased injection zone pressures and the large number of wells in oil and gas fields that could serve as leakage pathways. Injected CO 2 could also force brine from the target formation into USDWs, which could affect drinking water. To address potential releases or leakage that could endanger USDWs, in the Class VI rule, EPA included monitoring, reporting, and recordkeeping requirements specific to CO 2 injection. Class VI construction and testing requirements, which are generally more stringent than Class II requirements for EOR, are also intended to prevent USDW endangerment. Regarding other types of risk from improperly managed projects, EPA identified risks to air quality, human health, and ecosystems as potential concerns not addressed by SDWA authorities. In its 2010 report, the Task Force concluded that SDWA's limited application to only those groundwater formations that meet the specific statutory definition of USDWs may "require clarification to support actions to address or remedy ecological or non-drinking water human health impacts arising from the injection and sequestration of CO 2 ." The Task Force also stated that an accidental large release could result in risks to surface water, local ecology, and human health. (See text box Human Health and Environmental Considerations of CO 2 and Geologic Sequestration .) An additional concern with injection and sequestration of CO 2 is the increased potential for earthquakes associated with deep-well injection. Earthquakes induced by CO 2 injection could fracture the rocks in the reservoir or, more importantly, the caprock above the reservoir. Class VI well regulations require that information on earthquake-related history be included in the permit application and that owners or operators not exceed injection pressure that would induce seismicity or initiate fractures. NETL and other stakeholders offer other perspectives on potential health and environmental risks. Regarding the risks of CO 2 leakage, NETL outlines several case studies on leakage related to underground carbon storage in a 2019 report. The report states that use of EOR in the United States "has demonstrated that large volumes of gas can be stored safely underground and over long timeframes when the appropriate best-practices are implemented." According to the report, "Despite over 40 years of operating CO 2 EOR projects, leakage events have rarely been reported," although the authors also note that "there has been no official mechanism for reporting leaks of CO 2 until recently." Other stakeholders have also commented that, even given potential health and environmental risks, the benefits of CO 2 sequestration in reducing GHG emissions as part of climate change mitigation efforts outweigh such risks. <5.1.2. Liability and Property Rights Issues> In the Class VI rule, EPA acknowledged stakeholder interest in liability and long-term stewardship but noted that that the agency does not have the authority to determine property rights or transfer liability from one owner or operator to another. In its report, the Task Force also identified that "the existing Federal framework largely does not provide for a release or transfer of liability from the owner/operator to other persons" and noted that some stakeholders view these issues as a barrier to future CCS project deployment. Specific policy questions regarding property rights include who owns and controls the subsurface formations (known as the pore space) targeted for CO 2 sequestration, if and how such property can be transferred or aggregated, and how underground reservoirs that cross state and tribal boundaries should be regulated. State laws and contractual property arrangements, similar to those established for oil and gas development, may address some of these questions, but some analysts identify the need for more clarity. Issues of financial liability and long-term stewardship of injection sites and storage reservoirs also remain largely unresolved. Analysts have raised questions such as (1) who is responsible for the site and reservoir after the 50-year mandated post-injection site care period, (2) what is the role of the federal or state government in assisting site developers and operators with managing the risks associated with sequestration activities, and (3) whether the federal government should be involved in taking on some or all financial responsibility during the life-cycle of sequestration projects. Large-scale commercial geologic sequestration projects would likely require unique liability and stewardship structures that address issues such as the particular characteristics of CO 2 , the entire life-cycle of sequestration projects from site selection to periods beyond site closure and the geologic time frame (hundreds or thousands of years) over which sequestration occurs. For more information on legal sequestration issues, see CRS Report RL34307, Legal Issues Associated with the Development of Carbon Dioxide Sequestration Technology , by Adam Vann and Paul W. Parfomak. <5.2. Other Policy Considerations> <5.2.1. Research and Development> EPA has stated that "a supporting regulatory framework for the future development and deployment of [carbon storage] technology can provide the regulatory certainty needed to foster industry adoption of CCS, which is crucial to supporting the goal of any climate change legislation." Even with the completion of several large-scale demonstration field projects, analysts recognize uncertainties regarding wide-spread commercial CCS operation in the United States. These technical issues include uncertainties in operations, such as how much CO 2 would be injected, CO 2 sources, availability of appropriate locations, and the exact constituents of CO 2 injection streams. A lack of existing infrastructure for CCS systems from capture technology to pipelines to transport CO 2 may also act as barriers to future CCS deployment. Congress has directly supported federal activities in both geologic sequestration of CO 2 and EOR through the EPAct in 2005 and EISA in 2007, directing DOE to carry out R&D activities to further technical knowledge and deployment of CCS. Several bills in the 116 th Congress including H.R. 1166 / S. 383 , H.R. 3607 , and S. 1201 would continue or expand DOE's CCS programs, including carbon storage programs. Some of these bills would direct EPA to conduct CCS research and/or direct DOE to develop and implement R&D programs related to geologic sequestration methods, storage siting, and assessment of potential impacts. Provisions in some of these bills would also direct DOE to continue its partnership programs for large-scale sequestration demonstration projects. Other relevant provisions include provisions that would require actions from the Council on Environmental Quality, such as publishing guidance and submitting reports to Congress on CCS research and development. <5.2.2. Project Cost> The cost of constructing and operating a new CCS system or retrofitting an existing facility, such as a coal-fired power plant, with CCS is likely to play a major role in the future deployment of commercially viable sequestration projects. Costs for large-scale geologic sequestration or EOR include expenses directly related to injection and storage, as well as costs of investing in sufficient carbon capture and transportation infrastructure and maintaining ongoing facility operations. Regarding regulatory costs associated with geologic sequestration, in the preamble to the Class VI rule, EPA specified the agency's intention that the rule would not impede geologic sequestration: Should this rule somehow impede GS from happening, then the opportunity costs of not capturing with the benefits associated with GS could be attributed to this regulation; however the Agency has tried to develop a rule that balances risk with practicability, site specific flexibility and economic considerations and believes the probability of such impedance is low. Analysts expect that the costs of CCS, whether new system or retrofitting of an existing facility, are likely to total several billion dollars per project, which could act as a barrier to future CCS deployment without the continuation of subsidies. Recently, Public Service Company of New Mexico reportedly estimated that retrofitting a 500-megawatt coal-fired power plant with CCS technology could cost between $5 billion and $6 billion. The company reportedly stated that its evaluations showed that it would be more cost effective to switch to another source of energy (such as renewable energy) rather than continue to use coal with the addition of CCS. Examples of completed commercial-scale CCS operations and associated costs are limited, causing some uncertainty regarding future investments and the scale of project deployment in the coming decades. In a 2019 report, NETL indicated that "the potential costs of commercial-scale CCS are still not fully understood, particularly from a fully integrated (capture, transportation, and storage) perspective." Costs could vary greatly due to a variety of site-specific factors. The type of capture technology is the largest component of costs, possibly accounting for as much as 80% of the total. The variations in the geology of storage formations also make predicting future geologic sequestration costs particularly difficult. Projects that inject some or all the CO 2 for EOR (with incidental carbon storage) involve different cost implications and economic factors from projects injecting solely for permanent CO 2 sequestration. These factors could influence future deployment of these types of projects, as facility owners and operators may consider cost implications when deciding whether to invest in EOR or when deciding between investing projects for EOR or permanent geologic sequestration. EOR operations typically use the existing injection infrastructure in place from earlier oil and gas production activities. Thus, the well exploration and construction costs are "sunk costs." Unlike geologic sequestration projects, these expenses may not be included in total project cost calculations, resulting in comparatively lower costs for injecting and storing the CO 2 . In addition, for EOR projects, overall project costs could be influenced by revenue for the owner or operator from additional oil and gas production. EOR project costs may also be subject to variability and uncertainty, however. NETL notes that the price of oil and the cost and availability of CO 2 are key drivers in the economics of CO 2 EOR. Federal tax credits for carbon storage, available since 2009 for both EOR and geologic sequestration, may also play a role in underground injection and storage of CO 2 project costs and investment decisions . These credits are discussed later in this report. <5.2.3. Public Acceptance and Participation> In the preamble to the proposed Class VI rule, EPA noted that "GS of CO 2 is a new technology that is unfamiliar to most people, and maximizing the public's understanding of the technology can result in more meaningful public input and constructive participation as new GS projects are proposed and developed." EPA also stated that "the agency expects that there will be higher levels of public interest in GS projects than for other injection activities." In the Class VI rule, EPA adopted the existing UIC public participation requirements, which require permitting authorities to provide public notice of pending actions, hold public hearings if requested, solicit and respond to public comments, and involve a broad range of stakeholders. At least two cases involving Class VI permits have come before EPA's Environmental Appeals Board. The first case involved the permit for the FutureGen facility, which was never constructed. The second case involved ADM's Illinois facility, currently operating and permitted in Illinois. Public concerns centered on safety and environmental protection issues, including air quality, groundwater quality, and protection of endangered species. Local landowners claimed that the permits do not adequately address how the facility will ensure these protections in the event of leakage or well failure. They also raised concerns about property rights (including mineral rights), potential decreases in property value, and increased traffic associated with the facilities. <5.2.4. Continued Use of Fossil Fuels> In the EPAct in 2005 and EISA in 2007, Congress recognized connections between geologic sequestration of CO 2 and the continued use of fossil fuel as a major source of electricity in the United States. Consistent with Congress's directives, DOE's CCS research identifies that the purpose of its CCS research, technology development, and testing is "to benefit the existing and future fleet of fossil fuel power generating facilities by creating tools to increase our understanding of geologic reservoirs appropriate for CO 2 storage and the behavior of CO 2 in the subsurface." In the preamble to the proposed Class VI rule, EPA stated that, "the capture and storage of CO 2 would enable the continued use of coal in a manner that greatly reduces the associated CO 2 emissions while other safe and affordable energy sources are developed in the coming decades." Some stakeholders have argued for further research, development and deployment of CCS (when coupled with negative carbon technology, such as direct air capture) as a method for achieving the negative emissions trajectories modeled by the IPCC. Some of these stakeholders state that CCS is an appropriate transitional technology to reduce CO 2 emissions from electricity generation and other industrial sources while expanding the capacity of low or zero-carbon power sources, such as renewable energy. In contrast, other stakeholders have argued that CO 2 sequestration could create a disincentive to reduce fossil-fuel-based power plant emissions or shift to renewable energy sources. In particular, some stakeholders note that injecting CO 2 for EOR may actually increase net GHG emissions, as it produces additional oil and gas to be burned as fuel. CCS systems also require energy to compress, transport, and inject the CO 2 , which, if derived from fossil fuel combustion, could detract from the net GHG reduc tion benefits of sequestration. <5.2.5. Carbon Storage Tax Credits> Federal tax credits for carbon storage were first enacted in 2008 by the Energy Improvement and Extension Act ( P.L. 110-343 ). This act added Section 45Q to the Internal Revenue Code, which established tax credits for CO 2 storage through both EOR and geologic sequestration. For EOR, only the CO 2 that is used as tertiary injectant and remains in the reservoir qualifies for the tax credit. CO 2 recaptured or recycled does not qualify. The Bipartisan Budget Act of 2018 (BBA) amended Section 45Q to increase the amount of these tax credits from $22.66 to $50 per ton over time for sequestered CO 2 and from $12.83 to $35 per ton over time for CO 2 used in EOR. The BBA also removed a 75-million-ton cap on total qualified CO 2 captured or injected but required the relevant taxpayer to claim the credit over a 12-year period after operations begin. Additionally, eligible facilities must be operating or must begin construction before 2024. The U.S. Department of the Treasury is currently considering comments on proposed implementing regulations for the BBA tax credit provision and has not released a final rule. In response to the 2019 Internal Revenue Service notice requesting comments on carbon credits for future regulations and guidance, some oil and gas industry commenters expressed concerns with Treasury's proposed approach to measuring "secure geological storage" and other requirements, which they assert would impact their ability to plan and invest in CCS projects. In the meantime, the tax credit as authorized in the BBA is available to qualified entities. Treasury estimates that in FY2019, the credit will reduce federal income tax revenue by $70 million. Over the FY2020-FY2029 budget window, Treasury estimates that the tax credit will reduce federal income tax revenue by a total of $2.3 billion. As of May 2019, the amount of stored carbon oxide claimed for 45Q credits since 2011 totaled 62,740,171 tons. In legislation pending in the 116 th Congress, H.R. 5156 would extend the deadline for the start of construction of a qualified facility to January 1, 2025. S. 2263 would revise the requirements for the secure geologic storage of carbon oxide for EOR and sequestration. <6. Recent CCS Legislation> Table 2 , below, lists legislation introduced in the 116 th Congress that includes provisions relating to geologic sequestration of CO 2 (as of date of report publication). Legislation in the 116 th Congress has focused on research and development of CCS, including carbon storage through EOR and geologic sequestration, and adjustments to the 45Q carbon storage tax credit. Appendix A. Estimates of U.S. Storage Capacity for CO 2 Appendix B. Large Scale Injection and Geologic Sequestration of CO 2 Projects in the United States Appendix C. Comparison of Class II and Class VI Wells

For several decades the federal government has funded efforts to explore the feasibility of mitigating the release of greenhouse gases (GHGs) while burning fossil fuels as a source of energy. Carbon capture and storage (CCS)—the process of capturing manmade carbon dioxide (CO 2 ) at its source, such as a coal-fired power plant, and storing it before its release into the atmosphere—has been proposed as a technological solution for mitigating emissions into the atmosphere while continuing to use fossil energy. Underground carbon storage, known as geologic sequestration, is the long-term containment of a fluid (including gas or liquid CO 2 in subsurface geologic formations). Long-term storage of CO 2 can also occur incidentally through enhanced oil recovery (EOR), a process of injecting CO 2 into an oil or gas reservoir that can significantly increase the amount of oil or gas produced. The U.S. Department of Energy (DOE) leads the federal government's carbon storage research and development (R&D) as part of the agency's fossil energy programs. The agency conducts research on geologic sequestration and EOR, and carries out the Regional Carbon Sequestration Partnerships (RCSP) program—a set of public-private partnerships across the United States to deploy testing and development of CO 2 injection and storage. To date in the United States, nine projects have injected large volumes of CO 2 into underground formations as demonstrations of potential commercial-scale storage. Four of these projects are actively injecting and storing CO 2 —one in an underground saline reservoir to demonstrate geologic sequestration and three in oil and gas reservoirs as part of EOR. Currently, while numerous large-scale storage R&D projects are ongoing in the United States, none of the projects injecting CO 2 solely for geologic sequestration are operating in a commercial capacity. The Safe Drinking Water Act (SDWA), administered by the U.S. Environmental Protection Agency (EPA), provides authorities for regulating underground injection of fluids and serves as the framework for regulation of geologic sequestration of CO 2 and EOR. The major purpose of the act's Underground Injection Control (UIC) provisions is to prevent endangerment of underground sources of drinking water from injection activities. EPA has promulgated regulations and established minimum federal requirements for six classes of injection wells. In 2010, EPA promulgated regulations for the underground injection of CO 2 for long-term storage and established UIC Class VI, a new class of wells solely for geologic sequestration of CO 2 . The well performance standards and other requirements established in the Class VI rule are based on the distinctive features of CO 2 injection compared to other types of injection. Two Class VI wells, both in Illinois, are currently permitted by EPA in the United States. No state has issued a permit for a Class VI well. CO 2 injection for EOR is conducted using Class II wells (associated with oil and gas production). SDWA also authorizes states to administer UIC programs in lieu of EPA, known as primacy . For Class VI CO 2 geologic sequestration wells, only North Dakota has primacy. Most oil and gas producing states have primacy for Class II wells and regulate these wells under their own state programs. Congress has supported carbon storage via underground injection through recent legislation directing DOE to expand R&D activity and increasing the federal tax credit for underground carbon storage. A policy challenge that Congress may face with underground carbon storage is balancing protection of underground sources of drinking water with supporting and encouraging the development of cost-effective CCS technology. If Congress were to explore future policy in this area, Members may consider the potential health and environmental risks (beyond any related risks to underground sources of drinking water) not addressed by SDWA. Other issues for Congress include unresolved liability and property rights issues, overall CCS project cost, public acceptance of these sequestration projects and participation in their planning, and the relationship of the growth of underground carbon storage with continuing to burn fossil fuels for generating electricity.

crs_R46314

crs_R46314_0

<1. Introduction> The Higher Education Act of 1965 (HEA; P.L. 89-329, as amended) authorizes the operation of three federal s tudent 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. While new loans are authorized to be made only through the Direct Loan program, FFEL and Perkins Loan program loans remain outstanding and borrowers of such loans remain responsible for repaying them. As of December 31, 2019, $1.5 trillion in these loans, borrowed by or on behalf of 42.8 million individuals, remained outstanding. Direct Loan program loans are owned by the U.S. Department of Education (ED). As of December 31, 2019, approximately 35.3 million borrowers owed about $1.3 trillion in Direct Loan debt. FFEL program loans may be held by private lenders, guaranty agencies, or ED. As of December 31, 2019, approximately 11.8 million borrowers owed about $257.2 billion in FFEL program debt. Of that, approximately $87.7 billion was held by ED, representing between 3.3 million and 6 million borrowers, and $169.3 billion was held by private lenders or guaranty agencies, representing debt for between 6.0 million and 7.2 million borrowers. Perkins Loan program loans may be held by institutions of higher education (IHEs) that made the loans or by ED. As of December 31, 2019, about 1.9 million borrowers owed approximately $5.9 billion in Perkins Loans. In response to the current coronavirus disease 2019 (COVID-19) pandemic, numerous questions have arisen regarding student loan repayment flexibilities and debt relief that may be available to individuals to alleviate potential financial effects related to COVID-19. The HEA generally authorizes several options for qualifying individuals. Recent administrative and congressional action, including the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136 ), provide additional student loan relief measures. This report provides an overview of student loan repayment flexibilities and debt relief provisions that may be available to borrowers facing financial difficulties resulting from the pandemic. It first lists some pre-existing loan terms and conditions (authorized through statute and regulations) that may be available to individuals. It then discusses specific administrative and congressional actions taken to address student loan debt in the context of COVID-19. The report concludes with a brief description of additional existing authorities that could be utilized to address other aspects of student loan relief. <2. Pre-existing Loan Terms and Conditions> Several loan terms and conditions that offer forms of repayment relief to borrowers were authorized in statute and regulations prior to the onset of the COVID-19 pandemic. These include periods of deferment and forbearance, which offer borrowers temporary relief from the obligation to make monthly payments; and the availability of income-driven repayment (IDR) plans (e.g., income-based repayment, Pay As You Earn [PAYE]), which afford borrowers the opportunity to make payments in amounts that are capped at a specified share or proportion of their discretionary income, for a maximum repayment period of 20 or 25 years. <2.1. Deferment> A deferment is a temporary period during which a borrower's obligation to make regular monthly payments of principal or interest is suspended, and during which an interest subsidy (i.e., interest does not accrue) may be provided. Where an interest subsidy is not provided, unpaid interest that has accrued on a borrower's loan during a deferment is capitalized (i.e., added to the principal) at the expiration of the deferment period. Periods of deferment do not count toward the 120 monthly payments required to qualify for Public Service Loan Forgiveness (PSLF), and most are not included in a borrower's repayment period (e.g., periods of unemployment deferment do not count toward the maximum repayment periods of 20 or 25 years under the IDR plans). In most instances, a borrower must proactively apply for and request a deferment. A deferment may be granted for a variety of reasons. Unemployment deferment and economic hardship deferment (described below) may be especially relevant to individuals facing financial difficulties due to COVID-19. These types of deferment are available to borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs. <2.1.1. Unemployment Deferment> A borrower who is seeking to obtain full-time employment and is either not employed or employed less than full-time may be granted an unemployment deferment . To be eligible, a borrower must either be receiving unemployment benefits or document that he or she has registered with a public or private employment agency (if one is available within 50 miles) and is diligently seeking to obtain full-time employment. The deferment may be granted for an initial six-month period, and may be extended in six-month increments. A borrower may receive the deferment for a maximum cumulative period of three years, which may include one or more episodes of unemployment. During an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans, the subsidized component of Direct Consolidation Loans, FFEL Stafford (Subsidized) Loans, the subsidized component of FFEL Consolidation Loans, and Perkins Loans. <2.1.2. Economic Hardship Deferment> A borrower may qualify for a deferment during periods while he or she is experiencing an economic hardship. To qualify, a borrower must be (1) receiving payments under a federal or state public assistance program (e.g., Temporary Assistance for Needy Families [TANF], Supplemental Security Income [SSI], Supplemental Nutrition Assistance Program [SNAP], state general public assistance, other means-tested benefits), or (2) working full-time and have a monthly income that does not exceed an amount equal to 150% of the poverty line applicable to the borrower's family size, as calculated on a monthly basis. The deferment may be granted for periods of up to one year at a time, and may be extended up to a cumulative maximum of three years. Periods of up to three years while a borrower qualifies for an economic hardship deferment may be counted as part of the repayment period for each of the IDR plans. During an economic hardship deferment, an interest subsidy is provided on Direct Subsidized Loans, the subsidized component of Direct Consolidation Loans, FFEL Stafford Loans, the subsidized component of FFEL Consolidation Loans, and Perkins Loans. <2.2. Forbearance> Forbearance constitutes permission for a borrower to temporarily cease making monthly payments, to make payments in reduced amounts, or to make payments over an extended period of time. During periods of forbearance, no interest subsidies are provided (i.e., interest continues to accrue) and borrowers ultimately remain responsible for paying all of the interest that accrues on their loans. Borrowers may pay the interest as it accrues during forbearance. At the end of the forbearance period, any unpaid accrued interest is capitalized into the principal balance of Direct Loan program and FFEL program loans; it is not capitalized (but remains due) for Perkins Loan program loans. Periods of forbearance do not count toward the 120 monthly payments required to qualify for PSLF, and are not included in a borrower's repayment period (e.g., periods of student loan debt burden forbearance do not count toward the maximum repayment periods of 20 or 25 years under the IDR plans). Generally, borrowers must apply for forbearance. General forbearance and student loan debt burden forbearance (described below) may be especially relevant to individuals facing financial difficulties due to COVID-19. These types of forbearance are available to borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs. <2.2.1. General Forbearance> A borrower may request a general forbearance (sometimes referred to as a discretionary forbearance) on the basis of experiencing a temporary hardship due to financial difficulties, a change in employment, medical expenses, or other reasons. General forbearance may be granted for an initial period of up to 12 months, renewed upon the borrower's request, and limited to a maximum of 36 months. At the end of the forbearance period, any unpaid interest that accrued during the period is capitalized. <2.2.2. Student Loan Debt Burden Forbearance> A borrower may receive a forbearance on the basis of having a federal student loan debt burden that equals or exceeds 20% of his or her total monthly taxable income. To qualify, a borrower must demonstrate that his or her required monthly payments on HEA Title IV federal student loans (e.g., loans made under the Direct Loan, FFEL, or Perkins Loan programs) equal or exceed that amount. Student loan debt burden forbearance may be granted for an initial period of up to 12 months, may be renewed upon the borrower's request, and is limited to a maximum of 36 months. <2.3. Income-Driven Repayment Plans> IDR plans afford borrowers the opportunity to make payments in amounts that are capped at a specified share or proportion of their discretionary income over a repayment period not to exceed 20 to 25 years, depending on the plan. At the end of the repayment period, the remaining balance of an individual's loans is forgiven. Under these plans, it is possible for a borrower's monthly payment to equal $0. There are several IDR plans currently available to borrowers: the Income-Contingent Repayment (ICR) plan, the Income-Based Repayment (IBR) plans (one version of which is available to individuals who qualify as a new borrower on or after July 1, 2014; and another which is available to individuals who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan. In general, Direct Loan borrowers (other than Parent PLUS Loan borrowers) are eligible for any of these plans. FFEL program borrowers (other than Parent PLUS loan borrowers) are only eligible for the IBR plans. Perkins Loan borrowers are not eligible for any IDR plan. Individuals must apply to repay their loans according to an IDR plan. In addition, they must annually provide documentation of their income and family size to remain eligible for IDR repayment. Borrowers may update their income and family size at any time if either changes. Upon submission of such information, a borrower's monthly payment amount will be recalculated accordingly. <3. Administrative and Congressional Actions Taken in Response to COVID-19> Recently, ED and Congress have taken steps to provide additional forms of relief to federal student loan borrowers. This includes cancelling Direct Loans for payment periods during which qualifying individuals withdrew from their course of study due to COVID-19, waiving Direct Subsidized Loan limitations for students affected by COVID-19, temporarily setting interest rates to 0% on qualifying loans, expanding the instances under which a forbearance may be available to borrowers of qualifying loans, and temporarily ceasing collections on qualifying defaulted loans. <3.1. Returning Direct Loans> Under the HEA, a Direct Loan borrower may be required to return or repay all or part of the Direct Loans borrowed if the student does not complete a payment or enrollment period at an IHE for which the loan was received. Required procedures for such returns or repayments vary depending on whether a student did not begin attendance at an IHE or whether he or she withdrew. <3.1.1. Failure to Begin Attendance> If a student does not begin attendance at an IHE in a payment or enrollment period, Title IV funds (including Direct Loan funds) must be returned to ED by the IHE and/or the student according the regulatory provisions. For Direct Loan amounts required to be returned by the student, the IHE must immediately notify ED (or its loan servicers) when it becomes aware that the student will not begin or has not begun attendance. Loan servicers then issue a final demand letter to the borrower. The demand letter requires the borrower to repay any loan principal and accrued interest within 30 days from the date the letter is mailed. If the borrower fails to comply with the demand letter, he or she is considered in default on the loan. In March 2020, ED issued guidance to IHEs specifying some flexibilities that may be used to address the return of Direct Loans by recipients who did not begin attendance at an IHE due to COVID-19. ED stated that if a student was unable to begin attendance due to a COVID-19-related school closure, the IHE is not required to notify the loan servicer of the student's failure to begin attendance. By waiving this requirement, loan servicers would not issue demand letters, and borrowers would be able to repay any loans according to the terms of the promissory note, including receiving a six-month grace period prior to the start of repayment. <3.1.2. Withdrawal> HEA Section 484B specifies that when a Title IV aid recipient withdraws from an IHE before the end of the payment or enrollment period for which funds were disbursed, Title IV funds (including any Direct Loans received) must be returned to ED by the IHE and/or aid recipient according to statutorily prescribed rules (this is often referred to as Return of Title IV Aid). If an aid recipient is required to return any portion of a Direct Loan, he or she repays it in accordance with the terms of the loan. The CARES Act authorizes several waivers with respect to Return of Title IV Aid procedures. Specific to Direct Loan borrowers, the act requires ED to cancel a borrower's obligation to repay the entire portion of a Direct Loan associated with a payment period during which the student withdraws from an IHE as a result of a qualifying emergency . <3.2. Direct Subsidized Loan Limitations> Since July 1, 2013, a student who is a first-time borrower may only borrow Direct Subsidized Loans for a period that may not exceed 150% of the published length of the academic program in which he or she is currently enrolled (e.g., six years for enrollment in a four-year bachelor's degree program). This is referred to as the Direct Subsidized Loan maximum eligibility period. If a Direct Subsidized Loan borrower subject to this provision remains enrolled beyond the applicable maximum eligibility period, he or she will lose the interest subsidy and will become responsible for paying the interest that accrues on his or her Direct Subsidized Loans after the date that the maximum eligibility period is exceeded. The CARES Act specifies that ED shall exclude from the maximum eligibility period any semester (or equivalent) that the student does not complete due to a qualifying emergency, if ED is "able to administer such policy in a manner that limits complexity and the burden on the student." <3.3. Entering Repayment> In general, borrowers of Direct Loan, FFEL, and Perkins Loan program loans are required to make payments on the loans during a repayment period. The repayment period for Direct Subsidized Loans, Direct Unsubsidized Loans, FFEL Stafford Loans, FFEL Unsubsidized Loans, and Perkins Loans begins after a grace period. The grace period begins after the borrower ceases to be enrolled in an eligible postsecondary program on at least a half-time basis (enrollment on at least a half-time basis is often referred to as in-school status for federal student loan purposes). The repayment period for Direct PLUS Loans (to graduate students and to parents of dependent undergraduate students), Direct Consolidation Loans, FFEL PLUS Loans, and FFEL Consolidation Loans is required to begin when the loan is fully disbursed. However, borrowers of these loans, along with borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, FFEL Stafford Loans, FFEL Unsubsidized Loans, and Perkins Loans, may qualify for a deferment on the basis of their in-school status (or the in-school status of the student on whose behalf a PLUS Loan was made to a parent borrower), during which time they are not required to make payments on their loans but interest may accrue. A borrower qualifies for such an in-school deferment if he or she, or the student on whose behalf a PLUS Loan is made, is enrolled on at least a half-time basis. ED has announced some flexibilities for borrowers of Direct Loan and FFEL program loans whose loan status was in-school on the date the student's attendance at an IHE was interrupted due to COVID-19. The loan status of such borrowers will continue to be reported as in-school until the IHE determines that the student has withdrawn from it. ED has permitted IHEs to defer reporting a student's withdrawn status if the IHE has a reasonable expectation that it will reopen at the start of a payment period that begins no later than 90 days following its COVID-19-related closure and that the student will resume attendance when the IHE reopens. ED guidance does not address Perkins Loans. <3.4. Interest Accrual> Interest is charged on loans made under the Direct Loan, FFEL, and Perkins Loan programs. Typically, under a limited set of circumstances the federal government subsidizes some or all of the interest that would otherwise accrue on certain Direct Subsidized Loans, FFEL Stafford Loans, and Perkins Loans. For March 13, 2020, through September 30, 2020, the Administration has set interest rates on federally held student loans (e.g., all Direct Loan program loans, and FFEL and Perkins Loan program loans held by ED) to 0%. The CARES Act specifies that during this time interest will not accrue. This means borrowers will not be responsible for paying interest on their ED-held loans for this period. This will permit borrowers to enter into a period of deferment or forbearance without concern for whether interest would accrue and capitalize. Borrowers who continue making payments on their loans during this time of 0% interest will not have decreased monthly payments. They will have the full amount of the payments applied toward loan principal. Borrowers who are eligible for this benefit need not apply for it; ED will automatically adjust their accounts to reflect the 0% interest. In addition, ED has authorized FFEL program lenders and institutions that hold Perkins Loans to provide the same 0% interest rate on these nonfederally held loans on a voluntary basis. Borrowers who are ineligible for the 0% interest rate benefit because their FFEL program loan holder or Perkins Loan program IHE is not providing it may take advantage of the 0% interest period by consolidating such loans into a Direct Consolidation Loan, which is eligible for the 0% interest rate. This 0% interest rate, coupled with the various options for temporary cessation of payments (e.g., forbearance, deferment) discussed throughout this report, means that qualifying borrowers may temporarily cease payments on their loans without interest accruing or being subject to capitalization when they begin to make payments again at a later point in time. <3.5. Cessation of Payments> In addition to the pre-existing deferment and forbearance options available to borrowers, ED and Congress have recently taken further steps to enable borrowers to temporarily cease making payments on their qualifying loans. For March 13, 2020, through September 30, 2020, federally held student loans (e.g., all Direct Loan program loans, and FFEL and Perkins Loan program loans held by ED) will be placed in an administrative forbearance. During this time, borrowers will not be required to make payments due on their loans. Borrowers who are eligible for this benefit need not apply for it; ED will automatically suspend payments. In implementing these provisions, ED has indicated that borrowers may opt out of this special administrative forbearance by contacting their loan servicer. In addition, any payments made on a borrower's account between March 13, 2020, and September 30, 2020, can be refunded to the borrower. A borrower must contact his or her loan servicer to request a refund. ED has also authorized FFEL program lenders and institutions that hold Perkins Loans to provide this special administrative forbearance to borrowers on a voluntary basis. Borrowers who are ineligible for this benefit because their FFEL program loan holder or Perkins Loan program IHE is not providing it may take advantage of the benefit by consolidating such loans into a Direct Consolidation Loan. Generally, periods of forbearance do not count toward the 120 monthly payments required to qualify for PSLF, and are not included in a borrower's repayment period (e.g., periods of unemployment deferment do not count toward the maximum repayment periods of 20 or 25 years under the IDR plans). However, the CARES Act specified that ED "shall consider each month for which a loan payment was suspended" under this special administrative forbearance "as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program." Thus, for Direct Loan borrowers (the only borrowers eligible for PSLF) this special administrative forbearance will count toward the 120 monthly payments required to qualify for PSLF if the borrower was in a qualifying repayment plan prior to the payment suspension and also works full-time in qualifying employment during the suspension. For borrowers of federally held loans, the suspended payments will also count toward the 20- and 25-year repayment periods under the IDR plans, and toward the nine voluntary payments within 10 consecutive months required for individuals to rehabilitate their defaulted loans. It is unclear whether suspended payments on nonfederally held FFEL program loans whose lender has authorized this special administrative forbearance would count toward the 20- and 25-year repayment periods under applicable IDR plans. Perkins Loans, regardless of whether they are held by ED or an IHE, are ineligible for IDR plans. In addition, ED recently authorized institutions that hold Perkins Loans to grant a forbearance to borrowers who are in repayment and are unable to make payments due to COVID-19. Under this forbearance, interest would continue to accrue. The initial forbearance period may not exceed three months, but it may be extended upon a borrower providing supporting documentation. Borrowers must request the forbearance from the IHE. This period of forbearance counts toward the three-year maximum limit on the number of years of forbearance that may be granted to a Perkins Loan borrower. <3.6. Loan Default and Collections> Defaulting on a federal student loan can result in a number of adverse consequences for a borrower. Upon default, the borrower's obligation to repay the loan is accelerated (i.e., the entire unpaid balance of principal and interest becomes due in full). In addition, the borrower loses eligibility for certain borrower benefits (e.g., deferment, loan forgiveness), as well as eligibility to receive additional Title IV federal student aid. A defaulted borrower may have his or her student loan account transferred to an ED-contracted private collection agency (PCA) that will contact the borrower and offer him or her options for voluntary debt resolution, such as loan rehabilitation, consolidation out of default, or entry into a voluntary repayment agreement. If such voluntary debt resolution attempts do not succeed, involuntary collection practices may be utilized, which include administrative wage garnishment; offset of federal income tax returns, Social Security benefits, and certain other federal benefits; and civil litigation. <3.6.1. Collection of Defaulted Loans> For March 13, 2020, through September 30, 2020, ED will halt the above-described involuntary debt collection practices, and ED-contracted PCAs will stop proactive collection activities (i.e., stop making collection calls and sending letters or billing statements to defaulted borrowers) for all federally held student loans (e.g., all Direct Loan program loans, and FFEL and Perkins Loan program loans held by ED). However, borrowers may contact PCAs to continue repayment arrangements they had made prior to implementation of this policy or to consolidate their loans out of default. Borrowers of federally held loans whose federal tax refund or Social Security benefits were in the process of being withheld on or after March 13, 2020, and before September 30, 2020, will have any offset portion returned to them. Borrowers whose wages were garnished between March 13, 2020, and September 30, 2020, will have their wages refunded. In addition, ED has authorized institutions to stop collection activities on defaulted Perkins Loans that they hold through September 30, 2020, upon notification from a borrower, a member of the borrower's family, or another reliable source that the borrower has been affected by COVID-19. <3.6.2. Satisfactory Repayment Arrangements, Loan Rehabilitation, and Consolidation Out of Default> To regain Title IV student aid eligibility, a defaulted federal student loan borrower must make six on-time, voluntary monthly payments on a defaulted loan. In addition, loan rehabilitation offers defaulted borrowers an opportunity to have their loan(s) reinstated as active and to have other borrower benefits and privileges restored. To rehabilitate a loan, Direct Loan, FFEL, or Perkins Loan program borrowers must make nine on-time payments according to generally applicable procedures. Alternatively, a borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more defaulted Direct Loan, FFEL, and Perkins Loan program loans. To become eligible to do so, a borrower must make three consecutive, on-time, full monthly payments on a defaulted loan. ED has stated that for specified periods, if a borrower of a defaulted Direct Loan, FFEL, or Perkins Loan program loan fails to make any of the consecutive monthly payments required to re-establish eligibility for Title IV federal student aid, to rehabilitate such defaulted loans, or to consolidate such defaulted loans out of default, the borrower shall not be considered to have missed any of those payments. <3.7. Reporting to Consumer Reporting Agencies> Information about a borrower's federal student loans is reported to nationwide consumer reporting agencies on a regular basis. Information reported includes items such as loan amount and repayment status (e.g., whether a borrower is current on making payments). The CARES Act specifies that through September 30, 2020, ED shall ensure that any payment that has been suspended under the special administrative forbearance described above shall be reported to a consumer reporting agency as if it were a regularly scheduled payment made by the borrower. <3.8. Teacher Loan Forgiveness> The Teacher Loan Forgiveness program provides loan forgiveness benefits to borrowers of qualifying Direct Loan and FFEL program loans. To qualify for benefits, a borrower must serve as a full-time teacher for at least five consecutive complete academic years in a qualifying school or public education service agency that serves children from low-income families. The CARES Act specifies that ED shall waive the requirement that years of qualifying teaching service be consecutive if an individual's service was temporarily interrupted due to a qualifying emergency, and after such temporary disruption the borrower resumes teaching and ultimately completes a total of five years of qualifying service. Qualifying service may include service performed before, during, and after the qualifying emergency. <4. Additional Flexibilities> In addition to the above-described administrative and congressional actions that have been taken in response to COVID-19, further flexibility and authority is provided through the Higher Education Relief Opportunities for Students Act (HEROES Act). The HEROES Act can only be implemented, however, in connection with a war or other military action or a national emergency declared by the President. The HEROES Act provides the Secretary with authority to waive or modify statutory and regulatory requirements that apply to the HEA Title IV student aid programs in an effort to help affected individuals. There are three categories of affected individuals: 1. those who are serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency; 2. those who reside or are employed in an area that is declared a disaster area by any federal, state, or local official in connection with a national emergency; and 3. those who suffered direct economic hardship as a direct result of a war or other military operation or national emergency. Examples of support that may be available to student loan borrowers under the HEROES Act include the following: For borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs who are in the 1 st or 2 nd categories of affected individuals, the initial grace period excludes any period, not to exceed three years, during which a borrower is an affected individual. Borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs who were in an "in-school" status but left school because they became a 1 st or 2 nd category affected individual may retain their in-school status for up to three years. During this period, the Secretary will pay any interest that accrues on a FFEL Stafford Loan. Borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs who were in an "in-school" deferment or a graduate fellowship deferment but left school because they became a 1 st or 2 nd category affected individual may retain their deferment for a period of up to three years during which they are affected. During this period, the Secretary will pay any interest that accrues on a FFEL Stafford Loan. For borrowers of Perkins Loans who are in the 1 st or 2 nd categories of affected individuals, any forbearance granted on the basis of their status as an affected individual is excluded from the usual three-year limit on forbearance. Also, for these categories of affected individuals, borrowers of Perkins Loans may be granted forbearance based on an oral request and without written documentation for a one-year period and an additional three-month transition period. Borrowers of FFEL program loans who are in the 1 st or 2 nd categories of affected individuals may be granted forbearance based on an oral request and without written documentation for a one-year period and an additional three-month transition period. For borrowers that may qualify for Teacher Loan Forgiveness (Direct Loan and FFEL program borrowers) or Perkins Loan Cancellation (Perkins Loan program borrowers) on the basis of continuous or uninterrupted qualifying service, such service will not be considered interrupted by any period during which they are in the 1 st or 2 nd categories of affected individuals or during a three-month transition period. For borrowers who defaulted on Direct Loan, FFEL, or Perkins Loan program loans and are seeking to rehabilitate their loans by making nine on-time payments according to generally applicable procedures, any payments missed during periods when they are in the 1 st or 2 nd categories of affected individuals or during a three-month transition period shall not be considered an interruption in the series of payments required for loan rehabilitation. For borrowers who defaulted on Direct Loan, FFEL, or Perkins Loan program loans and are seeking to reestablish eligibility for Title IV federal student aid by making six consecutive on-time payments, any payments missed during periods when they are in the 1 st or 2 nd categories of affected individuals or during a three-month transition period shall not be considered an interruption in the series of payments required for purposes of reestablishing Title IV eligibility. For borrowers who defaulted on Direct Loan or FFEL program loans and are seeking to consolidate loans out of default, any payments missed during the period when they are in the 1 st or 2 nd category of affected individuals or during a three-month transition period shall not be considered an interruption in the series of payments required for purposes of reestablishing Title IV aid eligibility. Borrowers who are repaying their Direct Loan or FFEL program loans according to an IDR plan and because of their status as 1 st or 2 nd category affected individuals are unable to provide information normally required annually to document their income and family size may maintain their current payment amount for a period of up to three years, including a three-month transition period. This flexibility is made in lieu of having their payment amount adjusted to be based on a standard 10-year repayment plan or an alternative repayment plan, as applicable.

The Higher Education Act of 1965 (HEA; P.L. 89-329, as amended) authorizes 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. As of December 31, 2019, $1.5 trillion in such loans, borrowed by or on behalf of 42.8 million individuals, remained outstanding. In response to the current coronavirus disease 2019 (COVID-19) pandemic, numerous questions have arisen regarding student loan repayment flexibilities and debt relief that may be available to individuals to alleviate potential financial effects related to COVID-19. The HEA authorizes several flexibilities that may be relevant to individuals facing financial difficulties resulting from COVID-19. These include the following: Loan deferment and forbearance options offer a borrower temporary relief from the obligation to make monthly payments. In certain instances, interest does not accrue during deferment periods; although interest does accrue during forbearance periods. Periods of deferment or forbearance do not count toward the 120 monthly payments required to qualify for Public Service Loan Forgiveness (PSLF), nor do they count toward the 20- or 25-year repayment periods under the income-driven repayment plans. Income-driven repayment (IDR) plans afford borrowers the opportunity to make payments in amounts that are capped at a specified share or proportion of their discretionary income over a repayment period not to exceed 20 or 25 years, depending on the plan. At the end of the repayment period, the remaining balance of an individual's loans is forgiven. Recent administrative and congressional actions, including the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136 ), provide additional student loan relief measures: Interest rates on federally held student loans are being set to 0% from March 13, 2020, through September 30, 2020. Federally held student loans are being placed in a special administrative forbearance for March 13, 2020, through September 30, 2020. During this time, borrowers will not be required to make payments due on their loans. This special administrative forbearance will count toward the 120 monthly payments required to qualify for PSLF, the 20- and 25-year repayment periods under the IDR plans, and the nine voluntary payments required for individuals to rehabilitate their defaulted loans. Debt collections activities, including involuntary collection activities such as wage garnishment and offset of certain federal benefits (e.g., federal income tax return benefits, Social Security benefits) are being suspended on federally held student loans for March 13, 2020, through September 30, 2020.

crs_R45888

crs_R45888_0

<1. Introduction> Congress and the Donald J. Trump Administration are debating enhancing and expanding barriers on the southwest border. The extent of these barriers, and how construction of these barriers will be funded has become a central part of the interactions between Congress and the Trump Administration on border security and funding legislation for the broader federal government. The debate has revealed the lack of an authoritative compilation of data on the details of federal investment in border barriers. This is in part due to the evolving structure of the appropriations for agencies charged with protecting the border account structures have shifted, initiatives have come and gone, and appropriations prior to FY2017 typically did not specify a precise level of funding for barriers as opposed to other technologies that secure the border. The Trump Administration's continued advocacy for funding for a "border wall system" has led to a congressional interest in the historical context for border barrier funding. This report briefly contextualizes the history of U.S. enforcement of the U.S.-Mexico border, before turning to funding for border barriers within the contemporary period, accounting for changing appropriations structures. <2. Historical Context> <2.1. Establishment and Policing of the U.S.-Mexico Border> The Treaty of Guadalupe Hidalgo in 1848, with the cession of land to the United States, ended the Mexican-American War and set forth an agreed-upon boundary line between the United States and Mexico. The physical demarcation of the boundary was essentially set by the Gadsden Purchase, finalized in 1854, with some minor adjustments since then. Securing U.S. borders has primarily been the mission of the U.S. Border Patrol, which was established by Congress by an appropriations act in 1924. Initially, a relatively small force of 450 officers patrolled both the northern and southern borders between inspection stations, guarding against the smuggling of contraband and unauthorized migrants. The Immigration Act of 1924 established immigration quotas for most countries, with the exception of those in the Western Hemisphere, including Mexico. (While some specific limitations existed, per-country quotas for Western Hemisphere countries did not exist until 1976. ) Earlier policies had set categorical exclusions to entry (e.g., for Chinese and other Asian immigrants) that were exceptions to an otherwise open immigration policy. Between 1942 and 1964, the Bracero Program brought in nearly 5 million Mexican agricultural workers to fill the labor gap caused by World War II. Both employers and employees became used to the seasonal work, and when the program ended, many continued this employment arrangement without legal authorization. Debates about enhancing enforcement of immigration laws ensued in the late 1970s and 1980s, largely in concert with counter-drug smuggling efforts and interest in curbing the rise in unauthorized flows of migrant workers. <2.2. Emergence of Barriers as Deterrence> A significant effort to construct barriers on the southern border as a deterrent to illegal entry by migrants or smugglers into the United States began in the early 1990s. In 1991, U.S. Navy engineers built a ten-foot-high corrugated steel barrier between San Diego and Tijuana made of surplus aircraft landing mats, an upgrade to the previous chain-link fencing. In 1994, the Border Patrol (then part of the Department of Justice under the Immigration and Naturalization Service, INS) released a strategic plan for enforcing immigration laws along the U.S. border, as a part of a series of immigration reform initiatives. The plan, developed by Chief Patrol Agents, Border Patrol headquarters staff, and planning experts from the Department of Defense Center for Low Intensity Conflict, described their approach to improving control of the border through a strategy of "prevention through deterrence," under which resources were concentrated in major entry corridors to establish control of those areas and force traffic to more difficult crossing areas. The Border Patrol will increase the number of agents on the line and make effective use of technology, raising the risk of apprehension high enough to be an effective deterrent. Because the deterrent effect of apprehensions does not become effective in stopping the flow until apprehensions approach 100 percent of those attempting entry, the strategic objective is to maximize the apprehension rate. Although a 100 percent apprehension rate is an unrealistic goal, we believe we can achieve a rate of apprehensions sufficiently high to raise the risk of apprehension to the point that many will consider it futile to continue to attempt illegal entry. Prior to 1996, federal statute neither explicitly authorized nor required barrier construction along international borders. In 1996, the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) was enacted, and Section 102(a) specifically directed the Attorney General to "install additional physical barriers and roads ... in the vicinity of the United States border to deter illegal crossings in areas of high illegal entry into the United States." <2.3. From INS (in Department of Justice) to CBP (in Homeland Security)> Following the terrorist attacks of September 11, 2001, the U.S. government changed its approach to homeland security issues, including control of the border. As a part of the establishment of the Department of Homeland Security (DHS) in 2003, INS was dismantled, and the Border Patrol and its responsibility for border security were moved from the Department of Justice to DHS as a part of U.S. Customs and Border Protection (CBP). DHS and CBP were stood up in 2003, and received their first annual appropriations in FY2004. <3. DHS Border Barriers: Legislative Era (2005-2016)> During the 109 th and the first session of the 110 th Congresses (2005-2007), comprehensive immigration reform legislation and narrower border security measures were debated. One result was that Congress explicitly authorized and funded new construction of border barriers, significantly increasing their presence. <3.1. Enacted Authorizations and Appropriations> In the 109 th Congress, two bills were enacted that amended Section 102 of IIRIRA, easing the construction of additional border barriers. Section 102 of the REAL ID Act of 2005 ( P.L. 109-13 , Div. B) included broad waiver authority that allowed for expedited construction of border barriers. The Secure Fence Act of 2006 ( P.L. 109-367 ) directed the Secretary of Homeland Security to "achieve and maintain operational control over the entire international land and maritime borders of the United States," mandated the construction of certain border barriers and technology on the border with Mexico by the end of 2008, and required annual reports on progress on border control. This was a different approach in border barrier legislation. Past immigration policy bills had included border barriers as a part of a suite of remedies across government to the border security problem in the context of immigration policy. The Secure Fence Act instead provided authorization for DHS alone to achieve "operational control" of the border through barriers, tactical infrastructure, and surveillance while largely not addressing the broader set of immigration policies that could contribute to improved border security. In addition, the Secure Fence Act substantially revised IIRIRA Section 102(b) to include five specific border areas to be covered by the installation of fencing, additional barriers, and technology. The FY2006 DHS Appropriations Act ( P.L. 109-90 ) provided the first appropriations specifically designated for the Border Patrol (now under CBP and a part of DHS) to construct border barriers. The act specified $35 million for CBP's San Diego sector fencing. This funding was part of a surge in CBP construction spending from $91.7 million in FY2005 and $93.4 million in the FY2006 request to $270.0 million for FY2006 enacted appropriations. This direction also represented the first specific statutory direction provided to CBP on the use of its construction funds. Toward the end of 2007, Congress amended Section 102 of IIRIRA through Section 564 of the Consolidated Appropriations Act, 2008. Congress again required the construction of reinforced fencing along at least 700 miles of the U.S.-Mexico border, where it would be "most practical and effective," but also included flexibility in implementing this requirement, stating that: nothing in this paragraph shall require the Secretary of Homeland Security to install fencing, physical barriers, roads, lighting, cameras, and sensors in a particular location along an international border of the United States, if the Secretary determines that the use or placement of such resources is not the most appropriate means to achieve and maintain operational control over the international border at such location. <3.1.1. The "BSFIT" Appropriation> Starting in FY2007 and continuing through FY2016, border barrier funding in CBP's budget was included in the "Border Security Fencing, Infrastructure, and Technology" (BSFIT) appropriation. When BSFIT was established in the Department of Homeland Security Appropriations Act, 2007 ( P.L. 109-295 ), it consolidated border technology and tactical infrastructure funding from other accounts, including CBP's Construction appropriation and Salaries and Expenses appropriation. According to the FY2007 DHS appropriations conference report, Congress provided $1,512,565,000 for BSFIT activities for FY2007: $1,187,565,000 from annual appropriations in P.L. 109-295 , and $325,000,000 in prior enacted supplemental appropriations from P.L. 109-234 and other legislation. Congress directed portions of that initial appropriation to two specific border security projects, and withheld $950 million until a spending plan for a border barrier was provided. Starting in FY2008, a PPA for "Development and Deployment" of technology and tactical infrastructure was included at congressional direction under the BSFIT appropriation. The BSFIT Development and Deployment PPA is, over the tenure of CBP, the most consistently structured year-to-year direction from Congress to CBP regarding putting border security technology and infrastructure in the field, covering FY2008-FY2016. The BSFIT Development and Deployment structure remained unchanged until the implementation of the Common Appropriations Structure (CAS) for DHS in the FY2017 appropriations cycle, which redistributed BSFIT funding to the Operations and Support (OS) appropriation and the Procurement, Construction, and Improvements (PC&I) appropriation. Border barrier design and construction funding, other than ports of entry, is now included in the Border Security Assets and Infrastructure PPA along with several other activities. Figure 1 shows the requested and enacted levels for the Development and Deployment PPA from FY2008 through FY2016. Although it doesn't show an almost $1.2 billion FY2007 appropriation for border infrastructure before the Development and Deployment PPA was implemented, it does indicate the early high levels of investment in border infrastructure, which then tapered off. The dashed line shows the size of the budget request for these elements. <3.2. Identifying Border Barrier Funding> While the new structure of appropriations made it clear that funding was being directed to border security enhancements, the level of detail was not always sufficient to identify the funding level for barrier construction. CRS was able to obtain this more granular information directly from CBP, which provided a breakdown to CRS of its spending on border barriers beginning with FY2007. The primary program that funded barrier construction in this period was the Tactical Infrastructure (TI) Program. Figure 2 and Table 1 present funding data provided by CBP for border barriers under the TI program. The funding provided in FY2007 to FY2009 resulted in increased border barrier construction (which extended for a few years into the early 2010s). As the funds for construction were expended, CBP transitioned its border barrier activities to primarily maintenance and minor repairs, until FY2017. CBP has indicated in follow-up communications that no further historical data are available, as barrier construction was conducted by several entities within CBP, and not centrally tracked. In addition, the definitions of tactical infrastructure may allow for inclusion of some elements only peripherally related to border barriers. Taking these factors into account, given the limited mileage constructed prior to FY2007 (see Appendix for details), the above data present the best available understanding of appropriations and spending on border barriers in the 2007-2016 period. <4. DHS Border Barriers: Executive Era (2017-Present)> On January 25, 2017, the Trump Administration issued Executive Order 13767, "Border Security and Immigration Enforcement Improvements." Section 2(a) of the EO indicates that it is the policy of the executive branch to "secure the southern border of the United States through the immediate construction of a physical wall on the southern border, monitored and supported by adequate personnel so as to prevent illegal immigration, drug and human trafficking, and acts of terrorism." The EO goes on to define "wall" as "a contiguous, physical wall or other similarly secure, contiguous, and impassable physical barrier." <4.1. Enacted Appropriations> <4.1.1. Changes in Structure> For FY2017, changes were made both in the structure of how funds were appropriated, and how CBP organized those funds among its authorized activities. This complicates efforts to make detailed comparisons in funding levels between the present and time periods prior to FY2016. <4.1.1.1. Appropriations> When DHS was established in 2003, components of other agencies were brought together over a matter of months, in the midst of ongoing budget cycles. Rather than developing a new structure of appropriations for the entire department, Congress and the Executive continued to provide resources through existing account structures when possible. CBP's budget structure evolved over the DHS's early years, including the institution of the Border Security Fencing, Infrastructure, and Technology (BSFIT) account in FY2007. At the direction of Congress, in 2014 DHS began to work on a new Common Appropriations Structure (CAS), which would standardize the format of DHS appropriations across components. After several years of negotiations with Congress, DHS made its first budget request in the CAS for FY2017, and implemented the new budget structure while operating under a continuing resolution in October 2016. This resulted in the BSFIT structure being eliminated. The funding that had been provided under its appropriation would now be provided under the CBP Operations and Support (OS) and Procurement, Construction, and Improvements (PC&I) appropriations. <4.1.1.2. Execution of Funding> Aside from the appropriations structure, changes within CBP's internal account structure occurred during FY2017. The "Wall Program" was established at CBP during FY2017. The Wall Program is a lower-level PPA nested within the new Border Security Assets and Infrastructure activity, which in turn is a part of the CBP PC&I appropriation. According to CBP, the Wall Program oversees the execution of the FY2017 TI program funding and "will be responsible for all future wall construction." CBP first directed appropriations to the Wall Program in FY2018 ($1.375 billion). CBP's TI Program continues to manage the funding for maintenance of new and replacement border barriers, as it has since FY2007. Table 2 shows appropriations for border barriers requested by the Administration and provided by Congress in the DHS appropriations acts. Each fiscal year is discussed in detail after Table 2 . <4.1.2. FY2017> The Trump Administration submitted a supplemental appropriations request in March 2017 for a variety of priorities, including CBP staffing and border wall construction. The request for additional CBP PC&I funding included $1.38 billion, of which $999 million was for "planning, design, and construction of the first installment of the border wall." The FY2017 DHS Appropriations bill included a sixth title with the congressional response to the supplemental appropriations request. It included $341.2 million to replace approximately 40 miles of existing primary pedestrian and vehicle barriers along the southwest border "using previously deployed and operationally effective designs, such as currently deployed steel bollard designs, that prioritize agent safety" and to add gates to existing barriers. <4.1.3. FY2018> The Administration requested $1.72 billion for the Border Security Assets and Infrastructure PPA, including $1.57 million for construction of border barriers. In the FY2018 appropriations measure, Congress provided $1.74 billion, which, according to a House Appropriations Committee summary, included funding for "over 90 miles of physical barrier construction along the southern border including replacement, bollards, and levee improvements." Section 230 of the bill specified the following $1.375 billion for the following activities under the CBP PC&I appropriation: $445 million for 25 miles of primary pedestrian levee fencing in Rio Grande Valley (RGV) sector; $196 million for primary pedestrian fencing in RGV sector; $251 million for secondary replacement fencing in San Diego sector; $445 million for replacement of existing primary pedestrian fencing; and $38 million for border barrier planning and design. The section went on to note that the funding for primary fencing "shall only be available for operationally effective designs deployed as of [May 5, 2017], such as currently deployed steel bollard designs that prioritize agent safety." <4.1.4. FY2019> The Administration initially requested $1.647 billion for the Border Security Assets and Infrastructure PPA. Budget justification documents noted that $1.6 billion was requested for the border wall. The Administration reportedly requested $5.0 billion for the wall from Republican congressional leadership. However, no publicly available modification of its request was presented to Congress until January 6, 2019. At that time, in the midst of a lapse in annual appropriations due in part to conflict over border barrier funding, the acting head of the Office of Management and Budget (OMB) submitted a letter seeking $7 billion in additional border related funding. The $7 billion included $4.1 billion more for "the wall" than the Administration originally requested. The letter indicated that the total request of $5.7 billion would pay for "approximately 234 miles of new physical barrier and fully fund the top 10 priorities in CBP's Border Security Improvement Plan." P.L. 116-6 , the Consolidated Appropriations Act, 2019, included $1.375 billion for CBP "for the construction of primary pedestrian fencing, including levee pedestrian fencing, in the Rio Grande Valley Sector." Funding could only be used for "operationally effective designs deployed as of [May 5, 2017], such as currently deployed steel bollard designs that prioritize agent safety." <4.1.4.1. Border Barrier Funding Outside the Appropriations Process> The same day that the President signed the FY2019 consolidated appropriations act into law, he declared a national emergency on the southern border of the United States. A fact sheet accompanying the declaration indicated the President's intent to make additional funding available for border barriers through three methods, sequentially. These methods and related actions are: 1. Drawing about $601 million from the Treasury Forfeiture Fund A letter from the Department of the Treasury on February 15, 2019, indicated that those funds would be made available to DHS for "law enforcement border security efforts" ($242 million available March 2, and $359 million after additional forfeitures were received). According to court documents, Treasury transferred the full $601 million to DHS on September 27, 2019. CBP will reportedly use the funds as follows: $261 million for future-year real estate planning and acquisition for border barrier construction along the southwest border. $340 million for border barrier projects in the Rio Grande Valley Sector, of which $124 million is for construction; and $216 million is for construction management costs, increased project costs, and real estate planning and acquisition. 2. Making up to $2.5 billion available through the Department of Defense's support for counterdrug activities (authorized under 10 U.S.C. 284) $1 billion has been reprogrammed within the Department of Defense to its Drug Interdiction and Counter Drug Activities account, and that funding, in turn, was transferred for the U.S. Army Corps of Engineers to do certain DHS-requested work on border barriers. On May 10, 2019, the Department of Defense announced an additional $1.5 billion reprogramming of funding that had been dedicated to a variety of initiatives, including training and equipping Afghan security forces, programs to dismantle chemical weapons, and other activity for which savings or program delays had been identified. The DOD indicated that the funding would construct an additional 80 miles of border barriers. Use of both of these tranches of reprogrammed funds to pay for border barrier projects had been blocked by a court injunction until July 26, 2019, when the Supreme Court ruled that the government could proceed with the use of the funds while a lower court determines the legality of the transfer that made the funds available. 3. Reallocating up to $3.6 billion from various military construction projects under the authority invoked by the emergency declaration On September 3, 2019, Secretary of Defense Mark Esper issued a memorandum with the determination that "11 military construction projects along the international border with Mexico, with an estimated total cost of $3.6 billion, are necessary to support the use of the armed forces in connection with the national emergency [at the southern border]." The memorandum indicates $1.8 billion in unobligated military construction funding for overseas projects would be made available immediately, while $1.8 billion in domestic military construction projects would be provided once it is needed. <4.1.5. FY2020> In February 2019, The Administration requested $5 billion in border barrier funding for FY2020, to support the construction of approximately 206 miles of border wall system. The House Appropriations Committee included no funding for border barriers when it reported its FY2020 DHS appropriations bill. In addition, the bill would have restricted the ability to transfer or reprogram funds for border barrier construction and proposed rescinding $601 million from funding appropriated for border barriers in FY2019. The Senate Appropriations Committee took the opposite approach when it reported S. 2582 , recommending $5 billion for border barrier construction. It also did not include any of the House bill's proposed restrictions or the rescission. Neither the House nor the Senate considered these appropriations bills on the floor. The FY2020 DHS Appropriations Act ( P.L. 116-93 , Div. D) which was passed as part of the Consolidated Appropriations Act, 2020 included $1.375 billion for "construction of barrier system along the southwest border." The barrier system design restrictions are similar to prior years, with a new exception for designs that help "mitigate community or environmental impacts." There is an additional requirement that the barriers are to be built in the highest priority locations identified in CBP's Border Security Improvement Plan. <4.2. Comparing DHS Border Barrier Funding Across Eras> Figure 3 presents a comparison of the total funding made available in the first and second eras of DHS efforts to support planning and construction of barriers on the U.S.-Mexico border. This comparison is made with two important caveats: the data sources and funding structures are different in the two eras. In the legislative era (FY2007-FY2016), detailed information was provided directly to CRS in a communication from CBP. It was tracked for "tactical infrastructure," which included funding for border roads and other TI. In the executive era (FY2017 to the present), data from CBP and appropriations measures (which has been more detailed with respect to barrier planning and construction) are generally consistent, but the Administration uses the specifically defined "border wall" program to track most of the funding. A small amount of funding for barrier replacement and supporting infrastructure was provided through the tactical infrastructure PPA in FY2018. <5. Questions Relevant to Future DHS Border Barrier Funding> Section 4 of E.O. 13767, "Physical Security of the Southern Border of the United States," focuses almost entirely on the construction of "a physical wall" on the U.S.-Mexico border as a means of obtaining operational control of the nearly 2,000-mile border. CBP has indicated that it cannot provide authoritative historical data prior to FY2007 on the level of funding invested in border barrier planning and construction. To briefly recap the funding that has been provided by Congress in response to the Trump Administration's initiative, the $4.47 billion in appropriations provided by Congress to CBP for border barrier planning and construction during the Trump Administration exceeds the amount provided for those purposes in the BSFIT account for the 10 years from FY2007 to FY2016 by $2 billion. Of the $4.47 billion: $1.04 billion was specifically directed to barrier replacement projects; $2.02 billion was specifically directed to construction needs in the Rio Grande Valley Sector; and $1.41 billion has been provided for planning and construction of border barriers without specific direction in regards to location or whether the funding was for barrier replacement or construction of additional miles of barriers. Despite the historically high volume of resources provided, the Administration has taken unprecedented steps noted above in an attempt to more than double the funding level appropriated to CBP by Congress for barrier construction since the signing of E.O. 13767. $601 million was provided to DHS in FY2019 from the Treasury Forfeiture Fund. As noted in " Border Barrier Funding Outside the Appropriations Process ," $124 million of that funding is being used for construction, while $477 million is for real estate planning and acquisition, increased project costs, and construction management costs. Generally, the Administration, in its discussion about border barriers, relies on the U.S. Border Patrol Impedance and Denial Prioritization Strategy , which includes a list of projects for barrier construction. There are no known authoritative cost estimates for the total construction or operation and maintenance costs of these projects if they are all completed, or publicly available assessments of how completion of various projects might affect CBP's operational costs. Furthermore, GAO reported in 2016 that the border barriers' contributions to CBP goals were not being adequately measured. GAO reported in 2018 that CBP's methodology for prioritizing border barrier deployments did not use cost estimates that included data on topography, land ownership, and other factors that could impact the costs of individual barrier projects. The Administration's stated intent is to expand the amount of border barriers on the southwest border, and this issue will likely be part of debates on the budgets for the current and future fiscal years. Congress may wish to obtain the following information and explore the following questions in assessing border barrier funding proposals: 1. What are the projected operation and maintenance costs for the existing southwest border barriers? How will those change with additional replacements, upgrades, or new construction of barriers? 2. What are the projected land acquisition and construction costs of CBP's remaining top priority border barrier projects, based on unique topography, land ownership, and strategic intent of the projects? What steps is CBP taking to control the growth of those costs? Who within the Administration is providing oversight of how these funds are used, and are they reporting their findings to Congress? 3. Are existing barriers and completed improvements having measurable impacts on attempted illegal entry into the U.S. and smuggling of contraband? How are CBP and other stakeholders making their assessments? Is CBP getting its desired tactical or strategic outcomes? 4. Are the operational benefits worth the financial and operational costs, or are there more efficient ways to achieve the desired tactical or strategic outcomes? 5. How should Congress respond to the Administration's exercise of reprogramming and transfer authorities to provide funding for border barrier work above the amount Congress provided to CBP for that purpose? <5.1. Appendix. Tracking Barrier Construction on the U.S.-Mexico Border> The United States' southern border with Mexico runs for nearly 2,000 miles over diverse terrain, through varied population densities, and across discontinuous sections of public, private, and tribal land ownership. The Department of Homeland Security (DHS) Customs and Border Protection (CBP) is primarily responsible for border security, including the construction and maintenance of tactical infrastructure, but also the installation and monitoring of surveillance technology, and the deployment of border patrol agents to impede unlawful entries of people and contraband into the United States (e.g., unauthorized migrants, terrorists, firearms, and narcotics). Built barriers, such as fencing, are a relatively new feature on the southern border. These structures vary in age, purpose, form, and location. At the end of FY2015, approximately 653 miles roughly one-third of the international boundary had a primary layer of barriers. Approximately 300 miles of the "primary fence" was designed to prevent vehicles from entering, and approximately 350 additional miles was designed to block people on foot "pedestrian fencing." CBP has used various materials for pedestrian fencing, including bollard, steel mesh, and chain link, and employed bollard and Normandy-style fencing for vehicle barriers. Across 37 discontinuous miles, the primary layer is backed by a secondary layer of pedestrian fencing as well as an additional 14 miles of tertiary fencing (typically to delineate property lines). On January 10, 2020, the Administration announced the completion of the first 100 miles of the "new border wall system" under the Trump Administration. Based on CBP's information, the 100 miles of new border wall system largely replaces less formidable existing barriers with 18- to 30-foot bollard style fencing designed to obstruct both vehicles and pedestrians. It does not represent additional miles of the primary layer of border barriers. CBP has not announced the completion of any additional miles of primary fencing since 2015, but sections of legacy fencing and breached areas have been replaced or repaired and other improvements have been made. An interactive online project by inewsource (a nonprofit, nonpartisan investigative online newsroom in San Diego) and KPBS (a Public Broadcasting Service television and radio station in San Diego, California) used data obtained via a Freedom of Information Act (FOIA) request to Customs and Border Protection to account for every mile of existing border fencing by the year built. The data are used in this appendix to produce Figure A-1 showing the number of miles of primary border barrier constructed for the period 1960-2018 (annual data shown in Table A-1 ). Small areas of the border had fencing prior to 1990. By 1993, fencing in the San Diego area had been completed, covering the first 14 miles of the border east from the Pacific Ocean and a few other areas. Under the provisions of IIRIRA, the Secretary of Homeland Security and, prior to 2003, the Attorney General has the discretion to determine the appropriate amount of additional barriers to build, as well as their location. Approximately 40 additional miles of primary fence were constructed on the southern border through 2005. The vast majority of the existing primary barriers more than 525 miles were constructed between 2007 and 2009 (see Table A-1 and Figure A-1 ).

The purpose of barriers on the U.S.-Mexico border has evolved over time. In the late 19 th and early 20 th centuries, fencing at the border was more for demarcation, or discouraging livestock from wandering over the border, rather than deterring smugglers or illegal migration. Physical barriers to deter migrants are a relatively new part of the border landscape, first being built in the 1990s in conjunction with counterdrug efforts. This phase of construction, extending into the 2000s, was largely driven by legislative initiatives. Specific authorization for border barriers was provided in 1996 in the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA), and again in 2006 in the Secure Fence Act. These authorities were superseded by legislation included in the Consolidated Appropriations Act, 2008, which rewrote key provisions of IIRIRA and replaced most of the Secure Fence Act. The result of these initiatives was construction of more than 650 miles of barriers along the nearly 2,000-mile border. The Trump Administration has driven the second phase of construction of border barriers. On January 25, 2017, the Administration issued Executive Order 13767, "Border Security and Immigration Enforcement Improvements." Section 2(a) of the E.O. indicates that it is the policy of the executive branch to "secure the southern border of the United States through the immediate construction of a physical wall on the southern border, monitored and supported by adequate personnel so as to prevent illegal immigration, drug and human trafficking, and acts of terrorism." The debate over funding for and construction of a "border wall system" in this phase has created congressional interest in the historical context of border barrier funding. There has not been an authoritative compilation of data on the level of federal investment in border barriers over time. This is in part due to the evolving structure of the appropriations for agencies charged with protecting the border—account structures have shifted, initiatives have come and gone, and appropriations typically have not specified a precise level of funding for barriers as opposed to other technologies that secure the border. Funding was not specifically designated for border barrier construction until FY2006. The nearly $4.5 billion in appropriations provided by Congress for border barrier planning and construction since the signing of the E.O. exceeds the amount provided for those purposes from FY2007 to FY2016 combined by almost $2 billion. Most of the contracts that have been awarded thus far are for improvements to, or replacements of, the existing barriers at the border. However, a significant portion of the funds appropriated to the Department of Homeland Security (DHS) is available for construction of barriers where they do not currently exist. The Administration took steps in FY2019 to secure funding beyond the levels approved by Congress for border barriers. These included: transferring roughly $601 million from the Treasury Forfeiture Fund to U.S. Customs and Border Protection (CBP); using $2.5 billion in Department of Defense funds transferred to the Department's counterdrug programs to construct border barriers; and reallocating up to $3.6 billion from other military construction projects using authorities under the declaration of a national emergency. This report provides an overview of the funding appropriated for border barriers, based on data from CBP and congressional documents, and a primer on the Trump Administration's efforts to enhance the funding for border barriers, with a brief discussion of the legislative and historical context of construction of barriers at the U.S-Mexico border. It concludes with a number of unanswered questions Congress may wish to explore as this debate continues. An appendix tracks reported barrier construction mileage on the U.S.-Mexico border by year.

crs_R45924

crs_R45924_0

<1. Introduction> The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. Annual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy. <2. USDA's August 2019 Farm Income Forecast> In the second of three official U.S. farm income outlook releases scheduled for 2019 (see shaded box below), ERS projects that U.S. net farm income will rise 4.8% in 2019 to $88.0 billion, up $4.0 billion from last year. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+7.2%) to $112.6 billion. The August 2019 net farm income forecast represents an increase from USDA's preliminary February 2019 forecast of $69.4 billion. An increase in government support in 2019, projected at $19.5 billion and up 42.5% from 2018, is the principal driver behind the rise in net farm income. Support from traditional farm programs is expected to be bolstered by large direct government payments in response to trade retaliation under the escalating trade war with China. At a projected $19.5 billion in calendar 2019, direct government payments would represent 22.2% of net farm income the largest share since 2006 when federal subsidies represented a 27.6% share. The August forecast of $88 billion is just above (+0.9%) the 10-year average of $87.3 billion and represents continued agriculture-sector economic weakness since 2013's record high of $123.7 billion. <2.1. Highlights> Both net cash income and net farm income achieved record highs in 2013 but fell to recent lows in 2016 ( Figure 1 ) before trending higher in each of the last three years 2017, 2018, and 2019. Commodity prices ( Figure A-1 to Figure A-4 ) have echoed the same pattern as farm income over the 2013-2019 period. When adjusted for inflation and represented in 2018 dollars ( Figure 2 ), the net farm income for 2019 is projected to be on par with the average of $86.8 billion for net farm income since 1940. After declining for four consecutive years, total production expenses for 2019 ( Figure 16 ), at $346.1 billion, are projected up slightly from 2018 (+0.4%), driven largely by higher costs for feed, labor, and property taxes. Global demand for U.S. agricultural exports ( Figure 20 ) is projected at $134.5 billion in 2019, down from 2018 (-6.2%), due largely to a decline in sales to China. Farm asset values and debt levels are projected to reach record levels in 2019 asset values at $3.1 trillion (+2.0%) and farm debt at $415.7 billion (+3.4%) pushing the projected debt-to-asset ratio up to 13.5%, the highest level since 2003 ( Figure 26 ). <2.2. Substantial Uncertainties Underpin the August 2019 Outlook> Abundant domestic and international supplies of grains and oilseeds suggest a fifth straight year of relatively weak commodity prices in 2019 ( Figure A-1 through Figure A-4 , and Table A-4 ). However, considerable uncertainty remains concerning the eventual outcome of the 2019 growing season and the prospects for improved market conditions heading into 2020. As of early September, three major factors loom over U.S. agricultural markets and contribute to current uncertainty over both supply and demand prospects, as well as market prices: 1. First, wet spring conditions led to unusual plantings delays for the corn and soybean crops. This means that crop development is behind normal across much of the major growing regions and that eventual yields will depend on beneficial fall weather to achieve full crop maturity. Also, the late crop development renders crop growth vulnerable to an early freeze in the fall. 2. Second, large domestic supplies of corn, soybeans, wheat, and cotton were carried over into 2019 ( Figure 6 ). Large corn and soybean stocks have kept pressure on commodity prices throughout the grain and feed complex in 2019. 3. Third, international trade disputes have led to declines in U.S. exports to China a major market for U.S. agricultural products and added to market uncertainty. In particular, the United States lost its preeminent market for soybeans China. It is unclear how soon, if at all, the United States will achieve a resolution to its trade dispute with China or how international demand will evolve heading into 2020. <2.2.1. Late-Planted Corn and Soybean Crops Are Behind Normal Development> U.S. agricultural production activity got off to a very late start in 2019 due to prolonged cool, wet conditions throughout the major growing regions, particularly in states across the eastern Corn Belt. This resulted in record large prevented planting acres ( Figure 3 ) and delays in the planting of the corn and soybean crops ( Table 1 ), especially in Illinois, Michigan, Ohio, Wisconsin, and North and South Dakota. As of August 22, 2019, U.S. farmers have reported to USDA that, of the cropland that they intended to plant this past spring, they were unable to plant 19.8 million acres due primarily to prolonged wet conditions that prevented field work. Such acres are referred to as "prevent plant (PPL)" acres. The previous record for total PPL acres was set in 2011 at 10.2 million acres. The 19.8 million PPL acres includes 11.4 million acres of corn and 4.5 million acres of soybeans both establish new records 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. In addition, a sizeable portion of the U.S. corn and soybean crops were planted later than usual. Traditionally, 96% of the U.S. corn crop is planted by June 2, but in 2019 by that date only 67% of the crop had been planted ( Table 1 ). Similarly, the U.S. soybean crop was planted with substantial delays. By June 16, only 67% of the U.S. soybean crop was planted, whereas an average of 93% of the crop has been planted by that date during the past five years. These planting delays have important implications for crop development as they push both crops' growing cycle into hotter, drier periods of the summer than usual and increase the risk of plant growth being shut off by an early freeze. But planting delays also increase the complexity of producer decisionmaking by pushing the planting date into the crop insurance "late planting period," when insurance coverage starts to decline with each successive day of delay ( Figure 4 ). When the planting occurs after the crop insurance policy's "final planting date," the "late planting period" comes into play. Producers must then decide whether to opt for "prevented planting" indemnity payments (valued at 35% of their crop insurance guarantee) or try to plant the crop under reduced insurance coverage with a heightened risk of reduced yields. Producer's choices were further complicated in 2019 by the Secretary of Agriculture'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). <2.2.2. Large Corn and Soybean Stocks Continue to Dominate Commodity Markets> Corn and soybeans are the two largest U.S. commercial crops in terms of both value and acreage. For the past several years, U.S. corn and soybean crops have experienced strong growth in both productivity and output, thus helping to build stockpiles at the end of the marketing year. This has been particularly true for soybean production, which has seen rapid growth in yield, acres planted, and stocks. U.S. soybean production has been expanding rapidly since 1990, largely at the expense of the wheat sector which has been steadily losing acreage over the past several decades ( Figure 5 ). This pattern reached a historic point in 2018 when, for the first time in history, U.S. soybean plantings (at 89.196 million acres) exceeded corn plantings (89.129 million acres). The strong soybean plantings in 2018, coupled with the second-highest yields on record (51.6 bushels/acres), produced a record U.S. soybean harvest of 4.5 billion bushels and record ending stocks (1 billion bushels or a 27.2% stocks-to-use ratio) that year. However, the record soybean harvest in 2018, combined with the sudden loss of the Chinese soybean market (as discussed in the " Agricultural Trade Outlook " section of this report) discouraged many producers from planting soybeans in 2019. This contributed to a drop off (-14%) in soybean planted acres. Most market watchers had expected to see a strong switch from soybean to corn acres in 2019 as a result of the record soybean stocks and weak prices related to the U.S.-China trade dispute. However, the wet spring made large corn plantings unlikely as corn yields tend to experience rapid deterioration when planted in June or later. Despite these indications, USDA's National Agricultural Statistics Service (NASS) released the results of its June acreage survey for corn planted acres at 91.7 million acres well above market expectations. However, because the wet spring had caused widespread delayed planting, USDA announced that it would re-survey the 14 major corn-producing states. The updated survey results were released on August 12 and, at 90.0 million acres, confirmed higher-than-expected corn plantings. As a result, the outlook for the U.S. corn crop has been pressured by the large planted acreage estimate but filled with uncertainty over the eventual success of the crop considering that it is being grown under unusually delayed conditions. Corn ending stocks are projected to surpass 2 billion bushels for the fourth consecutive year. Strong domestic demand from the livestock sector coupled with a robust export outlook are expected to support the season average farm price for corn at $3.60/bushel in the 2019/20 marketing year, unchanged from the previous year. The outlook for the U.S. soybean crop is more certain: USDA projects a 19% drop in U.S. soybean production to 3.68 billion bushels. Despite the outlook for lower production in 2019, the record carry-over stocks from 2018, and the sudden loss of China as the principal buyer of U.S. soybeans in 2018, USDA projects lower soybean farm prices (-8%) at $8.40/bushel for the 2019/20 marketing year the lowest farm price since 2006 ( Figure 6 ). Both wheat and upland cotton farm prices for 2019 are projected down slightly from 2018 primarily due to the outlook for continued abundant stocks as indicated by the stocks-to-use ratios. <2.2.3. Diminished Trade Prospects Contribute to Market Uncertainty> The United States is traditionally one of the world's leading exporters of corn, soybeans, and soybean products vegetable oil and meal. During the recent five-year period from 2013/2014 to 2017/2018, the United States exported 49% of its soybean production and 15% of its corn crop. As a result, the export outlook for these two crops is critical to both farm sector profitability and regional economic activity across large swaths of the United States as well as in international markets. However, the tariff-related trade dispute between the United States and China (as well as several major trading partners) has resulted in lower purchases of U.S. agricultural products by China in 2018 and 2019 and has cast uncertainty over the outlook for the U.S. agricultural sector, including the corn and soybean markets. <2.2.4. Livestock Outlook for 2019 and 2020> Because the livestock sectors (particularly dairy and cattle, but hogs and poultry to a lesser degree) have longer biological lags and often require large capital investments up front, they are slower to adjust to changing market conditions than is the crop sector. As a result, USDA projects livestock and dairy production and prices an extra year into the future (compared with the crop sector) through 2020, and market participants consider this expanded outlook when deciding their market interactions buy, sell, invest, etc. <2.2.4.1. Background on the U.S. Cattle-Beef Sector> During the 2007-2014 period, high feed and forage prices plus widespread drought in the Southern Plains the largest U.S. cattle production region had resulted in an 8% contraction of the U.S. cattle inventory. Reduced beef supplies led to higher producer and consumer prices and record profitability among cow-calf producers in 2014. This was coupled with then-improved forage conditions, all of which helped to trigger the slow rebuilding phase in the cattle cycle that started in 2014 ( Figure 7 ). The expansion continued through 2018, despite weakening profitability, primarily due to the lag in the biological response to the strong market price signals of late 2014. The cattle expansion appears to have levelled off in 2019 with the estimated cattle and calf population unchanged from a year earlier at 103 million. Another factor working against continued expansion in cattle numbers is that producers are now producing more beef with fewer cattle. <2.2.4.2. Robust Production Growth Projected Across the Livestock Sector> Similar to the cattle sector, U.S. hog and poultry flocks have been growing in recent years and are expected to continue to expand in 2019. For 2019, USDA projects production of beef (+0.6%), pork (+5.0%), broilers (+1.7%), and eggs (+2.3%) to expand modestly heading into 2020. This growth in protein production is expected to be followed by continued positive growth rates in 2020: beef (+1.9%), pork (+2.8%), broilers (+1.1%), and eggs (+0.9%). A key uncertainty for the meat-producing sector is whether demand will expand rapidly enough to absorb the continued growth in output or whether surplus production will begin to pressure prices lower. USDA projects that combined domestic and export demand for 2019 will continue to grow for red meat (+1.7%) and poultry (+1.5%) but at slightly slower rates than projected meat production, thus contributing to 2019's outlook for lower prices and profit margins for livestock. <2.2.4.3. Livestock-Price-to-Feed-Cost Margins Signal Profitability Outlook> The changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 8 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed margins have all exhibited significant volatility during the 2017-2019 period. The hog, milk, and cattle feed ratios have trended downward during 2018 and 2019, suggesting eroding profitability. The broiler-to-feed price ratio has shown more volatility compared with the other livestock sectors but has trended upward from mid-2018 into 2019. While this result varies widely across the United States, many small or marginally profitable cattle, hog, and milk producers face continued financial difficulties. Continued production growth of between 1% and 4% for red meat and poultry suggests that prices are vulnerable to weakness in demand. In addition, both U.S. and global milk production are projected to continue growing in 2019. As a result, milk prices could come under further pressure in 2019, although USDA is currently projecting milk prices up slightly in 2019. The lower price outlook for cattle, hogs, and poultry is expected to persist through 2019 before turning upward in 2020 ( Table A-4 ). <2.3. Gross Cash Income Highlights> Projected farm-sector revenue sources in 2019 include crop revenues (46% of sector revenues), livestock receipts (42%), government payments (5%), and other farm-related income (8%), including crop insurance indemnities, machine hire, and custom work. Total farm sector gross cash income for 2019 is projected to be up (+2.2%) to $425.3 billion, driven by increases in both direct government payments (+42.5%) and other farm-related income (+19.3). Cash receipts from crop receipts (-1.7%) and livestock product (+0.5%) are down (-0.6%) in the aggregate ( Figure 9 ). <2.3.1. Crop Receipts> Total crop sales peaked in 2012 at $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2019, crop sales are projected at $193.7 billion, down 1.7% from 2018 ( Figure 10 ). Projections for 2019 and percentage changes from 2018 include Feed crops corn, barley, oats, sorghum, and hay: $56.3 billion (+0.4%); Oil crops soybeans, peanuts, and other oilseeds: $36.3 billion (-14.0%); Fruits and nuts: $29.5 billion (+1.7%); Vegetables and melons: $19.6 billion (+6.0%); Food grains wheat and rice: $12.3 billion (+6.5%); Cotton: $7.5 billion (-7.4%); and Other crops including tobacco, sugar, greenhouse, and nursery: $31.2 billion (+2.8%). <2.3.2. Livestock Receipts> The livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily from 2009 to 2014, when it peaked at a record $212.3 billion. However, the sector turned downward in 2015 (-10.7%) and again in 2016 (-14.1%), driven largely by projected year-over-year price declines across major livestock categories ( Table A-4 and Figure 12 ). In 2017, livestock sector cash receipts recovered with year-to-year growth of 8.1% to $175.6 billion. In 2018, cash receipts increased slightly (+0.6%). In 2019, cash receipts are projected up 0.5% for the sector at $177.4 billion as cattle, hog, and dairy sales offset declines in poultry. Projections for 2019 (and percentage changes from 2018) include Cattle and calf sales: $67.3 billion (+0.3%); Poultry and egg sales: $38.9 billion (-15.8%); Dairy sales: valued at $39.7 billion (+12.7%); Hog sales: $24.5 billion (+16.2%); and Miscellaneous livestock: valued at $7.0 billion (+2.1%). <2.3.3. Government Payments> Historically, government payments have included Direct payments (decoupled payments based on historical planted acres), Price-contingent payments (program outlays linked to market conditions), Conservation payments (including the Conservation Reserve Program and other environmental-based outlays), Ad hoc and emergency disaster assistance payments (including emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices), and Other miscellaneous outlays (including market facilitation payments, cotton ginning cost-share, biomass crop assistance program, peanut quota buyout, milk income loss, tobacco transition, and other miscellaneous payments). Projected government payments of $19.5 billion in 2019 would be up 42.5% from 2018 and would be the largest taxpayer transfer to the agriculture sector (in absolute dollars) since 2005 ( Figure 14 and Table A-4 ). The surge in federal subsidies is driven by large "trade-damage" payments made under the MFP initiated by USDA in response to the U.S.-China trade dispute. MFP payments (reported to be $10.7 billion) in 2019 include outlays from the 2018 MFP program that were not received by producers until 2019, as well as expected payments under the first and second tranches of the 2019 MFP program. USDA ad hoc disaster assistance is projected higher year-over-year at $1.7 billion (+87.1%). Payments under the Agricultural Risk Coverage and Price Loss Coverage programs are projected lower (-12.4%) in 2019 at a combined $2.8 billion compared with an estimated $3.2 billion in 2018 (see "Price Contingent" in Figure 14 ). Conservation programs include all conservation programs operated by USDA's Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $3.7 billion are forecast for 2019, down slightly (-8.4%) from $4.0 billion in 2018. Total government payments of $19.5 billion represents a 5% share of projected gross cash income of $425.3 billion in 2019. In contrast, government payments are expected to represent 22% of the projected net farm income of $88.0 billion. The importance of government payments as a percentage of net farm income varies nationally by crop and livestock sector and by region. <2.3.4. Dairy Margin Coverage Program Outlook> The 2018 farm bill ( P.L. 115-334 ) made several changes to the previous Margin Protection Program (MPP), including a new name the Dairy Margin Coverage (DMC) program and expanded margin coverage choices from the original range of $4.00-$8.00 per hundredweight (cwt.). Under the 2018 farm bill, milk producers have the option of covering the milk-to-feed margin at a $9.50/cwt. threshold on the first 5 million pounds of milk coverage under the program. The DMC margin differs from the USDA-reported milk-to-feed ratio shown in Figure 8 but reflects the same market forces. As of August 2019, the formula-based milk-to-feed margin used to determine government payments was at $9.45/cwt., just below the newly instituted $9.50/cwt. payment threshold ( Figure 15 ), thus increasing the likelihood that DMC payments may be less available in the second half of 2019. In total, the DMC program is expected to make $600 million in payments in 2019, up from $250 million under the previous milk MPP in 2018. <2.4. Production Expenses> Total production expenses for 2019 for the U.S. agricultural sector are projected to be up slightly (+0.4%) from 2018 in nominal dollars at $346.1 billion ( Figure 16 ). Production expenses peaked in both nominal and inflation-adjusted dollars in 2014, then declined for five consecutive years in inflation-adjusted dollars. However, in nominal dollars production expenses are projected to turn upward in 2019 the first upward turn since 2014. Production expenses affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs, purchases of feeder animals and poultry, and hired labor. Feed costs, labor expenses, and property taxes are all projected up in 2019 ( Figure 17 ). In contrast, fuel, land rent, interest costs, and fertilizer costs all major crop production expenses are projected lower. But how have production expenses moved relative to revenues? A comparison of the indexes of prices paid (an indicator of expenses) versus prices received (an indicator of revenues) reveals that the prices received index generally declined from 2014 through 2016, rebounded in 2017, then declined again in 2018 ( Figure 18 ). Farm input prices (as reflected by the prices paid index) showed a similar pattern but with a smaller decline from their 2014 peak and have climbed steadily since mid-2016, suggesting that farm sector profit margins have been squeezed since 2016. <2.4.1. Cash Rental Rates> Renting or leasing land is a way for young or beginning farmers to enter agriculture without incurring debt associated with land purchases. It is also a means for existing farm operations to adjust production more quickly in response to changing market and production conditions while avoiding risks associated with land ownership. The share of rented farmland varies widely by region and production activity. However, for some farms it constitutes an important component of farm operating expenses. Since 2002, about 39% of agricultural land used in U.S. farming operations has been rented. The majority of rented land in farms is rented from non-operating landlords. Nationally in 2017, 29% of all land in farms was rented from someone other than a farm operator. Some farmland is rented from other farm operations nationally about 8% of all land in farms in 2017 (the most recent year for which data are available) and thus constitutes a source of income for some operator landlords. Total net rent to non-operator landlords is projected to be down (-2.1%) to $12.5 billion in 2019. Average cash rental rates for 2019 were up (+1.4%) year-over-year ($140 per acre versus $138 in 2018). National average rental rates which for 2019 were set the preceding fall of 2018 or in early spring of 2019 dipped in 2016 but still reflect the high crop prices and large net returns of the preceding several years, especially the 2011-2014 period ( Figure 19 ). The national rental rate for cropland peaked at $144 per acre in 2015. <3. Agricultural Trade Outlook> U.S. agricultural exports have been a major contributor to farm income, especially since 2005. As a result, the financial success of the U.S. agricultural sector is strongly linked to international demand for U.S. products. Because of this strong linkage, the downturn in U.S. agricultural exports that started in 2015 ( Figure 20 ) deepened the downturn in farm income that ran from 2013 through 2016 ( Figure 1 ). Since 2018, the U.S. agricultural sector's trade outlook has been vulnerable to several international trade disputes, particularly the ongoing dispute between the United States and China. A return to market-based farm income growth for the U.S. agricultural sector will likely necessitate improved international trade prospects. <3.1. Key U.S. Agricultural Trade Highlights> USDA projects U.S. agricultural exports at $134.5 billion in FY2019, down (-6.2%) from $143.4 billion in FY2018. Export data include processed and unprocessed agricultural products. This downturn masks larger country-level changes that have occurred as a result of ongoing trade disputes (as discussed below). In FY2019, U.S. agricultural imports are projected up at $129.3 billion (1.4%), and the resultant agricultural trade surplus of $5.2 billion would be the lowest since 2006. A substantial portion of the surge in U.S. agricultural exports that occurred between 2010 and 2014 was due to higher-priced grain and feed shipments, including record oilseed exports to China and growing animal product exports to East Asia. As commodity prices have leveled off, so too have export values (see the commodity price indexes in Figure A-1 and Figure A-2 ). In FY2017, the top three markets for U.S. agricultural exports were China, Canada, and Mexico, in that order. Together, these three countries accounted for 46% of total U.S. agricultural exports during the five-year period FY2014-FY2018 ( Figure 21 ). However, in FY2019 the combined share of U.S. exports taken by China, Canada, and Mexico is projected down to 38% largely due to lower exports to China. The ordering of the top markets in 2019 is projected to be Canada, Mexico, the European Union (EU), Japan, and China, as China is projected to decline as a destination for U.S. agricultural exports. From FY2014 through FY2017, China imported an average of $26.2 billion of U.S. agricultural products. However, USDA forecasts China's imports of U.S. agricultural products to decline to $20.5 billion in FY2018 and to $10.9 billion in FY2019 as a result of the U.S.-China trade dispute. The fourth- and fifth-largest U.S. export markets have traditionally been the EU and Japan, which accounted for a combined 17% of U.S. agricultural exports during the FY2014-FY2018 period. These two markets have shown limited growth in recent years when compared with the rest of the world. However, their combined share is projected to grow to 19% in FY2019 ( Figure 21 ). The "Rest of World" (ROW) component of U.S. agricultural trade South and Central America, the Middle East, Africa, and Southeast Asia has shown strong import growth in recent years. ROW is expected to account for 43% of U.S. agricultural exports in FY2019. ROW import growth is being driven in part by both population and GDP growth but also from shifting trade patterns as some U.S. products previously targeting China have been diverted to new markets. Over the past four decades, U.S. agricultural exports have experienced fairly steady growth in shipments of high-value products including horticultural products, livestock, poultry, and dairy. High-valued exports are forecast at $94.0 billion for a 69.9% share of U.S. agricultural exports in FY2019 ( Figure 22 ). In contrast, bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a record low 30.1% share of total U.S. agricultural exports in FY2019 at $40.5 billion. This compares with an average share of over 60% during the 1970s and into the 1980s. As grain and oilseed prices decline, so will the bulk value share of U.S. exports. <3.2. U.S. Farm and Manufactured Agricultural Product Export Shares> The share of agricultural production (based on value) sold outside the country indicates the level of U.S. agriculture's dependence on foreign markets, as well as the overall market for U.S. agricultural products. As a share of total farm and manufactured agricultural production, U.S. exports were estimated to account for 19.8% of the overall market for agricultural products from 2008 through 2016 the most recent data year for this calculation ( Figure 23 ). The export share of agricultural production varies by product category: At the upper end of the range for export shares, the bulk food grain export share has varied between 50% and 80% since 2008, while the oilseed export share has ranged between 47% and 58%. The mid-spectrum range of export shares includes the export share for fruit and tree nuts, which has ranged from 37% to 45%, while meat products have ranged from 27% to 41%. At the low end of the spectrum, the export share of vegetable and melon sales has ranged from 15% to 18%, the dairy products export share from 9% to 24%, and the agricultural-based beverage export share between 7% and 13%. <4. Farm Asset Values and Debt> The U.S. farm income and asset-value situation and outlook suggest a relatively stable financial position heading into 2019 for the agriculture sector as a whole but with considerable uncertainty regarding the downward outlook for prices and market conditions for the sector and an increasing dependency on international markets to absorb domestic surpluses and on federal support to offset lost trade opportunities due to ongoing trade disputes. Farm asset values which reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments are projected to be up 2.0% in 2019 to a nominal $3.1 trillion ( Table A-3 ). In inflation-adjusted terms (using 2018 dollars), farm asset values peaked in 2014 ( Figure 24 ). Nominally higher farm asset values are expected in 2019 due to increases in both real estate values (+2.0%) and nonreal-estate values (+2.1%). Real estate is projected to account for 83% of total farm sector asset value. Crop land values are closely linked to commodity prices. The leveling off of crop land values since 2015 reflects stagnant commodity prices ( Figure 25 ). For 2019, USDA forecasts that prices for most major commodities will decline from 2018 wheat, barley, soybeans, cotton, choice steers, broilers, and eggs lower; sorghum, oats, rice, and pork products higher ( Table A-4 ). However, these projections are subject to substantial uncertainty associated with international commodity markets. Total farm debt is forecast to rise to a record $415.7 billion in 2019 (+3.4%) ( Table A-3 ). Farm equity or net worth, defined as asset value minus debt is projected to be up slightly (+1.8%) at $2.7 trillion in 2019 ( Table A-3 ). The farm debt-to-asset ratio is forecast up in 2019 at 13.5%, the highest level since 2003 but still relatively low by historical standards ( Figure 26 ). <5. Average Farm Household Income> A farm can have both an on-farm and an off-farm component to its income statement and balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of the inclusion of nonfarm investments, jobs, and other links to the nonfarm economy. Average farm household income (sum of on- and off-farm income) is projected at $116,060 in 2019 ( Table A-2 ), up 4.7% from 2018 but 13.5% below the record of $134,165 in 2014. About 17% ($20,075) of total farm household income is from farm production activities, and the remaining 83% ($95,985) is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 27 ). Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. <5.1. Total vs. Farm Household Average Income> Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 28 ). In 2017 (the last year for which comparable data were available), the average farm household income of $111,744 was about 30% higher than the average U.S. household income of $86,220 ( Table A-2 ). <5.1.1. Appendix. Supporting Charts and Tables> Figure A-1 to Figure A-4 present USDA data on monthly farm prices received for several major farm commodities corn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data are presented in an indexed format where monthly price data for year 2010 = 100 to facilitate comparisons. USDA Farm Income Data Tables Table A-1 to Table A-3 present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table A-4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2018-2019 marketing year.

This report uses the U.S. Department of Agriculture's (USDA) farm income projections (as of August 30, 2019) and agricultural trade outlook update (as of August 29, 2019) to describe the U.S. farm economic outlook. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $88 billion in 2019, up $4 billion (+4.8%) from last year. However, the forecast rise in 2019 net farm income is largely the result of a 42.5% increase in government payments to the agricultural sector valued at $19.5 billion (highest since 2005). USDA's support outlays forecast for 2019 include nearly $11 billion in direct payments made under trade assistance programs intended to help offset foreign trade retaliation against U.S. agricultural products, as well as payments under traditional farm programs. Without this federal support, net farm income would be lower, primarily due to the outlook for continued weak prices for most major crops. Commodity prices are under pressure from large planted acreage estimates of corn and soybeans in 2019, large carry-in stocks from a record soybean and near-record corn harvest in 2018, and diminished export prospects due to the ongoing trade dispute with China. Should these conditions persist into 2020, they would signal the potential for continued dependence on federal programs to sustain the U.S. agricultural sector in 2020. Since 2008, U.S. agricultural exports have accounted for a 20% share of U.S. farm and manufactured or processed agricultural sales. In 2018, total agricultural exports were estimated up 2% at $143.4 billion. However, abundant supplies in international markets, strong competition from major foreign competitors, and the ongoing U.S.-China trade dispute are expected to shift trade patterns and lower U.S. agricultural export prospects significantly (-6%) to a projected $134.5 billion in 2019. Farm asset value in 2019 is projected up from 2018 to $3.1 trillion (+2%). Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. U.S. farmland values are projected to rise 1.8% in 2019, similar to the increases of 1.9% in 2018 and 2.3% in 2017. Because they comprise such a large portion of the U.S. farm sector's asset base (83%), change in farmland values is a critical barometer of the farm sector's financial performance. However, another critical measure of the farm sector's well-being is aggregate farm debt, which is projected to be at a record $415.7 billion in 2019—up 3.4% from 2018. Both the debt-to-asset and the debt-to-equity ratios have risen for seven consecutive years, suggesting a weakening of the financial situation for the U.S. farm sector. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, this advantage derives primarily from off-farm income as a share of farm household total income. Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. Furthermore, the farm household income advantage over the average U.S. household has narrowed in recent years. In 2014, the average farm household income (including off-farm income sources) was about 77% higher than the average U.S. household income. In 2017 (the last year with comparable data), that advantage was expected to decline to 30%.

crs_R45745

crs_R45745_0

<1. A Relationship in Flux?> <1.1. Long-Standing U.S. and Congressional Engagement> Since the end of the Second World War, successive U.S. Administrations and many Members of Congress have supported a close U.S. partnership with Europe. Often termed the transatlantic relationship , this partnership encompasses the North Atlantic Treaty Organization (NATO), of which the United States is a founding member, and extensive political and economic ties with the European Union (EU) and most countries in Western and Central Europe. The United States has been instrumental in building and leading the transatlantic relationship, viewing it as a key pillar of U.S. national security and economic policy for the past 70 years. The United States spearheaded the formation of NATO in 1949 to foster transatlantic security and collective defense in Europe. Since the early1950s, U.S. policymakers also supported the European integration project that would evolve into the modern-day EU as a way to promote political reconciliation (especially between France and Germany), encourage economic recovery, and entrench democratic systems and free markets. During the Cold War, U.S. officials regarded both NATO and the European integration project as central to deterring the Soviet threat. After the Cold War, U.S. support was crucial to NATO and EU enlargement. Today, European membership in the two organizations largely overlaps; 22 countries currently belong to both (see Figure 1 ). The United States and Europe also have cooperated in establishing and sustaining an open, rules-based international trading system that underpins the global economic order and contributes to U.S. and European wealth and prosperity. Congress has been actively engaged in oversight of U.S. policy toward Europe and has played a key role in shaping the transatlantic partnership. After the end of the Cold War, many Members of Congress encouraged NATO's evolution arguing that to remain relevant, NATO must be prepared to confront security threats outside of alliance territory and were strong advocates for both NATO and EU enlargement to the former communist countries of Central and Eastern Europe. The U.S. and European economies are deeply intertwined through trade and investment linkages that support jobs on both sides of the Atlantic. Many Members of Congress thus have a keen interest in monitoring efforts to deepen transatlantic economic ties, such as through potential further trade liberalization, regulatory cooperation, and addressing trade frictions. At the same time, various Members have expressed concern for years about European allies' military dependence on the United States and some Members may oppose European policies on certain foreign policy or economic issues. <1.2. The Trump Administration and Heightened Tensions> Over the decades, U.S-European relations have experienced numerous ups and downs and have been tested by periods of political tension, various trade disputes, and changes in the security landscape. However, no U.S. president has questioned the fundamental tenets of the transatlantic security and economic architecture to the same extent as President Trump. Many European policymakers and analysts are critical of President Trump's reported transactional view of the NATO alliance, what some view as his singular focus on European defense spending as the measure of the alliance's worth, and his seeming hostility toward the EU, whose trade practices he has argued are unfair and detrimental to U.S. economic interests. Many in Europe also are concerned by what they view as protectionist U.S. trade policies, including the imposition of steel and aluminum tariffs and potential auto tariffs. U.S.-European policy divisions have emerged on a range of other issues as well, including arms control and nonproliferation, China, Iran, Syria, the Middle East peace process, climate change, and the role of international organizations such as the United Nations and the World Trade Organization (WTO). The Trump Administration contends that its policies toward Europe seek to shore up and preserve a strong transatlantic partnership to better address common challenges in what it views as an increasingly competitive world. The Administration asserts that it is committed to NATO and its collective defense clause (Article 5), has backed NATO efforts to deter Russia, and is seeking to address barriers to trade with the EU through proposed new trade negotiations. Supporters argue that President Trump's approach has led to increased European defense spending and greater European willingness to address inequities in U.S-European trade relations. Nevertheless, U.S.-European relations face significant strain. European policymakers continue to struggle with what they view as a lack of consistency in U.S. policies, especially given conflicting Administration statements about NATO and the EU. Some in Europe appear increasingly anxious about whether the United States will remain a credible and reliable partner. <1.3. A Challenging Political Context and Shifting Policy Priorities> European concerns about potential shifts in U.S. foreign, security, and trade policies come amid a range of other difficult issues confronting Europe. These include the United Kingdom's pending departure from the EU (known as "Brexit"), increased support for populist, anti-establishment political parties, rule of law concerns in several countries (including Poland, Hungary, and Romania), sluggish growth and persistently high unemployment in key European economies (such as France, Italy, and Spain), ongoing pressures related to migration, a continued terrorism threat, a resurgent Russia, and a competitive China. The EU in particular is struggling with questions about its future shape and role on the world stage. In light of Europe's various internal preoccupations, some in the United States harbor concerns about the ability of European allies in NATO, or the EU as a whole, to serve as robust and effective partners for the United States in managing common international and regional challenges. Meanwhile, the United States faces deep divisions on numerous political, social, and economic issues, as well as anti-establishment sentiments and concerns about globalization and immigration among some segments of the U.S. public. A number of analysts suggest that President Trump's "America First" foreign policy signals a U.S. shift away from international cooperation and toward a more isolationist United States. Experts point out that until the 20 th century, U.S. foreign policy was based largely on the imperative of staying out of foreign entanglements. Some contend that "the trend toward an America First approach has been growing since the end of the Cold War" and that the post-World War II "consensus about America's role as upholder of global security has collapsed" among both Democrats and Republicans. Such possible shifts could have lasting implications for transatlantic relations and the post-World War II U.S.-led global order. In addition, both the United States and Europe face generational and demographic changes. For younger Americans and Europeans, World War II and the Cold War are far in the past. Some observers posit that younger policymakers and publics may not share the same conviction as previous generations about the need for a close and stable transatlantic relationship. <2. The Transatlantic Partnership and U.S. Interests4> Despite periodic difficulties over the years in the transatlantic relationship, U.S. and European policymakers alike have valued a close transatlantic partnership as serving their respective geostrategic and economic interests. U.S. policymakers, including past presidents and many Members of Congress, have articulated a range of benefits to the United States of strong U.S.-European ties, including the following: U.S. leadership of NATO and U.S. support for the European integration project have been crucial to maintaining peace and stability on the European continent and stymieing big-power competition that cost over 500,000 American lives in two world wars. NATO and the EU are cornerstones of the broader U.S.-led international order created in the aftermath of World War II. U.S. engagement in Europe has helped to foster democratic and prosperous European allies and friends that frequently support U.S. foreign and economic policy preferences and bolster the credibility of U.S. global leadership, including in multilateral institutions such as the United Nations and the WTO. U.S. engagement in Europe helps limit Russian, Chinese, or other potentially malign influences in the region. The two sides of the Atlantic face a range of common international challenges from countering terrorism and cybercrime to managing instability in the Middle East and share similar values and policy outlooks. Neither side can adequately address such diverse global concerns alone, and the United States and Europe have a demonstrated track record of cooperation. U.S. and European policymakers have developed trust and well-honed habits of political, military, and intelligence cooperation over decades. These dynamics are unique in international relations and cannot be easily or quickly replicated elsewhere (particularly with countries that do not share the same U.S. commitment to democracy, human rights, and the rule of law). The United States and Europe share a substantial and mutually beneficial economic relationship that is highly integrated and interdependent. This economic relationship substantially contributes to economic growth and employment on both sides of the Atlantic. The EU accounts for about one-fifth of U.S. total trade in goods and services, and the United States and the EU are each other's largest source and destination for foreign direct investment (FDI). The transatlantic economy generates over $5 trillion per year in foreign affiliate sales and directly employs about 9 million workers on both sides of the Atlantic (and possibly up to 16 million people when indirect employment is included). Together, the United States and Europe have created and maintained the current rules-based international trading system that has contributed to U.S. (and European) wealth and prosperity. The combined U.S. and EU economies account for 46% of global gross domestic product (GDP) and over half of global FDI. Together, this provides the United States and Europe with significant economic clout that has enabled the two sides of the Atlantic to take the lead in setting global rules and standards. At times, U.S. officials and analysts have expressed frustration with certain aspects of the transatlantic relationship. Previous U.S. administrations and many Members of Congress have criticized what they viewed as insufficient European defense spending and have questioned the costs of the U.S. military presence in Europe (especially after the Cold War). U.S. policymakers have long-standing concerns about some EU regulatory barriers to trade. In addition, observers point out that the EU lacks a single voice on many foreign policy issues, which may complicate or prevent U.S.-EU cooperation. Some in the United States have argued that maintaining a close U.S.-European partnership necessitates compromise and may slow U.S. decisionmaking. Meanwhile, some European officials periodically complain about U.S. dominance of the relationship and a frequent U.S. expectation of automatic European support, especially in international or multilateral forums. Those with this view contend that although the United States has long urged Europe to "do more" in addressing challenges both within and outside of Europe, the United States often fails to grant European allies in NATO, or the EU as an institution, an equal say in transatlantic policymaking. In the past, some European leaders particularly in France have aspired to build up the EU as a global power in part to check U.S. influence. Most European governments, however, have not supported developing the EU as a counterweight to the United States. Regardless of these occasional U.S. and European irritations with each other, the transatlantic partnership has remained grounded broadly in the premise that its benefits outweigh the negatives for both sides of the Atlantic. <3. NATO6> The United States was the driving proponent of NATO's creation in 1949 and has been the alliance's undisputed leader as it has evolved from a regionally focused collective defense organization of 12 members to a globally engaged security organization of 29 members. Successive U.S. Administrations have viewed U.S. leadership of NATO as a cornerstone of U.S. national security strategy, bringing benefits ranging from peace and stability in Europe to the political and military support of 28 allies, including many of the world's most advanced militaries. NATO proponents in the United States point out that U.S. leadership of NATO has allowed the United States to station U.S. forces, including nuclear weapons, in Europe at bases that enable quicker air, sea, and land access to other locations of strategic importance, including the Middle East and Africa. They underscore that NATO also provides an unrivaled platform for constructing and operating international military coalitions with an integrated command structure that is unprecedented in terms of size, scale, and complexity. For almost as long as NATO has been in existence, it has faced criticism. One long-standing concern of U.S. critics, including President Trump and some Members of Congress, is that the comparatively low levels of defense spending by some European allies and their reliance on U.S. security guarantees have fostered an imbalanced "burdensharing" arrangement by which the United States carries an outsize share of the responsibility for European security. President Trump has repeatedly expressed these sentiments in suggesting that NATO is a "bad deal" for the United States. Although U.S. leaders have long called for increased allied defense spending, none are seen to have done so as stridently as President Trump or to link these calls so openly to the U.S. commitment to NATO and a broader questioning of the alliance's value and utility (see text box below). Administration supporters, including some Members of Congress, argue that President Trump's forceful statements have succeeded in securing defense spending increases across the alliance that were not forthcoming under his predecessors. Trump Administration officials stress that U.S. policy toward NATO continues to be driven by a steadfast commitment to European security and stability. The Administration's 2017 National Security Strategy and 2018 National Defense Strategy articulate that the United States remains committed to NATO's foundational Article 5 collective defense clause. (President Trump has proclaimed his support for Article 5 as well.) U.S. strategy documents also underscore that the Administration continues to view NATO as crucial to deterring Russia. The Administration has requested significant increases in funding for U.S. military deployments in Europe under the European Deterrence Initiative (EDI) . The United States currently leads a battalion of about 1,100 NATO troops deployed to Poland and deploys a U.S. Army Brigade Combat Team of about 3,300 troops on continuous rotation in NATO's eastern member states. Despite stated U.S. policy, some European allies express unease about President Trump's commitment to NATO, especially amid reports that the President has considered withdrawing the United States from the alliance. European allies refute past statements by President Trump that NATO is obsolete and take issue with the President's claims that European countries have taken advantage of the United States by not spending enough on their own defense. Since the end of the Cold War, NATO allies and partner countries have contributed to a range of NATO-led military operations across the globe, including in the Western Balkans, Afghanistan, the Mediterranean Sea, the Middle East, and Eastern Europe. European allies also stress that the first and only time NATO invoked Article 5 was in solidarity with the United States after the September 11, 2001, terrorist attacks. Subsequently, Canada and the European allies joined the United States to lead military operations in Afghanistan, the longest and most expansive operation in NATO's history. Many in Europe and Canada view their contributions in Afghanistan as an unparalleled demonstration of solidarity with the United States and a testament to the value they can provide in achieving shared security objectives. As of early 2019, almost one-third of the fatalities suffered by coalition forces in Afghanistan have been from NATO members and partner countries other than the United States. In 2011, the high point of the NATO mission in Afghanistan, about 40,000 of the 130,000 troops deployed to the mission were from non-U.S. NATO countries and partners. NATO also continues to face a number of political and military challenges. Key among these is managing a resurgent Russia. Allied discussions over NATO's strategic posture have exposed divergent views over the threat posed by Russia (see " Key Foreign Policy and Security Challenges " for more information). Differences also exist among the allies over the appropriate role for NATO in addressing the wide-ranging security challenges emanating from the Middle East and North Africa. NATO continues to grapple with significant disparities in allied military capabilities, especially between the United States and the other allies. In most, if not all, NATO military interventions, European allies and Canada have depended on the United States to provide key capabilities such as air- and sea-lift, refueling, and intelligence, surveillance, and reconnaissance (ISR). In addition, a number of European policymakers and outside analysts contend that President Trump's negative rhetoric about NATO is damaging alliance cohesion and raising questions about future U.S. leadership of the alliance (see " U.S. Policy Considerations and Future Prospects " below). <4. The European Union11> Since May 1950 when President Harry Truman first offered U.S. support for the European Coal and Steel Community, regarded as the initial step on the decades-long path toward building the EU the United States has championed the European integration project. Supporters of the EU integration project contend that it largely succeeded in fulfilling core U.S. post-World War II-goals in Europe of promoting peace and prosperity and deterring the Soviet Union. After the Cold War, the United States strongly backed EU enlargement to the former communist countries of Central and Eastern Europe, viewing it as essential to extending stability, democracy, and the rule of law throughout the region, preventing a strategic vacuum, and firmly entrenching these countries in Euro-Atlantic institutions and the U.S.-led liberal international order. The United States and many Members of Congress traditionally have supported the EU membership aspirations of Turkey and the Western Balkan states for similar reasons. Over the past 25 years, as the EU has expanded and evolved, U.S.-EU political and economic relations have deepened. Despite some acute differences (including the 2003 war in Iraq), the United States has looked to the EU for partnership on foreign policy and security concerns worldwide. Although EU decisionmaking is sometimes slower than many U.S. policymakers would prefer and agreement among EU member states proves elusive at times, U.S. officials generally have regarded cooperation with the EU where possible as serving to bolster U.S. positions and enhance the prospects of achieving U.S. objectives. The United States and the EU have promoted peace and stability in various regions and countries (including the Balkans, Afghanistan, and Africa), jointly imposed sanctions on Russia for its aggression in Ukraine, enhanced law enforcement and counterterrorism cooperation, worked together to contain Iran's nuclear ambitions, and sought to tackle cross-border challenges such as cybersecurity and climate change. Historically, U.S.-EU cooperation has been a driving force behind efforts to liberalize world trade and ensure the stability of international financial markets. EU officials have been surprised by what they regard as President Trump's largely negative opinion of the bloc and key member states such as Germany. President Trump has supported the UK's decision to leave the EU and has expressed doubts about the EU's future viability. President Trump has called the EU a "foe" for "what they do to us in trade," although he also noted, "that doesn't mean they are bad it means that they are competitive." At the same time, the EU is concerned by the Administration's trade policies, especially the imposition of steel and aluminum tariffs and potential auto tariffs. Many in the EU question whether the United States will continue to be a reliable partner for the EU in setting global trade rules and standards and sustaining the multilateral trading system. (See " Trade and Economic Issues " for more information.) Some commentators suggest that the Trump Administration largely views the EU through an economic prism and is less inclined to regard the EU as an important political and security partner. Various observers speculate that unlike past Administrations, the Trump Administration might be indifferent to the EU's collapse if it allowed the United States to negotiate bilateral trade deals with individual member states that it believes would better serve U.S. interests. President Trump (and some Members of Congress) have expressed keen interest in concluding a free trade agreement (FTA) with the United Kingdom following its expected withdrawal from the EU (see " Possible Implications of Brexit "). Many analysts suggest that President Trump's critical views of the EU are shaped by a preference for working bilaterally with nation-states rather than in international or multilateral forums. In a December 2018 speech in Brussels, Belgium, U.S. Secretary of State Mike Pompeo asserted that "the European Union and its predecessors have delivered a great deal of prosperity to the entire continent" and that "we [the United States] benefit enormously from your success," but he also criticized multilateralism and asked, "Is the EU ensuring that the interests of countries and their citizens are placed before those of bureaucrats here in Brussels?". Secretary Pompeo's comments were widely interpreted as an implicit rebuke of the EU. Others point out that the Trump Administration is not the first U.S. Administration to be skeptical of multilateral institutions or to be charged with preferring unilateral action. This was a key European criticism of the George W. Bush Administration as well. In addition, many in the EU are uneasy with elements of the Trump Administration's "America First" foreign policy. Several Administration decisions have put the United States into direct conflict with the EU and experts suggest they could endanger U.S.-EU political cooperation. These include, in particular, the Trump Administration's decisions to withdraw from the 2015 multilateral nuclear deal with Iran and the Paris Agreement on climate change (see " Key Foreign Policy and Security Challenges " for more information). EU officials also view the Administration's recognition of Jerusalem as Israel's capital as undermining prospects for resolving the Israeli-Palestinian conflict. At the same time, Administration officials contend that certain EU policies are damaging relations with the United States. Among other issues, such officials express frustration with the EU's refusal to discuss agricultural products in planned U.S.-EU trade negotiations, and they argue that that the EU does not sufficiently understand the extent of the threat posed by Iran. Some U.S. policymakers voice concern that renewed EU defense initiatives could compete with NATO. In 2017, 25 EU members launched a new EU defense pact (known as Permanent Structured Cooperation, or PESCO) aimed at enhancing European military capabilities and bolstering the EU's Common Security and Defense Policy (CSDP). Previous U.S. Administrations have been anxious about CSDP's potential implications for NATO. The EU has bristled at the Trump Administration's criticisms, however, given its strident calls for greater European defense spending and burdensharing in NATO, as well as Administration suggestions that PESCO could become a "protectionist vehicle for the EU" that impedes U.S.-European defense industrial cooperation and U.S. defense sales to Europe. U.S. officials note that there have always been disagreements between the United States and the EU, and they argue that fears of a demise in relations are largely overblown. At the same time, some U.S. policymakers and analysts suggest that the multiple challenges currently facing the EU could have negative implications for the EU's ability to be a robust, effective U.S. partner. Those with this view note that internal preoccupations (ranging from Brexit to migration to voter disenchantment with traditionally pro-EU establishment parties) could prevent the EU from focusing on key U.S. priorities, such as Russian aggression in Ukraine, a more assertive China, instability in the Middle East and North Africa, the ongoing conflict in Syria, and the continued terrorism threat. Others point out that despite the string of recent EU crises over the past few years, the EU has survived and the bloc has continued to work with the United States on numerous regional and international issues. <5. Possible Implications of Brexit18> In a 2016 referendum, UK voters favored leaving the EU by 52% to 48%. In March 2017, the UK government officially notified the EU of its intention to withdraw, triggering a two-year period for the UK and the EU to conclude complex withdrawal negotiations. Since the 2016 referendum, the UK has remained divided on what type of Brexit it wants. UK Prime Minister Theresa May's government largely pursued a "hard" Brexit that would keep the UK outside the EU's single market and customs union, thus allowing the UK to negotiate its own trade deals with other countries. Since January 2019, the UK Parliament has rejected the withdrawal agreement negotiated with the EU three times; a key sticking point has been the "backstop" to resolve the Irish border question and protect the Northern Ireland peace process. As the result of a six-month extension offered by EU leaders on April 10 (at an emergency European Council summit), the UK is scheduled to exit the EU by October 31, 2019, at the latest. Since deciding to leave the EU, the UK has sought to reinforce its close ties with the United States and to reaffirm its position as a leading country in NATO. The UK is likely to remain a strong U.S. partner, and Brexit is unlikely to cause a dramatic makeover in most aspects of the U.S.-UK relationship. Analysts believe that close U.S.-UK cooperation will continue for the foreseeable future in areas such as counterterrorism, intelligence, economic issues, and the future of NATO, as well as on numerous global and regional security challenges. UK officials have emphasized that Brexit does not entail a turn toward isolationism and that the UK intends to remain a global leader in international diplomacy, security issues, trade and finance, and development aid. President Trump has expressed repeated support for Brexit. In October 2018, the Trump Administration notified Congress of its intent to launch U.S.-UK trade negotiations once the UK ceases to be a member of the EU, and many Members of Congress appear receptive to a U.S.-UK FTA in the future. At the same time, some in Congress are concerned that Brexit might negatively affect the Northern Ireland peace process. In London in April 2019, House Speaker Nancy Pelosi asserted that there would be "no chance whatsoever" for a U.S.-UK FTA should Brexit weaken the 1998 peace accord that ended Northern Ireland's 30-year sectarian conflict. Beyond the U.S.-UK bilateral relationship, Brexit could have a substantial impact on certain U.S. strategic interests, especially in relation to Europe more broadly and future developments in the EU. The UK is the EU's second-largest economy and a key diplomatic and military power within the EU. Moreover, the UK is often regarded as the closest U.S. partner in the EU, a partner that commonly shares U.S. views on foreign policy, trade, and regulatory issues. Some observers suggest that the United States is losing its best advocate within the EU for policies that bolster U.S. goals and protect U.S. interests. Others contend that the United States has close bilateral ties with most EU countries, shares common political and economic preferences with many of them, and as such, the UK's departure will not significantly alter U.S.-EU relations. Some U.S. officials have conveyed concerns that the UK's withdrawal could make the EU a less capable and less reliable partner for the United States given the UK's diplomatic, military, and economic clout. The UK has served as a key driver of certain EU initiatives, especially EU enlargement (including to Turkey) and efforts to develop stronger EU foreign and defense policies. In addition, as the UK is a leading voice for robust EU sanctions against Russia in response to Russia's annexation of Ukraine's Crimea and aggression in eastern Ukraine, some observers suggest that the departure of the UK could shift the debate in the EU about the duration and severity of EU sanctions. More broadly, U.S. officials have long urged the EU to move beyond what is often perceived as a predominantly inward focus on treaties and institutions, in order to concentrate more effort and resources toward addressing a wide range of shared external challenges (such as terrorism and instability to Europe's south and east). Some observers note that Brexit has produced another prolonged bout of internal preoccupation within the EU and has consumed a considerable degree of UK and EU time and personnel resources in the process. At the working level, EU officials are losing British personnel with significant technical expertise and negotiating prowess on issues such as sanctions or dealing with countries like Russia and Iran. On the other hand, some analysts have suggested that Brexit could ultimately lead to a more like-minded EU, able to pursue deeper integration without UK opposition (the UK traditionally served as a brake on certain EU integration efforts). For example, Brexit could allow the EU to move ahead more easily with undertaking military integration projects under the EU Common Security and Defense Policy. However, as discussed above, Trump Administration officials express a degree of concern about PESCO, the EU's new defense pact, and some worry that without UK leadership, CSDP and PESCO could evolve in ways that may infringe upon NATO's primary role in European security in the longer term. <6. Key Foreign Policy and Security Challenges> The United States and Europe face numerous common foreign policy and security challenges. The Trump Administration maintains that its policy choices display strong U.S. leadership and seek to bolster both U.S. and European security. Administration officials also argue that they remain ready to work with Europe on many of these common challenges. <6.1. Russia21> U.S.-European cooperation has been viewed as crucial to managing a more assertive Russia and preventing Russia from driving a wedge between the two sides of the Atlantic. The imposition of sanctions on Russia in response to its aggression in Ukraine is cited as a key example of a policy that has benefited from U.S.-EU coordination given the EU's more extensive economic ties with Russia. The EU has welcomed congressional efforts since the start of the Trump Administration to maintain U.S. sanctions on Russia, despite concerns that certain provisions in the Countering Russian Influence in Europe and Eurasia Act (CRIEEA) of 2017 ( P.L. 115-44 , Countering America's Adversaries Through Sanctions Act [CAATSA], Title II) could negatively affect EU business and energy interests. Although some Europeans remain wary about President Trump's expressed interest in improving U.S.-Russian relations, U.S. and European policies toward Russia remain broadly aligned. As noted above, the Trump Administration has endorsed new NATO initiatives to deter Russian aggression and increased the U.S. military footprint in Europe. The United States has continued to support and impose sanctions on Russia for its actions in Ukraine and other malign activities (including Russia's March 2018 chemical weapons attack in the United Kingdom on former Russian intelligence officer and UK citizen Sergei Skripal and his daughter). The United States and many European countries share similar concerns about Russian cyber activities and influence operations and have sought to work together in various forums to share best practices on countermeasures. At the same time, some policymakers and analysts express concern about the effectiveness and sustainability of NATO efforts to deter Russia and the use of sanctions as a long-term policy option. Some allies, including Poland and the Baltic States, have urged a more robust allied military presence in Central and Eastern Europe and strongly support maintaining pressure on Russia through sanctions. Others, including leaders in Germany and Italy, have stressed the importance of a dual-track approach to Russia that complements deterrence with dialogue. A key U.S.-European friction point is the Nord Stream 2 gas pipeline project that would increase the amount of Russian gas delivered to Germany and other parts of Europe via the Baltic Sea. The Trump Administration and many Members of Congress object to Nord Stream 2 because they believe it will increase European energy dependence on Russia and undercut Ukraine (the pipeline would bypass the country, thereby denying Ukraine transit fees and possibly loosening constraints on Russian policy toward Ukraine). Many in the EU share these concerns, including Poland and other Central European countries, as well as the European Commission (the EU's executive body). Germany, Austria, and other supporters view Nord Stream 2 primarily as a commercial project and argue that it will help increase the supply of gas to Europe. <6.2. Arms Control and the INF Treaty23> Most European NATO allies, as well as the EU, have long regarded the Intermediate-Range Nuclear Forces (INF) Treaty as a key pillar of the European security architecture. On February 1, 2019, the Trump Administration announced it was suspending U.S. participation in the INF Treaty and would withdraw the United States in six months (in accordance with the terms of the treaty). European leaders largely agree with the U.S. assessment that Russia is violating the INF Treaty, and NATO leaders have announced that they "fully support" the U.S. decision. At the same time, European officials remain deeply concerned that the U.S. suspension and expected withdrawal from the INF Treaty could spark a new arms race and harm European security. Subsequent to the U.S. decision, Russian President Vladimir Putin announced that Russia also would suspend participation in the INF Treaty. Moreover, Putin indicated that Russia would begin work on developing new nuclear-capable missiles in light of the treaty's collapse. Many European officials appear troubled by the U.S. decision because they contend that the United States has not presented a clear way forward. Some worry that should the United States seek to field U.S. missiles in Europe in the future, this could create divisions within NATO and be detrimental to alliance cohesion. They add that tensions linked to the planned U.S. withdrawal from the INF Treaty could negatively affect possible efforts to renew the 2010 New Strategic Arms Reduction Treaty (known as New START) with Russia, which is set to expire in 2021. <6.3. China26> As expressed in the December 2017 U.S. National Security Strategy , U.S. officials have grown increasingly concerned that "China is gaining a strategic foothold in Europe by expanding its unfair trade practices and investing in key industries, sensitive technologies, and infrastructure." Chinese investment in the EU reportedly has increased from approximately $700 million annually prior to 2008 to $30 billion in 2017. Such investment spans sectors including energy, transport, communications, media, insurance, financial services, and industrial technology. The Trump Administration and many Members of Congress have been alarmed in particular by some European governments' interest in contracting with Chinese telecommunications company Huawei to build out at least parts of their fifth generation (or 5G) wireless networks. U.S. officials have warned European allies and partners that using Huawei or other Chinese 5G equipment could impede intelligence-sharing with the United States due to fears of compromised network security. Although some allies, such as the UK and Germany, have said they would not prevent Chinese companies from bidding on 5G contracts, they have stressed that they would not contract with any companies that do not meet their stringent national security requirements. In addition to concerns about intellectual property theft and illicit data collection or spying, some analysts worry that Chinese economic influence could translate into leverage over European countries. Such leverage could push some European governments to align their foreign policy positions with China or otherwise validate policies of the Chinese government, and possibly prevent the EU from speaking with one voice on China. Some experts suggest that smaller EU countries, as well as less prosperous non-EU Balkan countries, are relatively vulnerable to this type of leverage, although large EU countries also could be susceptible. As evidence, many note Italy's decision to join China's Belt and Road Initiative (BRI), China's state-run initiative to deepen Chinese investment and infrastructure links across Asia, Africa, Latin America, and Europe. The Trump Administration reportedly lobbied Italy against joining the BRI. Despite U.S. concerns about China's growing footprint in Europe, Administration officials appear hopeful that the United States and Europe can work together to meet the various security and economic issues posed by a rising China. Over the past year, EU members France and Germany have backed efforts by the European Commission to develop more stringent requirements to regulate Chinese investment in Europe. In a March 2019 joint position paper on China, the European Commission and the EU's High Representative for Foreign Affairs and Security Policy characterized China in part as an "economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance." In a February 2019 interview, U.S. Ambassador to the EU Gordon Sondland called on the United States and the EU to "combine our mutual energies to meet China and check China in multiple respects: economically, from an intelligence standpoint, militarily." Some analysts, however, are skeptical about the extent to which U.S.-European cooperation toward China is possible. Those with this view note the disparities in U.S. and European security interests vis- -vis China and apparent U.S. inclinations to view China as an economic rival to a greater extent than many European governments. <6.4. Iran34> Many European governments and the EU are alarmed by rising tensions between the United States and Iran, which they fear could lead to military confrontation. Differences over Iran have strained U.S.-European relations considerably during the Trump Administration. The EU opposes the Administration's decision to withdraw from the 2015 nuclear deal with Iran (the Joint Comprehensive Plan of Action, or JCPOA). The EU worked closely with the Obama Administration to negotiate the JCPOA and considers it to be a major foreign policy achievement that has prevented Iran from developing nuclear weapons. Many analysts assert that the EU's adoption of strict sanctions against Iran between 2010 and 2012, including a full embargo on oil purchases, brought U.S. and European approaches on Iran into alignment. They credit this combined U.S.-EU economic pressure as key to forcing Iran into the negotiations that produced the JCPOA. The Trump Administration contends that the JCPOA has only served to embolden Iran and has urged the EU to join the United States in abandoning the JCPOA and reimposing sanctions on Iran. The EU shares other U.S. concerns about Iran, including those related to Iran's ongoing ballistic missile program and support for terrorism, but the EU asserts that such issues should be addressed separately from the JCPOA. The EU also contends that the U.S. decision to unilaterally withdraw from the JCPOA could destabilize the region and worries that the reimposition of U.S. sanctions on Iran could threaten EU business interests. The EU remains committed to the JCPOA and has sought to work with Iran and other signatories to prevent its collapse. In January 2019, France, Germany, and the UK launched the Instrument in Support of Trade Exchanges (INSTEX), a special-purpose vehicle (SPV) designed to enable trade in humanitarian items (including food, medicine, and medical devices) that are generally exempt from sanctions (although INSTEX might eventually provide a platform to trade with Iran in oil and other products). Some in the EU, however, fear that Iran's commitment to the JCPOA may be weakening amid Iran's announcement in early May 2019 that it would no longer abide by JCPOA restrictions on stockpiles of low-enriched uranium and heavy water. The EU continues to urge Iran not to withdraw from the JCPOA completely. <6.5. Syria35> Many European governments were alarmed by President Trump's announcement in December 2018 that the United States would withdraw its entire 2,000-strong force in Syria fighting the Islamic State terrorist organization (also known as ISIS or ISIL). Most European countries have supported the U.S.-led international coalition to defeat the Islamic State since 2014. Although President Trump's decision to withdraw U.S. forces was based on his view that the Islamic State was largely defeated, the United States reportedly did not consult with its European partners on its military plans. The apparent lack of consultations has raised concerns about a breakdown in U.S.-European cooperation and potential negative consequences for transatlantic cohesion. News reports suggest that U.S. officials urged the UK and France to keep their ground forces in Syria following the expected U.S. departure and called for European countries to deploy an "observer" force to patrol a "safe zone" on the Syrian side of the border with Turkey. The UK and France reportedly declined these requests, and other European governments did not appear eager to assume the risks of a Syria operation in the absence of U.S. forces. The United States has since announced that it will keep a residual force of around 400 troops in Syria in an apparent effort to encourage a continued European presence, but it remains uncertain whether European governments will agree to this approach. <6.6. Afghanistan37> In December 2018, news outlets reported that the Trump Administration was considering substantially reducing the U.S. troop presence in Afghanistan. European allies, who have served with the United States and NATO in Afghanistan since 2001, reacted to these reports with surprise and concern. Although the Administration has begun negotiations with the Taliban on ending the conflict in Afghanistan, U.S. officials denied a possible drawdown in U.S. forces. European officials asserted that any future reduction in U.S. troops in Afghanistan must be carried out in close coordination with the allies. Some experts have questioned the viability of NATO's Afghanistan mission without continued U.S. participation at current levels. Subsequent press reports indicate that the U.S. Defense Department has begun discussions with European allies on future military plans for Afghanistan. European military involvement in Afghanistan has faced relatively consistent public opposition in many European countries. As such, observers suggest that allies could be receptive to winding down NATO's mission in Afghanistan in tandem with the United States. At the same time, some European officials reportedly object to being left out of peace talks with the Taliban, given allied military contributions as well as considerable European development assistance to Afghanistan. <6.7. Counterterrorism40> Since 2001, the United States has enhanced counterterrorism and homeland security cooperation with European governments and the EU. The United States and the EU have concluded several agreements in this area, including accords to improve shipping container security, share airline passenger data, and track terrorist financing. U.S. and European officials alike regard such cooperation as crucial to fighting terrorism on both sides of the Atlantic. In recent years, the United States and Europe have focused on combating the Islamic State and the foreign fighter phenomenon. Like its predecessors, the Trump Administration appears to value such cooperation. Recently, some European governments and the EU have bristled at President Trump's call for European countries to repatriate European fighters and sympathizers captured by U.S.-backed forces in Syria and Iraq or risk their release as the United States prepares to withdraw its forces from Syria. Many European governments have been grappling with how to deal with returning Islamic State fighters and their families, but some are hesitant to assume the associated security risks of bringing such citizens home. Amid broader tensions, some analysts worry about fissures developing between the United States and Europe on counterterrorism strategies and tactics. <6.8. Climate Change42> The EU reacted with dismay to President Trump's announcement in June 2017 that the United States would withdraw from the 2015 multilateral Paris Agreement aimed at reducing greenhouse gas emissions and combating climate change (the U.S. withdrawal is due to take effect in November 2020). The EU had worked closely with the former Obama Administration to negotiate the 2015 accord. In announcing his decision, President Trump asserted that the Paris Agreement disadvantages U.S. businesses and workers, but he also indicated that he would be open to negotiating a "better" deal. The EU rejects any renegotiation of the Paris Agreement, and EU officials have vowed to work with U.S. business leaders and state governments that remain committed to implementing the accord's provisions. Analysts suggest that the Trump Administration's decision to withdraw from the Paris Agreement has spurred the EU to assume even greater stewardship of the accord. In February 2018, the EU asserted that it would not conclude FTAs with countries that do not ratify the Paris Agreement, creating another potential friction point in U.S.-EU trade discussions. The EU continues to voice support for other international partners especially developing countries in meeting their commitments to the Paris Agreement and has intensified cooperation with China in particular. At the same time, observers point out that some EU countries are facing challenges in meeting their existing targets to reduce greenhouse gas emissions and efforts to formalize more ambitious EU emissions reduction goals have encountered a degree of resistance within the EU. <7. Trade and Economic Issues46> <7.1. Current Trade and Investment Ties> The United States and the EU are each other's largest trade and investment partners. Total U.S.-EU trade in merchandise and services reached $1.3 trillion in 2018 ( Figure 2 ). Investment ties, including affiliate presence and intra-company trade, are even more significant given their size and interdependent nature. In 2017, the stock of transatlantic foreign direct investment (FDI) totaled over $5 trillion ( Figure 3 ); the EU accounts for over half of both FDI in the United States and U.S. direct investment abroad. While the transatlantic economy is highly integrated, it still faces tariffs and nontariff barriers to trade and investment. U.S. and EU tariffs are low on average, though tariffs are high on some sensitive products. Regulatory differences and other nontariff barriers also may raise the costs of U.S.-EU trade and investment. Over the years, the United States and the EU have sought to further liberalize trade ties, enhance regulatory cooperation, and work together on international economic issues of joint interest and concern, for instance, regarding China's trading practices. Although U.S.-EU trade and economic frictions emerge periodically, tensions are currently heightened under the Trump Administration's trade policy, which has given priority to reducing U.S. bilateral trade deficits, utilizing unilateral tariff measures under U.S. trade laws, and applying a critical view of the U.S. role in international economic cooperation. EU officials are troubled in particular by the Trump Administration's skepticism of the WTO, and they are concerned that it reflects a broader U.S. shift away from international cooperation. At the same time, many WTO members, including the United States and EU, are engaged in active discussions on aspects of potential reform to the WTO, including changes to its dispute settlement system. Meanwhile, the United States continues to monitor developments on a wide range of EU trade and other policies, such as on data protection, digital trade, and penalties for corporate tax avoidance, some of which the United States sees as trade barriers. <7.2. Trade Disputes> The Trump Administration blames "unfair" trade practices by the EU, and particularly Germany, for the U.S. merchandise trade deficit with the EU. In 2018, the United States had an overall $110 billion deficit in merchandise and services trade with the EU, as the deficit in merchandise trade ($170 billion) outweighed the surplus for trade in services ($60 billion). President Trump has criticized in particular the U.S.-EU imbalance on auto trade, flagging the EU 10% tariff and U.S. 2.5% tariff on cars though the U.S. tariff rate for trucks is higher (25% versus 22% in the EU). The role of "unfair" trade practices as a driver of trade deficits is contested. EU leaders maintain that the U.S.-EU trade relationship is fair and mutually beneficial given the U.S. services surplus and the higher profits earned by U.S. companies doing business in Europe. In 2016, affiliates of U.S. multinational enterprises (MNEs) in Europe had $2.8 trillion in sales, while affiliates of European MNEs in the United States had $2.2 trillion in sales. On June 1, 2018, President Trump imposed tariffs of 25% and 10% on certain steel and aluminum imports, respectively, under Section 232 of the Trade Expansion Act of 1962, after Department of Commerce investigations found that current imports threaten to impair U.S. national security. The EU, which represented 22% of U.S. steel imports and 9% of U.S. aluminum imports in 2018, received an initial temporary exemption from the tariffs, but unlike some other trading partners, it was unable to negotiate a permanent tariff exemption in exchange for an alternative quota arrangement. Most European leaders view the imposition of the steel and aluminum tariffs on the EU as baseless given close U.S.-EU political and security ties. The EU response to the U.S. tariffs has been multifaceted. Among other measures, the EU has imposed retaliatory tariffs against selected U.S. products, including, for example, Kentucky bourbon and Harley-Davidson motorcycles. Both sides are now pursuing cases in the WTO on the measures. The Section 232 investigation of automobiles and parts has further strained relations, and its outcome could be highly significant to proposed new U.S.-EU trade negotiations (see below). Motor vehicles are a leading U.S. import from the EU, and some EU auto companies have manufacturing facilities in the United States. On May 17, 2019, President Trump announced that the Section 232 auto investigation found that U.S. imports of motor vehicles and parts threaten to impair U.S. national security. Although this finding allows the President to impose unilateral import restrictions such as tariffs, the President decided initially to seek a negotiated solution and directed the U.S. Trade Representative (USTR) to resolve this threatened impairment through negotiating agreements with the EU, Japan, and any other country that the USTR deems appropriate. The USTR must update the President on the progress of the negotiations within 180 days. Frictions also may rise with new developments in the protracted U.S.-EU "Boeing-Airbus" cases in WTO dispute settlement; each side has long complained about subsidies imposed by the other to its domestic civil aircraft industry. In April 2019, the United States and EU announced preliminary lists of their traded goods on which they propose to impose countermeasure tariffs of $11.2 billion and $12 billion, respectively, to compensate for harm they claim that the other's subsidies have caused. A final WTO assessment is expected this summer on the countermeasure value amounts that each side is entitled to impose. Although the Boeing-Airbus cases have been in WTO litigation for 14 years, the current environment raises questions about potential tit-for-tat retaliation. <7.3. Proposed New Trade Negotiations> On October 16, 2018, the Trump Administration notified Congress under Trade Promotion Authority (TPA) of new U.S. trade agreement negotiations with the EU to seek a "fairer, more balanced" relationship. Prior U.S.-EU negotiations on a Transatlantic Trade and Investment Partnership (T-TIP) stalled after 15 rounds under the Obama Administration. The proposed new talks follow the July 2018 U.S.-EU Joint Statement that aimed to de-escalate current trade tensions (agreed between President Trump and European Commission President Jean-Claude Juncker). The new talks have not started formally yet. U.S.-EU disagreement over the scope of the new talks has cast uncertainty over their outlook. U.S. negotiating objectives aim to address tariffs and nontariff barriers for goods, services, agriculture, government procurement, intellectual property rights, investment, and other areas, including new issues such as digital trade. The United States may seek to negotiate in stages. The EU, which insists on not negotiating "with a gun to our head," seeks limited negotiations to defuse tensions and avoid the pitfalls of the wide-ranging T-TIP negotiations. EU negotiating directives authorize the European Commission to eliminate tariffs on industrial products (but specifically exclude agriculture) and address regulatory nontariff barriers in a conformity assessment agreement to make it easier for companies to prove their products meet EU and U.S. technical requirements while maintain a high level of protection in the EU. The EU claims it is adhering to commitments made in the Joint Statement, in which the two sides announced plans to launch negotiations to eliminate tariffs, nontariff barriers, and subsidies on "non-auto industrial goods," as well as to boost trade specifically in services, chemicals, pharmaceuticals, medical products, and U.S. soybeans. In the Joint Statement, the United States and EU also committed to: enhancing their strategic cooperation on energy to boost the EU's purchase of U.S. liquefied natural gas (LNG) to diversify its energy supply, launching a dialogue on standards and regulations to reduce exporting barriers and costs, and working with "like-minded partners" to address unfair trade practices and WTO reform. Although the two sides have not started the new trade negotiations formally, the EU notes progress in advancing some of the other commitments from the Joint Statement for instance, the rise in EU imports of soybeans and LNG from the United States. U.S.-EU regulatory cooperation also is ongoing for such sectors as pharmaceuticals, medical products, and chemicals. A key feature of the proposed negotiations is their potential role in defusing current U.S.-EU trade tensions. Although the two sides agreed in the Joint Statement not to escalate tariffs while negotiations are active and to examine the Section 232 steel and aluminum tariffs, President Trump has threatened the EU repeatedly with tariffs, including over its exclusion of agriculture. The EU asserts it will stop negotiating if the United States applies new Section 232 tariffs, and it may stop negotiating if subject to new trade restrictions under other U.S. trade laws. A path forward on the negotiations appears unclear due to a number of factors. Differences on the scope, especially on agriculture, could thwart the negotiations before they even start formally. Many in Congress and in the U.S. agricultural sector oppose excluding agriculture from the negotiations, viewing the negotiations as an opportunity to address key U.S. concerns about barriers to accessing European agricultural markets. For the EU, agriculture is a sensitive issue, stemming in part from commercial and cultural practices often enshrined in EU laws and regulations, which also often differ from those of the United States. If formal negotiations start, a narrow agreement could lead to some "wins" and facilitate further negotiations, but such an agreement may be limited to trade liberalization across a few sectors. Yet, T-TIP shows the challenges of negotiating a more comprehensive FTA. Potential Section 232 auto tariffs, while possibly preserving U.S. negotiating leverage, loom large over the negotiations in how they could affect EU willingness to engage. The priority that each side gives to the negotiations also is an open question, given ongoing EU-UK negotiations over Brexit and the proposed U.S.-UK FTA negotiations contingent upon the UK regaining a national trade policy after it withdraws from the EU. Concluding even limited U.S.-EU trade negotiations likely will take time, and the EU approval process may be lengthy, given the role of the European Parliament and member states. If a U.S.-EU trade agreement is concluded, it is unclear if, on the U.S. side, it would meet congressional expectations or TPA requirements. On the EU side, complexities include Brexit, which would remove the UK's leading voice on trade liberalization from the EU. France opposes the U.S.-EU talks due to the U.S. position on global efforts to address climate change. Successful negotiations, however defined, could help resolve the current standoff over tariffs; moreover, they could rebuild trust and reinforce trade ties amid shifts in U.S. trade policy approaches under the Trump Administration and transformations to the EU post-Brexit. In addition, while an FTA could be commercially significant in improving the competitiveness of U.S. and EU businesses in each other's market, it also could be strategically significant for the United States and EU in jointly shaping global "rules of the road" on new trade issues and in addressing issues of mutual concern (e.g., regarding China's trade practices). However, if the talks fail, trade tensions could escalate. Some transatlantic observers fear a continuation of tit-for-tat tariff escalation. Alternatively, the two sides may explore other avenues for engagement, such as enhanced regulatory cooperation and sectoral agreements. <8. Implications for the United States> <8.1. U.S. Policy Considerations and Future Prospects> For the past 70 years, the transatlantic relationship has been grounded in a commitment to the post-World War II order based on alliances with like-minded democratic partners. U.S. support for a strong partnership with Europe has been premised largely on the belief that U.S. leadership of NATO and close U.S.-EU ties promote U.S. security and stability and magnify U.S. global influence and financial clout. Despite periodic U.S.-European tensions over the decades and changes in the security environment since the end of the Cold War, most experts judge that the transatlantic partnership continues to advance U.S. strategic and economic interests. The Trump Administration's 2017 National Security Strategy reiterates the long-standing view that "the United States is safer when Europe is prosperous and stable, and can help defend our shared interests and ideals." The Administration argues, however, that Europe is not prepared to address what it sees as growing great power competition. President Trump's calls for NATO allies to spend more on defense and shoulder more of the security burden reflect this worldview, as well as his commitment to ensure that U.S allies do not "take advantage of their friendship with the United States, both in military protection and trade." Some commentators maintain that President Trump has asked legitimate questions about whether there is sufficient burdensharing within NATO given current threats and Europe's relatively weak military capabilities. Some analysts suggest that President Trump has succeeded more than past U.S. presidents in demanding that European allies increase defense budgets. Administration supporters also credit President Trump with compelling the EU to address U.S. trade concerns, and they welcomed provisions in the July 2018 U.S.-EU Joint Statement aimed at boosting EU purchases of soybeans and LNG. Many U.S. officials and some outside experts downplay concerns about a dwindling U.S. commitment to the transatlantic partnership. They point out that there has been continuity in many U.S. policies toward Europe. The Trump Administration has sought to bolster NATO efforts to deter Russia and supported Montenegro's accession to NATO (in 2017), as well as the signing of North Macedonia's NATO accession protocol in February 2019 following the resolution of its name dispute with Greece. As noted previously, the United States has sought to work with the EU on de-escalating tensions over trade and tariffs. Furthermore, U.S. officials contend that the United States hopes to cooperate with European allies and partners in tackling global foreign policy and security issues. Secretary of State Pompeo has urged European governments to work with the United States to confront common challenges posed by Russia, China, and Iran (among others) and to reform international institutions such as United Nations and the WTO. Critics contend, however, that the Trump Administration's policies and rhetoric toward NATO, the EU, and some key allies are damaging the transatlantic partnership, undermining the trust and confidence upon which it ultimately rests, and creating significant uncertainty about the U.S. commitment to European security and U.S.-EU cooperation. European officials and analysts have been relieved that President Trump has voiced support for NATO and Article 5, but some suggest that by tying the U.S. commitment to NATO to increases in allied defense spending, President Trump is harming the credibility of the U.S. security guarantee. This, in turn, could weaken U.S. leadership of the alliance and embolden Russia. Many observers assert that President Trump's seemingly transactional view of NATO and the broader U.S.-European relationship is detrimental to transatlantic cohesion. Following the September 11, 2001, terrorist attacks on the United States, NATO invoked Article 5 and European allies fought and died with U.S. forces in Afghanistan. Some analysts suggest that European support for the U.S. and NATO missions in Afghanistan is driven more by the desire to stand as allies with the United States, and less by the view that instability in Afghanistan poses a significant threat to their own security. Experts increasingly question whether the allies will follow where the United States leads in the future. As a prime example of diminished cohesion, many point to current European reluctance to keep forces in Syria to guard against an Islamic State resurgence after the expected U.S. troop withdrawal. Such U.S.-European divisions are widely considered a win for Russia, both in terms of undermining the transatlantic partnership and consolidating Russia's influence in Syria. Some European leaders worry about potential U.S. global disengagement and argue that Europe must be better prepared to address both regional and international challenges on its own. Many observers view EU efforts over the past few years to conclude trade agreements with other countries and regions (including Canada, Japan, and Latin America) and to enhance defense cooperation as aimed, in part, at reducing European dependence on the United States. Some analysts suggest that recent calls by French President Emmanuel Macron for a "European army" seek to underscore the need to boost European military capabilities in the face of growing uncertainty about the future U.S. role in the world. German Chancellor Angela Merkel subsequently supported Macron's position on developing a European army, although she noted that it should seek to complement, not compete with, NATO. Others contend that the transatlantic partnership will endure. Europe remains largely dependent on the U.S. security guarantee, and the magnitude of U.S.-EU trade and investment ties will continue to bind together the two sides of the Atlantic. Those with this view also point out that the United States and Europe continue to share broadly similar values and policy outlooks and have few other partners of comparable size and influence elsewhere in the world. Some observers note that European allies have sought to respond constructively to President Trump's criticisms of NATO. Many experts believe that despite U.S.-EU tensions on certain policy issues, the EU will seek to work with the Trump Administration where possible and will aim to preserve political, security, and economic relations with the United States for the long term. The EU continues to cooperate with the United States on issues of common interest and concern, such as countering terrorism, promoting cybersecurity, and reforming the WTO, and plans to negotiate a new trade agreement with the United States (although formal negotiations have yet to begin). <8.2. Issues for Congress> Many Members of Congress regard a strong, close transatlantic partnership as crucial to U.S. national security and economic interests. In February 2019, Speaker Pelosi led a congressional delegation to Europe and asserted that the visit sought to reaffirm "our commitment to the transatlantic alliance, our commitment to NATO and respect for the European Union." In the 115 th Congress, hearings addressed a wide range of current European issues from Brexit to EU policy toward Russia to European migration issues. In the 116 th Congress, several hearings focused on NATO ahead of its 70 th anniversary in April 2019, and on the broader transatlantic relationship under the Trump Administration. Broad bipartisan support exists in Congress for NATO. While many Members of Congress have criticized specific developments within NATO regarding burdensharing, for example Congress as a whole has long backed NATO and U.S. leadership of the alliance. During the Trump Administration, expressions of congressional support have been viewed at times as an effort to reassure allies troubled by President Trump's criticisms of the alliance. During the Trump Administration, both chambers of Congress have passed legislation expressly reaffirming U.S. support for NATO, including legislation passed by the House in January 2019 ( H.R. 676 ) seeking to limit the president's ability to withdraw from NATO unilaterally. Legislation similar to H.R. 676 has been introduced in the Senate ( S.J.Res. 4 and S. 482 ). Some analysts viewed the bipartisan House-Senate invitation to NATO Secretary General Jens Stoltenberg to address a joint session of Congress in April 2019 as an additional demonstration of NATO's importance to Congress. Many Members of Congress also have considered the EU to be vital to European peace and prosperity, and thus serving U.S. interests. In the 115 th and 116 th Congresses, some House and Senate Members have sought to reassure EU officials and member state governments of continued U.S. support for the EU, in part through visits to Brussels and key European capitals, the reestablishment of the EU Caucus in the House, and continued House participation in the Transatlantic Legislators' Dialogue (TLD) with the European Parliament. In early 2019, some Members of Congress urged the Trump Administration to reinstate the status of the EU's diplomatic mission to the United States as equivalent to that of a national mission after the State Department downgraded it in late 2018 to that of an international organization (which has protocol implications). Congress traditionally has viewed U.S.-European trade and investment relations as being largely mutually beneficial. H.Res. 810, introduced in April 2018 by Representative William Keating, would have reaffirmed the importance of U.S.-EU trade and investment ties to the economic and national security interests of the United States. Some Members have expressed varying degrees of concern about the Trump Administration's imposition of tariffs on steel and aluminum imports from the EU and other U.S. trading partners. This concern could prompt legislative debate over modifying the President's delegated authority under Section 232 (see, for example, S. 3013 ). At the same time, some Members of Congress share the Administration's critical views on certain European foreign and economic policies. Like the Administration, many Members are concerned about European defense spending levels and have long objected to any EU initiatives to build European defense capabilities that could ultimately compete with NATO. Some Members are wary about what they view as growing Chinese influence in Europe, and troubled by potential European efforts to protect business interests from potential U.S. secondary sanctions on Iran or Russia. Considerable congressional opposition exists to projects such as the Nord Stream 2 natural gas pipeline, which many Members believe would increase European dependence on Russian gas. Some Members agree with the Administration that any new U.S.-EU trade talks must include agriculture. Members of Congress may wish to assess the extent to which the transatlantic relationship contributes to promoting U.S. strategic and economic interests, and the implications of the Administration's policies on the U.S.-European partnership in the short and long term. Deliberation may include the following potential issues: NATO. Congress may wish to examine the future of the alliance further. This could entail evaluating the current state of alliance cohesion, the extent of burdensharing within the alliance and how best to measure allied contributions, possible future threats facing NATO and whether NATO is equipped to manage such challenges, and NATO's costs and benefits for the United States. U.S.-EU Economic Relations. Based on its constitutional role over tariffs and foreign commerce, Congress has a direct interest in monitoring and shaping the proposed new U.S.-EU trade agreement negotiations, and it could consider implementing legislation for a potential final trade agreement under Trade Promotion Authority. Congress may be interested in the implications of Administration trade and tariff policies and the extent to which EU retaliatory tariffs and potential U.S. auto tariffs could affect U.S.-EU trade and investment ties. Members of Congress also may wish to consider the extent to which U.S.-EU cooperation on trade issues could help address issues of mutual concern, such as with respect to China's trading practices or the development of globally-relevant rules on trade. Future o f the EU . The EU is contending with numerous internal and external challenges. The EU also faces leadership changes, with a new European Parliament elected in May 2019 and a new European Commission and President of the European Council due to take office in late 2019. Congress may wish to examine whether and how such issues could affect the EU's future development and U.S.-EU cooperation. Brexit. Congress may wish to consider Brexit's implications for U.S.-UK and U.S.-EU relations, as well as for NATO and the Northern Ireland peace process. Congress may also examine possible options and prospects for a future U.S.-UK trade agreement following Brexit. Russia. Prospects for further U.S.-European cooperation on Russia, especially in the context of deliberations on imposing additional sanctions or employing other foreign policy tools to address concerns about Russia's activities, may be of interest to Congress. European vulnerabilities to hostile Russian measures and the degree to which Russia could benefit from transatlantic divisions may be issues for congressional oversight. China . Amid concerns on both sides of the Atlantic about China's growing global influence, Congress may wish to assess where U.S. and European policies converge and diverge with respect to China and possibilities for future U.S.-European cooperation in managing the rise of China.

For the past 70 years, the United States has been instrumental in leading and promoting a strong U.S.-European partnership. Often termed the transatlantic relationship, this partnership has been grounded in the U.S.-led post-World War II order based on alliances with like-minded democratic countries and a shared U.S.-European commitment to free markets and an open international trading system. Transatlantic relations encompass the North Atlantic Treaty Organization (NATO), the European Union (EU), close U.S. bilateral ties with most countries in Western and Central Europe, and a massive, interdependent trade and investment partnership. Despite periodic U.S.-European tensions, successive U.S. Administrations and many Members of Congress have supported the broad transatlantic relationship, viewing it as enhancing U.S. security and stability and magnifying U.S. global influence and financial clout. Transatlantic Relations and the Trump Administration The transatlantic relationship currently faces significant challenges. President Trump and some members of his Administration have questioned the strategic value and utility of NATO to the United States, and they have expressed considerable skepticism about the fundamental worth of the EU and the multilateral trading system. President Trump repeatedly has voiced concern that the United States bears an undue share of the transatlantic security burden and that EU trade policies are unfair to U.S. workers and businesses. U.S.-European policy divisions have emerged on a wide range of regional and global issues, from certain aspects of relations with Russia and China, to policies on Iran, Syria, arms control, and climate change, among others. The United Kingdom's pending departure from the EU ("Brexit") also could have implications for U.S. security and economic interests in Europe. The Trump Administration asserts that its policies toward Europe seek to bolster the transatlantic relationship by ensuring that European allies and friends are equipped to work with the United States in confronting the challenges posed by an increasingly competitive world. Administration officials maintain that the U.S. commitment to NATO and European security remains steadfast; President Trump has backed new NATO initiatives to deter Russian aggression and increased U.S. troop deployments in Europe. The Administration also contends that it is committed to working with the EU to resolve trade and tariff disputes, as signaled by its intention to launch new U.S.-EU trade negotiations. Supporters credit President Trump's approach toward Europe with strengthening NATO and compelling the EU to address U.S. trade concerns. Critics argue that the Administration's policies are endangering decades of U.S.-European cooperation that have advanced key U.S. geostrategic and economic interests. Some analysts suggest that current U.S.-European divisions are detrimental to transatlantic cohesion and represent a win for potential adversaries such as Russia and China. Many European leaders worry about potential U.S. global disengagement, and some argue that Europe must be better prepared to address both regional and international challenges on its own. Congressional Interests The implications of Trump Administration policies toward Europe and the extent to which the transatlantic relationship contributes to promoting U.S. security and prosperity may be of interest to the 116th Congress. Broad bipartisan support exists in Congress for NATO, and many Members of Congress view the EU as an important U.S. partner, especially given extensive U.S.-EU trade and investment ties. At the same time, some Members have long advocated for greater European burdensharing in NATO, or may oppose European or EU policies on certain foreign policy or trade issues. Areas for potential congressional oversight include the future U.S. role in NATO, as well as prospects for U.S.-European cooperation on common challenges such as managing a resurgent Russia and an increasingly competitive China. Based on its constitutional role over tariffs and foreign commerce, Congress has a direct interest in monitoring proposed new U.S.-EU trade agreement negotiations. In addition, Congress may consider how the Administration's trade and tariff policies could affect the U.S.-EU economic relationship. Also see CRS Report R45652, Assessing NATO's Value, by Paul Belkin; CRS Report R44249, The European Union: Ongoing Challenges and Future Prospects, by Kristin Archick; and CRS In Focus IF11209, Proposed U.S.-EU Trade Agreement Negotiations, by Shayerah Ilias Akhtar, Andres B. Schwarzenberg, and Renée Johnson.

crs_R46306

crs_R46306_0

<1. Introduction> In recent years, policymakers, industry stakeholders, and educational institutions have shown an interest in the federal government increasing financial support to individuals who pursue training and postsecondary education in non-degree instructional and work-based learning programs. These are instructional or work-based programs designed primarily for individuals beyond high school age and for which a degree is not conferred upon completion. Such programs include, but are not limited to, apprenticeships (e.g., masonry), college certificate programs (e.g., medical billing), and courses that lead to professional certificates or licensure (e.g., Microsoft certifications). By some accounts, there already is, and will continue to be, demand for workers to fill jobs that do not require a college degree but do require training or postsecondary education (e.g., skilled electrical work, health care support services). In addition, there is some evidence that the percentage of jobs requiring more than a high school diploma but not a degree is increasing. Although the federal government annually makes available over $100 billion in direct financial aid to individuals pursuing postsecondary education, the overwhelming majority of those funds are not available to a significant proportion of the individuals pursuing training and education through postsecondary non-degree programs. As some traditional colleges experience declining enrollment, some schools have shown an interest in creative approaches to increasing enrollment and maintaining revenues, including reaching out to adults who want to pursue completion of short programs that allow quick reentry into the workforce and/or increase earnings. Given the purported demand for workers with certain postsecondary non-degree credentials, Congress may consider viable options for providing direct federal support to students pursuing the completion of non-degree programs. Several proposals have surfaced recently that would increase direct federal support to students pursuing training and education in non-degree (short-term) programs. From 2011 to 2017, the Department of Education (ED) experimented with allowing Pell Grants to be received for short-term non-degree postsecondary education programs. In October 2019, the House Committee on Education and Labor ordered reported the College Affordability Act ( H.R. 4674 ), which would comprehensively reauthorize the Higher Education Act (HEA) and would expand the types of non-degree programs eligible for Pell Grants. In 2018, the President's Council of Economic Advisers presented options for bringing 25- to 64-year-olds back into the workforce with the skills required in the changing economy in an effort to increase the rate of economic growth. These included providing unemployment insurance benefits for individuals while training, providing Pell Grants for some short-term training programs, and developing a new comprehensive program for retraining displaced workers. The President's FY2021 budget request for ED proposed expanding Pell Grants to short-term programs that are not currently Pell-eligible. Several education and business organizations have supported extending Pell Grants, and occasionally Direct Loans, to programs that are shorter in duration than those that are currently eligible. Some stakeholders, however, express concerns about promoting non-degree programs and increasing financial support for students pursuing them. There is concern that some non-degree programs do not increase the employment or earnings of completers compared to individuals whose highest level of education is high school completion. Some concerns focus on how the federal government would ensure the quality of the programs. Other concerns focus on potentially high federal costs associated with supporting the programs, the potential need for student supports and business coordination, and the possibility of perpetuating income inequalities by fostering lower income students to pursue non-degree programs that lead to lower income professions. Some have raised questions about the demonstrated diminishing labor market returns over time for some technical non-degree programs, including apprenticeships. Additionally, some non-degree educational programs intended to prepare individuals for a specific occupation are neither required by nor necessarily preferred by employers, although the programs may be of a high quality. In light of evidence of employers increasingly relying on degrees when establishing hiring requirements, non-degree credential holders may have more difficulties in securing employment over the long term. In addition, adults with degrees currently employed in positions that do not require a degree may be crowding non-degree holders out of some occupations. In 2018, for instance, 28% of employment was in occupations that typically require a degree for entry-level positions, while 42% of the population aged 18 and over had a degree. This report provides an overview of existing federal programs and benefits that support individuals engaged in the pursuit of training and education in non-degree instructional and work-based learning programs. It informs consideration of additional or revised policy approaches aiming to support pursuit of training and education through non-degree programs. The report begins with a brief description of employer demand for individuals who have completed non-degree programs. This is followed by a discussion of the landscape and key characteristics of non-degree programs, from those offered through work-based learning to those offered through more formal instructional means. The report concludes with a detailed description of six federal programs and three tax benefits that currently provide direct financial support to students pursuing training and postsecondary education in non-degree instructional and work-based learning programs. Each program and benefit description highlights potential gaps and limitations in the scope and extent to which the program or benefit supports individuals pursuing non-degree programs, as well as student eligibility requirements and federal administration and oversight. <2. Labor Market for Non-degree Programs> Key stimuli for promoting financial support for individuals pursuing training and postsecondary education in non-degree programs include that the unfulfilled employer/business need for individuals with non-degree credentials is impeding, and/or will impede, economic growth; and that an individual's attainment of a non-degree postsecondary credential provides a worthwhile payoff. This section of the report provides data on the proportion of total employment and mean wages earned in occupations by typical entry-level education requirements. This discussion provides a sense of the market for non-degree credentials. It does not offer a comprehensive exposition of labor market returns and social impacts of increased non-degree program completion. In May 2018, approximately 6.2% of jobs in the national economy were in occupations for which the typical entry-level education requirement was a non-degree postsecondary credential ( Table 1 ). The Department of Labor's (DOL's) Bureau of Labor Statistics (BLS) assigns a typical entry-level education requirement the typical education level most workers need to enter an occupation for occupations that it tracks. Table 1 also presents the mean annual wages for occupations by typical entry-level education required. Mean annual wages for occupations that, at entry, require a high school diploma or its equivalent, some college but no degree, or a non-degree credential are all similar. While Table 1 shows differences in mean annual wages across education categories, these wages do not capture differences within the categories, which in many cases may include sizeable earnings differentials. For example, some research has found earnings premiums for individuals attaining long-term certificates, certificates in technical (e.g., electronics) and health fields, certificates in the field in which the individual works, and certificates from community colleges. <3. Non-degree Programs> Postsecondary non-degree programs provide training and education primarily to individuals who are beyond the typical age for secondary education. Most, but not all, non-degree programs are intended to prepare individuals for a particular occupation. Non-degree programs may be described by various classifications. One commonly used classification scheme delineates programs primarily provided by educational institutions (non-degree instructional) and by employers (work-based learning), although some programs include both instructional training and work-based learning. <3.1. Non-degree Instructional Programs> In general, postsecondary non-degree instructional programs are a combination of postsecondary courses or a postsecondary curriculum that fulfills an educational or professional objective, but for which a student does not earn a degree upon completion. Non-degree instructional programs prepare individuals for a wide variety of specialized jobs and more general employment. Upon completion of a non-degree instructional program, individuals receive a postsecondary educational certificate, which is a credential awarded by an educational institution based on the completion of a postsecondary instructional program, including coursework, assessment, or other performance evaluations. Individuals pursue non-degree programs for various reasons, including to expand knowledge and skills, to prepare for further education, to prepare for employment, to sustain employment, and when seeking promotion. For purposes of this report, non-degree instructional programs exclude those that lead to postbaccalaureate certificates and exclude transfer programs . Typically, transfer programs do not award a certificate or degree, but provide education for at least two academic years and are acceptable for full credit toward a bachelor's degree. Non-degree instructional programs should not be confused with certifications and licenses, which are occupational credentials awarded by entities that assess whether individuals have met established occupational standards or requirements. Licenses are required to practice in some occupations. Certifications show that an individual has attained competency in an occupation. Some certifications and licenses require the completion of a non-degree instructional (or degree) program. <3.1.1. Non-degree Instructional Program Providers> A diverse set of entities offer non-degree instructional programs. Traditional postsecondary educational institutions colleges and universities offer non-degree instructional programs, as do trade, vocational, and technical schools. In fall 2018, almost 3,000 institutions of higher education enrolled nearly1.9 million non-degree seeking undergraduate students. Other entities also offer such programs, including businesses; professional organizations; trade unions; nonprofit organizations; federal, state, and local governments; museums; bootcamps; hospitals; and the military. One study estimated that there were over 4,500 for-profit non-traditional postsecondary educational institutions enrolling almost 670,000 students in academic year (AY) 2009-2010. <3.1.2. Duration, Structure, and Cost of Programs> Non-degree instructional programs vary considerably in length and duration. Programs may require a few days or more than two years to complete. Generally, the length is related to curriculum requirements, industry expectations, and the breadth and complexity of skills that the program is intended to instill. The length of the program may also be affected by federal, state, and private entities that require a minimum number of educational hours to be eligible for employment, or for certification or licensing. The overall program duration may be broken up if it is designed in stackable units. A single educational program aligned to a career path may be redesigned into a sequence of independent programs (stackable units). Programs are offered in classrooms, online, by correspondence, with cooperative elements, or through a combination of methods. Generally, students must fund or find funding for the cost of a program, and, if applicable, for related living expenses and lost wages for foregone employment. Program cost varies by length, program resource requirements, and provider. For example, for the most heavily enrolled programs in AY2018-2019, the average published cost for tuition and fees was over $9,000 at public less-than-two-year colleges and approximately $15,000 at private less-than-two-year colleges. <3.1.3. Credit and Noncredit Programs> In non-degree instructional programs, a dichotomy exists between programs made up of credit course(s) and those structured as a series of noncredit courses. However, courses in the same field of study with the same vocational objective and industry recognition may be offered for credit at one institution and noncredit at another, or even within the same institution. Generally speaking, individuals who successfully complete credit courses and programs earn credits that may be transferred or used as currency toward the completion of other credit programs (either at the conferring school or at another school). All degree programs are credit programs. Credit programs are most often approved by an accrediting entity and may have more stringent student entrance or prerequisite requirements. Credit programs may lead to a variety of vocations. Although noncredit programs may offer continuing education units (CEUs) or vocational certificates to program completers, the programs do not proffer these students currency toward the pursuit of credit programs or noncredit programs in other fields. The advantage of noncredit programs is that they often are less expensive for students and educational institutions, cover a broader range of topics, and can be modified more quickly to be attentive to industry and student needs. Noncredit programs may satisfy career entry requirements; may include adult basic education (ABE) and English as a second language (ESL) instruction; may provide personal enrichment; and may be customized training. Based on 2007-2013 enrollment information from nine colleges in one state community college system, approximately 38% of enrollments were in noncredit courses: vocational (18%), ABE (9%), ESL (7%), and general educational development (GED) (4%). <3.1.4. Participation Data> National level data on the universe of non-degree instructional programs, enrollment, and completions are incomplete. Some states and the federal government do not collect data on noncredit programs. A 2016 nationwide survey found that 8% of adults aged 16-65 and not enrolled in high school had a postsecondary certificate, although some of these certificates may be postgraduate. The subset of educational institutions participating in the HEA Title IV federal student aid programs (see the " HEA Title IV Federal Student Aid " section below) awarded almost 1 million for-credit non-degree undergraduate credentials and approximately 3 million undergraduate degrees in AY2017-2018. <3.2. Work-Based Learning Programs> The term work-based learning refers to a range of training and educational activities that are intended to impart general or specific workplace skills to individuals through time spent at an employer's worksite or a simulated work location. The terms defined in Table 2 are examples of common types of work-based learning in the federal context. Work-based learning is a broad term and may occur at multiple points in a career path and in multiple forms, ranging from career exploration for youth to highly specialized technical training for incumbent workers. Activities considered to be work-based learning include, but are not limited to, on-the-job training (OJT), apprenticeships, summer job experiences, internships, externships, residencies, cooperative programs (co-ops), and paid or unpaid work experiences. Programs that provide wages or remuneration are often referred to as earn and learn programs . <3.2.1. Registered Apprenticeship (RA)> RA programs are a distinctive form of work-based learning because of their DOL oversight. RA programs are registered with DOL or a DOL-approved state agency if they meet standards delineated in federal regulations. Among the requirements, a registration application must include a work process schedule, which outlines the major competencies of the occupation and how a combination of OJT and/or related instruction will lead to the worker demonstrating proficiency in those competencies. Once a program is registered, the registration agency must review the program no less than once every five years to ensure that it remains in compliance with the required standards. If the program demonstrates a "persistent and significant failure to perform successfully," the program may be deregistered. <3.2.2. Providers> Because work-based learning encompasses such a broad range of training activities, it is possible for multiple types of entities or individuals to offer such learning experiences. Work-based learning experiences may be provided by employers (either formally or informally), labor unions, external training providers, educational institutions providing work-relevant instruction, or partnerships of these entities. <3.2.3. Structure, Duration, and Cost of Programs> Work-based learning is generally structured to meet the needs of the employer, potential employer, or trainee. For example, summer internships may offer three to four months of informal training opportunities. Conversely, a summer internship may offer a formal curriculum covering specified procedures or tasks through iterative task-based coaching/instruction. RA programs require at least 2,000 hours of supervised OJT and range in duration from one to six years, but most RA programs are four years in duration. Some RA programs take a time-based approach through which an apprentice learns and obtains skills by completing a specified number of hours of OJT. Other programs take a competency-based approach in which skill attainment is verified by the apprentice demonstrating proficiency in the skill learned. Programs may also be constructed as hybrid programs that combine aspects of the time-based and competency-based approaches. All RA program designs must include related instruction to supplement OJT. The costs of work-based learning programs are primarily borne by the provider, but the trainee may be required to cover his/her living costs. Program costs may include the lost work time of experienced employees, fees for contracted trainers, and trainee wages. As the work-based learning progresses, some portion of the program costs may be offset by the trainee's increased productivity. In some cases, trainees may be required to pay for related instruction or other costs. Work-based learners who do not receive remuneration or receive nominal remuneration must provide for their own transportation, room, and board while also potentially forgoing the opportunity to earn wages from other paid employment. <3.2.4. Participation Data> The data on work-based or employer provided training are not extensive. The data sets that do exist often differ in methodology, timeframe, and purpose. For example, some surveys look only at firms with 50 or more employees, while others are part of larger household surveys not designed around employer provided training questions. A summary of four different government surveys related to employer provided training in the 1990s concluded that while most establishments offer some training (formal or informal), the percentage of workers receiving training ranged from 16% to 70%. A 2016 nationwide survey found that 21% of adults aged 16-65 had completed a work-based learning program, although not all of these programs were intended to prepare individuals for a particular occupation or field of work. Among adults aged 16-65, the most common work-based learning programs completed were in healthcare and teaching. With respect to RA, DOL reported approximately 633,000 active apprentices in about 25,000 active programs in FY2019. In the same year, about 81,000 apprentices completed a program. The construction industry currently accounts for the largest share of apprenticeships, though they are available in other industries such as manufacturing and transportation. <4. Federal Programs and Benefits> The federal government provides direct financial support to individuals pursuing training and education that might better prepare them for entry into the workforce and that might help them realize their potential. None of the federal programs or benefits that provide such support focus exclusively on promoting training or education through the pursuit of non-degree programs. With that caveat in mind, federal programs are described below in an order that generally attempts to correspond to their relevance to supporting the pursuit of training or education through non-degree programs. The design and implementation of the federal programs and benefits are notably different in several aspects including, but not limited to, the choice and monitoring of non-degree programs. The primary benefit programs are the Workforce Innovation and Opportunity Act (WIOA) Title I program, the federal student aid programs, federal tax benefits, and veterans educational assistance. WIOA Title I, administered by the Department of Labor (DOL), is intended to encourage general workforce development and may be used to directly subsidize training costs of individuals who pursue training and education. The federal student aid programs, authorized under Title IV of the Higher Education Act (HEA) and administered by the Department of Education, provide grants and loans to students to aid them in accessing and completing postsecondary education programs. The Internal Revenue Service (IRS) administers the Internal Revenue Code, which, among other things, provides certain tax benefits as a strategy for post-education financial support. Educational assistance administered by the Department of Veterans Affairs (VA), specifically the Post-9/11 GI Bill and Veteran Employment Through Technology Education Courses (VET TEC), are programs designed to provide direct financial support to students that allows them to pursue a wide variety of educational and training programs. Two programs that augment the basic living supports for needy families with some training and education assistance are also discussed in this report. Supplemental Nutrition Assistance Program (SNAP) Employment & Training (E&T), administered by the Department of Agriculture (USDA), provides training and education opportunities to individuals with a high risk for educational failure. Temporary Assistance for Needy Families (TANF), administered by the Department of Health and Human Services (HHS), provides flexibility to states to use TANF funds for activities that would develop a more highly skilled workforce through training and education. The subsequent sections of this report describe these prominent federal programs that can be used to support students in non-degree programs. The sections are organized to focus on key program design elements and highlight differences among the programs. Table 3 highlights a few program characteristics that help to delineate key differences. <4.1. WIOA Contracts and Individual Training Accounts (ITAs) (DOL)> Title I of the Workforce Innovation and Opportunity Act (WIOA; P.L. 113-128 ) is the primary federal workforce development legislation and is intended to bring about increased coordination among federal workforce development and related programs. WIOA Title I is administered by DOL and funded through discretionary appropriations. Services authorized under WIOA are intended to: increase the employment, retention, and earnings of participants, and increase attainment of recognized postsecondary credentials by participants, and as a result, improve the quality of the workforce, reduce welfare dependency, increase economic self-sufficiency, meet the skill requirements of employers, and enhance the productivity and competitiveness of the Nation. The Adult and Dislocated Worker Employment and Training Activities program under WIOA Title I provides formula grants to states, which in turn allocate the majority of those funds to local Workforce Development Boards (WDBs). At the local level, funds are required to be used for five main purposes: establishing a One-Stop delivery system, providing career services, providing training services, establishing relationships with employers, and developing industry or sector partnerships. As part of its service delivery model, WIOA provides consumer choice to participants. The program for adult and dislocated worker participants in WIOA is structured around two main levels of services: career services and training. On an operational level, career services are categorized as basic and individualized . Basic services include assistance such as labor market information and job postings, while individualized services include assistance such as skills assessment and case management. <4.1.1. Eligibility of Non-degree Programs> Eligible WIOA participants may pursue training and education at the eligible training provider (ETP) of their choice. A state Eligible Training Provider List (ETPL) identifies choices to customers who are accessing WIOA services. Generally, ETPs include the following: institutions of higher education that are eligible to participate in the HEA Title IV federal student aid programs and offer programs leading to a recognized postsecondary credential, entities that provide RA, or other public or private training providers. Allowable training activities that may be supported with WIOA Title I funds are non-degree and degree instructional programs and certain types of work-based learning, including OJT, RA, customized training, and incumbent worker training. Training must be for occupations that are in demand in the local area or region, are in demand in an area to which the trainee is willing to relocate, or are deemed (by the local WDB) to have "high potential for sustained demand or growth in the local area." In addition, the implementing regulations for WIOA specify that a program of training services provided by an ETP is one or more courses or classes or a structured regimen that leads to the following: an industry-recognized certificate or a certificate of completion of an RA, a license recognized by the state or federal government, an associate or baccalaureate degree, a secondary school diploma or equivalent, employment, or measurable skill gains toward a credential. Local areas under WIOA may reserve up to 20% of combined adult and dislocated worker funds for incumbent worker training. <4.1.2. Participant Eligibility for Training> The workforce development system designed by WIOA is premised on universal access, such that an adult age 18 or older who is a citizen or noncitizen authorized to work in the United States does not need to meet any qualifying characteristics in order to receive career services. While basic career services are available to all adults, individualized career services are to be provided as appropriate to help individuals obtain and retain employment. Under WIOA, service at one level is not a prerequisite for service at the next level. To be eligible to receive training, an individual must be unlikely or unable to obtain or retain employment that leads to economic self-sufficiency, be in need of training services to obtain or retain employment that leads to economic self-sufficiency, have the skills and qualifications to participate successfully in training, select a training service linked to an occupation in the local area (or be willing to relocate to another area where the occupation is in demand), and be unable to obtain other grant assistance (e.g., Pell Grants) for the training services. These determinations are made by a One-Stop operator through an interview, evaluation, or assessment, which can include a recent evaluation or assessment conducted pursuant to another education or training program. Local WDBs designate colleges and universities, private organizations, and government agencies as One-Stop operators that assess and evaluate individuals and decide which individuals to provide with access to training services. Of funds allocated to a local area for adult employment and training activities, priority for career and training services is to be given to recipients of public assistance, other low-income individuals, and individuals who are basic skills deficient. It is left to the discretion of the local WDB, in consultation with the state's governor, to determine how to allocate funds among these priority groups. <4.1.3. Basic Benefit Payment Structure> Under WIOA, training is allowed through ITAs or through contracts for services. While ITAs are the primary vehicle, contracts may be used in certain circumstances. WIOA also permits funds to be used for supportive services (e.g., child care and transportation) and "needs-related payments" necessary to enable an individual to participate in training. When an individual is determined by a One-Stop operator to be eligible to receive training services, that individual, in consultation with the One-Stop operator, may choose training services from the ETPL. At that point, an ITA is established, from which payment is made to the ETP, not to the individual, for training services. Local WDBs have the authority to set limits on the type and duration of training and may choose to set limits on the amount of an ITA, based on individual circumstances or on an across-the-board level. WIOA participants who are in receipt of an ITA may use ITA funds to support non-degree instructional and degree programs and the related instruction portion of an RA. In addition, local WDBs are also authorized to provide supportive services, including transportation, child care, dependent care, housing, and needs-related payments necessary to enable an individual to participate in training. While training is typically carried out through the ITA model, local WDBs may provide training through a contract for services, which may include various forms of work-based learning. The contract is an agreement between a local WDB and an employer or RA sponsor for occupational training for a WIOA participant in exchange for reimbursement from the WDB. A contract for services may be used if the consumer choice requirements of WIOA are met; the services are OJT, RA, customized training, incumbent worker training, or transitional employment; the local WDB determines there is an insufficient number of training providers in a local area to meet the ITA requirements; the local WDB determines there is a local training program of demonstrated effectiveness to serve individuals with barriers to employment; the local WDB determines that it is most appropriate to contract training services to train multiple individuals in in-demand occupations or industry sectors; or the training service is a pay-for-performance contract. For example, through a contract, a local WDB may reimburse an OJT provider (employer) for up to 50% of the wage rate of a participant (reimbursement rates may be 75% in limited circumstances). State and local WDBs may also enter into contracts with RA sponsors to reimburse the sponsors for up to 75% of an apprentice's wages. Notably, reimbursement for wages is supported by a contract, not an ITA. <4.1.4. Basic Administrative Structure> As noted, states are responsible for developing the ETPL. Local WDBs and One-Stop operators administer the training programs and payments to training providers. Thus, administrative structures and procedures vary by state. <4.1.5. Quality Assurance Mechanisms> Quality assurance of training providers is established through both initial and continued provider eligibility processes. The governor and the state WDB in each state are responsible for establishing criteria and procedures for eligible providers of training services to receive funding in the local workforce investment areas. RA programs are automatically eligible to be included on the state ETPL. Non-RA training providers not previously eligible under WIOA or its predecessor law must apply to the governor and the local WDB (according to a procedure established by the governor) for initial eligibility of one fiscal year. To maintain continued eligibility, existing training providers must follow procedures established by the governor and implemented by the local WDB and submit WIOA-specified information. WIOA provides general requirements while allowing local WDBs discretion on specific factors. For example, while WIOA indicates that OJT contracts should be limited in duration, as appropriate to the occupation, the training content, and the participant's prior work experience and service strategy, the exact length of the OJT contract is determined by the local WDB. Similarly, WIOA requires that in determining employer eligibility to receive WIOA incumbent worker training funding, a local WDB must consider the characteristics of individuals in the program and the relationship of the training to the competitiveness of the individual and the employer without establishing quantifiable targets. <4.1.6. Measures of Program Performance> WIOA requires ETPs and states to report measures of program participation and outcomes. Notably, RA programs are not required to submit ETP performance report information. To be considered for continued eligibility, providers must submit to the governor every two years the following performance and cost information for participants receiving training under WIOA Title I: the percentage of program participants in unsubsidized employment in the second and fourth quarters after program exit; median earnings of program participants who are in unsubsidized employment during the second quarter after program exit; the percentage of program participants who obtain a recognized postsecondary credential, or secondary school diploma or equivalent, during participation or within one year of program exit; information on the type of recognized postsecondary credentials received by program participants; information on the cost of attendance, including tuition and fees, for program participants; and information on program completion rates for program participants. In addition, the governor may require additional, specific performance information deemed necessary to determine continued eligibility. States are required to publish and disseminate annual ETP performance reports. The reports must include the following information with respect to each program of study eligible to receive WIOA funds, disaggregated by the type of entity that provided the training, during the most recent program year and the three preceding program years: the total number of participants who received training services through a WIOA Title I program, the total number of participants who exited from training services, and the average cost per participant for the participants who received training services. In addition, the ETP performance reports must include the number of participants with barriers to employment served by the WIOA Title I programs, disaggregated by each program of study eligible to receive WIOA funds and each subpopulation of such individuals, and by race, ethnicity, sex, and age. <4.1.7. Program Participation> The first WIOA ETP performance report is not yet available, but some participation data are available. Within the WIOA-authorized forms of work-based learning, the most recent data available (2017) indicate 955,094 adult participants and 469,572 dislocated worker participants. The majority of participants are age 30 and over (67% of adults and 82% of dislocated workers) and unemployed or have received a layoff notice (82% of adults and 92% of dislocated workers). While many participants had no postsecondary education experience (59% of adults and 47% of dislocated workers), a notable 22% of adults and 34% of dislocated workers had a degree. Table 4 shows usage of training services among program exiters in program year 2018. Fewer than 20% of WIOA Title I participants engage in work-based learning provided under contract. The majority, over 66%, of trainees pursue skills training or upgrading through non-degree instructional and degree programs with ITAs. The most popular occupations pursued by adults through training were healthcare, transportation and material moving, and production. The most popular occupations pursued by dislocated workers were transportation and material moving, computer and mathematical, office and administrative support, and management. <4.1.8. Program Limitations> WIOA Title I currently supports adult entry or reentry into the workforce primarily by providing career services, but short-term training and education are also provided. The program assumes that many participants only need career services. Support for non-degree training and education pursuits could be bolstered by the following: increasing focus of One-Stop operators to increase access to non-degree training; additional funding could be dedicated to wage reimbursement and/or ITAs to ensure the availability of career services; the 20% limit on incumbent training could be relaxed to ensure current workers remain employed despite changing skill requirements, and the restriction on recipients of training services being able to obtain other grant assistance (e.g., Pell Grants) could be eliminated to allow programs to supplement one another. Non-degree program quality may vary given state and local flexibility in developing the ETPL. <4.2. HEA Title IV Federal Student Aid (ED)> Title IV of the Higher Education Act (HEA; P.L. 89-329, as amended), authorizes programs that provide financial assistance to students to promote access to, affordability, and completion of higher education at certain institutions of higher education (IHEs). The programs are administered by the Department of Education. Grants are available to qualified, financially needy students, and loans are available to qualified borrowers (both students and parents of dependent students). The primary types of Title IV aid are Federal Pell Grants and federal student loans made through the William D. Ford Federal Direct Loan (Direct Loan) program. The Pell Grant and Direct Loan programs are designed to provide portable aid (i.e., the availability of aid follows students to the eligible postsecondary education institutions in which they choose to enroll). Title IV also authorizes other aid programs that are relatively smaller in scale and thus are not discussed in this report. Pell Grants and Direct Loan program loans are available to all eligible individuals regardless of congressional appropriations. The Direct Loan program is a mandatory entitlement program for budgetary purposes. As a mandatory entitlement, all eligible individuals have access to borrow in accordance with program rules, and the requisite budget authority is available. The Pell Grant program is often referred to as a quasi-entitlement because eligible students receive the Pell Grant award to which they are entitled regardless of discretionary appropriations levels. <4.2.1. Eligibility of Non-degree Programs> Pell Grants and Direct Loans may be used to pursue Title IV-eligible programs of study, which include non-degree instructional and degree programs and some work-based learning. Title IV-eligible programs must be offered by Title IV-participating IHEs. To be eligible, programs and Title IV-participating IHEs must meet a variety of criteria, including quality assurance (see the " Quality Assurance Mechanisms " section). Title IV-participating IHEs are classified as public IHEs, private nonprofit IHEs, proprietary (private for-profit) IHEs, and public and private nonprofit postsecondary vocational institutions. Non-degree programs must meet several eligibility requirements. For example, in general, the Title IV-eligible non-degree instructional program and the Title IV-eligible portion of work-based learning must lead to a certificate or other recognized non-degree credential (e.g., diploma or license). Also, Title IV aid is generally not available for noncredit programs or portions of programs for which a defined number of credit or clock hours is not associated. For instructional and work-based learning programs measured in clock hours, the OJT portion of work-based learning must be offered under the supervision of an IHE. If a portion of the OJT is offered by an entity under contract with an IHE, such portion must be less than 50% of the program. In general, non-degree programs are subject to specific durational requirements, including weeks of instructional time and number of credit or clock hours. For Pell Grants, the non-degree programs offered by public and private nonprofit postsecondary vocational institutions and proprietary institutions must either be at least 15 weeks of instructional time and at least one of the following: 600 clock hours, 16 semester hours, or 24 quarter hours; or at least 10 weeks of instructional time and at least one of the following: 300 clock hours, 8 semester hours, or 12 quarter hours. For the Direct Loan program, non-degree programs offered by public and private nonprofit postsecondary vocational institutions and proprietary institutions must be at least 10 weeks of instructional time and 300-599 clock hours. In addition, students must be enrolled in an eligible program of study on at least a half-time basis to borrow through the Direct Loan program. See the text box below for information on an ED experiment with shorter duration programs. Non-degree programs at public and private nonprofit IHEs that are at least one academic year in length and lead to a certificate or other recognized non-degree credential are eligible for both the Pell Grant and Direct Loan programs, without regard to any of the above-specified durational requirements. <4.2.2. Participant Eligibility> For a student to be eligible to receive Title IV funds for his or her higher education, he or she must be enrolled (or accepted for enrollment) in a Title IV-eligible program. In addition, among other criteria, a student must be a U.S. citizen, national, legal permanent resident, or other specified eligible noncitizen; and have a high school diploma (or equivalent, such as a general educational development [GED] certificate) or meet other relevant criteria. Individuals must also meet program-specific eligibility criteria to receive Pell Grants or Direct Loan program loans. <4.2.2.1. Pell Grant Program-Specific Eligibility Criteria> To receive Pell Grants, students must meet program-specific criteria that include the following: being enrolled in an undergraduate program, not having completed the curriculum requirements of a bachelor's degree, and demonstrating financial need (primarily individuals from families in the two lowest income quintiles as determined under the program's award rules). All recipients are subject to a cumulative lifetime eligibility cap on Pell Grant aid of 12 full-time semesters (or the equivalent). <4.2.2.2. Direct Loan Program-Specific Eligibility Criteria> To receive Direct Loan program loans, students must meet program-specific criteria that include being enrolled on at least a half-time basis. Students (or their parents in the case of PLUS Loans to parents borrowing on behalf of a dependent child) may need to meet additional eligibility criteria to qualify for specific Direct Loan program loan types. The primary loans are the following: Direct Subsidized 83 Loans for undergraduate students with demonstrated financial need, Direct Unsubsidized Loans for any student regardless of financial need, and PLUS Loans for parents of dependent undergraduate students and graduate and professional students regardless of financial need. Individuals who are new borrowers on or after July 1, 2013, may only borrow Direct Subsidized Loans for a period of time not to exceed 150% of the published length of their academic program. <4.2.3. Basic Benefit Payment Structure> In general, the amount of Title IV aid for which a student is eligible is guided by statutory award rules. Aggregate Title IV aid and other aid (e.g., institutional aid) typically cannot exceed a student's cost of attendance (COA). The COA is an institutionally determined measure of a student's educational expenses for the period of enrollment and generally includes items such as tuition and fees; an allowance for books and supplies; and, as applicable, an allowance for room and board. The COA may also include transportation costs and dependent care expenses. An important feature of the Pell Grant award rules is that the grant is determined without consideration of any other financial assistance a student may be eligible to receive or may be receiving. Annual appropriations acts and the HEA establish the total maximum Pell Grant award amount that a student may receive in an academic year. For award year (AY) 2020-2021, the maximum Pell Grant award that an eligible individual enrolled full-time for a 26-30 week academic year may receive will be $6,345. The amount may be reduced based on the student's COA, financial need, enrollment rate, or program duration. Pell Grant awards used to pursue non-degree programs are generally subject to income taxation; whereas Pell Grant awards used to pursue degree programs are only subject to income taxation if used for purposes other than tuition and fees. Direct Loan program award rules vary by type of loan borrowed. In addition, numerous other factors could affect the type and amount of aid awarded. However, some generally applicable rules apply to the Direct Loan program. Other types of financial assistance awarded to the student must be taken into account when awarding Direct Loan program loans. Also, an individual cannot be awarded a Direct Subsidized Loan or Direct Unsubsidized Loan in an amount that exceeds statutory annual and aggregate award limits, which are determined based on an individual's dependency status and class level. For example, a dependent undergraduate student may borrow up to $5,500 in Direct Subsidized Loans and Direct Unsubsidized Loans for his or her first year, while an independent undergraduate student may borrow up to $9,500 in such loans in his or her first year. The annual maximum loan amount an undergraduate student may receive is prorated when the borrower is enrolled in a program that is shorter than a full academic year. <4.2.4. Basic Administrative Structure> ED's Office of Federal Student Aid (FSA) is the primary entity responsible for administering the Title IV aid programs. The administrative tasks associated with the programs are completed by a number of actors (e.g., FSA, IHEs), depending on the function. FSA undertakes many high-level functions in Title IV program administration. These include, but are not limited to, contracting for the operation and maintenance of systems to process aid; providing customer service, training, and user support for the administration of the programs; and ensuring integrity of the programs. IHEs complete many of the day-to-day functions associated with awarding and disbursing Title IV aid to students. ED makes funds available to IHEs so that they can disburse awards to students. IHE functions include verifying a student's eligibility to receive the aid, calculating aid amounts, disbursing aid funds, and managing program funds at the institutional level. In addition, under the Pell Grant program ED pays participating IHEs an administrative cost allowance. <4.2.5. Quality Assurance Mechanisms> Several HEA provisions intended to ensure the quality of Title IV-eligible programs and Title IV-participating IHEs have been enacted to protect students and taxpayers. The program integrity triad state authorization, accreditation, and ED certification is the foundation of these provisions and is intended to provide a balance in the Title IV eligibility requirements. State authorization is intended to provide consumer protection, accreditation is intended to provide quality assurance, and ED certification is intended to provide direct oversight of compliance in the Title IV programs. In addition to the requirements of the program integrity triad, non-degree programs may be required to meet gainful employment requirements. The following subsections briefly describe each piece of the triad and the gainful employment requirements as they relate to Title IV-eligible programs. <4.2.5.1. State Authorization> An IHE must be authorized to provide a postsecondary education within the state in which it is located to participate in the Title IV programs, which includes complying with any applicable state approval or licensure requirements. State approval and licensure requirements vary appreciably among the states. For instance, some states approve IHEs and their individual educational programs, while other states only require approval of an IHE as a whole. The degree to which a state evaluates an individual educational program may also vary by state. For example, states variously evaluate program curricula, program objectives, projected enrollment, student outcome measurements (e.g., completion and placement rates), and justification of program need (e.g., industry demand or consumer interest). In addition, some states require programmatic accreditation (discussed below) or separate approval by another state agency (e.g., a professional licensing agency). <4.2.5.2. Accreditation100> To participate in Title IV programs, an IHE must be accredited by an accrediting agency recognized by ED as a reliable authority of the quality of the education being offered. Accrediting agencies are private associations of member educational institutions or industry associations that undertake quality review of educational institutions and/or programs. In general, an IHE need only be accredited by a regional or national accreditor to participate in Title IV programs. The regional or national accreditor must evaluate whether the IHE meets accrediting agency-prescribed criteria. Although these criteria vary among the agencies, ED-recognized accrediting agencies must regularly evaluate statutorily specified areas, including an IHE's faculty, curricula, facilities, student support services, and success with respect to student achievement in relation to the institution's mission. Within these broadly outlined criteria, accrediting agencies have discretion as to the precise evaluation measures. Regional and national accreditors evaluate an IHE's performance on the whole, but may choose to evaluate a sample of programs. An educational program does not need to be accredited by a programmatic accrediting agency for Title IV purposes. However, an IHE may seek programmatic accreditation to satisfy employer and some occupational licensure requirements. To gain programmatic accreditation, an educational program offered by an IHE is evaluated on established standards for the particular field of study, such as whether the curriculum meets professional guidelines. <4.2.5.3. ED Certification> When an IHE seeks to participate in Title IV programs, it must apply for certification from ED. During this process, ED evaluates whether the IHE meets Title IV participation requirements. ED reviews each educational program to determine whether it satisfies eligibility requirements. For example, the eligibility requirements include the aforementioned durational requirements; and 300-599 clock-hour programs that may be eligible to participate in the Direct Loan program must, among other requirements, have verifiable completion and placement rates of at least 70%. If an IHE wants to add a new educational program to its Title IV eligibility, it generally may self-certify to ED that the new program is Title IV eligible or, for new 300-599 clock-hour programs, submit an application to ED for approval. <4.2.5.4. Gainful Employment (GE)106> The HEA specifies that most non-degree programs must prepare students for "gainful employment in a recognized occupation." Regulations promulgated in 2014 (2014 GE regulations) defined the term gainful employment in a recognized occupation , but they were rescinded in 2019. The 2014 GE regulations were intended to serve as a proxy measure for programmatic quality by establishing debt-to-earnings (D/E) rates that programs were required to meet. The rationale behind the rule was that if an educational program is of sufficient quality, then it will lead to earnings that will enable students to repay the student loans they borrowed for enrollment in the program. Under the GE framework, each program subject to the GE rules must meet two D/E rates. Programs that fail to meet minimum standards in multiple years will be ineligible for Title IV participation for three years. No program has yet been subject to loss of Title IV eligibility under the requirements. In addition, the education programs subject to GE rules must meet third-party standards such as being approved by an ED-recognized accrediting agency, being recognized by the relevant state agency, being programmatically accredited (if required by a federal entity or state agency in the state in which the IHE is located or otherwise seeks state approval), and meeting any applicable educational prerequisites for professional licensure or certification in the state in which the IHE is located. <4.2.6. Measures of Program Performance> The HEA does not define measures of performance for the Title IV programs. The HEA does require that Title IV participating IHEs and ED report information on enrollment, certificates and degrees conferred, student charges, and other information that may be of interest to prospective and current students and policymakers. <4.2.7. Program Participation> ED collects data annually on Title IV non-degree instructional for-credit programs. Table 5 shows the total number of non-degree instructional for-credit programs and credentials and the percentage of non-degree instructional for-credit programs and awards by institutional sector in AY2017-2018. Of the 6,418 Title IV-participating IHEs, 4,618 offered non-degree for-credit programs. Approximately half of Title IV-eligible non-degree for-credit programs are offered by private for-profit IHEs, while more than two-thirds of non-degree for-credit credentials from Title IV-eligible programs are awarded by public IHEs. In AY2015-2016, approximately 765,000 Pell Grant recipients pursued non-degree credit programs and received about $2.7 billion in Pell Grant awards roughly 10% of the total number of recipients and dollar amount of awards. Also in AY2015-2016, approximately 10% of undergraduates who borrowed a Direct Loan were pursuing certificate programs. <4.2.8. Program Limitations> Support for non-degree programs is limited in several ways: Title IV aid is only available to support individuals pursuing credit programs of a statutorily specified duration at Title IV-participating IHEs. Support for work-based learning is limited to programs or portions of programs that lead to a certificate or degree and that are offered by Title IV-participating IHEs. Some students who may choose to pursue training or education via non-degree programs will not be eligible. These include students who do not have a high school diploma (or equivalent) or who are not enrolled in a career pathway program; with respect to Pell Grants, students who have a bachelor's degree; and with respect to the Direct Loan program, students enrolled less than half-time. Non-degree program quality may vary. It is primarily assessed through the program integrity triad, since the 2014 GE rules have been rescinded. State authorizers and accreditors have some flexibility in determining and applying criteria to assess quality. Few reports have examined state authorization requirements in general, or as they relate to program quality in particular. However, those that have done so identify the variation among state authorization requirements as an impediment and a complicating factor in assessing institutional experiences with state authorization. They note that an individual state's history, resources, and priorities may affect the extent to which the state chooses to take a more active or passive role in some areas, such as evaluating non-degree programs. Despite difficulties in assessing state authorization requirements, researchers have pointed to the following as potential weaknesses in at least some states' authorization requirements: concerns that the oversight of some state boards may be impaired by potential conflicts of interest, overrepresentation of special interests, or a sense of being beholden to IHEs; input requirements (e.g., faculty members' qualifications, facilities and equipment used in the instructional process) may impede innovative education models; elongated timeframes to receive state authorization, which may be a result of a complex regulatory state process or a lack of state resources; conflicts across state laws in instances where an institution offers educational programming in multiple states; and despite the fact that many states require institutions to report on student outcomes, few states may actually make authorization renewal decisions based on those outcomes. A 2014 GAO report identified some of the strengths and weaknesses of the accreditation system as it relates to program quality. One strength is that institutional accreditors tailor their expert peer reviews depending on the school type and mission. In addition, programmatic accreditation is specifically aligned to the particular field or type of program. Potential weaknesses identified by GAO include conflicting interests between IHEs and the IHE-funded accreditors, the insufficiency of accreditor capacity and resources, the inability of experts to assess innovative modes of education (e.g., competency-based education), and the difficulty in defining and measuring academic quality. <4.3. Tax Benefits (IRS)122> Education tax benefits, administered by the Internal Revenue Service, partially offset some of the costs of higher education for eligible taxpayers. They differ from other benefits in several ways. First, unlike many benefits programs, education tax benefits tend to provide the greatest advantage to upper middle income taxpayers. Second, unlike traditional financial aid, which is used to pay for education expenses around the time the education is received, taxpayers claim education tax benefits when they file their federal income tax return. Hence, taxpayers receive a tax benefit only after they have already paid for their education expenses, sometimes many months after the expense is incurred. Many education tax benefits are only available to individuals enrolled in a degree program. However, some education tax benefits do have eligibility rules that are broad enough to include individuals enrolled in non-degree programs. In contrast to most other federal education programs, the education tax benefits discussed in this report reduce federal revenues rather than increase outlays. Hence, education tax benefits are considered a type of "spending through the tax code" that is not subject to annual appropriations. Any persons that meet the requirements for these benefits can receive them (generally when they file their federal income tax return). Education tax benefits may encourage overconsumption of education or subsidize education that would have taken place without these tax incentives. Taxpayers in non-degree programs may currently be eligible for the following: The Lifetime Learning Credit, which reduces a taxpayer's income tax liability and provides financial assistance to taxpayers (or their family members) who are pursuing education. The Lifetime Learning Credit is a nonrefundable tax credit for 20% of the first $10,000 in qualifying expenses. The credit phases out for taxpayers above certain income thresholds. Employer Provided Educational Assistance, which excludes eligible employer provided educational costs from the taxpayer's taxable income. 529 accounts, which are intended to help families save for future educational expenses. <4.3.1. Eligibility of Non-degree Programs> The Lifetime Learning Credit and 529 accounts may be used for eligible education expenses associated with pursuing non-degree programs at Title IV-eligible IHEs. A broader range of non-degree programs may be eligible for employer provided educational assistance. <4.3.1.1. The Lifetime Learning Credit (LLC)> Qualified education expenses used to calculate the amount of the credit are defined as tuition and related expenses required for enrollment in a course at a Title IV-eligible IHE. Related expenses are amounts that are required for enrollment, including books, supplies, and equipment, but do not include living expenses or other expenses that are not required for enrollment. These expenses must be reduced by any amount of tax-free educational assistance used to pay for qualified educational assistance (including employer provided educational assistance and tax-free distributions from 529 accounts). For the purposes of the LLC, a course can either be part of a post-secondary degree program or be a course to help the student acquire or improve job skills (e.g., part of a non-degree program). <4.3.1.2. Employer Provided Educational Assistance> Employer provided educational assistance can be used for tuition, fees, books, supplies, and equipment associated with any form of instruction or training that improves or develops the recipient's skills. According to IRS Publication 970, "the payments don't have to be for work-related courses or courses that are part of a degree program." For example, an employer could pay up to $5,250 of the tuition costs of an employee's course to improve his or her skills. This amount would not be included in the employee's wage income. In addition, the statute does not state that the institution providing the program must be a Title IV-eligible IHE. <4.3.1.3. 529 Accounts> Tax-free withdrawals from 529 accounts are allowed for qualified expenses, which include tuition and required fees, room and board, books, supplies, equipment, and, for special needs beneficiaries, additional expenses at a Title IV-eligible IHE. Those expenses do not need to be associated with a degree program. <4.3.2. Participant Eligibility for Training> Eligibility for training depends on factors outside of the tax code. Whether the training qualifies for tax incentives is a different question. To qualify for tax benefits, participants must either file a federal income tax return or be claimed as a dependent or spouse on one. <4.3.2.1. The Lifetime Learning Credit (LLC)> Taxpayers can claim the credit for qualified education expenses paid for themselves, their spouses, or their dependent children. Taxpayers cannot claim the credit if they file as married filing separately, if they (or their spouses if filing jointly) are nonresident aliens, or if their income is $68,000 or more ($136,000 or more if married filing jointly). <4.3.2.2. Employer Provided Educational Assistance> Participants can only use this tax benefit if their employer offers an educational assistance program. <4.3.2.3. 529 Accounts> Beneficiaries of a 529 account are designated at the time of its establishment. Amounts in a 529 account may also be transferred to another 529 account established for certain relatives of designated beneficiaries. <4.3.3. Basic Benefit Payment Structure> Individuals apply for the LLC when they file their federal income tax return after incurring qualified educational expenses. Qualified educational expenses paid from a 529 account or through an employer are tax-free. <4.3.3.1. The Lifetime Learning Credit (LLC)> The LLC is calculated as 20% of the first $10,000 of qualified education expenses, yielding a maximum credit of $2,000 per taxpayer. The maximum credit amount phases out for taxpayers with income between $58,000 and $68,000 ($116,000 and $136,000 for married joint filers) in 2019. Because the credit is nonrefundable, the amount of the credit that the taxpayer receives cannot by definition exceed the taxpayer's federal income tax liability. Hence, if a taxpayer has little to no federal income tax liability (e.g., they are low-income), they will generally receive little if any benefit from a non-refundable tax credit like the LLC. <4.3.3.2. Employer Provided Educational Assistance> Employers may choose to provide their employees with up to $5,250 in tax-free tuition assistance per year under an employer sponsored educational assistance program. The assistance is not included in the employees' wages and is not subject to federal income taxes, nor is it subject to payroll taxes. <4.3.3.3. 529 Accounts> Taxpayers can withdraw funds from their 529 accounts tax-free and use the distribution to pay for qualifying education expenses associated with non-degree programs, subject to restrictions of the individual plans. (In practice, many taxpayers establish 529 plans for children. However, these taxpayers are allowed under the statute to transfer some or all of the child's 529 account balance into the 529 account of certain relatives of the child tax-free. ) <4.3.4. Basic Administration> The IRS primarily relies on taxpayers, employers, and states to ensure proper administration of the benefits, although the IRS may audit taxpayers to ensure compliance. <4.3.4.1. The Lifetime Learning Credit (LLC)> Taxpayers effectively apply for the LLC by filing their federal income tax return (Form 1040) and IRS Form 8863 (related to claiming education tax credits). These forms, and their associated instructions, describe eligibility rules and help taxpayers calculate the amount of the credit. Taxpayers do not explicitly need to list the course or program of study they are enrolled in when applying for the LLC on their federal income tax return, although they are asked to provide information about the educational institution on Form 8863. <4.3.4.2. Employer Provided Educational Assistance> To qualify as an educational assistance program, an employer's plan must be in written form and must meet certain other requirements. According to regulation, "it is not required that a program be funded or that the employer apply to the IRS for a determination that the plan is a qualified program. However, under IRC Section 601.201 (relating to rulings and determination letters), an employer may request that the IRS determine whether a plan is a qualified program." In addition, a program cannot discriminate in favor of employees who are officers, shareholders, self-employed, or highly compensated (although such employees can be eligible for these benefits along with other employees). Employees eligible to participate in the program must be given reasonable notice of its terms and availability. <4.3.4.3. 529 Accounts> Generally, states sponsor 529 plans, and individuals can establish accounts in a given plan for a designated beneficiary. When a taxpayer withdraws an amount from a 529 plan, the 529 program is to provide the taxpayer with a Form 1099-Q, which will show the total amount withdrawn and the breakdown between investment growth ("earnings") and the original investment ("basis"). If taxpayers apply any of this withdrawal to a non-eligible expense, they are required to include a portion of the withdrawal on their federal income tax returns, and hence, it may be subject to taxation. Unless audited, a taxpayer does not have to document how they have spent their withdrawals (e.g., the kind of program). In 2018, approximately 0.5% of taxpayers were audited. <4.3.5. Quality Assurance Mechanisms> Outside of the eligibility rules discussed above, the Internal Revenue Code (IRC) does not have rules regarding the quality of training and education programs for which a tax benefit is claimed. <4.3.6. Measures of Program Performance> The IRS does not publish, nor is it required to collect or publish, any measures of a non-degree program's performance. <4.3.7. Program Participation> IRS data on these education tax benefits are limited. <4.3.7.1. The Lifetime Learning Credit (LLC)> IRS data indicate that in 2015, approximately 2.5 million taxpayers claimed approximately $2.1 billion of the LLC, for an average credit of $830 per taxpayer. These data indicate that approximately half of all LLC dollars were claimed by taxpayers with adjusted gross income (AGI) between $50,000 and $200,000. Taxpayers with AGI below $15,000 or more than $200,000 generally did not claim the LLC, due to its nonrefundability and phase-out, respectively. To date, no studies have evaluated the impact of the LLC on enrollment in non-degree programs or its effectiveness in helping non-degree candidates improve their job skills. <4.3.7.2. Employer Provided Educational Assistance> Administrative data from the IRS on the exclusion of employer provided educational assistance are unavailable. To date, no studies have evaluated the impact of employer provided educational assistance on enrollment in non-degree programs or its effectiveness in helping non-degree candidates improve their job skills. <4.3.7.3. 529 Accounts> Administrative data from the IRS on 529 plans are unavailable. Survey data analyzed by GAO indicate that relatively few families have established these accounts, and that those who do tend to have greater assets and income than those who do not establish the accounts. CRS has not identified any studies that have evaluated the impact of 529 plans on enrollment in non-degree programs or their effectiveness in helping non-degree candidates improve their job skills. <4.3.8. Program Limitations> Most research regarding education tax benefits broadly have found little effect on increasing enrollment. This research highlights some limitations with education tax benefits that may be applicable to non-degree programs. First, education tax benefits, when received many months after expenses are incurred, may provide limited assistance to students who cannot afford upfront education costs. Second, as GAO has highlighted, there are a variety of different education benefits and it may be confusing for taxpayers to determine what benefit they are eligible for, and which benefits provide the largest tax savings. Finally, the education tax benefits discussed in this report only benefit taxpayers with income tax liabilities, which excludes many low-income taxpayers who have little to no income tax liabilities. <4.4. Veterans Education Programs (Post-9/11 GI Bill and VET TEC) (VA)> Veterans education programs (GI Bills) were originally intended to help former servicemembers adjust to civilian life by providing for the "reintegration of the discharged soldier, sailor, and marine into the civilian economy in the most prompt and adequate manner." Over the years, the benefits have been renewed and revised to also compensate for compulsory service, encourage voluntary service, avoid veteran unemployment, provide equitable benefits to all who served, and promote military retention. The pilot Veteran Employment Through Technology Education Courses (VET TEC) and its predecessor are an alternative approach that incentivizes training providers for program completion and employment. VET TEC is not a GI Bill. The GI Bills and VET TEC provide financial assistance to students whose eligibility is based on a qualifying individual's service in the uniformed services while such students are enrolled in approved programs of education, which include training programs. The GI Bills and VET TEC are administered primarily by the Department of Veterans Affairs. The GI Bills are appropriated entitlements funded with mandatory spending. Appropriated entitlement spending is funded, but not controlled, in annual appropriations acts. VET TEC is funded by a limited allocation from GI Bill appropriations. The remainder of this section describes the Post-9/11 GI Bill and VET TEC. The Post-9/11 GI Bill has represented approximately 80% or more of total GI Bill participation and spending in each year since FY2013. <4.4.1. Eligibility of Non-degree Programs> While the majority of Post-9/11 GI Bill benefits are used to support education through degree pursuit, they are also used to support students pursuing training and education through approved work-based learning and non-degree instructional programs at a variety of training establishments and educational institutions. Non-degree programs include credit and noncredit instructional programs, courses that prepare individuals for assessments to further their education or career (e.g., Advanced Placement [AP] exams or real estate licensing exams), OJT, apprenticeships, and courses that lead to a predetermined educational, vocational, or professional objective ( Table 6 ). The variety of eligible programs was intended to provide eligible individuals with the maximum choice in training and education options. VET TEC benefits are only available for the pursuit of non-degree high-technology programs of education at contracted training providers that enter into a Program Participation Agreement (PPA) with the VA. A high-technology program of education provides instruction in computer programming, computer software, media application, data processing, or information science. The training providers must meet several criteria including, but not limited to, not offering degrees and not charging tuition and fees that exceed annual VA caps. <4.4.2. Participant Eligibility for Training> Post-9/11 GI Bill benefits are available to eligible servicemembers and veterans and their family members. The program is not open to the general public and is not based on family income levels. A servicemember or veteran must meet qualifying active duty service requirements in the uniformed services and either continue on active duty or meet specified discharge/release requirements. An eligible servicemember may transfer benefits to family members. The spouse and children of a servicemember who dies in the line of duty while serving on active duty as a member of the Armed Forces are also eligible. To be eligible for VET TEC, an individual must be a GI Bill-eligible veteran enrolled full-time in a VET TEC-eligible program. VET TEC participants may or may not be recipients of GI Bill benefits. <4.4.3. Basic Benefit Payment Structure> Both the Post-9/11 GI Bill and VET TEC provide living stipend payments directly to participants and payments to providers for direct program costs. Program costs are paid by the Post-9/11 GI Bill concurrent with program pursuit, while VET TEC pays costs during and after pursuit. In addition to payments, eligible individuals may apply for personalized counseling to help guide their career paths, ensure the most effective use of their VA benefits, and help them achieve their goals. <4.4.3.1. Post-9/11 GI Bill> The Post-9/11 GI Bill provides eligible persons an entitlement to educational assistance payments over a period of 36 months (or its equivalent in part-time educational assistance). In cases where a veteran transfers all or a portion of the benefits, transferors and transferees must share the 36 months of entitlement. Under the Post-9/11 GI Bill, several types of benefit payments are available. The amount of each payment and eligibility for the payments depends on an individual's benefit level; the type of training or education program pursued; the rate of enrollment or pursuit; actual charges, and when relevant, in-state tuition charges; the location of the training or education; and the mode of education delivery. An individual's benefit level is based on their aggregate length of qualifying active duty service or other eligibility characteristics. While an individual is enrolled in a program of education or pursuing training, an educational institution may receive payments for tuition and fee charges, and the individual may receive a monthly housing allowance, a books and supplies stipend, tutorial assistance, and additional monthly payments. Individuals are reimbursed for fees charged for taking approved tests. As an illustration in AY2019-2020, a veteran enrolled in an educational program at a hypothetical private educational institution may receive up to $24,476.79 in tuition and fees, but no more than the actual tuition and fee charges; between approximately $800 and $4,300 monthly for housing, depending on location; and up to $1,000 for books and supplies. Veterans pursuing OJT or apprenticeship receive a progressively decreasing housing allowance that is intended to partially offset scheduled wage increases associated with the OJT or apprenticeship, and may not receive a tuition benefit if no tuition is charged by the sponsoring employer or instructional provider. <4.4.3.2. VET TEC> Under VET TEC, payments are provided to veterans and training providers. While enrolled full-time, veterans receive a monthly housing allowance that is similar to the Post-9/11 GI Bill housing allowance. The VA reimburses the qualified training provider for the cost of tuition and other fees for the program. The VA pays 25% of the cost upon initial enrollment of an eligible veteran, 25% upon program completion, and 50% upon employment of the completer in a suitable field. Training providers cannot charge tuition and fees to the VET TEC participant directly. <4.4.4. Basic Administrative Structure> Potential participants apply to the VA to ensure eligibility for either the Post-9/11 GI Bill or VET TEC. Eligible individuals may then enroll in or enter into a training agreement for approved programs. Educational institutions and training establishments certify the expected and actual enrollment and pursuit of eligible individuals to the VA. Certifications of individual enrollment and pursuit are made at regular intervals and when there are changes to what was previously certified. The VA verifies eligibility, calculates payment amounts, and distributes payments to eligible individuals and educational institutions. <4.4.5. Quality Assurance Mechanisms> Program quality for GI Bill-approved programs is primarily determined by semi-independent state approving agencies (SAAs), but the VA also has oversight obligations. Program quality for VET TEC programs relies heavily on participant employment outcomes. <4.4.5.1. Post-9/11 GI Bill157> While the VA primarily relies on SAAs for initial approval of programs of education, the VA and SAAs share responsibility for ongoing oversight. The VA contracts (or enters into agreement) with each SAA to provide approval, oversight, and other related activities to ensure the quality of programs of education and proper administration of GI Bill benefits. Statutory and regulatory provisions and policy have established standards for the programs of education, educational institutions, and training establishments. The quality standards apply to each program of education. Many standards were established in response to reports of poor quality or incidences of abuse. Four prominent standards apply to the quality of most programs: program objective, independent study (e.g., online) restrictions, the 85-15 rule, and contractual arrangement restrictions. The program objective may not be avocational, recreational, or personal development. Independent study programs must be accredited by an ED-recognized accrediting agency and must lead to a degree or certificate that meets additional statutorily specified criteria. Under the 85-15 rule, no more than 85% of students enrolled in a program of education may have tuition, fees, or other charges covered by institutional aid or by a GI Bill. For programs offered in part or exclusively through contractual agreements, the contracted courses must be independently approved for GI Bill purposes. Besides the standards that apply to most programs of education, there are additional requirements depending on the type of program. For example, non-degree programs must be offered in facilities with adequate space and equipment, taught by instructors with adequate education and qualifications, and follow curricula with recognized accepted standards. Programs designed to prepare individuals for state licensure or certification or for an occupation requiring state board approval must meet the relevant instructional requirements. Programs of education that have not been approved or certified as meeting quality educational criteria by another government agency are required to meet various standards and criteria in addition to the aforementioned standards. Non-degree programs that have been approved by other government agencies are Federal Aviation Administration (FAA) approved flight training programs, DOL Registered Apprenticeships, and state-approved apprenticeships. The standards include, but are not limited to, having faculty with adequate qualifications and having a curriculum that is similar to other institutions, or meeting licensure, certification, or board standards. <4.4.5.2. VET TEC158> The VA is the sole arbiter in determining if a facility is eligible for VET TEC. The payment structure and several key elements of the PPA are designed to ensure program quality and value. The payment structure, as described earlier, reimburses training providers when veterans complete the program and when they find meaningful employment . Meaningful employment means employment occurring within 180 days of program completion and using the skills of the completed program for self-employment, promotion, or new employment. Key quality-related requirements within the VET TEC PPA require that training providers be licensed or approved by the required federal, state, or municipal agencies and meet the 85-15 rule. The PPA further requires that the VET TEC-eligible programs not be self-paced. <4.4.6. Measures of Program Performance> As of 2013, the VA is required to report annually on the number of credit hours, certificates, degrees, and other qualifications earned by Post-9/11 GI Bill participants. The requirement was initiated to determine whether the program effectively prepares eligible individuals for the future. The VET TEC program performance measures are the program admittance rate, job placement and retention rates for program completers, the percentage of program completers employed less than six months in the field of study, the percentage of program completers employed at least six months in the field of study, median annual salary for employed program completers, and transfer rates to other academic or vocational programs. <4.4.7. Program Participation> Although GI Bill participant pursuit of training and education through non-degree programs is low, many educational institutions and training providers that do not offer degrees are approved for GI Bill purposes. Approximately 9% of GI Bill participants pursued an educational certificate in 2013, compared to 81% who pursued a degree. In FY2018, approximately 0.4% of Post-9/11 GI Bill participants were pursuing OJT or an apprenticeship. Of the educational institution and training establishment locations that offered programs approved for GI Bill purposes, almost 500 flight school locations, over 18,000 school locations, and over 9,000 OJT/apprenticeship locations did not award any degrees, based on data from December 2019. Of the over 18,000 school locations, 37% were private for-profit, 37% were public, and 27% were private nonprofit schools. The most popular certificates completed by Post-9/11 GI Bill participants in AY2018-2019 were in welding; information technology; heating, ventilation, and air conditioning; health care; and gunsmithing. Based on July 1, 2019, data following the February 2019 VET TEC launch, there were five approved training providers and eight participants. <4.4.8. Program Limitations> Program eligibility is limited to individuals who have served in the uniformed services and their family members. Some recent examinations of the program have found that program quality oversight may be compromised by the oversight process described above. A 2018 GAO report indicated that SAA funding, the scope and focus of oversight actions, and the process for choosing institutions to audit may limit the ability to adequately conduct thorough oversight. A 2018 VA OIG report found that SAAs lacked adequate controls to review all statutory approval standards, including, in particular, potentially deceptive advertising or program modifications. <4.5. Supplemental Nutrition Assistance Program (SNAP) Employment & Training (E&T) (USDA)170> SNAP (formerly known as the Food Stamp Program), is administered by the Department of Agriculture and provides eligible low-income households with benefits redeemable for eligible foods at authorized retailers. The vast majority of federal funding for SNAP is for the food benefits themselves, but the federal government provides other SNAP funding as well. For example, states receive SNAP Employment & Training (E&T) funding to provide employment and education services for SNAP participants; this education is sometimes provided through non-degree programs. First established by Congress in 1987 (then called Food Stamp Employment & Training (FSET)), the statutory purpose of SNAP E&T is to assist members of households participating in SNAP in "gaining skills, training, work, or experience that will increase their ability to obtain regular employment and meet state or local workforce needs." Congress also established SNAP E&T as a way to meet the SNAP's work-related requirements; generally, nondisabled adults ages 18 to 59 are subject to these requirements. Each state agency responsible for administering SNAP is required to implement a SNAP E&T program. States have the option to make their SNAP E&T programs mandatory or voluntary. That is, the state may choose to (1) make participation in E&T a condition of receiving SNAP benefits (mandatory) or (2) offer E&T but not require participation (voluntary). According to FY2017 USDA Food and Nutrition Service (USDA-FNS) data, the majority (35 of 53) state agencies operate voluntary E&T programs. A state's E&T program must include one or more of the following components: job search programs, job search training, workfare (work-for-benefits), work experience (may include OJT or apprenticeships), education, self-employment training, WIOA (i.e., job training services that are managed by agencies under WIOA), and programs to improve job retention. SNAP E&T funding includes several streams of mandatory funding: nearly $124 million is available without a state match, and then an open-ended federal match is available for states' administrative expenses and states' reimbursements for dependent care and transportation. Total E&T funding each year varies, depending on states' use of open-ended matching funding. Since October 2015, USDA-FNS, in partnership with Seattle Jobs Initiative (SJI), has been operating SNAP to Skills , a SNAP E&T capacity-building project USDA describes as addressing the need for education beyond high school. The project is "designed to provide states the technical assistance, tools, and resources they need to build more effective and job-driven SNAP E&T programs." SNAP to Skills provides enhanced technical assistance to 10 states, but reaches additional states with tools, resources, and a SNAP E&T learning academy. Statutory provisions require some integration between the WIOA Title I program and SNAP E&T. The SNAP E&T program must be delivered through the statewide workforce development system, unless the component is not available locally through such a system. While SNAP E&T recipients can receive services through WIOA One-Stop centers, SNAP staff have experience addressing the unique challenges of E&T recipients, such as low basic skills, housing instability, and mental health issues. <4.5.1. Eligibility of Non-degree Programs> A state's available services and programs vary. SNAP E&T programs can provide certain education activities, as specified in federal regulations: Educational programs or activities to improve basic skills or otherwise improve employability including educational programs determined by the State agency to expand the job search abilities or employability of those subject to the program. Allowable educational activities may include, but are not limited to, high school or equivalent educational programs, remedial education programs to achieve a basic literacy level, and instructional programs in English as a second language. Only educational components that directly enhance the employability of the participants are allowable. A direct link between the education and job-readiness must be established for a component to be approved. SNAP E&T education activities must have a direct link to employment and help SNAP participants move promptly into employment. Some states do offer and fund SNAP participants' pursuit of education and training via non-degree programs. According to FY2017 data, the most common education activities offered are vocational training and basic education. SNAP E&T may also provide actual work experience or training. Apprenticeships and subsidized employment are allowable, as are unpaid internships. <4.5.2. Participant Eligibility for Training> SNAP E&T serves those SNAP participants who are subject to the program's general work requirements, but some states may target their services to a subset of this population. To participate in SNAP, households must be income-eligible and meet certain other nonfinancial rules such as citizenship and work requirements. To be financially eligible, household gross monthly income (all income as defined by SNAP law) must be at or below 130% of the federal poverty level, and household net monthly income (SNAP-specified deductions are subtracted) must be at or below 100% of the federal poverty level. Under certain state options, the threshold may be as high as 200% of the federal poverty line. Under current law for SNAP participation, general work requirements or work registration requirements are in place. That is, non-disabled adults who are not working are required to register for work, accept a job if offered one, and not reduce their work below 30 hours per week. This work registrant population is the eligible population for SNAP E&T programs, but states may design their E&T programs to focus on a subset of this population. States may also choose to make E&T mandatory for this population or a subset of it. The process by which SNAP agencies or third-party partners assign or refer an individual for particular E&T programs or services varies. USDA guidance requires state agencies to assess participants to determine the most effective E&T component(s) for that participant; guidance suggests a range of assessment tools. The 2018 farm bill ( P.L. 115-334 , enacted December 2018) now requires all states to include "case management services such as comprehensive intake assessments, individualized service plans, progress monitoring, or coordination with services providers." In general, E&T funds cannot be used to serve Temporary Assistance for Needy Families cash assistance recipients (see the " Temporary Assistance for Needy Families (TANF) (HHS) " section for more information). Some individuals enrolled half-time or more in an IHE are ineligible for SNAP. Such individuals may be eligible if assigned or placed in the IHE through a specified program, including a WIOA Title I program or SNAP E&T. <4.5.3. Basic Benefit Payment Structure> SNAP provides food assistance, while SNAP E&T provides educational programs and funds some associated costs. SNAP E&T funds may be used to cover the costs of education, develop a program component, or pay for the costs associated with an education program. Associated costs may include dependent care and transportation. Most E&T funding does not go directly to program participants but rather is administered by state agencies and contracted programs. It is common for states to contract for specific education programs or to work through partnerships. USDA-FNS presents third-party partnerships as a model for developing, implementing, and growing a SNAP E&T program. Through such partnerships, states work with a third party such as a community college. The third party provides a financial or in-kind contribution to the program. Upon invoicing, the state draws down federal funds to reimburse the partners. The federal funds may be 100% funding or a 50% match depending on the funding stream. For Pell Grant-eligible students, the Pell Grant must be the first payer of college expenses. The first payer indicates that the Pell Grant amount would be based on full college expenses, whereas the E&T benefit would be based on the college expenses not covered by the Pell Grant. Associated expenses supported by E&T must be reasonable and necessary. Before using E&T funds for tuition, the state must first explore other funding sources, such as education grants (but not loans). W orkforce partnerships were added to the E&T program by the 2018 farm bill. Workforce partners may include private employers, nonprofit organizations providing services relating to workforce development, and training providers identified on WIOA ETPLs. The workforce partners provide training, work, or experience. As mentioned above, work components may include OJT and apprenticeships. <4.5.4. Basic Administrative Structure> Each SNAP E&T program is designed by the state within a federal framework of rules and is subject to USDA-FNS approval. Statute and regulation set out requirements for states' E&T plans. State programs can and do vary greatly in their capacity and services offered. Per changes made by the 2018 farm bill, the programs must be implemented in consultation with the state workforce development board (WDB) or private employers or employer organizations (See the " WIOA Contracts and Individual Training Accounts (ITAs) (DOL) " section for state WDBs' responsibilities under WIOA Title I). SNAP E&T participants generally learn of the available programs and services through the SNAP state agency or referrals to partner agencies. <4.5.5. Quality Assurance Mechanisms> States typically monitor and assess provider and program quality, though USDA-FNS has increasingly provided technical assistance and resources to help them do so. <4.5.6. Measures of Program Performance> The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ) required USDA to establish a performance indicators reporting process. USDA has finalized the regulation implementing this reporting, and the first annual report was due in January 2018. As of the date of this report, USDA has not published a compilation or information based on the reports. The national reporting measures are unsubsidized employment in the second quarter after completion of participation in SNAP E&T; median quarterly wages in the second quarter after completion of participation in SNAP E&T; unsubsidized employment in the fourth quarter after completion of participation in SNAP E&T; and completion of an educational, training, work experience, or OJT component. <4.5.7. Program Participation> The majority of SNAP E&T participants were provided services other than education. According to USDA-FNS FY2016 data, the most recent available, 38 of 53 SNAP state agencies provided an education component in their E&T program, and the states served almost 70,000 SNAP participants in the education components of their programs. FY2016 SNAP E&T participation data on all participants (not necessarily education component participants) by state show that some states served fewer than 100 participants, while other states served nearly 100,000. <4.5.8. Program Limitations> There are a few limitations to SNAP E&T. First, it is more common for SNAP E&T participants to participate in job search or other non-education components; fewer than 10% of participants receive education. Second, information is not available on the quality of educational programs or work experience. A forthcoming evaluation on the 2014 farm bill pilot projects may inform future guidance and policymaking. In addition, subsequent employment outcomes are not available. Finally, wages earned through SNAP E&T may increase household income, and thus may reduce eligibility for SNAP and SNAP E&T. <4.6. Temporary Assistance for Needy Families (TANF) (HHS)206> The Temporary Assistance for Needy Families block grant has the statutory purpose of increasing state flexibility to (1) provide assistance to needy families with children so that children can live in their own homes or in the homes of relatives; (2) end the dependence of needy parents on government benefits by promoting work, job preparation, and marriage; (3) reduce out-of-wedlock pregnancies; and (4) promote the formation and maintenance of two-parent families. States may expend their TANF block grants (and associated state funds) in any manner "reasonably calculated" to achieve TANF's statutory purpose. TANF is administered HHS. Under federal budget rules, TANF is a mandatory spending program. TANF is not a dedicated education and/or training program, but a broad-purpose block grant that gives states permission to spend funds on a wide range of benefits, services, and activities. TANF is best known for providing monthly assistance to needy families with children, primarily headed by single mothers, to help meet their basic needs. This assistance is usually in the form of cash, but may also be paid as a voucher or to a third party to meet a basic need. TANF funds may also be used to support subsidized employment, OJT, and training and education programs; however, this is a subset of the types of activities that TANF may fund. Several states have used TANF funds to support career pathways . According to HHS, "a career pathway provides access to interconnected education programs and support services for students and workers to help them advance in their chosen career paths to jobs with family-sustaining wages." One state program includes coordinators who are paid with TANF funds but are employed at a community college and serve as case managers, recruiting students and ensuring they have access to support services. The program also makes use of college work-study jobs. <4.6.1. Eligibility of Non-degree Programs> TANF has no rules limiting the types of training and education programs that are eligible, though there are limits on how much training and education may be counted toward meeting its performance measure (see the " Measures of Program Performance " section). Therefore, the state may decide what kinds of vocational educational training are eligible. <4.6.2. Participant Eligibility for Training> TANF funds must be used for low-income families with children; thus, parents or other caretakers of children would be eligible for training and education. Financial eligibility rules are set by the state in which the family resides, and there is a significant amount of variation among them. According to HHS data, "in 2015, over one-third of adult TANF assistance recipients (38.6%) had less than a high school education, and more than half (53.9%) had no further education beyond high school completion (or its equivalent)." <4.6.3. Basic Benefit Payment Structure> TANF helps fund state assistance programs for needy families with children. Funds are provided to the states, which then provide assistance to families. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ), which created TANF, requires that funds be spent as determined by state legislatures. States determine eligibility rules and benefit amounts for these programs. They also determine what activities to require of adult recipients of assistance. There is no federal requirement to provide different benefit amounts depending upon whether adult recipients are in training and education, but benefits must be reduced or ended if recipients refuse to participate in required activities that may include training and education. (States may create "good cause" and other exceptions for which the sanction for failure to participate in required activities may be waived.) TANF also provides funding for a wide range of benefits and support services other than cash assistance, and some low-income parents who do not receive cash assistance are served by TANF funds. Support services may include, but are not limited to, advising, career planning, and employment services. <4.6.4. Basic Administrative Structure> Benefits and services are delivered at the state and local level. States decide which participants get which services. State TANF programs sometimes refer assistance recipients to a WIOA One Stop Center for education or employment. Other states choose to operate employment and training services for TANF recipients separately from the WIOA system. <4.6.5. Quality Assurance Mechanisms> There are no federal rules regarding the quality of training and education programs, though states might establish such rules. <4.6.6. Measures of Program Performance> The minimum work participation rate (WPR) is TANF's sole performance measure. TANF requires each state to meet a performance standard that requires a minimum percentage of its assistance caseload to either be working or engaged in activities. The rules for what counts as engagement limits training and education: "vocational educational training" is limited to 12 months in a lifetime; obtaining a GED is either not countable toward the standard or counted only if an individual is in another activity more closely related to work for a minimum number of hours per week. States may also meet their minimum work participation rate in whole or in part through reducing the cash assistance caseload. <4.6.7. Program Participation and Outcomes> Little program-wide data exists on TANF participation in training and education and the subsequent outcomes. <4.6.8. Program Limitations> Child care and educational preparation may limit a large proportion of TANF recipients from taking advantage of and succeeding in non-degree programs. Most TANF assistance adults are single mothers with young children. States may use TANF funds to assist parents with child care. The TANF cash assistance caseload is significantly disadvantaged in terms of education. The choice of non-degree programs may be limited: The 12-month lifetime limit on vocational educational training limits the types of training that TANF recipients can pursue. An individual in an apprenticeship program may exceed the income eligibility threshold for receiving assistance. In addition, the quality of training and education programs is unknown.

Recent Administrations and Congress have demonstrated bipartisan support for increasing federal assistance to individuals pursuing training and education in postsecondary non-degree programs, sometimes referred to as short -term programs . Non-degree programs are postsecondary training and education programs that are most often shorter in duration than a bachelor's or associate's degree program. They generally provide work-based learning or educational instruction to individuals who are beyond the typical age for secondary education to prepare them for a particular occupation. Examples of support have included proposals to expand existing federal programs, create new programs, and improve coordination between existing programs. This report provides an overview of existing federal programs and benefits that support individuals pursuing training and education in non-degree programs. A prominent argument for supporting individuals pursuing training and education in non-degree programs is that there is a substantial employer need for individuals with some postsecondary credentials but no degree. In 2018, approximately 72% of jobs in the national economy were in occupations for which the typical entry-level education is less than an associate's degree. Just over 6% explicitly required a non-degree credential, but these credentials could prepare individuals for many jobs that do not require a bachelor's or higher level degree. Mean annual wages for individuals whose highest educational attainment is high school completion are similar to those for individuals with a non-degree credential. Earnings for individuals with only non-degree credentials vary based on differences in occupational field, program duration, and type of educational institution attended. Several federal programs provide direct financial support to or on behalf of students to enable them to pursue training and postsecondary education in non-degree instructional and work-based learning programs. None of these federal programs or benefits that provide such support focus exclusively on promoting non-degree program pursuits. The federal programs include the following: Title I of the Workforce Innovation and Opportunity Act (WIOA; P.L. 113-128 ) is the primary federal workforce development statute. The program relies on state and local workforce development boards to enter into contracts with training and education program providers and oversee the quality of the providers. Title IV of the Higher Education Act of 1965 (HEA; P.L. 89-329), as amended, authorizes grant and loan programs that provide financial assistance to higher education students. Non-degree program quality assessment is handled by state authorizers, accrediting agencies, and in some instances through Department of Education certification. Education tax benefits, administered by the Internal Revenue Service (IRS), partially offset some of the costs of higher education for eligible taxpayers. Many education tax benefits are only available to individuals enrolled in a degree program, but three education tax benefits can also be claimed for postsecondary non-degree programs: the Lifetime Learning Credit, the Exclusion for Employer Provided Educational Assistance, and tax-advantaged 529 plan education savings accounts. The Post-9/11 GI Bill and Veteran Employment Through Technology Education Courses (VET TEC) were originally intended to help veterans enter the civilian workforce. Post-9/11 GI Bill program quality is primarily overseen by state agencies under contract with the Department of Veterans Affairs. VET TEC program quality is assured by withholding 50% of tuition and fees from providers until participants are employed. Supplemental Nutrition Assistance Program (SNAP) Employment & Training (E&T) provides eligible low-income households with employment and education services. E&T funding is administered by state agencies through contracted providers, which receive funds to cover education and other program costs. The Temporary Assistance for Needy Families (TANF) block grant is best known for providing monthly cash assistance to needy families with children but may be used to support subsidized employment, on-the-job training, and training and education programs.

crs_R46014

crs_R46014_0

<1. Introduction> Following a presidential declaration of emergency or major disaster, the Federal Emergency Management Agency (FEMA) may provide three primary forms of assistance: Individual Assistance (IA), Public Assistance (PA), and Hazard Mitigation Assistance (HMA). IA, which is the focus of this report, provides aid to affected individuals and households, and can take the form of assistance for housing and for other needs through the Individuals and Households Program, crisis counseling, disaster unemployment assistance, disaster legal services, and disaster case management services, as well as mass care and emergency assistance. PA provides grants to local, state, territorial, and Indian tribal governments, as well as certain private nonprofit organizations, for emergency protective measures, debris removal operations, and repair or replacement of damaged public infrastructure. HMA funds pay for mitigation and resiliency projects and programs to reduce the threat or impacts of future disasters. This report provides brief descriptions of the categories of IA authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; P.L. 93-288, as amended; 42 U.S.C. 5121 et seq.). The information is based on the program guidance that FEMA released in March 2019, to serve as a comprehensive IA program policy resource; the Individual Assistance Program and Policy Guide (IAPPG) applies to emergencies and disasters declared on or after March 1, 2019. State, territorial, and Indian tribal governments do not automatically receive IA when a disaster occurs. Following an incident , the governor or tribal chief executive must request that the President declare an emergency or major disaster and that IA be authorized. When drafting a request for a major disaster declaration authorizing IA, the state, territorial, or Indian tribal government must demonstrate that the incident exceeds their capacity to effectively respond without federal assistance. FEMA then evaluates the request using a set of factors before providing a recommendation to the President. In March 2019, FEMA released the updated factors considered when evaluating a governor's request for IA, which became effective June 1, 2019. Thus, this report also lists and briefly describes the updated IA factors. <2. Individual Assistance Programs> Various types of FEMA IA may be provided to disaster survivors. The available IA options depend on the type of declaration (i.e., an "emergency" or "major disaster"), and the type(s) of IA requested by the governor of the affected state or the tribal chief executive. These requests must be authorized by FEMA (for information on the factors considered when determining whether to authorize IA, see the " IA Factors " section, below) . FEMA's IA program includes 1. Mass Care and Emergency Assistance ; 2. Crisis Counseling Assistance and Training Program ; 3. Disaster Unemployment Assistance ; 4. Disaster Legal Services ; 5. Disaster Case Management ; and 6. Individuals and Households Program. A brief description of each form of IA is included below. <2.1. Mass Care and Emergency Assistance14> Mass Care and Emergency Assistance (MC/EA) involves the provision of life-sustaining services to disaster survivors prior to, during, and following an incident through short-term recovery. MC/EA includes seven service "activities": (1) sheltering; (2) feeding; (3) distribution of emergency supplies; (4) support for individuals with disabilities and others with access and functional needs; (5) reunification services for adults and children; (6) support for household pets, service animals, and assistance animals; and (7) mass evacuee support. <2.2. Crisis Counseling Assistance and Training Program16> The Crisis Counseling Assistance and Training Program (CCP) provides grant funding to eligible local, state, territorial, and Indian tribal governments, as well as nongovernmental organizations. CCP supplements efforts to assist individuals and communities with recovering from the effects of a disaster through community-based outreach and the provision of services, such as crisis counseling, psycho-education, and coping skills development. CCP also provides support by linking the disaster survivor with other resources, such as individuals and agencies that help survivors in the recovery process. The program provides short- to intermediate-term assistance to support mental and emotional health needs. Two CCP programs provide assistance for different lengths of time: (1) the Immediate Services Program provides funding for up to 60 days following a major disaster declaration; and (2) the Regular Services Program provides funding for up to nine months from the notice of award. <2.3. Disaster Unemployment Assistance23> Disaster Unemployment Assistance (DUA) provides benefits to individuals who were previously employed or self-employed, were rendered jobless or whose employment was interrupted as a direct result of a major disaster, and are ineligible for regular unemployment insurance. DUA may also provide re-employment assistance. DUA benefits may continue for up to 26 weeks following the declaration of a major disaster. <2.4. Disaster Legal Services27> Disaster Legal Services (DLS) are provided free to low-income individuals who require them because of a major disaster. The provision of services is "confined to the securing of benefits under the [Stafford] Act and claims arising out of a major disaster." Assistance may include help with insurance claims, drawing up new wills and other legal documents lost in the disaster, help with home repair contracts and contractors, and appeals of FEMA decisions. Disaster Legal Services are provided through an agreement with the American Bar Association's Young Lawyers Division. Neither the statute nor the regulations establish cost-share requirements or time limitations for DLS. <2.5. Disaster Case Management31> The Disaster Case Management (DCM) program partners case managers with disaster survivors to develop and implement disaster recovery plans that address their unmet needs. The program is time-limited, and shall not exceed 24 months from the date of the major disaster declaration. <2.6. Individuals and Households Program34> The Individuals and Households Program (IHP) provides financial and/or direct assistance to eligible individuals and households who, as a result of a disaster, have uninsured or under-insured necessary expenses and serious needs that cannot be met through other means or forms of assistance. The IHP is the primary way FEMA assists disaster survivors. Although it may meet basic needs, it cannot compensate for all losses. The categories of IHP assistance are Housing Assistance and Other Needs Assistance (ONA) (see Table 1 ). The period of assistance is generally limited to 18 months following the date of the emergency or major disaster declaration. <2.6.1. Housing Assistance> Multiple types of Housing Assistance may be provided to meet disaster survivors' post-disaster housing needs. Housing Assistance includes the subcategories of Financial Housing Assistance and Direct Housing Assistance. The appropriate types of housing assistance depend on various considerations, including, but not limited to, cost-effectiveness; availability; suitability; and access to services. The federal cost share for FEMA housing assistance is 100%. The following sections provide a brief overview of each type of Housing Assistance organized by subcategory. Financial Housing Assistance Financial Housing Assistance is grant funding provided directly to the individual or household by FEMA. Some types of Financial Housing Assistance are subject to a limit on the amount of Financial Housing Assistance an individual or household is eligible to receive. Lodging Expense Reimbursement (LER) provides funding for out-of-pocket short-term lodging costs and taxes when the applicant is displaced from their primary residence because it is uninhabitable or inaccessible. Rental Assistance (including Initial Rental Assistance and Continued Rental Assistance) provides funding to rent alternate housing accommodations while the applicant is displaced from their primary residence because it is uninhabitable, inaccessible, affected by a utility outage, or unavailable. Home Repair Assistance provides funding to repair an owner-occupied primary residence, utilities, and infrastructure, subject to the maximum amount of financial assistance. Home Replacement Assistance provides funding to help replace a disaster-destroyed owner-occupied primary residence, subject to the maximum amount of financial assistance. Direct Housing Assistance Direct Housing Assistance is housing provided to the individual or household by FEMA or the state, territorial, or Indian tribal government. Direct Housing Assistance is not subject to the limit on the maximum amount of financial assistance an individual or household is eligible to receive. However, FEMA may only provide Direct Housing Assistance when Rental Assistance (a type of Financial Housing Assistance) is not available or is insufficient. Multifamily Lease and Repair (MLR) places disaster survivors in leased, repaired or improved multifamily temporary housing units (e.g., apartments). Transportable Temporary Housing Units (TTHUs) place disaster survivors in purchased or leased temporary housing units. TTHU sites must meet specific requirements, including (1) providing access to available and functional utilities; (2) complying with government ordinances; and (3) satisfying federal floodplain management and Environmental Planning and Historic Preservation (EHP) compliance review requirements. Direct Lease places disaster survivors in leased residential properties. Permanent Housing Construction (PHC) is a last resort used to provide home repair and new construction services to homeowners in insular areas or another location where no alternative housing resources are available. <2.6.2. Other Needs Assistance> Other Needs Assistance (ONA) provides a grant of financial assistance for other disaster-related necessary expenses and serious needs, and includes the subcategories of SBA-Dependent ONA and Non-SBA-Dependent ONA. ONA is subject to a limit on the amount of assistance an individual or household is eligible to receive. Further, ONA assistance may be somewhat limited because some ONA-eligible items and amounts available to be awarded are predetermined by FEMA and the state, territorial, or Indian tribal government. The federal cost share for ONA is 75%, and the non-federal cost share is the remaining 25%. The following sections provide an overview of each type of ONA organized by subcategory. SBA-Dependent ONA FEMA and the SBA collaborate in determining applicant eligibility for SBA-Dependent ONA. To receive SBA-Dependent types of ONA, applicants must first apply for an SBA disaster loan. SBA-Dependent ONA is only available to individuals or households who do not qualify for an SBA disaster loan or whose SBA disaster loan amount is insufficient. Personal Property Assistance provides funding to repair or replace eligible items damaged or destroyed as a result of a disaster. Transportation Assistance provides funding to repair or replace a vehicle damaged by a disaster. Moving and Storage Assistance provides funding to relocate and store essential personal property while repairs are made, and then return the property to the repaired primary residence. Group Flood Insurance Policy enables FEMA or the state, territorial, or Indian tribal government to pay $600 for three years of flood insurance for real and personal property through the National Flood Insurance Program (NFIP). Upon the expiration of the group policy, the applicant must purchase and maintain their own flood insurance; failure to do so may affect future IHP eligibility. Non-SBA-Dependent ONA Non-SBA-Dependent types of ONA may be awarded regardless of the individual or household's SBA disaster loan status. Funeral Assistance provides funding to assist with eligible expenses. Medical and Dental Assistance provides funding to assist with eligible expenses. Childcare Assistance is provided in the form of a one-time payment that covers up to eight cumulative weeks of childcare and eligible expenses to care for children aged 13 and under, and/or children up to age 21 who have a disability. Miscellaneous Expenses provides funding for reimbursement of eligible items purchased or rented after a disaster to assist with recovery. Critical Needs Assistance (sometimes referred to as "Immediate Needs Assistance") is provided in the form of a one-time payment of $500 to individuals or households who need life-saving and life-sustaining items because they are displaced from their primary dwelling as a result of a disaster. Clean and Removal Assistance is provided in the form of a one-time payment to address floodwater contamination for individuals or households whose primary residence experienced flood damage (any assistance received will be deducted from any subsequent award of Home Repair Assistance). <3. IA Factors for a Major Disaster Declaration> State, territorial, and Indian tribal governments do not automatically receive Individual Assistance (IA) when an incident occurs. The governor or tribal chief executive must request that the President declare an emergency or major disaster and that IA be authorized. This is because federal assistance is intended to supplement not supplant local, state, territorial, or Indian tribal government response and recovery efforts. In making such a request, the governor or tribal chief executive is claiming and must demonstrate that they are unable to effectively respond to the incident without federal assistance. The governor or tribal chief executive's request for a presidential declaration of emergency or major disaster must include information about the actions and resources that have been or will be committed, and an estimate of the amount and severity of the disaster-caused damages, in addition to other required information. Specific factors are considered by FEMA when evaluating the need for supplemental federal assistance to individuals (i.e., IA) pursuant to a request for a major disaster declaration. FEMA provides a recommendation to the President, and the decision to grant a declaration request is at the President's discretion. The authority to designate assistance types to be made available is delegated to the FEMA Assistant Administrator for the Disaster Assistance Directorate. <3.1. IA Factors> On March 21, 2019, as required by Section 1109 of the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P.L. 113-2 ), FEMA issued a final rule revising the factors considered when evaluating a governor's request for IA. The factors were revised to establish more objective criteria for evaluating the need for assistance, clarify eligibility requirements, and expedite a presidential declaration determination. These factors became effective June 1, 2019. In addition to the revised factors, FEMA also produced guidance for use by state, territorial, and Indian tribal governments when drafting requests for major disaster declarations authorizing IA. In addition to determining IA eligibility, the factors are also used to identify the types of IA that will be made available to the requesting state/territory/Indian tribal government. The factors considered when evaluating a governor's request for a major disaster declaration authorizing Individual Assistance are intended to assess the "severity, magnitude, and impact of a disaster, as well as the capabilities of the affected jurisdictions." "FEMA will always consider all relevant information submitted as part of a declaration request." As was the case prior to the adoption of the revised IA factors, major disaster declarations are made at the President's discretion and the IA factors do not limit presidential discretion. Brief descriptions of the factors are as follows: 1. State Fiscal Capacity and Resource Availability requires an evaluation of the resources available to the local and state/territorial/Indian tribal government, nongovernmental organizations, and the private sector, combined with the circumstances that contribute to a lack of sufficient resources, resulting in a need for supplemental federal assistance. This factor includes two subfactors: a. Fiscal Capacity evaluates the state's ability to raise revenue for disaster response and recovery using one of two variables: (1) increasing or decreasing, or higher or lower state total taxable resources (TTR); or (2) higher or lower state gross domestic product (GDP), which may be considered as the primary alternative to TTR for requesting territories or when TTR data is unavailable. Higher or lower per capita personal income by local area may also be considered with TTR or state GDP when FEMA needs to better assess the need for supplemental federal assistance within a local area. In addition, other factors may be considered because even states with a high fiscal capacity may be affected by disasters that overwhelm their capabilities, or the variables (i.e., TTR and state GDP) may not accurately reflect a state's fiscal capacity due to extenuating circumstances; and b. Resource Availability evaluates whether the disaster-caused needs can be met using non-Stafford Act sources. Two variables are considered: (1) resources and services provided by local and state/territorial/Indian tribal governments, and nongovernmental and private sector organizations; and (2) the cumulative effect of recent disasters occurring in the previous 24-month period. 2. Uninsured Home and Personal Property Losses considers the results of the FEMA-State Preliminary Damage Assessment (PDA) process to evaluate the extent of damage and estimated cost of assistance. The subfactors considered include (1) the "peril that caused the disaster damage" because it may affect insurance coverage; (2) the percentage of affected applicants with insurance for the peril that caused the damage; (3) whether the concentration of damages is in one area or if it is widespread; (4) the number of homes damaged and degree to which they are damaged (i.e., whether habitability is affected); (5) the estimated cost of assistance based on the PDA data and historical data; (6) the estimated rate of homeownership for the affected homes, which may influence whether the IHP is needed, and what types of housing assistance should be made available; and (7) other relevant PDA data that may demonstrate a need for supplemental federal assistance. 3. Disaster Impacted Population Profile evaluates the recovery challenges of the impacted population considering the affected community's demographics as compared with national averages. 4. Impact to Community Infrastructure evaluates the disaster's impact by considering disruption, damage, or destruction for more than 72 hours to any of the following three subfactors: (1) Life-Saving and Life-Sustaining Services that provide an "essential community function that ... will affect public health and safety", such as police, fire, and emergency medical services (EMS), medical facilities, and water treatment services; (2) Essential Community Services that improve quality of life, such as schools and childcare providers, and social services; and (3) Transportation Infrastructure and Utilities that, for example, render housing uninhabitable or inaccessible, or affect the delivery of services. 5. Casualties , including the number of individuals who are missing, injured, or deceased as a result of a disaster, indicate the level of trauma, which may influence the appropriate types of IA assistance to provide. Disaster Related Unemployment identifies the number of individuals who may have lost work or become unemployed as a result of the disaster and who do not qualify for standard unemployment insurance.

Following a presidential declaration of emergency or major disaster, the Federal Emergency Management Agency (FEMA) may provide three primary forms of assistance: Individual Assistance (IA), Public Assistance (PA), and Hazard Mitigation Assistance (HMA). IA, which is the focus of this report, provides aid to affected individuals and households. PA provides grants to local, state, territorial, and Indian tribal governments, as well as certain private nonprofit organizations for emergency protective measures, debris removal operations, and repair or replacement of damaged public infrastructure. HMA funds pay for mitigation and resiliency projects and programs to reduce the threat or impacts of future disasters. State, territorial, and Indian tribal governments do not automatically receive IA when a disaster occurs. Instead, the governor or tribal chief executive must request that the President declare an emergency or major disaster and that IA be authorized. When drafting such a request, the state, territorial, or Indian tribal government must demonstrate that the incident exceeds their capacity to effectively respond without federal assistance. FEMA then evaluates the request using a set of factors and provides a recommendation to the President. The evaluation of the IA factors, in addition to helping FEMA determine whether or not to recommend the President declare a major disaster, helps FEMA identify the types of IA that are needed. This report provides brief descriptions of the categories of IA authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; P.L. 93-288 , as amended; 42 U.S.C. §§5121 et seq.): 1. Mass Care and Emergency Assistance; 2. Crisis Counseling Assistance and Training Program; 3. Disaster Unemployment Assistance; 4. Disaster Legal Services; 5. Disaster Case Management; and 6. Individuals and Households Program. The information regarding the Individuals and Households Program (IHP) is covered in greatest detail herein, because it is the primary assistance program for providing federal assistance to individuals and households following a presidential declaration of emergency or major disaster. The IHP provides financial and/or direct assistance to eligible individuals and households who, as a result of a disaster, have uninsured or under-insured necessary expenses and serious needs that cannot be met through other means or forms of assistance. Forms of financial assistance include some categories of Housing Assistance (e.g., Rental Assistance) and Other Needs Assistance (ONA), and forms of direct assistance include other categories of Housing Assistance (e.g., Transportable Temporary Housing Units). The IA program information is based on the guidance that FEMA released in March 2019, to serve as a comprehensive IA program policy resource; the Individual Assistance Program and Policy Guide (IAPPG) applies to emergencies and disasters declared on or after March 1, 2019. This report also briefly describes the updated factors considered when evaluating a governor's request for IA pursuant to a presidential declaration of emergency or major disaster, which became effective June 1, 2019. As required by Section 1109 of the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P.L. 113-2 ), FEMA released these updated factors to establish more objective criteria for evaluating the need for assistance, clarify eligibility requirements, and expedite a presidential declaration determination.

crs_R45946

crs_R45946_0

<1. Introduction> In 1883, following the assassination of President James A. Garfield by disgruntled job seeker Charles Guiteau, the Pendleton Act was signed into law by President Chester A. Arthur to ensure that "government jobs be awarded on the basis of merit ." The Pendleton Act ended the spoils system to ensure that qualified individuals were hired into federal service and to prevent the President from being "hounded by job seekers." With the advent of the merit system, federal employees found themselves serving longer in government while also being attracted to private-sector jobs related to their federal employment. The movement of employees between the private sector and government is often referred to as the revolving door . Generally, the revolving door is described as the movement of individuals between the public and private sector, and vice versa. Individuals may move because they possess policy and procedural knowledge and have relationships with former colleagues that are useful to prospective employers, either in government or in the private sector. Some observers see the revolving door as potentially valuable to both private-sector firms and the government; other observers believe that employees leaving government to join the industries they were regulating, or leaving the private sector to join a relevant government agency, could provide an unfair representational advantage and create the potential for conflicts of interest. While Congress has passed laws regulating the revolving door phenomenon in the executive branch, there has to date been little data available about the underlying phenomenon. This report provides data on the movement into and out of government by executive branch personnel in President George W. Bush's and President Barack Obama's Administrations. Using a dataset of executive branch Cabinet department officials compiled by graduate students at the Bush School of Government and Public Service at Texas A&M University in partnership with CRS, this report provides empirical data about the use of the revolving door by a subset of federal officials, with a particular focus on those who were registered lobbyists either before or after their government service. This report begins with an overview of existing revolving door laws and regulations that affect executive branch personnel. It next examines the potential advantages and disadvantages of the revolving door phenomenon. Data collected in partnership with the Bush School of Government and Public Service at Texas A&M University are then presented and analyzed. The data provide an empirical picture of the executive branch revolving door as it relates to registered lobbyists. This analysis is followed by a discussion of select issues for potential congressional consideration. <2. The Revolving Door in the Executive Branch> Revolving door provisions, which can include laws, regulations, and executive orders, are often considered as a subset of conflict-of-interest provisions that govern the interaction of government and nongovernmental individuals. While most historic revolving door provisions generally addressed individuals exiting government for work in the private sector, some have also addressed individuals entering government. Overall, revolving door conflict-of-interest laws have existed since the late 19 th century. The first identified conflict-of-interest provision was enacted in 1872. This provision generally prohibited a federal employee from dealing with matters in which they were involved prior to government service. In 1919, the first restrictions were placed on individuals who had specifically served as procurement officials from leaving government service "to solicit employment in the presentation or to aid or assist for compensation in the prosecution of claims against the United States arising out of any contracts or agreements for the procurement of supplies which were pending or entered into while the said officer or employee was associated therewith." Similarly, the Contract Settlement Act of 1944 (58 Stat. 649) included a provision making it Unlawful for any person employed in any Government agency during the period such person is engaged in such employment or service, to prosecute or to act as counsel attorney or agent for prosecuting, any claim against the United States, or for any such person within two years after the time when such employment or serve has ceased, to prosecute, or to act as counsel, attorney, or agent for prosecuting, any claim against the United States involving any subject matter directly connected with which such person was so employed or performed duty. In 1962, portions of the current statutory provision at 18 U.S.C. 207 were enacted as part of a major revision of federal conflict-of-interest laws. Since the 1960s, postemployment restriction laws have been amended several times, including by the Ethics in Government Act of 1978 to add certain one-year "cooling off" periods for high-level executive branch personnel and limit executive branch official postemployment advocacy (i.e., lobbying) activities; by the Ethics Reform Act of 1989; and by the Honest Leadership and Open Government Act of 2007, which extended the "cooling off" period to two years for "very senior" executive branch officials. Revolving door provisions, including conflict-of-interest laws and "cooling off" periods, were initially designed to protect government interests against former officials using proprietary information on behalf of a private party and current officials against inappropriately dealing with matters on which they were involved prior to government service. Additionally, they attempted to limit the possible influence and allure of potential private arrangements by federal officials when they interact with prospective private clients or would-be future employers while still employed by the government. Historically, the decision to adopt, or amend, revolving door and conflict-of-interest provisions has been balanced against the potential deterrent of restricting the movement of individuals between the public and private sector. For example, in 1977, the Senate Committee on Governmental Affairs reported a bill that would have amended the existing revolving door provisions. As part of its justification for the measure, the committee explained the need to balance the appearance of impropriety against the need to attract skilled government workers. Its report noted the following: 18 USC 207, like other conflict of interest statutes, seeks to avoid even the appearance of public office being used for personnel or private gain. In striving for public confidence in the integrity of government, it is imperative to remember that what appears to be true is often as important as what is true. Thus government in its dealings must make every reasonable effort to avoid even the appearance of conflict of interest and favoritism. But, as with other desirable policies, it can be pressed too far. Conflict of interest standards must be balanced with the government's objective in attracting experienced and qualified persons to public service. Both are important, and a conflicts policy cannot focus on one to the detriment of the other. There can be no doubt that overly stringent restrictions have a decidedly [sic] adverse impact on the government's ability to attract and retain able and experienced persons in federal office. The revolving door allows movement in both directions, with individuals both entering and exiting government. Some past researchers have argued that those who enter government with prior industry experience are more supportive of regulated industry than those without industry experience. Similarly, two studies have concluded that the lure of private-sector employment has led regulators to support the regulated industry during their time in government. Whether or not the revolving door on net helps or hinders the functioning of government agencies may depend, however, on the potential benefits of transitioning individuals between government and the private sector versus the potential for conflicts of interest to develop on the part of those individuals. Some studies have identified positive aspects of the revolving door and the relationships developed between regulators and the regulated. Other studies find that government agencies are better run with stable leadership that does not often utilize the revolving door and keeps some distance between the agency and the regulated industry. <3. Existing Revolving Door Laws and Executive Orders> Current laws and regulations generally govern the movement of federal employees from the government to the private sector and vice versa. These provisions can be divided into three categories: broadly applicable postemployment laws, supplemental regulations, and executive order requirements. Revolving door provisions, however, do not necessarily apply to all instances of an employee leaving government service. Rather, they are specific to covered officials (see below) who leave government and are then involved with an issue they were also involved in while a federal employee. For some circumstances, the Office of Government Ethics (OGE) "has emphasized that the term [ particular matter ] typically involves a specific proceeding affecting the legal rights of the parties, or an isolatable transaction or related set of transactions between identified parties." <3.1. Postemployment Laws> Initially enacted in 1962, 18 U.S.C. 207 provides a series of postemployment restrictions and was enacted "to prevent former Government employees from leveraging relationships forged during their Government service to assist others in their dealings with the Government." These include a lifetime ban on "switching sides" on a particular matter involving specific parties on which any executive branch employee had worked personally and substantially while with the government; a two-year ban on "switching sides" on a somewhat broader range of matters that were under the employee's official responsibility; a one-year restriction on assisting others on certain trade or treaty negotiations; a one-year "cooling off" period for certain "senior" officials, barring representational communications before their former departments or agencies; a two-year "cooling off" period for "very senior" officials, barring representational communications and attempts to influence certain other high-ranking officials in the entire executive branch of government; and a one-year ban on certain officials performing some representational or advisory activities for foreign governments or foreign political parties. Current law focuses on postemployment restrictions of former federal employees rather than on individuals entering government. These postemployment laws focus on "representational" activities of former federal employees and are "designed to protect against the improper use of influence and government information by former employees, as well as to limit the potential influence that a prospective employment arrangement may have on current federal officials when dealing with prospective private clients or future employers while still in government service." One study found the appeal of postemployment contact with the government to be strong, especially when there is a "demand for the personnel credentials" of former officials within an industry, and when former officials can move from a regulatory agency to the regulated industry. The revolving door restrictions are in addition to statutes that apply more broadly to all individuals engaged in certain representational activities, regardless of whether they ever worked for the federal government. These restrictions, found primarily in the Foreign Agents Registration Act (FARA) and the Lobbying Disclosure Act (LDA), however, do not prohibit any particular behavior. Rather, they require registration as a foreign agent or lobbyist and the periodic disclosure of information about influence activities. <3.2. Supplemental Regulations> Regulations for the implementation of revolving door provisions are issued by OGE. Found at 5 C.F.R. 2641, these regulations provide an overview and definitions for current revolving door, postemployment conflict-of-interest restrictions; list prohibitions covered by the regulations and the law; and provide a summary of statutory exceptions and waivers. The OGE regulations pertain only to postemployment restrictions found at 18 U.S.C. 207 and only to executive branch employees. In some cases, agencies have issued additional regulations that supplement OGE's regulations. For example, the Office of Management and Budget (OMB) provides guidance on the application of postemployment restrictions to all government employees, whereas the Federal Housing Finance Agency provides specific additional postemployment restrictions for its employees. <3.3. Executive Order Ethics Pledges> In several instances, the President has issued an executive order to influence the interactions and relationships between the public and the executive branch. For example, President John F. Kennedy issued an executive order (E.O. 10939) that included provisions for behavior by government employees. In the years after President Kennedy's Administration, other Presidents also issued ethics executive orders to address postgovernment revolving door restrictions. These executive orders were issued by President Lyndon Johnson, President Richard Nixon, President Ronald Reagan, and President George H. W. Bush. In more recent Administrations, three Presidents have each issued an executive order that included additional revolving door restrictions for certain Administration appointees. They are President Clinton (1993), President Obama (2009), and President Trump (2017). Each of these executive orders contained an ethics pledge that provided additional conflict-of-interest requirements for executive branch personnel leaving the government and for individuals entering government. Each also extended statutory and regulatory revolving door provisions, included additional restrictions on lobbyists entering government and lobbying back government upon departure, and in two instances (Clinton and Trump) contained restrictions on former appointees leaving the government to represent a foreign principal. For a more detailed discussion of executive order ethics pledges, see CRS Report R44974, Ethics Pledges and Other Executive Branch Appointee Restrictions Since 1993: Historical Perspective, Current Practices, and Options for Change , by Jacob R. Straus. <4. Revolving Door: Advantages and Disadvantages> Discussion of whether revolving door restrictions are positive or negative generally focuses on whether former government employees, when they switch jobs, have an inherent or perceived conflict of interest. Though legislation often treats the revolving door as a negative trend, the movement of individuals between the government and private sector may also present multiple potential benefits. One argument in favor of the revolving door, for example, is that the promise of future private-sector employment could potentially improve the quality of candidates applying for government jobs. Further, direct connections with government officials are important, but a close relationship is not necessarily what drives postemployment activities. Although some believe that government employees contemplating a move to the private sector will be friendly to industry interests at the expense of the public interest, two studies have also concluded that regulators instead may engage in more aggressive actions, regardless of their future job prospects. Additionally, the flow of personnel between the public and private sectors may increase the knowledge base of both sectors. Critics of the revolving door and the movement of employees between the government and private sector often advocate for longer "cooling off" periods and stronger restrictions related to conflicts of interest. Additionally, critics often assert that the revolving door has negative effects for the transparency and efficiency of government. These critics see existing bias between those in government and their connections with lobbying firms and the potential for those connections to be exploited when the individual is employed by the private sector. Additional criticism of the revolving door focuses on the worth of a former government employee over time. One study has concluded that a majority of revenue generated by private lobbying firms was directly attributable to employees with previous government experience. Another study found that "'who you know' rather than 'what you know' drives a good proportion of lobbying revenues." <5. Research Design and Methodology> In every Administration, executive branch officials arrive from, and depart to, the private sector. The movement between the government and the private sector touches on many industries and professions. When such movement occurs, it is possible that conflicts of interest could arise for current and former government officials. Data on executive branch employees entering and exiting the government have historically been difficult to compile. During the 2017-2018 academic year (September 2017 to May 2018), CRS partnered with graduate students at the Bush School of Government and Public Service at Texas A&M University to collect and analyze data on the revolving door. Data were collected on the subset of former executive branch officials who were listed in the United States Government Policy and Supporting Positions (the Plum Book ). Published every four years, the Plum Book "lists over 7,000 Federal civil service leadership and support positions that may be subject to noncompetitive appointment, nationwide. Data covers positions such as agency heads and their immediate subordinates, policy executives and advisors, and aides who report to these officials." The positions listed in the Plum Book are political appointments, which represent a subset of executive branch employees. Therefore, this report presents data on that subset of individuals who have worked in these executive branch positions. Additionally, since the Plum Book is published only once every four years, it is a "snapshot" of a given Administration's appointees and includes only individuals who were serving at the time of publication. Four Plum Books were used to build a dataset of political appointees who served in President George W. Bush's and President Barack Obama's Administrations. Overall, 6,665 federal appointees were included spanning the two Administrations. Table 1 reports the number of appointees from each Administration included in this dataset. If an appointee served in more than one Administration, data reported are for the most recent Administration served. Appointees were not included in the dataset twice. Further, if an appointee left the Administration prior to the Plum Book 's publication, then they do not appear in the data. Political appointees included in the dataset represented 15 Cabinet departments and were paid at the GS-13 level or higher a pay rate generally considered to have supervisory authority in the executive branch. Table 2 lists the Cabinet departments included in this study and the number of employees from that Cabinet department included in the dataset. For most individuals and industries, data on both pregovernment and postgovernment service is not readily obtainable from public sources. Therefore, this report uses official Lobbying Disclosure Act (LDA) data on registered lobbyists to gain insight into the revolving door phenomenon. Administered by the Clerk of the House of Representatives and the Secretary of the Senate, LDA registration data are required by law to be published online. The LDA database includes all registration and disclosure statements for lobbyists and is searchable by name, lobbying firm, or lobbying client. Since the Plum Book provides the names of former executive branch officials, the LDA database was searched to match pregovernment and postgovernment service of individuals registered as lobbyists. Appointees were classified as lobbyists if they were registered under LDA at any time before or after their government service, regardless of the duration of their registration. These data, which reflect a subset of people who move between employment in the private sector and government in either direction, are the focus of this report's analysis. <6. Revolving Door Lobbyists in the Executive Branch> <6.1. Overall Patterns> Of Bush and Obama Administration executive branch appointees in the dataset, approximately 92% (6,159) were never registered as lobbyists, while 8% (506) were registered either before, after, or both before and after their government service. Of those registered as lobbyists, approximately 36.5% registered before joining the government, 55.1% registered after leaving their executive branch jobs, and 8.3% registered both before and after their federal service. Overall, these numbers generally appear to be in line with other studies of the executive branch, which suggest that most high-level federal appointees were not employed as lobbyists either prior to, or after, their government service. Examining the number and percentage of lobbyists in the dataset by Administration ( Table 3 ) shows that the overall levels of registered lobbyists either before or after government service is relatively low in both the Bush Administration and the Obama Administration. The Obama Administration, however, had more of its appointees who were registered lobbyists before their government service than after their government service, while the Bush Administration had more of its appointees who were registered lobbyists after their government service than before their government service. As shown in Table 3 , the total number of registered lobbyists in the dataset from the Bush Administration (340) was higher overall than from the Obama Administration (166), although the number of lobbyists serving in either Administration is not particularly large compared to the total number of appointees included in the dataset. During his Administration, President Obama instituted an executive order to restrict the number of lobbyists entering the Administration, a policy that did not exist in the Bush Administration. The number of individuals who were registered lobbyists before serving in President Obama's first term is similar to the first term of the Bush Administration. The number of lobbyists entering government, however, was higher in President Obama's second term than in either the Bush Administration or President Obama's first term. For individuals leaving the Administration, the number of registered lobbyists is lower in the Obama Administration than in the Bush Administration. <6.2. Department Trends> In the dataset, Cabinet departments differed greatly in the number of officials who were registered lobbyists either before or after their federal service. Some departments had few individuals who were registered lobbyists either before or after their time in government, whereas others had more. Figure 1 reports the percentage of registered lobbyists by department in the dataset collected by the Bush School of Government and Public Service and CRS. As shown in Figure 1 , the percentage of federal appointees in the dataset who registered as lobbyists before their government service, after their government service, or both ranges from a high of 18% (Department of Commerce) to a low of 1% (Department of Justice). The figures for other agencies ranges between 2% and 17%. The overall percentages of Cabinet department officials in the dataset who have ever been registered lobbyists might raise some questions for future research on the connections between government agencies and regulated industries. For example, some agencies appear to have a higher percentage of lobbyists than other agencies. Could a high percentage of lobbyists indicate stronger links to regulated industries? Similarly, how might lobbyists entering government differ in their government-industry connection than lobbyists leaving government? Might maintaining government-industry connections allow for better outreach by government agencies and access to information and resources by interest groups? The timing of when lobbyists registered may provide additional insight into how often federal officials in the dataset utilized the revolving door between government and lobbying. Figure 2 shows the percentage of LDA-registered officials at various agencies divided by when they registered before their service, after their service, or both. As Figure 2 shows, every Cabinet department for which data were gathered had some number of officials listed in the Plum Book who registered as lobbyists either before or after their government service, or both. The number of officials in the dataset identified as registered lobbyists is noted on the left-hand side of Figure 2 next to the name of the federal department at which they worked. As the figure shows, each department had a different mix of the percentage of its officials in the dataset identified as registered lobbyists who registered to lobby before their government service, after their government service, or both. The percentage of the total number of lobbyists who worked at a particular agency who were registered lobbyists before their government service ranged from 10% in the Department of Labor to 61% in the Department of Veterans Affairs. The percentage of the total number of lobbyists who worked at a particular agency who were registered lobbyists after their government service ranged from 39% in the Department of Veterans Affairs to 82% in the Department of Transportation. Additionally, all departments included in the data except the Department of Veterans Affairs had individuals who were registered lobbyists before and after their government service. For the Department of Labor, half of officials who were lobbyists registered both before and after their government service. For other agencies, the percentages ranged from 1% (Department of State) to 19% (Department of Housing and Urban Development). <7. Conclusions and Selected Considerations for Congress> In every Administration, individuals move between the public and private sectors. In recent years, there has been greater focus on potential additional restrictions that might be placed on individuals entering and exiting government through the introduction of legislation to amend current revolving door restrictions and the issuance of executive orders to temporarily increase the "cooling off" period for executive branch appointees. Current law compartmentalizes the revolving door by placing distinctive postemployment restrictions on different types of government employees. For example, restrictions on government officials engaged in contracting do not necessarily apply to nonprocurement or noncontracting employees. Such varying restrictions were enacted because "the present complexity and size of Executive departments require occasional separate treatment of certain departmental agencies and bureaus. It would be patently unfair in some cases to apply the one year no contact prohibition to certain employees for the purpose of an entire department when, in reality, the agency in which he worked was separate and distinct from the larger entity." <7.1. Amending "Cooling Off" Periods> In past Congresses, legislation has been introduced to lengthen revolving door "cooling off" periods. Those measures often propose extending "cooling off" periods to as few as two years to instituting a lifetime ban. If enacted, increased restrictions could serve to diminish the interaction between former government officials and government agencies and could reduce the appeal of leaving the government for a private-sector position. Additionally, such additional restrictions might "eliminate the appearance of favoritism a former official may have in lobbying his or her former office, and prevent a former official from financially benefiting from the use of confidential information obtained while working for the Federal Government." Conversely, extending the "cooling off" period could possibly be seen as an unreasonable restriction on postemployment and "curtailing an individual's constitutional right of free association." Alternatively, Congress could reduce or eliminate the "cooling off" period. Having a shorter "cooling off" period, or eliminating it altogether, might arguably increase the talent pool available both inside and outside the government. Finally, Congress could codify past executive branch ethics pledges that generally placed additional restrictions on executive branch appointees. Codifying ethics pledge provisions would have the effect of making those changes permanent, and not subject to being revoked by a future executive order. This could allow for permanent changes to existing ethics and conflict-of-interest provisions. <7.2. Administration of the Revolving Door> Administration and enforcement of revolving door provisions are spread among several entities. For example, each agency is responsible for collecting financial disclosure statements from individual employees and ensuring that they comply with conflict-of-interest provisions, including revolving door restrictions. Potential violations of revolving door laws, however, would likely be prosecuted by the Department of Justice. Congress could amend current law to consolidate the administration and enforcement of conflict of interest and revolving door provisions. Consolidation could provide a single office to help ensure compliance and enforcement of existing laws. Consolidation, however, would potentially add an additional layer to the collection and evaluation documents used to identify potential conflicts-of-interest or revolving door concerns. Since each agency collects financial disclosure forms from its employees, those forms would still need to be transmitted to a central location. Ethics enforcement, including the review of financial disclosure forms for potential conflicts of interest, has historically been conducted at the agency level, as each agency is often in the best position to determine whether a real or perceived conflict exists for its employees. <7.3. Maintain Current Revolving Door Standards> Congress might determine that current revolving door laws and regulations are effective or that the potential costs of changes outweigh potential benefits. Instead of amending existing revolving door provisions, Congress could continue to use existing law and regulations to govern the movement of individuals between the federal government and private sector. Changes to the revolving door could be made on an as-needed basis through modifications to executive branch regulations or executive orders.

Individuals may be subject to certain restrictions when leaving the government for private employment or joining the government from the private sector. These restrictions were enacted in response to what is often referred to as the revolving door . Generally, the revolving door is described as the movement of individuals between the public and private sector. Individuals may move because they possess policy and procedural knowledge and have relationships with former colleagues that are useful to prospective employers. Laws attempting to restrict the movement of individuals between the government and the private sector have existed since at least the late 1800s. Today's revolving door laws focus on restricting former government employees' representational activities that attempt to influence federal officials with whom they used to work. Found at 18 U.S.C. §207, revolving door laws for executive branch officials include (1) a lifetime ban on "switching sides" (e.g., representing a private party on the same "particular matter" involving identified parties on which the former executive branch employee had worked while in government); (2) a two-year ban on "switching sides" on a broader range of issues; (3) a one-year restriction on assisting others on certain trade and treaty negotiations; (4) a one-year "cooling off" period for certain senior officials on lobbying; (5) two-year "cooling off" periods for very senior officials from lobbying; and (6) a one-year ban on certain former officials from representing a foreign government or foreign political party. In addition to laws, executive orders have been used to place further restrictions on executive branch officials, including officials entering government. For example, President Trump issued an executive order (E.O. 13770) to lengthen "cooling off" periods for certain executive branch appointees both entering and exiting government. To date, much of the empirical work concerning the revolving door has focused on former Members of Congress or congressional staff leaving Capitol Hill, especially those who become lobbyists in their postcongressional careers. This report provides some empirical data about a different aspect of the revolving door—the movement into and out of government by executive branch personnel. Using research conducted by the Bush School of Government and Public Service at Texas A&M University's capstone class over the 2017-2018 academic year, this report presents data about the revolving door in the executive branch through the lens of President George W. Bush's and President Barack Obama's Administrations. The analysis includes Cabinet department officials who were listed, for either Administration, in the United States Government Policy and Supporting Positions (the Plum Book ). Through an examination of appointees in President Bush's and President Obama's Administrations, several findings emerge. First, approximately 92% of executive branch officials in the examined dataset were never registered lobbyists, while 8% were registered lobbyists at some point before or after their government service. Second, Cabinet departments differed greatly in the number of officials who were registered lobbyists either before or after their federal service. Although every Cabinet department surveyed had some percentage of officials registered as lobbyists either before or after their government service, the percentage of officials included in the dataset who registered as lobbyists before their government service, after their government service, or both ranged from a high of 18% (Department of Commerce) to a low of 1% (Department of Justice). Third, the data also show that for lobbyists entering government, the percentage of officials in the dataset who had been lobbyists before government serving in the Bush and Obama Administrations ranged from 10% in the Department of Labor to 61% in the Department of Veterans Affairs. The analogous percentages for government employees in the dataset leaving to become lobbyists ranged from 39% in the Department of Veterans Affairs to 82% in the Department of Transportation. Finally, the report identifies several areas for potential congressional consideration. In recent years, several bills have been introduced in Congress to address many of these potential areas. These include options to amend existing "cooling off" periods and evaluate the administration and enforcement of revolving door regulations. Alternatively, Congress may choose to maintain current "cooling off" periods, administration, and enforcement practices.

crs_R45808

crs_R45808_0

The current September 11 th Victim Compensation Fund (VCF) provides cash benefits to certain persons whose health may have been affected by the aftermath of the September 11, 2001, terrorist attacks on the Pentagon and the World Trade Center, and the terrorist-related aircraft crash at Shanksville, PA. The current iteration of the VCF may be unable to pay full benefits to eligible persons and is scheduled to sunset on December 18, 2020. Current VCF data are provided in this report's Appendix . <1. History of the VCF> On September 22, 2001, the Air Transportation Safety and System Stabilization Act (ATSSA; P.L. 107-42 ) was enacted into law. Quickly passed by Congress in the wake of the September 11, 2001, terrorist attacks, this legislation provided various forms of relief to the American airline industry and affirmed Congress's commitment to improving airline safety. Title IV of the ATSSA also established the VCF to compensate persons injured or the representatives of persons killed in the attacks or their immediate aftermath. The VCF originally closed in 2003 and was reopened in 2011 and expanded to provide compensation to responders to the September 11, 2001, terrorist attacks and others, such as certain New York City residents, who may have suffered health effects in the aftermath of the attacks. The VCF was reauthorized in 2015 and, if not reauthorized in the 116 th Congress, will sunset on December 18, 2020. <1.1. Original VCF> The original VCF, as created by Title IV of the ATSSA, provided cash benefits to the following groups of persons who suffered physical injury or death as a result of the terrorist attacks of September 11, 2001: persons who were present at the World Trade Center, Pentagon, or aircraft crash site in Shanksville, PA, at the time of or in the immediate aftermath of the aircraft crashes at those sites on September 11, 2001; and passengers and crew of any aircraft that crashed on September 11, 2001, as a result of terrorist activity. The amount of benefits available to each claimant was determined by a Special Master appointed by the Attorney General. The amount of benefits payable to each claimant was based on each person's economic losses (such as loss of future earnings) and noneconomic losses (such as pain and suffering). The VCF statute specifically prohibited the payment of punitive damages. Benefits were reduced by certain collateral source payments, such as life insurance benefits, available to the claimant. There was no cap on the amount of benefits that any one person could receive or on total benefits paid. By filing a VCF claim, a person waived his or her right to file a civil action or be a party to such an action in any federal or state court for damages related to the September 11, 2001, terrorist-related aircraft crashes. This provision established the VCF as an alternate and expedited route to compensation for victims while providing some protection against lawsuits for damages that may have been brought by victims against the air carriers; airframe manufacturers; the Port Authority of New York and New Jersey, who owned the World Trade Center; or any other entity. Congress provided funding for the VCF through an appropriation of "such sums as may be necessary" for benefit payment and administration. The Special Master of the VCF was required to promulgate regulations to govern the program within 90 days of the law's enactment, and all claims had to be filed within two years of the regulations' promulgation, at which time the VCF would close. The original VCF received 7,403 claims and made awards totaling $7.049 billion to 5,560 claimants. <1.2. Reopened VCF> The original VCF was closed to new claims in December 2003. However, concerns about injuries and illnesses incurred by persons involved in emergency response, recovery, and debris removal operations at the September 11 th aircraft crash sites led Congress to reopen the VCF with the enactment of Title II of the James Zadroga 9/11 Health and Compensation Act of 2010 (Zadroga Act; P.L. 111-347 ). The reopened VCF extended eligibility for cash benefits to persons who suffered physical injuries or illnesses as a result of rescue, recovery, or debris removal work at or near the September 11 th aircraft crash sites during the period from September 11, 2001, to May 30, 2002, as well as certain persons who lived, worked, or were near the World Trade Center on September 11, 2001. The VCF was initially reopened for new claims through October 3, 2016. Total benefits and administrative costs paid by the reopened VCF were limited to $2.775 billion, unlike in the original VCF, which had no cap on total funding for benefits, allowing the Special Master to award benefits without considering the benefits' total cost. Under the reopened VCF, attorneys' fees were limited to 10% of the VCF award. <1.3. VCF Reauthorization> The reopened VCF was scheduled to stop taking claims on October 3, 2016. The VCF was reauthorized on December 18, 2015, with the enactment of Title IV of Division O of the Consolidated Appropriations Act, 2016 (Zadroga Reauthorization Act of 2015; P.L. 114-113 ). Under this reauthorization, claims approved before the reauthorization date are considered Group A claims. Group A claims are subject to the same rules as claims under the reopened VCF and are subject to the $2.775 billion cap on total benefit payments. All other claims filed before the final VCF deadline of December 18, 2020, are considered Group B claims subject to additional rules and funding caps established by the reauthorization legislation. Thus, all current claims are Group B claims. <2. Overview of the VCF Under Current Law> <2.1. VCF Eligibility> To be eligible for VCF benefits, a person must have died as a passenger or crew member on one of the aircraft hijacked on September 11, 2001; died as a direct result of the terrorist-related aircraft crashes or rescue, recovery, or debris removal in the immediate aftermath of the September 11, 2001, terrorist attacks; or been present at a September 11 th crash site in the immediate aftermath of the September 11, 2001, terrorist attacks and suffered physical harm as a direct result of the crashes or the rescue, recovery, and debris removal efforts. <2.1.1. Immediate Aftermath> For the purposes of VCF eligibility, the immediate aftermath of the September 11 th terrorist attacks is the time period from September 11, 2001, to May 30, 2002. <2.1.2. September 11th Crash Sites> For the purposes of VCF eligibility, the September 11 th crash sites include the World Trade Center, Pentagon, or Shanksville, PA, crash sites; the buildings or portions of buildings that were destroyed as a result of the September 11 th terrorist attacks; the area in Manhattan that is south of the line that runs along Canal Street from the Hudson River to the intersection of Canal Street and East Broadway, north on East Broadway to Clinton Street, and east on Clinton Street to the East River; and any area related to debris removal, such as the debris-removal barges and Fresh Kills in Staten Island, New York. <2.1.3. Physical Harm> To be eligible for the VCF, individuals who did not die as passengers or crew members of one of the hijacked aircraft, or as a direct result of the September 11 th terrorist attacks (including rescue, recovery, and debris removal), must have suffered physical harm as a result of the attacks. For the purposes of VCF eligibility, physical harm is demonstrated by the presence of a World Trade Center (WTC)-related physical health condition as defined for the purposes of the World Trade Center Health Program (WTCHP). <2.1.3.1. WTC-Related Physical Health Condition> A WTC-related physical health condition is a physical health condition covered by the WTCHP. These conditions are those provided in statute at Sections 3312(a) and 3322(b) of the Public Health Service Act (PHSA) and those added through rulemaking by the WTCHP administrator. Per Section 3312(a) of the PHSA, to be covered by the WTCHP and thus compensable under the VCF, a condition must be on the list of covered WTCHP-covered conditions and it must be determined that exposure in the aftermath of the September 11, 2001, terrorist attacks "is substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." In most cases, the VCF requires that a person's condition be certified by the WTCHP for that condition to be compensable. The WTCHP provides guidance on how to evaluate if a person's condition meets the standard to be linked to exposure in the aftermath of the September 11, 2001, terrorist attacks. This evaluation is based on a combination of the amount of time a person was physically present at a site and the specific activities such as search and rescue, sleeping in a home in Lower Manhattan, or just passing through a site in which the person engaged. For example, a person who was engaged in search and rescue activities at the World Trade Center site between September 11 and September 14, 2001, must have been present for at least 4 hours for the WTCHP to certify his or her condition and thus compensable by the VCF, whereas a person whose only activity was passing through Lower Manhattan during the same period, and who was not caught in the actual dust cloud resulting from the buildings' collapse, would have to have been in the area for at least 20 hours to be eligible for compensation. The WTCHP evaluates conditions that do not meet the minimum exposure criteria on a case-by-case basis using "professional judgement" and "any relevant medical and/or scientific information." WTCHP-covered mental health conditions may not be used to establish VCF eligibility, as the VCF does not include any provisions for benefit payments for mental health conditions. <2.1.3.2. Cancer as a WTC-Related Physical Health Condition> The WTCHP statute does not include any type of cancer in the list of WTC-related health conditions. However, the statute does require the WTCHP administrator to periodically review the available scientific evidence to determine if any type of cancer should be covered by the WTCHP and, by extension, the VCF. In response to a petition to add conditions to the list of WTC-related health conditions, the WTCHP administrator is required, within 90 days, to either request a recommendation on action from the WTC Scientific/Technical Advisory Committee (STAC) or make a determination on adding the health condition. If the WTCHP administrator requests a recommendation from the STAC, that recommendation must be made within 90 days of its receipt and the WTCHP administrator must act on that request within an additional 90 days. On September 7, 2011, Representatives Carolyn B. Maloney, Jerrold Nadler, Peter King, Charles B. Rangel, Nydia M. Velazquez, Michael G. Grimm, and Yvette Clarke and Senators Charles E. Schumer and Kirsten E. Gillibrand filed a petition, in the form of a letter to the WTCHP administrator, requesting that the administrator "conduct an immediate review of new medical evidence showing increased cancer rates among firefighters who served at ground zero" and that the administrator "consider adding coverage for cancer under the Zadroga Act." In response to this petition, the WTC administrator requested that the STAC "review the available information on cancer outcomes associated with the exposures resulting from the September 11, 2001, terrorist attacks, and provide advice on whether to add cancer, or a certain type of cancer, to the List specified in the Zadroga Act." On September 12, 2012, based on the STAC's recommendations, the WTCHP administrator added more than 60 types of cancer, covering nearly every body system and including any cancers in persons less than 20 years of age and any rare cancers, to the list of WTC-related health conditions, thus making these conditions compensable under the VCF. In a review of the decision to add cancers to the list of WTC-related health conditions, the Government Accountability Office (GAO) found that the WTCHP administrator used a hazards-based approach to evaluate cancers. This approach evaluated whether exposures in the aftermath of the September 11, 2001, terrorist attacks were associated with types of cancer but did not evaluate the probability of developing cancer based on a given exposure. A GAO-convened scientific panel indicated that the hazards-based approach the WTCHP administrator used was reasonable given data constraints and the fact that there is a certification process to determine if a cancer or other condition on the list of WTC-related health conditions meets the statutory requirement of being "substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." The panel also indicated that this approach could have benefited from an independent peer review process. The WTCHP administrator stated that peer review was not possible given the statutory time constraints to act on the petition and the STAC's recommendation. One year later, the WTCHP administrator added prostate cancer to the list of WTC-related health conditions. The WTCHP administrator has also established minimum latency periods for certain types of cancer and maximum onset periods for certain types of aerodigestive disorders. <2.2. VCF Operations> The Civil Division of the Department of Justice administers the VCF. The VCF Special Master, currently Rupa Bhattacharyya decides VCF eligibility and benefits. A claimant dissatisfied with the Special Master's decision on his or her claim may file an appeal and request a hearing before a VCF hearing officer appointed by the VCF. There is no further right of appeal or judicial review of VCF decisions. A claimant may amend his or her claim after a decision has been made if the claimant has new material relevant to the claim. <2.2.1. Registration and Claim Deadlines> All claims for VCF benefits must be filed by December 18, 2020, five years after the VCF reauthorization act's enactment. Before filing a claim, a potential claimant must have registered with the VCF by one of the following applicable deadlines: by October 3, 2013, if the claimant knew, or reasonably should have known, that he or she suffered a physical harm or died as a result of the September 11 th attacks or rescue, recovery, or debris removal efforts, and that he or she was eligible for the VCF, on or before October 3, 2011; within two years of the date the claimant knew, or reasonably should have known, that he or she has a WTC-related physical health condition or died as a result of the September 11 th attacks and is eligible for the VCF. If a claimant has a condition that is later added to the list of conditions covered by the WTCHP, then the two-year period begins on the later of the dates when a government entity, such as the WTCHP or a state workers' compensation agency, determines that the condition is related to the September 11 th attacks, or when a claimant's condition is added to the list of conditions covered by the WTCHP. <2.3. VCF Benefits> Benefits under the original VCF were not subject to any caps on individual or total payments. When the VCF was reopened, total benefits were subject to a cap of $2.775 billion; however, there were no specific caps on individual benefits. VCF benefits for Group B are subject to caps on noneconomic losses and total benefits. Benefits under the VCF for Group B claims are determined by the Special Master based on the claimant's economic and noneconomic losses. For noneconomic losses, there is a cap of $250,000 for claims based on cancer and $90,000 for all other claims. However, for cases in which a person's death was caused by a WTC-related health condition, the VCF regulations provide that the presumed award for noneconomic loss is $250,000 plus an additional $100,000 for the person's spouse and each dependent. When calculating economic losses, the Special Master is only permitted to consider the first $200,000 in annual income when determining losses to past earnings and future earning capacity, which limits the amount of economic losses that can be paid. There is a total cap of $4.6 billion for VCF Group B awards. As in past iterations of the VCF, benefits are reduced by certain collateral source payments available to claimants, such as life insurance benefits, workers' compensation payments, and government benefits related to the person's injury or death, such as Social Security Disability Insurance (SSDI) and the Public Safety Officers' Benefits Program (PSOB). <3. VCF Financing> The costs of VCF benefits and administration are not subject to annual appropriations. Rather, costs for Group A benefits and administration were financed by the $2.775 billion in appropriations provided by the Zadroga Act. Costs for Group B benefits and administration are financed by the one-time appropriation of $4.6 billion provided in the Zadroga Reauthorization Act of 2015. Thus, the total funding available for the VCF since its reopening is $7.375 billion. Funding was made exempt from budget sequestration by the Zadroga Reauthorization Act of 2015. <4. Special Master's Reduction of Future Awards> Total funding for VCF benefits and administrative costs is capped by the $7.375 billion in appropriations that have been provided in the Zadroga Act and Zadroga Reauthorization Act of 2015, with a total cap of $4.6 billion for VCF Group B awards. The VCF statute requires the Special Master to annually reassess VCF policies and procedures to determine if these policies and procedures satisfy the statutory requirements that claimants with the most debilitating physical conditions have their claims prioritized and that total expenditures for awards and administrative costs associated with Group B claims do not exceed the $4.6 billion in available funding. <4.1. Special Master's Assessment> <4.1.1. Notice of Inquiry> In October 2018, the Special Master published a Notice of Inquiry in the Federal Register seeking public comments on possible policy changes that the Special Master could consider to ensure there is sufficient funding to administer and pay future VCF claims without exceeding the $4.6 billion cap on Group B expenditures. The Special Master received 28 comments in response to this Notice of Inquiry, of which 16 were relevant to the request for information on possible VCF policy and procedure changes. <4.1.2. Projections of Future VCF Expenditures> In February 2019, the Special Master published her most recent annual assessment of VCF policies and procedures. This report includes two sets of projections of future VCF benefit and administrative costs. One projection is based on historical program data and another projection is based on these historical data, augmented by data on recent program trends. These two models were also used in the 2017 assessment, whereas the 2018 assessment only projected costs based on historical program data. As shown in Table 1 , the Special Master projects under both models that total VCF program costs by the end of the program will far exceed the $7.375 billion in available funding. This is the first time the Special Master projects that program funding will be insufficient to pay all VCF benefits and administrative expenses. On June 21, 2019, during testimony before the House Committee on the Judiciary, the Special Master pointed to increases in death claims, cancer claims, and claims from non-responders have played a role in driving projected benefit costs above the amount of available funding Congress provided. The Special Master did not, however, break down how much of the cost increases can be attributed to each of these three factors. <4.1.2.1. Death Claims> As of May 31, 2019, the Special Master has determined that 1,057 death claims are eligible for the reopened VCF. Of these, award decisions based on economic and noneconomic loss have been made in 856 cases. As a comparison, the original VCF paid awards in 2,880 cases of death. Because there is a regulatory presumption of noneconomic loss of $250,000 for the decedent and an additional $100,000 for the spouse and any dependents, noneconomic loss awards in death cases have the potential to be larger than those in injury cases. Since the VCF's reauthorization in 2015, the number of eligible and awarded death cases has increased significantly. For claims paid prior to reauthorization (Group A claims), awards were paid in 17 death cases. Thus, in less than four years since reauthorization, there has been a nearly 5,000% increase in death awards. Of the 839 death awards paid since reauthorization, 517 were awarded in the period between April 30, 2018, and April 30, 2019, with an additional 43 claims paid in May 2019. Through the end of May 2019, there has been an average of more than 35 new eligibility decisions and more than 48 new awards in death claims per month. Although the Special Master does not discuss the causes of the increases in death claims, the nature of many of the compensable medical conditions, especially certain types of cancer with low survival rates, means that many persons eligible for compensation from the VCF will likely die as a result of their WTC-related health conditions, thus possibly making their families eligible for death compensation. <4.1.2.2. Cancer Claims> Cancers were first added to the VCF as compensable conditions in September 2012. Since then, there have been 8,734 cases with at least one form of cancer determined to be eligible for the VCF. As of the end of April 2019, eligible claims with at least one type of cancer made up 37% of all eligible VCF claims. As shown in Table 2 , the most significant growth in cancer claims occurred shortly after cancers were added to the list of WTC-eligible health conditions and also in the most recent year. Between September 30, 2014, and December 31, 2015, the number of eligible claims with cancer as the only compensable condition (cases that would not otherwise be eligible for the VCF if not for the addition of cancer) increased 194% from 472 claims to 1,387 claims. This increase is understandable and expected given that this was early in the period during which cancer claims were first eligible for compensation. However, the recent increase in eligible cancer-only claims as a percentage of all eligible claims is one of the factors that drove the projected program costs, which were just below total available funds in the 2018 assessment, over the funding cap in the 2019 assessment. In 2018, the number of eligible cancer-only claims increased 58%. At the end of 2018, eligible cancer-only claims made up 18% of all eligible claims. The increase in eligible cancer claims is notable for three reasons. First, no types of cancer were compensable when the VCF was originally reopened in 2010 and no cancers were included in the list of WTC-related health conditions created by Congress in the Zadroga Act. Cancers were added to the list of covered conditions by the WTCHP administrator in two determinations made in 2012 and 2013. These determinations resulted in more than 60 types of cancer covering nearly every body system being compensable under the VCF. Neither the VCF nor WTCHP statutes include any specific provisions requiring any follow-up or continuous review of scientific evidence to determine if, in the nearly seven years since these determinations were made, there is any additional evidence to support or refute including these types of cancers in the list of WTC-related health conditions compensable under the VCF. The GAO cited limitations on data available in 2012 as a reason that its scientific panel found the WTCHP administrator's use of a hazards-based rather than probability model to add cancers to the list of WTC-related health conditions reasonable. Given the increases in the number of persons receiving services from the WTCHP and developing cancer in the years since the 2012 and 2013 cancer determinations, there may be additional data to warrant reevaluating the list of covered cancers or evaluating the likelihood of developing cancer after different types of exposures in the aftermath of the September 11, 2001, terrorist attacks. In addition, the VCF covers a wide range of persons from firefighters and police officers who were the first responders to the attacks, to construction and other workers who were involved in debris removal, and to adults and children who were in lower Manhattan at the time of the attacks, all of whom may have had different types and durations of exposure to toxic substances in the aftermath of the attacks. Although the determination that a person's health condition was linked to his or her exposure in the aftermath of the September 11, 2001, terrorist attacks is based on a combination of duration and nature of exposure, the list of covered conditions, including all cancers except childhood cancer, applies equally to all persons with no accounting for individual exposure experience. Second, the VCF is a program of presumptive eligibility. Thus, when determining eligibility for the VCF, controlling factors such as genetics, age, behaviors such as tobacco use, or exposure to other toxins are not considered and the Special Master does not make a determination as to the probability that a person's exposure in the aftermath of the September 11, 2001, terrorist attacks caused his or her cancer. Rather, the only requirement that a cancer or other health condition be linked to a person's exposure in the aftermath of the attacks is the WTCHP's determination that such exposure "is substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." In addition, the WTCHP administrator did not consider the likelihood or probability that any given cancer would occur based on the hazards experienced in the aftermath of the September 11, 2001, attacks when cancers were added to list of WTC-related health conditions. This approach is different than the probability of causation model used for some cancer claims under Part B of the Energy Employees Occupational Illness Compensation Program Act (EEOICPA), in which the probability that a person's cancer was caused by occupational exposure to ionizing radiation must be 50% or greater to receive compensation. The VCF's presumptive eligibility model is also in contrast to the probability of causation model recommended by the National Research Council Board on Radiation Effects Research to be used to determine eligibility for benefits under the Radiation Exposure Compensation Act (RECA) for persons who lived near the Nevada Test Site during atmospheric atomic weapons testing. However, the presumptive eligibility model is used for other federal compensation programs, including disability compensation for veterans exposed to radiation and Agent Orange. Third, cancer claims have the potential to result in higher benefits than non-cancer claims. The cap on noneconomic loss awards for cancer claims is $250,000 versus $90,000 for non-cancer claims. <4.1.2.3. Non-responder Claims> Since it was reauthorized in 2015, the VCF has paid awards to an increasing number of non-responders. For claims paid prior to reauthorization (Group A claims), awards to non-responders including those who participated in cleaning or maintenance work near one of the crash sites or persons who lived in, worked in, attended school in, or were visiting lower Manhattan between September 11, 2001, and May 30, 2002 made up 14% of total initial compensation awards. As of the end of 2018, the percentage of total awards made to non-responders had risen to 19% of total initial awards. Although the Special Master cites the increase in non-responder claims as one of the causes of the increase in VCF benefit costs and the recent projection that program costs will exceed available funding, limitations in the data reported by the VCF make analyzing this potential cost driver difficult. In her congressional testimony, the Special Master states "At the time of Reauthorization in December 2015, not quite 14% of all VCF awards were paid to non-responders. Today, just about 38% of claims filed are from this population." However, this is not a direct comparison, as the Special Master is comparing data on awards with data on claims filed, regardless of whether those claims result in awards without any additional information on the percentage of claims filed that may result in awards. In addition, the data reported by the VCF in its annual status reports are, according to the VCF, self-reported data. Finally, in each year's data on claimant categories, there are a number of cases listed as "no response." Of the 20,981 initial awards reported in the VCF's most recent status report, for example, 370 cases, or 2% of total awards, are listed in the "no response" category. <4.2. Reductions of Future Awards> Because award costs under both models are projected to exceed the $7.375 billion in available funding, in February 2019, the Special Master announced the following reductions in the amounts of all future VCF awards for all cases pending as of February 25, 2019: For all cases filed on or before February 1, 2019; the calculated award is to be reduced by 50%; For all cases that qualify for expedited processing because the claimant has a terminal illness or significant financial hardship, the calculated award is to be reduced by 50%; and For all cases filed after February 1, 2019, the calculated award is to be reduced by 70%. In all cases, the full amount of any offsets for collateral source payments are to continue to be taken. The award reductions are not to apply to appeals decisions initially issued before February 25, 2019. However, there will be scheduling adjustments for future appeals. For appeals of noneconomic loss decisions, the VCF is to schedule appeals hearings only for cases involving the most severe conditions, such as cancer, interstitial lung disease, and sarcoidosis. For all other noneconomic loss and economic-loss cases, the VCF is not to schedule appeals hearings until after December 18, 2020. These schedule changes are designed to ensure that there is sufficient funding to pay increased noneconomic loss determinations made on appeal for the most severe conditions. <5. Potential VCF Reauthorization in the 116th Congress> The VCF is scheduled to sunset on December 18, 2020. The 116 th Congress faces the question of whether to reauthorize the program or let it expire. On June 12, 2019, the House Committee on the Judiciary ordered that H.R. 1327 , the Never Forget the Heroes: Permanent Authorization of the September 11 th Victim Compensation Fund Act, be reported. Identical legislation, S. 546 , is pending committee action in the Senate. This reauthorization legislation includes the following major components: authorization for the VCF through FY2090, with a deadline of October 1, 2089, to file claims; removal of the cap on VCF funding; appropriations of "such sums as may be necessary" for the VCF for each fiscal year through FY2090; payment of the difference between the full award and the actual amount received for all persons who received reduced awards due to the Special Master's actions; authority for the Special Master to exceed the limit on noneconomic loss if it is determined that a person's pain and suffering is of such severity as to make the award "insufficiently compensatory"; and a cost of living adjustment, to be made every five years, to the maximum amount of annual income permitted to be considered by the Special Master when determining economic loss (currently $200,000). The reauthorization legislation would not make any changes to the basic eligibility for VCF awards. The legislation also would not specifically address the three drivers of increased VCF costs that the Special Master identified in her 2019 congressional testimony: (1) increases in death claims, (2) cancer claims, and (3) claims from non-responders. However, because this legislation would provide full funding for the VCF not subject to annual appropriations, any increases in program costs would not result in the VCF having insufficient funding to pay all benefits. The Congressional Budget Office has estimated that this legislation, if enacted, would result in $6.785 billion in direct spending on benefits and administration between FY2019 and FY2024 and $10.180 billion in spending between FY2019 and FY2029. <5.1. House Passage of Reauthorization Legislation> On July 12, 2019, the House of Representatives passed H.R. 1327 with the following amendments: the bill's title was changed to the "Never Forget the Heroes: James Zadroga, Ray Pfeifer, and Luis Alvarez Permanent Authorization of the September 11 th Victim Compensation Fund Act"; the appropriations of "such sums as may be necessary" for the VCF for each fiscal year through FY2090 is changed to include each fiscal year through FY2092, and the deadline for filing claims is changed from October 1, 2089, to October 1, 2090; the authority for the Special Master to exceed the limit on noneconomic loss is changed from requiring a determination that a person's pain and suffering is of such severity as to make the award "insufficiently compensatory" to a determination that the claim "presents special circumstances"; the original bill's requirement that the Special Master apply a cost-of-living adjustment to the maximum amount of annual income permitted to be considered when determining economic loss (currently $200,000) every five years was replaced with a provision requiring the Special Master to "periodically" adjust the limit "to account for inflation"; a provision was added permitting the Attorney General to appoint up to two Deputy Special Masters and providing that the Special Master and the deputies serve at the pleasure of the Attorney General; and a provision was added specifying that the legislation's budgetary effects shall not be entered on the statutory or Senate PAYGO scorecards, thus making the legislation exempt from PAYGO requirements that new legislative spending not increase the deficit. <5.1.1. Appendix. September 11th Victim Compensation Fund Awards and Amounts>

The September 11 th Victim Compensation Fund (VCF) provides cash benefits to certain persons whose health may have been affected by exposure to debris or toxic substances in the aftermath of the September 11, 2001, terrorist attacks on the Pentagon and the World Trade Center, and the terrorist-related aircraft crash at Shanksville, PA. Congress created the original VCF shortly after the 2001 terrorist attacks to provide compensation to persons injured and to the families of persons killed in the attacks and their immediate aftermath. In 2011, Congress reopened the VCF to provide benefits to persons who responded to the terrorist attack sites, were involved in the cleanup of these sites, or lived in lower Manhattan during the attacks. The VCF was reauthorized in 2015, and it is scheduled to sunset on December 18, 2020. The VCF has awarded more than $5 billion since its reopening and is in danger of exceeding its current appropriation of $7.375 billion before its sunset date and thus being unable to pay full benefits. In February 2019, the Special Master of the VCF announced that all future VCF awards would be reduced to prevent the VCF from running out of appropriated funds. The Special Master cites increases in death claims, cancer claims, and claims from non-responders as drivers of the increase in VCF benefit costs. Reauthorization bills, H.R. 1327 and S. 546 , have been introduced, with H.R. 1327 being ordered reported out of the Judiciary Committee on June 12, 2019. Both bills would reauthorize the VCF without changing any eligibility categories and appropriate "such sums as may be necessary" for each fiscal year through FY2090. On July 12, 2019, H.R. 1327 was passed by the House of Representatives with amendments that changed the bill's name, changed the provisions for adjusting the maximum amount of income considered for determining noneconomic loss, added up to two Deputy Special Masters to the program's administration, and made the bill's spending exempt from PAYGO requirements.

crs_R45778

crs_R45778_0

The Budget Control Act of 2011 (BCA; P.L. 112-25 ), which was signed into law on August 2, 2011, includes statutory limits on discretionary spending for FY2012-FY2021, often referred to as "spending caps." There are currently separate annual limits for defense discretionary and nondefense discretionary spending. (The defense category consists only of discretionary spending in budget function 050, "national defense." The nondefense category includes discretionary spending in all other budget functions. ) Each discretionary spending limit is enforced separately through sequestration. Discretionary spending that is provided for certain purposes is effectively exempt from the spending limits. This means that when compliance with the discretionary spending limits is evaluated, these special types of spending are treated differently: Adjustments . The law specifies that spending for certain activities, such as responding to a national emergency or fighting terrorism, will receive special budgetary treatment. This spending is most easily thought of as being exempt from, or an exception to, the spending limits. Formally, however, the BCA states that the enactment of such spending allows for a subsequent upward adjustment of the discretionary limits to accommodate the spending. As a result, these types of spending are referred to as "adjustments." (The reference here to "adjustments to the limits" should be distinguished from statutory changes that have been enacted since 2011 increasing the spending limits.) These adjustments are not formally made until after the spending legislation has been enacted. Therefore, references to the discretionary spending limits typically refer to the spending limit level before the permitted adjustments have been included. 21 st Century Cures Act spending exempt from the limits . In addition to the adjustments specified in the BCA, the 21 st Century Cures Act (Division A of P.L. 114-255 ), enacted on December 13, 2016, provided that a limited amount of appropriations for specified purposes (at the National Institutes for Health and the Food and Drug Administration and for certain grants to respond to the opioid crisis) are to be subtracted from any cost estimate provided for the purpose of enforcing the discretionary spending limits. As of the date of this report, the Cures Act is unique in providing a statutory exemption of this kind. These adjustments and the Cures Act exemptions complicate conversations and information related to overall discretionary spending amounts. When references are made to total discretionary spending, those figures may include spending that is provided under the adjustments authority as well as the Cures Act exemptions. However, when references are made to the discretionary spending limits, typically they do not include the spending that occurs as part of the adjustments or the Cures Act exemptions. More information is provided below on each adjustment and the Cures Act. <1. Spending Not Subject to the Limits, Formally Referred to as Adjustments> While the categories of spending described below are often thought of as being exempt from the spending limits, in fact the enactment of such spending allows for a subsequent upward adjustment of the discretionary limits to accommodate the spending. For this reason, we refer to these categories of spending as "adjustments." Permissible adjustments to the discretionary spending limits are specified in Section 251(b) of the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177 (2)), unless otherwise noted. The Office of Management and Budget (OMB) is responsible for evaluating compliance with the discretionary spending limits. To provide transparency to the process of evaluating such compliance, OMB is required to submit sequestration reports to Congress. In these reports, and in the President's annual budget submission, OMB is required to calculate the permissible adjustments and to specify the discretionary spending limits for the fiscal year and each succeeding year. The sections below provide more detailed information on the adjustments. These adjustments vary greatly. Two adjustments Overseas Contingency Operations (OCO) and emergency spending have made up the vast majority of the spending. These adjustments are uncapped and can be used for broad purposes. Five other adjustments are capped and can be used for specific programs or purposes. Two additional adjustments address potential technical issues that can arise in enforcing the spending limits. <1.1. Spending Under the BCA Limits and Adjustments, FY2012-FY2018> The most recent adjustment totals provided by OMB can be seen in Figure 1 and are detailed in Table A-1 . Trends in adjustments amounts can be seen in Figure 2 . According to OMB, in the seven fiscal years since the discretionary spending limits were instituted, approximately $891 billion of spending has been provided under these adjustments. (This does not include levels for FY2019, which has not yet concluded.) Spending for OCO totaled approximately $646 billion during the period, making up 73% of the total spending permitted under the adjustments. Spending for OCO ranged from a low of approximately $74 billion (FY2015 and FY2016) to a high of approximately $104 billion (FY2017). Spending provided under the emergency spending designation totaled approximately $178 billion during the period, making up 20% of total spending provided under the adjustments. Most of this amount was provided for a single fiscal year (approximately $110 billion in FY2018). The other seven adjustments made up about 7% of total spending occurring under the adjustments. <1.2. Overseas Contingency Operations/Global War on Terrorism (OCO/GWOT)> Adjustments are made to the spending limits to accommodate enacted spending that has been designated as being for Overseas Contingency Operations/Global War on Terrorism (referred to in this report as OCO). There is no statutory limit on the amount of spending that may be designated for OCO, meaning that Congress and the President can together designate any amount they agree upon. There is no statutory definition of what activities are eligible to be designated for OCO. The only requirements associated with this designation are that (1) the legislation must specify that the spending is for OCO, (2) each account within an appropriations bill that will be for OCO must be designated separately meaning that an entire bill that includes several separate accounts cannot have a "blanket" OCO designation and (3) the President must also designate the spending as being for an OCO requirement. It is not unusual for Congress to include language stating that spending designated for OCO is available only if the President also designates it as being for OCO. Further, the language typically states that the President designate "all such amounts" or none. For example, in March 2018, the Consolidated Appropriations Act (CAA) of 2018 ( P.L. 115-141 ) included OCO designations for many accounts. Two such accounts are included below: Military Personnel , Army For an additional amount for "Military Personnel, Army", $2,683,694,000: Provided , That such amount is designated by the Congress for Overseas Contingency Operations/Global War on Terrorism pursuant to section 251(b)(2)(A)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985. Military Personnel, Navy For an additional amount for "Military Personnel, Navy", $377,857,000: Provided , That such amount is designated by the Congress for Overseas Contingency Operations/Global War on Terrorism pursuant to section 251(b)(2)(A)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985. In addition, Section 6 of the act stated: Each amount designated in this Act by the Congress for Overseas Contingency Operations/Global War on Terrorism pursuant to section 251(b)(2)(A)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985 shall be available (or rescinded, if applicable) only if the President subsequently so designates all such amounts and transmits such designations to the Congress. The President then formally designated the spending as being for OCO: In accordance with section 6 of the Consolidated Appropriations Act, 2018 (H.R. 1625; the "Act"), I hereby designate for Overseas Contingency Operations/Global War on Terrorism all funding (including the rescission of funds) and contributions from foreign governments so designated by the Congress in the Act pursuant to section 251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985, as outlined in the enclosed list of accounts. The details of this action are set forth in the enclosed memorandum from the Director of the Office of Management and Budget. Not all of OCO spending falls within the statutory definition of defense (050). For example, in FY2017, of the approximate $104 billion of discretionary spending designated as OCO, $21 billion was in the nondefense category. Likewise, while a majority of OCO spending appears in the Department of Defense appropriations bill, it also commonly appears in the Department of State, Foreign Operations, and Related Programs appropriations bill as well as the Department of Homeland Security appropriations bill and the Military Construction, Veterans Affairs, and Related Agencies appropriations bill. <1.3. Emergency Requirements> Adjustments may also be made to the spending limits to accommodate enacted spending that has been designated as being an "emergency requirement." There is no statutory limit on the amount of spending that may be designated for emergencies, meaning that Congress and the President can together designate any amount they agree upon. Likewise, there is no statutory classification of what activities are eligible to be designated as an emergency requirement. The only statutory requirements are that (1) the legislation must specify that the spending is for an emergency requirement, (2) each account within an appropriations bill that will be for "emergency requirements" must be designated separately meaning that an entire bill that includes several separate accounts cannot have a "blanket" emergency requirement designation and (3) the President must also designate the spending as being for an emergency requirement. It is not unusual for Congress to include language stating that the spending designated for emergency is available only if the President also designates it as being for an emergency. Further, the language typically states that the President designate "all such amounts" or none. For example, in October 2017, the Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017 ( P.L. 115-72 ), was enacted, which included emergency requirement designations for several accounts. One such account is included below: For an additional amount for "Wildland Fire Management", $184,500,000, to remain available through September 30, 2021, for urgent wildland fire suppression operations: Provided, That such funds shall be solely available to be transferred to and merged with other appropriations accounts from which funds were previously transferred for wildland fire suppression in fiscal year 2017 to fully repay those amounts: Provided further, That such amount is designated by the Congress as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985. In addition, Title II of the act states: Sec. 304. Each amount designated in this division by the Congress as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985 shall be available only if the President subsequently so designates all such amounts and transmits such designations to the Congress. After this legislation was enacted, the President formally designated the spending as an emergency requirement. In accordance with section 304 of division A of the Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017 (H.R. 2266; the "Act"), I hereby designate as emergency requirements all funding (including the repurposing of funds and cancellation of debt) so designated by the Congress in the Act pursuant to section 251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985, as outlined in the enclosed list of accounts. The details of this action are set forth in the enclosed memorandum from the Director of the Office of Management and Budget. <1.4. Disaster Relief> Adjustments may also be made to the spending limits to accommodate certain enacted spending that has been designated as being for disaster relief. The BCA defines disaster relief as activities carried out pursuant to a determination under Section 102(2) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. Adjustment amounts permitted under the disaster relief designation are limited and are calculated pursuant to a statutory formula. Not all spending that is enacted to provide for disaster relief includes this designation. Congress may provide funds for the purpose of disaster relief but allow the spending to count against the discretionary spending limits, or it may designate the spending as an emergency requirement, particularly when the level of disaster relief being provided would exceed the amount permitted under the disaster relief adjustment. For example, the Bipartisan Budget Act of 2018 included appropriations related to Hurricanes Harvey, Irma, and Maria of $23.5 billion for the Federal Emergency Management Agency's Disaster Relief Fund for major disasters declared pursuant to the Stafford Act. However, that spending was designated as an emergency requirement and therefore employed the emergency adjustment described above, as opposed to the disaster relief adjustment, which is capped. The formula used to determine the maximum amount permitted under the disaster relief adjustment was amended by the CAA of 2018, and, as described below, the new formula is to apply to FY2019 and beyond. OMB is required by law to include in its Sequestration Update Report a preview estimate of the adjustment for disaster relief for the upcoming fiscal year. For example, OMB included a preview estimate of $7.366 billion as the cap for disaster relief adjustment in its Sequestration Update Report for 2018 (released on August 18, 2017). Subsequently, appropriations were enacted in the CAA of 2018 providing $7.366 billion for FY2018 for the Federal Emergency Management Agency's Disaster Relief Fund in the FY2018 Department of Homeland Security Appropriations Act (division F of the CAA of 2018). <1.4.1. Formula Used for FY2012-FY2018> The formula used to calculate the limit for the disaster relief adjustment for FY2018 and earlier required that the annual adjustment for disaster relief not exceed "the average funding provided for disaster relief over the previous 10 years, excluding the highest and lowest years," plus the amount by which appropriations in the previous fiscal year was less than the average funding level, often referred to as carryover. Under this formula, if the carryover from one year was not used in the subsequent year, it could not carry forward for a subsequent year. According to OMB, this "led to a precipitous decline in the funding ceiling as higher disaster funding years began to fall out of the 10-year average formula." According to OMB, the limit for the adjustment fell from a high of $18.43 billion in 2015 to a low of $7.366 billion in 2018. <1.4.2. Formula for FY2019-FY2021> The CAA of 2018 altered the formula for the disaster relief adjustment in ways "that will ultimately increase the funding ceiling," according to OMB. The formula for FY2019 and beyond comprises the total of the average funding provided for disaster relief over the previous 10 years, excluding the highest and lowest years; 5% of the total appropriations provided either (1) since FY2012 or (2) in the previous 10 years whichever is less subtracting any amount of budget authority that was rescinded in that period with respect to amounts provided for major disasters declared pursuant to the Stafford Act and designated by the Congress and the President as being for emergency requirements (as described above); and the cumulative net total of the unused carryover for FY2018, as well as unused carryover for any subsequent fiscal years. OMB has stated that under this formula, the potential adjustment limit for disaster relief for FY2019 would be capped at $14.965 billion. <1.5. Wildfire Suppression> The CAA of 2018 included a new adjustment that applies to FY2020-FY2027 for wildfire suppression. Adjustments may be made to the spending limits to accommodate enacted spending that provides an amount for wildfire suppression operations in the Wildland Fire Management accounts at the Departments of Agriculture or Interior. The law states that the adjustments may not exceed the amounts shown below for each of FY2020-FY2027. However, the law allows such an adjustment to accommodate "additional new budget authority" for wildfire suppression in excess of the average costs for wildfire suppression operations as reported in the President's budget request for FY2015, which is $1.394 billion. Unlike some of the adjustments described above, this adjustment does not require a separate ad ditional designation from the President. <1.6. Program Integrity Adjustments> The BCA includes two separate adjustments to accommodate spending related to ensuring that certain program funding is spent appropriately, safeguarding against waste, fraud, and abuse. While these two adjustments are separate under the law, they are often grouped together in budget totals, as in Table A-1 . <1.6.1. Continuing Disability Reviews and Redeterminations21> As originally enacted, the BCA permits adjustments to the spending limits to accommodate enacted spending for two types of program integrity activities conducted by the Social Security Administration: (1) continuing disability reviews, which are periodic medical reviews of Social Security disability beneficiaries and Supplemental Security Income (SSI) recipients under the age of 65; and (2) redeterminations, which are periodic financial reviews of SSI recipients. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) expanded the types of program integrity activities for which the adjustments are permitted. The expanded definition may also accommodate spending for (3) cooperative disability investigation units, which investigate cases of suspected disability fraud; (4) fraud prosecutions by Special Assistant United States Attorneys; and (5) work-related continuing disability reviews, which are periodic earnings reviews of Social Security disability beneficiaries. The adjustments may not exceed the amounts shown below for each of FY2012-FY2021. However, the law allows such an adjustment to accommodate "additional new budget authority" for program integrity activities in excess of $273 million. Unlike some of the adjustments described above, this adjustment does not require a separate additional designation from the President. As an example, in March 2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), included related spending for continuing disability reviews, redeterminations, and other specified activities: Of the total amount made available under this heading, not more than $1,735,000,000, to remain available through March 31, 2019, is for the costs associated with continuing disability reviews under titles II and XVI of the Social Security Act, including work-related continuing disability reviews to determine whether earnings derived from services demonstrate an individual's ability to engage in substantial gainful activity, for the cost associated with conducting redeterminations of eligibility under title XVI of the Social Security Act, for the cost of co-operative disability investigation units, and for the cost associated with the prosecution of fraud in the programs and operations of the Social Security Administration by Special Assistant United States Attorneys: Provided , That, of such amount, $273,000,000 is provided to meet the terms of section 251(b)(2)(B)(ii)(III) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and $1,462,000,000 is additional new budget authority specified for purposes of section 251(b)(2)(B) of such Act. <1.6.2. Health Care Fraud and Abuse Control> Adjustments are made to the spending limits to accommodate enacted spending that specifies an amount for health care fraud and abuse control, but the adjustment may not exceed an amount specified in statute. The law states that the appropriations act must specify an amount for the health care fraud and abuse control program at the Department of Health and Human Services. The law states further that the adjustments may not exceed the amounts shown below for each of FY2012-FY2021. However, the law allows such an adjustment to accommodate "additional new budget authority" for health care fraud and abuse control in excess of $311 million. Unlike some of the adjustments described above, this adjustment does not require a separate additional designation from the President. As an example, in March 2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), included related spending for health care fraud and abuse control: In addition to amounts otherwise available for program integrity and program management, $745,000,000, to remain available through September 30, 2019 . Provided further, That of the amount provided under this heading, $311,000,000 is provided to meet the terms of section 251(b)(2)(C)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and $434,000,000 is additional new budget authority specified for purposes of section 251(b)(2)(C) of such Act. <1.7. Reemployment Services and Eligibility Assessments> The Bipartisan Budget Act of 2018 ( P.L. 115-123 ), enacted in February 2018, included a new adjustment for FY2019-FY2021. Adjustments may be made to the spending limits to accommodate enacted spending that specifies an amount for grants to states under Section 306 of the Social Security Act (42 U.S.C. 506). The law states further that the adjustments may not exceed the amounts shown below for each of FY2019-FY2021. However, the law allows such an adjustment to accommodate "additional new budget authority" for reemployment services and eligibility assessments in excess of $117 million. Unlike some of the adjustments described above, this adjustment does not require a separate additional designation from the President. <1.8. Changes in Concepts and Definitions> The BCA provided that adjustments may be made to the spending limits to address changes in concepts and definitions. The law requires that OMB calculate such an adjustment when the President submits the budget request and that such changes may be made only after consultation with the House and Senate Appropriations Committees and the House and Senate Budget Committees. Further, the law states that such consultation with the committees shall include written communication that affords the committees an opportunity to comment before official action is taken. The law states that such changes "shall equal the baseline levels of new budget authority and outlays using up-to-date concepts and definitions, minus those levels using the concepts and definitions in effect before such changes." It appears that no adjustments have been made to accommodate changes in concepts and definitions since enactment of the BCA in 2011. However, the discretionary spending limits in effect between 1991 and 2002 similarly permitted adjustments to accommodate changes in concepts and definitions. During that period, such adjustments were made as a result of a reclassification that shifted programs between the mandatory and the discretionary categories. Other adjustments were made for accounting changes made by the Federal Credit Reform Act of 1990 and changes in budgetary treatment and estimating methodologies. <1.9. Technical Adjustment (Allowance) for Estimating Differences> It is common for legislation to be enacted each year that permits an adjustment to the discretionary spending limits for that fiscal year in the event that the limits would be breached as a result of estimating differences between the Congressional Budget Office (CBO) and OMB. For example, the Financial Services and General Government appropriations act for FY2018 included this provision: If, for fiscal year 2018, new budget authority provided in appropriations Acts exceeds the discretionary spending limit for any category set forth in section 251(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 due to estimating differences with the Congressional Budget Office, an adjustment to the discretionary spending limit in such category for fiscal year 2018 shall be made by the Director of the Office of Management and Budget in the amount of the excess but the total of all such adjustments shall not exceed 0.2 percent of the sum of the adjusted discretionary spending limits for all categories for that fiscal year. For that particular fiscal year, OMB had estimating differences with CBO, which OMB stated "would cause OMB estimates to exceed both caps." These estimating differences were $4 million for the defense category and $554 million for the nondefense category. OMB stated that the maximum allowable adjustment for estimating differences for FY2018 was $2.81 billion and that the amount of estimating differences ($558 million) was within the allowable adjustment. OMB adjusted the caps upward by the amounts of the estimating differences noted. <2. 21st Century Cures Act Spending Not Subject to the Limits> Title I in Division A of the 21 st Century Cures Act ( P.L. 114-255 ), enacted in December 2016, authorized appropriations for programs and activities related to health care, research, and opioid abuse. The act also established a distinctive budgetary mechanism related to certain authorizations that is different from the adjustments described above but has a similar effect. Specifically, the act established three accounts: the National Institutes of Health (NIH) Innovation Account, the Food and Drug Administration (FDA) Innovation Account, and the Account for the State Response to the Opioid Crisis. The act then transferred funds from the General Fund of the Treasury to these accounts and authorized those funds to be appropriated for specific dollar amounts in specific fiscal years. Those funds were not to be available for obligation until they were appropriated in appropriations acts each fiscal year. The act further stated that when appropriations are enacted for such authorized activities up to the authorized amount each fiscal year those appropriations are to be subtracted from any cost estimate provided for the purpose of enforcing the discretionary spending limits. This effectively exempts any spending provided for these activities between FY2017 and FY2026 from the spending caps. Specifically, the bill provides such exceptions for the accounts and amounts shown in below. In each case, the exemptions apply only to the years included in the respective table. <2.1. Appendix. Discretionary Spending Limits and Adjustments Under the BCA>

The Budget Control Act of 2011 (BCA; P.L. 112-25 ) established statutory limits on discretionary spending for FY2012-FY2021. There are currently separate annual limits for defense discretionary and nondefense discretionary spending. The law specifies that spending for certain activities, such as responding to a national emergency or fighting terrorism, will receive special budgetary treatment. This spending is most easily thought of as being exempt from the spending limits. Formally, however, the BCA states that the enactment of such spending allows for a subsequent upward adjustment of the discretionary limits to accommodate the spending. As a result, these types of spending are referred to as "adjustments." Two adjustments—for spending designated as emergency or for Overseas Contingency Operations (OCO)—have made up the vast majority of the spending. (These adjustments are uncapped and can be used for broad purposes.) Five other adjustments are capped and can be used for more specific programs or purposes, and two additional adjustments address potential technical issues that can arise in enforcing the spending limits. According to information provided by the Office of Management and Budget (the agency responsible for evaluating compliance with the discretionary spending limits), in the seven fiscal years that have concluded since the discretionary spending limits were instituted, approximately $891 billion of spending has occurred under these adjustments. Spending for OCO made up 73% of the total, and spending for emergencies made up 20%. In addition to the adjustments specified in the BCA, the 21 st Century Cures Act (Division A of P.L. 114-255 ) provided that a limited amount of appropriations for specified purposes are to be exempt from the discretionary spending limits. As of the date of this report, the Cures Act is unique in providing an exemption of this kind.

crs_R45818

crs_R45818_0

<1. Purpose and Scope> The purpose of this report is to provide information and analysis for Congress on Afghanistan and the nearly two-decade U.S. project there. Topics covered include U.S. military engagement and security dynamics; the regional context; reconciliation efforts; Afghan politics and governance; foreign assistance; and social and economic development. Supplementary materials, including a historical timeline and background on the Soviet war in Afghanistan, are included as appendices. This information is meant to provide background and context for lawmakers as they consider administration budget requests, oversee U.S. military operations and aid programs, and examine the U.S. role in South Asia and the world. For a more frequently updated treatment of current events in Afghanistan and developments in U.S. policy, refer to CRS Report R45122, Afghanistan: Background and U.S. Policy In Brief , by Clayton Thomas. <2. Overview> The U.S. and Afghan governments, along with partner countries, remain engaged in combat with a robust Taliban-led insurgency. While U.S. military officials maintain that Afghan forces are "resilient" against the Taliban, by some measures insurgents are in control of or contesting more territory today than at any time since 2001. The conflict also involves an array of other armed groups, including active affiliates of both Al Qaeda (AQ) and the Islamic State (IS, also known as ISIS, ISIL, or by the Arabic acronym Da'esh ). Since early 2015, the North Atlantic Treaty Organization (NATO)-led mission in Afghanistan, known as "Resolute Support Mission" (RSM), has focused on training, advising, and assisting Afghan government forces. Combat operations by U.S. counterterrorism forces, along with some partner forces, have increased since 2017. These two "complementary missions" make up Operation Freedom's Sentinel (OFS). Simultaneously, the United States is engaged in a diplomatic effort to end the war, most notably through direct talks with Taliban representatives (a reversal of previous U.S. policy). In January 2019, U.S. and Taliban negotiators reached a draft framework, in which the Taliban would prohibit terrorist groups from operating on Afghan soil in return for the eventual withdrawal of U.S. forces, though lead U.S. envoy Zalmay Khalilzad insists that "nothing is agreed until everything is agreed." As of July 2019, negotiations do not directly involve representatives of the Afghan government, leading some Afghans to worry that the United States will prioritize a military withdrawal over a complex political settlement that preserves some of the social, political, and humanitarian gains made since 2001. A major complicating factor underlying the negotiations is the unsettled state of Afghan politics; Afghanistan held inconclusive parliamentary elections in October 2018 and the presidential election, originally scheduled for April 2019, has been postponed until September 2019. The Afghan government has made some notable progress in reducing corruption and implementing its budgetary commitments, but faces domestic criticism for its failure to guarantee security and prevent insurgent gains. The United States has spent more than $132 billion in various forms of reconstruction aid to Afghanistan over the past decade and a half, from building up and sustaining the Afghan National Defense and Security Forces (ANDSF) to economic development. This assistance has increased Afghan government capacity, but prospects for stability in Afghanistan still appear distant. Some U.S. policymakers hope that the country's largely underdeveloped natural resources and geographic position at the crossroads of future global trade routes might improve the economic life of the country, and, by extension, its social and political dynamics. Nevertheless, in light of the ongoing hostilities Afghanistan's economic and political prospects remain uncertain at best. <3. U.S. Military Operations> <3.1. September 11 and Start of Operation Enduring Freedom (2001-2009)> On September 11, 2001, the United States suffered a series of coordinated terrorist attacks executed by the Islamist terrorist group Al Qaeda. Al Qaeda leadership was based in Afghanistan and protected by the Taliban government that ruled most of that country (see textbox below). U.S. President George W. Bush articulated a policy that equated those who harbor terrorists with terrorists themselves, and asserted that a friendly regime in Kabul was needed to enable U.S. forces to search for Al Qaeda members there. On September 14, 2001, in Congress, S.J.Res. 23 ( P.L. 107-40 ), passed 98-0 in the Senate and with no objections in the House, authorized the use of military force, stating that: [t]he President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001 or harbored such organizations or persons in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons. The Administration also sought United Nations (U.N.) backing for military action. On September 12, 2001, the U.N. passed Security Council Resolution 1368, expressing the Council's "readiness to take all necessary steps to respond to the September 11 attacks." When the Taliban refused the Bush Administration's demand to extradite Al Qaeda leader Osama bin Laden, the Administration launched military operations against the Taliban to "disrupt the use of Afghanistan as a terrorist base of operations, and to attack the military capability of the Taliban regime." Combat operations in Afghanistan began on October 7, 2001, with the launch of Operation Enduring Freedom (OEF). Initial military operations initially consisted primarily of U.S. air strikes on Taliban and Al Qaeda forces, facilitated by the cooperation between reported small numbers (about 1,000) of U.S. special operations forces and Central Intelligence Agency operatives. The purpose of these operations was to help Afghan forces opposed to the Taliban (led by an armed coalition known as the Northern Alliance) advance by directing U.S. air strikes on Taliban positions. In October 2001, about 1,300 Marines were deployed to pressure the Taliban in the southern province of Kandahar, but there were few pitched U.S.-Taliban battles. Northern Alliance forces despite promises that they would not enter Kabul did so on November 12, 2001, to widespread popular approval. The Taliban subsequently lost the south and east to U.S.-supported Pashtun leaders, including Hamid Karzai. The Taliban regime ended on December 9, 2001, when Taliban head Mullah Omar and other leaders fled Kandahar, leaving it under tribal law. A provisional government was set up (see " Constitution and Political System ," below) and on May 1, 2003, U.S. officials declared an end to "major combat." From 2003 to mid-2006, U.S. and international troops (as part of the U.N.-mandated and NATO-led International Security Assistance Force, ISAF) trained nascent Afghan forces and fought relatively low levels of insurgent violence with focused combat operations mainly in the south and east. By late 2005, U.S. and partner commanders considered the insurgency mostly defeated and NATO assumed lead responsibility for security in all of Afghanistan during 2005-2006. Those optimistic assessments proved misplaced when violence increased in mid-2006. NATO-led operations during 2006-2008 cleared Taliban fighters from some areas but did not prevent subsequent reinfiltration by the Taliban, nor did preemptive combat and increased development work produce durable success. Taking into account the deterioration of the security situation, the United States and its partners decided to increase force levels. <3.2. Obama Administration: "Surge" and Drawdown (2009-2014)> Upon taking office, the Obama Administration declared that the Afghanistan mission was a high priority, but that the U.S. level of effort there would eventually need to be reduced. The Administration convened a 60-day inter-agency "strategy review," chaired by former CIA analyst Bruce Riedel and co-chaired by then-Special Representative for Afghanistan and Pakistan Richard Holbrooke and then-Under Secretary of Defense for Policy Michele Flournoy. In response to that review, President Barack Obama announced a "comprehensive" strategy on March 27, 2009, that would require the deployment of an additional 21,000 U.S. forces. In June 2009, U.S. Army General Stanley McChrystal, who headed U.S. Special Operations forces from 2003 to 2008, became the top U.S. and NATO commander in Afghanistan. In August 2009, General McChrystal delivered a strategy assessment recommending that the goal of the U.S. military should be to protect the population rather than to search out and combat concentrations of Taliban fighters, warning of the potential for "mission failure" in the absence of a fully resourced, comprehensive counterinsurgency strategy. His assessment stated that about 44,000 additional U.S. combat troops would be needed to provide the greatest chance for success. The assessment set off debate within the Administration and launched another policy review. Some senior U.S. officials argued that adding many more U.S. forces could produce a potentially counterproductive sense of U.S. occupation. President Obama announced the following at West Point on December 1, 2009: 30,000 additional U.S. forces (a "surge") would be sent to "reverse the Taliban's momentum" and strengthen the Afghan National Defense and Security Forces (ANDSF); and beginning in July 2011, there would be a transition to Afghan security leadership and a corresponding drawdown of U.S. forces. The troop surge brought U.S. force levels to 100,000, with most of the additional forces deployed to the south. When the surge was announced, the Afghan Interior Ministry estimated that insurgents controlled 13 of the country's 356 districts and posed a "high-risk" to another 133. The Taliban had named "shadow governors" in 33 out of 34 of Afghanistan's provinces, although some were merely symbolic. Operations by U.S., NATO, and Afghan forces throughout 2010 and 2011 reduced areas under Taliban control substantially and the transition to Afghan security leadership began on schedule in July 2011. In concert with the transition, and asserting that the killing of Osama bin Laden represented a key accomplishment of the core U.S. mission, President Obama announced on June 22, 2011 that: U.S. force levels would fall to 90,000 (from 100,000) by the end of 2011. U.S. force levels would drop to 68,000 by September 2012. In his February 2013 State of the Union message, President Obama announced that the U.S. force level would drop to 34,000 by February 2014, which subsequently occurred. Most partner countries drew down their forces at roughly the same rate and proportion as the U.S. drawdown, despite public pressure in some European countries to more rapidly reduce or end military involvement in Afghanistan. During 2010-2012, the Netherlands, Canada, and France ended their combat missions, but they continued to train the ANDSF until the end of 2014. On June 18, 2013, NATO and Afghanistan announced that Afghan forces were now taking the lead on security throughout all of Afghanistan. As international forces were reduced in 2014, Afghan and international officials expressed uncertainty about U.S. and partner plans for the post-2014 period. On May 27, 2014, President Obama clarified Administration plans by announcing the size of the post-2014 U.S. force and plan for a U.S. military exit according to the following timeline: The U.S. military contingent in Afghanistan would be 9,800 in 2015, deployed in various parts of Afghanistan, consisting mostly of trainers in the NATO-led "Resolute Support Mission" (RSM). The U.S. force would decline to about 5,000 by the end of 2016 and consolidate in Kabul and at Bagram Airfield. After 2016, the U.S. military presence would be consistent with normal security relations with Afghanistan (about 1,000 military personnel) under U.S. Embassy authority (without a separate military chain of command in country). Their mission would be to protect U.S. installations, process Foreign Military Sales (FMS) of weaponry to Afghanistan, and train the Afghans on that weaponry. During 2014, the United States and its partners prepared for the end of the ISAF mission. U.S. airpower in country was reduced, ISAF turned over the vast majority of about 800 bases to the ANDSF, and the provincial reconstruction teams (PRTs) were turned over to Afghan institutions. <3.2.1. Bilateral Accords: Strategic Partnership Agreement (SPA) and Bilateral Security Agreement (BSA)> On May 1, 2012, President Obama and then-President Hamid Karzai signed an Enduring Strategic Partnership Agreemen t (SPA) between Afghanistan and the United States. The signing followed a long negotiation that focused on resolving Afghan insistence on control over detention centers and a halt to or control over nighttime raids on insurgents by U.S. forces. In addition to provisions designating Afghanistan as a Major Non-NATO Ally, the agreement committed the two countries to negotiating a Bilateral Security Agreement (BSA ) that would detail the terms of U.S. engagement in Afghanistan. The BSA was approved by a loya jirga (consultative assembly) called by then-President Karzai in November 2013, though he then refused to sign; the agreement was eventually signed by President Ashraf Ghani as one of his first acts after taking office in September 2014. The BSA was considered as an executive agreement was not submitted for congressional approval. The BSA governs the United States' post-2014 presence in Afghanistan through the end of 2024 "and beyond" unless terminated by mutual written agreement or by either country with two years' written notice. The agreement does not set (or otherwise refer to) U.S. and partner force levels, but lays out the parameters and goals of the U.S. military mission and provides for U.S. access to Afghan bases. The BSA also stipulates that "the United States shall have the exclusive right to exercise jurisdiction over such [U.S.] persons in respect of any criminal or civil offenses committed in the territory of Afghanistan." The BSA does not commit the United States to defend Afghanistan from attack from another country, but states that "the United States shall regard with grave concern any external aggression or threat" thereof. Some Afghan figures, including Karzai (who remains active in Afghan politics), advocate revising the BSA, but such efforts do not appear to have the support of the current Afghan government. <3.3. Resolute Support Mission (2015-Present)> The NATO-led ISAF ended at the close of 2014, and was replaced by Resolute Support Mission (RSM) on January 1, 2015. The legal framework for NATO's presence is based on a Status of Forces Agreement signed between the Afghan government and NATO in September 2014 and ratified by the Afghan parliament in November 2014. That agreement defines RSM as a "non-combat training, advising and assistance mission," though combat operations by some U.S. forces, in support of Afghan forces, continue. <3.3.1. Alterations to the Drawdown Schedule and Rules of Engagement> Concerns about Taliban gains after 2015 led to several changes to the U.S. mission in the final two years of the Obama Administration. On March 24, 2015, in concert with the visit to Washington, DC of President Ghani and Chief Executive Officer Abdullah Abdullah, President Obama announced that U.S. forces would remain at a level of about 9,800 for all of 2015, rather than being reduced to 5,500 by the end of the year, as originally announced. In January 2016, the Obama Administration authorized U.S. commanders in Afghanistan to attack the local Islamic State affiliate, Islamic State-Khorasan Province (ISKP, more below) forces. In June 2016, President Obama authorized U.S. forces to conduct preemptive combat. According to then-Secretary of Defense Ashton Carter on July 12, 2016, U.S. forces were enabled to "anticipate battlefield dynamics and ... deploy and employ their forces together [with the ANDSF] in a way that stops a situation from deteriorating [or] interrupts an enemy in the early stages of planning and formulating an attack." On July 6, 2016, President Obama again adjusted planned U.S. force levels, stating that the level would drop to 8,400 at the end of 2016, rather than to the 5,500 that was previously announced. The communique of the NATO summit in Warsaw, Poland (July 8-9, 2016), announced that other NATO countries would continue to support RSM beyond 2016, both with force contributions and donations to the ANDSF (the latter until 2020). No force or budget levels were specified in the declaration. <3.3.2. Developments during the Trump Administration> In a national address on August 21, 2017, President Donald Trump announced a "new strategy" for Afghanistan and South Asia. Despite expectations that he would describe specific elements of his new strategy, particularly the prospects for additional troops, President Trump declared "we will not talk about numbers of troops or our plans for further military activities." Some policymakers characterized the strategy as "short on details" and serving "only to perpetuate a dangerous status quo." Others welcomed the decision, contrasting it favorably with proposed alternatives such as a full withdrawal of U.S. forces (which President Trump conceded was his "original instinct") or heavy reliance on contractors. Beyond additional troops, the strategy also gave broader authority for U.S. forces to operate independently of Afghan forces and "attack the enemy across the breadth and depth of the battle space," expanding the list of targets to include those related to "revenue streams, support infrastructure, training bases, [and] infiltration lanes." This was exercised in a series of operations, beginning in fall 2017, against Taliban drug labs. These operations, often highlighted by U.S. officials, sought to degrade what is widely viewed as one of the Taliban's most important sources of revenue, namely the cultivation, production, and trafficking of narcotics. Some analysts have questioned the impact of these strikes, which ended in late 2018. <3.4. Security Dynamics: The Taliban and Other Armed Groups> Decades of instability, civil war, and weak central government control have contributed to the existence of a complex web of militant groups in Afghanistan. While the Taliban are by far the largest and best-organized, they operate alongside (and sometimes in competition with) other armed groups, including regional affiliates of both the Islamic State and Al Qaeda. <3.4.1. Taliban Insurgency> While U.S. commanders have asserted that the ANDSF performs well despite taking heavy casualties, Taliban forces have retained, and by some measures are increasing, their ability to contest and hold territory and to launch high-profile attacks. U.S. officials often have emphasized the Taliban's failure to capture a provincial capital since their week-long seizure of Kunduz city in northern Afghanistan in September 2015, but Taliban militants briefly overran two capitals, Farah and Ghazni, in May and August 2018, respectively. Then-Secretary of Defense James Mattis described the Taliban assault on Ghazni, which left hundreds dead, as a failure for the Taliban, saying "every time they take [a city] ... they're unable to hold it." Since at least early 2017, U.S. military officials have stated that the conflict is "largely stalemated." Arguably complicating that assessment, the extent of territory controlled or contested by the Taliban has generally grown since 2016 by most measures (see Figure 3 ). In November 2015, the Special Inspector General for Afghanistan Reconstruction (SIGAR) began publishing in its quarterly reports a district-level assessment of stability in Afghanistan produced by the U.S. military. This assessment estimated the extent of Taliban control and influence in terms of both territory and population, and was typically accompanied by charts portraying those trends over time as well as a color-coded map of control/influence by district (see Figure 4 ). That data showed a gradual increase in the share of Afghan districts controlled, influenced, or contested by insurgents (46% as of October 2018, the last month such data was evidently collected, compared to 28% in November 2015). According to SIGAR's April 30, 2019 quarterly report, the U.S. military is "no longer producing its district-level stability assessments of Afghan government and insurgent control and influence." SIGAR reports that it was told by the U.S. military that the assessment is no longer being produced because it "was of limited decision-making value to the [U.S.] Commander." The Taliban have demonstrated considerable, and some observers would argue growing, tactical capabilities. Due to the high levels of casualties inflicted by the Taliban, the Trump Administration has reportedly urged Afghan forces to pull out of some isolated outposts and rural areas. Reports indicate that ANDSF fatalities have averaged 30-40 a day in recent months, and President Ghani confirmed in November 2018 that Afghan forces had suffered more than 28,000 fatalities since 2015. So-called "green on blue" attacks (insider attacks on U.S. and coalition forces by Afghan nationals) are a sporadic, but persistent, problem several U.S. servicemen died in such attacks in 2018, as did 85 Afghan soldiers. In October 2018, General Miller was present at an attack inside the Kandahar governor's compound by a Taliban infiltrator who killed a number of provincial officials, including the powerful police chief Abdul Raziq; Miller was unhurt but another U.S. general was wounded. The May 2016 death of then-Taliban head Mullah Mansour in a U.S. drone strike demonstrated Taliban vulnerabilities to U.S. intelligence and combat capabilities, although his death did not appear to have a measurable effect on Taliban effectiveness; it is unclear to what extent current leader Haibatullah Akhundzada exercises effective control over the group and how he is viewed within its ranks. <3.4.2. Haqqani Network> Founded by Jalaluddin Haqqani, a mujahideen commander and U.S. ally during the war against the Soviet occupation, the Haqqani Network is a semiautonomous wing of the Afghan Taliban. As such, it has been cited by U.S. officials as a potent threat to U.S. and allied forces and interests, as well as a "critical enabler of Al Qaeda." Jalaluddin Haqqani served as a minister in the Taliban regime, and after 2001 reestablished a presence in the Pakistani tribal territory of North Waziristan. By 2006, he was credited as "the architect of the Taliban's current attacks on U.S. and coalition forces in Afghanistan." Within a few years, Jalaluddin's son Sirajuddin took over the group's operations, becoming increasingly influential in setting overall insurgency strategy, and was selected as deputy leader of the Taliban in 2015. The Taliban announced the death of Jalaluddin, who reportedly had been ill for years, in September 2018. The Haqqani network is blamed for a number of major attacks, including a devastating May 2017 bombing in Kabul's diplomatic district that left over 150 dead and sparked violent protests against the government. The Haqqani network has historically targeted Indian interests in Afghanistan, reinforcing perceptions by some observers and officials that the group often acts as a tool of Pakistani foreign policy. In September 2011, then-Chairman of the Joint Chiefs of Staff Michael Mullen testified in front of the Senate Armed Services Committee that the Haqqani network acts "as a veritable arm" of Pakistan's main intelligence agency, the Inter-Services Intelligence Directorate (ISI). Additionally, it reportedly holds captive two professors (Timothy Weeks, an Australian, and American citizen Kevin King, who is reportedly seriously ill) kidnapped from the American University of Afghanistan in August 2016; and a journalist (Paul Overby) seized in 2014 after crossing into Afghanistan to try to interview the Haqqani leadership. The faction's participation in a political settlement potentially could be complicated by its designation as a Foreign Terrorist Organization (FTO) under the Immigration and Naturalization Act. That designation was made on September 9, 2012, after the 112 th Congress enacted S. 1959 (Haqqani Network Terrorist Designation Act of 2012, P.L. 112-168 ), requiring an Administration report on whether the group met the criteria for FTO designation. <3.4.3. Islamic State-Khorasan Province> Beyond the Taliban, a significant share of U.S. operations are aimed at the local Islamic State affiliate, known as Islamic State-Khorasan Province (ISKP, also known as ISIS-K), although experts debate the degree of threat the group poses. ISKP (also referred to as ISIS-K) has been active in Afghanistan since mid-2014. ISKP was named as an FTO by the State Department on January 14, 2016. The group's presence in Afghanistan crystallized from several small Afghan Taliban and other militant factions that announced affiliation with the organization in 2013; ISKP presence grew further as additional Taliban factions defected to the group and captured some small areas primarily in eastern Afghanistan. ISKP has reportedly received financial assistance from the core organization formerly located in the self-declared "caliphate" in parts of Iraq and Syria. Estimates of the number of ISKP fighters generally range from 1,000 to 3,000. To address the ISKP threat, U.S. commanders have had authorization since December 2015 to combat ISKP fighters by virtue of their affiliation with the Islamic State, whether or not these fighters pose an immediate threat to U.S. and allied forces. U.S. operations have repeatedly targeted the group's leaders, with three killed in less than a year: Hafiz Saeed Khan died in a July 2016 U.S. airstrike and successors Abdul Hasib and Abu Sayed were killed in April and July 2017, respectively. ISKP has survived these leadership losses and appears to be a growing factor in U.S. and Afghan strategic planning. ISKP was the target of the much publicized April 2017 use of a GBU-43 (also known as a Massive Ordnance Air Blast, or MOAB), reportedly the first such use of the weapon in combat. A number of U.S. military, as well as CIA personnel, have been killed in anti-ISKP operations. ISKP and Taliban forces have sometimes fought over control of territory or because of political or other differences. In April 2018, a U.S. air strike killed the ISKP leader (himself a former Taliban commander) in northern Afghanistan, Qari Hekmatullah. NATO described neighboring Jowzjan province as "the main conduit for external support and foreign fighters from Central Asian states into Afghanistan." ISKP also has claimed responsibility for a number of large-scale attacks, many targeting Afghanistan's Shia minority. ISKP is also reported to have ambitions beyond Afghanistan; an unnamed U.S. intelligence officials was quoted in June 2019 as saying that, absent sustained counterterrorism pressure, "Afghanistan's IS affiliate will be able to carry out a large-scale attack in the U.S. or Europe within the next year." <3.4.4. Al Qaeda63> While the Al Qaeda attacks of September 11 precipitated U.S. military operations in Afghanistan, the group has been a relatively minor player on the Afghan battlefield since. However, the relationship between Al Qaeda and the Taliban has important implications for U.S.-Taliban negotiations and a potential settlement. From 2001 until 2015, Al Qaeda was considered by U.S. officials to have only a minimal presence (fewer than 100 members) within Afghanistan, operating mostly as a facilitator for insurgent groups and mainly in the northeast. However, in late 2015 U.S. Special Operations forces and their ANDSF partners discovered and destroyed a large Al Qaeda training camp in Kandahar Province a discovery suggesting a stronger Al Qaeda presence in Afghanistan than had been generally understood. In April 2016, U.S. commanders publicly raised their estimates of Al Qaeda fighters in Afghanistan to 100-300, and said that relations between Al Qaeda and the Taliban had become increasingly close; Afghan estimates are generally higher. The United Nations reports that Al Qaeda, while degraded in Afghanistan and facing competition from ISKP, "remains a longer-term threat." U.S. efforts to find remaining senior Al Qaeda leaders reportedly focus on bin Laden's successor Ayman al-Zawahiri, who is presumed to be on the Pakistani side of the border. While most successful U.S. strikes on high-ranking Al Qaeda operatives have taken place in Pakistan, several have been killed in Afghanistan in recent years, including operative Abu Bara Al Kuwaiti (October 2014, in Nangarhar Province); and Al Qaeda's commander for northeastern Afghanistan, Faruq Qahtani (October 2016). Al Qaeda is allied with the Taliban; bin Laden pledged allegiance to Taliban founder Mullah Omar and bin Laden successor Ayman al Zawahiri has done the same with Omar's two successors, in turn. According to a January 2019 U.N. report, Al Qaeda "continues to see Afghanistan as a safe haven for its leadership, based on its long-standing, strong ties with the Taliban." Some observers have noted operational cooperation between Al Qaeda and the Taliban, particularly in the east, in recent years. The AQ-Taliban alliance may complicate U.S. demands that the Taliban foreswear support for terrorism as part of a potential U.S. troop withdrawal deal; some analysts have recommended that "as part of any final deal, the Taliban should be required to state, in no uncertain terms, its official position" on Al Qaeda. Al Qaeda in the Indian Subcontinent (AQIS) is an affiliate of Al Qaeda based in and including members from various terrorist groups in South and Central Asia. Zawahiri announced the group's formation in 2014. In June 2016, the State Department designated the group as an FTO and its leader, Asim Umar, as a specially designated global terrorist. The large terrorist training camp found in Kandahar in 2015 was attributed by U.S. military officials to AQIS. <3.5. Afghan National Defense and Security Forces (ANDSF)> The primary objective of the post-2015 NATO-led Resolute Support Mission in Afghanistan is training, advising, and assisting the Afghan National Defense and Security Forces (ANDSF) in their struggle against the Taliban and other armed groups. Funding the ANDSF costs an estimated $6 billion per year, of which the U.S. has provided about $4.5 billion in recent years. At the NATO summit in Warsaw in July 2016, U.S. partners pledged $1 billion annually for the ANDSF during 2017-2020. U.S. officials assess that Afghanistan is contributing its pledged funds $500 million (as calculated in Afghan currency) despite budgetary difficulties. At the 2012 NATO summit in Chicago, Afghanistan agreed to assume full financial responsibility for the ANDSF by 2024, though current security dynamics and economic trends make that unlikely. The Department of Defense (DOD), SIGAR, and others have reported on deficiencies of the ANDSF, citing challenges such as absenteeism, high casualties, illiteracy, inconsistent leadership, and a deficit of logistical capabilities, such as airlift, medical evacuation, resupply, and other associated functions. ANDSF units and personnel also have been associated with credible allegations of child sexual abuse and other potential human rights abuses. A number of metrics related to ANDSF performance have been classified in recent years. In October 2017, SIGAR reported that "in a significant development," U.S. officials "classified or otherwise restricted information" SIGAR had previously reported, such as casualty rates, personnel strength, and attrition within the ANDSF. U.S. officials have cited a request from the Afghan government as justification for the decision. Personnel figures and attrition rates for some ANDSF components have since been made available in SIGAR reports. Other public information about ANDSF capabilities is also generally not encouraging. Media reports indicate that ANDSF fatalities have averaged 30-40 a day in recent months, and President Ghani stated in January 2019 that more than 45,000 security personnel had paid "the ultimate sacrifice" since he took office in September 2014. Partly in response to those casualty rates, Afghan forces are reportedly shuttering small checkpoints (where the majority of successful Taliban attacks take place) in favor of larger bases in more secure territory. U.S. advisors have long advocated for such moves, although critics claim that these steps effectively cede swaths of the country to the Taliban. The major components of the ANDSF are: Afghan National Army (ANA). The Afghan National Army has been built from scratch since 2002 it is not a direct continuation of the national army that existed from the nineteenth century until the Taliban era. That army disintegrated during the 1992-1996 mujah i d ee n civil war and the 1996-2001 Taliban period. Of its authorized size of 195,000, the ANA (all components) had about 190,000 personnel as of January 2019. Its special operations component, known as the Afghan Special Security Forces (ASSF) numbers nearly 21,000. The ASSF is trained by U.S. Special Operations Forces, and U.S. commanders say it might be one of the most proficient special forces in the region. Afghan special forces are utilized extensively to reverse Taliban gains, and their efforts reportedly have reportedly made up 70% to 80% of the fighting in recent years. A December 2018 DOD report assessed that ASSF "misuse increased to unsustainable levels" in late 2018, saying that the ASSF's deployment for such missions as static defense operations (in lieu of the conventional ANA) undermines anti-Taliban efforts. Afghan Air Force (AAF) . Afghanistan's Air Force is emerging as a key component of the ANDSF's efforts to combat the insurgency. The AAF has been mostly a support force but, since 2014, has increased its bombing operations in support of coalition ground forces, mainly using the Brazil-made A-29 Super Tucano. The force is a carryover from the Afghan Air Force that existed prior to the Soviet invasion, though its equipment was virtually eliminated in the 2001-2002 U.S. combat against the Taliban regime. Since FY2010, the United States has appropriated about $8.4 billion for the AAF, including $1.7 billion in FY2019. Still, equipment, maintenance, logistical difficulties, and defections continue to plague the Afghan Air Force, which has about 104 aircraft including four C-130 transport planes and 46 Mi-17 (Russian-made) helicopters. DOD plans to purchase up to 159 UH-160 Black Hawk helicopters for the AAF have been complicated by shortages of Afghan engineers and pilots. Afghan National Police (ANP) . U.S. and Afghan officials believe that a credible and capable national police force is critical to combating the insurgency. DOD reports on Afghanistan assess that "significant strides have been made in professionalizing the ANP." However, many outside assessments of the ANP are negative, asserting that there is rampant corruption to the point where citizens mistrust and fear the ANP. According to SIGAR, as of 2019, the U.S. has obligated $21.4 billion (in Afghanistan Security Forces Funds, ASFF) to support the ANP since FY2005. The force is largely supported by the U.N.-managed Law and Order Trust Fund for Afghanistan (LOTFA). The U.S. police training effort was first led by State Department/Bureau of International Narcotics and Law Enforcement (INL), but DOD took over the lead role in April 2005. Police training has been highlighted by SIGAR and others as a potentially problematic area where greater interagency cooperation is needed. The target size of the ANP, including all forces under the ANP umbrella (except the Afghan Local Police, which are now under the command of the Ministry of the Interior), is 124,000; as of December 2018, it has 116,000 personnel. According to a December 2018 DOD assessment, women reportedly have a higher presence in the ANP than they do in the ANA. Afghan Local Police (ALP) . In 2008, the failure of several police training efforts led the Afghan government, with U.S. assistance, to support local forces in protecting their communities, despite some reluctance to create local militias, which previously had been responsible for human rights abuses in Afghanistan. The ALP concept grew out of earlier programs to organize and arm local civilians to provide security in their home districts; fighters are generally selected by local elders. The current number of ALP members (known as "guardians") is around 28,000. The ALP have the authority to detain criminals or insurgents temporarily, and transfer them to the ANP or ANA, but have been cited by Human Rights Watch and other human rights groups, as well as by DOD investigations, for killings, rapes, arbitrary detentions, land grabs, and sexual abuse of young boys. Others criticize the ALP as incompatible with the goal of creating nationalized defense and security forces and characterize ALP forces as unaccountable militias serving the interests of local strongmen. There have been discussions around incorporating ALP elements into the ANDSF. The ALP are funded by the United States at approximately $60 million a year (ASFF funds disbursed by CSTC-A). <4. Regional Dimension> Regional developments and relationships have long influenced events inside Afghanistan. The Trump Administration has linked U.S. policy in Afghanistan to broader regional dynamics, particularly as they relate to South Asia. Key states include Afghanistan's most important neighbors, Pakistan and Iran; the larger regional players India, Russia, and China; and the politically influential Gulf States. <4.1. Pakistan> The neighbor that is considered most crucial to Afghanistan's security is Pakistan, which has played an active and, by many accounts, negative role in Afghan affairs for decades. Experts and officials debate the extent of Pakistan's commitment to Afghan stability in light of its attempts to exert control over events in Afghanistan through ties to insurgent groups. DOD reports on Afghanistan's stability repeatedly have identified Afghan militant safe havens in Pakistan as a key threat to Afghan stability. Afghanistan-Pakistan Relations. Many Afghans approved of Pakistan's backing the mujahideen that forced the Soviet withdrawal in 1988-1989, but later came to resent Pakistan as one of three countries to formally recognize the Taliban as the legitimate government. (Saudi Arabia and the United Arab Emirates are the others.) Relations improved after Pakistani President Pervez Musharraf left office in 2008 but remain troubled as Afghan leaders continue to accuse Pakistan of supporting the Taliban and meddling in Afghan affairs. On several occasions, President Ghani has accused Pakistan of waging an "undeclared war" on Afghanistan. Some analysts argue that Pakistan sees Afghanistan as potentially providing it with "strategic depth" against India. Pakistan has long asserted that India uses its diplomatic facilities in Afghanistan to recruit anti-Pakistan insurgents, and that India is using its aid programs to build anti-Pakistan influence there. Long-standing Pakistani concerns over Indian activities in Afghanistan are being exacerbated by President Trump's pledge to further develop the United States' strategic partnership with India as part of the new U.S. approach to Afghanistan and South Asia. About 2 million Afghan refugees have returned from Pakistan since the Taliban fell, but 1.4 million registered refugees remain in Pakistan, according to the United Nations, along with perhaps as many as 1 million unregistered refugees. Many of these refugees are Pashtuns, the ethnic group that makes up about 40% of Afghanistan's 35 million people and 15% of Pakistan's 215 million; Pashtuns thus represent a plurality in Afghanistan but are a relatively small minority among many others in Pakistan, though Pakistan's Pashtun population is considerably larger than Afghanistan's. Pakistan condemns as interference statements by President Ghani (who is Pashtun) and other Afghan leaders about an ongoing protest campaign by Pakistani Pashtuns for greater civil and political rights. Afghanistan-Pakistan relations are also complicated by the two countries' long-running dispute over their shared 1,600-mile border, the "Durand Line." Pakistan, the United Nations, and others recognize the Durand Line as an international boundary, but Afghanistan does not. Afghanistan contends that the Durand Line, a border agreement reached between the British Empire and Afghanistan in 1893, was drawn unfairly to separate Pashtun tribes and should be renegotiated. Tensions between the two neighbors have erupted several times in recent years, most recently in 2017, when clashes at the Chaman border crossing (which sits on the Durand Line) reportedly led to civilian and military casualties on both sides. Previous agreements led to efforts to deconflict the situation, but such bilateral mechanisms evidently have proven insufficient. Pakistan claims to have established nearly 1,000 border posts along the Durand Line, nearly five times as many as operated by Afghanistan. Pakistan and U.S. Policy in Afghanistan. For several years after the September 11, 2001 attacks, Pakistani cooperation with the United States against Al Qaeda was, arguably, relatively effective. Pakistan arrested more than 700 Al Qaeda figures after the September 11 attacks and allowed U.S. access to Pakistani airspace, some ports, and some airfields for the major combat phase of OEF. However, traditional support for the Taliban by elements of the Pakistani government and security establishment caused strains with the U.S. that were compounded by the May 1, 2011, U.S. raid that killed Osama bin Laden in Pakistan. Relations worsened further after a November 26, 2011, incident in which a U.S. airstrike killed 24 Pakistani soldiers, and Pakistan responded by closing border crossings, suspending participation in the border coordination centers, and boycotting the December 2011 Bonn Conference. Relations improved from the 2011 low in subsequent years but have remained tense. President Trump, in announcing a new Afghanistan strategy in August 2017, declared that "we can no longer be silent about Pakistan's safe haven for terrorist organizations," and that while "in the past, Pakistan has been a valued partner ... it is time for Pakistan to demonstrate its commitment to civilization, order, and to peace." Despite that praise for Pakistan as a "valued partner," and U.S. other officials hailing successful Pakistani efforts to secure the release of several Americans held by the Haqqanis in Afghanistan in October 2017, the Trump Administration announced plans in January 2018 to suspend security assistance to Pakistan. That decision has impacted hundreds of millions of dollars of aid. Beyond the issue of aid (which had been withheld in the past, to little apparent effect), observers have speculated about such measures as reexamining Pakistan's status as a major non-NATO ally, increasing U.S. drone strikes on targets within Pakistan, and imposing sanctions on Pakistani officials. Pakistani officials and others warn that such measures could be counterproductive, highlighting the potential geopolitical costs of increasing pressure on Pakistan, especially as they relate to U.S. counterterrorism efforts and Pakistan's critical role in facilitating U.S. ground and air lines of communication to landlocked Afghanistan. <4.2. Iran> Iran has long sought to exert its historic influence over western Afghanistan and to protect Afghanistan's Shia minority. Tensions between Iran and the U.S., whose presence in Afghanistan has long concerned Tehran, may be driving Iran's reported attempts to support the Taliban, its erstwhile foe. Iran historically opposed the Taliban, which Iran saw as a threat to its interests in Afghanistan, especially after Taliban forces captured the western city of Herat in September 1995, and Iran supported the anti-Taliban Northern Alliance with fuel, funds, and ammunition. In September 1998, Iranian and Taliban forces nearly came into direct conflict when Taliban forces killed several Iranian diplomats in the course of the Taliban's offensive in northern Afghanistan. Iran massed forces at the border and threatened military action, but the crisis cooled without a major clash. Iran offered search and rescue assistance in Afghanistan during the U.S.-led war to topple the Taliban, and it also allowed U.S. humanitarian aid to the Afghan people to transit Iran. Iran helped broker Afghanistan's first post-Taliban government, in cooperation with the United States, at the December 2001 Bonn Conference. At the same time, Iran has had diplomatic contacts with the Taliban since at least 2012, when Iran allowed a Taliban office to open in Iran, and high-level Taliban figures have visited Iran. While some analysts see the contacts as Iranian support of the insurgency, others see them as an effort to exert some influence over reconciliation efforts. Iran likely seeks to ensure that U.S. forces cannot use Afghanistan as a base from which to pressure or attack Iran. Since at least early 2017, however, U.S. officials have reported more active Iranian backing for Taliban elements, particularly in western Afghanistan. In November 2018, Trump Administration officials displayed a number of Iranian-origin rockets that they alleged had been provided to the Taliban. Iran's support of Taliban fighters, many of whom are Pashtun, is in contrast with Iran's traditional support of non-Pashtun Persian-speaking and Shia factions in Afghanistan. For example, Iran has funded pro-Iranian armed groups in the west and has supported Hazara Shias in Kabul and in Hazara-inhabited central Afghanistan, in part by providing scholarships and funding for technical institutes as well as mosques. There are consistent allegations that Iran has funded Afghan provincial council and parliamentary candidates in areas dominated by the Persian-speaking and Shia minorities. Even as it funds anti-government groups as a means of pressuring the United States, Iran has built ties to the Afghan government. President Ghani generally has endorsed his predecessor's approach on Iran; Karzai called Iran a "friend" of Afghanistan and said that Afghanistan must not become an arena for disputes between the United States and Iran. At other times, Afghanistan and Iran have had disputes over Iran's efforts to expel Afghan refugees. There are approximately 1 million registered Afghan refugees in Iran, with as many as 2 million more unregistered. Iran's ties to the Shia community in Afghanistan have facilitated its recruitment of Afghan Shias to fight on behalf of the Asad regime in Syria, though there is some evidence that Shia Afghan refugees have been coerced into joining the war effort (see textbox). <4.3. India> India's past involvement in Afghanistan reflects its long-standing concerns about potential Pakistani influence and Islamic extremism emanating from Afghanistan, though its current role is focused on development. India also views Afghanistan as a trade and transit gateway to Central Asia, but Pakistan blocks a direct route, so India has sought to develop Iran's Chabahar Port. India supported the Northern Alliance against the Taliban in the mid-1990s and retains ties to Alliance figures. India saw the Afghan Taliban's hosting of Al Qaeda during 1996-2001 as a major threat because of Al Qaeda's association with radical Islamic organizations in Pakistan that seek to end India's control of part of the disputed territories of the former princely state of Jammu and Kashmir. Some of these groups have committed major acts of terrorism in India, including the attacks in Mumbai in November 2008 and in July 2011. Afghanistan has sought to strengthen its ties to India in large part to access India's large and rapidly growing economy but has sought to do so without causing a backlash from Pakistan. In October 2011, Afghanistan and India signed a "Strategic Partnership." The pact affirmed Pakistani fears by giving India, for the first time, a formal role in Afghan security; it provided for India to train ANDSF personnel, of whom thousands have been trained since 2011. However, India has resisted playing a greater role in Afghan security, probably to avoid becoming ever more directly involved in the conflict in Afghanistan or inviting Pakistani reprisals. India's involvement in Afghanistan is dominated by development issues. India is the fifth-largest single country donor to Afghan reconstruction, funding projects worth over $3 billion. Indian officials assert that their projects are focused on civilian, not military, development and are in line with the development priorities set by the Afghan government. As part of the new U.S. strategy for Afghanistan, President Trump called in August 2017 for India to "help us more with Afghanistan, especially in the area of economic assistance and development," though he also derided Indian aid to Afghanistan in January 2019. Prime Minister Modi visited Afghanistan in December 2015 and June 2016 to inaugurate major India-sponsored projects, including the new parliament complex in Kabul and the Afghan-India Friendship Dam in Herat province. In May 2016, India, Iran and Afghanistan signed the Chahbahar Agreement, under which India is to invest $500 million to develop Iran's Chahbahar port on the Arabian Sea. That port is designed to facilitate increased trade between India and Afghanistan, bypassing Pakistan. The Trump Administration is providing India with a waiver under applicable Iran sanctions laws to be able to continue to develop the port. <4.4. Russia> For years Russia tacitly accepted the U.S. presence in Afghanistan as furthering the battle against radical Islamists in the region. Recently, however, in the context of renewed U.S.-Russian rivalry, Russia has taken a more active role both in the conflict (including providing some political and perhaps material support for the Taliban) and in efforts to bring it to a negotiated end. During the 1990s, after the Soviet Union's 1989 withdrawal from Afghanistan and subsequent breakup (see Appendix B ), Russia supported the Northern Alliance against the Taliban with some military equipment and technical assistance in order to blunt Islamic militancy emanating from Afghanistan. After 2001, Russia agreed not to hinder U.S. military operations, later cooperating with the United States in developing the Northern Distribution Network supply line to Afghanistan. About half of all ground cargo for U.S. forces in Afghanistan flowed through the Northern Distribution Network from 2011 to 2014, despite the extra costs as compared to the route through Pakistan. Nevertheless, Russian-U.S. collaboration in Afghanistan, a relative bright spot in the two countries' relationship, has suffered in light of a more general deterioration of bilateral ties. Moscow has taken a markedly more assertive role in Afghanistan since at least late 2015. U.S. officials have differed in how they characterize both the nature of and motivation for Russia's actions, but there appears to be widespread agreement that they represent a challenge to U.S. goals. Former Secretary Mattis said that Russia was "choosing to be strategic competitors" with the United States in Afghanistan, while former U.S. commander General Nicholson said the Russians were motivated by a desire to "undermine the United States and NATO." Other analysts have noted Russian anxieties about a potential long-term U.S. military presence in Central Asia, a region that has been in Moscow's sphere of influence since the 19 th century. The Russian government frames its renewed interest in Afghanistan as a reaction to the growth of ISKP, for which Russia faults the United States. However, Russian descriptions of ISKP strength and geographic location generally surpass estimates by the United States and others, perhaps overstating the threat to justify supporting the Taliban, which Russia may see as less of a direct danger. The Washington Post, citing unnamed U.S. defense officials, reported in 2017 that Russia had provided weapons (including heavy machine guns) to the Taliban ostensibly to be used against the Islamic State affiliated fighters, but that the weapons had surfaced in places far from ISKP strongholds, like Helmand province. Russia had previously condemned such claims as "groundless" and "absurd fabrications;" a Taliban spokesman also denied the reports, saying "our contacts with Russia are for political and diplomatic purposes only." General Nicholson echoed such reports in a March 2018 interview, saying, "We've had weapons brought to this headquarters and given to us by Afghan leaders and said, this was given by the Russians to the Taliban." Russia also has sought to establish itself as a player in Afghanistan by its efforts to bring about a negotiated settlement. In December 2016, Moscow hosted Chinese and Pakistani officials in a meeting that excluded Afghan representatives, drawing harsh condemnation from the Afghan government. Significantly, Russia has also hosted Taliban officials for talks in Moscow, in February and May 2019 meetings in which Afghan government representatives did not participate. <4.5. China> China's involvement in Afghanistan, with which it shares a small, remote border, is motivated by several interests, of which reducing what China perceives as a threat from Islamist militants in Afghanistan and securing access to Afghan minerals and other resources are considered the most important. Since 2012, China has deepened its involvement in Afghan security issues and has taken on a more prominent role as a potential mediator in Afghan reconciliation, though its role in both is still relatively modest. In 2012, China signed a series of agreements with Afghanistan, one of which reportedly promised Chinese training and funding for Afghan forces, though some reports, citing participants, question how beneficial that training is. In October 2014, China hosted Ghani for his first working trip abroad as president, during which China agreed to provide $330 million in bilateral aid over the coming three years, in addition to other forms of support. As a consequence of that visit, some Taliban figures reportedly visited China, apparently accompanied by Pakistani security officials, as part of an effort to promote an Afghan political settlement. In 2018, Chinese officials denied reports of plans to build a military base in the Wakhan Corridor, a sparsely inhabited sliver of Afghanistan with which China has a 47-mile border, saying, "no Chinese military personnel of any kind on Afghan soil at any time." China did agree to help Afghanistan stand up a "mountain brigade" in the Wakhan Corridor to take on any Islamist fighters who return to the country from the Middle East. China fears that some of the returned fighters may be Chinese nationals who may be planning attacks in China's northwestern region of Xinjiang, across the border from Afghanistan. In a September 2018 interview with Reuters, Afghanistan's ambassador to Beijing said China will be doing "some training" of Afghan troops as part of that effort, but in China, rather than in Afghanistan, as some reports had suggested. Looking ahead, China may be seeking to play a larger role in reconciliation efforts in Afghanistan; China has considerable influence with its ally Pakistan, which is generally considered the most important regional player in the Afghan conflict. China participates in various multilateral fora dedicated to fostering Afghan peace talks, such as the Quadrilateral Coordination Group (comprising representatives from Afghanistan, China, Pakistan, and the United States). Chinese officials reportedly have met with Taliban representatives several times in the past year as well. Many experts see China's activities in Afghanistan as primarily economically driven. Chinese delegations continue to assess the potential for new investments in such sectors as mining and energy. The cornerstone of China's investment to date has been the development of the Aynak copper mine south of Kabul, but that project has stalled over contractual disputes, logistical problems, and some security issues. Additionally, prospective transportation and trade routes through Afghanistan comport with China's Belt and Road Initiative and previous U.S. efforts to establish a similar New Silk Road. Some experts argue that shared U.S. and Chinese interests in a stable Afghanistan represent a potential area for Sino-American cooperation. <4.6. Persian Gulf States> At times the Gulf States have been considered a key part of the effort to stabilize Afghanistan, though donations by Gulf residents have been a major source of Taliban funding. Gulf States have also contributed development funds and have influence with some Afghan clerics and factions. Saudi Arabia has a long history of involvement in Afghanistan; it channeled hundreds of millions of dollars to the mujahideen in the 1980s during the war against the Soviet occupation, and was one of three countries to formally recognize the Taliban government. Saudi Arabia later brokered some of the negotiations between the Afghan government and "moderate" Taliban figures. More recently, however, Saudi officials have described the Taliban as "armed terrorists," though some critics allege that the kingdom has not taken measures to stop private donors in the Kingdom from giving financial support to the Taliban. The United Arab Emirate s (UAE) , another country that recognized the Taliban regime, deployed a limited number of troops and aircraft to support NATO security missions in southern Afghanistan. The UAE has donated over $250 million to Afghanistan since 2002 for housing, health care, and education projects. UAE officials were reportedly discussing the UAE aid program for southern Afghanistan at the time of the January 10, 2017 bombing at the Kandahar governor's guest house that killed at least six UAE diplomats, including the UAE's Ambassador to Afghanistan. Qatar did not recognize the Taliban and was not regarded as a significant player on the Afghanistan issue until 2011. Senior Taliban figures opened an informal "political office" in Doha, with U.S. acquiescence, as part of efforts to establish talks with the Taliban in 2013. Qatar also has played host to most of the substantive U.S.-Taliban talks being overseen by Special Representative Khalilzad. <4.7. Multilateral Fora> The United States has encouraged Afghanistan's neighbors to support a stable and economically viable Afghanistan and to include Afghanistan in regional security and economic organizations and platforms. Afghanistan has sought to increase its integration with neighboring states through participation in other international fora, including the Shanghai Cooperation Organization (SCO), a security coordination body that includes Russia, China, Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan, to which Afghanistan was granted full observer status in 2012. In addition, several regional meetings series have been established between the leaders of Afghanistan and neighboring countries. These include summit meetings between Afghanistan, Pakistan, the U.S., and China (the Quadrilateral Coordination Group, or QCG). The Quadrilateral Coordination Group met for the sixth time in October 2017. Russia convened a meeting with Pakistan and China to discuss Afghanistan in December 2016 (more below), drawing condemnation from the Afghan government, which was not invited to participate; Afghanistan was invited to, and attended, the second (February 2017) and third (April 2017) meetings, though the United States declined to attend. Economically, the U.S. has emphasized the development of a Central Asia-South Asia trading corridor in an effort to keep Afghanistan stable and economically vibrant as donors wind down their involvement. <5. Reconciliation Efforts> For years, the Afghan government, the United States, and various neighboring states have engaged in efforts to bring about a political settlement with insurgents. As of July 2019, U.S. officials, led by Special Representative for Afghanistan Reconciliation Zalmay Khalilzad, are currently engaged in direct talks with the Taliban in the most serious discussions to end the U.S. military effort there since it began. However, the Taliban still refuse to negotiate with representatives of the Afghan government , which they seek to delegitimize. <5.1. Afghan Government Initiatives> The Afghan government has overseen several initiatives aimed at bringing the war to an end, including a February 2018 offer from President Ghani to negotiate with the Taliban without preconditions, but there does not appear to have been any substantive engagement between Taliban and Afghan leaders to date. On September 5, 2010, an "Afghan High Peace Council" (HPC) was formed to oversee the settlement and reintegration process. Then-President Karzai appointed former president Burhanuddin Rabbani to head it, in part to gain crucial support for negotiations with the Taliban; Rabbani was assassinated in September 2011. The HPC was significantly reorganized and effectively relaunched in 2016; at the time, one prominent Afghanistan analyst described it as a "side-show in the peace process," a position that seemed to be confirmed in 2018 when that same analyst assessed that "there will be no HPC role in the negotiations" the Afghan government is attempting to start with the Taliban. The 2016 reconciliation with the government of one insurgent faction, Hizb-e-Islami-Gulbuddin (HIG), led by former mujah ideen party leader Gulbuddin Hekmatyar, was seen as a possible template for further work toward a political settlement. A former muja hideen commander who is accused of committing human rights abuses during the Afghan civil war of the 1990s, Hekmatyar allied his fighters with the Taliban after 2001, although HIG was not a major factor on the Afghanistan battlefield. In 2010, Hekmatyar signaled his openness to reconciliation with Kabul, and Hekmatyar instructed followers to vote in the 2014 presidential elections. On September 22, 2016, after months of negotiations, Afghan officials and Hekmatyar representatives signed a 25-point reconciliation agreement; U.N. sanctions against Hekmatyar were dropped in February 2017. In May 2017, Hekmatyar returned to Kabul, rallying thousands of supporters at a speech in which he criticized the Afghan government. Hekmatyar declared his candidacy for the 2019 presidential election in January 2019. The Taliban have maintained their long-standing refusal to negotiate with representatives of the Afghan government, which they characterize as a corrupt and illegitimate puppet of foreign powers, and Kabul is not directly involved in the ongoing U.S.-Taliban negotiations (more below). Some observers have criticized that arrangement; former U.S. Ambassador to Afghanistan Ryan Crocker argued that by not insisting on the inclusion of the Afghan government in these negotiations "we have ourselves delegitimized the government we claim to support," and advocated that the U.S. halt talks until the Taliban agree to include the Afghan government. A planned meeting between as many as 200 Afghan delegates, including some Afghan officials (in their personal capacity), and the Taliban in Doha collapsed in April 2019 when Taliban representatives objected at the last minute to the size and makeup of the group; that meeting has been postponed indefinitely. A meeting between 50 Afghans and 17 Taliban representatives took place in July 2019; the Afghan delegation included some government officials, who participated in a personal capacity. The two-day "Intra-Afghan Conference for Peace" concluded with a joint statement that stressed the importance of an intra-Afghan settlement, and was hailed by Khalilzad as a "big success." Afghan President Ashraf Ghani has promised that his government will not accept any settlement that limits Afghans' rights. In a January 2019 televised address, he further warned that any agreement to withdraw U.S. forces that did not include Kabul's participation could lead to "catastrophe," pointing to the 1990s-era civil strife following the fall of the Soviet-backed government that led to the rise of the Taliban (see textbox above). President Ghani's concern about being excluded from the talks surfaced in mid-March when his national security advisor accused Khalilzad of "delegitimizing the Afghan government and weakening it," and harboring political ambitions within Afghanistan, leading to a sharp rebuke from the State Department. According to a former State Department official, "The real issue is not the personality of an American diplomat; the real issue is a policy divergence," namely, Afghans' concerns about the potential U.S. withdrawal. <5.2. U.S.-Taliban Talks> The first direct meetings between U.S. and Taliban representatives began in 2010, centered largely on the issues of a prisoner exchange and the opening of a Taliban political office in Doha, Qatar. Multiple factors, including opposition from the Afghan government led by then-President Hamid Karzai, caused the collapse of talks in March 2012. Qatari and Pakistani mediation led to a 2013 agreement to allow the Taliban to open the Doha office, but because the Taliban opened that office in June 2013 with the trappings of an official embassy, in direct violation of the terms of the agreement, the Qatari government shuttered the office less than a month later. In June 2014, Qatar coordinated the release of U.S. prisoner Bowe Bergdahl in exchange for five high-ranking Taliban officials imprisoned at Guantanamo Bay individuals who are now part of the Taliban team negotiating with the United States in Doha. No further talks between U.S. and Taliban officials occurred under the Obama Administration. <5.2.1. Developments under the Trump Administration> In President Trump's August 2017 speech laying out the new strategy for Afghanistan, he referred to a "political settlement" as an outcome of an "effective military effort," but did not elaborate on what U.S. goals or conditions might be as part of this putative political process. In remarks the next day, then-Secretary of State Rex Tillerson rejected the idea of preconditioning talks on the Taliban's acceptance of certain arrangements, saying "the Government of Afghanistan and the Taliban representatives need to sit down and sort this out. It's not for the U.S. to tell them it must be this particular model, it must be under these conditions." The Trump Administration decided in July 2018 to enter into direct negotiations with the Taliban, without Afghan government representatives. This came almost a year after the President announced a new strategy for South Asia that many interpreted as a sign of renewed American commitment to Afghanistan. With no progress on the battlefield, the Trump Administration reversed the long-standing U.S. position that any peace process would have to be "Afghan owned and Afghan led," and the first high-level, direct U.S.-Taliban talks occurred in Doha in July 2018. The September 2018 appointment by Secretary of State Mike Pompeo of Ambassador Zalmay Khalilzad, the Afghan-born former U.S. Ambassador to Afghanistan under President George W. Bush, as Special Representative for Afghanistan Reconciliation added more momentum to this effort. Since his appointment, Khalilzad has held a near-continuous series of meetings with the Afghan, Pakistani, and other regional governments, as well as with Taliban representatives. After six days of negotiations in Doha in January 2019, Khalilzad stated that, "The Taliban have committed, to our satisfaction, to do what is necessary that would prevent Afghanistan from ever becoming a platform for international terrorist groups or individuals," in return for which U.S. forces would eventually fully withdraw from the country. Khalilzad later cautioned that "we made significant progress on two vital issues: counter terrorism and troop withdrawal. That doesn't mean we're done. We're not even finished with these issues yet, and there is still work to be done on other vital issues like intra-Afghan dialogue and a complete ceasefire." After a longer series of talks that ended on March 12, 2019, Khalilzad announced that an agreement "in draft" had been reached on counterterrorism assurances and U.S. troop withdrawal. He noted that after the agreement is finalized, "the Taliban and other Afghans, including the government, will begin intra-Afghan negotiations on a political settlement and comprehensive ceasefire." It remains unclear what kind of political arrangement could satisfy both Kabul and the Taliban to the extent that the latter fully abandons its armed struggle. The Taliban have given contradictory signs, with one spokesman saying in January 2019 that the group is "not seeking a monopoly on power" and another in May speaking of the group's "determination to re-establish the Islamic Emirate in Afghanistan." Still, many Afghans, especially women, who remember Taliban rule and oppose the group's policies and beliefs, remain wary. <6. Afghan Governance and Politics> Political contention among Afghans can be seen as both a sign of the country's U.S.- and internationally supported democratic development as well as a troubling reminder of the country's fractured past and a potential impediment to peace. <6.1. Constitution and Political System> During Taliban rule (1996-2001), Afghanistan was run by a small group of mostly Pashtun clerics loyal to Mullah Mohammad Omar, who remained based in Kandahar. No representative body was functioning, and government offices were minimally staffed and lacked modern equipment. The ouster of that government by U.S. forces and their Afghan partners in late 2001 paved the way for the success of a long-stalled U.N. effort to form a broad-based Afghan government. In November 2001, after the Taliban government collapsed, the United Nations invited major Afghan factions, most prominently the Northern Alliance and allies of former King Zahir Shah but, notably, not the Taliban to an international conference in Bonn, Germany. There, on December 5, 2001, the factions signed the "Bonn Agreement" which authorized an international peacekeeping force and called for a loya jirga (consultative assembly) to establish a Transitional Authority to administer the country until a new constitution could be drafted. That loya jirga elected Afghan Interim Administration chairman Hamid Karzai as president in June 2002, and a subsequent jirga approved a new constitution, establishing the Islamic Republic of Afghanistan, in January 2004. The Afghan constitution sets up a presidential system, with an elected president and bicameral national legislature, the 259-seat lower house of which ( Wolesi Jirga ) is popularly elected. The president serves a five-year term, with a two-term limit, and there are two vice presidents. The president has broad powers. Under article 64, he has the power to appoint all "high-ranking officials," which includes not only cabinet ministers but also members of the Supreme Court, judges, provincial governors and district governors, local security chiefs, and members of supposedly independent commissions such as the Independent Election Commission and the Afghan Independent Human Rights Commission (AIHRC). These appointments are constitutionally subject to confirmation by the National Assembly. To some extent, the National Assembly can check the powers of the president, although many observers assert that it has been unable to limit presidential authority. Both the upper and lower houses are required to pass laws and the national budget. The National Assembly has often tried to assert its institutional strength, such as by holding a March 2006 vote to require the cabinet to be approved individually, rather than en bloc , increasing opposition leverage. Votes of no-confidence against ministers, which under Article 92 of the Afghan constitution can be proposed by 20% of lower house members, have often affirmed these powers, with several of Karzai's and Ghani's ministers blocked or removed from office. Because it tends to be composed of more established, notable Afghans who are traditionalist in their political outlook, the upper house has tended to be more politically conservative than the lower house, and more supportive of the president (who appoints a third of its members under the constitution). <6.2. Politics of Ethnicity and Elections> Afghanistan's active political scene is often viewed through the prism of the country's complex ethnic makeup, itself a sensitive political issue. The Afghan constitution references 14 ethnicities as well as "other tribes," (Article 4) and designates six languages (Uzbek, Turkmen, Pachaie, Nuristani, Baluchi, and Pamiri) as possible third official languages (Article 16) after the two official national languages, Pashto and Dari (the Afghan variant of Persian). Reliable figures for the ethnic breakdown of Afghanistan are difficult to come by and, as in many other parts of the world, are heavily freighted with political ramifications. For example, the CIA World Factbook does not provide any estimates at all, stating that "current statistical data on the sensitive subject of ethnicity in Afghanistan are not available." There is generally widespread agreement that four ethnic groups are most dominant in Afghanistan. In descending order of size, they are Pashtuns, Tajiks, Hazaras, and Uzbeks. One representative estimate gives their size as 42%, 27%, 9%, and 9% of the Afghan population, respectively. Pashtuns are generally acknowledged to be the largest ethnic group in Afghanistan, and have traditionally dominated Afghan governance; Presidents Hamid Karzai (2003-2014) and Ashraf Ghani (2014-present) are both ethnic Pashtuns. Pashtuns are concentrated in the south and east of the country, along the border with Pakistan, which has a sizeable Pashtun minority of its own. The Taliban is largely, though not exclusively, Pashtun. Tajiks , who generally speak Dari, are thought to be the second largest group in Afghanistan. The Northern Alliance that opposed the Taliban was led by Tajiks like Ahmad Shah Massoud, and today's Tajik-dominated Jamiat-e-Islami party features significant figures like Foreign Minister Salahuddin Rabbani, former Balkh governor Atta Mohammad Noor, and national Chief Executive Officer (CEO) Abdullah (who is of mixed Tajik-Pashtun ancestry). The Persian-speaking Hazara people live mostly in central Afghanistan and represent most of Afghanistan's Shia minority. They have periodically suffered discrimination, persecution, and violence. Deputy CEO Mohammad Mohaqiq is an ethnic Hazara. They are generally considered to be the most socially liberal ethnic group in Afghanistan. Uzbeks represent Afghanistan's largest Turkic minority population (other Turkic groups in Afghanistan include Turkmen and Kyrgyz), concentrated mostly in the country's north, where they have sometimes come into conflict with Tajiks and other groups. Vice President Abdul Rashid Dostum is generally considered the leader of Afghanistan's Uzbek community. Hamid Karzai won the first nationwide presidential election in October 2004, and reelection in 2009; the latter election, the first to be administered by the Afghan government, was clouded by widespread fraud allegations. The election system (a runoff between the top two candidates if no majority is achieved in the first round) favors the likelihood the president will be an ethnic Pashtun. This was seemingly confirmed in 2014, when Abdullah Abdullah (of mixed ancestry, but associated with the Tajik community) won a plurality of votes with 45% in the first round and then lost with 44% in the second round to now-President Ghani, an ethnic Pashtun. The 2014 presidential election was seen as a major test for Afghanistan as the U.S. and international partners drew down in advance of a planned transfer of responsibility for security to Afghan forces. In the first round, held in April 2014, violence was relatively low and there were fewer fraud complaints and deducted votes than in the 2009 election. The second round of voting, in June 2014, was extremely contentious and Abdullah alleged that fraud was responsible for preliminary results that showed him losing to Ghani, with Abdullah supporters reportedly threatening to seize power by force. Intense U.S. involvement, including calls from President Barack Obama and negotiations mediated by Secretary of State John Kerry, eventually led to a September 2014 power sharing agreement between the two men. As part of that accord, Ghani was inaugurated as president and appointed Abdullah as Chief Executive Officer (CEO), a new, extraconstitutional position with powers approximating those of a prime minister. This arrangement, known as the national unity government, remains intact but has encountered extensive difficulties. Abdullah publicly accused Ghani in August 2016 of acting unilaterally and refusing to meet regularly with him. Outward signs of friction seem to have receded since 2017, though tensions clearly remain. A trend in Afghan society and governance that worries some observers is the increasing fragmentation along ethnic and ideological lines. Such fractures have long existed in Afghanistan but were largely contained during Hamid Karzai's presidency. These divisions are sometimes seen as a driving force behind some of the contentious episodes that have challenged Ghani. Vice President Abdul Rashid Dostum, who has criticized Ghani's government for favoring Pashtuns at the expense of the Uzbek minority he is seen to represent, left Afghanistan for Turkey in May 2017. Dostum's departure came in the wake of accusations that he engineered the kidnapping and assault of a political rival, prompting speculation that his departure was an attempt to avoid facing justice in Afghanistan. Dostum returned to Afghanistan in July 2018, quelling protests by his supporters; he remains under indictment but no legal proceedings against him have taken place. Ghani's December 2017 dismissal of Atta Mohammad Noor, the powerful governor of the northern province of Balkh who defied Ghani by remaining in office for several months before resigning in March 2018, was another sign of serious political divisions, possibly along ethnic lines. Noor is one of the most prominent members of the Jamiat-e-Islami party, which is seen to represent the country's Tajik minority. After multiple delays, elections for the 249-seat Wolesi Jirga (the lower house of Afghanistan's bicameral legislature) were held in October 2018. District council elections, originally scheduled to take place at the same time, were delayed due to a lack of candidates. The elections were preceded by contention among electoral commissioners and an ethnically charged dispute over electronic identity cards. Various technical and logistical challenges have exposed the Independent Election Commission (IEC) to widespread criticism, with one observer describing the process as a "triumph of administrative chaos." Instability marred the election results as well: elections were held a week late in Kandahar and indefinitely postponed in Ghazni, and hundreds of polling stations in areas outside of the government's control were closed. Additionally, ten candidates were assassinated during the campaign and dozens of civilians were killed and hundreds wounded in election-day violence. Still, most reports indicated at least some measure of voter enthusiasm, especially in urban areas; turnout was estimated at around 4 million of 9 million registered voters. Afghanistan scholar Barnett Rubin observed, "The main obstacle to democracy in Afghanistan is not the willingness of the people to participate, but the capacity of the state to make their participation meaningful." Final nationwide results (except for Ghazni, parliamentary elections for which are supposed to be run alongside the 2019 presidential election) were released in May 2019. President Ghani and CEO Abdullah, along with over a dozen other candidates, are running in the presidential election now scheduled, after two postponements, for September 2019. President Ghani's mandate expired on May 22, 2019. Many of his chief rivals have said that his government is no longer legitimate and have called for him to step down in favor of an alternate political arrangement. On April 20, 2019, the Afghan Supreme Court reportedly issued a ruling extending the president's term until the election (along with those of his vice presidents; it is unclear what the CEO's status will be), citing a similar 2009 ruling that extended then-President Karzai's term to cover a postponement of the 2009 presidential election. It is unclear whether delays to the presidential election are related to ongoing U.S.-Taliban talks. U.S. officials have denied that the establishment of an interim government is part of their negotiations with the Taliban, but some observers speculate that such an arrangement (which Ghani has rejected) might be necessary to accommodate the reentry of Taliban figures into public life. An interim government, or some other broad national political arrangement, might also facilitate the establishment of a new political system, which a putative settlement might require. The Taliban have stated their intention to replace the 2004 Afghan constitution, which they characterize as "invalid" and "imported from the West," with an Islamic system. President Ghani has responded by pointing out that Afghanistan is an Islamic republic and that the constitution prohibits any laws that "contravene the tenets and provisions" of Islam, though he has stated his openness to reviewing and amending it within legal processes. Some analysts have argued that the Afghan constitution breeds ethnic conflict by investing the president with considerable powers (including the ability to appoint all provincial governors) and that a more decentralized system is necessary. <7. Aid, Economic Development, and Human Rights> Since the United States and its partners intervened in 2001, the international community has contributed tens of billions of dollars in economic and development assistance to Afghanistan. At the height of this effort, donor aid accounted for more than 75% of Afghanistan's GDP. As of early 2018, donor aid still accounts for about 60% of total Afghan government expenditures (both operating budget and development budget), with domestic revenues making up the rest. Experts and policymakers have debated many aspects of aid to Afghanistan, including amounts, mechanisms for delivery, donor coordination, and distribution within Afghanistan. <7.1. U.S. Assistance to Afghanistan> Between 1985 and 1994, the United States had a cross-border aid program for Afghanistan, implemented by USAID personnel based in Pakistan. Citing the difficulty of administering this program, there was no USAID mission for Afghanistan from the end of FY1994 until the reopening of the U.S. Embassy in Afghanistan in late 2001. During the 1990s, the United States was the largest single provider of assistance to the Afghan people even though no U.S. aid went directly to the Taliban government when it was in power during 1996-2001; monies were provided through relief organizations. Since 2001, the United States has been by far the largest international donor to Afghanistan, spending over $132 billion for development assistance since FY2001 according to SIGAR. U.S. aid has been primarily focused on security assistance, accounting for nearly 63% of those funds (see Figure 6 ). Appendix C at the end of this report portrays U.S. assistance to Afghanistan by year since the fall of the Taliban. The cited figures do not include costs for U.S. combat operations. The United States and other donors have been working to transition assistance away from off-budget (internationally managed, excluded from the Afghan national budget) expenditures to on-budget (managed by the Afghan government, also referred to as "direct contributions"). About $14.5 billion of U.S. assistance provided to Afghanistan has been directly to the Afghan government ($9.2 billion directly to the Afghan government, $5.3 billion through international trust funds). Since 2010, donors have aimed to increase to half the portion of development assistance delivered on-budget. SIGAR has expressed misgivings about this goal, arguing that "the Afghan government often lacks both the will and the necessary internal controls to ensure that those funds are spent on what the donor intended" and that "should U.S. military and civilian personnel levels decrease, the ability to track on-budget assistance will inevitably suffer." <7.1.1. Aid Conditionality and Oversight> Some laws have required the withholding of U.S. aid subject to Administration certification of Afghan compliance on a variety of issues, including counternarcotics efforts, corruption, vetting of the Afghan security forces, human rights practices, protection of women's rights, and other issues. Successive measures included in annual appropriations measures and National Defense Authorization Acts have conditioned Economic Support Funds (ESF) and International Narcotics Control and Law Enforcement (INCLE) funding to Afghanistan on various requirements, including the submission of various reports, and the certification that the Afghan government is meeting certain benchmarks related to metrics including corruption, democratic development, and women's rights. All the required certifications have been made, and virtually no U.S. funds have been withheld from Afghanistan. The FY2008 defense authorization bill ( P.L. 110-181 ) established a "Special Inspector General for Afghanistan Reconstruction" modeled on a similar outside auditor for Iraq. The SIGAR issues quarterly reports and specific audits of aspects of Afghan governance and security, with particular attention to how U.S.-provided funds have been used. The SIGAR, as of July 2019, is John Sopko. Some executive branch agencies have periodically criticized SIGAR audits as inaccurate or as highlighting problems that the agencies are already correcting. For example, DOD took strong exception to a December 4, 2013, audit by the SIGAR that asserted that the U.S. military had failed to adequately manage risk accounting for $3 billion in DOD funds for the ANDSF. SIGAR's annual operations are funded at around $55 million. H.Rept. 116-78 , accompanying the House Appropriations Committee-reported FY2020 State, Foreign Operations, and Related Programs Appropriations bill, directs that "Not later than 180 days after enactment of this Act, the SIGAR shall submit to the Committees on Appropriations a detailed plan, including funding requirements and personnel data, for the complete drawdown of operations in Afghanistan by the end of fiscal year 2021." <7.1.2. Other International Donors and Multilateral Trust Funds> Non-U.S. donors, including such institutions as the EU and the Asian Development Bank, have provided substantial funds for Afghanistan's development. According to SIGAR, most of those funds are through three major international funds: the World Bank-managed Afghanistan Reconstruction Trust Fund (ARTF), the UNDP-managed Law and Order Trust Fund for Afghanistan, and the NATO-managed Afghan National Army Trust Fund (ANATF). As of late 2018, the largest donors to these funds, after the U.S., are the UK, Japan, Germany, the EU, and Canada (see Figure 7 ). Major pledges have been made primarily at donor conferences such as Tokyo (January 2002), Berlin (April 2004), Kabul (April 2005), London (February 2006), Paris (June 2008), London (January 2010), Tokyo (July 2012), and Brussels (October 2016). At the 2012 Tokyo conference, the United States and its partners pledged a total of $16 billion in aid to Afghanistan through 2015 ($4 billion per year for 2012-2015) and agreed to sustain support through 2017 at levels at or near the past decade. Among other major pledges, Japan pledged $3 billion through 2016, and Germany pledged $550 million over four years. The Tokyo Mutual Accountability Framework (TMAF) that resulted from the conference stipulated requirements of the Afghan government in governance, anti-corruption, holding free and fair elections, and human rights practices. As an incentive, if Afghanistan meets the benchmarks, the TMAF increases (to 20% by 2024) the percentage of aid provided through the ARTF and other mechanisms that give Kabul discretion in the use of donated funds. Donors met to assess progress on the TMAF benchmarks and pledged more funds for Afghanistan at a donors meeting in Brussels in October 2016. The conference welcomed Afghanistan's new "National Peace and Development Framework" and its efforts to fight corruption. At the conclusion of the meeting, donors announced pledges of $15.2 billion for the period of 2017-2020 (and support at lower levels thereafter through 2024). In November 2018, 61 countries and 35 international organizations met in Geneva to measure progress on development and reform in light of the Brussels pledges. At the conference, donor nations reaffirmed their commitment to continue support through 2020 and praised some successes (such as "bold and important steps" on the peace process taken by the Afghan government) but left some key issues unaddressed, according to one analyst. <7.2. Economic and Human Development> Economic development is pivotal to Afghanistan's long-term stability. Some economic sectors in Afghanistan have been developed largely with private investment, including by well-connected Afghan officials or former officials who founded companies. Promoting economic growth has been a major goal of U.S. development assistance, mostly by USAID, but also by other departments. For example, the DOD Task Force for Business and Stability Operations (TFBSO) sought to facilitate additional private investment in Afghanistan. However, A SIGAR report of November 2014 assessed that the Task Force's efforts yielded very little result, and the TFBSO concluded its operations in March 2015. Decades of war have stunted the development of most domestic industries. More recently, the economy also has been hurt by a decrease in aid provided by international donors since 2014. Afghanistan's Gross Domestic Product (GDP) has grown an average of 7% per year since 2003, but growth slowed to 2% in 2013 due to aid cutbacks and political uncertainty about the post-2014 security situation. Since 2015, Afghanistan has experienced a "slight recovery" with growth of between 2% and 3% in 2016 and 2017, though the increase in the poverty rate (55% living below the national poverty line in 2016-2017 compared to 38% in 2012-2013) complicates that picture. On the other hand, the Afghan government has made progress in increasing revenue (though as mentioned above, the percentage of total budgetary expenditures funded by donor grants is still above 60%). In any event, "for the foreseeable future, and barring a breakthrough in reconciliation and an end to or at least a substantial reduction in the level of conflict, Afghanistan will remain highly aid dependent." Efforts by the U.S. and others to build the legitimate economy are showing some results, by some accounts, and are outlined by sector below. <7.2.1. Infrastructure> U.S. aid has been key to a number of infrastructure initiatives, most notably in constructing roads, improving the electric grid, and developing the telecommunications sector. Roads. Road building in Afghanistan, which reportedly had less than 50 miles of paved roads in 2001, was a major development priority; as former commander of U.S. forces in Afghanistan General Eikenberry (later Ambassador) has said, "where the roads end, the Taliban begin." USAID has spent about $2.1 billion on road construction and maintenance projects, with DOD funding an additional $850 million in such work, according to an October 2016 SIGAR audit report. The major road, the Ring Road (which links the country's five major cities), has been completely repaved using funds from various donors, including substantial funds from the Asian Development Bank, at a total expense of about $4 billion (all donors). Some observers warn that the Afghan government lacks the resources to adequately maintain the roads built with international funds. Many of the roads built have fallen into disrepair and are marked with major potholes, as discussed in detail in the October 2016 SIGAR audit report. As of July 2019, USAID does not appear to have any ongoing roadbuilding projects. Electricity. Considerable U.S. efforts in the energy sector since 2001 arguably have yielded mixed results. According to the January 2019 SIGAR report, total U.S. disbursements for power projects total over $2 billion, including $1.5 billion in USAID Economic Support Funds (ESF) since FY2002 (with $626 million in active power-infrastructure programs) and about $565 million in DOD Afghanistan Infrastructure Funds. While the percentage of Afghans with access to electricity has increased due to these and other development efforts, by most estimates a majority remains without grid-connected power. Afghanistan has a complex power system, operating in nine separate, unconnected grids, and is still largely dependent on the sale of surplus power from its neighbors, importing 80% of its energy. The vast majority (95%) of Afghanistan's domestically generated electricity is provided by hydropower. The United States has worked to create a more independent and cohesive system by assisting in the development of indigenous power production and management capabilities and by connecting Afghanistan's disparate power grids. Telecommunications. Several Afghan telecommunications firms (e.g., Roshan, MTN, and Afghan Wireless) have formed since 2002 and more than $2 billion in private investment has flowed into this sector, according to a 2016 SIGAR report. Cellular networks now reach approximately 90% of Afghans, and the Asia Foundation found in 2018 that over 89% of respondents reported that their household owned at least one mobile phone, up from 52% in 2009. This rapid development, aided by tens of millions of dollars in support from DOD, State, and USAID, has made telecommunications a key driver of the Afghan economy. Various observers have assessed in recent years that the sector contributes millions in tax revenues to the Afghan government, and provides employment to tens of thousands of Afghans, though doubts about its sustainability exist. <7.2.2. Agriculture> Agriculture has always been key to Afghanistan's economy and stability; even though only about 12% of Afghanistan's land is arable, about 70% of Afghans live in rural areas. Non-opium agriculture contributes about 25% of Afghanistan's GDP (down from around 70% as late as the mid-1990s). Because most GDP gains since 2001 have come from other sectors, experts have identified agriculture as a key potential growth area. Agriculture continues to employ around 40% of Afghanistan's labor force, but policies to encourage the growth of such subindustries as intensive livestock production and horticultural crops could double agriculture GDP and add more than a million jobs in that sector over the next decade, according to the World Bank. U.S. policy to boost Afghanistan's agriculture sector is aimed not only at reducing drug production but also at contributing to economic growth. Prior to the turmoil that engulfed Afghanistan in the late 1970s, Afghanistan was a major exporter of agricultural products. Since 2002, USAID has disbursed more than $2 billion on almost 60 agriculture programs for such goals as increasing access to markets and providing alternatives to poppy growing, according to July 2018 SIGAR audit. According to a 2019 factsheet, USAID programs have facilitated over $845 million in increased sales of agriculture products, supporting the equivalent of 647,000 full time equivalent jobs. <7.2.3. Mining and Gems> Afghanistan's mining sector has been largely dormant since the Soviet invasion. Some Afghan leaders complain that not enough has been done to support the potentially lucrative mining sector. The issue became more prominent in June 2010 when the DOD Task Force for Business and Stability Operations announced, based on surveys, that Afghanistan may have untapped minerals, including copper, iron, lithium, gold, and precious gems, worth over $1 trillion. Some experts assert that U.S. hopes for this sector as a driver of long-term economic sustenance for Afghanistan are misplaced. Instability and poor infrastructure are the most important impediments to the development of this sector, but questions about the legality of some projects, and the overall legal framework, have led some to question whether profits will actually support the Afghan people. <7.2.4. Oil, Gas, and Related Pipelines> Years of war have stunted development of a hydrocarbons energy sector in Afghanistan. The country has no hydrocarbons export industry, only a small refining sector that provides some of Afghanistan's needs for gasoline or other fuels. Nevertheless, Afghanistan's prospects in this sector appeared to brighten by the 2006 announcement of an estimated 3.6 billion barrels of oil and 36.5 trillion cubic feet of gas reserves, amounts that could make Afghanistan self-sufficient in energy or even able to export. USAID has funded test projects to develop gas resources in northern Afghanistan, including a $120 million contribution to the $580 million Sheberghan Gas Development Project, which consisted of a number of gas wells and, in partnership with the private sector, building a 200 megawatt gas-fired thermal plant and associated transmission lines in northern Afghanistan. Afghanistan's geographic location could also let it become a transit hub for Central Asian natural gas. The most important current gas project is the Turkmenistan-Afghanistan-Pakistan-India, or TAPI, pipeline. In 2002, the leaders of Turkmenistan, Afghanistan, and Pakistan signed preliminary agreements on a gas pipeline that would originate in southern Turkmenistan and pass through Afghanistan to Pakistan, with possible extensions into India. The leaders of the four countries involved formally "broke ground" on the pipeline at a ceremony in Turkmenistan in 2015, and work on the Afghan section began in February 2018. Afghanistan stands to gain access to gas, as well as earn hundreds of millions annually in transit fees, but some describe claims of progress on the project as "dubious," and point to security concerns along the pipeline's intended route through Afghanistan, among other potential issues, as causes for skepticism. <7.2.5. Education> With more than 60% of Afghans under the age of 24, strengthening the education system is recognized as key to Afghanistan's future but, as in other areas, prospects depend largely on security dynamics. While most sources (including USAID and others) give a figure of 9 million children enrolled in school, the January 2017 SIGAR report relays a December 18, 2016 interview with the Afghan Minister of Education, who said that "after adjusting numbers for more than 3 million permanently absent registered students from school records, only 6 million students were actually attending classes in Afghanistan." Continuing Taliban attacks on schools have caused some ("over 1,000" according to a January 2017 address by the acting Minister of Education) to close and hindered efforts to enroll Afghan students. Attacks tripled in 2018, according to a UNICEF report (though at least some of that rise is attributable to violence surrounding the 2018 parliamentary elections, during which many schools were used as polling centers). <7.2.6. Trade> U.S. policy has been to encourage Afghanistan's trade relationships, particularly those with its neighbors. Afghanistan took a major step forward on building its trade relationships with its accession to the World Trade Organization (WTO) in July 2016, over a decade after it first applied. USAID has funded a number of projects to increase the competitiveness of Afghan products in international markets, which have shown some results; the value of Afghan exports rose from $600 million in 2016 to an estimated $1 billion in 2018. In September 2004, the United States and Afghanistan signed a bilateral trade and investment framework agreement (TIFA), and most of Afghanistan's exports are eligible for duty free treatment under the enhanced Generalized System of Preferences (GSP) program. Still, Afghanistan is a relatively minor trading partner of the United States, with U.S. exports totaling $1.2 billion in 2018 and imports from Afghanistan totaling just $29 million. <7.3. General Human Rights Issues> U.S. assistance has also been used to promote the broader U.S. policy of enhancing and protecting human rights in Afghanistan and promoting the government's adherence to international standards of human rights practices. Like previous years' State Department human rights reports on Afghanistan, the report for 2018 attributes most of Afghanistan's human rights deficiencies to overall lack of security, loose control over the actions of Afghan security forces, corruption, and cultural norms such as the preclusion of male-female interactions. Successive State Department reports cite torture, rape, and other abuses by officials, security forces, detention center authorities, and police. Afghanistan has a free press, and Afghans freely express a variety of views, including criticism of the central government, in Afghanistan's numerous independent media outlets (though local media may be more constrained by local powerbrokers). Journalists have been targeted by insurgent groups, including in an April 30, 2018, suicide attack that killed nine reporters and photographers in Kabul. Numerous peaceful protests, marches, and sit-ins over the past year are a testament to the government's general respect for freedom of assembly. Several other issues related to the status of human rights in Afghanistan are outlined below. <7.3.1. Status of Women> Freedoms for women have expanded since the fall of the Taliban. The advancement of Afghan women has been a stated U.S. policy interest and goal of U.S. assistance efforts, though it is unclear how sustainable these gains are, particularly given ongoing U.S.-Taliban negotiations. Despite these gains, and an expenditure by the U.S. government of roughly $1 billion on programs for which the advancement of women was a component, the U.N. still ranks Afghanistan 163 rd of 164 countries on its 2017 gender development index. Potential changes to the status of women in Afghanistan under a prospective political settlement have drawn scrutiny and speculation from Afghans and outside observers alike. Selected Metrics Female literacy: 6% (2001) vs. 16% (2017). Girls in school: 3.5 million enrolled, 2.2 million out-of-school. The Taliban claim to have lifted the ban on educating girls, and in Taliban-controlled areas some girls are attending primary school. Civil service: 22% female (30% target level set in the Tokyo Mutual Accountability Framework). Women in parliament: Article 83 of the Afghan constitution directs that on average at least two women be elected to the lower house of parliament from each of Afghanistan's 34 provinces, creating a quota of 68 women out of 250 seats (about 27%). One third of the upper house of parliament (34 of 102 seats) is selected by the president, and Article 84 directs that half of these seats (17) be filled by women. As of November 2018, 4,735 women serve in the Afghanistan National Defense and Security Forces (ANDSF), making up slightly less than 2% of the force. Afghan Government E fforts The Afghan government pursues a policy of promoting equality for women under its National Action Plan for Women of Afghanistan (NAPWA) as required by the Tokyo Mutual Accountability Framework. Afghanistan has a Ministry of Women's Affairs, the primary function of which is to promote public awareness of relevant laws and regulations concerning women's rights. It plays a key role in trying to protect women from domestic abuse by overseeing the operation of as many as 29 women's shelters across Afghanistan. Despite gains since 2001, numerous abuses, such as denial of educational and employment opportunities, forced marriage, and honor killings, continue primarily because of conservative traditions. On August 6, 2009, then-President Karzai issued, as a decree, the "Elimination of Violence Against Women" (EVAW) law that makes many of the practices mentioned above unlawful. Efforts by the National Assembly to enact the EVAW in 2010 and in 2013 failed due to opposition from religious conservatives. While prosecutions of abuses against women are increasingly obtaining convictions, a relatively small percentage of reports of violence against women are registered with the judicial system; about one-third of those proceed to trial. President Ghani has signaled his support for women's rights by publicly highlighting the support he receives from his wife, despite the Afghan cultural taboo about mentioning wives and female family members in public. Ghani nominated a woman to Afghanistan's Supreme Court, but the National Assembly rejected her nomination in July 2015. He has also appointed two female governors one more than during Karzai's presidency and three (of 25) cabinet ministers. In February 2018, hundreds of Afghan women gathered at a conference in Kabul to urge Ghani's government to reject any potential peace deal that does not safeguard women's rights. While women are not included in the current U.S.-Taliban negotiations, they comprise 26% of Afghan High Peace Council, and 20% of provincial peace councils, which lead local peacebuilding efforts. A number of women participated in July 2019 talks between Taliban and Afghan representatives (including some government officials who attended in a personal capacity). U . S . Policy Successive SIGAR audits and reports have identified issues with U.S.-funded programs to support Afghan women. According to SIGAR, Congress appropriated $627 million to address the needs of Afghan women and girls from FY2003 through FY2010; SIGAR reported at least $64.8 million in the three subsequent fiscal years but stated that the "full extent of [DOD, State, and USAID] efforts was unclear." In late 2018, SIGAR assessed that the most prominent and highly funded initiative in this area, USAID's Promoting Gender Equity in National Priority Programs (Promote), is hindered by insufficient evaluation efforts and noted that it was "unclear whether the Afghan government has the institutional capacity to continue Promote's activities once the program ends." <7.3.2. Religious Freedoms and Minorities> For several successive years, including in its 2018 annual report, the U.S. Commission on International Religious Freedom (USCIRF) has identified Afghanistan as a "Tier 2" country, meaning that the government "engaged in or tolerated serious" violations that are "characterized by at least one of the elements of the 'systematic, ongoing, and egregious'" standard. According to USCIRF, "aspects of the country's constitution and other laws are contrary to international standards for freedom of religion." Members of minority religions, including Christians, Sikhs, Hindus, and Baha'i's, often face discrimination, but members of these communities also sometimes serve at high levels of government. According to USCIRF, the number of Hindus and Sikhs in Afghanistan has dwindled from nearly 200,000 in 1992 to between 3,000 and 7,000 today. These groups were targeted in a July 2018 ISKP attack against a campaign rally in Jalalabad that killed more than 20, including a Sikh candidate for parliament. ISKP has also aggressively targeted Afghanistan's Shia minority (10-20% of the population), most of which are ethnic Hazaras. Afghan Shia leaders appreciated the July 2009 enactment of a "Shia Personal Status Law" that gave Afghan Shias the same degree of recognition as the Sunni majority, and provided a legal framework for Shia family law issues. Some rights groups characterized the law as formalizing discrimination against Shia women. <7.3.3. Human Trafficking> Afghanistan was ranked as "Tier 2" in the State Department Trafficking in Persons Report for 2018, a continuation of its 2017 ranking and an improvement from 2016 when Afghanistan was ranked as "Tier 2: Watch List" on the grounds that the Afghan government was not complying with minimum standards for eliminating trafficking and had not demonstrated increased efforts against trafficking since the prior reporting period. As part of the government's significant efforts to combat trafficking, the 2018 report cites a revision to the penal code that increases penalties for human trafficking and a new training manual for combating trafficking. Nevertheless, the report says that the government did not report any new prosecutions or convictions of officials involved in trafficking, despite credible allegations. The report asserts that Afghanistan is a source, transit, and destination country for trafficked persons, though trafficking within Afghanistan is more common than trafficking across its borders. Related abuses prevalent in Afghanistan include forced or bonded labor; sex trafficking, including for bacha bazi , a practice in which wealthy men use groups of young boys for social and sexual entertainment (see textbox below); and the recruitment and use of children in combat. <8. Outlook> Insurgents and terrorist groups have demonstrated considerable capabilities in 2018 and 2019, throwing into sharp relief the daunting security challenges that the Afghan government and its U.S. and international partners face. At the same time, prospects for a negotiated settlement have risen, driven by direct U.S.-Taliban talks, though the prospects for such negotiations to deliver a settlement are uncertain. Those talks currently are centered on the U.S. and Taliban priorities, namely counterterrorism and the withdrawal of foreign troops, respectively. Special Representative for Afghan Reconciliation Khalilzad and other U.S. officials maintain that facilitating an intra-Afghan settlement is also a U.S. objective, but the means by which the U.S. could force the Taliban into dialogue with the Afghan government (let alone guarantee the Taliban's adherence to certain political or other conditions) is unclear, especially after a U.S. withdrawal from the country. Observers differ on whether or not the Taliban pose an existential threat to the Afghan government, given the current military balance, but generally agree that alterations to U.S. troop deployments or, perhaps more importantly, U.S. funding for the ANDSF, would pose a challenge to the Afghan government. As President Ghani said in 2018, "[W]e will not be able to support our army for six months without U.S. [financial] support." Increased political instability, fueled by questions about the central government's authority and competence and rising ethnic tensions, may pose as serious a threat to Afghanistan's future as the Taliban does. A potential collapse of the Afghan military and/or the government that commands it could have significant implications for the United States, particularly given the nature of negotiated security arrangements. Regardless of how likely the Taliban would be to gain full control over all, or even most, of the country, the breakdown of social order and the fracturing of the country into fiefdoms controlled by paramilitary commanders and their respective militias may be plausible, even probable; Afghanistan experienced a similar situation nearly thirty years ago during its post-Soviet civil war. Under a more unstable future scenario, alliances and relationships among extremist groups could evolve, as could security conditions, offering new opportunities to transnational terrorist groups, whether directly or by default. Human rights would be likely to suffer as well. In light of these uncertainties, Members of Congress and other U.S. policymakers may reassess notions of what success in Afghanistan looks like, examining how potential outcomes might harm or benefit U.S. interests, and the relative levels of U.S. engagement and investment required to attain them. The present condition, which is essentially a stalemate that has endured for several years, could persist; some argue that the United States "has the capacity to sustain its commitment to Afghanistan for some time to come" at current levels. In May 2019, former National Security Advisor H.R. McMaster compared the U.S. effort in Afghanistan to an "insurance policy" against the negative consequences of the government's collapse. Other analysts counter that "the threat in Afghanistan doesn't warrant a continued U.S. military presence and the associated costs which are not inconsequential." The Trump Administration has described U.S. policy in Afghanistan as "grounded in the fundamental objective of preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan." For years, some analysts have challenged that line of reasoning, describing it as a strategic "myth" and arguing that "the safe haven fallacy is an argument for endless war based on unwarranted worst-case scenario assumptions." Some of these analysts and others dismiss what they see as a disproportionate focus on the military effort, citing evidence that "the terror threat to Americans remains low" to argue that "a strategy that emphasizes military power will continue to fail." Core issues for Congress in Afghanistan include Congress's role in authorizing, appropriating funds for, and overseeing U.S. military activities, aid, and regional policy implementation. Additionally, Members of Congress may examine how the United States can leverage its assets, influence, and experience in Afghanistan, as well as those of Afghanistan's neighbors and international organizations, to encourage more equal, inclusive, and effective governance. Congress also could seek to help shape the U.S. approach to talks with the Taliban, or to potential negotiations aimed at altering the Afghan political system, through oversight, legislation, and public statements. How Afghanistan fits into broader U.S. strategy is another issue on which Members might engage, especially given the Administration's focus on strategic competition with other great powers. Some recognize fatigue over "endless wars" like that in Afghanistan but argue against a potential U.S. retrenchment that could create a vacuum Russia or China might fill. Others describe the U.S. military effort in Afghanistan as a "peripheral war," and suggest that "the billions being spent on overseas contingency operation funding would be better spend on force modernization and training for future contingencies." Appendix A. Historical Timeline, 1747-2001 This timeline briefly describes the major political and military events that have shaped Afghanistan's modern trajectory from the Durrani Empire to the U.S. invasion in 2001. Appendix B. Soviet War in Afghanistan The Soviet Union's invasion of, and withdrawal from, Afghanistan has emerged as a frequently referenced possible historical analogue for the U.S. experience there. While there are clear and dramatic differences between the U.S. and Soviet experiences in Afghanistan, they also share some similarities that are of potential value in assessing various U.S. policy options. The Soviet Union deployed troops into Afghanistan in December 1979 to buttress the communist People's Democratic Party of Afghanistan (PDPA) government, which had been established after the 1978 Saur (April) Revolution. Growing instability in Afghanistan, including a nascent grassroots popular uprising against the PDPA's reform program and factional fighting within the PDPA, led Soviet leaders to order the initial invasion of about 80,000 Soviet troops, which quickly took control of urban centers, major lines of communication, and other strategic points. Soviet troops, which numbered over 100,000 at their peak, partnered with Afghan government forces and various paramilitaries but generally bore the brunt of fighting against armed opposition groups, collectively known as the mujahideen . Mujahideen groups, supported by Pakistan, the United States, Saudi Arabia, and others, led a guerilla campaign against Soviet and Afghan government forces characterized by sabotage operations, attacks against military and government sites, and attacks against some civilian targets. The Soviet effort was not just military in nature. The USSR also "sent thousands of technical specialists and political advisors" to Afghanistan to "help stabilize the government and broaden its base of support," though these missions were often undermined by "infighting and lack of coordination among advisers and other Soviet officials." By 1985, newly installed Soviet leader Mikhail Gorbachev had decided to seek a withdrawal from Afghanistan. Soviet military losses were substantial (around 13,000 Soviet troops killed and 40,000 wounded over the course of the decade-long intervention), but experts disagree about the extent to which these casualties motivated the decision to withdraw. Other reasons cited include international isolation, the economic cost of the war effort, the potential for political unrest within the USSR, and the greater importance Gorbachev placed on his reform program. Increasingly, Soviet attention turned to both pressuring squabbling Afghan leaders to unify and building up the Afghan military, which suffered from high rates of desertion, attrition, and casualties. U.N.-mediated talks in Geneva between delegations from the governments of Afghanistan (supported by the USSR) and Pakistan (supported by the U.S.) began in March 1982 and continued fitfully until the signing of the Geneva Accords in April 1988. The Soviet withdrawal began in May, per the Accords, and finished on February 15, 1989, when the last Soviet soldier crossed back into the Soviet Union (now Uzbekistan) from Afghanistan. In late 1988, some Soviet officials advocated maintaining a residual force in Afghanistan, citing violations of the Geneva Accords by Pakistan, and the withdrawal was briefly paused. However, the United States and Pakistan, perceiving that the Soviet impulse to pull out would trump concerns about the post-withdrawal political situation, maintained aid to the mujahideen and "the bluff failed to work." Mujahideen forces, as a nonstate movement, were excluded from U.N. negotiations and continued to receive support from the United States, Pakistan, and other backers after the Soviet withdrawal, as the Afghan government continued to receive military and financial support from Moscow. With this support, the Afghan government (led by Najibullah Ahmadzai, commonly known by his first name) defied expectations among some in the U.S. that it would quickly collapse after the Soviet pullout and maintained its position for several years. In September 1991, as the Soviet Union was being engulfed in a major political crisis that would eventually lead to its dissolution in December 1991, Soviet and U.S. officials announced a final cutoff in their countries' support to their respective clients, effective January 1992. With the help of key defections including current Vice President Abdul Rashid Dostum, m ujah i deen and other Afghan groups displaced Najibullah in April 1992, and the country sank into a civil war from which the Taliban would emerge and eventually take control of most of the country. Upon their entry to Kabul in September 1996, one of the Taliban's first acts was to torture and publicly hang Najibullah. Appendix C. U.S. Reconstruction Assistance to Afghanistan (SIGAR)

Afghanistan has been a significant U.S. foreign policy concern since 2001, when the United States, in response to the terrorist attacks of September 11, 2001, led a military campaign against Al Qaeda and the Taliban government that harbored and supported it. In the intervening 18 years, the United States has suffered approximately 2,400 military fatalities in Afghanistan, with the cost of military operations reaching nearly $750 billion. Congress has appropriated approximately $133 billion for reconstruction. In that time, an elected Afghan government has replaced the Taliban, and most measures of human development have improved, although Afghanistan's future prospects remain mixed in light of the country's ongoing violent conflict and political contention. Topics covered in this report include: Security dynamics . U.S. and Afghan forces, along with international partners, combat a Taliban insurgency that is, by many measures, in a stronger military position now than at any point since 2001. Many observers assess that a full-scale U.S. withdrawal would lead to the collapse of the Afghan government and perhaps even the reestablishment of Taliban control over most of the country. Taliban insurgents operate alongside, and in periodic competition with, an array of other armed groups, including regional affiliates of Al Qaeda (a longtime Taliban ally) and the Islamic State (a Taliban foe and increasing focus of U.S. policy). U.S. military engagement . The size and goals of U.S. military operations in Afghanistan have evolved over the course of the 18-year war, the longest in American history. Various factors, including changes in the security situation and competing U.S. priorities, have necessitated adjustments. While some press reports indicate that the Trump Administration may be considering at least a partial withdrawal, U.S. officials maintain that no decision has been made to reduce U.S. force levels. Regional context . Afghanistan has long been an arena for, and victim of, regional and great power competition. Pakistan's long-standing, if generally covert, support for the Taliban makes it the neighbor whose influence is considered the most important. Other actors include Russia and Iran (both former Taliban foes now providing some measure of support to the group); India (Pakistan's main rival); and China. Reconciliation efforts. U.S. officials have long contended that there is no military solution to the war in Afghanistan. Direct U.S.-Taliban negotiations, ongoing since mid-2018, on the issues of counterterrorism and the presence of U.S. troops could offer greater progress than past efforts. However, U.S. negotiators caution that the Taliban's continued refusal to negotiate with the Afghan government could preclude the stated U.S. goal of a comprehensive settlement. Afghan governance and politics. Afghanistan's democratic system has achieved some success since its post-2001 establishment, but corruption, an evident failure to provide sufficient security and services, and infighting between political elites has undermined it. The unsettled state of Afghan politics complicates ongoing efforts to negotiate a settlement: the presidential election has been postponed twice and is now scheduled for September 2019. U.S. and foreign assistance. Military operations have been complemented by large amounts of development assistance; since 2001, Afghanistan has been the largest single recipient of U.S. aid. Most of that assistance has been for the Afghan military (a trend particularly pronounced in recent years), but aid has also supported efforts to build Afghan government capacity, develop the Afghan economy, and promote human rights.

crs_R46213

crs_R46213_0

<1. Introduction and Overview> Economic sanctions are one foreign policy tool that can be used to potentially influence the behavior and actions of political leadership in other countries. Oil-related sanctions are one option that could be used to apply economic pressure on certain countries in order to achieve broader geopolitical and foreign policy objectives. Currently, the United States has active economic sanctions imposed on three major oil-producing and exporting countries: Iran, Russia, and Venezuela. Combined, these countries produced approximately 17.7 million barrels per day (bpd) of oil in 2018 approximately 18% of total world oil production according to one estimate. Only a portion of these supply volumes might be directly affected by U.S. economic sanctions in the near term potentially ranging from 3.3 million to 4.0 million bpd from both Iran (estimated to be 2.8 million bpd) and Venezuela (estimated to range from 0.5 million to as much as 1.2 million bpd). Estimated oil production volumes affected to date have been approximately 1.7 million bpd from Iran. Venezuela oil production has likely also been affected, although accurately quantifying volumes is challenging due to monthly oil production declines that had been occurring over a period of years prior to U.S. sanctions affecting oil trade in January 2019. A sustained global petroleum supply imbalance of 1% to 2% could contribute to market conditions that could result in volatile price movements (both upward and downward) for crude oil and related petroleum products (e.g., gasoline and diesel fuel). To date, oil supply impacts related to economic sanctions have not generally resulted in significant upward price pressure for benchmark oil prices. Generally, sanctions-related supply losses have been counterbalanced by increased production and exports from the United States, Russia, and other countries; petroleum trade flow adjustments; indications of slowing global oil demand growth rates; and design elements of oil-related sanctions. Oil sanctions frameworks can include wind-down periods, requirements to consider and certify that global oil supply is adequate to compensate for supply reductions, and engagement with other oil producers before applying certain sanctions. These design elements are intended to mitigate sanctions-related market and price impacts and to build into the sanctions regime multilateral coordination and cooperation. Oil-related economic sanctions for each respective country discussed in this report differ in terms of design and potential market impacts. As a result, each framework is likely to have a different effect on oil production, trade, and potentially price levels. Generally, each sanctions framework is structured to reduce either immediately or in the future oil sales revenue to the subject country. Since 2011, sanctions targeting Iran's oil sector have aimed to eliminate the country's oil export revenue. Sanctions applied to Russia's oil sector generally target long-term, high-risk oil production projects. Venezuela sanctions imposed to date prohibit petroleum trade with the United States historically one of the primary destinations for Venezuela's oil exports and have the potential to affect Venezuela's petroleum trade with other countries. Table 1 provides a general overview of current oil-sector sanctions imposed on Iran, Russia, and Venezuela. <2. Scope of Report> The scope of this report is to assess the possible impact of current U.S. economic sanctions on oil production in and exports from Iran, Russia, and Venezuela. For each country, this report provides general background and historical information about the oil sector, followed by an overview of each oil-related sanctions framework and a discussion of oil production, supply, and trade impacts resulting from U.S. sanctions. European Union (EU) oil sector sanctions imposed on Iran and Russia are referenced but are not discussed in detail. Selected oil market impact observations specifically price impacts and trade flow adjustments and policy considerations are discussed. A detailed assessment of how oil-related sanctions might have affected each target country's overall economy and how these effects may have contributed to achieving U.S. foreign policy objectives is beyond the scope of this report. <3. Iran7> Iran holds the fourth largest proven oil reserves in the world behind Venezuela, Saudi Arabia, and Canada with an estimated 156 billion barrels as of the end of 2018. A founding member of the Organization of the Petroleum Exporting Countries (OPEC), commercial crude oil production in Iran started in 1913 and Iran has been both an oil producer and exporter for more than a century. Iran's oil industry was nationalized in 1951 by Prime Minister (PM) Mohammed Mossadeq, who expropriated the Anglo-Iranian oil company today known as BP. Foreign policy concerns about PM Mossadeq's potential pivot toward the Soviet Union resulted in a U.S.- and British-sponsored intelligence operation that removed Mossadeq from power in 1953. Following that operation, a consortium of U.S. and European oil companies effectively took control of Iran's oil production and exports. Crude oil production in Iran was at its highest historical rate in the 1970s when it ranged between 5 million and 6 million bpd for much of the decade. Diplomatic relations between the United States and Iran in the late 1960s and for most of the 1970s were generally positive, with oil production and trade being one element of the relationship. During this period, the Shah of Iran (Iran's political leader at the time) in an effort to increase oil revenues for military and domestic policy purposes requested then-President Nixon to eliminate the Mandatory Oil Import Quota (MOIQ) system that limited U.S. crude oil import volumes from foreign countries. In 1969, the Shah also reportedly offered to sell the United States 1 million bpd of crude oil for 10 years at a price of $1/barrel for the United States to create a strategic oil stockpile. President Nixon declined the Shah's request and offer. As domestic U.S. oil production levels were not keeping pace with increasing U.S. oil demand, President Nixon replaced MOIQ with an import licensing fee system in April 1973. Iran was not party to the October 1973 oil embargo instituted by members of the Organization of Arab Petroleum Exporting Countries (OAPEC) an event that contributed to rapidly rising petroleum prices, perceived supply shortages, and the enactment of U.S. laws to ensure domestic availability of oil supply. The oil market situation in late 1973 created an opportunity for Iran to increase oil revenue. U.S. crude oil imports from Iran more than doubled from 1973 to 1978, when imports reached approximately 550,000 bpd. However, U.S.-Iran relations changed in 1979 when the Iranian revolution culminated with the Shah abdicating, Iran becoming an Islamic republic, and Ayatollah Khomeini rising to power as Iran's supreme leader. Oil production in Iran started declining in late 1978, due to a labor strike in opposition to the Shah's policies, and the situation led to one of the largest (5.6 million bpd) and longest (nearly six months) supply disruptions in history. This supply loss contributed to one of the highest inflation-adjusted annual oil price periods on record. <3.1. Overview of U.S. Sanctions on Iran's Oil Sector> Sanctions imposed on Iran have been a foreign policy tool used by the United States for nearly three decades with the goal of deterring state-supported terrorism, Iran's regional influence, and its nuclear program. Iran's oil sector has been the target of multiple U.S. sanctions initiatives. For example, imports of Iranian crude oil to the United States were prohibited in 1987. Prior to the prohibition, U.S. oil buyers imported as much as 550,000 bpd from Iran. Additional elements of Iran's oil sector are also subject to sanctions, including investments in Iran's oil production; insurance for Iranian oil entities and for shipping Iranian crude oil; the sale of goods and services that support Iran's oil production; oil transportation; and oil exports. Sanctions targeting Iran's oil sector are the product of enacted laws and issued executive orders (E.O.s) that span multiple Administrations. For a brief overview of relevant oil sanctions legislation, see the text box below titled Enacted Legislation that Affect s Iran's Oil Sector: Selected Examples . This section focuses on sanctions legislation enacted in December 2011 National Defense Authorization Act for Fiscal Year 2012 ( P.L. 112-81 ) and subsequent E.O.s designed to reduce Iran's oil export revenue. <3.2. Sanctions Framework Targeting Iran's Oil Exports> Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (FY2012 NDAA; P.L. 112-81 ) created a sanctions framework designed to motivate Iran's oil buyers to reduce purchases, with the goal of limiting Iran's oil export revenue. The core element of this framework includes financial sanctions prohibition on opening and accessing U.S. bank accounts that are to be imposed on foreign financial institutions that conduct a "significant financial transaction" with Iran's Central Bank or with any sanctioned Iranian bank. However, these transactions can potentially continue should affected countries comply with other elements of the sanctions framework that incentivize oil buyers to reduce imports from Iran while mitigating potential oil supply and price impacts. Other design elements of this framework include the following: (1) a 180-day wind-down period for implementation; (2) a provision that allows for financial institutions to be excepted from sanctions based on reducing Iran oil purchases; (3) a requirement that the Administration consider impacts to global oil prices and supplies; and (4) outreach to other petroleum producing countries. <3.2.1. Significant Reduction Exception (SRE)> Sanctions do not apply to financial institutions under the jurisdiction of countries that the President determines to have "significantly reduced" oil purchases volumes from Iran significantly is not statutorily defined. SREs are valid for 180 days, and countries must continue reducing Iranian oil purchases during this period to receive a subsequent exception. The SRE design element provides the Administration with some discretion to determine the level of economic pressure to apply while considering possible global oil supply and price effects. <3.2.2. Petroleum Market Assessment and Consideration> The President is required to determine 90 days following enactment and every 180 days thereafter that the price and availability of petroleum from non-Iranian producers are adequate to enable Iran's crude oil buyers to significantly reduce purchase volumes. This determination must be based on petroleum price and availability reports submitted to Congress by the Energy Information Administration (EIA) every 60 days. Oil market conditions, should an undersupply situation result in escalated prices, could motivate some degree of sanctions relief even if such an action may not be consistent with sanctions-related policy objectives. However, the term adequate is not defined in enacted sanctions legislation. Therefore, the Administration could have flexibility in determining if oil markets are adequately supplied regardless of price levels. <3.2.3. Outreach to Petroleum Producing Countries> The sanctions framework also requires the President to encourage petroleum-producing countries to increase oil supplies and to minimize sanctions-related oil availability and price impacts. U.S. State Department officials reportedly have had discussions with oil-producing countries and have indicated that other countries specifically Saudi Arabia and the United Arab Emirates (UAE) would provide additional oil supply to compensate for reduced volumes from Iran. <3.2.4. Executive Orders 13622 and 13846> On July 30, 2012, President Obama issued E.O. 13622 to authorize additional Iran sanctions. The President revoked the E.O. in the course of implementing the U.S. obligations under the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA); President Trump reinstated the E.O.'s tenets on August 6, 2018, with the issuance of E.O. 13846. With respect to Iran's oil exports, E.O. 13846 strengthens the NDAA sanctions framework in two primary ways: 1. Prohibits access to the U.S. financial system for any foreign financial institution that conducts or facilitates a significant financial transaction with the National Iranian Oil Company or for the purchase of petroleum, petroleum products, or petrochemical products, and 2. Authorizes the imposition of Iran Sanctions Act ( P.L. 104-172 ) sanctions on any entity that engages in significant transactions for the purchase of petroleum, petroleum products, or petrochemical products from Iran. Financial institutions and entities subject to sanctions contained in E.O. 13846 can continue petroleum and petrochemical transactions if their country of primary jurisdiction receives an SRE (see " Significant Reduction Exception (SRE) " section). <3.3. Oil Export Sanctions Relief and Reimposition> International negotiations with respect to Iran's nuclear development program resulted in two multilateral agreements that first relieved then waived FY2012 NDAA sanctions and revoked E.O. 13622 sanctions that target Iran's oil exports. President Trump ended U.S. participation in the agreements and reimposed Iran oil export sanctions. Following is a brief description of the oil-related aspects of the two multilateral agreements and the termination of U.S. participation. Joint Plan of Action ( JPA ) : an interim agreement in effect between January 20, 2014, and January 16, 2016, that, among other provisions, removed the requirement on Iran's oil buyers to continue reducing oil purchases to receive an SRE. Iran's oil purchasers at that time (China, India, Japan, Republic of Korea, Taiwan, and Turkey) were allowed to continue purchasing oil at the then-current average. Sanctions on insurance, transportation services, and petrochemical exports were suspended. JCPOA : implemented on January 16, 2016, when the Administration waived FY2012 NDAA Section 1245 financial sanctions and revoked E.O. 13622. These actions effectively removed secondary sanctions targeting Iran's oil exports. Buyers could resume importing unrestricted oil volumes from Iran. United States ends JCPOA participation (sanctions re imposed ) : President Trump announced on May 8, 2018, that the United States would terminate its JCPOA participation and sanctions would be re-imposed following a wind-down period (180 days for sanctions targeting Iran's oil exports). On November 5, 2018, FY2012 NDAA Section 1245 financial sanctions and petroleum, petroleum product, and petrochemical purchase sanctions were reinstated. SREs were issued to eight countries in November 2018 (for additional information see Figure 1 notes). However, SREs are no longer allowed as of May 2019. <3.4. Oil Supply Impacts> Secondary sanctions that target Iran's oil exports have resulted in a direct and measurable effect on Iran's crude oil production and on observable export volumes of crude oil and condensate. As indicated in Figure 1 , crude oil and condensate exports declined by approximately 1.2 million bpd nearly 57% between December 2011 (upon enactment of the FY2012 NDAA) and July 2012. Iran's oil production volumes followed a similar trajectory. During the JPA effective period (January 2014 to January 2016), Iran's crude oil production and export volumes stabilized, as countries were no longer required to continue reducing imports to receive SREs. With the implementation of the JCPOA, sanctions affecting oil exports were waived and Iran's production and exports returned to pre-FY2012 NDAA levels. Following the United States exiting the JCPOA in May 2018, production and exports declined and then stabilized once SREs were granted to eight countries in November 2018. As of May 2, 2019, it is the Trump Administration's intent to no longer grant SREs. According to Bloomberg L.P.'s oil tanker tracking service, observable exports from Iran have declined significantly (see Figure 1 notes for background about data challenges) based on October 2019 volumes. Iran's crude oil exports to certain independent refiners in China have carried on, and some analysts expect this trade relationship to continue. <4. Russia> Russia is one of the largest oil producers and exporters in the world. In 2018, crude oil and condensate production in Russia was larger than in any other country, at approximately 11.2 million bpd. The United States (11 million bpd) and Saudi Arabia (10.5 million bpd) were ranked second and third respectively. As of the end of 2018, Russia held the sixth largest amount of proven oil reserves with approximately 106 billion barrels. Commercial oil production in Russia and the former Soviet Union dates back to the 1870s when the first wells were drilled in Baku (today the capital of Azerbaijan). Increasing oil production and exports along with oil refining to make kerosene for artificial lighting in the late 1800s resulted in the emergence of a major competitor to the global monopoly held by U.S.-based Standard Oil at that time. The oil industry continued to grow and expand in the Russian Empire and growth continued to develop in the Soviet Union after the 1917 Bolshevik Revolution. Soviet oil policy decisions in the 1920s and 1950s resulted in depressed global oil prices that are credited with motivating two historical oil industry developments. The first was an export campaign in the 1920s that contributed to low prices and the signing of the historic Achnacarry Agreement in 1928 by multiple oil companies with the intent to restrict oil production in order to support oil prices. The second was an oil market-share campaign in the 1950s that led to lower prices and was one factor credited with motivating creation of OPEC in 1960. By 1987, the Soviet Union was the largest oil producer in the world at nearly 12.5 million bpd, more than twice the production of Saudi Arabia that year. Soviet oil production had declined to 10.3 million bpd in 1991, the year the Soviet Union was formally dissolved and the Russian Federation (Russia) established. Oil production in the Russian Federation represented approximately 90% of Soviet oil production in 1991, at 9.3 million bpd. Russia's oil production declined to just over 6 million bpd in 1996 but recovered to 10.8 million bpd by 2013. Today, oil is a major element of Russia's economy; approximately 46% of federal revenue came from the oil and gas sector in 2018. <4.1. Oil Sector Sanctions Framework41> Following Russia's invasion and occupation of Ukraine's Crimea region in March 2014, President Obama declared a national emergency (E.O. 13660) with respect to Russia's actions in Ukraine. Subsequent E.O.s, Department of the Treasury directives, and enacted legislation created a sanctions framework, elements of which target Russia's oil sector. Oil sector sanctions imposed on Russia originated in E.O. 13662, which identified Russia's energy sector as an element of Russia's economy that could potentially be sanctioned. Sanctions imposed on Russia's oil sector target two general activities by prohibiting certain transactions with U.S. entities: (1) access to debt finance (Directive 2, described below), and (2) access to technology, goods, and services to support complex oil exploration and production projects (Directive 4, described below). Subsequently, the Department of the Treasury published and has periodically updated a list (Sectoral Sanctions Identification, or SSI, list) of Russian entities that are subject to these E.O. 13662 sectoral sanctions. Directives 2 and 4 issued by the Department of the Treasury, which apply to certain Russian oil companies, describe transactions and activities that are prohibited with entities included on the SSI list. Table 2 contains a list of Russian oil companies and indicates those that are subject to Directive 2 and Directive 4 sanctions. The Ukraine Freedom Support Act of 2014 ( P.L. 113-272 ) created a framework that would allow the President to impose secondary sanctions on foreign persons/entities that make significant investments as determined by the President in special Russian crude oil p rojects (i.e., projects that would extract crude oil from deepwater, Arctic offshore, and shale projects located in Russia). Enactment of the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA; Title II of P.L. 115-44 , the Countering America's Adversaries Through Sanctions Act) in August 2017 codified and strengthened Directives 2 and 4, as described below. CRIEEA also modified the Ukraine Freedom Support Act to require the President to impose sanctions on persons/entities determined to have made significant investments in special Russian crude o il p rojects . <4.1.1. Directive 2: Access to Debt Finance45> Directive 2 limits the ability of Russian oil companies on the SSI list to borrow from U.S. financial institutions and other lenders. The original version of Directive 2 (July 2014) prohibited access to U.S. debt with a maturity longer than 90 days for certain companies operating in Russia's energy sector. CRIEEA modified Directive 2 to prohibit entities on the SSI list from accessing U.S. debt with a maturity longer than 60 days. Some of Russia's largest oil companies, by production volume, are subject to this directive and now have reduced access to debt capital. Limited access to financial markets can potentially result in higher borrowing costs for the affected companies and could make it difficult for these companies to finance company activities. Directive 2 had the potential to affect Russia's near-term oil production. However, according to analyst reports, Russian oil companies on the Directive 2 SSI list were able to secure alternative sources of finance by accessing, through domestic borrowing, Russia's federal financial reserves. <4.1.2. Directive 4: Access to Oil Exploration and Production Technology48> Directive 4 prohibits the sale and transfer of goods, services, and technology from U.S. entities to Russian companies on the SSI list that would support three types of Russian oil exploration and production projects: (1) deepwater, (2) Arctic offshore, and (3) shale. The original version of Directive 4 (September 2014) stipulated that these oil sector sanctions were applicable to projects located in Russian territory or claimed maritime waters. However, CRIEEA legislation enacted in 2017 expanded the applicability of Directive 4 to include deepwater, Arctic offshore, or shale projects in any location inside or outside Russia that are 33% or more owned or are subject to voting control by a sanctioned Russian entity. Directive 4 sanctions target complex and challenging oil exploration and production projects that are likely part of Russia's long-term oil resource development plans. In conjunction with Directive 4 sanctions, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced export restrictions on Russia in July 2014 to prohibit the export of certain items that may be used for deepwater, Arctic offshore, and shale projects. BIS's announcement of the implementation of these export restrictions indicated the long-term nature of the energy technology sanctions: "While these sanctions do not target or interfere with the current supply of energy from Russia or prevent Russian companies from selling oil and gas to any country, they make it difficult for Russia to develop long-term, technically challenging future projects." <4.1.3. Secondary Sanctions on Special Russian Crude Oil Projects> Section 4(b) of the Ukraine Freedom Support Act of 2014 ( P.L. 113-272 ) created a framework for secondary sanctions that could be imposed on non-U.S. persons/entities that invest in deepwater, Arctic offshore, and shale projects that extract crude oil special Russian crude oil projects located in Russia. The secondary sanctions framework includes a menu of nine sanctions. As amended by CRIEEA, should the President determine that foreign persons or entities have made a significant investment a term not defined in enacted legislation in certain Russian crude oil projects, the President is required to impose at least three of the nine sanctions on those foreign persons/entities. To date, secondary sanctions related to investments in these types of Russian crude oil projects have not been imposed. <4.2. Oil Supply Impacts> Oil production in Russia has increased since U.S. oil sector sanctions were first imposed in July 2014. Further, this increase occurred during a period of rapidly declining oil prices and Russia's participation in an oil production agreement with OPEC and other non-OPEC oil-producing countries (collectively referred to as OPEC+). Under the current sanctions framework, Russia could continue increasing oil production levels in the near term. However, future oil production in Russia is somewhat uncertain due in part to potential impacts that might result from Directive 2 and Directive 4 sanctions, as well as the potential for secondary sanctions that aim to limit foreign investment in certain Russian crude oil production projects. <4.2.1. Short-Term Supply: 2014-2019> On a monthly basis, Russian oil production increased by approximately 1 million bpd between July 2014 (10.4 million bpd) and December 2018 (11.45 million bpd), as illustrated in Figure 2 . Annual oil production levels in Russia have been trending up from 2014 to 2018. Monthly oil production levels have declined since December 2018 to 11.1 million bpd as of May 2019. Two factors that likely contributed to this observed decline are (1) implementation of a voluntary OPEC+ oil production agreement and (2) oil contamination in Russia's Druzhba pipeline that temporarily disrupted oil shipments to Europe. Russian oil production increased during periods of low and declining oil prices (see Figure 2 ) following the imposition of oil sector sanctions. This upward oil production trend during challenging market and price conditions is a result of several factors, including Russian companies securing alternative sources of finance, currency devaluation, and Russia's oil tax and export duty policy. <4.2.1.1. Alternative Sources of Finance> Directive 2 financial sanctions in combination with similar EU financial sanctions imposed on certain Russian oil companies required those firms to secure alternative sources of capital to manage corporate finance activities. Directive 2 sanctions had the potential to result in financial stress for Russian oil companies on the SSI list and potentially affect short-term oil production levels. However, reports indicate that sanctioned Russian oil companies were able to use Russia's international currency reserves accumulated, in part, when oil prices were in the $100 per barrel range (2011-2014) as an alternative source of finance. Russia's financial reserves enabled companies like Rosneft, a state-controlled Russian oil company, to borrow money from the domestic bond market to manage debt obligations and fund business operations. Additionally, Rosneft has sold minority ownership positions to Chinese and Indian companies as a means of funding oil production activities. Finally, Rosneft has raised cash through equity sales and sold a 19.5% ownership position to the Qatari Investment Authority and Glencore for $11.3 billion in 2016. <4.2.1.2. Currency Devaluation> Following the imposition of sanctions in mid-2014, and as oil prices were declining rapidly, the Russian ruble began to lose value relative to the U.S. dollar. In November 2014, Russia's Central Bank announced it would limit its exchange rate interventions and allow the ruble exchange rate to be determined by the market. Weakening of the ruble relative to the dollar each dollar being worth more rubles continued. In June 2014, one U.S. dollar could be exchanged for approximately 34 rubles. This exchange rate reached 59 in December 2014 and was as high as 75 in January 2016. This currency devaluation, while arguably negative for the overall Russian economy, actually supported profitability and cash flow for Russian oil companies. Russian oil export sales are primarily denominated in dollars, and most Russian oil company expenses are denominated in rubles. At a given oil price, currency devaluation increases the amount of rubles received for dollar-denominated oil sales. However, the exchange rate does not directly affect ruble-denominated expenses. As a result, ruble-denominated profitability can be supported even when oil prices are relatively low. These factors, along with downward price pressure on oilfield equipment and service contractors following oil price declines in 2014 through early 2016, contributed to the general upward trend of Russia's oil production while oil prices steeply declined. <4.2.1.3. Tax and Export Duty Policy> Russia's oil tax policy motivates oil companies operating in the country to maintain and increase oil production, even when benchmark oil prices reach levels as low as $20 per barrel (/b). Russia's oil tax framework currently consists of two primary elements: (1) mineral extraction tax (MET), and (2) export duty (ED). MET and ED payments are linked to benchmark oil prices. Both are calculated using formulas modified periodically to incentivize oil production from certain locations that adjust the tax and duty based on the price of Urals crude oil, Russia's oil price benchmark. The effect of this tax and duty structure is that the Russian government assumes most of the financial risk from low oil prices and receives most of the benefits from high oil prices. Based on analysis of MET and ED base formulas, government tax and duty receipts can be zero at a $10/b oil price and more than $45/b when oil prices reach $70/b. Oil company cash flows also fluctuate but to a much lesser extent and are insulated to some degree from oil price fluctuations. As a result, Russian oil companies are motivated to maintain and increase oil production with limited consideration of the market price for crude oil. Russia has also started implementation of its "tax maneuver" that will gradually eliminate the ED and increase the MET by 2024 for crude oil production. <4.2.2. Longer Term: Beyond 2019> Russia's ability to maintain and possibly increase oil production beyond 2019, should the sector continue to be subject to U.S. and EU sanctions, is uncertain. The International Energy Agency projects that oil production in Russia is likely to continue increasing through 2021 (11.8 million bpd including crude oil, condensate, and natural gas liquids) and then decline slightly by 2024 (11.6 million bpd). Russian oil production post-2024 is less certain, with some forecasts indicating that Russian oil companies may need to develop new resources in order to maintain oil production levels in the 11 million bpd range. Exploration and production sanctions (Directive 4) imposed in 2014 were intended to affect future Russian oil production. Some specific projects have been affected by U.S. and EU oil sector sanctions. For example, Exxon has withdrawn from joint venture projects with Rosneft that would develop oil resources in deepwater, Arctic offshore, and shale locations. Additionally, certain European oil company joint venture projects have been affected by oil sector sanctions. French oil company Total sold its ownership stake in a shale joint venture project with Lukoil. According to the Energy Information Administration (EIA), large shale oil resources are present in Russia. Several U.S. and European oil companies had been participating in joint venture Russian shale oil projects prior to the 2014 sanctions. However, development of these projects has since slowed. Should Directive 4 and similar EU sanctions continue to be imposed, sustaining oil production growth in Russia will likely be a function, largely, of two factors: (1) the ability of Russian oil companies to develop or acquire oil production technology needed to produce resources in deepwater, Arctic offshore, and shale formations; and (2) the successful execution of exploration and development strategies that target oil production in areas outside the scope of sectoral sanctions (e.g., tight oil). Following the imposition of Directive 4 sanctions in 2014, Russia started developing plans to reduce its reliance on imports of oil production equipment. Furthermore, Russian oil companies reportedly have been increasing acquisition of oilfield equipment from Chinese suppliers. <5. Venezuela> Venezuela holds the largest proven oil reserves in the world, estimated at 303 billion barrels as of the end of 2018. A founding member of OPEC, Venezuela has produced oil commercially since 1914. U.S. oil companies began seeking agreements also referred to as concessions to explore for and produce oil in Venezuela as early as 1919. Venezuela was not a participant in the 1973 Organization of Arab Petroleum Exporting Countries embargo of oil shipments to the United States and other countries. However in 1976, consistent with developments in other oil-producing countries during the 1970s, Venezuela nationalized its oil industry and created Petroleos de Venezuela S.A. (PdVSA). U.S. oil companies, such as Exxon, reduced investments in the country leading up to nationalization but continued to be active in Venezuela in a limited service-based role following nationalization. Oil production in Venezuela was approximately 3.7 million bpd in 1970. Production declined 2.1 million bpd (54%) from 1971 to 1988 to reach 1.6 million bpd. In the 1990s, PdVSA embarked on a program referred to as the apertura petrolera or oil opening. As part of this program, international oil companies including U.S.-firms Chevron, Exxon, and Conoco were allowed to either control certain oil field operations or establish majority-owned oil production joint ventures with PdVSA. Oil production in Venezuela increased to approximately 3.4 million bpd by 1998. During his campaign, former Venezuelan President Hugo Ch vez elected in 1998 threatened to reverse the apertura program. Subsequently, President Ch vez enacted the Hydrocarbons Law of 2001, which restructured Venezuela's petroleum sector by requiring PdVSA to have majority ownership of future oil developments and raising royalty payments on existing projects to the Venezuelan government. Throughout the Ch vez presidency, oil companies operating in Venezuela were subject to periodic increases in royalty rates and taxes. These additional payment requirements reduced the financial attractiveness of investing in Venezuela's oil sector. In 2007, the Ch vez government enacted a law that required existing oil joint ventures to convert into new entities that would be majority-owned by PdVSA. Some companies (e.g., Chevron) complied with the new requirement. Other companies (e.g., Exxon and Conoco) ceased operations and sued PdVSA for damages resulting from unilateral changes to contractual agreements. Oil production in Venezuela trended a bit lower but was relatively stable from 2007 through 2013, in the range of 2.5 million bpd. Following the death of Ch vez in 2013, Nicol s Maduro was elected president of Venezuela. A series of antidemocratic actions and human rights violations by the Maduro government resulted in sanctions legislation and executive actions by the United States. In 2017, President Trump declared a national emergency in E.O. 13808 and the Administration imposed financial sanctions on PdVSA, including limiting PdVSA's access to U.S. debt finance. PdVSA is also prohibited from receiving dividends and cash distributions from its U.S.-based Citgo refining subsidiary. These limitations made it more difficult for PdVSA to purchase oil-related services and oil production equipment. With the overall U.S. objective to pressure President Maduro to transfer government control, the United States recognized Juan Guaid as interim president of Venezuela and imposed sanctions in January 2019 aimed at reducing Venezuela's oil revenues. These sanctions effectively terminate U.S.-Venezuela petroleum trade and potentially make it difficult for PdVSA to sell crude oil to and obtain petroleum products from non-U.S. entities. <5.1. Oil Trade Sanctions Framework> U.S. sanctions targeting Venezuela's oil trade are a function of PdVSA being designated to be subject to U.S. sanctions. This designation prohibits U.S. companies from engaging in transactions with PdVSA, including petroleum trade, oilfield service operations, and oil production operations in Venezuela. To date, Congress has not enacted legislation that specifies and requires oil sanctions be imposed on Venezuela. Rather, the sanctions framework is a result of E.O.s issued under national emergency authorities, and Treasury designations and general licenses (GLs) based on that emergency that allow for the wind down or continuation of certain activities see list of actions below. E.O. 13850 (November 1, 2018): authorized prohibiting U.S. persons from engaging in certain transactions with any person determined by the Secretary of the Treasury to have supported "deceptive practices or corruption" involving the Government of Venezuela. E.O. 13857 (January 25, 2019): amended the "Government of Venezuela" definition in E.O. 13850 to include PdVSA. Treasury designates PdVSA (January 28, 2019): the Secretary of the Treasury determined that persons operating in Venezuela's oil sector are subject to sanctions. PdVSA added to the Specifically Designated Nationals (SDN) list. GLs issued (January 28, 2019 and subsequent revisions): Office of Foreign Asset Control (OFAC) GLs authorize certain transactions and activities with PdVSA for certain periods, including oil purchases (wind down periods) and oil production operations (continuation). E.O. 13884 (August 5, 2019): blocks property and interests in property located in the United States for persons/entities determined to have assisted PdVSA and the Government of Venezuela. The Secretary of the Treasury's determination and designation affects several areas in which U.S. companies have business interests (e.g., debt and financial transactions, oil field services, and oil production activities) and effectively terminates U.S.-Venezuela petroleum (crude oil and petroleum products) trade. GL 12 allowed U.S. companies to continue purchasing and importing crude oil and petroleum products from PdVSA until April 28, 2019. However, any payment made for petroleum imported from PdVSA during the 90-day wind-down period must have been deposited in a U.S.-based blocked account. This requirement likely resulted in most of these transactions ending immediately, as PdVSA would have been motivated to seek alternative buyers. Some GLs explicitly stated that exporting diluents typically light crude oil, condensate, or naphtha that is blended with Venezuelan heavy crude oil to facilitate transportation and processing from the United States to Venezuela was prohibited immediately. Chevron currently participating in oil production joint ventures with PdVSA and four oil service companies (Halliburton, Schlumberger, Baker Hughes, and Weatherford International) have been granted a GL to continue operating in Venezuela. This GL has been extended multiple times since January 2019 and is currently set to expire on April 22, 2020. <5.2. Potential Secondary Sanctions> Treasury guidance issued in January 2019 and E.O. 13884 create the potential for imposing sanctions on non-U.S. entities that transact with PdVSA. Following E.O. 13857, OFAC-issued Frequently Asked Questions (FAQs, #657) indicated that petroleum purchases by non-U.S. entities involving "any other U.S. nexus (e.g., transactions involving the U.S. financial system or U.S. commodity brokers)" are prohibited following the 90-day wind-down period. Most oil transactions are denominated in U.S. dollars and this guidance may create some difficulties for PdVSA to secure alternative buyers for crude oil volumes that were previously destined for the United States. E.O. 13884 provides for the blocking of property and interests in property in the United States for persons and entities determined by the Secretary of the Treasury to have materially assisted term not defined in the E.O. PdVSA. This potential for sanctions on entities that transact with PdVSA, and have interests in property within U.S. jurisdiction, may further complicate PdVSA's efforts to sell crude oil to non-U.S. buyers and acquire petroleum products from alternative suppliers. <5.3. Oil Supply Impacts> Following the 2017 imposition of PdVSA financial sanctions, Venezuela's monthly oil production declined by approximately 50% between August 2017 and January 2019. Venezuelan oil production had been trending downward in prior years due to aging oil infrastructure and insufficient investment in, and maintenance of, oil production assets. As indicated in Figure 3 , crude oil production declined from approximately 2.8 million bpd in January of 2011 to approximately 1.9 million bpd in August 2017 when sanctions were imposed on PdVSA. U.S. imports of Venezuelan crude oil also declined by nearly 50%, on a monthly basis, during this period. Sanctions imposed on PdVSA in 2017 made it difficult for the company to access financial resources from debt markets and to receive cash distributions from PDV Holding PdVSA's U.S.-based subsidiary that owns Citgo, an oil refining and marketing company. This limitation likely created some operational difficulties for PdVSA with respect to short-term credit that might be needed to pay for oil-related services and acquire oil production and maintenance equipment from U.S. suppliers. Oil production data illustrated in Figure 3 indicate that the production decline accelerated following the 2017 financial sanctions. However, it is difficult to attribute specific production volume declines directly to these sanctions since production had been trending lower since 2014. Oil production continued declining and reached approximately 1 million bpd in January 2019, when Treasury's PdVSA determination, designation, and GLs took effect (see Figure 3 ). U.S. imports of Venezuelan crude oil declined 50% over a one-month period between January 2019 and February 2019, and consistent with the pressure applied under sanctions, have since been reduced to zero. Prohibiting petroleum trade between the two countries results in a constraint in the global oil logistics system that can potentially resolve itself as transportation modes, trade routes, and transactions adjust to the sanctions-related constraint. PdVSA has sought alternative buyers such as India and China, countries that historically have been two of the largest destinations for Venezuelan crude oil (see Figure 8 in the " Trade Flow Adjustments "). Ship-tracking information indicates that Venezuela's crude oil exports to India and China increased 49% and 34% respectively between January 2019 and February 2019. However, export volumes to these countries in February 2019 were in the range of export volumes that have been observed since 2017. Although PdVSA sanctions do not explicitly prohibit non-U.S. entities from purchasing crude oil and petroleum products from Venezuela, these sanctions prohibit transactions that occur on or after April 28, 2019, that involve the U.S. financial system. Furthermore, E.O. 13884 provides Treasury with discretion to take action against foreign persons/entities that assist PdVSA. These sanctions framework elements may make it difficult for PdVSA to locate alternative buyers for crude oil barrels previously destined for the United States. <6. Oil Market Impact Observations> Sanctions-related oil supply losses and trade constraints have had an impact on oil markets. These impacts have been observed in the form of Iran and Venezuela supply reductions, as discussed above. Impacts have also been reflected in price relationships for specific crude oil types and adaptive changes to trade flow patterns. In terms of benchmark prices (i.e., West Texas Intermediate and Brent futures contracts that are often quoted in the media), potential price escalation that might be expected from Iran and Venezuela supply reductions appear to have been averted to date by an increase in oil production in other countries, trade flow adjustments, and indications of slowing oil demand growth rates. Higher oil production and export volumes from the United States, Russia, and other oil-producing and exporting countries have contributed toward mitigating potential upward price pressure. <6.1. Oil Prices> Potential effects on oil and petroleum product (e.g., gasoline, diesel fuel, and aviation fuel) prices have been an explicit and implied consideration for sanctions that impact global oil supply and trade. Enacted sanctions legislation targeting Iran's oil exports requires the Administration to consider and certify that the world oil market is adequately supplied when imposing sanctions and to coordinate with other oil-producing countries to minimize price impacts (see " Sanctions Framework Targeting Iran's Oil Exports " and subsequent discussion). Additional policy design elements, such as wind-down periods, provide some time for markets to adjust for sanction-related trade constraints. These design elements serve to minimize potential price increases to oil buyers and petroleum product consumers. At the same time, existing oil-related sanctions policy does not include considerations for possible oil market oversupply a circumstance that could contribute to market conditions that could result in sharply lower oil prices should certain sanctions be relieved, waived, or terminated. While such an outcome may be a temporary benefit to U.S. petroleum consumers, a severe oil price decline over a sustained period could have a negative impact on U.S. oil exploration, production, and exports. This topic is discussed further in the " Policy Considerations " section. <6.1.1. Benchmark Prices> Oil prices that receive the most visibility are front month benchmark futures prices that are regularly reported in the news media. Benchmark prices represent the value of crude oil with certain quality characteristics at a specific location. Buyers and sellers use benchmark prices to establish a baseline oil price that is adjusted for various parameters such as quality differences and transportation costs (e.g., maritime, rail, and pipeline). Brent crude oil, a light/sweet crude oil that represents the price of North Sea (located between the United Kingdom, Norway, and Denmark) crude oil cargoes loaded on to shipping vessels, is one common benchmark price that is generally considered a proxy for global prices. As indicated in Figure 4 , Brent prices in August 2019 were more than 40% lower than in December 2011, when legislation targeting Iran oil exports was enacted. However, this macro-level pricing behavior does not suggest that oil sanctions imposed since 2011 have contributed to lower prices. Rather, benchmark prices generally reflect near-term expectations of global oil supply potentially affected by oil-related sanctions and demand balances that quickly can change due to unplanned production outages, economic and oil demand growth forecasts, supply growth in certain countries, OPEC oil production decisions, and other physical and financial market variables. Due to the different factors contributing to benchmark price directional movements, it is difficult to attribute any actual price change to a sanctions event that either reduced supply or allowed curtailed oil volumes to return. However, there was at least one period when uncertainty about sanctions targeting Iran's oil exports arguably contributed to temporary market oversupply and an oil price decline. When the Trump Administration announced in May 2018 that the United States would exit the JCPOA, general market expectations were that the Administration would not grant SREs to countries that were importing crude oil from Iran. In response to this expectation, Saudi Arabia increased its oil production by approximately 1 million bpd between May 2018 and November 2018. Other producers, including Russia, also increased production over this period. However, the Administration granted SREs to eight countries in November 2018. A temporary oversupply resulted and arguably contributed to the Brent benchmark price declining by more than $20 per barrel between November 5, 2018, and December 24, 2018. Media reports indicate that the SREs created an oversupplied market condition that required Saudi Arabia, Russia, and other OPEC+ members to manage. <6.1.2. Price Differentials for Certain Crude Oil Types> Petroleum sanctions imposed on Venezuela prohibit petroleum trade with the United States. The largest element of the U.S.-Venezuela petroleum trade relationship consisted of U.S. imports of Venezuelan crude oil (approximately 500,000 bpd in January 2019). A significant portion of these imports was classified as heavy/sour, indicating the crude oil's gravity and sulfur content. When Venezuela petroleum trade sanctions were announced in January 2019, U.S. refiners began seeking alternative suppliers during the 90-day wind-down period. The resulting price impact was an increase in prices for medium and heavy crude oils relative to light/sweet crude and a narrowing of the price differential between these crude oil types (see Figure 5 ). As indicated in Figure 5 , the Louisiana Light Sweet (LLS) to Mars spot price differential has been negative on certain days in 2019 following the prohibition of U.S.-Venezuela petroleum trade in January. Lower quality Mars crude oil was temporarily more expensive than LLS crude oil. While this is not the first time this differential has been negative the LLS/Mars price differential was also negative on certain days in 2009 and 2011 price signals in 2019 are indicative of the oil logistics system adjusting to a sanctions-related trade constraint. U.S. refiners that previously purchased heavy crude oil from Venezuela were required to source substitute crude oil from other suppliers (e.g., Colombia, Canada, Iraq, and Saudi Arabia), modify refinery operations to process other crude oil types, or a combination of both. Operating margins for U.S. refiners that are optimally configured to process heavy/sour crude oil could be adversely affected by a persistently narrow or negative light/heavy price differential. <6.2. Trade Flow Adjustments> Sanctions imposed on Iran and Venezuela have resulted in oil export and trade constraints for which the global oil logistics system has had to adjust. For example, Iran's oil buyers have sourced oil from alternative suppliers, and some U.S. refiners have located alternative supplies to replace crude oil previously imported from Venezuela. The United States, Russia, Saudi Arabia, and other countries have provided alternative oil supplies to compensate for sanctions-related oil supply constraints. <6.2.1. U.S. Crude Oil Exports> Crude oil exports from the United States have contributed to "adequate" global oil supply a statutory requirement of the Iran oil export sanctions framework that has enabled the Administration to pursue an objective of reducing Iran's oil exports to zero. Growth in U.S. crude oil exports has been enabled by increasing U.S. oil production, the 2015 repeal of a 40-year crude oil export prohibition, and global oil benchmark price differentials that financially motivate crude oil exports. Monthly U.S. crude oil export volumes have been as high as 3 million bpd in 2019. South Korea, following a U.S. policy decision to exit the JCPOA, provides an example of how U.S. crude oil exports provided an alternative source of oil supply as the country reduced imports from Iran (see Figure 6 ). As indicated in Figure 6 , South Korea imports of Iranian crude oil declined to zero following the Trump Administration's May 2018 decision to exit the JCPOA in expectation that no SREs would be granted. At the same time, imports of U.S. crude oil to South Korea immediately increased and had more than quadrupled, month-over-month, by December 2018. <6.2.2. China Oil Imports> China's oil imports provide another example of how oil trade flows have adjusted to sanctions-related constraints. As illustrated in Figure 7 , imports of Iranian crude oil to China began to decline following the U.S. JCPOA exit at a relatively slower pace than South Korea. As imports from Iran began to decline, imports from Saudi Arabia and Russia increased as refineries in China sought alternative oil supplies. China imports of U.S. crude oil declined to as low as zero (March 2019) likely a result of U.S/China trade negotiations following the JCPOA exit but have increased since. In September 2019, China imposed a 5% import tariff on U.S. crude oil, which could in addition to crude oil quality considerations (see Figure 7 notes) reduce incentives for refineries in China to increase U.S. crude oil purchases as an alternative to Iranian supplies. <6.2.3. Venezuela-Related Trade> Sanctions imposed on PdVSA have effectively eliminated petroleum trade between the United States and Venezuela. In response to this trade constraint, PdVSA has sought alternative buyers for crude oil that was previously destined for the United States and has sought alternative suppliers of light crude oil and other diluents previously supplied by U.S. exporters. As indicated in Figure 8 , Venezuela crude oil exports to the United States immediately stopped following the January 2019 designation of PdVSA as a sanctioned entity. To date, crude oil exports to China and India have remained at levels similar to those observed since 2017. However, oil exports to countries categorized as "other" have trended up since January 2019. Potential secondary sanctions on entities that transact with PdVSA using the U.S. financial system, as well as entities determined to have materially supported the government of Venezuela, could motivate non-U.S. entities to reduce or eliminate purchases of Venezuelan crude oil at some point in the future. PdVSA has also been sourcing diluent products from other suppliers. U.S. diluent exports to Venezuela were prohibited immediately in January 2019, with no wind-down period. According to trade reports, PdVSA has sourced diluents from Russia following the imposition of U.S. sanctions. However, total Venezuela diluent imports have reportedly been lower compared with import levels prior to January 2019. Lower diluent imports could be a leading indicator for lower crude oil production due to blending needs for certain Venezuelan crude oil types. <7. Policy Considerations> Sanctions imposed on Iran, Russia, and Venezuela have affected global oil markets, prices, and trade flows. As U.S. foreign policy objectives toward these countries evolve, sanctions relief, increased sanctions pressure, or both may have additional impacts on supply, prices, and potentially the U.S. oil production sector. Regarding Iran, options for additional sanctions that might affect Iran's oil sector appear to be limited as the current framework aims to eliminate Iranian oil exports. Should sanctions relief be provided to Iran, such an action could contribute to a market condition that could result in lower oil prices actual price levels would depend on market conditions at such a time and could adversely affect U.S. oil production and exports. Regarding Russia, some Members of Congress have called for additional sanctions, and several bills have been introduced in the 116 th Congress with certain provisions that could affect Russia's oil sector. Finally, the Administration has continued to strengthen oil-related sanctions on Venezuela through the use of E.O.s and administrative actions. Legislation introduced in the 116 th Congress would codify some of these sanctions. <7.1. Iran: Oil Market Impacts Should Sanctions Be Relieved or Eliminated> Impacts to oil supply and the potential for high oil prices are explicit considerations for economic sanctions that affect Iran's oil trade. Iran oil trade sanctions are the most stringent of the three frameworks discussed in this report. This framework includes design elements that require a periodic assessment of global oil supply adequacy when sanctions are applied and maintained (see " Sanctions Framework Targeting Iran's Oil Exports " and subsequent discussion). However, the framework does not include provisions to assess the potential for global oil market oversupply should these sanctions be relieved, waived, or eliminated. Depending on oil market conditions (i.e., supply and demand balances) at the time of potential sanctions relief, the immediate reentry of 1 million to 2 million bpd of Iranian supply could contribute to a market condition that could result in downward oil price pressure that could range from moderate to severe. Iran's oil minister has indicated that, should U.S. oil export sanctions be removed, oil production and exports could return to pre-sanctions levels in as little as three days. Although gasoline and diesel fuel consumers might welcome this result, oil producers could encounter challenging business and financial conditions should oil prices decline to, and be sustained at, extremely low levels. In 2018, total petroleum production (crude oil, condensate, and natural gas liquids) in the United States was larger than in any other country (Saudi Arabia and Russia ranked second and third, respectively). Low oil prices, depending on the actual price level and its duration, could contribute to reductions in both U.S. oil production growth and actual production levels, and could contribute to challenging business conditions for this sector of the U.S. economy. Historically, oil producers have generally relied on OPEC to attempt to manage oil supply and demand imbalances. However, as recently as 2014, OPEC effectively led by Saudi Arabia sometimes has elected not to adjust production levels when oil markets are oversupplied. Results from such decisions have included rapidly declining oil prices, financial strain on some U.S. oil producers, lower U.S. crude oil production, and proposed legislation to investigate OPEC anticompetitive practices because prices were too low. Subsequently, OPEC, along with Russia and other non-OPEC countries, entered into a voluntary production agreement in December 2016 to address market oversupply and low oil prices. As prices were rising, the No Oil Producing and Exporting Cartels (NOPEC) Act was introduced with the goal of reducing and moderating oil prices that were deemed too high. The United States' ongoing position as the world's largest petroleum consumer is now coupled with being one of the largest and fastest growing oil producers. As a result, economic sensitivity to oil price levels has been rebalanced to reflect the interests of both consumers and producers. Introduced legislation is indicative of this balance. Should oil export sanctions on Iran be relieved or eliminated, the current sanctions framework would require the market to adjust to additional Iranian barrels that quickly could reenter the market. Market adjustments could take the form of lower prices, OPEC+ production restraint, or both. Depending on market conditions at such a time and the volume of Iranian oil that reenters, global benchmark oil prices could experience downward pressure that could range from moderate to severe. Extremely low oil prices could possibly have a negative impact on all oil producers, including U.S. companies. Based on recent history, whether or not OPEC, along with other OPEC+ countries, might adjust production levels to accommodate additional Iranian barrels is uncertain. One possible option to address such an outcome, should this potential situation become a concern, may be to encourage, or perhaps require, consideration of oil market conditions and communication with other oil producers as a means to reduce downside price risk that might result from sanctions relief. <7.2. Russia: Is the Iran Oil Export Framework Applicable?> Much of the congressional interest in additional economic sanctions directed toward Russia includes introduced legislation that would impose sanctions on various elements of Russia's energy sector, including oil production. The current Russia oil-sector sanctions framework has not affected near-term oil production but may affect future oil production. Comparing this near-term outcome with the measurable impacts of sanctions targeting Iran's oil exports, it might be of interest to explore the potential applicability of the Iran oil export sanctions framework to Russia. The size of Russia's and Iran's oil production (approximately 11 million bpd currently and 4 million bpd prior to oil export sanctions, respectively) is one consideration. Two additional considerations (discussed below) are Russia's pipeline integration with Europe and U.S. institutional investor ownership of certain Russian oil companies. <7.2.1. Russia's Oil Pipeline Integration with Europe> Transneft, Russia's state-controlled oil pipeline company that is on the SSI list, transports approximately 83% of crude oil produced in Russia. One element of the Transneft pipeline system is the Druzhba (Friendship) pipeline network that supplies Russian crude oil to several European refineries, many of which are optimally configured to process Russian crude oil. A sanctions framework such as the one currently structured for Iran that might require oil buyers to significantly reduce oil purchases from Russia could be difficult for some refiners due to pipeline logistics and access to alternative suppliers. Unlike Iran's crude oil buyers that can access alternative suppliers through easily-adaptable maritime trade, accessing and configuring pipeline infrastructure to source non-Russian supplies is a more complicated and potentially difficult endeavor. Such logistical constraints introduce complexities when considering the possibility of applying the Iran oil trade sanctions framework to Russia's oil sector. <7.2.2. U.S. Institutional Investor Ownership of Russian Oil Companies> Russia's oil sector is different compared with Iran's in that U.S. institutional investors have ownership positions in some of Russia's major oil companies. Banks, U.S. states, pension funds, and insurance companies have minority investment positions in companies such as Rosneft and Lukoil, which are on the SSI list. Sanctions that affect these companies, and that aim to reduce Russia's oil production and exports, could negatively affect the value of Russian oil companies and investments held by U.S. investors and their clients. <7.3. Russia: Introduced Legislation> A number of congressional concerns about Russia's influence in Europe, interference in U.S. elections, and other activities have resulted in legislation introduced in the 116 th Congress that, among other things, would impose additional sanctions targeting Russia's energy sector. Some of the proposed bills that could affect Russia's oil sector are listed below. <7.3.1. S. 1830: Energy Security Cooperation with Allied Partners in Europe Act of 2019> As originally introduced, the bill would have required mandatory sanctions on persons/entities that invest in based on certain investment level thresholds or support Russian energy export pipelines, including modernization and repair. Mandatory sanctions under this bill could include oil pipelines. Transneft, Russia's oil pipeline monopoly controlled by the Kremlin, transports 83% of oil produced in Russia. Transneft's pipeline system is used to transport crude oil to shipping ports and to export oil to refineries in European countries and in China. To the extent that the possibility of sanctions might reduce pipeline development and maintenance activities for Russia's oil pipeline network, this could affect oil flows and oil prices for certain European refineries that may not have easily accessible alternatives to Russian crude oil. Provisions related to export pipeline sanctions were removed from the bill when it was reported out of the Committee on Foreign Relations in December 2019. <7.3.2. S. 1060: Defending Elections from Threats by Establishing Redlines Act of 2019> The bill would prohibit any "new investment" to be defined by the President after enactment in a Russian energy company or in Russia's energy sector, including oil production. Investments made in the United States or by a U.S. person/entity would be prohibited. The bill would require the President to impose financial sanctions on certain property owned by any foreign firm that makes a new investment in Russia's energy sector or in a Russian energy company (i.e., secondary sanctions). <7.3.3. S. 482: Defending American Security from Kremlin Aggression Act of 2019> As reported by the Committee on Foreign Relations, the bill would require sanctions to be imposed on individuals/entities that invest in energy projects outside of Russia that are supported by Russian-owned or parastatal entities. The bill would also require the imposition of sanctions on any person/entity that sells, leases, or provides goods, services, technology, financing, or support for any crude oil development in the Russian Federation not just for deepwater, Arctic offshore, and shale developments currently included in the existing sanctions framework. <7.4. Venezuela: Sanctions Enforcement and Enacted Legislation> Sanctions affecting Venezuela's oil sector prohibit U.S. entities from transacting with PdVSA and provide a potential pathway for the Administration to sanction non-U.S. entities that transact with PdVSA and support the government of Venezuela. Petroleum trade between the United States and Venezuela has been eliminated. To date, however, enforcement actions related to Venezuela oil sector sanctions that could be imposed on non-U.S. entities have largely targeted companies and shipping vessels that have transported oil to Cuba. Venezuela's crude oil exports have continued since U.S. sanctions were imposed in January 2019, with India and China being two of the largest destinations. Trade reports indicate that much of Venezuela's oil exports are being managed by a Rosneft trading office. Rosneft has also provided PdVSA with diluent cargos as an alternative supplier to U.S. exporters and the company participates in multiple joint venture oil production projects in Venezuela. Whether or not these activities violate the U.S. sanctions framework, and are potentially subject to an enforcement action, is subject to a determination made by the Administration. Rosneft has argued that oil-trading with PdVSA is not a sanctions violation. To date, no sanctions enforcement action related to Rosneft transactions with PdVSA has been taken. Legislation enacted in December 2019 ( P.L. 116-94 ) includes provisions that require the Administration to engage with other countries and to coordinate an international effort to impose sanctions on the Maduro government. P.L. 116-94 also includes sections that express concern about PdVSA transactions with Rosneft primarily related to a Rosneft loan to PdVSA collateralized by 49% ownership of PdVSA's U.S.-based Citgo refinery and marketing company. <8. Concluding Remarks> In some cases, U.S. economic sanctions that target oil sectors in Iran, Russia, and Venezuela have observably affected oil markets in several ways, including reductions in supply, changes in price relationships, and adjustments to trade flows. Oil-related sanctions frameworks include design elements that aim to minimize upward price pressure that might result from the imposition of sanctions. However, design elements that consider possible oil market impacts in the event of oil-related sanctions relief or termination that could contribute to market oversupply and downward price pressure are not included in current oil-related sanctions frameworks. Arguably, potential sanctions-related price escalation has been counterbalanced by increased global supplies, lower global demand growth rate expectations, and market adjustments in response to oil supply and trade constraints. Should oil market conditions change to a persistent undersupply condition and benchmark prices escalate to levels deemed too high for U.S. consumers, sanctions relief is one available policy option that could possibly be considered to increase oil supply with the goal of rebalancing markets and moderating price levels; however, such an action could potentially conflict with broader foreign policy objectives.

Economic sanctions imposed by the United States—through enacted legislation and executive action—on Iran, Russia, and Venezuela aim to pressure the ruling governments to change their behavior and policies. Currently, these sanctions aim to either eliminate (Iran) or restrict (Venezuela) crude oil trade of as much as 3.3 million to 4.0 million barrels per day (bpd), roughly 3%-4% of global petroleum supply. Estimated oil production volumes affected to date have been approximately 1.7 million bpd from Iran. Venezuela oil production has also likely been affected, although accurately quantifying volumes is difficult due to monthly oil production declines over a period of years prior to U.S. sanctions affecting oil trade in January 2019. Sanctions imposed on Russia's oil sector generally target longer-term oil production and to date have not reduced Russian oil supply or trade. Oil production in Russia has increased since oil-sector sanctions began in 2014, although the country has arguably incurred economic costs in order to incentivize and support oil output levels. Sanctions targeting Iran's oil sector date back to the 1980s and affect virtually every element of Iran's oil sector (e.g., investment, shipping, insurance, and exports). Legislation enacted in 2011 ( P.L. 112-81 ) and 2013 ( P.L. 112-239 ), along with subsequent executive orders (E.O.s), created a sanctions framework designed to discourage oil importers—by sanctioning banks that transact with Iran or facilitate oil transactions, as well as entities that buy Iranian oil—from purchasing crude oil and other petroleum and petrochemical products from Iran. Iran oil export sanctions include design elements (e.g., significant reduction exceptions, requirements to certify oil markets are adequately supplied, and coordination with oil-producing countries) intended to minimize oil price escalation that could result from sanctions-related oil supply reductions. Iran oil export sanctions have been applied, waived, and reapplied since 2011. As of November 2019, the Trump Administration's stated goal has been to reduce Iran's oil exports to zero. Trade data indicate that observed Iranian crude oil exports declined by approximately 80% between April 2018 and October 2019. Should sanctions affecting Iran's oil exports be relieved or terminated, the reentry of 1 million to 2 million bpd of crude oil could, depending on market conditions and oil-producing country decisions, contribute to oil market oversupply that could lower oil prices. While U.S. petroleum product consumers may welcome such an outcome, severe and persistently low prices could have adverse effects on U.S. oil producers. Oil sector sanctions imposed on Russia via E.O. since 2014, and codified ( P.L. 115-44 ) in 2017, apply to certain Russian oil companies and target two activities: (1) accessing debt finance, and (2) accessing oil exploration and production technology for deepwater, Arctic offshore, and shale projects. Near-term Russian oil supply does not appear to have been affected by these sanctions to date; oil production has increased since 2014. Alternative financing, currency devaluation, and Russia's oil tax and export duty policies have provided Russian companies with capital and incentives to increase oil production and exports. Over the long term, Russian oil output could be affected by oil production technology sanctions, as some European and U.S. companies have terminated participation in certain oil exploration and development projects. Economic sanctions affecting Venezuela's oil trade are the product of E.O.s and U.S. Department of the Treasury designations in 2019 prohibiting transactions with Petroleo s de Venezuela S.A. (PdVSA). Petroleum trade between the United States and Venezuela has been eliminated. As a result, Venezuela has sought alternative buyers of crude oil previously destined for the United States and alternative suppliers of petroleum products previously sourced from U.S. exporters. Although U.S. economic sanctions do not explicitly prohibit non-U.S. entities from trading oil and petroleum products with PdVSA, Treasury has discretion to take action against foreign entities that provide material support to PdVSA. This sanctions framework element could make it difficult for PdVSA to secure alternative buyers and suppliers. Rosneft, a Russian-controlled oil company, has reportedly facilitated Venezuelan crude oil trade with independent oil refiners in China and has provided Venezuela with petroleum products previously sourced from U.S. suppliers. Enacted legislation in the 116 th Congress ( P.L. 116-94 ) requires the Administration to coordinate Venezuela sanctions with international partners and expresses concerns about certain PdVSA transactions with Rosneft. Sanctions-related oil supply constraints have affected oil production and trade. Oil market characteristics—generally inelastic supply and demand in the short term—could contribute to market conditions that could result in volatile price movements (both up and down) when supply and demand are imbalanced by as little as 1% to 2% for a brief or sustained period. To date, persistently high crude oil prices have been moderated by several factors, including increasing U.S. oil production and exports, trade flow adjustments, expectations of slowing demand growth rates, and sanctions design elements. However, oil trade sanctions have affected price differentials for certain crude oil types (e.g., light vs. heavy).

crs_R45928

crs_R45928_0

When Congress enacted the Patient Protection and Affordable Care Act (ACA) in 2010, it required employment-based health plans and health insurance issuers to cover certain preventive health services without cost sharing. Those services, because of agency guidelines and rules, would soon include contraception for women. The federal contraceptive coverage requirement sometimes called the "contraceptive mandate" has generated significant public policy and legal debates. Proponents of the requirement have stressed a need to make contraception more widely accessible and affordable to promote women's health and equality. Opponents have centrally raised religious freedom based objections to paying for or otherwise having a role in the provision of coverage for some or all forms of contraception. The Supreme Court first took up a challenge to the contraceptive coverage requirement in 2014 in Burwell v. Hobby Lobby Stores, Inc. In Hobby Lobby , the Court held that the requirement did not properly accommodate the religious objections of closely held corporations. After Hobby Lobby , legal challenges to the contraceptive coverage requirement continued. The lower federal courts divided over the legality of an accommodation process instituted in 2013 that shifted the responsibility to provide coverage from an objecting employer to its insurer once the employer certified its religious objections. In 2017, citing the uncertain legal footing of that accommodation, the Trump Administration decided to automatically exempt most nongovernmental entities from the coverage requirement based on their religious or moral objections. However, more than 15 states filed or joined lawsuits challenging the expanded exemptions. Federal courts, including the U.S. Court of Appeals for the Third Circuit, have preliminarily enjoined the government from implementing the expanded exemptions while those challenges proceed. The Supreme Court has agreed to review the Third Circuit's decision. The case, Little Sisters of the Poor v. Pennsylvania , is scheduled for argument in May, paving the way for a decision in summer 2020. Meanwhile, the government is largely precluded from relying on the prior accommodation process as a result of a federal district court's injunction. This report begins by explaining the statutory and regulatory framework for the federal contraceptive coverage requirement. It then recaps the Supreme Court's decision in Hobby Lobby before discussing the agency actions taken in response to that decision and subsequent Supreme Court rulings and executive action. Next, the report discusses significant pending legal challenges to the coverage exemptions and accommodations, including the Supreme Court case, Little Sisters of the Poor . The report concludes with some considerations for Congress, including the broader legal questions that could be answered in Little Sisters of the Poor and options that federal lawmakers have proposed related to the contraceptive coverage requirement. <1. The Contraceptive Coverage Requirement> The federal contraceptive coverage requirement stems from the Patient Protection and Affordable Care Act but was developed and modified by subsequent agency guidelines and rules. Before the ACA, various federal and state requirements dictated whether a health plan needed to cover contraceptive services. Although more than half of the states required plans covering prescription drugs to include contraception, access was typically subject to cost-sharing requirements. The scope of religious exemptions from these state requirements varied. Moreover, each state's law extended "only to insurance plans that [were] sold to employers and individuals in [that] state." It did not apply to self-insured employer-sponsored health plans (also known as self-funded plans) in which nearly 60% of covered workers were enrolled. Self-insured plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that generally did not require coverage for specific preventive services before the ACA. Nevertheless, whether as a matter of law or industry practice, "most private insurance and federally funded insurance programs" offered some form of insurance coverage for contraception before the federal contraceptive coverage requirement. With the enactment of the ACA, Congress required certain employment-based health plans and health insurance issuers (insurers) to cover various preventive health services without cost sharing. One ACA provision specifically requires coverage "with respect to women" for "preventive care and screenings . . . as provided for in comprehensive guidelines supported by the Health Resources and Services Administration [(HRSA)]" within the U.S. Department of Health and Human Services (HHS). To implement this requirement, HHS commissioned a study by the Institute of Medicine (IOM) "to review what preventive services are necessary for women's health and well-being." In its final report, the IOM recommended that HRSA consider including the "full range of Food and Drug Administration [(FDA)]-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity." Among other reasons, IOM concluded that "[s]ystematic evidence reviews and other peer-reviewed studies provide evidence that contraception and contraceptive counseling are effective at reducing unintended pregnancies," which HHS had identified as a specific national health goal. HRSA adopted the IOM's recommendation, including in HRSA's 2011 Women's Preventive Services Guidelines (HRSA guidelines) "all" FDA-approved contraception "as prescribed." The HRSA guidelines applied to plan years beginning on or after August 1, 2012. However, they exempted certain "religious employers" houses of worship and certain related entities that primarily employed and served persons who shared their religious tenets. In 2012, HHS announced a temporary "safe harbor" from government enforcement of the coverage requirement for certain nonexempt, nonprofit organizations with religious objections to covering some or all forms of contraception. Subsequent rules called such nonprofits "eligible organizations." On July 2, 2013, following a notice and comment period, HHS, the Department of Labor (DOL), and the Department of the Treasury (the Departments) jointly issued a final rule (2013 Rule) to "simplify and clarify the religious employer exemption" and "establish accommodations" for eligible organizations. The rule continued to authorize HRSA to provide an automatic exemption to the coverage requirement for houses of worship. However, it no longer required those employers to have "the inculcation of religious values" as their purpose or to "primarily" employ and serve "persons who share [their] religious tenets" to qualify for the exemption. The 2013 Rule also established an accommodation process for "eligible organizations" essentially, nonprofit, religious organizations with religious objections to some or all forms of contraception. The accommodation also extended to student health plans arranged by eligible institutions of higher education. Eligible organizations could comply with the contraceptive coverage requirement by completing a self-certification form provided by HHS and DOL and sending copies of this form to their insurers or third-party administrators (TPAs), as applicable. For insured plans, the rule required the issuers, upon receipt of a certification, to "[e]xpressly exclude contraceptive coverage" (or the subset of objected-to methods) from the applicable plans but separately pay for any required, excluded contraceptive services for the enrolled individuals and their beneficiaries. For self-insured plans, the rule stated that the TPA, upon receipt of a certification, would become the "plan administrator" for contraceptive benefits under ERISA and responsible for providing contraceptive coverage. In addition, the certification provided to the TPA would become "an instrument under which the plan is operated." The rule required the insurer or TPA, rather than the objecting organization, to notify plan participants that separate payments would be made for contraception and that the organization would not be administering or funding such coverage. <2. RFRA and the Hobby Lobby Decision> Numerous organizations filed lawsuits challenging the contraceptive coverage requirement and the accommodation process. Among other claims, these plaintiffs argued that the requirement violated the Religious Freedom Restoration Act of 1993 (RFRA). RFRA is a federal statute enacted in response to Employment Division v. Smith , a 1990 Supreme Court decision holding that the Free Exercise Clause of the First Amendment does not require the government to exempt religious objectors from generally applicable laws. Except under narrow circumstances, RFRA prohibits the federal government from "substantially burden[ing] a person's exercise of religion even if the burden results from a rule of general applicability." RFRA allows such a burden only if the government shows that applying the burden to the person (1) furthers "a compelling governmental interest"; and (2) "is the least restrictive means" of furthering that interest. This "strict scrutiny" standard, particularly the "least restrictive means" requirement, is "exceptionally demanding." Thus, in challenges by religious objectors to the application of generally applicable laws, RFRA extends "far beyond" what the "Court has held is constitutionally required." The initial challenges to the contraceptive coverage requirement centered on two emerging issues: (1) whether for-profit corporations were "persons" protected by RFRA; and (2) whether requiring employers to cover contraception to which they objected on religious grounds violated RFRA. The Supreme Court took up both issues as they related to closely held corporations in Burwell v. Hobby Lobby Stores, Inc . , issuing a decision on June 30, 2014. The challengers in Hobby Lobby , which included the owners of the "nationwide chain" of arts-and-crafts stores of the same name, objected to providing health insurance coverage for four of the 20 FDA-approved methods of contraception included in the coverage requirement. In their view, "life begins at conception" and "facilitat[ing] access" to methods of contraception that "may operate after the fertilization of an egg" would violate their religious beliefs. The challengers argued that requiring them to provide insurance coverage for such contraception violated RFRA. The Supreme Court held that Hobby Lobby, though a corporation, was a "person" covered by RFRA. Although RFRA itself did not define "person," the first section of the U.S. Code , commonly known as the Dictionary Act, defined the term to include "corporations" for the purpose of "determining the meaning of any Act of Congress, unless the context indicates otherwise." The Court reasoned that "nothing in RFRA" suggested a meaning other than the Dictionary Act definition. Specifically, the majority rejected HHS's argument that for-profit corporations could not "exercise" religion, reasoning that they could do so through "[b]usiness practices that are compelled or limited by the tenets of a religious doctrine." The Court then proceeded to analyze whether the contraceptive coverage requirement "substantially burden[ed]" the challengers' exercise of religion. The Court accepted their argument that providing coverage for certain forms of contraception would violate their sincerely held religious beliefs because it might enable or facilitate the "destruction of an embryo." According to the majority, "federal courts have no business addressing" whether "the religious belief asserted in a RFRA case is reasonable." The more limited judicial role, the Court said, is to determine whether the "line drawn" by the religious objectors "reflects 'an honest conviction.'" Because no party disputed the sincerity of the employers' convictions, the Court focused its inquiry on whether the burden imposed by the coverage requirement was substantial. The Court concluded that it was, because the requirement would force the challengers to either violate their religious beliefs or face "severe" economic consequences. The Court next considered whether the contraceptive coverage requirement nonetheless satisfied RFRA's strict scrutiny standard. The Court assumed, for purposes of its analysis, that applying the coverage requirement to petitioners served a "compelling governmental interest" in "guaranteeing cost-free access to the four challenged contraceptive methods." However, the Court concluded that the least restrictive means standard was not satisfied because HHS had "at its disposal" the accommodation process it provided to nonprofit organizations with religious objections which, in the Court's view, did not "impinge on" the challengers' religious beliefs and "serve[d] HHS's stated interests equally well." Accordingly, the Court held that applying the contraceptive coverage requirement to closely held corporations violated RFRA. On July 14, 2015, the Departments finalized a rule in response to the Hobby Lobby decision that extended the accommodation previously reserved for religious nonprofits to for-profit entities that are "not publicly traded, [are] majority-owned by a relatively small number of individuals, and object[] to providing contraceptive coverage based on [their] owners' religious beliefs." <3. Legal Challenges to the Accommodation Process and Agency Responses> When the Court handed down its decision in Hobby Lobby , a separate line of legal challenges to the contraceptive coverage requirement involving the accommodation process remained unresolved by the High Court. In one such case, a Christian college argued that the process, which required objecting entities to submit a certification form called EBSA Form 700 to their insurers or TPAs, itself burdened its exercise of religion in violation of RFRA and the First Amendment. The college believed that submitting the required form would "make it morally complicit in the wrongful destruction of human life." As shown in Figure 1 , EBSA Form 700 had two pages: the first required the organization to certify compliance with the criteria for obtaining the accommodation and the second contained a notice to TPAs. After a federal district court denied the college's motion to preliminarily enjoin the enforcement of the contraceptive coverage requirement, the college sought emergency relief from the Supreme Court. On July 3, 2014, three days after deciding Hobby Lobby , the Supreme Court ruled that while the college's case was on appeal to the Seventh Circuit, the college did not need to comply with the contraceptive coverage requirement or complete EBSA Form 700 so long as it "inform[ed] the Secretary of Health and Human Services in writing that it is a non-profit organization that holds itself out as religious and has religious objections to providing coverage for contraceptive services." On August 27, 2014, "consistent with the Wheaton order," HHS issued an interim rule that provided eligible organizations an alternative to EBSA Form 700. Pursuant to this rule, organizations could opt to notify HHS, rather than their insurers or TPAs, of their eligibility for the exemption and their objections to providing coverage for some or all forms of FDA-approved contraception. This option (the "alternative notice process") required organizations to provide HHS with their insurers' or TPAs' names and contact information. After receiving the notice, those Departments would send a "separate notification" to each issuer or TPA, which, for self-insured plans, would designate the TPA as the plan administrator and constitute "an instrument under which the plan is operated." The model notice that HHS issued with the interim rule appears in Figure 2 . After these changes in the law, the Seventh Circuit affirmed the district court's decision to deny the college a preliminary injunction. The appellate court reasoned that the college did not have to provide certain forms of contraception in its student benefit plans so long as it notified either its TPA or the government of its objection to providing that coverage. Although the government would designate the college's preexisting TPA to provide the required coverage, the court reasoned that the plan instrument became the "government's plan" rather than the college's plan. The court also rejected the college's argument that complying with the accommodation process would render it "complicit" in providing the contraception to which it objected. Writing for the court, Judge Richard Posner reasoned that "it is the law , not any action on the part of the college," that requires the TPA to provide coverage once the college has registered its objection. Accordingly, the court concluded that the college was unlikely to prevail on its RFRA claim. The Seventh Circuit was not the only appellate court to uphold the accommodation process amid requests for injunctive relief. Appellate courts in eight circuits in total concluded (at least as a preliminary matter while litigation proceeded on the merits) that the process did not impose a substantial burden on the challengers' exercise of religion. They rejected the view that providing notice to insurers or TPAs, or to HHS, "triggered" the provision of contraception, making the plaintiffs partially responsible for an act that violated their beliefs. Like the Seventh Circuit, they reasoned that the ACA, not the transmission of EBSA Form 700 or the notice to HHS, was the reason the applicable plans provided coverage for contraception without cost sharing. Some appellate judges dissented from their panel's decision or a denial of rehearing by the full circuit court, including now Supreme Court Justices Neil Gorsuch and Brett Kavanaugh. The Eighth Circuit was the first appellate court to hold that the accommodation process violated RFRA. In that case, the district court had preliminarily enjoined the government from enforcing the contraceptive coverage requirement against two nonprofit employers that offered self-insured plans. The Eighth Circuit read Hobby Lobby to require it to "accept [the plaintiffs'] assertion that self-certification under the accommodation process using either [EBSA] Form 700 or HHS Notice would violate their sincerely held religious beliefs." And it reasoned that providing the notice resulted in the provision of contraceptive coverage even if the plaintiffs did not have to arrange for or subsidize that coverage. The court then concluded that the process was not the least-restrictive means of serving the government's interest in providing women with access to cost-free contraception. In particular, it observed that the government could require objecting organizations to notify HHS of their objections without providing "the detailed information and updates" required under the alternative notice process. The court also found that the government failed to demonstrate why it could not reimburse employees for their purchase of contraceptives directly or pursue other ways to make contraception more widely available. After the Eighth Circuit rendered its decision but before the government sought the Supreme Court's review, the Supreme Court consolidated and granted certiorari in seven other cases involving RFRA challenges to the accommodation process under the caption Zubik v. Burwell . However, on May 16, 2016, the Supreme Court vacated the Zubik decisions and remanded the cases to the circuit courts in light of the "significantly clarified view of the parties." The Court explained that in response to its request for additional briefing after oral argument, the government confirmed that "contraceptive coverage could be provided to petitioners' employees, through petitioners' insurance companies" without requiring the petitioners to notify their insurers or HHS in the manner previously required. The petitioners, in turn, confirmed that an insurer's independent provision of contraceptive coverage to the petitioners' employees would not burden the petitioners' religious exercise. The Court instructed the appellate courts on remand to afford the parties "an opportunity to arrive at an approach going forward that accommodates petitioners' religious exercise while at the same time ensuring that women covered by petitioners' health plans 'receive full and equal health coverage, including contraceptive coverage.'" It also enjoined the government from taxing or penalizing the petitioners based on a failure to provide notice, reasoning that the petitioners apprised the government of their religious objections through the litigation itself. The Court expressly declined to opine on whether the existing accommodation process substantially burdened the petitioners' religious exercise or nonetheless complied with RFRA's strict scrutiny standard. <4. Executive Action After Zubik> Following the Supreme Court's remand, the executive branch took additional actions on the contraceptive coverage requirement. The Departments solicited and reviewed public comments on options to further revise the process. However, as of January 9, 2017, the Departments had not identified a "feasible approach . . . [to] resolve the concerns of religious objectors, while still ensuring that the affected women receive full and equal health coverage, including contraceptive coverage." At that time, the Departments maintained that the existing accommodation process was "consistent with RFRA." Following a change in presidential administrations, on May 4, 2017, President Donald J. Trump issued an executive order directing the Departments to "consider issuing amended regulations, consistent with applicable law, to address conscience-based objections to the preventive-care mandate promulgated under [42 U.S.C. ] 300gg-13(a)(4)" the ACA provision that refers specifically to preventive care for women and pursuant to which HRSA included contraceptive coverage. On October 6, 2017, the Departments reversed their position on the legality of the accommodation process and issued two interim final rules (IFRs) that made that process "optional." The first rule (the Religious Exemption IFR) expanded the automatic exemption formerly available only to houses of worship and related entities to include any nongovernmental organization that objected to providing or arranging coverage for some or all contraceptives based on "sincerely held religious beliefs." The second rule (the Moral Exemption IFR) extended the same exemption to certain nongovernmental organizations whose objections were based on "sincerely held moral convictions," rather than religious beliefs. Pursuant to these rules, "an eligible organization [that] pursue[d] the optional accommodation process through the EBSA Form 700 or other specified notice to HHS" would "voluntarily shift[] an obligation to provide separate but seamless contraceptive coverage to its issuer or [TPA]." However, if an employer or institution chose to rely on the automatic exemption rather than the accommodation process, neither the objecting entity nor its insurer or TPA would need to provide coverage for the objected-to contraceptive methods. The Departments also added an "individual exemption" that allowed willing employers and issuers, both governmental and nongovernmental, to provide alternative policies or contracts that did not offer contraceptive coverage to individual enrollees who objected to such coverage based on sincerely held religious beliefs or moral convictions. The Departments estimated that the Religious Exemption IFR "would affect the contraceptive costs of approximately 31,700 women" based on information derived from the litigating positions of various objecting entities and notices the agency received pursuant to the previous accommodation process. They further estimated that the total costs potentially transferred to those affected women would amount to "approximately $18.5 million." However, to "account for uncertainty" in its estimate, the agencies also examined the "possible upper bound economic impact" of the Religious Exemption IFR. Applying a different methodology, the Departments arrived at a figure of approximately 120,000 women, with potential transfer costs totaling $63.8 million. The Departments projected a smaller effect with respect to the Moral Exemption IFR, estimating that it could affect the contraceptive costs of 15 women, an aggregate effect of approximately $8,760. The Departments finalized the Religious and Moral Exemption IFRs on November 15, 2018, with effective dates of January 14, 2019 (collectively, the 2019 Final Rules). The 2019 Final Rules amended the regulatory text "to clarify the intended scope of the language" but retained the substance of the IFRs. The Departments increased their upper-bound estimate of the number of women that the expanded Religious Exemption could affect from 120,000 women to 126,400 women, yielding potential transfer costs of $67.3 million. <5. Little Sisters of the Poor and Other Pending Legal Challenges> The expanded exemptions generated a new set of legal challenges from states concerned with the fiscal burdens of the revised rules and the Departments' authority to promulgate them. In addition, some private parties (including a nationwide class of employers) successfully obtained injunctions against enforcement of the prior accommodation process after the government stopped defending the process on RFRA grounds. This section discusses some of the key pending legal challenges, beginning with a summary of the procedural history and arguments before the Supreme Court in Little Sisters of the Poor v. Pennsylvania . <5.1. Little Sisters of the Poor v. Pennsylvania> In late 2018, Pennsylvania and New Jersey asked a federal court to block the 2019 Final Rules, alleging, among other claims, that the rules (1) "failed to comply with the notice-and-comment procedures" required by the Administrative Procedure Act (APA) and (2) were "'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law' in violation of the [APA's] substantive provisions." The U.S. District Court for the Eastern District of Pennsylvania ruled that the states were "likely to succeed" on both of their APA claims and preliminarily enjoined the rules on a nationwide basis. On appeal, the Third Circuit affirmed the district court's decision. The appellate court ruled that the Departments committed a procedural APA violation in issuing the IFRs by "dispensing with" the statute's notice and comment requirement without "good cause." In the court's view, the Departments' solicitation of comments before issuing the Final Rules did not remedy this defect because the agency's action did not give the public a "meaningful opportunity" to comment on the rules during their formulation, or demonstrate that the agency showed "any real open-mindedness" to amending the IFRs. The court next considered whether the 2019 Final Rules were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" grounds for a reviewing court to "set aside" the rules under the APA. The Third Circuit concluded that the ACA did not authorize the Departments to "exempt actors" from the preventive services requirement. Reciting the statutory language, the court observed that group health plans and insurers "shall" cover "such additional preventive care . . . as provided for in comprehensive guidelines supported by [HRSA]." The appellate court reasoned that the "authority to issue 'comprehensive guidelines' concerns the type of services that are to be provided and does not provide authority to undermine Congress's directive" expressed with the command shall "concerning who must provide coverage for these services." The Third Circuit also disagreed with the Departments' argument that the expanded Religious Exemption in the 2019 Final Rules was necessary to bring the contraceptive coverage requirement into compliance with RFRA. Recognizing that RFRA authorized courts to determine, through "individualized adjudication," whether a particular law burdens a person's religious exercise, the court concluded that it need not defer to the Departments' assessment of the necessity of a broader religious exemption. Additionally, the court concluded that RFRA could not have required the expanded exemption because the prior accommodation process itself complied with RFRA. And the Third Circuit reasoned that making compliance with the accommodation process optional for religious objectors "would impose an undue burden on nonbeneficiaries the female employees who will lose coverage for contraceptive care." Finally, the circuit court upheld the district court's decision to issue a nationwide preliminary injunction. The court reasoned that the injunction would ensure that the "likely" unlawful 2019 Final Rules would not take effect in some states only to be invalidated in full after further judicial proceedings. The court also concluded that a nationwide remedy was "necessary to provide the States complete relief," because individuals may reside or attend college in Pennsylvania or New Jersey but obtain their health insurance from an employer-sponsored or a parent's plan in a state that was not part of the lawsuit. If those individuals lost contraceptive coverage on an out-of-state plan, they might turn to state-sponsored services in Pennsylvania or New Jersey, placing fiscal burdens on those states. Two parties filed petitions for certiorari with the Supreme Court seeking to appeal the Third Circuit's ruling: the federal government and the Little Sisters of the Poor Saints Peter and Paul Home (Little Sisters), a religious nonprofit organization that was permitted to intervene in the litigation in defense of the interim final rules, but later denied standing to challenge the 2019 Final Rules on appeal. On January 17, 2020, the Supreme Court granted both petitions and consolidated the appeals. Over 50 amicus briefs have been filed by organizations, individuals, states, and localities. Some Members of Congress have also filed briefs in opposition to or support of the Third Circuit's ruling. While the case raises a number of legal issues, the central question presented in Little Sisters of the Poor is whether the Departments "had statutory authority under the ACA and [RFRA] to expand the conscience exemption" to the contraceptive coverage requirement through the 2019 Final Rules. The federal government advances three main arguments in defense of its substantive authority to issue the rules. First, the government argues that HRSA has "ample authority to develop guidelines" for women's preventive services "that account for sincere conscience-based objections" because, among other reasons, ACA's "plain text" requires coverage "' as provided for in comprehensive guidelines supported by [HRSA].'" Second, the government contends that RFRA required it to extend automatic exemptions to "certain employers with conscientious objections" because the prior accommodation process, which may have sufficed for Hobby Lobby, did "not eliminate the substantial burden" that the coverage requirement placed on those employers. Third, the government argues that RFRA authorizes, even if it does not require, the expanded Religious Exemption because it applies to "the implementation" of "all Federal law." In support of its interests, Little Sisters argues that in light of the "substantial burden" mandatory contraceptive coverage places on religious exercise recognized in Hobby Lobby , the government was "duty-bound to change its rules and stop forcing religious objectors to comply via the accommodation." Little Sisters described the certification process as "the stingiest of accommodations" that amounted to "merely another means of complying with the contraceptive mandate." The state-respondents ask the Supreme Court to affirm the Third Circuit's ruling. They frame the case as more than a dispute over "the appropriate balance between the health and autonomy of women and the religious and moral views of their employers," because it concerns "the power of federal agencies to resolve such questions by relying on power never explicitly granted by Congress nor recognized by the courts." The states argue, inter alia , that Congress, through the ACA, "delegated HRSA authority to oversee guidelines defining what preventive services for women must be covered, not who must cover them." In the states' view, "RFRA does not grant federal agencies broad rulemaking authority to create exemptions from mandatory laws absent a violation," which was not present under the prior regulatory framework because "the accommodation 'effectively exempt[s]' an employer." And they remind the Court that "[n]o party claims that RFRA authorizes the moral rule" and its exemption. <5.2. Challenges by Other States> Pennsylvania and New Jersey were not the only states to challenge the expanded exemptions. A lawsuit by the Commonwealth of Massachusetts to block the enforcement of the interim rules and later the final rules was initially barred on standing grounds. But on May 2, 2019, the First Circuit reversed the district court's ruling, holding that Massachusetts had shown an "imminent" fiscal harm "fairly traceable" to the expanded exemptions, sufficient to confer standing. The appellate court remanded the case to the district court to consider the Commonwealth's substantive arguments that the 2019 Final Rules violated the APA, the First Amendment's Establishment Clause, and the "equal protection guarantee" of the Fifth Amendment's Due Process Clause. The parties' motions for summary judgment asking the court for a ruling on the legal issues prior to (and ultimately instead of) a trial were pending before the district court when the parties and the court agreed to stay the proceedings in light of a potential Supreme Court ruling in Little Sisters of the Poor . An action in the U.S. District Court for the Northern District of California proceeded alongside the Pennsylvania and Massachusetts cases. In 2018, 14 states moved to enjoin enforcement preliminarily of the 2019 Final Rules. A subset of these states had already obtained a nationwide injunction against enforcement of the IFRs, which the Ninth Circuit then modified to apply only in the states that were plaintiffs in the action. In renewing their challenge to the 2019 Final Rules, the states advanced APA, Establishment Clause, and Equal Protection Clause claims similar to the Massachusetts action. As with its first ruling on the IFRs, the district court decided the motion for injunctive relief on statutory grounds. The court concluded that the final rules likely violated the APA because they were "not in accordance with" the ACA and were not required, and potentially not even authorized, by RFRA. Rather than issue a nationwide injunction, this time the court issued a preliminary injunction against enforcement in the plaintiff states alone. On appeal, the Ninth Circuit ruled that "the district court did not err in concluding that the agencies likely lacked statutory authority under the ACA to issue the final rules," engaging in a textual analysis similar to the Third Circuit's in the Pennsylvania action. The appellate court also shared the district court's reservations that RFRA did not permit, let alone require, the Religious Exemption, citing three reasons. First, RFRA does not explicitly "delegate[] to any government agency the authority to determine violations and to issue rules addressing alleged violations." Second, the Religious Exemption "contradicts congressional intent that all women have access to appropriate preventative care." And third, a "blanket exemption for self-certifying religious objectors" was "at odds with the careful, individualized, and searching review mandate[d] by RFRA." While the Ninth Circuit affirmed the district court's decision, it emphasized that its "disposition [was] only preliminary," preserving "the status quo until the district court renders judgment on the merits based on a fully developed record." <5.3. DeOtte v. Azar> While the Pennsylvania and California actions resulted in preliminary injunctions against the 2019 Final Rules, the Departments are also enjoined from enforcing the prior accommodation process in key respects as a result of a nationwide injunction issued by the U.S. District Court for the Northern District of Texas. In DeOtte v. Azar , the court certified two classes of objectors to the contraceptive coverage requirements. The "Employer Class" consisted of the following: Every current and future employer in the United States that objects, based on its sincerely held religious beliefs, to establishing, maintaining, providing, offering, or arranging for: (i) coverage or payments for some or all contraceptive services; or (ii) a plan, issuer, or third-party administrator that provides or arranges for such coverage or payments. The "Individual Class" consisted of the following: All current and future individuals in the United States who: (1) object to coverage or payments for some or all contraceptive services based on sincerely held religious beliefs; and (2) would be willing to purchase or obtain health insurance that excludes coverage or payments for some or all contraceptive services from a health insurance issuer, or from a plan sponsor of a group plan, who is willing to offer a separate benefit package option, or a separate policy, certificate, or contract of insurance that excludes coverage or payments for some or all contraceptive services. The court granted these classes summary judgment on their RFRA claims. Similar to the Eighth Circuit's pre- Zubik reasoning, the district court concluded with respect to the Employer Class that the court could not question the lead plaintiff's position "that the act of executing the accommodation forms is itself immoral." As for the Individual Class, the court accepted the plaintiffs' argument that purchasing plans that cover certain forms of contraception substantially burdens their religious exercise because it makes them "complicit" in the provision of contraception to which they object. Having found that the requirement imposed a substantial burden on these groups, the court then concluded that the requirement was insufficiently tailored. It reasoned that "[i]f the Government has a compelling interest in ensuring access to free contraception, it has ample options at its disposal that do not involve conscripting religious employers" or requiring the participation of objecting employees. The district court permanently enjoined the government from enforcing the contraceptive coverage requirement against any member of the Employer Class to the extent of its objection. It further enjoined the government from preventing a "willing" employer or insurer from offering Individual Class members plans that do not include contraceptive coverage. In its final order specifying the terms of its nationwide, permanent injunction, the court included a "safe harbor" allowing the Departments to (1) ask employers or individuals whether they are sincere religious objectors; (2) enforce the contraceptive coverage requirement with respect to employers or individuals who "admit" they are not sincere religious objectors; and (3) seek a declaration from the court that an employer or individual falls outside the certified classes if the government "reasonably and in good faith doubt[s] the sincerity of that employer or individual's asserted religious objections." Before entering final judgment, the district court denied the State of Nevada's motion to intervene (supported by 22 additional states) in the litigation. Nevada appealed that denial and the court's injunction to the Fifth Circuit, which has stayed the appeal pending a decision in Little Sisters of the Poor . <6. Considerations for Congress> Although the contraceptive coverage requirement remains in effect, the injunctions discussed above leave its implementation and enforcement in an uncertain posture. In combination, these rulings affect the regulatory frameworks that existed both before and after the promulgation of the expanded exemptions. The injunctions entered in the Pennsylvania and California actions do not bar entities that qualified for an exemption or an accommodation before the Religious or Moral Exemption IFRs from availing themselves of those options. Accordingly, it appears that (1) qualifying institutions (e.g., houses of worship) can still invoke the exemption for religious employers; and (2) "eligible organizations" including closely held corporations as defined in the 2015 rule can still use the accommodation process. However, as a result of the injunctions entered in DeOtte and other cases concerning the accommodation, the government is more limited in its ability to enforce the requirement against entities that choose not to notify their insurers or HHS of their objections. For example, regardless of an entity's compliance with the accommodation process, the government may not enforce the requirement against employers that object to providing or arranging for contraceptive coverage based on sincerely held religious beliefs, at least to the extent of those employers' objections. And the government may not prevent employers or insurers from offering plans without contraceptive coverage to individuals who oppose that coverage based on sincere religious beliefs. A Supreme Court decision in Little Sisters of the Poor could clarify the validity of the 2019 Final Rules and the scope of the exemptions going forward. A ruling affirming the nationwide injunction or remanding with instructions to issue a narrower preliminary injunction would likely result in invalidation of the 2019 Final Rules in at least some states, which could prompt the Department to issue new regulations or guidance. In contrast, a ruling reversing the Third Circuit's decision and holding that the 2019 Final Rules do not violate the APA could pave the way for the expanded exemptions to take effect, leaving the question of further amendments to the federal contraceptive coverage requirement to the Departments and to Congress. The litigation from Hobby Lobby to Little Sisters of the Poor reflects an ongoing public policy debate over the extent to which the government should accommodate entities with religious or moral objections to contraception, particularly when those accommodations may compromise their employees' or students' access to the full range of contraceptive services covered for other women. As a legal matter, a Little Sisters of the Poor decision could help to clarify whether RFRA allows or requires federal agencies to exempt entities from generally applicable laws that the agencies conclude will burden the religious exercise of those groups. The decision could also clarify whether, in making this determination, agencies may or must account for the interests of third parties, such as the women who otherwise would receive contraceptive coverage under the ACA. Other issues, such as the Departments' authority to exempt objecting universities or employers from in the words of one court "existing and future " contraceptive coverage requirements through private settlement agreements, allegedly without the involvement of students or employees, may be the next phase of litigation. Amicus briefs filed by some Members of Congress in Little Sisters of the Poor highlight differing views of what RFRA requires of federal agencies. In a brief filed by 161 Members of Congress, the amici argue that RFRA "is far more than a backward-facing statute enacted to address prior wrongs," setting "forth an affirmative mandate that, when carrying out official duties, each member of the federal government (including federal administrative agencies) ' shall not substantially burden a person's exercise of religion,' absent a compelling interest and use of the least restrictive means." In contrast, a group of 186 Members of Congress argue that "RFRA did not, and was not intended to, grant authority to federal agencies to craft exemptions to laws enacted by Congress and thereby to negate Congress's own legislative intent." That brief further maintains that RFRA was not "intended to allow some individuals' religious liberties (or agencies' own perceptions about those religious liberties) to be used as a sword to limit the rights of others." Because Little Sisters of the Poor involves a statutory rather than a constitutional challenge to the 2019 Final Rules, the Court's ruling is unlikely to preclude Congress from amending the coverage requirement, its exemptions, or RFRA itself, if Congress disagrees with the Court's decision. Individual Members of Congress have proposed a number of approaches over the years that would recalibrate the legal framework for contraceptive coverage, including those that would have the government take a more active role in facilitating access to contraception and others that would attempt to clarify the responsibilities of the government in accommodating those with genuine religious objections to a coverage requirement. Some lawmakers have proposed amendments to the ACA's preventive services coverage requirements "with respect to women" to explicitly require coverage of contraception. For example, a bill introduced in the last Congress would have amended the preventive services requirement in subsection (a)(4) to include "contraceptive care," including "the full range of [FDA-approved] female-controlled contraceptive methods" and "instruction in fertility awareness-based methods . . . for women desiring an alternative method." Other proposals, including a bill introduced in the 116th Congress, would direct the Departments to include certain forms of contraception at the regulatory level. In general, legislation specifying that contraception is among the required preventive health services may help tip the scales on the government interest prong of the RFRA analysis toward a compelling interest in providing cost-free coverage for contraception through employer-sponsored health plans. In Hobby Lobby , the Supreme Court assumed that the government had a compelling interest in "guaranteeing cost-free access" to the objected-to contraceptive methods. However, the majority noted that "there are features of ACA that support" the opposing view, in particular, the inapplicability of the requirement to grandfathered plans. The Departments went a step further in the 2019 Final Rules, suggesting that the government did not have a compelling interest in contraceptive coverage because Congress left the decision of whether to include it to the agencies. Codifying the requirement may respond to arguments of this nature. However, proposals to expand contraceptive coverage, standing alone, could still be susceptible to challenge by religious objectors who might still assert that laws mandating coverage even if they include some exemptions impose a substantial burden on their religious exercise and are not narrowly tailored under RFRA. RFRA applies by default to all federal statutes adopted after its enactment (November 16, 1993) "unless such law explicitly excludes such application by reference to this Act." Some legislation concerning contraception includes language excepting those provisions from RFRA or excluding RFRA claims. A pair of bills introduced in the wake of Hobby Lobby would have prohibited an "employer that establishes or maintains a group health plan for its employees" from "deny[ing] coverage of a specific health care item or service . . . where the coverage of such item or service is required under any provision of Federal law or the regulations promulgated thereunder," notwithstanding RFRA. Lawmakers have also proposed amendments to RFRA itself. Similar bills introduced in both chambers this Congress would provide that RFRA's strict scrutiny standard does not apply to certain types of laws, including "any provision of law or its implementation that provides for or requires . . . access to, . . . referrals for, provision of, or coverage for, any health care item or service." Laws that make RFRA inapplicable to the contraceptive coverage requirement would not foreclose challenges based on the Free Exercise Clause. However, as previously noted, Free Exercise claims are potentially subject to a less stringent standard of review than RFRA-based objections because of the Supreme Court's holding in Employment Division v. Smith that the Free Exercise Clause typically does not require the government to provide religious-based exemptions to generally applicable laws. Other approaches to contraceptive coverage have focused on accommodating the interests of religious objectors. Some courts and objecting employers have suggested that Congress could avoid or minimize burdens on religious objectors by funding separate contraceptive coverage or expanding access to programs that provide free contraception instead of requiring employers to provide this coverage. Along these lines, the Departments separately issued a rule authorizing the directors of federally funded family planning projects to extend contraceptive services to some women whose employers do not provide coverage for such services because of a religious or moral exemption. While the efficacy of such proposals in maintaining or increasing access to contraception is beyond the scope of this report, alternatives that do not involve requiring private parties to provide contraceptive coverage or otherwise take an action that results in the provision of coverage by a third party could reduce the potential for both RFRA and Free Exercise challenges. Other proposals seek to codify exemptions to the contraceptive coverage requirement for entities with religious or moral objections. For example, the Religious Liberty Protection Act of 2014 would have prohibited HHS from "implement[ing] or enforc[ing]" any rule that "relates to requiring any individual or entity to provide coverage of sterilization or contraceptive services to which the individual or entity is opposed on the basis of religious belief." That bill also would have included a "special rule" in the ACA stating that a "health plan shall not be considered to have failed to provide" the required preventive health services "on the basis that the plan does not provide (or pay for) coverage of sterilization or contraceptive services because (A) providing (or paying for) such coverage is contrary to the religious or moral beliefs of the sponsor, issuer, or other entity offering the plan; or (B) such coverage, in the case of individual coverage, is contrary to the religious or moral beliefs of the purchaser or beneficiary of the coverage." Enacting statutory exemptions to the contraceptive coverage requirement might avoid future litigation over the Departments' authority under the ACA to create categorical exemptions. In addition, broader exemptions could reduce the potential for RFRA or Free Exercise challenges. At the same time, they could increase the prospect of Establishment Clause challenges like those brought in response to the expanded exemptions in the 2019 Final Rules. While the Supreme Court has said that "there is room for play in the joints" between the Free Exercise Clause and the Establishment Clause, it remains to be seen whether broad accommodations like the Religious Exemption and the Moral Exemption fit comfortably in that space. Little Sisters of the Poor marks the fourth Supreme Court term in six years in which the Court has granted certiorari in a dispute about the federal contraceptive coverage requirement. During that time period, the Departments promulgated six different rules concerning the requirement, a change in presidential administration marked a turning point in the Departments' RFRA calculus, and the Supreme Court underwent its own changes with the appointment of two new Justices. While the Court has the next opportunity to weigh in on the coverage requirement in Little Sisters of the Poor , Congress and the executive branch continue to have a role in defining the interests at stake and the balance to be achieved in the years ahead.

When Congress enacted the Patient Protection and Affordable Care Act (ACA) in 2010, it required employment-based health plans and health insurance issuers to cover certain preventive health services without cost sharing. Those services, because of agency guidelines and rules, would soon include contraception for women. The "contraceptive coverage requirement," or "contraceptive mandate" as it came to be known, was heavily litigated in the years to follow, and exemptions from the requirement are currently the subject of a pending Supreme Court case. The various legal challenges to the contraceptive coverage requirement primarily concerned (1) what types of employers and institutions should be exempt from the requirement based on their religious or moral objections to contraception; (2) what procedures the government can require for an entity to invoke a religious-based accommodation; and (3) how much authority federal agencies have to create exceptions to the coverage requirement. As originally formulated, only houses of worship and similar entities were exempt from the requirement, but the government later added an accommodation process for certain religious nonprofit organizations. On June 30, 2014, the Supreme Court held in Burwell v. Hobby Lobby Stores, Inc. that the contraceptive coverage requirement violated federal law insofar as it did not also accommodate the religious objections of closely held, for-profit corporations. The law at issue in that case—the Religious Freedom Restoration Act of 1993 (RFRA)—prohibits the federal government from "substantially burden[ing] a person's exercise of religion" except under narrow circumstances. Since Hobby Lobby , the agencies tasked with implementing the ACA have faced numerous hurdles in their attempts to accommodate the interests of sincere objectors while minimizing disruptions to the provision of cost-free contraceptive coverage to women. The lower courts split on whether the accommodation process—which required eligible objecting entities to notify their insurers or the government that they qualified for an exemption—substantially burdened the objectors' exercise of religion. Initially, most circuit courts rejected the view that such an accommodation triggered, facilitated, or otherwise made objectors complicit in the provision of coverage, denying their RFRA claims. After consolidating some of these cases for review, the Supreme Court ultimately vacated and remanded the decisions when the government and the objecting parties suggested that a solution might be reached so that the objectors' insurers could provide the required coverage without notice from the objecting parties. Following a change in presidential administration, the implementing agencies reevaluated and reversed their position on the legality of the then-existing accommodation process, concluding that it violated RFRA when applied to certain entities. The agencies opted to automatically exempt most nongovernmental entities that objected to providing coverage for some or all forms of contraception on religious or moral grounds. These expanded exemptions sparked a new round of litigation based on claims that the agencies exceeded their authority under the ACA or violated federal requirements for promulgating new rules. Federal courts, including the U.S. Court of Appeals for the Third Circuit, preliminarily enjoined the government from implementing the expanded exemptions. The Supreme Court is slated to hear arguments on the Third Circuit's decision in May in Little Sisters of the Poor v. Pennsylvania . Meanwhile, the government is largely precluded from relying on the prior accommodation process as a result of a nationwide injunction issued by a federal district court. Little Sisters of the Poor marks the fourth Supreme Court term in six years in which the Court has granted certiorari in a dispute about the federal contraceptive coverage requirement. During that time period, the Executive Departments promulgated six different rules concerning the requirement, a change in presidential administration marked a turning point in the Departments' RFRA calculus, and the Supreme Court underwent its own changes with the appointment of two new Justices. A Supreme Court decision in Little Sisters of the Poor could inform Congress's next steps with regard to the contraceptive coverage requirement. From a legal perspective, Congress has several options for clarifying the requirement's scope, including through amendments to the ACA and RFRA. An opinion in Little Sisters may also provide additional direction to lawmakers and federal agencies asked to accommodate the religious and moral beliefs of regulated entities when enacting or implementing laws of broader applicability.

crs_R46331

crs_R46331_0

<1. Overview> This report describes selected health care-related provisions that are scheduled to expire during the second session of the 116 th Congress (i.e., during calendar year [CY] 2020). For purposes of this report, expiring provisions are defined as portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring provisions included in this report are those related to Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. The report also includes health care-related provisions enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or extended under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ). This report describes health care-related provisions within the same scope that expired during the first session of the 116 th Congress (i.e., during CY2019). Although the Congressional Research Service (CRS) has attempted to be comprehensive, it cannot guarantee that every relevant provision is included here. The two types of provisions discussed in this report generally are enacted in the context of authorization laws and thus are typically within the purview of congressional authorizing committees. The duration that a provision is in effect usually is regarded as creating a timeline for legislative decisionmaking. In choosing this timeline, Congress navigates tradeoffs between the frequency of congressional review and the stability of funding or other legal requirements that pertain to the program. The first type of provision in this report provides or controls mandatory spending, meaning it provides temporary funding, temporary increases or decreases in funding (e.g., Medicare provider bonus payments), or temporary special protections that may result in changes in funding levels (e.g., Medicare funding provisions that establish a floor). The second type of provision defines the authority of government agencies or other entities to act, usually by authorizing a policy, project, or activity. Such provisions also may temporarily delay the implementation of a regulation, requirement, or deadline, or establish a moratorium on a particular activity. Expiring health care provisions that are predominantly associated with discretionary spending activities such as discretionary authorizations of appropriations and authorities for discretionary user fees are excluded from this report. Certain types of provisions with expiration dates that otherwise would meet the criteria set forth above are also excluded from this report. Some of these provisions are excluded, because they are transitional or routine in nature or have been superseded by congressional action that otherwise modifies the intent of the expiring provision. For example, statutorily required Medicare payment rate reductions and payment rate re-basings that are implemented over a specified period are not considered to require legislative attention and are excluded. The report is organized as follows: Table 1 lists the relevant provisions that are scheduled to expire in 2020. Table 2 lists the relevant provisions that expired during 2019. The provisions in each table are organized by expiration date and applicable health care-related program. The report then describes each listed provision, including a legislative history. The summaries are grouped by provisions scheduled to expire in 2020 followed by those that expired in 2019. Appendix A lists demonstration projects and pilot programs that are scheduled to expire in 2020 or that expired in 2019 and are related to Medicare, Medicaid, CHIP, and private health insurance programs and activities or other health care-related provisions that were enacted in the ACA or last extended under the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). Appendix B lists the status of provisions included in CRS Report R45781, Health Care-Related Expiring Provisions of the 116th Congress, First Session , that did not apply within the scope of this report. Appendix C lists all laws that created, modified, or extended the health care-related expiring provisions described in this report. Appendix D lists abbreviations used in the report. <2. CY2020 Expiring Provisions> <2.1. Social Security Act (SSA) Title V: Sexual Risk Avoidance Education Program and Personal Responsibility Education Program> <2.1.1. Sexual Risk Avoidance Education Program (SSA 510; 42 U.S.C. 710)5> <2.1.1.1. Background> The Title V Sexual Risk Avoidance Education (SRAE) program, formerly known as the Abstinence Education Grants program, provides funding for education to adolescents aged 10 to 20 exclusively on abstaining from sexual activity outside of marriage. The Department of Health and Human Services (HHS) administers the program, and funding is provided primarily via formula grants. The 50 states, District of Columbia, and the territories are eligible to apply for funds. Jurisdictions request Title V SRAE funds as part of their request for Maternal and Child Health Block Grant funds authorized in SSA Section 501. Funds are allocated to jurisdictions based on their relative shares of low-income children. Funding is also available for eligible entities (not defined in statute) in jurisdictions that do not apply for funding. <2.1.1.2. Relevant Legislation> The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( PRWORA; P.L. 104-193 ), Section 912 , established the Abstinence Education Grants program and provided $50 million for each of FY1998 through FY2002. The Welfare Reform Extension Act of 2003 (WREA 2003; P.L. 108-40 ), Section 6, provided $50 million for FY2003. An Act to Extend the Temporary Assistance for Needy Families Block Grant Program, and Certain Tax and Trade Programs, and For Other Purposes ( P.L. 108-89 ), Section 101 , provided funding through March 31, 2014 in the manner authorized for FY2002 (i.e., $50 million, but proportionally provided for the first two quarters of FY2004). The Welfare Reform Extension Act of 2004 (WREA 2004 ; P.L. 108-210 ), Section 2 , provided funding through June 30, 2004 in the manner authorized for FY2002. TANF and Related Programs Continuation Act of 2004 ( P.L. 108-262 ) , Section 2 , provided funding through September 30, 2004 in the manner authorized for FY2002. Welfare Reform Extension Act, Part VIII ( P.L. 108-308 ) , Section 2 , provided funding through March 31, 2005 in the manner authorized for FY2004. The Welfare Reform Extension Act of 2005 (WREA 2005 ; P.L. 109-4 ), Section 2, provided funding through June 30, 2005 in the manner authorized for FY2004. TANF Extension Act of 2005 ( P.L. 109-19 ) , Section 2 , provided funding through September 30, 2005 in the manner authorized for FY2004. QI, TMA, and Abstinence Programs Extension and Hurricane Katrina Unemployment Relief Act of 2005 ( P.L. 109-91 ) , Section 102 , provided funding through December 31, 2005 in the manner authorized for FY2005. The Tax Relief and Health Care Act of 2006 (TRHCA; P.L. 109-432 ), Section 401 , provided funding through June 30, 2007 in the manner authorized for FY2006. An Act to Provide for the Extension of Transitional Medical Assistance, and Other Provisions ( P.L. 110-48 ) , Section 1 , provided funding through September 30, 2007 in the manner authorized for FY2006. TMA, Abstinence Education, and QI Programs Extension Act of 2007 ( P.L. 110-90 ) , Section 2 , provided funding through December 31, 2007 in the manner authorized for FY2007. The Medicare, Medicaid, and SCHIP Extension Act of 2007 ( MMSEA; P.L. 110-173 ), Section 202 , provided funding through June 30, 2008 in the manner authorized for FY2007. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA ; P.L. 110-275 ), Se ction 201 , provided funding through June 30, 2009 in the manner authorized for FY2007. ACA, Section 2954, provided $50 million for each of FY2010 through FY2014. Protecting Access to Medicare Act of 2014 ( PAMA ; P.L. 113-93 ), Section 205 , provided $50 million for FY2015. Medicare Access and CHIP Reauthorization Act of 2015 ( MACRA ; P.L. 114-10 ), Section 214 , provided $75 million for each of FY2016 and FY2017. BBA 2018, Section 50502 , renamed the program and provided $75 million for each of FY2018 and FY2019. Continuing App ropriations Act, 2020, and Health Extenders Act of 2019 ( P.L. 116-59 ), Section 12 01 , provided $10,684,931 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriation s Act, 2020, and Further Health Extenders Act of 2019 ( P.L. 116-69 ), Section 120 1 , provided $16,643,836 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) Division N, Section 303, provided $48,287,671 for the period of October 1, 2019 through May 22, 2020. Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ), S ection 3821 provided $75 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. <2.1.1.3. Current Status> Funding authorized under the CARES Act for the Title V SRAE program expires after November 30, 2020. <2.1.2. Personal Responsibility Education Program (SSA 513; 42 U.S.C. 713(f))> <2.1.2.1. Background> The Personal Responsibility Education Program (PREP) is a broad approach to teen pregnancy prevention that seeks to educate adolescents ages 10 through 19 and pregnant and parenting youth under age 21 on both abstinence and contraceptives to prevent pregnancy and sexually transmitted infections (STIs). Education services can address abstinence and/or contraceptives to prevent pregnancy and STIs. PREP includes four types of grants, which are administered by HHS: (1) State PREP grants, (2) Competitive PREP grants, (3) Tribal PREP, and (4) PREP Innovative Strategies (PREIS). A majority of PREP funding is allocated to states and territories via the State PREP grant. The 50 states, District of Columbia, and the territories are eligible for funding. Funds are allocated by formula based on the proportion of youth aged 10 to 20 in each jurisdiction relative to other jurisdictions. <2.1.2.2. Relevant Legislation> ACA, Section 2953 , established PREP and provided $75 million annually from FY2010 through FY2014. PAMA, Section 206 provided $75 million for FY2015. MACRA, Section 215 , provided $75 million for each of FY2016 and FY2017. BBA 2018, Section 50503 , provided $75 million for each of FY2018 and FY2019. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019, Section 1202, provided $10,684,931 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Section 1202, provided $16,643,836 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 304, provided $48,287,671 for the period of October 1, 2019 through May 22, 2020. CARES Act , Section 382 2 provided $75 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. <2.1.2.3. Current Status> Funding authorized under the CARES Act for PREP expires after November 30, 2020. <2.2. SSA Title VXIII: Medicare> <2.2.1. Quality Measure Selection (SSA 1890A; 42 U.S.C. 1395aaa-1)> <2.2.1.1. Background> SSA Section 1890A requires the HHS Secretary to establish a pre-rulemaking process to select quality measures for use in the Medicare program. As part of this process, the Secretary makes available to the public measures under consideration for use in Medicare quality programs and broadly disseminates the quality measures that are selected to be used, while the consensus-based entity with a contract (National Quality Form, or NQF) gathers multi-stakeholder input and annually transmits that input to the Secretary. NQF fulfills this requirement through its Measure Applications Partnership (MAP), an entity that convenes multi-stakeholder groups to provide input into the selection of quality measures for use in Medicare and other federal programs. MAP publishes annual reports with recommendations for selection of quality measures in February of each year, with the first report published in February 2012. <2.2.1.2. Relevant Legislation> ACA, Section 3014(c) , transferred a total of $20 million from the Medicare Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds for each of FY2010 through FY2014 to carry out SSA Section 1890A(a)-(d) (and the amendments made to SSA Section 1890(b) by ACA Section 3014(a)). PAMA, Section 109 , transferred $5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and $15 million for the first six months of FY2015 (from October 1, 2014, to March 31, 2015) to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d); funds were required to remain available until expended. MACRA, Section 207 , transferred $30 million for each of FY2015 through FY2017 to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d). The funding provided under MACRA for FY2015 replaced the funding provided under PAMA for that year; therefore, the total funding for FY2015 was $30 million. BBA 2018, Section 50206 , transferred $7.5 million for each of FY2018 and FY2019 to carry out both Section 1890 and SSA Section 1890A(a)-(d). The section also added new HHS reporting requirements and modified existing NQF reporting requirements to specify use of funding, among other things. Amounts transferred for each of FY2018 and FY2019 are in addition to any unobligated balances that remained from prior years' transfers. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Section 1401, transferred $1,069,000 for the period beginning October 1, 2019, and ending November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Section 1401, transferred $1,665,000 for the period beginning October 1, 2019, and ending December 20, 2019. Further Consolidated Appropriations Act, 2020 , Division N, Section 102, transferred $4,830,000 for the period beginning October 1, 2019, and ending May 22, 2020. CARES Act, Section 3802 , provided $20 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. <2.2.1.3. Current Status> Funding authorized under the CARES Act to carry out the measure selection activities under SSA Section 1890A(a)-(d) expires after November 30, 2020. <2.2.2. Contract with a Consensus-Based Entity Regarding Performance Measurement (SSA 1890(d); 42 U.S.C. 1395aaa)> <2.2.2.1. Background> Under SSA Section 1890, the HHS Secretary is required to have a contract with a consensus-based entity (e.g., NQF) to carry out specified duties related to performance improvement and measurement. These duties include, among others, priority setting, measure endorsement, measure maintenance, and annual reporting to Congress. <2.2.2.2. Relevant Legislation> MIPPA, Section 183 , transferred, from the Medicare HI and SMI Trust Funds, a total of $10 million for each of FY2009 through FY2012 to carry out the activities under SSA Section 1890. American Taxpayer Relief Act of 2012 ( ATRA ; P.L. 112-240 ) , Section 609(a) , transferred $10 million for FY2013 and modified the duties of the consensus-based entity. Pathway for SGR Reform Act of 2013 ( PSRA ; P.L. 113-67 ) , Section 1109 , required that transferred funding remain available until expended. PAMA, Section 109 , transferred $5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and $15 million for the first six months of FY2015 (from October 1, 2014, to March 31, 2015) to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d); funds were required to remain available until expended. MACRA, Section 207 , transferred $30 million for each of FY2015 through FY2017 to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d). The funding provided under MACRA for FY2015 effectively replaced the funding provided under PAMA for that year; therefore, the total funding for FY2015 was $30 million. Funds were required to remain available until expended. BBA 2018, Section 50206 , transferred $7.5 million from the Medicare HI and SMI Trust Funds for each of FY2018 and FY2019 to carry out both Section 1890 and SSA Section 1890A(a)-(d). The section also added new HHS reporting requirements and modified existing NQF reporting requirements to specify use of funding, among other things. Amounts transferred for each of FY2018 and FY2019 are in addition to any unobligated balances that remained from prior years' transfers. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Section 1401, transferred $1,069,000 for the period beginning October 1, 2019, and ending November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Section 1401, transferred $1,665,000 for the period beginning October 1, 2019, and ending December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 102, transferred $4,830,000 for the period beginning October 1, 2019, and ending May 22, 2020. CARES Act, Section 3802 , provided $20 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. <2.2.2.3. Current Status> Funding authorized under the CARES Act to support the contract with the consensus-based entity under SSA Section 1890 expires after November 30, 2020. <2.2.3. Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) Technical Assistance to Small Practices and Practices in Health Professional Shortage Areas (SSA 1848(q)(11); 42 U.S.C. 1395w 4(q))(11)> <2.2.3.1. Current Law> MACRA made several fundamental changes to how Medicare pays for physician and practitioner services by (1) changing the methodology for determining the annual updates to the conversion factor, (2) establishing new methods for paying for professional services under Medicare Part B, including a merit-based incentive payment system (MIPS) to consolidate and replace several existing incentive programs and to apply value and quality adjustments to the Medicare physician fee schedule (MPFS), and (3) establishing the development of, and participation in, alternative payment models (APMs). To provide technical assistance to small practices and practices in health professional shortage areas, MACRA required the HHS Secretary to enter into contracts or agreements with appropriate entities (such as quality-improvement organizations, regional extension centers, or regional health collaboratives) to offer guidance and assistance to MIPS-eligible professionals in practices of 15 or fewer professionals. Under the technical assistance program, priority is required to be given to professionals located in rural areas, health professional shortage areas, or practices with low composite scores under the new payment system. The guidance and assistance is provided with respect to the MIPS performance categories or with respect to how to transition to the implementation of and participation in an APM. For purposes of implementing the technical assistance program, $20 million from the SMI Trust Fund was made available to the Centers for Medicare & Medicaid Services (CMS) for each of FY2016-FY2020. These amounts are available until expended. <2.2.3.2. Relevant Legislation> MACRA, Section 101, provided for the transfer of $20 million, for each of FY2016 through FY2020, from the Medicare SMI Trust Fund. <2.2.3.3. Current Status> No funds to support the technical assistance program have been authorized beyond FY2020. <2.2.4. Floor on Work Geographic Practice Cost Indices (SSA 1848(e)(1); 42 U.S.C. 1395w-4(e)(1)(E))> <2.2.4.1. Background> Payments under the Medicare MPFS are adjusted geographically for three factors to reflect differences in the cost of resources needed to produce physician services: physician work, practice expense, and medical malpractice insurance. The geographic adjustments are indices known as Geographic Practice Cost Indices (GPCIs) that reflect how each area compares to the national average in a "market basket" of goods. A value of 1.00 represents the average across all areas. These indices are used in the calculation of the payment rate under the MPFS. Several laws have established a minimum value of 1.00 (floor) for the physician work GPCI for localities where the work GPCI was less than 1.00. <2.2.4.2. Relevant Legislation> MMA , Section 412, provided for an increase in the work geographic index to 1.0 (floor) for any locality for which the work geographic index was less than 1.0 for services furnished from January 1, 2004, through December 31, 2006. TRHCA , Section 102 , extended the floor through December 31, 2007. MMSEA , Section 103, extended the floor through June 30, 2008. MIPPA , Section 134, extended the floor through December 31, 2009. In addition, beginning January 1, 2009, MIPAA set the work geographic index for Alaska to 1.5 if the index otherwise would be less than 1.5; no expiration was set for this modification. ACA , Section 3102, extended the floor through December 31, 2010. Medicare and Medicaid Extenders Act of 2010 (MMEA; P.L. 111-309 ) , Section 103, extended the floor through December 31, 2011. Temporary Payroll Tax Cut Continuation Act of 2011 ( TPTCCA, P.L. 112-78 ) , Section 303, extended the floor through February 29, 2012. Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, P.L. 112-96 ) , Section 3004, extended the floor through December 31, 2012, and required the Medicare Payment Advisory Commission (MedPAC) to report on whether any work geographic adjustment to the MPFS is appropriate, what that level of adjustment should be (if appropriate), and where the adjustment should be applied. The report also was required to assess the impact of such an adjustment, including how it would affect access to care. ATRA , Section 602, extended the floor through December 31, 2013. PAMA , Section 102, extended the floor through March 31, 2015. MACRA , Section 201, extended the floor through December 31, 2017. BBA 2018 , Section 50201, extended the floor through December 31, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 101 , extended the floor through March 22, 2020. CARES Act, Section 3801, extended the floor through November 30, 2020. <2.2.4.3. Current Status> The authority for the MPFS GPCI floor expires after November 30, 2020. <2.2.5. Home Health Prospective Payment System Rural Add-On for High Utilization Counties (SSA 1895; 42 U.S.C. 1395fff note)> <2.2.5.1. Background> Federally certified home health (HH) agencies receive increased payments under the HH prospective payment system (PPS) for Medicare home health care episodes furnished to beneficiaries in rural areas. Before BBA 2018, when provided by legislation, the HH rural add-on was a fixed percent age increase to the HH PPS that was applied uniformly to Medicare home health episodes of care provided in rural counties. Under BBA 2018, the add-on was applied unvaryingly for the first year the legislation extended the increase d payment, providing a 3% rural add-on payment to Medicare home health episodes furnished in any rural county that began in CY2018. After CY2018, BBA 2018 provided home health agencies a 3%, 2%, and 1% HH PPS add-on payment for services furnished in rural counties beginning during CY2019-CY2021, respectively, unless the Medicare home health services were, or are, furnished in a rural county with one of the two below-described designations, in which case alternative add-on payments were /are provided: For home health episodes furnished to beneficiaries who reside in low population density counties, which are defined as rural counties that have a population density of six or fewer individuals per square mile, BBA 2019 provided 4%, 3%, 2%, and 1% HH PPS add-on payments for services beginning during CY2019-CY2022, respectively , and For home health episodes provided to beneficiaries who reside in high utilization counties, which are defined as rural counties in the top quartile of all counties rendering home health services (by the number of HH episodes furnished per 100 Medicare eligibles), BBA 2018 provided 1.5% and 0.5% HH PPS add-on payments for home health episodes beginning in CY2019-CY2020, respectively. BBA 2018 provided no add-on payment for episodes furnished in high utilization rural counties that begin in CY2021 or CY2022. Under BBA 2018, rural counties were to be categorized only once and such determination applies to payment home health episodes through CY2022. <2.2.5.2. Relevant Legislation> The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA 2000; P.L. 106-554 ), Section 508, established a 10% add-on to Medicare's HH PPS rates for home health episodes provided to beneficiaries in rural areas beginning April 1, 2001, through March 31, 2003. Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( MMA ; P.L. 108-173 ), Section 421, provided a 5% add-on for services beginning April 1, 2004, through March 31, 2005. Deficit Reduction Act of 2005 ( DRA ; P.L. 109-171 ) , Section 5201, provided a 5% add-on for services beginning January 1, 2006, through December 31, 2006. ACA Section, 3131, provided a 3% add-on for services beginning April 1, 2010, through December 31, 2015. MACRA, Section 210, provided a 3% add-on for services beginning January 1, 2016 through December 31, 2017. BBA 2018, Section 50208, provided a 3% add-on for services beginning in CY2018. BBA 2018 provided a 3%, 2%, and 1% add-on for services beginning in years CY2019-CY2021, respectively, unless the services were provided in a low population density or high utilization rural county. For services provided in low population density rural counties, BBA 2018 provided an add-on at 4%, 3%, 2%, and 1% for services beginning in years CY2019-CY2022, respectively. For services furnished in high utilization rural counties, a 1.5% and 0.5% add-on was provided for services beginning in years CY2019-CY2020, respectively. <2.2.5.3. Current Status> After December 31, 2020, home health agencies are no longer set to receive an add-on payment for services provided in rural counties designated as high utilization counties. <2.3. Other Medicare Provisions> <2.3.1. Outreach and Assistance for Low-Income Programs (MIPPA 119; 42 U.S.C. 1395b-3 note)> <2.3.1.1. Background> The Administration for Community Living (ACL) administers federal grant programs that fund outreach and assistance to older adults, individuals with disabilities, and their caregivers in accessing various health and social services. Funding for these programs is provided through discretionary budget authority in annual appropriations to the following entities: State Health Insurance Assistance Programs (SHIPs): programs that provide outreach, counseling, and information assistance to Medicare beneficiaries and their families and caregivers on Medicare and other health insurance issues. Area Agencies on Aging (AAA): state-designated public or private nonprofit agencies that address the needs and concerns of older adults at the regional or local levels. AAAs plan, develop, coordinate, and deliver a wide range of home and community-based services. Most AAAs are direct providers of information and referral assistance programs. Aging and Disability Resource Centers (ADRCs): programs in local communities that assist older adults, individuals with disabilities, and caregivers in accessing the full range of long-term services and supports options, including available public programs and private payment options. The National Center for Benefits and Outreach Enrollment assists organizations to enroll older adults and individuals with disabilities into benefit programs that they may be eligible for, such as Medicare, Medicaid, the Supplemental Security Income (SSI) program, and the Supplemental Nutrition Assistance Program (SNAP), among others. In addition to discretionary funding for these programs, beginning in FY2009, MIPPA provided funding for specific outreach and assistance activities to Medicare beneficiaries. This mandatory funding was extended multiple times, most recently in the CARES Act through November 30, 2020, and provided for outreach and assistance to low-income Medicare beneficiaries including those who may be eligible for the Low-Income Subsidy program, Medicare Savings Program (MSP), and the Medicare Part D Prescription Drug Program. The HHS Secretary is required to transfer specified amounts for MIPPA program activities from the Medicare Trust Funds. <2.3.1.2. Relevant Legislation> MIPPA , Section 119, authorized and provided a total of $25 million for FY2009 to fund low-income Medicare beneficiary outreach and education activities through SHIPs, AAAs, ADRCs, and coordination efforts to inform older Americans about benefits available under federal and state programs. ACA , Section 3306, extended authority for these programs and provided a total of $45 million for FY2010 through FY2012 in the following amounts: SHIPs, $15 million; AAAs, $15 million; ADRCs, $10 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. ATRA , Section 610, extended authority for these programs through FY2013 and provided a total of $25 million in the following amounts: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. PSRA , Section 1110, extended authority for these programs through the second quarter of FY2014 and provided funds at FY2013 levels ($25 million) for the first two quarters of FY2014 (through March 31, 2014). PAMA , Section 110, extended authority for these programs through the second quarter of FY2015 (through March 31, 2015). For FY2014, PAMA provided a total of $25 million at the following FY2013 funding levels: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5.0 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5.0 million. In addition, PAMA provided funds at FY2014 levels for the first two quarters of FY2015 (through March 31, 2015). MACRA , Section 208, extended authority for these programs through September 30, 2017. For FY2015, MACRA provided funding at the previous year's level of $25 million in the following amounts: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. For FY2016 and FY2017, MACRA provided $37.5 million annually, a $12.5 million per year increase from FY2015 funding levels, in the following amounts: SHIPs, $13 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $12 million. BBA 2018, Section 50207, extended authority for these programs through September 30, 2019. For FY2018 and FY2019, BBA 2018 provides funding at the FY2017 funding level of $37.5 million annually in the following amounts: SHIPs, $13 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $12 million. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019, Section 1402, extended authority for these programs through November 21, 2019. For October 1, 2019 to November 21, 2019, they provided a total of $5.343 million in the following amounts: SHIPs, $1.852 million; AAAs $1.069 million; ADRCs, $712,000; and the contract with the National Center for Benefits Outreach and Enrollment, $1.710 million. F urther Continuing Appropriations Act, 2020 , and F urther H ealth Extenders Act of 2019 , Section 1402, extended authority for these programs through December 20, 2019. For November 22, 2019 to December 20, 2019, they provided a total of $2.98 million in the following amounts: SHIPs, $1.033 million; AAAs $597,000; ADRCs, $397,000; and the contract with the National Center for Benefits Outreach and Enrollment, $953,000. Further Consolidated Appropriations Act, 2020, Division N, Section 103, extended authority for these programs through May 22, 2020. For December 21, 2019 to May 22, 2020, it provided a total of $15.823 million in the following amounts: SHIPs, $5.485 million; AAAs $3.165 million; ADRCs, $2.110 million; and the contract with the National Center for Benefits Outreach and Enrollment, $5.063 million. CARES Act, Section 3803, extended authority for these programs through November 30, 2020. For FY2020, it provided a total of $37.5 million in the following amounts (which supersedes the funding previously provided by law for all periods of FY2020): SHIPs, $13 million; AAAs $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits Outreach and Enrollment, $12 million. Additionally, funding was provided for these programs for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided for FY2020. <2.3.1.3. Current Status> Funding authorized under the CARES Act for low-income outreach and assistance programs will expire after November 30, 2020. However, funds appropriated will be available for obligation until expended. <2.4. SSA Title XIX: Medicaid> <2.4.1. Protection for Recipients of Home and Community-Based Services Against Spouse Impoverishment (SSA 1924; 42 U.S.C. 1396r-5 note)> <2.4.1.1. Background> When determining financial eligibility for Medicaid-covered long-term services and supports (LTSS), there are specific rules under SSA Section 1924 for the treatment of a married couple's assets when one spouse needs long-term care provided in an institution, such as a nursing home. Commonly referred to as "spousal impoverishment rules," these rules attempt to equitably allocate income and assets to each spouse when determining Medicaid financial eligibility and are intended to prevent the impoverishment of the non-Medicaid spouse. For example, spousal impoverishment rules require state Medicaid programs to exempt all of a non-Medicaid spouse's income in his or her name from being considered available to the Medicaid spouse. Joint income of the couple is divided in half between the spouses, and the Medicaid spouse can transfer income to bring the non-Medicaid spouse up to certain income thresholds. Assets of the couple, regardless whose name they are in, are combined and then split in half. The non-Medicaid spouse can retain assets up to an asset threshold determined by the state within certain statutory parameters. Prior to enactment of the ACA, spousal impoverishment rules applied only in situations where the Medicaid participant was receiving LTSS in an institution. States had the option to extend these protections to certain home and community-based services (HCBS) participants under a Section 1915(c) waiver program. Beginning January 1, 2014, ACA Section 2404 temporarily substituted the definition of "institutionalized spouse" under SSA Section 1924(h)(1) to include application of these spousal impoverishment protections to all married individuals who are eligible for HCBS authorized under certain specified authorities. Thus, beginning January 1, 2014, for a five-year time period, the ACA required states to apply the spousal impoverishment rules to all married individuals who are eligible for HCBS under these specified authorities, not just those receiving institutional care. This modified definition expired on December 31, 2018. The 116 th Congress extended the authority for these protections and included a provision regarding state flexibility in the application of income or asset disregards for married individuals receiving certain HCBS. <2.4.1.2. Relevant Legislation> ACA, Section 2404, required states to extend spousal impoverishment rules to certain beneficiaries receiving HCBS for a five-year period beginning on January 1, 2014. The Medicaid Extenders Act of 2019 ( P.L. 116-3 ), Section 3 , extended this provision through March 31, 2019. The Medicai d Services Investment and Accountability Act of 2019 ( P.L. 116-16 ), Section 2, extended this provision through September 30, 2019. The Sustaining Excellence in Medicaid Act of 2019 ( P.L. 116-39 ), Section 3, extended this provision through December 31, 2019. Further Consolidated Appropriations Act, 2020 , Section 204, extended this provision through May 22, 2020. CARES Act, Section 3812, further extended this provision through November 30, 2020. <2.4.1.3. Current Status> The authority for the extension of spousal impoverishment protections for certain Medicaid HCBS recipients will expire after November 30, 2020. <2.5. SSA Title XXI: State Children's Health Insurance Program (CHIP)> <2.5.1. Increase to Enhanced Federal Medical Assistance Percentage (E-FMAP) (SSA 2105(b); 42 U.S.C. 1397ee(b))> <2.5.1.1. Background> The federal government's share of CHIP expenditures (including both services and administration) is determined by the enhanced federal medical assistance percentage (E-FMAP) rate. The E-FMAP rate is based on the federal medical assistance percentage (FMAP) rate, which is the federal matching rate for the Medicaid program. The FMAP formula compares each state's average per capita income with average U.S. per capita income. FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. The E-FMAP rate is calculated by reducing the state share under the regular FMAP rate by 30%. Statutorily, the E-FMAP (or federal matching rate) can range from 65% to 85%. For some CHIP expenditures, the federal matching rate is different from the E-FMAP rate. For instance, the matching rate for translation and interpretation services is the higher of 75% or states' E-FMAP rate plus 5 percentage points. Also, for services provided to children with family incomes exceeding 300% of the federal poverty level (FPL) with an exception for certain states, the matching rate is the lower regular FMAP rate. <2.5.1.2. Relevant Legislation> ACA, Section 2101 , included a provision to increase the E-FMAP rate by 23 percentage points (not to exceed 100%) for most CHIP expenditures from FY2016 through FY2019. Making further continuing appropriations for the fiscal year ending September 30, 2018, and for other purposes ( P.L. 115-120 ), Section 3005, extended the increase to the E-FMAP rate for one year through FY2020. However, for FY2020 the increase to the E-FMAP is 11.5 percentage points instead of 23 percentage points. <2.5.1.3. Current Status> The increase to the E-FMAP expires after September 30, 2020. <2.6. Public Health Service Act (PHSA)> <2.6.1. Community Health Center Fund (PHSA 330; 42 U.S.C. 254b-2(b)(1))> <2.6.1.1. Background> The Community Health Center Fund (CHCF) provided mandatory funding for federal health centers authorized in PHSA Section 330. These centers are located in medically underserved areas and provide primary care, dental care, and other health and supportive services to individuals regardless of their ability to pay. The mandatory CHCF appropriations are provided in addition to discretionary funding for the program; however, the CHCF comprised more than 70% of health center programs' appropriations in FY2019, the last year where final appropriations data are available. <2.6.1.2. Relevant Legislation> ACA, Section 10503, established the CHCF and provided a total of $9.5 billion to the fund annually from FY2011 through FY2015, as follows: $1 billion for FY2011, $1.2 billion for FY2012, $1.5 billion for FY2013, $2.2 billion for FY2014, and $3.6 billion for FY2015. The ACA also provided $1.5 billion for health center construction and renovation for the period FY2011 through FY2015. MACRA, Section 221, provided $3.6 billion for each of FY2016 and FY2017 to the CHCF. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes ( P.L. 115-96 ), Section 3101(a), provided $550 million for the first and second quarters of FY2018 to the CHCF. BBA 2018, Section 50901, made a number of changes to the health center program replaced language that had provided two quarters of funding and provided $3.8 billion to the CHCF in FY2018 and $4 billion in FY2019. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Division B, Section 1101 , provided $569,863,014 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1101 , struck the amount that had been provided in P.L. 116-59 and provided $887,671,223 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Ap propriations Act, 2020, Division N, Section 401, struck the amount that had been provided in P.L. 116-69 , and provided $2,575,342,466 for the period of October 1, 2019 through May 22, 2020. CARES Act , Section 3831, provided $4 billion for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $668,493,151 was provided for the period of October 1, 2020 through November 30, 2020. <2.6.1.3. Current Status> Funding authorized under the CARES Act for CHCF expires after November 30, 2020. Any unused portion of grants awarded for a given fiscal year prior to November 30, 2020, will remain available until expended. <2.6.2. Special Diabetes Programs (PHSA 330B and 330C; 42 U.S.C. 254c-2(b) and 254c-3(b))> <2.6.2.1. Background> The Special Diabetes Program for Type I Diabetes (PHSA Section 330B) provides funding for the National Institutes of Health to award grants for research into the prevention and cure of Type I diabetes. The Special Diabetes Program for Indians (PHSA Section 330C) provides funding for the Indian Health Service (IHS) to award grants for services related to the prevention and treatment of diabetes for American Indians and Alaska Natives who receive services at IHS-funded facilities. <2.6.2.2. Relevant Legislation> The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ), Sections 4921 and 4922, established the two special diabetes programs and transferred $30 million annually from CHIP funds to each program from FY1998 through FY2002. BIPA 2000, Section 931, increased each program's annual appropriations to $70 million for FY2001 through FY2002 and provided $100 million for FY2003. An Act to Amend the Public Health Service Act with Respect to Special Diabetes Programs for Type 1 Diabetes and Indians ( P.L. 107-360 ) , Section 1, increased each program's annual appropriations to $150 million and provided funds from FY2004 through FY2008. MMSEA, Section 302, provided $150 million for each program through FY2009. MIPPA, Section 303, provided $150 million each program through FY2011. MMEA, Section 112, provided $150 million each program through FY2013. ATRA, Section 625, provided $150 million each program through FY2014. PAMA, Section 204, provided of $150 million each program through FY2015. MACRA, Section 213, provided $150 million each program through FY2017. Disaster Tax Relief and Airport and Airway Extension Act of 2017 ( P.L. 115-63 ), Section 301(b), provided $37.5 million for first quarter of FY2018 for the Special Diabetes Program for Indians (Note: it did not provide funding for the Special Diabetes Program for Type I Diabetes.) An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes, Section 3102, provided $37.5 million for the second quarter for the Special Diabetes Program for Indians and provided $37.5 million for the first and second quarters of FY2018 for the Special Diabetes Program for Type I Diabetes. BBA 2018, Section 50902, replaced language that had provided funding for the first and second quarters of FY2018 to provide $150 million for each program in FY2018 and FY2019. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Division B, Section 1102 , provided $ 21,369,863 for each program for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1102 , struck the amount that had been provided in P.L. 116-59 and provided $ 33,287,671 for each program for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 402, struck the amount that had been provided in P.L. 116-69 , and provided $96,575,342 for each program for the period of October 1, 2019 through May 22, 2020. CARES Act, Section 3832, provided $150 million for FY2020 for each program, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $ 25,068,493 was provided for each program for the period of October 1, 2020 through November 30, 2020. <2.6.2.3. Current Status> Funding authorized under the CARES Act for the two special diabetes programs expires after November 30, 2020. Any unused portion of grants awarded for a given fiscal year prior to November 30, 2020, will remain available until expended. <2.6.3. National Health Service Corps Appropriations (PHSA 338H; 42 U.S.C. 254b-2(b)(2))> <2.6.3.1. Background> The National Health Service Corps (NHSC) provides scholarships and loan repayments to certain health professionals in exchange for providing care in a health professional shortage area for a period of time that varies based on the length of the scholarship or the number of years of loan repayment received. The NHSC receives mandatory funding from the CHCF through PHSA Title III. The NHSC also received discretionary appropriations in FY2011. Between FY2012 and FY2017, the program did not receive discretionary appropriations. Beginning in FY2018 and continuing in FY2019, the program received discretionary appropriations, primarily to expand the number and type of substance abuse providers participating in the NHSC. The mandatory funding from the CHCF represents more nearly three-quarters of the program's funding in both FY2018 and FY2019, the last years where final appropriations data are available. <2.6.3.2. Relevant Legislation> ACA, Section 10503, funded $1.5 billion to support the NHSC annually from FY2011 through FY2015, as follows: $290 million for FY2011, $295 million for FY2012, $300 million for FY2013, $305 million for FY2014, and $310 million for FY2015. Funds are to remain available until expended. MACRA, Section 221, funded $310 million for each of FY2016 and FY2017 for the NHSC. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes Section 3101 , funded $65 million for the first and second quarters of FY2018 for the NHSC. BBA 2018, Sec tion 50901 , replaced language that had provided two-quarters of funding and funded $310 million for each of FY2018 and FY2019 for the NHSC. Continuing Appropriations Act, 2020, and Health Extend ers Act of 2019, Division B, Section 1101 , provided $18,021,918 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1101 , struck the amount that had been provided in P.L. 116-59 and provided $28,072,603 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 401, struck the amount that had been provided in P.L. 116-69 , and provided $81,445,205 for the period of October 1, 2019 through May 22, 2020. CARES Act, Section 3831, provided $310 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $51,808,219 was provided for the period of October 1, 2020 through November 30, 2020. <2.6.3.3. Current Status> Funding authorized under the CARES Act for the CHCF component of the NHSC expires after November 30, 2020. Any unused portion of grants awarded for a given fiscal year prior to November 30, 2020, will remain available until expended. <2.6.4. Teaching Health Centers (PHSA 340H; 42 U.S.C. 256h)> <2.6.4.1. Background> The Teaching Health Center program provides direct and indirect graduate medical education (GME) payments to support medical and dental residents training at qualified teaching health centers (i.e., outpatient health care facilities that provide care to underserved patients). <2.6.4.2. Relevant Legislation> ACA, Section 5508 , established the Teaching Health Center program and provided $230 million for direct and indirect GME payments for the period of FY2011 through FY2015. MACRA, Section 221, provided $60 million for each of FY2016 and FY2017 for direct and indirect GME payments for teaching health centers. Disaster Tax Relief and Airport and Airway Exten sion Act of 2017, Section 301 , provided $15 million for the first quarter of FY2018 for direct and indirect GME payments for teaching health centers. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes, Section 3101 , struck the first quarter of funding and provided $30 million for the first and second quarters of FY2018 for direct and indirect GME payments for teaching health centers. It also limited the amount of funding that could be used for administrative purposes. B BA 2018, Section 50901 , made a number of changes to the Teaching Health Center program and replaced language that had provided two-quarters of funding and provided $126.5 million for each of FY2018 and FY2019 for direct and indirect GME payments for teaching health centers. Continuing Appropriations Act, 2020, and Health Extenders Act of 2 019 , Division B , Section 1101 , provided $44,164,384 or the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1101 , struck the amount that had been provided in P.L. 116-59 and provided $68,794,521 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020 , Division N , Section 401, struck the amount that had been provided in P.L. 116-69 , and provided $ 199,589,041 for the period of October 1, 2019 through May 22, 2020. CARES Act, Section 3831, provided $126.5 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $21,141,096 was provided for the period of October 1, 2020 through November 30, 2020. <2.6.4.3. Current Status> Funding authorized under the CARES Act for Teaching Health Center GME payments expires after November 30, 2020, but unused funds remain available until expended. <3. Other CY2020 Expiring Provisions> <3.1. Health Coverage Tax Credit (IRC 35; 26 U.S.C. 35)> <3.1.1. Background> The Health Coverage Tax Credit (HCTC) subsidizes 72.5% of the cost of qualified health insurance for eligible taxpayers and their family members. Potential eligibility for the HCTC is limited to two groups of taxpayers. One group is composed of individuals eligible for Trade Adjustment Assistance (TAA) allowances because they experienced qualifying job losses. The other group consists of individuals whose defined-benefit pension plans were taken over by the Pension Benefit Guaranty Corporation because of financial difficulties. HCTC-eligible individuals are allowed to receive the tax credit only if they either cannot enroll in certain other health coverage (e.g., Medicaid) or are not eligible for other specified coverage (e.g., Medicare Part A). To claim the HCTC, eligible taxpayers must have qualified health insurance (specific categories of coverage, as specified in statute). The credit is financed through a permanent appropriation under 31 U.S.C. 1324(b)(2); therefore, the financing of the HCTC is not subject to the annual appropriations process. <3.1.2. Relevant Legislation> The T rade Act of 2002 ( P.L. 107-210 ), Sections 2 01-203, authorized the Health Coverage Tax Credit, specified the eligibility criteria for claiming the credit, and made conforming amendment to the U.S.C. for purposes of financing the credit. The American Recovery and Reinvestment Act of 2009 ( ARRA, P.L. 111-5 ), Part VI: TAA Health Coverage Improvement Act of 2009 , expanded eligibility for and subsidy of the HCTC including retroactive amendments, and provided $80 million for FY2009 and FY2010 to implement the enacted changes to the HCTC. The Trade Adjustment Assistance Extension Act of 2011 ( P.L. 112-40 ), Section 241 , established a sunset date of before January 1, 2014. The T rade Preferences Extension Act of 2015 ( P.L. 114-27 ), Section 407 , retroactively reauthorized the HCTC and established a new sunset date of before January 1, 2020. Further Consolidated Appropriations Act, 2020, Section 146 , established a new sunset date of before January 1, 2021. <3.1.3. Current Status> Authorization for the HCTC is scheduled to expire after December 31, 2020. <4. CY2019 Expired Provisions> <4.1. Pregnancy Assistance Fund> <4.1.1. Pregnancy Assistance Fund (42 U.S.C. 18201-42 U.S.C. 18204)> <4.1.1.1. Background> The Pregnancy Assistance Fund (PAF) program focuses on meeting the educational, social service, and health needs of vulnerable expectant and parenting individuals and their families during pregnancy and the postnatal period. The program identifies eligible populations as expectant and parenting teens, college students, and women of any age who experience domestic violence, sexual violence, sexual assault, or stalking. HHS administers the PAF program, and funding is awarded competitively to the 50 states, DC, U.S. territories, and tribal entities (hereinafter, grantees) that apply successfully. Grantees may use funds (1) to establish, operate, or maintain pregnancy or parenting services at institutions of higher education (IHEs), high schools, or community service providers; (2) to provide, in partnership with the state attorney general's office, certain legal and supportive services for women who experience domestic violence, sexual violence, sexual assault, or stalking while they are pregnant or parenting an infant; and (3) to support, either directly or through a subgrantee, public awareness about PAF services for the expectant and parenting population that is eligible for the program. <4.1.1.2. Relevant Legislation> ACA, Section 10212 , established PAF and provided $25 million annually from FY2010 through FY2019. <4.1.1.3. Current Status> Funding authorized under the ACA expired after September 30, 2019. <4.2. SSA Title VXIII: Medicare> <4.2.1. Funding for Implementation of Section 101 of MACRA (MACRA Section 101(c)(3))> <4.2.1.1. Background> Section 101 of MACRA made fundamental changes to the way Medicare payments to physicians are determined and how they are updated. To implement the payment modifications in Section 101 of MACRA, the law authorized the transfer of $80 million from the SMI Trust Fund for each fiscal year beginning with FY2015 and ending with FY2019. The amounts transferred are to be available until expended. <4.2.1.2. Relevant Legislation> MACRA , Section 101 , provided for the transfer of $80 million, for each of FY2015 through FY2019, from the Medicare SMI Trust Fund. <4.2.1.3. Current Status> Appropriated funds to support the activities under this subsection have not been enacted for FY2020 or subsequent fiscal years. <4.2.2. Priorities and Funding for Measure Development (SSA 1848(s); 42 U.S.C. 1395w-4(s))> <4.2.2.1. Background> SSA Section 1848(s) required the HHS Secretary to develop a plan for the development of quality measures for use in the MIPS program, which is to be updated as needed. The subsection also requires the Secretary to enter into contracts or other arrangements to develop, improve, update, or expand quality measures, in accordance with the plan. In entering into contracts, the Secretary must give priority to developing measures of outcomes, patient experience of care, and care coordination, among other things. The HHS Secretary, through CMS, annually reports on the progress made in developing quality measures under this subsection. <4.2.2.2. Relevant Legislation> MACRA, Section 102 , provided for the transfer of $15 million, for each of FY2015 through FY2019, from the Medicare SMI Trust Fund. <4.2.2.3. Current Status> Appropriated funds to support the activities under this subsection have not been enacted for FY2020 or subsequent fiscal years. However, funds appropriated prior to FY2020 are available for obligation through the end of FY2022. <4.2.3. Temporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA 1886(m)(6)(B)(i); 42 U.S.C. 1395ww(m)(6)(B)(i))> <4.2.3.1. Background> Medicare pays LTCHs for certain inpatient hospital care under the LTCH prospective payment system (LTCH PPS), which is typically higher than payments for inpatient hospital care under the inpatient prospective payment system (IPPS). PSRA amended the law so that the LTCH PPS payment is no longer available for all LTCH discharges but instead is available only for those LTCH discharges that met specific clinical criteria. Specifically, LTCHs are paid under the LTCH PPS if a Medicare beneficiary either (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See section " Temporary Exception for Certain Spinal Cord Conditions from Application of the Medicare LTCH Site Neutral Payment for Certain LTCHs (SSA 1886(m)(6)(F); 42 U.S.C. 1395ww(m)(6)(F)) ." For LTCH discharges that did not qualify for the LTCH PPS based on these clinical criteria, a "site neutral payment rate" similar to the PPS for inpatient acute care hospitals (IPPS) was to be phased-in. The site neutral rate is defined as the lower of an "IPPS-comparable" per diem amount, as defined in regulations, or the estimated cost of the services involved. <4.2.3.2. Relevant Legislation> PSRA, Section 1206(a), established patient criteria for payment under the LTCH PPS and a site neutral payment rate for LTCH patients who do not meet these criteria. During a phase-in period for discharges in cost-reporting periods beginning in FY2016 and FY2017, LTCHs received a blended payment amount based on 50% of what the LTCH would have been reimbursed under the LTCH PPS rate and 50% of the site neutral payment rate. For cost-reporting periods beginning in FY2018 and subsequent years, the LTCH was to receive the site neutral payment rate. BBA 2018, Section 51005 , extended the transition period to site neutral Medicare payments for LTCH patients who do not meet the patient criteria for an additional two years, to include discharges in cost-reporting periods beginning during FY2018 and FY2019. During this period, LTCHs continue to receive the 50/50 blended payment for discharges that do not meet certain LTCH PPS criteria. <4.2.3.3. Current Status> The extended transition period to site neutral payments during which LTCHs receive a blended payment for discharges that do not meet the patient criteria expired for discharges occurring in cost-reporting periods beginning during FY2020 and subsequent years. <4.2.4. Temporary Exception for Certain Spinal Cord Conditions from Application of the Medicare LTCH Site Neutral Payment for Certain LTCHs (SSA 1886(m)(6)(F); 42 U.S.C. 1395ww(m)(6)(F))> <4.2.4.1. Background> Medicare pays LTCHs for inpatient hospital care under the LTCH PPS, which is typically higher than payments for inpatient hospital care under the IPPS. Effective for cost-reporting periods beginning in FY2016, LTCHS are paid the LTCH PPS rate for patients that meet one of the following two criteria: (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. For LTCH discharges that did not qualify for the LTCH PPS based on these criteria, a site neutral payment rate is being phased-in for cost-reporting periods beginning FY2016 through FY2019. Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See section " Temporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA 1886(m)(6)(B)(i); 42 U.S.C. 1395ww(m)(6)(B)(i)) " for details related to site neutral payment. <4.2.4.2. Relevant Legislation> The 21 st Century Cures Act (Cures Act; P.L. 114-255 ), Division C, Section 15009 , established an additional temporary criterion for payment under the LTCH PPS related to certain spinal cord conditions for discharges occurring in cost-reporting periods FY2018 and FY2019. Specifically, the LTCH PPS rate would apply to an LTCH discharge if all of the following are met: (1) the LTCH was a not-for-profit on June 1, 2014; (2) at least 50% of the LTCH's CY2013 LTCH PPS-paid discharges were classified under LTCH diagnosis related groups (DRGs) associated with catastrophic spinal cord injuries, acquired brain injury, or other paralyzing neuromuscular conditions; and (3) the LTCH during FY2014 discharged patients (including Medicare beneficiaries and others) who had been admitted from at least 20 of the 50 states, as determined by the HHS Secretary based on a patient's state of residency. <4.2.4.3. Current Status> The authority for the temporary criterion related to certain spinal cord conditions to receive payment under the LTCH PPS expired for discharges occurring in cost reporting periods during FY2020 and for subsequent years. <4.2.5. Transitional Payment Rules for Certain Radiation Therapy Services (SSA 1848(b)(11); 42 U.S.C. 1395w-4(b)(11))> <4.2.5.1. Background> Currently, Medicare payments for services of physicians and certain non-physician practitioners, including radiation therapy services, are made on the basis of a fee schedule. To set payment rates under the MPFS, relative values units (RVUs) are assigned to each of more than 7,000 service codes that reflect physician work (i.e., the time, skill, and intensity it takes to provide the service), practice expenses, and malpractice costs. The relative value for a service compares the relative work and other inputs involved in performing one service with the inputs involved in providing other physicians' services. The relative values are adjusted for geographic variation in input costs. The adjusted relative values are then converted into a dollar payment amount by a conversion factor. CMS, which is responsible for maintaining and updating the fee schedule, continually modifies and refines the methodology for estimating RVUs. CMS is required to review the RVUs no less than every five years; the ACA added the requirement that the HHS Secretary periodically identify physician services as being potentially misvalued, and make appropriate adjustments to the relative values of such services under the Medicare physician fee schedule. In determining adjustments to RVUs used as the basis for calculating Medicare physician reimbursement under the fee schedule, the HHS Secretary has authority, under previously existing law and as augmented by the ACA, to adjust the number of RVUs for any service code to take into account changes in medical practice, coding changes, new data on relative value components, or the addition of new procedures. Under the potentially misvalued codes authority, certain radiation therapy codes were identified as being potentially misvalued in 2015. However, because of concerns that the existing code set did not accurately reflect the radiation therapy treatments identified, CMS created several new codes during the transition toward an episodic alternative payment model. <4.2.5.2. Relevant Legislation> Patient Access and Medicare Protection Act (PAMPA; P.L. 114-115 ), required CMS to apply the same code definitions, work RVUs, and direct inputs for the practice expense RVUs in CY2017 and CY2018 as applied in 2016 for these transition codes, effectively keeping the payments for these services unchanged, subject to the annual update factor. PAMPA exempted these radiation therapy and related imaging services from being considered as potentially misvalued services under CMS's misvalued codes initiative for CY2017 and CY2018. PAMPA also instructed the HHS Secretary to report to Congress on the development of an episodic alternative payment model under the Medicare program for radiation therapy services furnished in non-facility settings. BBA 2018 Section 51009, extended the restrictions through CY2019. <4.2.5.3. Current Status> The payment restrictions expired after December 31, 2019. Appendix A. Demonstration Projects and Pilot Programs This appendix lists selected health care-related demonstration projects and pilot programs that are scheduled to expire during the second session of the 116 th Congress (i.e., during calendar year [CY] 2020). The expiring demonstration projects and pilot programs listed below have portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring demonstration projects and pilot programs included here are those related to Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. This appendix also includes health care-related demonstration projects and pilot programs that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or extended in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ). No relevant demonstration projects and pilot programs within the same scope expired during the first session of the 116 th Congress (i.e., during CY2019). Although CRS has attempted to be comprehensive, it cannot guarantee that every relevant demonstration project and pilot program is included here. Table A-1 lists the relevant demonstration projects and pilot programs that are scheduled to expire in 2020. Appendix B. Provisions Included in the Previous CRS Health Care-Related Expiring Provisions Report This appendix provides information on the provisions that were included in the previous CRS report on health care-related expiring provisions (CRS Report R45781, Health Care-Related Expiring Provisions of the 116th Congress, First Session ) henceforth referred to as "R45781," but were not detailed in the body of this report. As does the current report, R45781 included expiring provisions (of the same two types discussed herein) related to Medicare, Medicaid, State Children's Health Insurance Program (CHIP), and private health insurance programs and activities as well as selected other health care-related provisions. R45781 included health care-related provisions that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or, at the time of publication, had been extended under the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). R45781 also described health care-related provisions that, at the time of publication, were set to expire during the first session of the 116 th Congress (i.e., during calendar year [CY] 2019) or had expired during the 115 th Congress (i.e., during CY2017 or CY2018). Some of the provisions detailed in R45781 fell within the scope of this report. Such provisions expired in CY2019 or were extended and are set to expire in CY2020. Table B-1 includes the provisions detailed in R45781 that remain expired or were extended to dates beyond the 116 th Congress (i.e., after CY2020). The third column in Table B-1 provides each provision's expiration date as it was in R45781. The fourth column reflects updated information, indicating whether the expiration date remains "unchanged" by law or providing the current expiration date for provisions extended pursuant to congressional modification. Two private health insurance provisions were included in R45781 that did not meet the report criteria but were set to expire in 2019. These provisions modified fees and taxes established by the ACA to help fund ACA activities, including those related to private health insurance. As reflected in Table B-1, those fee and tax provisions were permanently repealed in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). Unlike the other provisions that were included in R45781 and were extended past CY2020, the extension for the Patient-Centered Outcomes Research Trust Fund (PCORTF) was legislatively undertaken in a manner that resulted in significant revisions to the program and/or funding mechanisms detailed in R45781. Because of this, this appendix includes an updated provision summary below Table B-1. See, "Patient-Centered Outcomes Research Trust Fund (IRC 9511 and 4375-4377, SSA 1183; 26 U.S.C. 9511; 26 U.S.C. 4375-4377; 42 U.S.C. 1320e-2)." For more detailed background information on the other provisions included in Table B-1, see CRS Report R45781, Health Care-Related Expiring Provisions of the 116th Congress, First Session . Table B-1 does not include demonstration projects or pilot programs. The only project or program in Appendix A of R45781 that was not included in this report is the Demonstration Program to Increase Access to Dental Health Care Service. The demonstration program expired after March 23, 2017. Patient-Centered Outcomes Research Trust Fund (IRC 9511 and 4375-4377, SSA 1183; 26 U.S.C. 9511; 26 U.S.C. 4375-4377; 42 U.S.C. 1320e-2) Background SSA Section 1181 establishes the Patient-Centered Outcomes Research Institute (PCORI), which is responsible for coordinating and supporting comparative clinical effectiveness research. PCORI has entered into contracts with federal agencies, as well as with academic and private sector research entities for both the management of funding and conduct of research. PHSA Section 937 requires the Agency for Healthcare Research and Quality (AHRQ) to broadly disseminate research findings that are published by PCORI and other government-funded comparative effectiveness research entities. IRC Section 9511 establishes the Patient-Centered Outcomes Research Trust Fund to support the activities of PCORI and to fund activities under PHSA Section 937. It provides annual funding to the PCORTF over the period FY2010-FY2019 from the following three sources: (1) annual appropriations, (2) fees on health insurance policies and self-insured plans, and (3) transfers from the Medicare HI and SMI Trust Funds. SSA Section 1183 provides for the transfer of the required funds from the Medicare Trust Funds. Transfers to PCORTF from the Medicare HI and SMI Trust Funds are calculated based on the number of individuals entitled to benefits under Medicare Part A or enrolled in Medicare Part B. IRC Sections 4375-4377 impose the referenced fees on applicable health insurance policies and self-insured health plans and describe the method for their calculation. For each of FY2011 through FY2019, IRC Section 9511 requires 80% of the PCORTF funds to be made available to PCORI, and the remaining 20% of funds to be transferred to the HHS Secretary for carrying out PHSA Section 937. Of the total amount transferred to HHS, 80% is to be distributed to AHRQ, with the remainder going to the Office of the Secretary (OS)/HHS. Relevant Legislation ACA, Section 6301 , provided the following amounts to the PCORTF: (1) $10 million for FY2010, (2) $50 million for FY2011, and (3) $150 million for each of FY2012 through FY2019. In addition, for each of FY2013 through FY2019, the section provided an amount equivalent to the net revenues from a new fee that the law imposed on health insurance policies and self-insured plans. For policy/plan years ending during FY2013, the fee equals $1 multiplied by the average number of covered lives. For policy/plan years ending during each subsequent fiscal year through FY2019, the fee equals $2 multiplied by the average number of covered lives. Finally, the section (in addition to ACA Section 6301(d)) provided for transfers to PCORTF from the Medicare Part A and Part B trust funds; these are generally calculated by multiplying the average number of individuals entitled to benefits under Medicare Part A, or enrolled in Medicare Part B, by $1 (for FY2013) or by $2 (for each of FY2014 through FY2019). Under this provision, PCORTF was to terminate on September 30, 2019. Continu ing Appropriations Act, 2020, and Health Extenders Act of 2019 ( P.L. 116-59 ), Section 1403 , extended the termination date of PCORTF through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019 ( P.L. 116-69 ), Section 1403 , further extended the termination date of PCORTF through December 20, 2019. Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), Division N, Section 104 , extends funding for PCORTF through FY2029 by appropriating both the amount equivalent to the net revenues received from the fees on health insurance policies and self-insured plans and providing a direct appropriation in a specified amount (the "applicable amount") for each of fiscal years 2020 through 2029. The transfers from the Medicare HI and SMI Trust Funds were not extended. The section extends the termination date of PCTORF through FY2029; extends the termination dates of the fees on health insurance policies and self-insured plans through FY2029; and extends the requirement that 20% of PCORTF funds be transferred to the HHS Secretary for carrying out PHSA Section 937 for each fiscal year through FY2029. The section also makes modifications to the authorizing language for PCORI relating to the composition of its Board; appointments to its Methodology Committee; and the identification of research priorities, among others. Current Status Appropriated funds to PCORTF expire after September 30, 2029. Funds transferred to the HHS Secretary under IRC Section 9511 remain available until expended. No amounts shall be available for expenditure from the PCORTF after September 30, 2029, and any amounts in the Trust Fund after such date shall be transferred to the general fund of the Treasury. Appendix C. Laws That Created, Modified, or Extended Current Health Care-Related Expiring Provisions Appendix D. List of Abbreviations AAA: Area Agencies on Aging ACA: Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) ACL: Administration for Community Living ADRC: Aging and Disability Resource Center AHRQ: Agency for Healthcare Research and Quality APM: Alternative payment model ARRA: American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) ASC: Ambulatory Surgery Center ATRA: American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) BBA 97: Balanced Budget Act of 1997 ( P.L. 105-33 ) BBA 2018 : Bipartisan Budget Act of 2018 ( P.L. 115-123 ) BIPA 2000 : Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 ( P.L. 106-554 ) CARES Act: Coronavirus Aid, Relief, and Economic Security Act ( P.L. 116-136 ) CHCF: Community Health Center Fund CHIP: State Children's Health Insurance Program CMS: Centers for Medicare & Medicaid Services CRS: Congressional Research Service CY: Calendar year DRA: Deficit Reduction Act of 2005 ( P.L. 109-171 ) DRG: Diagnosis related group E-FMAP: Enhanced federal medical assistance percentage FFCRA: Families First Coronavirus Response Act ( P.L. 116-127 ) FMAP: Federal medical assistance percentage FPL: Federal poverty level FY: Fiscal year GME: Graduate medical education GPCI: Geographic Practice Cost Index HCBS: Home and community-based services HCTC: Health Coverage Tax Credit HH: Home health HHS: Department of Health and Human Services HI: Hospital Insurance IHE : Institution of higher education IHS: Indian Health Service IPPS: Medicare Inpatient Prospective Payment System IVIG: Intravenous immune globulin LTCH: Long-term care hospital LTCH PPS: Long-term care hospital prospective payment system LTSS: Long-term services and supports MA: Medicare Advantage MACRA: Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ) MAP: Measure Applications Partnership MCTRJCA: Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) MedPAC: Medicare Payment Advisory Commission MIPPA: Medicare Improvements for Patients and Providers Act of 2008 ( P.L. 110-275 ) MIPS: Merit-based incentive payment system MMA: Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( P.L. 108-173 ) MMEA: Medicare and Medicaid Extenders Act of 2010 ( P.L. 111-309 ) MMSEA: Medicare, Medicaid and SCHIP Extension Act of 2007 ( P.L. 110-173 ) MPFS: Medicare physician fee schedule MSP: Medicare Savings Program NHSC: National Health Service Corps NQF: National Quality Forum PAF: Pregnancy Assistance Fund PAMA: Protecting Access to Medicare Act of 2014 ( P.L. 113-93 ) PAMPA: Patient Access and Medicare Protection Act ( P.L. 114-115 ) PCORI: Patient-Centered Outcomes Research Institute PCORTF: Patient-Centered Outcomes Research Trust Fund PETI: Post-eligibility treatment of income PHSA: Public Health Service Act PPS: Prospective payment system PREIS: Personal Responsibility Education Program Innovative Strategies PREP: Personal Responsibility Education Program PRWORA: Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) PSRA: Pathway for SGR Reform Act of 2013 ( P.L. 113-67 , Division B) RVU: Relative value unit SHIP: State Health Insurance Assistance Program SMI: Supplementary Medical Insurance SNAP: Supplemental Nutrition Assistance Program SRAE: Sexual Risk Avoidance Education SSA: Social Security Act SSI: Supplemental Security Income TAA: Trade Adjustment Assistance TANF: State Temporary Assistance for Needy Families TPTCCA: Temporary Payroll Tax Cut Continuation Act of 2011( P.L. 112-78 ) TRHCA: Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) U.S.C.: U.S. Code WREA 2003: Welfare Reform Extension Act of 2003 ( P.L. 108-40 ) WREA 2004: Welfare Reform Extension Act of 2004 ( P.L. 108-210 ) WREA 2005: Welfare Reform Extension Act of 2005 ( P.L. 109-4 )

This report describes selected health care-related provisions that are scheduled to expire during the second session of the 116 th Congress (i.e., during calendar year [CY] 2020). For purposes of this report, expiring provisions are defined as portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring provisions included in this report are those related to Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. The report also includes health care-related provisions enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or extended under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ). In addition, this report describes health care-related provisions within the same scope that expired during the first session of the 116 th Congress (i.e., during CY2019). Although the Congressional Research Service (CRS) has attempted to be comprehensive, it cannot guarantee that every relevant provision is included here. This report focuses on two types of health care-related provisions within the scope discussed above. The first, and most common, type of provision provides or controls mandatory spending, meaning it provides temporary funding, temporary increases or decreases in funding (e.g., Medicare provider bonus payments), or temporary special protections that may result in changes in funding levels (e.g., Medicare funding provisions that establish a floor). The second type of provision defines the authority of government agencies or other entities to act, usually by authorizing a policy, project, or activity. Such provisions also may temporarily delay the implementation of a regulation, requirement, or deadline or establish a moratorium on a particular activity. Expiring health care provisions that are predominantly associated with discretionary spending activities—such as discretionary authorizations of appropriations and authorities for discretionary user fees—are excluded from this report. Certain types of provisions with expiration dates that otherwise would meet the criteria set forth above are excluded from this report. Some of these provisions are excluded because they are transitional or routine in nature or have been superseded by congressional action that otherwise modifies the intent of the expiring provision. For example, statutorily required Medicare payment rate reductions and payment rate re-basings that are implemented over a specified period are not considered to require legislative attention and are excluded. The report provides tables listing the relevant provisions that are scheduled to expire in 2020 and that expired in 2019. The report then describes each listed provision, including a legislative history. An appendix lists relevant demonstration projects and pilot programs that are scheduled to expire in 2020 or that expired in 2019.

crs_98-696

crs_98-696_0

<1. Introduction> The process of resolving the legislative differences that arise between the House of Representatives and the Senate is one of the most critical stages of the legislative process. It is also potentially one of the most complicated. Each chamber continues to be governed by its own rules, precedents, and practices, but at this stage, each house also must take into account the preferences and, to some extent, the procedures of the other. This report summarizes the procedures the two houses of Congress use most frequently to resolve their legislative differences. It is based upon an interpretation of the rules and published precedents of the House and Senate and an analysis of the application of these rules and precedents in recent practice. It bears emphasizing that this report is not exhaustive, nor is it in any way an official statement of House or Senate procedures. It may serve as a useful introduction or general guide, but it should not be considered an adequate substitute for a study of House and Senate rules and precedents themselves or for consultations with the parliamentarians of the House and Senate on the meaning and possible application of the rules and precedents. Readers may wish to study the provisions of the rules especially House Rule XXII and examine the applicable precedents as explained in House Practice: A Guide to the Rules, Precedents, and Procedures of the House , especially pages 339-374 (on "Conferences Between the Houses") and pages 857-883 (on "Senate Bills; Amendments Between the Houses"), and in Riddick's Senate Procedure (Senate Document No. 101-28), especially pages 126-143 (on "Amendments Between Houses") and pages 449-493 (on "Conferences and Conference Reports"). <2. The Need for Resolution> Before Congress can submit a bill or joint resolution to the President for his approval or disapproval, the Senate and the House of Representatives must agree on each and every provision of that measure. It is not enough for both houses to pass versions of the same measure that are comparable in purpose but that differ in certain technical or even minor details; the House and Senate must agree on identical legislative language. Nor is it enough for the two chambers to approve separate bills with exactly the same text; the House and Senate both must pass the same bill. In sum, both chambers of Congress must pass precisely the same measure in precisely the same form before it can become law. Each of these requirements agreement on the identity of the measure (e.g., H.R. 1 or S. 1) and agreement on the text of that measure is considered in turn in the following sections of this report. <3. Selection of the Measure> Because both chambers must pass the same measure before it can become law, at some point during the legislative process the House must act on a Senate bill or the Senate must act on a House bill. Congress usually meets this requirement without difficulty or controversy. In some cases, however, selecting the measure may require some parliamentary ingenuity and can have policy and political consequences. After either house debates and passes a measure, it sends (or "messages") that bill to the other chamber. If the second house passes the first house's bill without any amendments, the legislative process is completed: Both houses have passed the same measure in the same form. If the second house passes the bill with one or more amendments, both chambers have acted on the same measure; now they must resolve the differences between their respective versions of the text if the measure is to become law. In most cases, either the House or the Senate can be the first chamber to act. However, the Constitution requires that all revenue measures originate in the House, and the House traditionally has insisted that this prerogative extends to appropriations as well as tax measures. Thus, the House normally acts first on such a measure, and, consequently, it is a House-numbered bill or joint resolution that Congress ultimately presents to the President for enacting appropriations or tax laws. In some cases, the proponents of a measure may decide that one house or the other should act first. For example, a bill's supporters may first press for floor action in the chamber where they think the measure enjoys greater support. They may hope that success in one house may generate political momentum that will help the measure overcome the greater opposition they expect in the second chamber. Alternatively, one house may defer floor action on a bill unless and until it is passed by the other, where the measure is expected to encounter stiff opposition. The House leadership, for example, may decide that it is pointless for the House to invest considerable time, and for Representatives to cast possibly unnecessary and politically difficult votes, on a controversial bill until after an expected Senate filibuster on a comparable Senate bill has been avoided or overcome. As these considerations imply, major legislative proposals frequently are introduced in both houses either identical companion bills or bills that address the same subject in rather different ways. If so, the appropriate subcommittees and committees of the House and Senate may consider and report their own measures on the same subject at roughly the same time. Thus, when one house passes and sends a bill to the other, the second chamber may have its own bill on the same subject that has been (or is soon to be) reported from committee and available for floor consideration. In such cases, the second chamber might act initially on its own bill, rather than the bill received from the other house. This is particularly likely to happen when the committee of the second house reports a bill that differs significantly in approach from the measure passed by the first chamber. The text selected for floor consideration generally sets the frame of reference within which debate occurs and amendments are proposed. In most cases, the House or Senate modifies, but does not wholly replace, the legislative approach embodied in the bill it considers. It is usually advantageous, therefore, for a committee to press for floor consideration of its approach, rather than the approach proposed by the other house. In large part for this reason, the House (or the Senate) sometimes acts on its own bill even though it has already received the other chamber's bill on the same subject. Under these circumstances, however, it would not be constructive for the House to pass its bill and then send it to the Senate. If the House were to do so, then each chamber would have in its possession a bill passed by the other, but both chambers would not yet have acted on the same measure. To avoid this potential problem, the second house often acts initially on its own bill, and then it also acts on the other chamber's bill on the same subject. In these situations, the House customarily debates, amends, and passes the House bill and, immediately thereafter, takes up the counterpart Senate bill. The floor manager then moves to "strike out all after the enacting clause" of the Senate bill (the opening lines of every bill "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled") and replace the stricken text with the full text of the House bill as just passed. The House often agrees by unanimous consent to consider the Senate bill and approves the House substitute routinely. The Senate bill, as amended, is then passed by voice vote or without objection. In some cases, a special rule includes provisions for such action on a companion Senate bill. For instance, a special rule may state The House hereby takes from the Speaker's table the bill S. l and adopts an amendment to strike out all after the enacting clause of the said Senate bill and insert in lieu thereof the provisions contained in H.R. 1 as passed by the House. In this way, the House actually passes two bills on the same subject and with identical provisions, but it is the Senate bill (which both chambers now have passed) that is the subject of further action. The Senate acts in a comparable fashion. The Senate might debate and amend its bill and, after passage, take up the House bill by unanimous consent, strike out all after the enacting clause, insert the amended text of the Senate bill, and pass the House bill, as it has been amended by the Senate's amendment in the nature of a substitute. To occur swiftly, these procedures require unanimous consent. Sometimes the Senate begins consideration of a House-numbered bill to avoid the need for unanimous consent at the end of the process, particularly when the measure is a revenue or appropriations measure. If the first house's bill has been referred to committee in the second chamber and is still there, it is first necessary to discharge the committee from further consideration of the bill. This also is normally accomplished routinely, either by unanimous consent or, in the House, pursuant to the provisions of a special rule. To avoid the need for this action, the Speaker often leaves a Senate bill on "the Speaker's table," instead of referring it to the appropriate House committee, if there is reason to expect that the House will soon act on a companion House bill. Similarly, a House bill may be taken up on the Senate floor without first being referred to committee when a companion Senate bill has been reported from committee and is on the Senate's legislative calendar. By these devices, the House and Senate arrange to act on the same bill, even if they have passed that measure with fundamentally different texts. In most cases, these arrangements are noncontroversial and routine. Under some circumstances, however, complications and difficulties can arise. The House operates under a rule that requires that all amendments must be germane to the measure being considered; the Senate does not. Unless the Senate imposes a germaneness requirement on itself by unanimous consent or by invoking cloture, most measures are subject to whatever nongermane floor amendments Senators wish to offer. Consequently, the Senate may select a House bill on one subject as a convenient "vehicle" and amend it to include provisions on other, unrelated subjects. Sometimes the use of unrelated legislative vehicles is accepted by both the House and the Senate as a useful, or even necessary, device to cope with different political and parliamentary conditions prevailing in the two chambers. <4. Two Methods of Resolution> Once the House and Senate have passed different versions of the same measure, there are basically two methods they can use to resolve the differences between their versions. One method involves a conference committee a panel of Members representing each house that attempts to negotiate a version acceptable to both chambers. Historically, Congress has sent most major bills to conference committees. The other method makes a conference committee unnecessary by relying instead on amendments between the houses Senate amendments to the House position, House amendments to the Senate position, or both. The two houses shuttle the measure back and forth between them, each chamber proposing an alternative to the position of the other or insisting on its own position, in the hope that both houses eventually will agree on the same position. The essential nature of each method can be described relatively simply. However, potential variations abound. Occasionally, some combination of the two methods may be used. For example, the House and Senate may begin the process of resolving their differences by amending each other's amendments. Then they may decide to go to conference if the first method is not totally, or even partially, successful. Alternatively, the two houses may decide immediately to create a conference committee, but that conference committee might resolve only some of the differences between their two versions. If so, the two chambers may accept whatever agreements the conferees have reached and then attempt to deal with the remaining disagreements through an exchange of amendments between the houses. Under some circumstances, the process can become even more complicated. Certain patterns of action are most common, but the possible variations make the procedures at this stage of the legislative process the most difficult to predict with any assurance. Moreover, either house may refuse to act at any time and at any stage of this process, and if that chamber remains adamant in its refusal to act, the measure dies. In general, the House or Senate cannot take any action by either method unless it is in formal possession of the "papers" the official copies of the measure and whatever amendments, motions, and accompanying messages have been approved by the House and Senate. In attempting to resolve their differences, the two chambers act sequentially, not simultaneously. <5. Amendments Between the Houses> The need to resolve differences arises when one house passes a measure that the second chamber subsequently passes with one or more amendments. It is these amendments that create the differences between the two houses. The differences may be resolved by one chamber accepting the amendments of the other or by proposing new amendments that the other house agrees to accept. Within limits to be discussed, the measure may be sent back and forth between the House and Senate, each house amending the amendments of the other, in the hope that one chamber will agree to the proposals from the other. When the amending opportunities are exhausted, one house must accept the position of the other or the bill can die for lack of agreement. Alternatively, at any stage during this process, either house can request a conference, thereby proposing to use the other method for resolving their differences. (Then, if the conference is not totally successful, it may be necessary to return once again to amendments between the houses.) The second chamber's amendments to the bill are the text that is subject to amendments between the houses, and that text may be amended in two degrees. Assume that the House has passed H.R. 1 and the Senate has passed the same bill with an amendment. When the Senate sends the bill back to the House, the House may amend the Senate amendment. (Technically, the House concurs in the Senate amendment with a House amendment.) This House amendment to the Senate amendment is a first-degree amendment. When the Senate receives from the House the bill with the House amendment to the Senate amendment, the Senate may concur in the House amendment to the Senate amendment. If the Senate does so, the differences between the chambers have been resolved. Alternatively, the Senate may amend the House amendment. (Technically, the Senate concurs in the House amendment to the Senate amendment with a further Senate amendment.) This further Senate amendment is a second-degree amendment. When the bill and the accompanying papers (that is, the various House and Senate amendments and messages) are now returned to the House, that chamber may not propose a further amendment. That would be a prohibited amendment in the third degree. The House may concur in the final Senate amendment, in which case the differences are resolved, or it may disagree to the Senate amendment. (Note that this is the first point at which disagreement has been expressed; a later section of this report discusses the importance of reaching the stage of disagreement.) If the House disagrees to the final Senate amendment (or to any Senate amendment at some earlier stage), the Senate may recede from its amendment and concur in the last position offered by the House (thereby achieving agreement), or the Senate may insist on its amendment. In turn, if both chambers are adamant, the House may insist on its disagreement, the Senate may adhere to its amendment, and the House finally may adhere to its disagreement. If this stage is reached, the bill is almost certain to die unless one house or the other recedes from its last position. (This same sequence of events can begin in the Senate, with the subsequent actions of the chambers reversed.) The two houses may reach agreement at any stage of this process if one chamber concurs in the amendment of the other or recedes from its own amendment. Alternatively, stalemate could be reached more quickly for instance, if the chambers refuse to alter their original positions and proceed directly through the stages of disagreement, insistence, and adherence, bypassing the intermediate stages at which they could offer new proposals in the form of first- and second-degree amendments between the houses. Fortunately, the House and Senate rarely reach the point of insistence and then adherence. <6. Consideration of Senate Amendments by the House> The House may consider on the floor a House-passed measure with Senate amendments under several circumstances: (1) instead of sending the bill to a conference committee, (2) in the process of sending it to conference, or (3) after the measure has been considered by a conference. This section discusses House action on Senate amendments either instead of or before consideration in conference. House actions on Senate amendments after conference are discussed in later sections of this report on amendments in true and technical disagreement. A bill that the House has passed and that the Senate has amended and returned to the House usually remains at "the Speaker's table" until it is taken up again on the House floor. It may be referred to a House committee at the discretion of the Speaker, but referral to committee is not mandatory and rarely occurs. The Speaker is most likely to refer the bill to committee if the Senate amendments are major in scope and nongermane in character, and especially if the Senate amendments would fall within the jurisdiction of a House committee that had not considered the bill originally. At this stage of the legislative process, the bill and the Senate amendments to it are not privileged for floor consideration by the House in other words, it is not in order for the House to consider the Senate amendments to the bill unless the Senate amendments do not include any authorization, appropriation, or revenue provisions that House rules require to be considered in Committee of the Whole. The bill and Senate amendments become privileged for House floor consideration only after the House has reached the stage of disagreement. The only motion that can be made on the House floor at this stage is a motion to go to conference with the Senate. This motion can take two forms. If the Senate has passed a House bill with Senate amendments, the motion proposes that the House disagree to the Senate amendments and request or agree to a conference with the Senate. If the Senate has disagreed to House amendments to a Senate bill and returned the bill to the House, the motion proposes instead that the House insist on its amendments and request or agree to a conference. In either case, the motion is entertained at the Speaker's discretion and may be made only if authorized by the committee (or committees) with jurisdiction over the subject of the measure. The same result is achieved far more often by unanimous consent. If the Senate amendments require consideration in Committee of the Whole, it is not in order to move to concur in the Senate amendments (thereby reaching agreement), or to move to concur in the Senate amendments with House amendments (thereby proposing a new House position to the Senate). However, such actions sometimes are taken by unanimous consent. The House floor manager may ask unanimous consent, for instance, to take the bill, H.R. 1, with Senate amendments thereto from the Speaker's table and concur in the Senate amendments. Another Member, generally a minority-party member of the committee of jurisdiction, often reserves the right to object, usually only for the purpose of asking the floor manager to explain the purpose of the request and the content of the Senate amendments. Their discussion usually establishes that the Senate amendments are either desirable or minor and, in any case, are acceptable to the Representatives who know and care the most about the measure. The reservation of objection then is withdrawn; the unanimous consent request is accepted, and the differences between the House and Senate are thereby resolved. In similar fashion, the House may again, by unanimous consent concur in some or all of the Senate amendments with House amendments. It bears repeating that, if there is objection to a unanimous consent request to concur in Senate amendments (with or without House amendments), no motion to that effect can be made if the amendments require consideration in Committee of the Whole. However, at least two alternatives are available. First, the Speaker may recognize the floor manager to move to suspend the rules and concur in the Senate amendments (again, with or without House amendments). Motions to suspend the rules may be considered, at the discretion of the Speaker, on a Monday, Tuesday, or Wednesday. The Speaker also may entertain motions to suspend the rules on other days by unanimous consent or pursuant to a special rule. Such a motion is debatable for 40 minutes, is not amendable, and requires support from two-thirds of the Members present and voting. Second, the Rules Committee may report, and the House may agree to, a special rulemaking in order a motion to concur (with or without amendments). In fact, the special rule may even be drafted in such a way that the vote to agree to the rule is also the vote to concur in the Senate amendments. Such a resolution is known as a self-executing rule and may take the following form: Resolved , That immediately upon the adoption of this resolution the bill ( H.R. 1 ), together with the Senate amendments thereto, is taken from the Speaker's table to the end that the Senate amendments be, and the same are hereby, agreed to. There are additional rules and precedents concerning the consideration of certain Senate amendments in Committee of the Whole, the germaneness of House amendments to Senate amendments, and the relative precedence of the motion to concur and the motion to concur with amendments. However, these rules and precedents are not often invoked at this stage of House proceedings because the measure and the Senate amendments are either sent directly to conference or they are disposed of by a means that waives these rules and precedents: unanimous consent, suspension of the rules, or special rules. Some of these possibilities are far more likely to arise during House floor action on Senate amendments in true or technical disagreement, and they are discussed in later sections on those subjects. <7. Consideration of House Amendments by the Senate> When the Senate receives a bill with House amendments, it normally is held at the desk. House amendments are privileged and, therefore, can be laid before the Senate without debate. Moreover, the consideration of these amendments suspends, but does not displace, the pending or unfinished business. Paragraph 3 of Rule VII provides: The Presiding Officer may at any time lay, and it shall be in order for a Senator to move to lay, before the Senate, any bill or other matter sent to the Senate by the President or the House of Representatives for appropriate action allowed under the rules and any question pending at that time shall be suspended for this purpose. Any motion so made shall be determined without debate. Normally, the majority leader asks the presiding officer to lay before the Senate the House message on a bill; such a message may state that the House has passed a certain Senate bill with amendments that are stated in the message. The message also may inform the Senate that the House has requested a conference. In many situations, House amendments are not called up on the Senate floor until after a process of consultations and negotiations as is characteristic of the Senate. The majority and minority floor managers can be expected to consult with each other and to decide if the House amendments are acceptable or if the two Senators can agree on amendments to those House amendments. Whatever agreement the floor managers reach also is discussed with other interested Senators in the hope of achieving general concurrence. If such concurrence is reached, it is reflected in an expeditious floor decision to agree to the House amendments, with or without further Senate amendments. If such an agreement is not reached, then a variety of parliamentary options are available for acting on House amendments. If the goal is to arrange for a conference committee with the House, a motion could be made that can take two forms: 1. If the House has passed a Senate bill with House amendments, the motion proposes that the Senate disagree to the House amendments, request or agree to a conference with the Senate, and authorize the presiding officer to appoint conferees. 2. If the House has disagreed to Senate amendments to a House bill and returned the bill to the Senate, the motion proposes instead that the Senate insist on its amendments, request or agree to a conference, and authorize the presiding officer to appoint conferees. In either case, the motion is subject to debate under the regular rules of the Senate, but as discussed in the section on arranging for a conference, a new rule approved in the 113 th Congress provides for an expedited cloture process on the motion. If the goal is to return the amendment(s) to the House to further the legislative process, then the basic choices before the Senate are to propose a change to the House amendment(s), agree to the House amendment(s), or to disagree to the House amendment(s). More formally, the three central motions to dispose of House amendments prior to the stage of disagreement are (1) that the Senate concur in the House amendment(s) with Senate amendment(s), (2) that the Senate concur in the House amendment(s), or (3) that the Senate disagree to the House amendment(s). Any of these motions are debatable and, therefore, subject to being filibustered. However, a fourth motion to table the House amendments is not debatable and, if agreed to by the Senate, returns the House amendment with a message that the Senate has disagreed to the House amendment. It is possible for multiple motions to dispose of a House amendment to be pending at the same time. The motions to concur, concur with an amendment, and to disagree are listed above in their order of precedence; a motion can be understood to have precedence over another if it may be offered while the other is pending and it is disposed of first. Thus, with a motion to disagree pending, a motion to concur and a motion to concur with an amendment could be offered and would be voted on first. If a motion to concur with an amendment were pending, however, neither a motion to concur nor a motion to disagree could be offered until the Senate disposed of the motion to concur with an amendment. A motion to table is of the highest precedence. Furthermore, if the House has proposed several amendments to the Senate bill (or Senate amendment), then the Senate could take different actions on each of the House amendments. When the Senate receives multiple amendments from the House, it considers them in the order that they affect the Senate text. A single motion can be made to dispose of several amendments, so long as it is the same form of disposition (for example, to concur), but such a motion would be subject to division. At least in part due to the potential for procedural complexity in relation to consideration of House amendments, in recent Congresses the majority leader has used his right of preferential recognition to offer a motion to concur in House amendments, as well as all the other available amendatory motions related to it. This process has been referred to as "filling the tree." The procedural effect of filling the tree or offering all of the amendatory motions available in a particular parliamentary situation is that no Senator can propose an alternative method of acting on the House amendments until the Senate disposes of (or lays aside by unanimous consent) one of the pending motions. Filling the tree does not affect the right of Senators to debate the motions regarding House amendments at length. It does not, therefore, bring the Senate any closer to final disposition of the House amendments. If, however, the majority leader can build a coalition of at least 60 Senators (assuming no vacancies in the Senate) in order to invoke cloture, then he can fill the tree to block other Senators from proposing other ways of disposing of House amendments, including perhaps proposing Senate amendments to the House amendments prior to Senate disposition of the House amendments. In recent Congresses, the majority leader has "filled the tree" and then filed a cloture motion in order to end consideration of an underlying question. If the Senate agrees to invoke cloture on a motion to dispose of the House amendments, such as a motion to concur, then all other pending motions of a higher precedence fall. The motion on which cloture was invoked can then be considered for a maximum of 30 additional hours. <8. The Informal Alternative to Conference> If the House and Senate versions of a measure are submitted to conference, the conference committee must meet formally and, if it resolves some or all of the differences between the houses, prepare both a conference report and a joint explanatory statement. To avoid these and other requirements, the two chambers may use the process of sending amendments between the houses as an informal alternative that achieves much the same purpose and result as would a conference committee. The purpose of a conference committee is to negotiate a settlement of the legislative differences between the two chambers. But these negotiations do not have to take place in the official setting of a conference committee meeting. They also can occur through informal discussions among the most interested Representatives and Senators and their staffs. If such informal discussions are successful, their results can be embodied in an amendment between the houses. As the second house nears or reaches completion of floor action on a measure, the staffs of the respective House and Senate committees are likely to be comparing the two versions of the bill and seeking grounds for settling whatever differences exist. After initial staff discussions, the House and Senate committee leaders themselves may become involved. If these informal and unofficial conversations appear productive, they may continue until a tentative agreement is reached, even though no conference committee has yet been created. If the tentative agreement proves acceptable to other interested Representatives and Senators, a conference committee may be unnecessary. Instead, when the bill with the second house's amendments has been returned to the first chamber, the majority floor manager may, under the appropriate rules or practices of that house, call up the bill and propose that the House or Senate (as the case may be) concur in the second chamber's amendments with some amendments. He or she then describes the differences between the House and Senate versions of the measure and explains that the proposed amendments represent a compromise that is agreeable to the interested Members of both houses. The floor managers may express their confidence that, if the first house accepts the amendments, the other chamber also will accept them. If the first house does agree to the amendments, the second chamber then considers and agrees to them as well, under its procedures for considering amendments of the "other body." In this way, the differences between the House and Senate are resolved through the kind of negotiations for which conference committees are created, but without resort to a formal conference committee. <9. The Stage of Disagreement> Since the purpose of conference committees is to resolve legislative disagreements between the House and Senate, it follows that there can be no conference committee until there is disagreement until the House and Senate formally state their disagreement to each other's positions. A chamber reaches this stage either by formally insisting on its own position or by disagreeing to the position of the other house, and so informing the other house. Once the House or Senate reaches the stage of disagreement, it cannot then agree to (concur in) a position of the other chamber, or agree with an amendment, without first receding from its disagreement. The stage of disagreement is an important threshold. Before this threshold is reached, the two chambers presumably are still in the process of reaching agreement. Thus, amendments between the houses, as an alternative to conference, are couched in terms of one chamber concurring in the other's amendments, or concurring in the other's amendments with amendments. For example, when the House concurs in Senate amendments with House amendments, the House does so because it does not accept the Senate amendments in fact, it disagrees with them. But the House does not state its disagreement explicitly and formally at this stage because crossing the threshold of disagreement has significant procedural consequences, especially in the House. Whereas House amendments are always privileged in the Senate, most Senate amendments are not privileged in the House before the House has reached the stage of disagreement. Moreover, the order of precedence among certain motions is reversed in the House (but not in the Senate) after the stage of disagreement has been reached. Before the stage of disagreement, the order of precedence among motions in both chambers favors motions that tend to perfect the measure further; after the stage of disagreement in the House, the order of precedence is reversed, with precedence being given to motions that tend to promote agreement between the chambers. Before the stage of disagreement, for example, a motion to concur with an amendment has precedence over a motion to concur; after the stage of disagreement in the House, a motion to recede and concur has precedence over a motion to recede and concur with an amendment. The precedence among motions before and after the stage of disagreement can become important during the process of exchanging amendments between the houses. It is most likely to matter after a conference committee has reported and the House and Senate are considering amendments in true or technical disagreement. For this reason, a more detailed discussion of the subject is reserved to the sections on such amendments. <10. Arranging for a Conference> If the differences between the House and the Senate cannot be resolved through the exchange of amendments between the houses, two possibilities remain. First, stalemate can lead to the death of the legislation if both chambers remain adamant. Second, the two houses can agree to create a conference committee to discuss their differences and seek a mutually satisfactory resolution. Historically, major bills have been sent to conference, either after an unsuccessful attempt to resolve the differences through amendments between the houses or, more often, without such an attempt having even been made. The process of arranging for a conference can begin as soon as the second house passes the bill at issue, either with one or more amendments to parts of the measure or with a single amendment in the nature of a substitute that replaces the entire text approved by the first chamber. The second house then may simply return the bill, with its amendments, to the first chamber if there is reason to believe that the first house might accept the amendments, or that amendments between the houses can be used successfully as an informal alternative to conference. It also may do so if the second house wishes to act first on an eventual conference report, because the chamber that asks for a conference normally acts last on the conference report. Alternatively, the second house may pass the bill and immediately insist on its amendments and also request a conference with the first chamber. By insisting on its amendments, the second chamber reaches the stage of disagreement. The bill, the second house's amendments, and the message requesting a conference then are returned to the first house. The first house is not obliged to disagree to the second chamber's amendments and agree to the requested conference. The first house also has the options, for example, of refusing to act at all or concurring in the second chamber amendments, with or without amendments. When one chamber requests a conference, however, the other house normally agrees to the request. If the second chamber just returns the bill and its amendments to the first house without insisting on its amendments, the first house may disagree to the amendments and request a conference. The bill, the amendments, and the message requesting the conference then are returned to the second chamber, which usually insists on its amendments (thereby reaching the stage of disagreement) and agrees to the conference. Thus, there are essentially two direct routes to conference. (There are more indirect routes, of course, if an attempt is first made to resolve the differences through an exchange of amendments.) The second house may begin the process by insisting on its amendments and requesting the conference. If this does not occur, the first house then may begin the process by disagreeing to the second chamber's amendments and requesting the conference itself. The first route is likely to be followed when the need for a conference is a foregone conclusion. However, strategic considerations also may influence how the Senate and House agree to go to conference, especially in view of the convention that the chamber that asks for the conference normally acts last on the conference report. With this in mind, proponents of the legislation may prefer one route to the other. For example, House or Senate conferees can avoid the possibility of facing a motion in one house to recommit the conference report (with or without instructions) if they have arranged for the other house to act first on the report. By the same token, if Senate opponents are expected to filibuster the conference report, proponents may prefer for the Senate to agree to a House request for a conference, so that the Senate will act first on the report. This arrangement avoids compelling Representatives to cast difficult votes for or against a conference report that may not reach a vote in the Senate. On the other hand, a bill's supporters could prefer that the House agree to the conference and then vote first on the report, with the hope that a successful House vote might improve the prospects for later success on the Senate floor. In addition, under a provision of Senate Rules added in 2013, it might be easier to arrange for conference (1) after the House has disagreed to a Senate amendment, or (2) after the House has amended a Senate bill (or amendment). At the start of the 113 th Congress, the Senate agreed to a rules change creating a new motion to take the steps necessary to arrange for a conference committee with the House and expediting the cloture process on that motion. Under this rule, if cloture is filed on the new motion to authorize a conference committee, the consolidated motion would be subject to two hours of debate, after which the Senate would vote on cloture. If cloture were invoked by three-fifths of the Senate, a simple majority could approve the motion to authorize a conference, and no further debate of the motion would be in order. The new motion, however, is only in order when a House message has been laid before the Senate. It would not be in order immediately after the Senate has passed a House bill with amendment(s). To arrange for a conference at that stage would require unanimous consent, just as it did prior to the rules change. <11. Selection of Conferees> After either house requests or agrees to a conference, it usually proceeds immediately to select conferees (or managers, as they may also be called). The selection of conferees can be critically important, because it is this group sometimes a small group of Representatives and Senators who usually determine the final form and content of major legislation. In the House, clause 11 of Rule I authorizes the Speaker to appoint all members of conference committees and gives him certain guidelines to follow: The Speaker shall appoint all select, joint, and conference committees ordered by the House. At any time after an original appointment, the Speaker may remove Members, Delegates, or the Resident Commissioner from, or appoint additional Members, Delegates, or the Resident Commissioner to, a select or conference committee. In appointing Members, Delegates, or the Resident Commissioner to conference committees, the Speaker shall appoint no less than a majority who generally supported the House position as determined by the Speaker, shall name Members who are primarily responsible for the legislation, and shall, to the fullest extent feasible, include the principal proponents of the major provisions of the bill or resolution passed or adopted by the House. These guidelines carry weight as admonitions but they necessarily give the Speaker considerable discretion, and his or her exercise of this discretion cannot be challenged on the floor through a point of order. In the Senate, the presiding officer is almost always authorized by unanimous consent to appoint "the managers on the part of the Senate." The Senate could also grant this authority to the presiding officer by agreeing to a motion arranging for a conference (Rule XXVIII, paragraph 2). Before the formal announcement of conferees in each chamber, a process of consultation takes place that vests great influence with the chairman and the ranking minority member of the committee (and sometimes the subcommittee) that had considered the bill originally. These Representatives and Senators almost always serve as conferees. Furthermore, they usually play an influential, and often a controlling, role in deciding the number of conferees from their respective chambers, the party ratio among these conferees, and which of their committee colleagues shall be appointed to the conference committee. In the House, the Speaker often accepts without change the list developed by the House committee leaders; the presiding officer in the Senate always does so. If the bill at issue had been considered by more than one committee in either house, all the involved chairmen and ranking minority members from that chamber normally participate in determining its roster of conferees, and the conferees usually are drawn from both or all of those committees. In such cases, the party leaders in each house are more likely to become involved in the selection process in determining the total number of House or Senate conferees and the division of conferees between or among the committees of jurisdiction, as well as in choosing individual Members to serve. From time to time, the Speaker also exercises the authority granted in the rule to appoint a Representative who offered a key successful floor amendment, even if he or she is not on the committee(s) that reported the legislation. In some cases and especially in cases of multiple committee jurisdiction House or Senate conferees may be appointed for limited purposes: for example, only for the consideration of Title I of the House version, or only for the consideration of a particular (and possibly nongermane) Senate amendment. Such conferees are expected to limit their participation in the conference to consideration of the matters for which they are appointed. This practice protects the influence in conference of the appropriate House and Senate standing committees. Each house determines for itself the size of its delegation to the conference committee. The House and Senate need not select equal numbers of conferees, and they frequently do not. However, unequal numbers of House and Senate managers do not affect the formal power of either house in conference decisions. The conference report requires approval by a majority of the House conferees and a majority of the Senate conferees, rather than a majority of all conferees. Each house usually appoints an odd number of conferees to avoid tie votes. <12. Instructing Conferees> After the House or Senate decides to go to conference (either by requesting the conference or agreeing to a request from the other house), its conferees usually are appointed immediately. Between these two steps, however, both houses have an opportunity (although usually only a momentary opportunity) to move to instruct the conferees. For example, the managers may be instructed to insist on the position of their house on a certain matter, or even to recede to the position of the other house. Instructions are not binding in either house. They are only admonitions, or advisory expressions of position or preference. No point of order lies in either the House or the Senate against a conference report on the ground that conferees did not adhere to the instructions they received. In the Senate, a motion to instruct is debatable and amendable. In the House, such a motion is debated under the one-hour rule, and a germane amendment to the instructions is in order only if the House does not order the previous question during or at the end of the first hour of debate. In neither house can conferees be instructed to take some action that exceeds their authority. In the House, clause 7 of Rule XXII also bars instructions that "include argument." Only one valid motion to instruct is in order in the House before its conferees are named, whether or not the motion is agreed to; but if a motion to instruct is ruled out of order, another motion to instruct may be made. Under the precedents of the House, a Member of the minority party is entitled to recognition to move to instruct. The Speaker normally looks first to senior minority-party members of the committee that reported the measure at issue. This recognition practice can be used to try to control the instructions that are proposed; for example, instructions on one subject may be precluded if the ranking minority member seeks recognition to offer a motion to instruct on another subject. In the House, but not in the Senate, motions to instruct also are in order after House conferees have been appointed but have failed to report an agreement. Clause 7(c)(1) of House Rule XXII provides in part: A motion to instruct managers on the part of the House, or a motion to discharge all managers on the part of the House and to appoint new conferees, shall be privileged (A) after a conference committee has been appointed for 45 calendar days and 25 legislative days without making a report.... By precedent, more than one proper motion to instruct is in order when made pursuant to this clause, and the minority party does not enjoy preferential recognition in offering such motions. According to clause 7(c)(2), the Speaker "may designate a time in the legislative schedule on that legislative day for consideration" of the motion to instruct. <13. Restrictions on the Authority of Conferees> In principle, there are significant restrictions on the kinds of policy agreements that House conferees can accept. In practice, however, these restrictions are not as stringent as they might seem at first. Because conference committees are created to resolve disagreements between the House and Senate, the authority of House conferees is limited to the matters in disagreement between the two houses. House conferees have no authority to change matters that are not in disagreement that is, either matters that appear in the House and Senate versions of the measure in identical form, or matters that were not submitted to the conference in either the House or the Senate version. Furthermore, as House conferees consider each matter in disagreement, their authority is limited by the scope of the differences between the House and Senate positions on that matter. The House's managers may agree on the House position, the Senate position, or some middle ground. But they may not include a provision in a conference report that does not fall within the range of options defined by the House position at one extreme and the Senate position at the other. If, for example, the House proposes to appropriate $1 billion for a certain purpose and the Senate proposes $2 billion instead, the House conferees may agree on $1 billion or $2 billion or any intermediate figure. But they may not agree on a figure that is less than $1 billion or more than $2 billion. To do so would exceed the scope of the differences between the House and Senate positions on that matter in disagreement. The concept of "scope" relates to specific differences between the House and Senate versions of the same measure, not to the implications or consequences of these differences. Thus, House conferees on a general appropriations bill may agree on the higher (or lower) of the House and Senate positions on each appropriation item, even though the sum of their agreements is higher (or lower) than the total sum proposed in either the House or the Senate version of the bill (unless the two versions explicitly state such a total). Also, if one house proposes to amend some existing law and the other chamber does not, the scope of the differences over this matter generally is bounded by the proposed amendments, on the one hand, and the pertinent provisions of existing law, on the other. Thus, the House conferees may agree on the proposed amendments or on alternatives that are closer to existing law. Thus, there are significant restrictions on the authority of House conferees: Their authority is restricted by the scope of the differences between the House and Senate over the matters in disagreement between them. However, it is far easier to make this statement than to apply it in all cases. It becomes much more difficult to define the scope of the differences when the differences are qualitative, not quantitative as in the example above. Moreover, how difficult it is to define the scope of the differences also depends on how the second chamber to act on the measure has cast the matters in disagreement. If one house takes up a measure from the other and passes the measure with a series of amendments to the first chamber's text, then the matters in disagreement in conference are cast in terms of two or more discrete amendments approved by the second house to pass the bill. These amendments usually are numbered for convenient reference. The two versions of the measure can be compared side by side to identify the provisions that are identical in both versions and those that are the subject of disagreements. Therefore, it is possible to identify both the matters in disagreement and the House and Senate positions on each of them. However, the second chamber that acts on a measure typically casts its version in the form of an amendment in the nature of a substitute for the entire text passed by the first house. In such cases, only one amendment is submitted to conference, even though that single amendment may encompass any number of specific differences between the House and Senate versions of the measure. In fact, the text of the bill as passed by one house and the text of the other house's amendment in the nature of a substitute may embody wholly different approaches to the subject of the measure. The two versions may be organized differently and may address the same subject in fundamentally different ways. Second house substitutes make it much harder, if not impractical, to specifically identify each matter in disagreement and the scope of the differences over that matter. When a second chamber substitute is in conference, therefore, the conferees must have somewhat greater room for maneuver. Technically, the House and Senate are in disagreement over the entire text of the measure; substantively, the policy disagreements may be almost as profound. In such cases, the conferees resolve the differences between the House and Senate by creating a third version of the measure a conference substitute for both the version originally passed by the first house and the amendment in the nature of a substitute approved by the second house. This latitude may be necessary, but it also means that the conference substitute could take the form of a third and new approach to the subject at hand an approach that had not been considered on the floor of either house. To inhibit such a result, clause 9 of House Rule XXII states: Whenever a disagreement to an amendment has been committed to a conference committee, the managers on the part of the House may propose a substitute that is a germane modification of the matter in disagreement. The introduction of any language presenting specific additional matter not committed to the conference committee by either House does not constitute a germane modification of the matter in disagreement. Moreover, a conference report may not include matter not committed to the conference committee by either House and may not include a modification of specific matter committed to the conference committee by either or both Houses if that modification is beyond the scope of that specific matter as committed to the conference committee. Notwithstanding this specificity, determining whether a conference substitute includes some new "matter" is far more difficult than determining whether the conferees' agreement on an appropriation for a program falls within the scope of the differences between the funding levels originally proposed by the House and Senate. If the House conferees have exceeded their authority in any one respect in agreeing to a conference report, that report as a whole is tainted and so is subject to a point of order on the House floor. However, there are at least three reasons why it is relatively unusual for a point of order to be made and sustained against a conference report. First, House conferees are aware of the limits within which they are to negotiate, and they usually try not to exceed their authority. Second, conferees frequently are presented with second chamber substitutes, and in those cases, they have somewhat greater discretion in the agreements they can reach. Third, even if the House managers propose a conference report that exceeds their authority, there are several ways in which they can protect their report against being subject to a point of order on the House floor. If the conferees were negotiating over separate numbered amendments and their agreement concerning one or more of the amendments is beyond their authority, they can report those amendments back to the House and Senate as amendments in technical disagreement. However, conferees may not report back in disagreement on part of an amendment in the nature of a substitute. Alternatively, the House can approve a conference report by a two-thirds vote under suspension of the rules, a procedure that does not allow points of order to be made on the floor. Finally, and perhaps most importantly in current practice, the House Rules Committee may propose that the House approve a special rule waiving any or all points of order against a conference report and against its consideration. Even if a conference report is ruled out of order, it may then be possible to propose precisely the same agreements that were contained in the report in the form of amendments between the houses (if the amendments are not in the third degree and do not contain nongermane matter). The Senate's rules and precedents embody roughly the same principles regarding restrictions on the authority of its conferees. Paragraphs 3 and 4 of Senate Rule XXVIII state, in part: 3. (a) Conferees shall not insert in their report matter not committed to them by either House, nor shall they strike from the bill matter agreed to by both Houses. (b) If matter which was agreed to by both Houses is stricken from the bill a point of order may be made against the report, and if the point of order is sustained, the report is rejected or shall be recommitted to the committee of conference if the House of Representatives has not already acted thereon. (c) If new matter is inserted in the report, a point of order may be made against the conference report and it shall be disposed of as provided under paragraph 4. 4. (a) In any case in which a disagreement to an amendment in the nature of a substitute has been referred to conferees (1) it shall be in order for the conferees to report a substitute on the same subject matter; (2) the conferees may not include in the report matter not committed to them by either House; and (3) the conferees may include in their report in any such case matter which is a germane modification of subjects in disagreement. Historically, the Senate has interpreted its rules and precedents affecting the content of conference reports in ways that grant conferees considerable latitude in reaching agreements with the House. According to Riddick's Senate Procedure , for example, a "conference report may not include new 'matter entirely irrelevant to the subject matter,' not contained in the House- or Senate-passed versions of a measure as distinct from a substitute therefor." And regarding conference substitutes, Senate precedents state that, "in such cases, they [the conferees] have the entire subject before them with little limitation placed on their discretion, except as to germaneness, and they may report any germane bill." Under current practice, the Senate takes a commonsense approach to deciding whether new matter is sufficiently relevant to constitute "a germane modification of subjects in disagreement." The authority of Senate conferees is further limited by paragraph 8 of Senate Rule XLIV. A Senator can raise a point of order against provisions of a conference report if they constitute "new directed spending provisions." Paragraph 8 defines a "new directed spending provision" as any item that consists of a specific provision containing a specific level of funding for any specific account, specific program, specific project, or specific activity, when no specific funding was provided for such specific account, specific program, specific project, or specific activity in the measure originally committed to the conferees by either House. Paragraph 8 of Senate Rule XLIV applies only to provisions of conference reports that would provide for actual spending. In other words, it applies only to discretionary and mandatory spending provisions and not to authorizations of appropriations. Discretionary spending is provided in appropriations acts and generally funds many of the programs, agencies, and routine operations of the federal government. Mandatory spending, also referred to as direct spending, is provided in or controlled by authorizing law and generally funds entitlement programs, such as Social Security and Medicare. The Senate can waive both of these restrictions on the content of conference reports by a three-fifths vote of Senators duly chosen and sworn (60 Senators assuming no vacancies). The process for waiving a point of order and the effect of a successful point of order raised under either of these rules are discussed in a later section of this report on floor consideration of conference reports. <14. Conference Procedures and Reports> Rules of procedure guide and constrain the legislative activities of both the House and Senate. So it is striking that there are almost no rules governing procedure in conference. The members of each conference committee can select their own chairmen. They also can decide for themselves whether they wish to adopt any formal rules governing such matters as debate, quorums, proxy voting, or amendments, but usually they do not. The only rules imposed by the two houses governing conference committee meetings concern approval of the conference report and the openness of meetings to all conferees and to the public. A majority of the House managers and a majority of the Senate managers must approve and sign the conference report. Decisions are never made by a vote among all the conferees combined. All votes take place within the House delegation and within the Senate delegation. This is why there is no requirement or necessity for the two houses to appoint the same number of conferees; five Senate conferees, for example, enjoy the same formal collective power in conference as 25 House conferees. Until the mid-1970s, conference meetings were almost always closed to the public; now they are open unless a specific decision is made to close part or all of a meeting. Paragraph 8 of Senate Rule XXVIII states: Each conference committee between the Senate and the House of Representatives shall be open to the public except when managers of either the Senate or the House of Representatives in open session determine by a rollcall vote of a majority of those managers present, that all or part of the remainder of the meeting on the day of the vote shall be closed to the public. The comparable House rule is even more stringent. Clause 12 of House Rule XXII requires a majority vote on the House floor to close part or all of a conference meeting. In other words, House conferees cannot vote to close a conference committee meeting unless they have been authorized to do so by a specific roll-call vote of the House. This difference between House and Senate rules has not been a source of public contention because efforts to close conferences normally are made only when they must deal with national security matters. When House managers want the authority to close part or all of a formal conference meeting, they usually offer a motion to this effect at the time the House arranges to go to conference. House rules place additional requirements on conference committee meetings. According to clause 12 of House Rule XXII, managers "should endeavor to ensure" that meetings only occur if every House manager has been given notice and an opportunity to attend. The House rule also explicitly states that all matters in disagreement are open to discussion at a conference meeting. If a point of order is made and sustained on the House floor that conferees met in violation of clause 12 (or that they never met at all), the conference report is rejected and the House is considered to have requested a further conference with the Senate. Similarly, the Senate has agreed that it is the "sense of the Senate" that conferees should hold "regular, formal meetings of all conferees that are open to the public," that conferees should be given "adequate notice" of such meetings, and that all conferees should be given an opportunity to "participate in full and complete debates" of the matters before the conference. Few other rules govern conference proceedings, and conference committees do not often vote to establish their own rules. Instead, they generally manage without them. This absence of rules reflects the basic nature of the conference committee as a negotiating forum in which the negotiators should be free to decide for themselves how to proceed most effectively. In some cases, conferences are rather formal. One delegation puts a proposal on the table; the other delegation considers it and responds with a counter-proposal. In other cases, conferences resemble free-form discussions in which the issues and the matters in disagreement are discussed without any apparent agenda or direction until the outlines of a compromise begin to emerge. In recent years, conferences on massive omnibus bills have even created "sub-conferences" to seek agreements that then can be combined into a single conference report. Sometimes customary practices develop among members of House and Senate committees who meet with each other regularly in conference. For example, they may alternate the chairmanship from one conference to the next between the committee or subcommittee chairmen from each house. Conference bargaining also can be facilitated by preliminary staff work. Staff may prepare side-by-side comparisons of the House and Senate versions so that the conferees can understand more easily how the two houses dealt with the same issues or problems. Furthermore, senior staff may engage in preliminary negotiations among themselves, seeking agreements acceptable to their principals, so that the members themselves can concentrate on the more intractable disagreements. When the conferees reach full agreement, staff prepare a conference report that indicates how each amendment in disagreement has been resolved. For example, the report may propose that the Senate recede from certain of its amendments to the House bill, that the House recede from its disagreement to certain other Senate amendments, and that the House recede from its disagreement to the remaining Senate amendments and concur in each with a House amendment (the text of which is made part of the report). When the conferees have considered a single amendment in the nature of a substitute, the report proposes that the house that originated the bill recede from its disagreement to the other house's substitute, and concur in that amendment in the nature of a substitute with a substitute amendment that is the new version of the bill on which the conference committee has agreed. Two copies of the conference report must be signed by a majority of House conferees and a majority of Senate conferees. No additional or minority views may be included in the report. From time to time, a manager's signature may be accompanied by an indication that he or she does not concur in the conference agreement on a certain numbered amendment. This does not make the report subject to a point of order in the House so long as a majority of House conferees have agreed on each numbered amendment. House rules require that House conferees be given an opportunity to sign the conference agreement at a set time and place. At least one copy of the final conference agreement must be made available for review by House managers with the signature sheets. The conference report itself is not the most informative document, because it does not describe the nature of the disagreements that confronted the conferees. Therefore, the rules of both houses require that a conference report be accompanied by a joint explanatory statement. According to paragraph 6 of Senate Rule XXVIII, this statement is to be "sufficiently detailed and explicit to inform the Senate as to the effect which the amendments or propositions contained in such report will have upon the measure to which those amendments or propositions relate." Clause 7(e) of House Rule XXII contains a comparable requirement. Normally, this joint explanatory statement summarizes the House, Senate, and conference positions on each amendment in disagreement (or each provision, in the case of second chamber and conference substitutes). The statement also is prepared in duplicate and signed by majorities of both House and Senate conferees. The house that agreed to the conference normally acts first on the conference report. Because this is an established practice, not a requirement of either House or Senate rules, the order of consideration can be reversed, if that is strategically advantageous. For example, the House may wish to delay acting on a report until after the Senate has voted on it because of the possibility that the report may fall victim to a Senate filibuster. Alternatively, Senate conferees may agree that the House should act first if the report is likely to enjoy greater support in the House in the belief (or hope) that the House vote will increase the prospects for approving the report in the Senate. Also, the first house to consider a conference report has the option of voting to recommit the report to conference. If either house agrees to the report, the effect of that vote is to discharge that house's conferees, so there is no longer a conference committee to which the report can be recommitted. Therefore, the second house to consider the report does not have the option of recommitting it; it only may accept or reject the report. Sometimes, therefore, the supporters of a bill arrange for one house or the other to act first on the conference report in order to avoid the possibility of a successful recommittal motion. Whatever the case may be, the conferees must see to it that the house they want to act first takes the papers out of the conference. If conferees cannot agree on any of the amendments before them, or if they cannot agree on all matters encompassed by one house's bill and the other's substitute, they may report back in disagreement. The House and Senate then can seek a resolution of the differences either through a second conference or through an exchange of amendments and motions between the houses. Conferees also may report in total disagreement if they have reached an agreement on a bill and a second chamber substitute that, in some respect, violates their authority. In such a case, their disagreement is technical, not substantive. After the House receives or the Senate agrees to the report in disagreement, the conferees' actual agreement is presented as a floor amendment to the amendment in disagreement, at which point considerations of the conferees' authority no longer apply. Alternatively, the conferees may submit their report to the House and Senate even though it violates their authority in one or more respects, and then, in the House, the Rules Committee can propose and the House can adopt a resolution protecting the report against points of order. <15. Floor Consideration of Conference Reports> A conference report may be presented or filed at almost any time the House or Senate is in session, but not when the Senate is in executive session or when the House has resolved into Committee of the Whole. A conference report is unlikely to be considered immediately because both the House and Senate have layover and availability requirements that apply to conference reports. In the House, conference reports are subject to a 72-hour "layover" requirement. Clause 8(a) of Rule XXII prohibits consideration of a conference report until 72 hours after the report and joint explanatory statement has been available in the Congressional Record or on the House electronic document repository ( http://docs.house.gov ). These requirements do not apply during the last six days of a session. In addition, copies of the report and the statement must be available for at least two hours before consideration of the report begins. Clause 2(b) applies the same requirements and conditions to amendments reported from conference in disagreement. However, the House may waive these restrictions by adopting a resolution reported from the Rules Committee for that purpose. A conference report that meets the availability requirements is considered as having been read when called up for consideration in the House. If a report does not meet one or more of the requirements but is called up by unanimous consent, it must be read. However, the House normally agrees by unanimous consent to have the joint explanatory statement read instead of the report, and then it also agrees to dispense with the reading of the statement. Conference reports are highly privileged in the House and may be called up at almost any time that another matter is not pending. When called up, the report is considered in the House (not in Committee of the Whole) under the one-hour rule. Clause 8(d) of Rule XXII requires that this hour be equally divided between the majority and minority parties, not necessarily between proponents and opponents. The two floor managers normally explain the agreements reached in conference and then yield time to other Members who wish to speak on the report. If both floor managers support the report, a Member who opposes it is entitled to claim control of one-third of the time for debate. Before a second hour of debate can begin, the majority floor manager moves the previous question. If agreed to, as it invariably is, this motion shuts off further debate, and the House immediately votes on agreeing to the conference report. Any points of order against a conference report in the House must be made or reserved before debate on the report begins (or before the joint explanatory statement is read). A conference report can be protected against one or more points of order if the Rules Committee reports and the House adopts a resolution waiving the applicable rules, or if the report is considered under suspension of the rules. In the Senate, paragraph 1 of Senate Rule XXVIII requires that a conference report must be "available on each Senator's desk" before the Senate may consider it. In addition, under paragraph 9 of that same rule it is not in order to vote on the adoption of a conference report unless it has been available to Members and the general public for at least 48 hours before the vote. This availability requirement can be waived by three-fifths of Senators duly chosen and sworn (60 Senators if there are no vacancies). It can also be waived by joint agreement of the majority and minority leader in the case of a significant disruption to Senate facilities or to the availability of the Internet. Under the rule, a report is considered to be available to the general public if it is posted on a congressional website or on a website controlled by the Library of Congress or the Government Publishing Office. The report and accompanying statement normally are not printed in the Senate section of the Record if they have been printed in the House section. Conference reports also normally are printed only as House documents. Conference reports are privileged in the Senate. The motion to consider a report on the Senate floor is in order at most times, and it is not debatable. The Senate's usual practice is to take up conference reports by unanimous consent at times arranged in advance among the floor and committee leaders. Under a standing order the Senate adopted at the close of the 106 th Congress in December 2000, the reading of a conference report is no longer required if the report "is available in the Senate." When considered on the Senate floor, a conference report is debatable under normal Senate procedures; it is subject to extended debate unless the time for debate is limited by unanimous consent or cloture, or if the Senate is considering the report under expedited procedures established by law (such as the procedures for considering budget resolutions and budget reconciliation measures under the Budget Act). Paragraph 7 of Senate Rule XXVIII states that, if time for debating a conference report is limited (presumably by unanimous consent), that time shall be equally divided between the majority and minority parties, not necessarily between proponents and opponents of the report. Consideration of a conference report by the Senate suspends, but does not displace, any pending or unfinished business; after disposition of the report, that business is again before the Senate. A point of order may be made against a conference report at any time that it is pending on the Senate floor (or after all time for debate has expired or has been yielded back, if the report is considered under a time agreement). If a point of order is sustained against a conference report on the grounds that conferees exceeded their authority either by including "new matter" (Rule XXVIII) or "new directed spending provisions" (paragraph 8 of Rule XLIV) in the conference report then there is a special procedure to strike out the offending portion(s) of the conference recommendation and continue consideration of the rest of the proposed compromise. Under the new procedure, a Senator can make a point of order against one or more provisions of a conference report. If the point of order is not waived (see below), the presiding officer rules whether or not the provision is in violation of the rule. If a point of order is raised against more than one provision, the presiding officer may make separate decisions regarding each provision. Senate rules provide further that when the presiding officer sustains a point of order against a conference report on the grounds that it violates either the prohibition of "new matter" or "new directed spending provisions," the matter is to be stricken from the conference recommendation. After all points of order raised under this procedure are disposed of, the Senate proceeds to consider a motion to send to the House, in place of the original conference agreement, a proposal consisting of the text of the conference agreement minus the "new matter" or "new directed spending provision" that was stricken. Amendments to this motion are not in order. The motion is debatable "under the same debate limitation as the conference report." In short, the terms for consideration of the motion to send to the House the proposal without the offending provisions are the same as those that would have applied to the conference report itself. If the Senate agrees to the motion, the conference recommendation as altered by the deletion of the "new matter" or "new directed spending provision" would be returned to the House in the form of an amendment between the houses. The House would then have an opportunity to act on the amendment under the regular House procedures for considering Senate amendments discussed in earlier sections of this report. Senate rules also create a mechanism for waiving these restrictions on conference reports. Senators can move to waive points of order against one or several provisions, or they can make one motion to waive all possible points of order under either Rule XXVIII or Rule XLIV, paragraph 8. A motion to waive all points of order is not amendable, but a motion to waive points of order against specific provisions is. Time for debate on a motion to waive is limited to one hour and is divided equally between the majority leader and the minority leader, or their designees. If the motion to waive garners the necessary support, the Senate is effectively agreeing to keep the matter that is potentially in violation of either rule in the conference report. The rules further require a three-fifths vote to sustain an appeal of the ruling of the chair and limit debate on an appeal to one hour, equally divided between the party leaders or their designees. The purpose of these requirements is to ensure that either method by which the Senate could choose to apply these rules through a motion to waive or through an appeal of the ruling of the chair requires a three-fifths vote of the Senate (usually 60 Senators). A simple majority (51 Senators if there are no vacancies and all Senators are voting) cannot achieve the same outcome. Conference reports may not be amended on the floor of either house. Conferees are appointed to negotiate over the differences between the versions of the same bill that the two houses have passed; the delegations return to their respective chambers with identical recommendations in the form of a report that proposes a package settlement of all these differences. The House and Senate may accept or reject the settlement, but they may not amend it directly. If conference reports were amendable, the process of resolving bicameral differences would be far more tortuous and possibly interminable. As noted in previous sections, the house that agrees to the request for a conference normally acts first on the report. The first chamber to act may vote to agree or not agree to the report, or it may agree to a preferential motion to recommit the report to conference, with or without non-binding instructions. Successful recommittal motions are quite unusual, in part because such an action implies that the conferees should and could have reached a more desirable compromise. If the first house agrees to the report, the second house only has the options of approving or disapproving the report. At this stage, the report cannot be recommitted. A vote by either house to agree to a conference report has the effect of automatically discharging its conferees and disbanding the conference committee; thus, there is no conference committee to which the second house could recommit the report. The defeat of a conference report in either house may kill the legislation, but only if no further action is taken, such as requesting a second conference or proposing a new position through an amendment between the houses. For lack of time, a second conference may not be practical near the end of a Congress, when many conference reports are considered. The vote to agree to a conference report normally completes that house's action on the measure, assuming the other house also approves the report. However, some conference reports, especially those on general appropriations bills, may be accompanied by one or more amendments in either true or technical disagreement. Furthermore, House rules include special procedures for coping with conference report provisions originating in the Senate that would not have been germane floor amendments to the bill in the House. These possibilities are discussed in separate sections that follow. <16. Amendments in True Disagreement> It is generally in the interests of both the House and Senate managers and their parent chambers for the conferees to reach full agreement. Each house already has passed a version of the legislation and has entrusted the responsibility for resolving its differences with the other house to Members who usually were actively involved in developing and promoting the measure. Nonetheless, conferees sometimes cannot reach agreement on all the amendments in disagreement. In such a case, the conferees may return to the House and Senate with a partial conference report dealing with the amendments on which they have reached agreement but excluding one or more amendments that remain in disagreement. The result is complicated and potentially confusing procedural possibilities that, fortunately, do not often arise in current practice. The house that agreed to the conference first debates and votes on the partial conference report. After the report is approved, the reading clerk reads or designates the first amendment in disagreement, and the majority floor manager offers a motion to dispose of the amendment. When this process begins in the House, for example, the floor manager may move that the House insist on its disagreement to a Senate amendment. Agreeing to this motion implies that the House adamantly supports its original position and that the House wishes the Senate to recede from its amendment. Alternatively, the floor manager may move that the House either (1) recede from its disagreement to the Senate amendment and concur in that amendment, or (2) recede and concur with a House amendment. In the latter case, this House amendment (which must be germane to the Senate amendment) may be the position that the House managers had been advocating in conference, or it may be a new compromise position they have developed. By agreeing to this motion, the House supports the negotiating position of its conferees and asks the Senate to concur in this new House amendment. After the House disposes of the first amendment in disagreement, it acts in similar fashion on each of the other amendments that were not resolved in conference. The House then sends all the papers to the Senate with a message describing its actions. If the Senate agrees to the partial conference report and to the House position on all the amendments in disagreement on which Senate action is required, the legislative process is completed and the bill may be enrolled for presidential action. However, the Senate may agree to the partial conference report (which is rarely controversial), but not accept the House position on one or more of the amendments in disagreement. Instead, the Senate may vote to insist on its original position, support the negotiating position of its managers, or propose a new bargaining position to the House. If the House has insisted on its disagreement to a Senate amendment, the Senate may continue to insist on its amendment. If the House has receded from its disagreement to a Senate amendment and concurred in that amendment with a House amendment, the Senate may disagree to the House amendment or it may concur in the House amendment with a further Senate amendment (if such a Senate amendment would not be an amendment in the third degree). If one or more amendments remain in disagreement at the end of this process, either method of resolution may be pursued again. The amendments may be "messaged" back and forth between the houses until one chamber accepts the position of the other or until stalemate is reached. Alternatively, either house may request a further conference to consider the amendments that remain in disagreement. The same or new conferees may be appointed. Only the amendments in disagreement are submitted to the new conference. The managers may not re-open matters that were resolved in the partial conference report that both houses approved, because these matters are no longer in disagreement. But the partial conference report cannot become law until all the remaining disagreements have been resolved. If the second conference is successful, the managers submit a second report for action on the House and Senate floor. If not, the legislation, including the partial conference report, is probably dead for that Congress. Amendments in true disagreement rarely arise when conferees are presented with a second chamber substitute. In such a situation, there is only one amendment before the conference. The conferees either reach agreement or they do not; they may not report only part of the substitute as an amendment in disagreement. If the conferees report back in total disagreement, the House and Senate can then vote to insist on their original positions or propose new versions of the legislation. This hardly ever occurs; but when it does, the bill may die for lack of further action, or the two houses may agree to a new conference to consider the same issues once again. Instead, amendments in true disagreement generally have arisen when the second chamber has passed a bill with a series of separate amendments. Since this has happened most often to general appropriations bills that originate in the House (and on which the Senate requests conferences), the House usually has acted first on partial conference reports and amendments in disagreement. The possibility of amendments in disagreement can make it exceedingly difficult to anticipate what will happen to a measure that is sent to conference. It is not simply a question of whether or not the conferees will be able to resolve all the amendments in disagreement by reaching compromises that fall within the scope of the differences between the House and Senate versions. If a number of amendments are considered in conference, the managers may reach agreement on some, but not on others. And what then happens to the amendments reported in disagreement depends on the motions that are made and agreed to by the House and Senate. Furthermore, the recourse to amendments in disagreement creates new possibilities that were not available in conference. In conference, the managers' options are defined and limited by the scope of the differences between the House and Senate positions before them. However, when the House and Senate act on an amendment in disagreement, they are not subject to this restriction. The concept of "the scope of the differences" is a restriction on the authority of managers in conference; it is not a restriction on amendments between the houses. So, for example, the House may amend a Senate amendment in disagreement with a new House position (or technically, the House may recede from its disagreement to the Senate amendment and concur in the Senate amendment with a House amendment) that goes beyond the scope of either house's original position. Thus, it is possible, though not very likely in practice, that (1) the conferees could report an amendment in disagreement, (2) the first chamber to act could propose a new position in the form of an amendment to the amendment in disagreement, (3) the second chamber could respond with a further amendment that constitutes a new position of its own, and (4) conferees could be appointed for a second time to attempt to resolve the differences between these two new positions on the same subject. In this second conference, the same general policy question would be at issue, but the scope of the differences between the House and Senate versions (and consequently the options open to the conferees) would not be the same. To add to the uncertainties, several other complications can occur in the House as it acts on each amendment in disagreement. These options arise from the different order of precedence among certain motions in the House (but not in the Senate) that prevails before and after the House reaches the stage of disagreement, and the opportunities for crossing and re-crossing that threshold. These complications have arisen most often during action on amendments in disagreement to general appropriations bills. Before the House reaches the stage of disagreement, the order of precedence favors motions that tend to perfect the measure further; after the stage of disagreement, the order of precedence is reversed and favors motions that tend to promote agreement between the houses. Thus, if a motion to concur in a Senate amendment is made on the House floor before the stage of disagreement, a motion to concur with an amendment has precedence and may be offered and voted on while the motion to concur is pending. The motion to concur with an amendment has precedence because it tends to perfect the measure. If the House agrees to the motion to concur with an amendment, the straight motion to concur automatically falls without a vote, even though it had been offered first. After the House has reached the stage of disagreement, however, a motion that the House recede from its disagreement and concur in a Senate amendment has precedence over a motion to recede and concur with an amendment. The motion to recede and concur tends to promote agreement more directly than the motion to recede and concur with an amendment. If a preferential motion to recede and concur is made and carries, no vote occurs on the motion to recede and concur with an amendment, even if that motion had already been made. As if this were not complicated enough, the motion to recede and concur is divisible in the House, as is the motion to recede and concur with an amendment. Any Representative may demand that it be divided into two proposals: first, that the House recede from its disagreement to the Senate amendment; and second, that the House then concur in the Senate amendment (or concur in it with an amendment, depending on which motion has been made). Following a demand for the division of the motion, the House first considers whether it should recede from its disagreement. But if the House votes to recede, it crosses back over the threshold of disagreement; consequently, the precedence of motions reverses, and a motion to concur with an amendment takes precedence over a motion to concur. As a result, the possibilities that may arise on the House floor as the House considers each amendment in disagreement depend on (1) which motion is made by the floor manager, (2) what motions have precedence over that motion, and (3) whether an attempt is made to change the order of precedence by demanding a division of the first motion. Suppose that the clerk reads an amendment in disagreement and the floor manager moves that the House recede from its disagreement to that amendment and concur therein. Because the House and Senate reached the stage of disagreement before they appointed their conferees, a motion to recede and concur with a House amendment does not have precedence. However, if any Member demands a division of the motion to recede and concur, the House first debates and votes on whether to recede. Normally, the House does vote to recede, because rejecting this motion would imply that the House is unwilling to consider either the Senate amendment or any compromise version. But when the House recedes from its disagreement, it crosses back over the threshold of disagreement, and the order of precedence among motions is reversed. When the House then considers the second half of the divided motion to concur in the Senate amendment another Member may move instead that the House concur in the Senate amendment with an amendment, because the motion to concur with an amendment now has precedence over the motion to concur. Only if the House rejects the motion to concur with an amendment would it then vote on the original proposal to concur in the Senate amendment. Suppose instead that, after an amendment in disagreement has been read, the floor manager moves that the House recede and concur with an amendment. The stage of disagreement having been reached, a simple motion to recede and concur has precedence and may be offered. But if this motion is divided, the House votes first on whether to recede. And if the House does recede, the threshold of disagreement is again re-crossed and the motion to concur with an amendment has precedence over the second half of the divided motion that the House concur. Thus, the amendment originally proposed in the motion to recede and concur with an amendment may be offered again as a motion to concur with an amendment after a preferential motion to recede and concur has been offered, after that motion has been divided, and after the House has voted to recede. The array of possible complications on the Senate floor is more limited. First, the order of precedence of motions in the Senate is not reversed after the stage of disagreement has been reached. Second, Senators may not demand the division of a motion to recede and concur or of a motion to recede and concur with an amendment. Even in the House, Representatives seldom use the opportunities available to them. Amendments in true disagreement rarely arise, and when they do, the House usually accepts the floor manager's motions to dispose of them. The sheer complexity of some of the parliamentary maneuvers described above probably discourages Members from attempting them for fear that they are more likely to create confusion than achieve some strategic advantage. Nonetheless, the possibility of amendments in true disagreement and the various options for dealing with each of them on the floor make it dangerous to predict with confidence exactly what will happen to a measure once it has been submitted to conference. <17. Amendments in Technical Disagreement> As discussed in earlier sections of this report, there are important restrictions on the content of conference reports. Conferees may deal only with the matters that are in disagreement between the House and Senate, and they must resolve each of these matters by reaching an agreement that is within the scope of the differences between the House and Senate positions. If a conference report violates these restrictions in any one respect, the entire report is subject to a point of order. Yet conferees sometimes find it desirable or necessary to exceed their authority. For example, changing circumstances may make it imperative for Congress to appropriate more money for some program than either the House or the Senate initially approved. Or the conferees may decide that a bill should include provisions on a subject that was not included in the version passed by either house. In such cases, the conferees may be able to achieve their purpose, without subjecting their report to a point of order, by using the device of amendments in disagreement. In doing so, they take advantage of the fact that the restrictions that apply to provisions of conference reports do not govern amendments between the houses. If the conferees wish to exceed their authority in resolving one of the amendments in disagreement, they can exclude this amendment from the conference report and present to the House and Senate a partial conference report and an amendment in disagreement. This is called an amendment in technical disagreement. There is no substantive disagreement between the House and Senate conferees; they report the amendment in disagreement only for technical reasons to avoid the restrictions that apply to conference reports. The first house considers the partial conference report and then the amendment in technical disagreement. When that amendment is presented (in the House, for example) the floor manager moves that the House recede from its disagreement to the Senate amendment and concur therein with an amendment that is the decision made in conference. Because this conference recommendation is considered outside of the conference report as part of a motion to dispose of an amendment in technical disagreement no point of order lies against the motion or the proposed amendment on the grounds that the amendment exceeds the scope of the differences or proposes a subject not committed to conference by either house. However, the proposed amendment still must be germane in the House. If the first house votes for the motion, the second chamber acts on the partial conference report and then on the first house's amendment to the amendment in technical disagreement. When the amendment is presented, the floor manager moves that the Senate concur in the House amendment (assuming that the House acted first). If the Senate agrees to this motion, the process of resolution is completed. Until the mid-1990s, conferees used this device regularly, although for a somewhat different purpose, to complete congressional action on general appropriations bills. The rules of the House generally prohibit such bills from carrying unauthorized appropriations and changes in existing law ("legislation"). The procedures of the Senate, however, are not as strict. Under a number of conditions, the Senate may consider floor amendments to general appropriations bills that would not have been in order in the House. If approved by the Senate, these amendments are sent to conference and constitute amendments in disagreement with the House. They are properly before the conference, and the conferees may accept them without violating the restrictions on their authority that have been mentioned so far. This situation could create a significant problem for the House. On a general appropriations bill, conferees could present the House with a conference report that is not amendable but that includes matter that could not even have been considered, much less approved, by the House when it first acted on the bill on the floor. The remedy for the House can lie in the use of amendments in technical disagreement. Clause 5 of House Rule XXII states that House conferees may not agree to a Senate amendment to a general appropriations bill if the amendment would violate the prohibitions in the House's rules against unauthorized appropriations and legislation on such bills (in clause 2 of Rule XXI), "unless specific authority to agree to the amendment first is given by the House by a separate vote with respect thereto." Otherwise, the same clause provides, the Senate amendment in question "shall be reported in disagreement by the conference committee back to the two Houses for disposition by separate motion." The same two options are available to conferees in the case of a Senate amendment proposing to appropriate funds in any bill that is not a general appropriations bill. In practice, House conferees never seek separate House floor votes in advance. Instead, the conferees report any amendments to which Rule XXII, clause 5(a), applies as amendments in technical disagreement. After the House agrees to the partial conference report, it considers these amendments. As each of the Senate amendments is presented to the House, the majority floor manager offers a motion that the House recede from its disagreement and either concur in the Senate amendment or concur in it with a House amendment. In either case, the floor manager's motion incorporates the agreement reached in conference. After the House agrees to these motions, the Senate approves the partial report and then agrees to corresponding motions to dispose of the amendments that require Senate action. Whereas the House has dealt with most or all of the amendments separately, the Senate usually has disposed of most or all of them en bloc by unanimous consent. (The House may dispose of a number of such amendments en bloc , also by unanimous consent, when they are noncontroversial and when the floor manager proposes that the House recede and concur in each of them.) By this means, the House could respond, on a case-by-case basis, to Senate amendments to general appropriations bills that would not have been in order in the House. This procedure enabled the House to protect itself against having simply to vote for or against a conference report containing such Senate amendments (or modifications of them) and, therefore, having to choose between rejecting the report (and jeopardizing the bill) or violating the principles of its own rules. By voting on the motions made by the House floor manager, the House could decide in each instance whether to accept the judgment of its conferees that wisdom or necessity dictated an exception to a strict separation of appropriations from both authorizations and changes in existing law. Moreover, the House and Senate have the same options for dealing with amendments in technical disagreement that are available for disposing of amendments in true disagreement. Thus, amendments in technical disagreement was a useful device to deal with the differences between House and Senate rules governing matters that may be included in general appropriations bills. This device was convenient for appropriations conferees because the Senate typically passed House appropriations bills with many separate, numbered amendments. Consequently, the conferees could report as many of these amendments as necessary as amendments in technical disagreement. In the last several Congresses, however, there have been far fewer amendments in technical disagreement accompanying appropriations conference reports. In many instances, the Senate has passed House appropriations bills with amendments in the nature of substitutes, and it is not possible to report back from conference with part of such an amendment in disagreement. Also, the House Rules Committee has reported, and the House has adopted, special rules waiving points of order against many of the appropriations conference reports. Anticipating that their reports would receive this protection, appropriations conferees could include all their agreements within their reports, without regard for considerations of scope or the matters in disagreement and without fear that they would make their reports vulnerable to points of order on the House floor. <18. House Consideration of Nongermane Senate Amendments> The contrast between House and Senate rules and procedures governing general appropriations bills poses one problem for bicameral relations that arises during the process of resolving legislative differences. A past remedy was the use of amendments in technical disagreement. Another and similar problem results from the contrast between House and Senate rules concerning the germaneness of amendments a problem for which the House has devised a somewhat different remedy. House rules require amendments to be germane (unless this requirement is waived by a special rule). By contrast, Senate rules require that amendments be germane only when offered to general appropriations measures or budget measures (both budget resolutions and reconciliation bills) or when offered after the Senate has invoked cloture. In addition, the Senate sometimes imposes a germaneness requirement on itself as part of unanimous consent agreements governing consideration of individual measures, although such agreements may include exceptions that make specific nongermane amendments in order. Consider the potential consequences of this difference for the House. The Senate may pass a House bill with one or more nongermane amendments. Each of these amendments is "conferenceable" (an unofficial term that is used from time to time by participants in the legislative process) as an amendment in disagreement between the House and Senate. The conferees may include it (or a modification of it) in their conference report without violating their authority. However, this situation could force the House into an up-or-down vote on a conference report including nongermane matters that were not debated on the House floor, that would have been subject to points of order if offered as House floor amendments, and that might not even have been considered by the appropriate House committees. The remedy for the House appears in clause 10 of House Rule XXII. This clause creates an opportunity for the House to identify nongermane matter originating in the Senate and to consider it separately. Of course, the House can and usually does adopt a special rule reported from the Rules Committee that waives the point of order this clause creates. Clause 10 states that when the House begins consideration of a conference report or a motion to dispose of a Senate amendment to which the House has disagreed, a Member may make a point of order (before debate begins) against matter contained in the report or the motion on the grounds that the matter in question would not have been germane if it had been offered as a House floor amendment to the measure (in the form the measure passed the House). If the Speaker sustains the point of order (thereby establishing that the matter in question is nongermane), the Member may then move that the House reject the nongermane matter. This motion is debatable for 40 minutes, to be equally divided between and controlled by proponents and opponents. After the House votes on the motion, another such point of order may be made against different nongermane matter; and if it is sustained, another motion to reject is in order. If the House defeats any and all motions to reject, the House thereby decides to retain the nongermane matter. The House may vote not to reject nongermane language for at least two reasons: (1) a majority of Representatives may support the nongermane matter on its merits, or (2) the House may conclude that the Senate is so insistent on its nongermane language that rejecting it could seriously jeopardize enactment of the entire bill. If the House does vote to reject any nongermane matter in a conference report, the report is considered as having been rejected. This is consistent with the principle that conference reports are not amendable. Clause 10(d)(2) states that, in most cases, the House then proceeds automatically to decide "whether the House shall recede and concur in the Senate amendment with an amendment consisting of so much of the conference report as was not rejected." In other words, the House votes to amend the Senate amendment with a House amendment that consists of the remainder of the conference agreement without the nongermane matter. If the Senate accepts this new House amendment, resolution is reached. If not, the Senate may disagree to the House amendment and request a new conference with the House. In this way, the House can isolate nongermane Senate matter for separate consideration, but neither chamber can impose its will on the other. Clause 10(d)(3) makes in order three possible motions, in an established order of precedence, that Members may make if the House votes to reject nongermane matter contained not in a conference report but in a motion that the House recede and concur in a Senate amendment, with or without amendment. In brief, these motions allow the House to amend the Senate amendment or to again disagree to it, perhaps also requesting a new conference with the Senate to resolve this disagreement.

The Constitution requires that the House and Senate approve the same bill or joint resolution in precisely the same form before it is presented to the President for his signature or veto. To this end, both houses must pass the same measure and then attempt to reach agreement about its provisions. The House and Senate may be able to reach agreement by an exchange of amendments between the houses. Each house has one opportunity to amend the amendments from the other house, so there can be Senate amendments to House amendments to Senate amendments to a House bill. House amendments to Senate bills or amendments are privileged for consideration on the Senate floor; Senate amendments to House bills or amendments generally are not privileged for consideration on the House floor. In practice, the House often disposes of amendments between the houses under the terms of a special rule reported by the Rules Committee. The Senate sometimes disposes of House amendments by unanimous consent, but the procedures associated with the exchange of amendments can become complicated. Alternatively, the House and Senate can each disagree to the position of the other on a bill and then agree to create a conference committee to propose a package settlement of all their disagreements. Most conferees are drawn from the standing committees that had considered the bill initially. The House or Senate may vote to instruct its conferees before they are appointed, but such instructions are not binding. Conferees generally are free to negotiate in whatever ways they choose, but eventually their agreement must be approved by a majority of the House conferees and a majority of the Senate conferees. The conferees are expected to address only the matters on which the House and Senate have disagreed. They also are expected to resolve each disagreement within the scope of the differences between the House and Senate positions. If the conferees cannot reach agreement on an amendment, or if their agreement exceeds their authority, they may report that amendment as an amendment in true or technical disagreement. On the House and Senate floors, conference reports are privileged and debatable, but they are not amendable. The Senate has a procedure to strike out portions of the conference agreement that are considered, under Senate rules, to be "out of scope material" or "new directed spending provisions." The House also has a special procedure for voting to reject conference report provisions that would not have been germane to the bill in the House. After agreeing to a conference report, the House or Senate can dispose of any remaining amendments in disagreement. Only when the House and Senate have reached agreement on all provisions of the bill can it be enrolled for presentation to the President.

crs_R46337

crs_R46337_0

<1. Introduction> The sale of U.S-origin armaments and other "defense articles " has been a part of national security policy since at least the Lend-Lease programs in the lead-up to U.S. involvement in World War II. Historically, Presidents have used sales of defense articles and services to foreign governments and organizations to further broad foreign policy goals, ranging from sales to strategically important countries during the Cold War, to building global counterterrorism capacity following the terrorist attacks of September 11, 2001. The sale of U.S. defense articles to foreign countries is governed by a broad set of statutes, public laws, federal regulations, and executive branch policies, along with international agreements. An interconnected body of legislative provisions, authorizations, and reporting requirements related to the transfer of U.S. defense articles appears in both the National Defense Authorization Acts (NDAA) and in the State Department, Foreign Operations, and Related Programs (SFOPS) Appropriations Acts. These laws reflect the roles that both the Department of State and the Department of Defense (DOD) take in the administration of the sale, export, and funding of defense articles to foreign countries, which can be found in both Title 22 (Foreign Relations) and Title 10 (Armed Services) of the United States Code . Congress enacted the current statutory framework for the sale and export of defense articles to other countries mainly through two laws The Foreign Assistance Act of 1961(FAA), 22 U.S.C 2151, et seq., and the Arms Export Control Act of 1976 (AECA), 22 U.S.C. 2751, et seq. Among other provisions, the FAA established broad policy guidelines for the overall transfer of defense articles and services from the United States to foreign entities (foreign countries, firms, and/or individuals) to include both sales and grant transfers, while the AECA also governs the sales of defense articles and services to those entities. This report describes the major statutory provisions governing the sale and export of defense articles Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) and outlines the process through which those sales and exports are made. FMS is the program through which the U.S. government, through interaction with purchasers, acts as a broker to procure defense articles for sales to certain foreign countries and organizations, also called eligible purchasers . In DCS, the U.S. government does not act as a broker for the sale, but still must license it, unless export of the item is exempt from licensing according to regulations in the International Traffic in Arms Regulations (ITAR), contained in Subchapter M, 22 CFR 120-130, described below. The President designates what items are deemed to be defense articles or defense services, and thus subject to DCS licensing, via the U.S. Munitions List (USML). All persons (other than U.S. government personnel performing official duties) engaging in manufacturing, acting as a broker, exporting, or importing defense articles and services must register with the State Department according to ITAR procedures. The State Department is required under the AECA to notify Congress 15 to 30 days prior to all planned FMS and DCS cases over a certain value threshold. Congress can, pursuant to the AECA, hold or restrict such sales via a joint resolution. The report also provides a select list of specific legislative limitations on arms sales and end use monitoring requirements found in the Arms Export Control Act. Future updates will consider policy implications and issues for Congress. <1.1. Sales and Security Assistance/Cooperation Programs> In FY2018, the latest year complete agency data is available, the value of authorized U.S. arms sales to foreign governments and export licenses issued totaled about $184.3 billion. Foreign entities purchased $47.71 billion in FMS cases and the value of privately contracted DCS authorizations licensed by the State Department (distinct from actual deliveries of licensed articles and services) totaled $136.6 billion ( Table 1 and Table 2 ). That same year, the State Department requested $7.09 billion (base and OCO) for all of its Title 22 security assistance authorities in its International Security Assistance account, while DOD executed $4.42 billion for Title 10 security cooperation authorities, totaling $11.51 billion, or 24.1% of what foreign entities spent on FMS and 8.4% of the amount of DCS approved licenses. <1.2. Security Assistance/Security Cooperation Programs> While most arms sales and exports are paid for by the recipient government or entity, transfers funded by U.S. security assistance or security cooperation grants to foreign security forces comprise a small portion of arms exports, but they are beyond the scope of this report. These transfers are generally considered foreign assistance, and are authorized pursuant to the FAA, annual National Defense Authorization Acts, and other authorities codified in Title 22 and Title 10 of the U.S. Code. With the exception of Title 10 authorities, the FAA and AECA also govern all of the transfers of U.S.-origin defense articles and services, whether they are commercial sales, government-to-government sales, or security assistance/security cooperation. Major Title 22 grant-based security assistance authorities pertaining to defense articles are Foreign Military Financing (FMF), Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR), Peacekeeping Operations (PKO). Major Title 10 grant-based security cooperation authorities are Authority to Build the Capacity of Foreign Security Forces ("333 authority"), Defense Institution Reform Initiative (DIRI), Ministry of Defense Advisors (MDOA) program, and Southeast Asia Maritime Security Initiative (MSI). DOD, through its Defense Security Cooperation Agency (DSCA), executes most security assistance and security cooperation programs. FMF, IMET, EDA, and equipment lease cases involving the transfer of U.S-origin arms are treated as FMS cases and reported as such by DSCA. Cases executed pursuant to Title 10 authorities are also treated as FMS cases, but are referred to by practitioners as "pseudo-FMS" cases because they often involve a focus on training of foreign forces as well as on the transfer of arms. <2. Sales and Exports of U.S. Defense Articles in Statute, Administration Policy, and Regulation> The broad set of statutes, public laws, federal regulations, executive branch policies, and international agreements governing the sale of U.S. defense articles to foreign countries include the following . <2.1. The Foreign Assistance Act of 1961 and the Arms Export Control Act of 1976> As noted above, the primary statutes covering the sale and export of U.S. defense articles to foreign countries are the FAA (P.L. 87-195, as amended) and AECA ( P.L. 90-629 , as amended) . The FAA expresses, as U.S. policy, that the efforts of the United States and other friendly countries to promote peace and security continue to require measures of support based upon the principle of effective self-help and mutual aid, [and that its purpose is] to authorize measures in the common defense against internal and external aggression, including the furnishing of military assistance, upon request, to friendly countries and international organizations. The AECA states that it is the sense of Congress that all such sales be approved only when they are consistent with the foreign policy of the United States, the purposes of the foreign assistance program of the United States as embodied in the Foreign Assistance Act of 1961, as amended, the extent and character of the military requirement and the economic and financial capability of the recipient country, with particular regard being given, where appropriate, to proper balance among such sales, grant military assistance, and economic assistance as well as to the impact of the sales on programs of social and economic development and on existing or incipient arms races. The FAA also establishes the U.S. policy for how recipient countries are to utilize defense articles sold or otherwise transferred. Section 502 states that defense articles and defense services to any country shall be furnished solely for internal security (including for antiterrorism and nonproliferation purposes), for legitimate self-defense, to permit the recipient country to participate in regional or collective arrangements or measures consistent with the Charter of the United Nations, or otherwise to permit the recipient country to participate in collective measures requested by the United Nations for the purpose of assisting foreign military forces in less developed friendly countries (or the voluntary efforts of personnel of the Armed Forces of the United States in such countries) to construct public works or to engage in other activities helpful to the economic and social development of such friendly countries. Section 22 of the AECA, provides the statutory basis for the U.S. Foreign Military Sales program and allows the U.S. government to interact with purchaser as a broker to procure defense articles for sales to certain foreign countries and organizations, also called eligible purchasers . Under this provision, the President may, without requirement for charge to any appropriation or contract authorization, enter into contracts to sell defense articles or defense services to a foreign country or international organization if it provides the U.S. government with a dependable undertaking to pay the full amount of the contract. Section 38 of the AECA furthermore provides the statutory basis for the U.S. Direct Commercial Sales of defense articles and services. Under this provision, the U.S. government does not act as a broker for the sale, but still must license it, unless specifically provided for in regulations in the International Traffic in Arms Regulations, contained in Subchapter M, 22 CFR 120-130, described below. The President designates what items are deemed to be defense articles or defense services, and thus subject to DCS licensing, via the U.S. Munitions List. All persons (other than U.S. government personnel performing official duties) engaging in manufacturing, acting as a broker, exporting, or importing defense articles and services must register with the State Department according to ITAR procedures. The provision also requires the President to review the items on the USML and to notify the House Foreign Affairs Committee, the Senate Foreign Relations Committee, and the Senate Banking Committee if any items no longer warrant export controls, pursuant to the ITAR. <2.2. National Security Presidential Memorandum Regarding U.S. Conventional Arms Transfer Policy: NSPM-10> In April 2018, the Trump Administration, citing the AECA, issued a National Security Presidential Memorandum, NSPM-10, outlining its policy concerning the transfer of conventional arms. The memorandum reflects many of the policy statements of the FAA and AECA in aiming to "bolster the security of the United States and our allies and partners," while preventing proliferation by exercising restraint and continuing to participate in multilateral nonproliferation arrangements such as the Missile Technology Control Regime (MTCR) and Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. It explicitly commits the U.S. government to continue to meet the requirements of all applicable statues, including the AECA, the FAA, the International Emergency Economic Powers Act, and the annual NDAAs. NSPM-10 also prioritizes efforts to "increase trade opportunities for United States companies, including by supporting United States industry with appropriate advocacy and trade promotion activities and by simplifying the United States regulatory environment." In addition, NSPM-10 directs the executive branch to consider the following in making arms transfer decisions: the national security of the United States, including the transfer's effect on the technological advantage of the United States; the economic security of the United States and innovation; relationships with allies and partners; human rights and international humanitarian law; and nonproliferation implications. <2.3. Title 22, Code of Federal Regulations, Foreign Relations> The AECA, Section 38, also authorizes the President to issue regulations on the import and export of defense articles. As noted above, the catalog of defense articles subject to these regulations is called the United States Munitions List. The USML is found in federal regulations at 22 CFR 121. The series of federal regulations for importing and exporting of defense articles the International Traffic in Arms Regulations is contained in Subchapter M, 22 CFR 120-130. The USML lists defense articles by category and identifies which of those articles are "significant military equipment" further restricted by provisions in the AECA. The President has delegated authority for administering the USML and associated regulations to the Secretary of State, who in turn has delegated this authority to the Deputy Assistant Secretary of State for Defense Trade Controls in the Bureau of Political-Military Affairs (PM). The Directorate of Defense Trade Controls (DDTC) is responsible for ensuring that commercial exports of defense articles and defense services advance U.S. national security objectives. DDTC also administers a public web portal for U.S. firms seeking assistance with exporting defense articles and services. <2.4. DOD's Security Assistance Management Manual> The Department of Defense has a substantial role in the sale of defense articles to foreign countries through FMS, which DOD administers in coordination with the Department of State mainly through the Defense Security Cooperation Agency. DSCA provides procedures for FMS and certain other transfers of defense articles and defense services to foreign entities in its Security Assistance Management Manual (SAMM). The SAMM is used mainly by the military services, the Office of the Secretary of Defense, Special Operations Command (SOCOM), the regional combatant commanders, and country teams in U.S. embassies overseas, and it may also be consulted by foreign countries and U.S. defense contractors. The SAMM also provides the timelines and methods for coordinating FMS, cases with the State Department. <3. Sales and Exports of U.S. Defense Articles in International Agreements25> The United States participates in two international agreements that broadly affect the transfer of U.S. defense articles: The Missile Technology Control Regime and the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. Other international agreements, such as the Treaty on the Nonproliferation of Nuclear Weapons (NPT), the Convention on the Physical Protection of Nuclear Material, the Chemical Weapons Convention, and the Biological and Toxin Weapons Convention, may limit exports of defense-related material, but only material linked to the development of nuclear, chemical, and biological weapons. <3.1. Missile Technology Control Regime> The Missile Technology Control Regime, while not a treaty, is an informal and voluntary association of countries seeking to reduce the number of systems capable of delivering weapons of mass destruction (other than manned aircraft), and seeking to coordinate national export licensing efforts aimed at preventing their proliferation. The MTCR was originally established in 1987 by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Since then, participation has grown to 35 countries. Member nations, by consensus, agree on common export guidelines (the MCTR Guidelines) on transfer of systems capable of delivering weapons of mass destruction, as well as an integral common list of controlled items (the MTCR Equipment, Software and Technology Annex). The annex is a list of controlled items both military and dual-use including virtually all key equipment, materials, software, and technology needed for the development, production, and operation of systems capable of delivering nuclear, biological, and chemical weapons. The annex is divided into "Category I" and "Category II" items. Partner countries exercise restraint when considering transfers of items contained in the annex, and such transfers are considered by each partner country on a case-by-case basis. The State Department, Directorate of Defense Trade Controls, administers the U.S. implementation of the MTCR and incorporates the MTCR guidelines and annex into the International Traffic in Arms Regulations and the U.S. Munitions List. <3.2. The Wassenaar Arrangement> In 1996, 33 countries, including the United States, agreed to the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. The arrangement aims "to contribute to regional and international security and stability, by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilising accumulations." It maintains two control lists. One is a list of weapons, including small arms, tanks, aircraft, and unmanned aerial systems. The second is a list of dual-use technologies including material processing, electronics, computers, information security, and navigation/avionics. Dual-use, in this context, means items and technologies that can be used in both civilian and military applications. DDTC incorporates the Wassennar Arrangement into the ITAR and USML. Under the Export Control Act of 2018 (Subtitle B, Part 1, P.L. 115-232 ), the Department of Commerce is to "establish and maintain a list" of controlled items, foreign persons, and end-uses determined to be a threat to U.S. national security and foreign policy. The legislation also directs the Commerce Department to require export licenses; "prohibit unauthorized exports, re-exports, and in-country transfers of controlled items"; and "monitor shipments and other means of transfer." <4. Foreign Military Sales Process> The FMS program is the U.S. government-brokered method for delivering U.S. arms to eligible foreign purchasers, normally friendly nations, partner countries, and allies. The program is authorized through the AECA, with related authorities delegated by the President, under Executive Order 13637, to the Secretaries of State, Defense, and Commerce. The State Department (DOS) is responsible for the export (and temporary import) of defense articles and services governed by the AECA, and reviews and submits to Congress an annual Congressional Budget Justification (CBJ) for security assistance. This also includes an annual estimate of the total amount of sales and licensed commercial exports expected to be made to each foreign nation as required by 22 U.S.C 2765(a)(2)). DOD generally implements the FMS program as a military-to-military program and serves as intermediary for foreign partners' acquisition of U.S. defense articles and services. Using what is commonly called the Total Package Approach , U.S. security assistance organizations must offer, in addition to specific defense articles, a sustainment package to help the buyer maintain and operate the article(s) effectively and in accord with U.S. intent. DOD follows the Defense Federal Acquisition Regulation Supplement (DFARS), except where deviations are authorized. Acquisition on behalf of eligible FMS purchasers must be in accordance with DOD regulations and other applicable U.S. government procedures. This arrangement affords the foreign purchaser the same benefits and protections that apply to DOD procurement, and it is one of the principal reasons why foreign governments and international organizations might choose to procure defense articles through FMS. FMS requirements may be consolidated with U.S. requirements or placed on separate contracts, whichever is more expedient and cost-effective. Purchasers must agree to pay in U.S. dollars, by converting their own national currency or, under limited circumstances, though reciprocal arrangements. When the purchase cannot be financed by other means, credit financing or credit guarantees can be extended if allowed by U.S. law. FMS cases can also be directly funded by DOS using Foreign Military Financing appropriations. <4.1. Letters of Request (LOR) Start the Process> When an eligible foreign purchaser (government or otherwise) decides to purchase or otherwise obtain a U.S. defense article or service, it begins the process by making the official request in the form of a letter of request (LOR) (See Figure 1 for an illustration of the process from receipt to case closure.) The letter may take nearly any form, from a handwritten request to a formal letter, but it must be in writing. The purchaser submits the LOR to a U.S. security cooperation organization (SCO), normally an Office of Defense Cooperation nested within the U.S. Embassy in the country, or directly to DSCA or an implementing agency (IA). The IA is usually a military department or DOD agency (e.g., Army Security Assistance Command, Navy International Programs Office, Air Force International Affairs). The LOR can be submitted in-country or through the country's military and diplomatic personnel stationed in the United States. Unless an item has been designated as "FMS Only," DOD is generally neutral as to whether a country purchases U.S.-origin defense articles/services through FMS or DCS (discussed below). The AECA gives the President discretion to designate which military end-items must be sold exclusively through FMS channels. This discretion is delegated to the Secretary of State under Executive Order 13637 and, as a matter of policy, this discretion is generally exercised upon the recommendation of DOD. Once the U.S. SCO receives the LOR, it transmits the request to the relevant agencies (e.g., DSCA, IA) for consideration and export licensing. U.S. government responses to LORs include price and availability (P&A) data, letters of offer and acceptance (LOAs), and other appropriate actions that respond to purchasers' requests. If the IA recommends disapproval, it notifies DSCA, which coordinates the disapproval with DOS, as required, and formally notifies the customer of the disapproval. <4.2. Letters of Offer and Acceptance (LOA) Set Terms> After approving the transfer of a defense article, the United States responds with a letter of offer and acceptance. The LOA is the legal instrument used by the USG to sell defense articles, defense services including training, and design and construction services to an eligible purchaser. The LOA itemizes the defense articles and services offered and when implemented becomes an official tender by the USG. Signed LOAs and their subsequent amendments and modifications are also referred to as "FMS cases." The time required to prepare LOAs varies with the complexity of the sale. <4.3. Reports to Congress> Within 60 days after the end of a quarter, the State Department, on behalf of the President, sends to the Speaker of the House, HFAC, and the chairman of the SFRC a report of, inter alia, LOAs offering major defense equipment valued at $1 million or more; all LOAs accepted and the total value; the dollar amount of all credit agreements with each eligible purchaser; and all licenses and approvals for exports sold for $1 million or more. <4.4. Case Executions Deliver Articles> The IA takes action to implement a case once the purchaser has signed the LOA and necessary documentation and provided any required initial deposit. The standard types of FMS cases are defined order, blanket order, and cooperative logistics supply support arrangement (CLSSA). A CLSSA usually accompanies sales of major defense articles, providing an arrangement for supplying repair parts and other services over a specified period after delivery of the articles. Defined order cases or lines are commonly used for the sale of items that require item-by-item security control throughout the sales process or that require separate reporting; blanket order cases or lines are used to provide categories of items or services (normally to support one or more end items) with no definitive listing of items or quantities. Defined order and blanket order cases are routinely used to provide hardware or services to support commercial end items, obsolete end items (including end items that have undergone system support buyouts), and selected non-U.S. origin military equipment. The case must be implemented in all applicable data systems (e.g., Defense Security Assistance Management System [DSAMS], Defense Integrated Financial System [DIFS], DSCA 1200 System, and Military Department [MILDEP] systems) before case execution occurs. The IA issues implementing instructions to activities that are involved in executing the FMS case. Case execution is the longest phase of the FMS case life cycle. Case execution includes acquisition, logistics, transportation, maintenance, training, financial management, oversight, coordination, documentation, case amendment or modification, case reconciliation, and case reporting. Case managers, normally assigned to the IAs, track FMS delivery status in coordination with SCOs. FMS records, such as case directives, production or repair schedules, international logistics supply delivery plans, requisitions, shipping documents, bills of lading, contract documents, billing and accounting documents, and work sheets, are normally unclassified. All case transactions, financial and logistical, must be recorded as part of the official case file. Cost statements and large accounting spreadsheets must be supported by source documents. LOA requirements are fulfilled through existing U.S. military logistics systems. With the exception of excess defense articles (EDA) or obsolete equipment, items are furnished only when DOD plans to ensure logistics support for the expected item service life. This includes follow-on spare parts support. If an item will not be supported through its remaining service life, including EDA and obsolete defense articles, an explanation should be included in the LOA. FMS cases may be amended or modified to accommodate certain changes. An amendment is necessary when a change requires purchaser acceptance. The scope of the case is a key issue for the IA to consider in deciding whether to prepare an amendment, modification, or new LOA. In defined order cases, scope is limited to the quantity of items or described services, including specific performance periods listed on the LOA. In blanket order cases, scope is limited to the specified item or service categories and the case or line dollar value. In CLSSAs, scope is limited by the LOA description of end items to be supported and dollar values of the cases. A scope change takes place when the original purpose of a case line or note changes. U.S. government unilateral changes to an FMS case are made by a modification and do not require acceptance by the purchaser. <4.5. Customs Clearance> In all FMS cases, the firms then ship the defense articles to the foreign partner via a third-party freight forwarding company. The security cooperation organization, part of the U.S. embassy country team, may receive the item and hand it over to the purchaser, or the purchaser may receive it directly. The U.S. government and the purchaser's advanced planning for transportation of materiel is critical for case development and execution. DOD policy requires that the purchaser is responsible for transportation and delivery of its purchased materiel. Purchasers can use DOD distribution capabilities on a reimbursable basis at DOD reimbursable rates via the Defense Transportation System (DTS). Alternatively, purchasers may employ an agent, known as a Foreign Military Sales freight forwarder, to manage transportation and delivery from the point of origin (typically the continental United States) to the purchaser's desired destination. Ultimately, the purchaser is responsible for obtaining overseas customs clearances and for all actions and costs associated with customs clearances for deliveries of FMS materiel, including any intermediate stops or transfer points. Generally, title to FMS materiel is transferred to the purchaser upon release from its point of origin, normally a DOD supply activity, unless otherwise specified in the LOA. However, U.S. government security responsibility does not cease until the recipient's designated government representative assumes control of the consignment. <5. Direct Commercial Sales Process> <5.1. DOS Role in DCS> While an export license is not required for the FMS transfers, registered U.S. firms may sell defense articles directly to foreign partners via licenses received from the State Department. In this case, the request for defense articles and/or defense services may originate as a result of interaction between the U.S. firm and a foreign government, may be initiated through the country team in U.S. embassies overseas, or may be generated by foreign diplomatic or defense personnel stationed in the United States. A significant difference between DCS licenses and FMS cases is that in DCS, the U.S government does not participate in the sale or broker the defense articles or services for transfer by the U.S. government to the foreign country. While DCS originates between registered U.S. firms and foreign customers, an application for an export license goes through a review process similar to FMS ( Figure 2 , below). DOS and DOD have agency review processes that assess proposed DCS transfers for foreign policy, national security, human rights, and nonproliferation concerns. In order for a U.S. firm to export defense articles or services on the U.S. Munitions List, it must first register with the State Department, Directorate of Defense Trade Controls. It must then obtain export licenses for all defense articles and follow the International Traffic in Arms Regulations. Once granted, an export license is valid for four years, after which a new application and license are required. To export a defense article through DCS, a U.S. defense firm must comply with ITAR requirements. The three Directorates of the State Department's Bureau of Political-Military Affairs publish policy, issue licenses, and enforce compliance in accord with the ITAR in order to ensure commercial exports of defense articles and defense services advance U.S. national security and foreign policy objectives. If marketing efforts involve the disclosure of technical data or the temporary export of defense articles, the defense firm must also obtain the appropriate export license from DDTC. DOD's Defense Technology Security Administration (DTSA) serves as a reviewing agency for the export licensing of dual-use commodities and munitions items and provides technical and policy assessments of export license applications. Specifically, it identifies and mitigates national security risks associated with the international transfer of critical information and advanced technology in order to maintain the U.S. military's technological edge and to support U.S. national security objectives. The ITAR includes many exemptions from the licensing requirements. Some are self-executing by the exporting firm who is to use them and normally are based on prior authorizations. Other exemptions (for example, the exemption in 22 CFR 125.4(b)(1) regarding technical data) may be requested or directed by the supporting military department or DOD agency. <5.2. DOD Role in DCS> In contrast to FMS, DOD does not directly administer sales or facilitate transportation of items purchased under DCS, although, unless the host country requests that purchase be made through FMS, DOD tries to accommodate a U.S. defense firm's preference for DCS, if articulated. In addition, DOD does not normally provide price quotes for comparison of FMS to DCS. If a company or country prefers that a sale be made commercially rather than via FMS, and when a company receives a request for proposal from a country and prefers DCS, the company may request that DSCA issue a DCS preference for that particular sale. The particulars of each recipient country, U.S. firm, and sale determine whether FMS or DCS is preferred. Before approving DCS preference for a specific transaction, DSCA considers the following: Items provided through blanket order and those required in conjunction with a system sale do not normally qualify for DCS preference. FMS procedures may be required in sales to certain countries and for sales financed with Military Assistance Program (MAP) funds or, in most cases, with FMF funds. The DSCA Director may also recommend to the DOS that it mandate FMS for a specific sale. DCS preferences are valid for one year; therefore, during this time, if the IA receives from the purchaser a request for pricing and availability (P&A) or an LOA for the same item, it should notify the purchaser of the DCS preference. U.S. firms may request defense articles and services from DOD to support a DCS to a foreign country or international organization. Defense articles must be provided pursuant to applicable statutory authority, including 22 U.S.C. 2770, which authorizes the sale of defense articles or defense services to U.S. companies at not less than their estimated replacement cost (or actual cost in the case of services). The SCO chief and other relevant members of the country team normally meet with visiting U.S. defense industry representatives regarding their experiences in country. The SCO chief responds to follow-up inquiries from industry representatives with respect to any reactions from host country officials or subsequent marketing efforts by foreign competitors. The SCO chief alerts embassy staff to observe reactions of the host country officials on U.S. defense industry marketing efforts. As appropriate, the SCO chief can pass these reactions to the U.S. industry representatives. However, the SCO may not work on behalf of any specific U.S. firm; its only preference can be for purchasers to "buy American." If the SCO chief believes that a firm's marketing efforts do not coincide with overall U.S. defense interests or have potential for damaging U.S. credibility and relations with the country, the SCO chief relays these concerns, along with a request for guidance, throughout the country team and to the Combatant Command, Military Department, and DSCA. <6. Excess Defense Articles> If a partner is unable to purchase, or wishes to avoid purchasing, a newly-manufactured U.S. defense article, it may request transfer of Excess Defense Articles from DOD to its designated recipient. EDA refers to DOD and United States Coast Guard (USCG)-owned defense articles that are no longer needed and, as a result, have been declared excess by the U.S. Armed Forces. This excess equipment is offered at reduced or no cost to eligible foreign recipients on an "as is, where is" basis. As such, EDA is a hybrid between sales and grant transfer programs. DOD states that the EDA program works best in assisting friends and allies to augment current inventories of like items with a support structure already in place. All FMS eligible countries can request EDA. An EDA grant transfer to a country must be justified to Congress for the fiscal year in which the transfer is proposed as part of the annual congressional justification documents for military assistance programs. There is no guarantee that any EDA offer will be made on a grant basis; each EDA transfer is considered on a case-by-case basis. EDA grants or sales that contain significant military equipment or with an original acquisition cost of $7 million or more require a 30-calendar day congressional notification. Title to EDA items transfers at the point of origin, except for items located in Germany; those EDA items transfer title at the nearest point of debarkation outside of Germany. All purchasers or grant recipients must agree that they will not transfer title or possession of any defense article or related training or other defense services to any other country without prior consent from DOS pursuant to 22 U.S.C. 2753 and 22 U.S.C. 2314. <7. Interagency Relationships in Arms Sales> The decision-making and execution involved in a transfer of defense articles or services includes myriad stakeholders, from the President and Congress to small, two-person Security Cooperation Organizations in embassies around the world. Having granted to the President authority to carry out arms sales and exports, Congress oversees its conduct. In further delegation of authority, the Secretaries of State and Defense, through their departments, carry out functions outlined in statute, federal regulations, and executive orders. <7.1. State Department Policy Prerogatives> All security assistance programs are subject to the continuous supervision and general direction of the Secretary of State, to be consistent with U.S. foreign policy interests. DOS ensures partner and purchaser eligibility for arms transfer(s) and obtains required assurances from recipient countries and organizations. The State Department also reviews and approves export license requests for direct commercial sales of items on the United States Munitions List. As mentioned above, DOS submits to Congress, in its Congressional Budget Justification, an annual estimate of the total amount of transfers expected to be made to each foreign nation and an annual arms sale proposal report (Javits Report) required by law. Within the State Department, the Bureau of Political-Military Affairs (PM) is the main administrator for arms transfers, whether FMS or DCS. PM provides policy direction for sale and export of defense articles related to international security, security assistance, military operations, defense strategy and plans, and defense trade. Under PM, the Office of Regional Security and Arms Transfers (RSAT) manages the sale/transfer of U.S.-origin defense articles and services to foreign governments. PM/RSAT, which is responsible for ensuring that all FMS cases are properly reviewed within the State Department for consistency with U.S. foreign policy and national security objectives, receives all FMS cases from DSCA, DOD's FMS implementing agency. PM/RSAT officers coordinate with other department bureaus and offices and provide recommendations to PM leadership on whether to approve potential FMS sales. Finally, PM/RSAT officers work with PM leadership and DOD to make the required notifications, to include briefing congressional staff on the Javits Report. Each U.S. embassy country team, under the direction of the State Department and led by the Chief of Mission (usually the U.S. Ambassador), prepares an Integrated Country Strategy (ICS) detailing mission plans for engagements with the host country, including defense education, training, arms transfers, and other cooperation. Within the country team, the senior defense official (SDO) directs the preparation of the defense cooperation portion of ICS. The embassy's SCO (see footnote 41 ), normally called the Chief of the Office of Defense Cooperation (ODC Chief), annually forecasts and documents the budget for defense cooperation activities, based upon his or her own contacts with the host nation military and those of the SDO and other military stationed in-country. Both the SDO and ODC Chief work under the direct supervision of the Chief of Mission but report to, and are evaluated by, the geographic combatant command (COCOM) in the operational area where the host nation lies. They manage the delicate task of balancing the COCOM's view of necessary security cooperation and capacity-building activities with relevant State Department officials' views. The SDO and ODC Chief may submit their recommendations directly to both the Head of Mission and to the COCOM. Where there is a large ODC, with subordinate service representative offices, the service representatives may submit service-specific forecasts and budgets to their service and its implementing agency as well. The COCOM views may or may not be reflected in the mission's ICS submission, as the Head of Mission ultimately decides what the mission will forward. Many countries that receive U.S.-made defense articles and services have organizations similar to an ODC in their embassies or consulates in the United States. They interact with both State Department and DOD officials, as well as U.S. defense contractors, to initiate and coordinate pre-LOR (for FMS) or pre-DCS actions. <7.2. DOD Policy and Implementation Role> Notwithstanding the primary role of the State Department, DOD plays a central role in shaping arms sales policy and implementing arms transfers (as noted in sections above outlining the processes for FMS and DCS). DOD Directive 5132.03 promulgates DOD Policy and Responsibilities Relating to Security Cooperation, based on the National Defense Strategy and the National Military Strategy. Within DOD security cooperation, the Theater Campaign Plan (TCP) balances U.S. government strategic imperatives with host nation military-to-military engagement. Each country section of the TCP identifies significant security cooperation initiatives planned for the country and articulates specific, measurable, attainable, relevant, and time-bound objectives in support of such initiatives. The regional COCOM's corresponding, subordinate country cooperation plans drive the specific transfers of defense articles and services, including major arms transfers and training events. The objectives set within these strategies take into account the host nation's security environment, political will, willingness and ability to protect sensitive information and technologies, and absorptive capacity, as well as policy and legal constraints. The COCOM then passes its recommendations for FMS and EDA arms transfers to the Chairman of the Joint Chiefs of Staff (CJCS) and to the Under Secretary of Defense for Policy (USD (P)) for inclusion in the integrated country strategy and the joint regional strategy; they also identify obstacles to execution of plans, including shortfalls in security cooperation authorities or resources, joint capability shortfalls, or shortfalls in partners' capabilities. The CJCS is generally charged with providing military advice to the Secretary of Defense concerning security cooperation. The CJCS and the USD(P) are charged with developing and managing a process to address obstacles to campaign plan execution that the COCOMs identify. The office of the USD(P) is generally charged with representing DOD in security assistance and security cooperation matters, setting DOD's security cooperation priorities, and harmonizing these within a whole-of-government approach to engagements with allied and partner nations. The one assistant charged purely with leading security cooperation is the Director of the Defense Security Cooperation Agency. Selected tasks of this officer, normally a 3-star general or flag officer, working directly for the USD (P), include providing guidance to the DOD Components and DOD representatives to U.S. missions (i.e. senior defense officials) for the execution of DOD security cooperation programs; managing and administering those Title 10 and 22 programs for which DSCA has responsibility, consistent with security cooperation priorities; and coordinating the development of foreign disclosure and sales policies and procedures for defense information, technology, and systems (with the USD(P) and USD (Sustainment). In sum, DOD generally implement security cooperation programs on behalf of the Department of State, as part of broader foreign policy and national security strategies. Based on its authority under Title 22, the State Department must arbitrate among a large number stakeholders (e.g., partner nations, embassy country teams, COCOMs, Joint Staff and Office of the Secretary of Defense) and interests (e.g., economic gain for U.S. firms, technology security, long-term national security of the United States and its partners). <8. End-Use Monitoring (EUM)> The Arms Export Control Act (AECA) directs the President to establish a program that provides for the end-use monitoring for all defense articles and defense services sold, leased, or exported under the act. The program is required to provide reasonable assurance that the recipient is complying with the requirements imposed by the U.S. government with respect to use, transfers, and security of the articles and services, as well as that such articles and services are being used for the purposes for which they were provided. The executive branch has two formal EUM programs: Blue Lantern is for Direct Commercial Sales, while Golden Sentry is for Foreign Military Sales. If exported defense articles require specialized physical security and accounting, the Golden Sentry program conducts specialized Enhanced EUM. <8.1. State Department's Blue Lantern Program (DCS)> The State Department's Directorate for Defense Trade Controls administers the Blue Lantern program for articles and services on the USML exported via DCS. According to DOS, it includes pre-license, post-license, and post-shipment checks to verify the bona fides of foreign country consignees and end users, as well as verifying the legitimacy of proposed transactions and the compliance with U.S. defense export rules and policies. Typically conducted by U.S. embassy and consular staff, verifications occur in over 100 countries every year. If the Blue Lantern check determines an unfavorable use, it may result in the denial or revocation of the export license, the violator's entry on DDTC's watch list, or referral to Homeland Security Investigations or the FBI. In FY2018, with 35,779 authorized DCS export license applications, DOS initiated 466 Blue Lantern checks (268 pre-license, 89 post-shipment, and 109 containing both pre-license and post-shipment checks) in over 70 countries. In the same year, DOS closed 585 Blue Lantern cases, with 168 labeled "unfavorable." <8.2. DOD's Golden Sentry Program (FMS)> The Defense Security Cooperation Agency administers DOD's Golden Sentry program, which is the FMS counterpart of State's Blue Lantern program. Golden Sentry's objective is to ensure compliance with technology control requirements and to provide reasonable assurance that the recipients are complying with U.S. government requirements with respect to the use, transfer, and security of defense articles and services. The program includes actions to prevent misuse or unauthorized transfer of the articles or services from title transfer until disposal, with the type of article or service generally determining the level of monitoring required. In routine EUM, DOD's Security Cooperation Organizations (SCOs) are required to observe and report any potential misuse or unapproved transfer of FMS articles or services to the regional COCOM, DSCA, and the State Department. They must conduct their checks at least quarterly, and must document their checks in reporting to DSCA. In the case of arms, ammunition, and explosives, SCOs are required to apply the same standards of U.S. control to the items upon release to the purchaser. <8.3. Enhanced EUM Golden Sentry> Some security-sensitive exported or transferred defense articles require specialized physical security and accounting. These items are designated as requiring Enhanced End-Use Monitoring (EEUM) by a military service's export policy, or by interagency agreement, or through DOD policy resulting from consultation with Congress. The EEUM program is administered through Golden Sentry and requires DOD's SCOs in-country to conduct planned and coordinated visits to host nation installations, where they verify by serial number each EEUM-designated item on an annual basis. <9. Questions for Congressional Consideration> <9.1. Do Current Levels of Arms Sales and Exports Fulfill Statutory and Policy Objectives? > Section 1 of the AECA states, "An ultimate goal of the United States continues to be a world which is free from the scourge of war and the dangers and burdens of armaments; in which the use of force has been subordinated to the rule of law; and in which international adjustments to a changing world are achieved peacefully. In furtherance of that goal, it remains the policy of the United States to encourage regional arms control and disarmament agreements and to discourage arms races." The AECA proceeds to acknowledge and allow that arms transfers and cooperation are necessary to "maintain and foster the environment of international peace and security essential to social, economic, and political progress." These two paragraphs appear to draw a distinction between the policy aims of arms production and transfer on the one hand and, on the other, the burden [emphasis added] thereof as separate from economic endeavor and progress. Current Administration policy contained in NSPM-10 is to "bolster the security of the United States and our allies and partners," while preventing proliferation by exercising restraint and continuing to participate in multilateral nonproliferation arrangements such as the Missile Technology Control Regime and the Wassenaar Arrangement. It explicitly commits the U.S. government to continue to meet the requirements of all applicable statues, including the AECA, the FAA, the International Emergency Economic Powers Act, and the annual NDAAs. It also prioritizes efforts to "increase trade opportunities for United States companies, including by supporting United States industry with appropriate advocacy and trade promotion activities and by simplifying the United States regulatory environment." The document adds "a dynamic defense industrial base" as a named employment source and stipulates "economic security" as a requirement for national security and defense. Congress may consider whether current sales and exports of defense articles and services, at current levels, bolster the security of the U.S. and its allies, while simultaneously fostering U.S. industry and innovation. Overall, should the goals of increasing trade opportunities for U.S. companies be an explicit goal of U.S. arms sales policy? In light of the potential differences between 10 U.S.C. 2151 and the current United States Conventional Arms Transfer Policy, Congress may consider whether to reformulate the goals of the Arms Export Control Act in light of the contemporary national security situation, whether and to what extent economic security comprises a facet of national security including any effect on the defense industrial base (DIB) and the national technical industrial base (NTIB), and whether to determine the value of U.S. national arms production and export as part of overall U.S. exports and the degree to which desirability of arms production contributes to real long term economic growth. <9.2. Are Current Methods of Conducting Sales of Defense Articles and Services Consistent with the Intent and Objectives of the AECA?> In FY2018, foreign entities purchased $47.71 billion in FMS cases and the value of privately contracted DCS authorizations licensed by the State Department totaled $136.6 billion (see Table 1 and Table 2 , above). Congress may consider if this amount of annual arms sales is consistent with the intent of statute governing these sales. The FAA expresses, as U.S. policy, "the efforts of the United States and other friendly countries to promote peace and security continue to require measures of support based upon the principle of effective self-help and mutual aid." The AECA states that "all such sales be approved only when they are consistent with the foreign policy of the United States, the purposes of the foreign assistance program , and the economic and financial capability of the recipient country, with particular regard being given, where appropriate, to proper balance among such sales, grant military assistance, and economic assistance as well as to the impact of the sales on programs of social and economic development and on existing or incipient arms races." Section 1 of the AECA further limits U.S. arms sales, as policy, to levels extant when it was enacted: It is the sense of the Congress that the aggregate value of defense articles and defense services- (1) which are sold under section 2761 or section 2762 of this title; or (2) which are licensed or approved for export under section 2778 of this title to, for the use, or for benefit of the armed forces, police, intelligence, or other internal security forces of a foreign country or international organization under a commercial sales contract; in any fiscal year should not exceed current levels. Congress may consider whether and how it measures the relation between the 1976 level of arms sales and any contemporary level. <9.3. Are End Use Monitoring Programs Resourced Adequately?> Some critics of current EUM programs point to a potential disparity between the number of defense articles exported and the number of EUM investigations completed. For example, in the State Department's Blue Sentry Program in FY2018, DDTC authorized 35,779 export license applications. DOS initiated 466 Blue Lantern checks (268 pre-license, 89 post-shipment, and 109 containing both pre-license and post-shipment checks) in over 70 countries. This represents approximately 1.3 percent of adjudicated license applications. The State Department employed five full-time employees and six contractors to administer the program. Some analysts have argued that such a small staff could not possibly track everything that happens to billions of dollars' worth of defense articles transferred to dozens of foreign countries each year. Acting Assistant Secretary of State for Political-Military Affairs Tina Kaidanow testified that under current programs, there are a number of steps that the U.S government can take to endure proper end use of exported defense articles. She noted further that most U.S defense manufacturers are responsible for ensuring compliance with the ITAR, with personnel dedicated to ensuring such compliance while working closely with the State Department to address any compliance issues that may arise. <9.3.1. Appendix. Selected Legislative Restrictions on Sales and Export of U.S. Defense Articles> Since the enactment of the Foreign Assistance Act (FAA) in 1961, Congress has amended both the FAA and the AECA, as well as Title 10 U.S.C. (governing DOD) in order to limit the sale and export of U.S. defense articles to certain foreign countries. Additional limitations have been enacted in the annual State/Foreign Operations and Related Programs Appropriations Acts, and through the National Defense Authorization Acts. The following illustrative examples are not intended to be comprehensive. Restrictions Based on Human Rights Violations Section 502B(a)(2) of the FAA (22 U.S.C. 2304(a)(2)) prohibits, absent the exercise of a presidential waiver, security assistance to any country where the government engages in a consistent pattern of gross violations of internationally recognized human rights. "Security assistance" is defined here to include "sales of defense articles or services, extensions of credits (including participations in credits), and guaranties of loans" under the AECA. The U.S. "Leahy Laws," Section 620M of the FAA and 10 U.S.C. 362, prohibit U.S. security assistance to foreign security force units when credible evidence exists that the unit has committed a gross violation of human rights. However, these laws do not define security assistance, and in practice the executive branch applies them only to U.S.-funded transactions, excluding FMS or DCS. The Child Soldiers Prevention Act of 2008 ( P.L. 110-547 , 22 U.S.C 2370c-1), prohibits assistance to and licensing for direct commercial sales of military equipment to the government of a country that is clearly identified as having governmental armed forces, police, or other security forces, or government-supported armed groups, that recruit or use child soldiers. The Victims of Trafficking and Violence Protection Act of 2000, P.L. 106-386 , amended Section 502B of the FAA to require that the President report to the Congress on countries found to be involved in extreme forms of trafficking of persons. The act prohibits nonhumanitarian and nontrade-related aid, including security assistance, to countries that do not comply with minimum standards for eliminating trafficking in persons, subject to presidential waiver. Restrictions on Countries Supporting Terrorism Section 40 of the AECA (22 U.S.C. 2780) prohibits exporting or otherwise providing, directly or indirectly, any munitions item to a country whose government has repeatedly provided support for acts of international terrorism. Section 40A (22 U.S.C. 2781) prohibits any defense article or defense service from being sold or licensed for export to any county the President determines is not cooperating fully with United States antiterrorism efforts. The prohibitions contained in this section do not apply with respect to any transaction subject to reporting requirements under title V of the National Security Act of 1947, 50 U.S.C. 3091 et seq. Restrictions on the Process of Foreign Military Sales Section 830 of the FY2017 National Defense Authorization Act, P.L. 114-328 , required the Secretary of Defense to prescribe regulations to require the use of firm fixed-price contracts for Foreign Military Sales. Restrictions and Limitations on Specific Countries and Regions Libya: Section 404 of the International Security and Cooperation Act of 1985, P.L. 99-83 , which amended the FAA (22 U.S.C. 2439aa-8), authorized the President to prohibit any goods or technology, including technical data or other information, from being exported to Libya. Middle East Countries, Excluding Israel: Section 36(h)(1) of the AECA, P.L. 90-629 , 22 U.S.C 2776(h)(1), requires any certification relating to a proposed sale to Middle East countries, excluding Israel, to include a determination that the sale or export of the defense articles or defense services will not adversely affect Israel's qualitative military edge over military threats to Israel. West Bank and Gaza: Section 699 of the FY2003 Foreign Relations Authorization Act, P.L. 107-228 , prohibits the sale of defense articles or defense services to any person or entity whom "the President determines, based on a preponderance of the evidence, has knowingly transferred proscribed weapons to Palestinian entities in the West Bank or Gaza," for two years after congressional notification. Iraq: The FY2008 NDAA, Section 1228, P.L. 110-181 , required the President to implement a policy to control the export and transfer of defense articles into Iraq, with no defense articles to be provided to the Government of Iraq until the President certified to Congress that a registration and monitoring system was in place. Arab League Boycott of Israel: Section 564 of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995, P.L. 103-236 , stated, "No defense article or defense service may be sold or leased by the United States Government to any country or international organization that, as a matter of policy or practice, is known to have sent letters to United States firms requesting compliance with, or soliciting information regarding compliance with, the Arab League secondary or tertiary boycott of Israel " Saudi Arabia and Kuwait: Section 104 of the Dire Emergency Supplemental Appropriations and Transfers for Relief from the Effects of Natural Disasters, for Other Urgent Needs, and for Incremental Costs of "Operation Desert Shield/Desert Storm" Act of 1992, P.L. 102-229 , prohibited any funds appropriated in the act to conduct, support, or administer any sale of defense articles or defense services to Saudi Arabia or Kuwait until that country paid in full their commitments to the United States made during Operation Desert Shield/Storm. Restrictions on Defense Articles Related to Nuclear, Biological, and Chemical Weapons The AECA has a series of provisions limiting the export of defense items related to nuclear, biological, and chemical weapons (22 U.S.C. 2799aa). Those controls are explained in detail in CRS Report R41916, The U.S. Export Control System and the Export Control Reform Initiative , by Ian F. Fergusson and Paul K. Kerr.

The sale and export of U.S.-origin weapons to foreign countries ("defense articles and defense services," officially) are governed by an extensive set of laws, regulations, policies, and procedures. Congress has authorized such sales under two laws: The Foreign Assistance Act (FAA) of 1961, 22 U.S.C. §2151, et seq. The Arms Export Control Act (AECA) of 1976, 22 U.S.C. §2751, et seq. The FAA and AECA govern all transfers of U.S.-origin defense articles and services, whether they are commercial sales, government-to-government sales, or security assistance/security cooperation grants (or building partnership capacity programs provided by U.S. military personnel). These measures can be provided by Title 22 (Foreign Relations) or Title 10 (Armed Services) authorities. Arms sold or transferred under these authorities are regulated by the International Traffic in Arms Regulations (ITAR) and the U.S. Munitions List (USML), which are located in Title 22, Parts 120-130 of the Code of Federal Regulations (CFR). The two main methods for the sale and export of U.S.-made weapons are the Foreign Military Sales (FMS) program and Direct Commercial Sales (DCS) licenses. Some other arms sales occur from current Department of Defense (DOD) stocks through Excess Defense Articles (EDA) provisions. For FMS, the U.S. government procures defense articles as an intermediary for foreign partners' acquisition of defense articles and defense services, which ensures that the articles have the same benefits and protections that apply to the U.S. military's acquisition of its own articles and services. For DCS, registered U.S. firms may sell defense articles directly to foreign partners though licenses and agreements received from the Department of State. Firms are still required to obtain State Department approval, and for major sales DOD review and congressional notification is required. In some cases where U.S. firms have entered into international partnerships to produce some major weapons systems, comprehensive export regulations under 22 CFR 126.14 are intended to allow exports and technical data for those systems without having to go through the licensing process. Congress has amended the FAA and AECA to restrict arms sales to foreign entities for a variety of reasons . These include restrictions on transfers to countries that violate human rights and states that support terrorism, as well as limitations on specific countries at certain times, such as any Middle East countries whose import of U.S. arms would adversely affect Israel's qualitative military edge. Arms transfers to Taiwan are governed under the Taiwan Relations Act of 1979, P.L. 96-8 , 22 U.S.C. § 3301 et seq. Under the AECA, Congress can also overturn individual notified arms sales via a joint resolution . During the 116 th Congress, such joint resolutions were introduced in opposition to planned arms sales to Saudi Arabia, but did not pass . All U.S. defense articles and defense services sold, leased, or exported under the AECA are subject to end-use monitoring (to provide reasonable assurance that the recipient is complying with the requirements imposed by the U.S. government with respect to use, transfers, and security of the articles and services) to be conducted by the President (Section 40A of the AECA) to ensure compliance with U.S. arms export rules and policies. FMS transfers are monitored under DOD's Golden Sentry program and DCS transfers are monitored under the State Department's Blue Lantern program.

crs_R46237

crs_R46237_0

<1. 1. What is a "census"?> A census, as distinguished from a survey, is intended to be a complete count of the population. A scientifically designed and conducted survey covers a sample of the population, and the results are generalizable to the whole population. <2. 2. Why is a census necessary?> The U.S. decennial census is, foremost, a constitutional requirement. The Enumeration Clause of the Constitution (Article I, Section 2, clause 3, as modified by Section 2 of the Fourteenth Amendment) mandates "counting the whole number of persons in each State" every 10 years in order to apportion seats in the House of Representatives. The first census occurred in 1790; 2020 marks the 24 th time the national count has taken place. The modern census is important for more than House apportionment. Decennial census data are used for within-state redistricting the redrawing of legislative districts. Decennial census and related data are used in certain formulas that determine states' and localities' annual allocations of federal funds, estimated by the Census Bureau as of FY2015 at $689.3 billion and by an academic researcher as of FY2017 at $1.5 trillion. The decennial counts also are the foundation for estimates of current population size between censuses and projections of future size. Businesses, nonprofit organizations, researchers, and all levels of government are steady consumers of decennial and related data collected by the Census Bureau. <3. 3. When will the census happen?> April 1, 2020, is the official Census Day. The count starts before, and census activities continue beyond, April 1, however. On January 21, 2020, the Census Bureau began the enumeration by counting the population in remote Toksook Bay, Alaska. The bureau is to start making in-person visits to nonrespondents in May 2020. By law, the bureau must provide the official numbers for House apportionment to the President no later than December 31, 2020. Also by law, states that requested 2020 population counts for, as examples, American Indian areas, counties, cities, towns, census tracts, census block groups, census blocks, and "state-specified congressional, legislative, and voting districts," must receive the data no later than March 31, 2021. The final design of the file containing these data remains to be specified, but the file will include data on "voting age, race, ethnicity, occupancy status, and (new for the 2020 Census) group quarters." The rollout of other census products is scheduled to continue until 2023. <4. 4. What has the Census Bureau done to promote awareness of the census and build support for it?> <4.1. The Census Barriers, Attitudes, and Motivators Study> The Census Bureau has researched ways to engage the people who likely will be hardest to count in 2020. For example, the Census Barriers, Attitudes, and Motivators Study (CBAMS), also called the "2020 Census Planning Survey," was conducted from February 20 through April 17, 2018, with a nationwide sample of 50,000 households. It covered, according to the bureau, "a range of topics related to census participation and completion." Respondents could complete the survey in English or Spanish, online or by mail. "Approximately 17,500 people responded to the survey, which was then weighted to be representative of all householders in the United States ages 18 and older." The bureau focused on differences in responses "across race, age, gender, education, and country of birth." Qualitative information gathered from 42 focus groups in 14 locations nationwide from March 14, 2018, through April 19, 2018, supplemented the survey results. The bureau reported that the use of focus groups was "designed to help the research team understand the attitudes of small demographic groups or groups that were otherwise difficult to reach with the survey." The "chief barrier" to 2020 census participation identified in the survey and the focus groups was "a lack of understanding of the purpose and process of the census." The focus groups showed this lack to be "associated with several negative attitudes toward the census, including apathy, privacy concerns, fear of repercussions, and general distrust of government." The survey results indicated that "certain demographic characteristics, including low levels of education, being young, and being of racial or ethnic minority groups," were related to "low levels of intent" to respond to the 2020 census. The survey and the qualitative findings, however, "revealed common motivators" for answering the census. Despite "important differences" among demographic groups, "funding for public services such as hospitals, schools, and roads is a key motivator across groups." The bureau observed that respondents resembling the people in the focus groups, especially, might understand "the importance and purpose of the census if they make the connection between completing a census form and the possibility of an increase in funding or support" for their communities. <4.2. Communications Strategy> The bureau used information such as gained from CBAMS to inform its $500 million communications strategy, developed by the bureau and its communications contractor, VMLY&R. <4.2.1. Advertising> As the bureau has explained, VMLY&R includes "multicultural advertising agencies, seasoned in reaching diverse audiences." An advertising campaign "in English and 12 other languages" will be part of the communications strategy. The languages are Arabic, Chinese (Mandarin and Cantonese), French, Haitian Creole, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Tagalog, and Vietnamese. As discussed under question 11, below, online questionnaires are to be available in the same languages. The bureau's schedule calls for paid advertising to begin running in January 2020, "across multiple platforms, including print and digital outlets, television and radio, billboards," and ads "at transit stations, grocery stores, and movie theaters." The two largest shares of the total paid media campaign budget are 39.0% for television and 29.1% for digital media. The campaign is expected to reach "99% of all households" nationwide, "particularly in multicultural and hard-to-count populations." <4.2.2. The Partnership Program> Another part of the communications strategy is the partnership program, which, in the bureau's explanation, "integrates two essential programs." The Community Partnership Engagement Program "employs the strengths of tribal, state, and local governments, as well as community-based organizations, faith-based organizations, schools, media, businesses, social services, ethnic organizations, and others." Much of the community partnership work is being "conducted by partnership specialists who are employed in the field leading up to and during" the census. The National Partnership Program "builds and strengthens relationships with businesses, industries and organizations with national reach." The two programs "are intended to be complementary" and draw on "the expertise of various Census Bureau employees to help maximize" census participation. The community partnership effort has, among other goals, the formation of Complete Count Committees (CCCs) in all 50 states, tribal areas, the District of Columbia, Puerto Rico, and cities with at least 200,000 residents. A CCC, according to the Census Bureau, comprises "a broad spectrum of government and community leaders from education, business, healthcare," and other organizations. CCC members are to develop census awareness and encourage cooperation with the census "based upon their knowledge of the local community." Still being formed, CCCs are "identifying budget resources and establishing local work plans" for implementation in 2020. The bureau has compiled and posted on its website a guide for those interested in forming CCCs and an alphabetized list of existing committees, with any available contact information. An additional component of the partnership program is Statistics in Schools, which, in general, promotes statistical literacy for students from kindergarten through high school and, specifically, explains to students why the census is important. One goal is for students to bring this message home. A related goal is to make school-age children and the adults in their households aware of the need to count all children in a household, being sure not to miss any babies or other children under age five. They sometimes can be erroneously omitted from the list of household residents, as has happened in past censuses. <4.3. The Response Outreach Area Mapper> The Census Bureau has developed an application, the Response Outreach Area Mapper (ROAM), to facilitate identifying hard-to-count areas and provide socioeconomic and demographic profiles of these areas using American Community Survey (ACS) estimates. ROAM has helped the bureau, in its words, "create a tailored communications and partnership campaign" and inform "outreach activities and hiring practices across the country," in order to hire "an adequate number of staff and staff with the necessary language skills for a given area." One advantage of ROAM for census partners is that they can use it to identify specific areas most needing their attention. <5. 5. How and when will people know that the census is underway?> As the Census Bureau has explained, it will let most people know by mail. In March 2020, about 95% of U.S. households are to receive mailed "invitations" from the bureau to answer the census online. A household that does not respond is to receive reminders in the mail, then, in April, a paper questionnaire to complete. Almost 5% of households including those who receive their mail at post office boxes and those recently displaced by natural disasters are to have an invitation delivered by census workers. Not quite 1% of households are to be enumerated in person during the initial phase of the census. These households are in remote areas, like parts of Alaska and northern Maine and certain American Indian areas that have asked to be counted in person. <6. 6. What questions will the census ask?> The census form asks for the following basic information: the number of people living or staying in the respondent's home as of April 1, 2020; whether any additional people living or staying in the home were not counted; whether anyone in the home usually lives or stays somewhere else; whether the home is owned, with or without a mortgage, or rented; the respondent's telephone number (in case the Census Bureau needs to contact the person to clarify any responses); the name of each person in the household and the person's relationship to the respondent; each person's sex; the person's age and birthdate; whether the person is "of Hispanic, Latino, or Spanish origin"; and the person's race. The bureau has emphasized that the census never asks a person for his or her Social Security number or bank or credit card account information, for any "money or donations," or for "anything on behalf of a political party." A form purporting to be a census form that requests such information is not from the Census Bureau and is not legitimate. <7. 7. Some people expected the census form to include a Middle Eastern or North African (MENA) racial or ethnic category. Why doesn't it?> The Census Bureau announced on January 26, 2018, that the form would not have a separate MENA category. A study the bureau released in 2017 noted that the "inclusion of a MENA category" in the 2015 National Content Test helped MENA respondents "more accurately report their MENA identities" and characterized the use of this category as "optimal." Later feedback, however, reportedly indicated the opinion of "a large segment" of the MENA population "that MENA should be treated as a category not for race but ethnicity," which "the bureau so far has not specifically tested." People of MENA background may continue to report themselves as "White." Two examples of "White" shown on the census form are Lebanese and Egyptian, both in the MENA category. The current Office of Management and Budget standards for federal reporting of race and ethnicity, which apply to the Census Bureau, designate "White" as "A person having origins in any of the original peoples of Europe, the Middle East, or North Africa." <8. 8. The census form does not have a question about citizenship, despite the widespread public perception that it might. What happened?> The 2020 census will collect only the basic data described under question 6, above. It will not ask people for detailed social, demographic, economic, or housing information, including about their legal, immigration, or citizenship status. A citizenship question was proposed, challenged, and ultimately not retained on the census form. Secretary of Commerce Wilbur Ross announced on March 26, 2018, that the 2020 census form would include the current American Community Survey question on citizenship. The question is, as it has been in the ACS since before 2010, "Is this person a citizen of the United States?" A checkbox appears beside each of the following possible answers: "Yes, born in the United States"; "Yes, born in Puerto Rico, Guam, the U.S. Virgin Islands, or Northern Marianas"; "Yes, born abroad of U.S. citizen parent or parents"; "Yes, U.S. citizen by naturalization Print year of naturalization"; and "No, not a U.S. citizen." The Department of Justice maintained that the census, not a survey like the ACS, was "the most appropriate vehicle for collecting" citizenship data "critical to the Department's enforcement of Section 2 of the Voting Rights Act" and its "protections against racial discrimination in voting." Opponents of the citizenship question expressed concern that it might depress immigrants' census response rates or cause them to falsify data, especially if their status in the United States, or that of their friends or families, was illegal. Census Bureau fieldworkers in 2017 noted heightened anxiety about data confidentiality among certain foreign-born respondents and reluctance to answer questions, particularly about citizenship status. Six former bureau directors signed a January 26, 2018, letter to Secretary Ross, opposing the late-date introduction of a citizenship question that, at the time, had not been tested for the 2020 census. Multiple lawsuits were filed to block the question. Judge Jesse Furman, U.S. District Court for the Southern District of New York, ruled on July 26, 2018, that a consolidated suit by the State of New York and others could proceed. The U.S. Supreme Court heard the case as Department of Commerce et al. v. New York et al. on April 23, 2019. The Court's decision, written by Chief Justice John Roberts and issued on June 27, 2019, found that the addition of a citizenship question did not violate the Enumeration Clause of the Constitution or the Census Act (Title 13, U.S. Code , Census ), but the Court held that Secretary Ross's decision violated the Administrative Procedure Act because his sole stated reason for adding the citizenship question was not the real reason for his decision. On July 11, 2019, the President issued an executive order stating that the ruling had "made it impossible, as a practical matter, to include a citizenship question on the 2020 decennial census questionnaire." The order, instead, directed "all executive departments and agencies" to give the department "the maximum assistance permissible, consistent with law, in determining the number of citizens and non-citizens in the country, including by providing any access" requested by the department to relevant administrative records. This action, the order continued, "will ensure that the Department will have access to all available records in time for use in conjunction with the census." On September 13, 2019, the organization LUPE and others filed a suit in the U.S. District Court for the District of Maryland against the Commerce Secretary, the Director of the Census Bureau, the Commerce Department, and the Census Bureau, seeking to block implementation of the executive order. The outcome of the suit remains to be determined. <9. 9. Where are all the detailed socioeconomic and housing questions that some people say the census asks?> The American Community Survey is occasionally confused with the decennial census. In past decades, through the 2000 census, the census consisted of a short form, with questions that applied to all U.S. residents, and a long form, which included the short form questions plus many more questions covering social, demographic, economic, and housing topics. The long form went to a representative sample of all U.S. residents, a 17% sample in 2000, and the results could be generalized to the whole resident population. The bureau discontinued the long form after 2000 and launched its replacement, the ACS, in 2005 and 2006. The bureau considers the ACS a part of the decennial census program but conducts it separately from the census. Although the census is administered once a decade, the ACS goes to a small sample of the population every month and, as did the long form, collects myriad data. ACS results are aggregated over time to produce one-year and five-year estimates. For the most populous areas, those with at least 65,000 people, sample data collected over just 12 months can be generalized to an area's whole population. For less populous areas, down to below 20,000 people, data have to be collected over five years to generate representative samples. All areas, however, receive new sets of estimates (either one-year or five-year estimates) every year. <10. 10. What options will people have for responding?> In 2020, for the first time, people will be able to answer the census online. Some people have heard or assumed that because they can answer online, they must answer online or the census will miss them. This concern is based on inaccurate perceptions. The bureau is emphasizing online responses because they can be quick and easy and because they can help control the cost of the census. Anyone who lacks internet access or simply prefers not to respond online, however, can fill out a paper questionnaire. People also will be able to submit their census answers by telephone, by calling Census Questionnaire Assistance centers. <11. 11. How can people answer the census if they are not proficient in English or need language support?> The Census Bureau will make the 2020 census questionnaire available online in 12 non-English languages: Arabic, Chinese (Mandarin and Cantonese), French, Haitian Creole, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Tagalog, and Vietnamese. The bureau will provide Census Questionnaire Assistance in the same languages and through a telecommunications device for the deaf. In addition, the bureau will make field enumeration materials available in Spanish and will provide bilingual (English and Spanish) paper questionnaires and related mailings. It also will provide language guides, language glossaries, and language identification cards in 59 non-English languages. The language guides will be available in video and print, including large print, and braille, as well as American Sign Language. <12. 12. Can people ignore the census or refuse to answer it if they wish?> Refusing or willfully neglecting to answer the census is illegal. Title 13, U.S. Code , Section 141, "Population and other census information," specifies that a decennial census is to be conducted. Section 221, "Refusal or neglect to answer questions; false answers," states, in full (a) Whoever, being over eighteen years of age, refuses or willfully neglects, when requested by the Secretary, or by any other authorized officer or employee of the Department of Commerce or bureau or agency thereof acting under the instructions of the Secretary or authorized officer, to answer, to the best of his knowledge, any of the questions on any schedule submitted to him in connection with any census or survey provided for by subchapters I, II, IV, and V of chapter 5 of this title, applying to himself or to the family to which he belongs or is related, or to the farm or farms of which he or his family is the occupant, shall be fined not more than $100. (b) Whoever, when answering questions described in subsection (a) of this section, and under the conditions or circumstances described in such subsection, willfully gives any answer that is false, shall be fined not more than $500. (c) Not withstanding any other provision of this title, no person shall be compelled to disclose information relative to his religious beliefs or to membership in a religious body. Title 18, U.S. Code , Crimes and Criminal Procedure , Sections 3559 "Sentencing Classification of Offenses," and 3571, "Sentence of Fine," effectively update the penalties for certain broad classes of offenses, without any specific mention of the census. Under this title and these sections, the possible penalty for the type of offense constituted by refusing or willfully neglecting to answer the census (13 U.S.C. 221(a)) is a fine of not more than $5,000. The possible penalty for providing any false census answer (13 U.S.C. 221(b)) is also $5,000. <13. 13. Some people say that they filled out a census form in 2018 or 2019. Do they still have to answer the 2020 census?> Yes. The Census Bureau did conduct limited 2020 census tests in 2018 and 2019. The 2018 test was the so-called dress rehearsal for the 2020 census, which the bureau described as "the last operational field test" before the actual census. The test was designed to "assess the readiness and integration of planned" 2020 "operations, procedures, systems and field infrastructure." It began in 2017 with address canvassing (explained under question 14. How will the Census Bureau know where people live so that it can contact them in 2020? , below) in Bluefield-Beckley-Oak Hill, West Virginia; Pierce County, Washington; and Providence County, Rhode Island. The enumeration phase of the test occurred in 2018 in Providence County only. As the bureau marked the "successful completion" of the test, a bureau official noted that work would continue through 2019 "to refine and scale" census systems "to ensure the best possible performance" in 2020. In 2019, the bureau selected a nationally representative sample of about 480,000 housing unit addresses to test how a proposed citizenship question might affect census response rates. The test did not involve nonresponse follow-up in the field. Although respondents' cooperation with these tests was helpful to the Census Bureau, the tests were not the actual decennial census. The 2020 census, the complete count of the U.S. resident population, is to occur only in 2020. Even if a person participated in a census test, the person still is obligated to answer the 2020 census questions and can be part of the census count only by doing so. <14. 14. How will the Census Bureau know where people live so that it can contact them in 2020?> Even though people will be able to answer the census online, an accurate Master Address File, with the addresses, geocodes, and other attributes of living quarters, will be, as in past decades, the foundation for contacting the public and conducting a good census. It will enable the bureau to notify the public about the census and, as necessary, send census forms and enumerators to nonresponding households. For the 2010 census, the bureau hired about 150,000 "address canvassers" to walk 11 million census blocks, updating addresses and maps as they went. In preparation for 2020, the bureau created Block Assessment, Research, and Classification Application software to compare satellite images of the United States at successive times. Using this software, the bureau could identify new housing developments, changes in existing houses, and other houses that were built after 2010. The bureau could compare, too, "the number of housing units in current imagery with the number of addresses on file for each block." Satellite imagery enabled the bureau to verify 65% of addresses without going into the field, leaving 35% for field verification. The bureau recruited and trained about 32,000 temporary workers to verify more than 50,000 addresses nationwide, covering about 1.1 million census blocks. On August 12, 2019, the bureau announced the start of this work, the first major field operation of the 2020 census. The operation ended on October 11, 2019. <15. 15. What other census jobs are still available?> The bureau expects to hire up to 500,000 temporary census field workers. Enumerators for the nonresponse follow-up operation, beginning in May 2020 and continuing through early July, are the main example. They will go door-to-door, collecting data from households that have not yet answered the census online, by mail, or by phone. Additionally, in certain remote areas, such as northern Maine and Alaska, visits from census-takers may be the only way for residents to report their census data. <16. 16. Who can apply for these jobs, and when?> According to a bureau official, "Recent high school graduates, veterans, retirees, military spouses, seasonal workers," and people who are bilingual are "highly encouraged to apply." Others are welcome, too. "It's important we hire people in every community in order to have a complete and accurate census," the official said. People are encouraged to apply now to be considered for positions in the spring of 2020. Recruitment has begun; paid training is to occur in March and April. <17. 17. What are the requirements for temporary census workers?> To qualify for temporary census employment, a person must be at least age 18, generally must be a U.S. citizen, must be proficient in English, must have a valid email address, and must complete an application that includes the applicant's Social Security number and answers to a set of assessment questions. For some positions, the applicant has to fill out a background questionnaire. Applicants must be fingerprinted, and their fingerprint images will go to the FBI to be processed and checked for criminal records, although a criminal record will not invariably disqualify an applicant. <18. 18. What are the benefits of being a temporary census worker?> Pay rates, which will vary according to where census jobs are located, will range from $13.50 to $30.00 an hour. Workers will receive paid training. They will be paid weekly, and their hours of work will be flexible. Veterans may be eligible for veterans' preference in hiring, and census employment has no upper age limit. <19. 19. How can the public know that authorized census workers, not impostors or criminals, are in their neighborhoods and knocking on their doors?> Every census field worker should have an identification badge (ID) that shows the worker's photograph, an expiration date for the ID, and a U.S. Department of Commerce watermark. Every respondent can check this identification and, if unsure about its authenticity, contact a regional census center to talk to a bureau representative. <20. 20. The census form asks people to report sensitive personal information. How can they be sure that the confidentiality of these data will be protected?> Legal protections for census data exist, and the Census Bureau also continues working to address cybersecurity vulnerabilities that have been, or are being, identified. <20.1. Legal Protections> Title 13, U.S. Code , both requires respondents to provide their data and provides for maintaining the confidentiality of data on individuals. Title 13, Section 9, "Information as confidential; exception," states, in part (a) Neither the Secretary, nor any other officer of employee of the Department of Commerce or bureau or agency thereof, or local government census liaison, may, except as provided in section 8 or 16 or chapter 10 of this title or section 210 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1998 or section 2(f) of the Census of Agriculture Act of 1997 (1) use the information furnished under the provisions of this title for any purpose other than the statistical purposes for which it is supplied; or (2) make any publication whereby the data furnished by any particular establishment or individual under this title can be identified; or (3) permit anyone other than the sworn officers and employees of the Department or bureau or agency thereof to examine the individual reports. No department, bureau, agency, officer, or employee of the Government, except the Secretary in carrying out the purposes of this title, shall require, for any reason, copies of census reports which have been retained by any such establishment or individual. Copies of census reports which have been so retained shall be immune from legal process, and shall not, without the consent of the individual or establishment concerned, be admitted as evidence or used for any purpose in any action, suit, or other judicial or administrative proceeding. Title 13, Section 214, "Wrongful Disclosure of Information," states, in full Whoever, being or having been an employee or staff member referred to in subchapter II of chapter 1 of this title, having taken and subscribed to the oath of office, or having sworn to observe the limitations imposed by section 9 of this title, or whoever, being or having been a census liaison within the meaning of section 16 of this title, publishes or communicates any information, the disclosure of which is prohibited under the provisions of section 9 of this title, and which comes into his possession by reason of his being employed (or otherwise providing services) under the provisions of this title, shall be fined not more than $5,000 or imprisoned not more than 5 years, or both. Under Title 18, Sections 3559 and 3571, the possible penalty for disclosing "any information, the disclosure of which is prohibited" (13 U.S.C. 214) is a substantially increased fine of not more than $250,000 or imprisonment of less than five years, or both. <20.2. Cybersecurity> The Census Bureau's operational plan has acknowledged the risk that "cybersecurity incidents," including data breaches and denial-of-service attacks, could affect its information technology (IT) systems, such as the online census questionnaires, "mobile devices used for fieldwork, and data processing and storage systems." Under the plan, "IT security controls will be put in place to protect the confidentiality, integrity, and availability of the IT systems and data," with the goal of preventing any such incidents from negatively affecting census operations. At a July 24, 2019, congressional hearing, Census Bureau Director Steven Dillingham summarized the bureau's cybersecurity efforts for the 2020 census. He stated, in part A key feature of the security is encryption of data at every stage in transit over the internet, at rest within our systems, and on the enumeration devices. Also, enumeration devices are secured with multiple credentials, and if a device is lost, it will be remotely disabled and have all its contents wiped. Our cybersecurity program is designed to adapt and respond to a changing threat landscape. We incorporate protections in our technology, have processes to continuously monitor systems, and have a team ready to respond immediately to any potential threat. The Census Bureau works with the Department of Homeland Security, the federal intelligence community, and industry experts to share threat intelligence, giving us the most visibility possible to enable immediate action to protect data. With this cooperation, we identify threats early so that we may proactively respond and improve security. Our developers and security engineers work together to integrate security into systems design and development. Our systems are independently assessed for cybersecurity before deployment, and ongoing testing of cybersecurity capabilities is conducted throughout the time systems are operational. Security staff monitor our systems for cybersecurity vulnerabilities with industry-leading tools. We continuously test for more than 100,000 known vulnerabilities, with thousands of new potential vulnerabilities added to the list on a regular basis. If a vulnerability is identified, or security enhancement required, the security team will act quickly to ensure the most effective security posture. At the same hearing, the Government Accountability Office (GAO) noted delays or gaps in the bureau's progress toward cybersecurity for 2020: The Bureau has established a risk management framework that requires it to conduct a full security assessment for nearly all the systems expected to be used for the 2020 Census and, if deficiencies are identified, to determine the corrective actions needed to remediate those deficiencies. As of the end of May 2019, the Bureau had over 330 corrective actions from its security assessments that needed to be addressed, including 217 that were considered "high-risk" or "very high-risk." However, of these 217 corrective actions, the Bureau identified 104 as being delayed. Further, 74 of the 104 were delayed by 60 or more days. According to the Bureau, these corrective actions were delayed due to technical challenges or resource constraints. GAO recently recommended that the Bureau take steps to ensure that identified corrective actions for cybersecurity weaknesses are implemented within prescribed time frames. GAO commended the bureau for working with the Department of Homeland Security (DHS) "to support" its "cybersecurity efforts." During the past two years, as a result of these activities, the Bureau has received 42 recommendations from DHS to improve its cybersecurity posture. GAO recently recommended that the Bureau implement a formal process for tracking and executing appropriate corrective actions to remediate cybersecurity findings identified by DHS. Implementing the recommendation would help better ensure that DHS's efforts result in improvements to the Bureau's cybersecurity posture. The GAO testimony also called attention to a Commerce Department Office of Inspector General (IG) report identifying challenges in the bureau's "cloud based systems" supporting the census. The bureau "agreed with all eight" of the IG's recommendations concerning these systems and "identified actions taken to address them." In addition, recognizing that "many of the same digital and social channels" being used to promote the census can work against it as well, the bureau established a "trust and safety team" to combat "the spread of misinformation (incorrect information spread unintentionally) and disinformation (incorrect information spread intentionally)." According to the bureau, the team comprises "more than a dozen communications and social media experts under the executive leadership of career senior officials." It is coordinating the bureau's "efforts with external technology and social media platforms, partner and stakeholder organizations, and cybersecurity officials." Drawing on "best practices from the public and private sectors," the team is monitoring "all available channels and open platforms for misinformation and disinformation about the census." The bureau also has launched a "Fighting 2020 Census Rumors" page on its website and has asked members of the public to email [email address scrubbed] if they see any "resources," social media postings, or websites that they think contain incorrect information about the census. Noteworthy in this context is a December 19, 2019, press report of an announcement by the social media company Facebook that, starting in 2020, it "will remove posts, photos," and other contents "that mislead people" about the census, "aiming to prevent malicious actors from interfering" with the process. "Under the new rules, Facebook will ban posts from misrepresenting when and how the census occurs, who can participate and what happens to the personal information people submit to the government, company executives said." According to the article, "Facebook and other tech giants, including Google and Twitter, have huddled with government officials in recent months to prevent census disinformation." Other companies "have unveiled their own defensive measures: Google in December said it prohibited ads and YouTube videos that aim to misinform about the 2020 count. Twitter's rules, meanwhile, prohibit 'misleading information about how to participate in an election or other civic event'," which presumably could include the census.

April 1, 2020, will mark the official date of the 24 th U.S. decennial census. Mandated by the Constitution and federal law, the census is considered a cornerstone of the nation's representative democracy. Nevertheless, an enumeration that is complete and accurate is difficult to achieve. Among other challenges, the census is often misunderstood, mischaracterized, feared, or avoided. This report addresses common questions concerning the 2020 census. The report is intended to provide information about the census, including clarifying various aspects of the census process. Among the topics covered are the origin and purpose of the census; the dates of key census activities; what the Census Bureau has done to promote the enumeration and gain cooperation with it, such as background research on hard-to-count groups and areas, and outreach to them and the broader public through a $500 million communications strategy that includes paid advertising; what basic data the census will collect, largely about how many people live in each household; each person's sex, age, birthdate, race, Hispanic or non-Hispanic ethnicity, and relationship to the person filling out the census form; and whether the housing unit is owned or rented; what information, the Census Bureau has explained, the census never collects, including Social Security numbers, bank or credit card account information, money, or anything on behalf of a political party; why people who consider themselves to be of Middle Eastern or North African race or ethnicity will not be able to report themselves as such on the census questionnaire; clarification that the census will not include a citizenship, nationality, immigration, or other related question; how the Census Bureau will collect detailed socioeconomic and housing data separately from the census; clarification that people have several different options for answering the census—online, on paper, or by telephone—even though online responses are officially most encouraged; language support for the census, including online questionnaires in English and 12 non-English languages, Census Questionnaire Assistance by telephone in the same languages and through a telecommunications device for the deaf, and language guides in 59 non-English languages that will be available in video, standard and large print, braille, and American Sign Language; legal requirement to answer the census and possible $5,000 penalty for nonresponse or false answers; clarification that people must respond to the 2020 census even if they participated in the 2018 or 2019 census tests; the process for updating the Master Address File, the basis for contacting the population about the start of the census and following up with nonrespondents; how and when people can become employed as temporary 2020 census workers, what the requirements are for being hired, and what this work can offer to employees; how the public can identify census workers to be sure that they are legitimate; and legal and cybersecurity protections for confidential census information.

crs_R46244

crs_R46244_0

<1. Introduction> Congress directs the U.S. Environmental Protection Agency (EPA) to implement the Renewable Fuel Standard (RFS) a mandate that requires U.S. transportation fuel to contain a minimum volume of renewable fuel. Every year obligated parties (including small refiners) demonstrate to EPA their compliance with the mandate. The EPA may grant small refineries an exemption from the RFS for a compliance period, if they can prove compliance would subject them to disproportionate economic hardship. Over the last few years, this programmatic action, once routine, has come under increasing scrutiny from some Members of Congress and stakeholders. The debate regarding small refinery exemptions (SREs) for the RFS has intensified, as both the number of SREs granted and the total exempted volume of gasoline and diesel has increased in recent years. At the core of the SRE policy discussion are three factors: (1) the SRE statutory requirements, (2) the EPA's SRE issuance process, and (3) the impact of SREs on meeting the statutory RFS volume requirements. There are various perspectives about SREs. Some Members of Congress and stakeholders have expressed their dissatisfaction with the SREs granted under the Trump Administration. For example, some biofuel organizations argue that the method used to grant SREs, the number of SREs issued in recent years, and the accounting for the exempted fuel in recent annual rulemakings, have undercut demand for biofuel, created market uncertainty, and violated the statute, among other things. Other Members of Congress and stakeholders contend that SREs alleviate the economic burden of complying with the mandate for some refineries, that SREs do not directly impact biofuel demand, and that SREs are a symptom of a larger policy problem, among other things. This report in a question and answer format provides information about SREs for the RFS and discusses related congressional and Executive Branch actions. More specifically, the report provides an overview of small refineries, the small refinery exemption process, challenges to EPA decisions on petitions and to its methodology for evaluating petitions, and gives a synopsis of recent RFS activity, including the new SRE projection methodology finalized by EPA. As discussed later in this report, much of the information about how EPA manages the SRE process is not publicly available because it involves confidential business information (CBI). The information provided in this report is based on a review of the statute and agency materials, as well as general knowledge about the program gleaned from various sources. The report also summarizes congressional bills that address small refinery exemptions and presents other items to consider when discussing small refinery exemptions. The report does not analyze the opportunities and challenges stakeholders may encounter from potential action taken by Congress or the Executive Branch. <2. Frequently Asked Questions> The following sections respond to 17 frequently asked questions about the RFS and small refinery exemptions. <2.1. 1. What is the RFS?> The RFS requires U.S. transportation fuel to contain a minimum volume of renewable fuel. The RFS statute specifies minimum annual volume targets (in billions of gallons) requiring 12.95 billion gallons of renewable fuel in 2010 and ascending to 36 billion gallons in 2022 ( Figure 1 ). The EPA Administrator has statutory authority to determine the volume amounts after 2022. The statute outlines the volume requirements in tables for four categories: total renewable fuel, total advanced biofuel, cellulosic biofuel, and biomass-based diesel. Both cellulosic biofuel and biomass-based diesel are a subset of advanced biofuel. Thus, the total renewable fuel statutory volume required for any given year equates to the sum of conventional biofuel (i.e., corn starch-based ethanol, which is unspecified in statute) and advanced biofuel (which is specified in statute). For each year, EPA converts the total volume requirement into a percentage standard that each obligated party must meet (based on projected gasoline and diesel consumption in that year). The statute requires that EPA regulate RFS compliance using a tradable credit system. Obligated parties (generally, refiners and importers) submit credits called renewable identification numbers (RINs) to EPA for each gallon in their annual obligation. In short, this annual obligation, referred to as the renewable volume obligation (RVO), is the obligated party's total gasoline and diesel sales multiplied by the annual renewable fuel percentage standards announced by EPA for each category of renewable fuel. The statute gives the EPA Administrator the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail. More specifically, the statute provides a general waiver authority for the overall RFS and waivers for two types of advanced biofuel: cellulosic biofuel and biomass-based diesel. Also, the statute requires that the EPA Administrator modify the applicable volumes of the RFS in 2016 and the years thereafter if certain conditions are met (this action is referred to by some as the RFS "reset"). <2.2. 2. What is a small refinery?> A refinery is a facility that converts raw materials (e.g., crude oil) into finished products (e.g., gasoline). The statute defines a "small" refinery as "a refinery for which the average aggregate daily crude oil throughput for a calendar year (as determined by dividing the aggregate throughput for the calendar year by the number of days in the calendar year) does not exceed 75,000 barrels." The statutory definition does not mention ownership. Based on the above definition, a small refinery for the RFS is any refinery that processes no more than about 3.2 million gallons of crude oil each day, or no more than about 1 billion gallons of crude oil per year. An analysis of U.S. Energy Information Administration (EIA) data for refineries based on calendar day operation appears to indicate that there were 53 small refineries as defined in the RFS statute operating as of January 1, 2019 ( Figure 2 ). Further, EIA data appears to indicate there is a total of 132 operating refineries overall. Thus, small refineries consist of about 40% of the nation's total number of operating refineries. Additionally, the small refineries comprise about 12% of total crude oil distillation capacity in the United States. <2.3. 3. What are small refinery exemptions?> A small refinery exemption releases a small refinery from having to comply with the RFS mandate for a given compliance period. The exemption is only applicable to small refineries as defined in statute for the program. The statute mentions two instances whereby EPA may issue a small refinery exemption: (1) a temporary exemption and (2) an extension of the exemption based on disproportionate economic hardship. The latter instance is currently of concern to most stakeholders and is the exemption referred to in this report. The statute required a temporary exemption for all small refineries up until calendar year 2011. EPA then proceeded with an exemption for 21 small refineries for an additional two years, 2011 and 2012, based on the results of a DOE study that these small refineries would suffer a disproportionate hardship if required to participate in the program. For petitions based on disproportionate economic hardship, the small refinery itself must petition the EPA Administrator for an exemption. A small refinery may only petition for an exemption based on the reason of disproportionate economic hardship. The EPA Administrator is to consult with the Secretary of Energy when evaluating a petition. This consultation comes in the form of a DOE recommendation. EPA has the ultimate authority and may accept or reject the DOE recommendation. <2.4. 4. What is "disproportionate economic hardship"?> The statute does not define disproportionate economic hardship, but requires DOE to complete a study to determine if RFS compliance would impose a disproportionate economic hardship on small refineries. DOE reports that Disproportionate economic hardship must encompass two broad components: a high cost of compliance relative to the industry average, and an effect sufficient to cause a significant impairment of the refinery operations. DOE developed a scoring matrix "to evaluate the full impact of disproportionate economic hardship on small refiners and used to assess the individual degree of potential impairment . " The matrix consists of disproportionate structural impact metrics (e.g., access to capital) , disproportionate economic impact metrics (e.g., relative refining margin measure) , and viability metrics (e.g., compliance cost eliminates efficiency gains) . Congress addressed disproportionate economic hardship in the Joint Explanatory Statement accompanying the 2016 Consolidated Appropriations Act ( P.L. 114-113 ) by stating tha t "If the Secretary finds that either of these two components [from the DOE March 2011 Small Refinery Exemption Study] exists, the Secretary is directed to recommend to the EPA Administrator a 50 percent waiver of RFS requirements for the petitioner." In report language for the 2017 appropriations bill for EPA , C ongress direct ed EPA to follow DOE's recommendation, and to notify both Congress and DOE if the Administrator disagrees with DOE's waiver recommendation and to deliver such notification 10 days prior to issuing a decision . <2.5. 5. What are the relevant sections in the statute that address small refinery exemption under the RFS?> There are three sections in the statute most relevant to small refinery exemptions: 42 U.S.C. 7545(o)(1)(K), 42 U.S.C. 7545(o)(3)(C), and 42 U.S.C. 7545(o)(9). <2.6. 6. What information must be submitted to EPA to petition for a small refinery exemption?> EPA reports that a petition for a small refinery exemption must specify the factors that demonstrate a disproportionate economic hardship and must provide a detailed discussion regarding the hardship the refinery would face in producing transportation fuel meeting the requirements of 80.1405 and the date the refiner anticipates that compliance with the requirements can reasonably be achieved at the small refinery. EPA reports that to fulfill these requirements, companies would likely submit "company business plans, financial statements, tax filings, communications with potential suppliers or lenders, and other records that demonstrate the petitioner satisfies the underlying substantive requirements to be accorded relief." To qualify for an exemption, a refinery must meet the definition of a small refinery for both the calendar year before and during the year for which an exemption is sought. Submissions are not publicly available. EPA addressed the financial and other information required for 2016 RFS small refinery exemption requests. In its memorandum, EPA reports it considers the findings of the DOE Small Refinery Study and a variety of economic factors when evaluating a petition. EPA reports the economic factors include, but are not limited to, profitability, net income, cash flow and cash balances, gross and net refining margins, ability to pay for small refinery improvement projects, corporate structure, debt and other financial obligations, RIN prices, and the cost of compliance through RIN purchases. <2.7. 7. Is there a deadline to apply for an exemption?> No. A small refinery may submit a petition to the EPA Administrator for a small refinery exemption at any time. <2.8. 8. Is there a date by which EPA is to act on an application for an exemption?> The EPA Administrator is required by statute to act on a petition for a small refinery exemption within 90 days of having received the petition. EPA reports it "will issue a decision within 90 days of receiving complete supporting information for the request from the small refinery." It is unclear what information must be submitted to EPA before the agency considers a petition "complete." There is no deadline as to when or whether EPA must publicly announce its decision. <2.9. 9. How frequently may a small refiner apply for an exemption?> A small refiner must apply separately for an exemption for each compliance year. According to EPA, "[b]eginning with the 2013 compliance year, small refineries may petition EPA annually for an exemption from their RFS obligations." <2.10. 10. How are the RFS Renewable Volume Obligations (RVOs) calculated?> The statute specifies annual renewable fuel volume amounts (in gallons) required for each category in the RFS through 2022. The EPA converts the statutory volumes or the volumes EPA has finalized using its waiver authority into annual percentage standards to ensure that obligated parties meet the volume amount. Obligated parties use this annual percentage to compute their RVOs. The RVO is the obligated party's total gasoline and diesel sales multiplied by the annual renewable fuel percentage standards announced by EPA plus any deficit of renewable fuel from the previous year. It is the RVO that informs an obligated party how many gallons of the particular renewable fuel type the party must account for in order to be in compliance. The obligated party is then responsible for submitting to EPA credits (i.e., renewable identification numbers or RINs) for each gallon in its RVO. Once all obligated parties have demonstrated compliance by meeting their RVOs, the volume of renewable fuel required to be blended into the nation's transportation fuel supply is met, minus any SREs. The statute contains volume amounts for four fuel categories: total renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. Thus, there are four annual percentage standards, one for each renewable fuel category. Accordingly, there are also four RVO calculations. There are six steps to understanding the relationship between an annual standard, an RVO, and RFS compliance: 1. The statute specifies a volume amount for a given year (e.g., 30 billion gallons for total renewable fuel for 2020); 2. EPA announces the final volume requirement which is either (a) the statutory volume amount or (b) a reduced volume requirement based on EPA's waiver authority (e.g., 20.09 billion gallons for total renewable fuel for 2020); 3. EPA issues an annual percentage standard (e.g., 11.56% for total renewable fuel for 2020); 4. The obligated party multiplies the annual percentage standard by its operational sales to compute its RVO for a particular fuel category; 5. The obligated party obtains the RINs needed to meet its RVO; and 6. The obligated party submits its RINs to EPA to demonstrate compliance. Obligated parties generally, refiners and importers must prove compliance with the RFS each year. Obligated parties include small refineries. However, if a small refinery receives a small refinery exemption, it is exempt from complying with the mandate for a given year. EPA reports "[t]he exempted refinery is not subject to the requirements of an obligated party for fuel produced during the compliance year for which the exemption has been granted." The small refineries that receive a small refinery exemption continue their operations, which may include blending renewable fuel and possibly acquiring RINs (which they can bank for future use or trade with other parties). <2.11. 11. How do small refinery exemptions impact annual RFS requirements (or RVOs)?> The impact of small refinery exemptions on annual RFS requirements, or RVOs, depends on how much fuel is exempted and when. In general, if a small refinery exemption is granted prior to a final rule setting the annual percentage standards being released, it may be accounted for in the annual percentage standard calculation for that year. If the exemption is granted after the final rule has been released, EPA reports that, under its prior approach, it did not revise its annual percentage standard calculation to account for the later-granted exemptions. The situation where the exemption is not included in the annual percentage calculation is of concern to some stakeholders (e.g., renewable fuel producers) as the renewable fuel volumes for which the small refineries were responsible for are not redistributed to the other obligated parties, and therefore those volumes are not accounted for by the RVOs. For example, in December 2017, EPA set the 2018 total renewable fuel percentage standard at 10.67%. EPA did not include any small refinery exemptions in its percentage standard calculations for 2018. Further, EPA stated that any exemptions granted after 2018 would not be reflected in the 2018 percentage standards. In August 2019, EPA announced 31 small refinery exemptions for 2018. EPA estimates that the 31 exemptions will account for nearly 13.4 billion gallons of gasoline and diesel being exempted for the 2018 compliance period. If EPA were to account for the exempted 13.4 billion gallons, it would lead to a different annual percentage standard than the standard contained in the final rule. The non-exempt obligated parties would be required to meet this different standard. Some refer to this as "reallocating the waived gallons." However, as EPA has implemented the program for 2018, the remaining obligated parties will not have to meet this different standard. <2.12. 12. How many small refinery exemptions have been issued?> Since 2013, the number of small refinery exemptions issued based on disproportionate economic hardship has varied, ranging from 7 to 31 in a given year ( Figure 3 ). EPA reports it has not yet received any SRE petitions for 2020. <2.13. 13. Does the statute require EPA to account for small refinery exemptions in annual standards?> The statute requires that EPA adjust the annual percentage standard to "account for the use of renewable fuel during the previous calendar year by small refineries that are exempt under paragraph (9) [Small refineries]." In 2010, EPA reported that it considers the amount of renewable fuel used in such instance would be negligible and assigns it a value of zero. CAA section 211(o) requires that the small refinery adjustment also account for renewable fuels used during the prior year by small refineries that are exempt and do not participate in the RFS2 program. Accounting for this volume of renewable fuel would reduce the total volume of renewable fuel use required of others, and thus directionally would reduce the percentage standards. However, as we discussed in RFS1, the amount of renewable fuel that would qualify, i.e., that was used by exempt small refineries and small refiners but not used as part of the RFS program, is expected to be very small. In fact, these volumes would not significantly change the resulting percentage standards. Whatever renewable fuels small refineries and small refiners blend will be reflected as RINs available in the market; thus there is no need for a separate accounting of their renewable fuel use in the equations used to determine the standards. We proposed and are finalizing this value as zero. In 2018, EPA stated that, regarding Clean Air Act direction that the agency account for renewable fuel used by exempt small refineries, EPA complies through the RIN trading program. In 2019, EPA further explained that the use of renewable fuel by exempt small refineries is accounted for by the RIN system. That is, since exempt small refineries have no obligation to comply with the applicable percentage standards, they can sell all the RINs associated with any renewable fuel they use. These RINs become part of the overall pool of RINs available to all obligated parties. Thus, no additional adjustment needs to be made to comply with this statutory provision. Some stakeholders argue that the amounts exempted in recent years are not negligible, and that reallocating these exempted volumes (as opposed to accounting for them through the RIN trading program) would lead to total renewable fuel consumption closer to the amount finalized by EPA for that year. Others contend that reallocating small refinery exemptions "punishes complying parties and creates an unlevel playing field among competing refineries putting additional pressure on the blendwall and increasing the overall cost of the program." <2.14. 14. How does EPA account for small refinery exemptions in the 2020 annual standards?> In recent years, the number of SREs granted and the total exempted volume of gasoline and diesel has changed, which could indicate the old methodology may no longer suffice. In December 2019, EPA issued a final rule that changes how it calculates the annual percentage standard to account for volumes of gasoline and diesel that will be exempted from the renewable volume obligations. In this final rule, EPA adopted the percentage standard calculation change it proposed in October 2019. In the final rule, EPA reports it is finalizing "a projection methodology based on a 2016 18 annual average of exempted volumes had EPA strictly followed DOE recommendations in those years. " EPA is to do this by amending two factors in the annual percentage standard calculation from: 1. GE i = the amount of gasoline projected to be produced by exempt small refineries and small refiners, in year i and 2. DE i = the amount of diesel fuel projected to be produced by exempt small refineries and small refiners in year i. to 1. GE i = the total amount of gasoline projected to be exempt in year i, in gallons, per 80.1441 and 80.1442 and 2. DE i = the total amount of diesel projected to be exempt in year i, in gallons, per 80.1441 and 80.1442. EPA reports this calculation modification leads to higher percentage standards, which "would have the effect of ensuring that the required volumes of renewable fuel are met when small refineries are granted exemptions from their 2020 obligations after the issuance of the final rule, provided EPA's projection of the exempted volume is accurate." Further, EPA reports that "[b]y projecting exempted volumes in advance of issuing annual standards, we can issue a single set of standards for each year without the need for periodic revisions and the associated uncertainty for obligated parties." Lastly, EPA reports that for petitions for 2019 and going forward it "intends to grant relief consistent with DOE's recommendations where appropriate" (e.g., grant 50% relief where DOE recommends 50% relief). In the past, EPA has granted full exemptions to small refinery petitions where DOE recommended 50% relief. <2.15. 15. Have there been any legal challenges involving small refinery exemptions?81> Yes. The legal challenges have generally taken one of two forms: (1) refineries challenging the EPA's denial of an exemption petition or (2) parties challenging EPA's methodology for granting and accounting for small refinery exemptions. As discussed below, individual challenges to EPA's exemption denials have at times succeeded, but courts have generally dismissed methodological challenges on procedural grounds. <2.15.1. Challenges to Small Refinery Exemption Decisions> Several individual refineries have challenged EPA's denials of their exemption petitions. For example, in December 2019 Suncor Energy petitioned for review of its denied exemption petition with the U.S. Court of Appeals for the Tenth Circuit. Refineries have specifically challenged EPA's adoption of DOE's scoring index (as noted in question 4), its reliance on DOE's refinery-specific assessments, and EPA's independent analysis. DOE's scoring matrix assesses whether a small refinery would incur a "disproportionate economic hardship" from complying with the RFS standard using two sets of components: disproportionate impacts metrics and viability metrics. Challenges to exemption denials have generally focused on the viability metrics. In general, courts have upheld as reasonable EPA's adoption of the DOE's scoring matrix, including its use of viability as a metric. The D.C. and the Eighth Circuits have each held that EPA reasonably interpreted the statutory phrase "disproportionate economic hardship" to require, as reflected in DOE's scoring matrix, that the refinery's viability be affected to demonstrate "hardship." However, the Tenth Circuit subsequently held that EPA cannot give such weight to viability, and particularly to the long-term threat of closure, that it effectively reads "disproportionate" out of "disproportionate economic hardship" in the statute. Courts have allowed EPA to rely on DOE's assessments but invalidated exemption denials for errors in the refinery-specific analyses. For example, the D.C. Circuit vacated and remanded an exemption denial because EPA's independent analysis contained two miscalculations that could have affected its ultimate decision to deny the exemption petition. Similarly, the Fourth Circuit vacated and remanded an exemption denial after finding that EPA had relied on a DOE assessment that was facially deficient. The court held that while EPA could rely on DOE's assessment and need not conduct its own independent analysis of DOE's conclusions concerning a specific exemption request, EPA cannot "blindly adopt [those] conclusions" or rely on a report that is "facially-flawed." Several biofuels associations challenged EPA's decision to grant three small refinery exemption petitions on a number of grounds. The Tenth Circuit vacated EPA's decisions for three reasons. First, the court interpreted the phrase " extension of the exemption," found in the statutory language authorizing small refinery exemption petitions, to require that the small refinery have received the exemption each year to be eligible. Second, the court concluded that EPA erred in its analysis by considering sources of economic hardship other than those associated with RFS compliance. The court held that the statute only allowed the exemption to be granted on the basis of disproportionate economic hardship from RFS compliance, not other economic factors such as a downturn in industry profit margins. Finally, the court held that when evaluating whether a small refinery incurs disproportionate economic hardship from RFS compliance specifically from having to purchase RINs EPA must take into account its position that refineries are able to pass the cost of RINs on to consumers in the fuel's price. The court acknowledged that EPA could either depart from this position, which it has previously taken, with an adequate explanation or could explain why the theory did not apply to the small refinery at issue in the petition. But the court held that failing to address the theory at all or how it affected EPA's analysis was arbitrary and capricious. <2.15.2. Challenges to EPA's Methodology> Parties have raised multiple challenges to how EPA administers the small refinery exemptions. To date, each of these challenges has been dismissed or transferred to another court on procedural grounds without reaching the merits of the parties' arguments. First, in 2018 the Producers of Renewables United for Integrity Truth and Transparency (PRUITT) challenged in the D.C. Circuit how EPA remedied small refinery exemptions it granted on remand after the relevant compliance year had ended. Specifically, PRUITT challenged EPA's decision to issue 2018 RINs to two Wyoming refineries whose 2014 and 2015 exemption petitions were granted after a court vacated and remanded EPA's initial denials in 2017. EPA issued the 2018 RINs to compensate for the 2014 and 2015 RINs that the refineries had retired for compliance before the exemptions were granted. EPA issued 2018 RINs because the 2014 and 2015 RINs the refineries used for compliance had since expired. The D.C. Circuit transferred this portion of the petition to the Tenth Circuit because EPA's issuance of the 2018 replacement RINs to the Wyoming refineries was regionally rather than nationally applicable. Litigation is ongoing. PRUITT also challenged EPA's interpretation of the statutory provision that small refineries "may at any time petition [EPA] for an extension of the exemption." The agency had interpreted that provision to allow it to grant exemptions after it sets the annual standards. The petitioner alleged that EPA violated its statutory duty to ensure the required volumes of renewable fuels are met by granting "retroactive" exemptions. The court dismissed this claim for lack of jurisdiction and, accordingly, did not reach the merits of this argument. Rather than challenging EPA's ability to grant exemptions after it sets the annual standards, the National Biodiesel Board (NBB) challenged how EPA accounts for these exemptions as part of the 2018 rulemaking setting the annual standards. EPA adjusts the annual standards for any exemptions granted before the standards are set, which by statute must occur by November 30 th the prior year. But EPA does not account for those exemptions granted later, either by adjusting the standards retroactively or by accounting for them prospectively using projections. NBB alleged that this approach violates the statute because it does not "ensure" that the volumes are met. The petitioner argued that EPA should project small refinery exemptions EPA was "reasonably likely to grant" after the standards are set, adjust the percentages accordingly, and then adjust for any deficiencies in EPA's projections by incorporating the shortfall into the following year's annual standards. The D.C. Circuit held that NBB had not preserved this challenge to the 2018 rule because it had failed to raise the argument with "reasonable specificity" during the public comment period, as the Clean Air Act requires. Although other parties had submitted comments regarding how EPA accounts for small refinery exemption volumes, the court determined that those comments either requested that EPA "cease granting retroactive exemptions" or "adjust the applicable volumes for the same year in which the retroactive exemptions are later granted." The court concluded that these comments were sufficiently different from NBB's argument that EPA had not had an opportunity to address the argument in its final rule. Accordingly, the D.C. Circuit held that NBB had forfeited the issue. Finally, based on media reports that EPA was increasing the number of exemptions granted, the American Biofuels Association challenged EPA's "decision to modify the criteria or lower the threshold by which [it] determines whether to grant small refineries an exemption." The number of filed and granted exemptions was not public when the lawsuit was filed. EPA subsequently created a small refinery exemption "dashboard" on its website and, in August 2019, issued a formal memorandum documenting its revised standards for granting small refinery exemptions. In the memorandum, EPA explains that it now only requires small refineries to experience either the disproportionate impacts or viability impairment to qualify for the exemption, whereas previously it required small refineries to demonstrate both criteria. In addition, EPA announced that it would grant full waivers when the Department of Energy recommended partial waivers, on the basis that this approach was more consistent with congressional intent. The D.C. Circuit dismissed American Biofuels Association's petition for lack of jurisdiction because the petition was based on a general pattern in agency decisionmaking rather than challenging a particular final agency action as required by the Administrative Procedure Act. The court noted, however, that EPA had acknowledged in oral argument that the August 2019 Memorandum is a final agency action that could be challenged if timely filed. <2.16. 16. What legislative proposals has Congress introduced that address small refinery exemptions?> Some members in the 116 th Congress have introduced bills that address small refinery exemptions. Table 1 provides a summary of each bill. <2.17. 17. What other issues might one consider when discussing small refinery exemptions?> The statute gives the EPA Administrator the authority to grant small refinery exemptions, if a small refinery can prove that compliance would subject it to disproportionate economic hardship. Some Members of Congress contend this authority is being applied improperly and could harm rural economies (e.g., biofuel producers). Others contend that the use of the authority protects small refineries and employment in the oil industry. Below are items Congress may consider as it debates EPA's authority to issue small refinery exemptions. Transparency. Information about certain parts of the small refinery exemption process is limited. For example, it is unclear who is applying for an exemption, what specific information is included in an SRE application, or how an application is evaluated. Further, it is not clear if the same criteria to evaluate an application are used consistently year-to-year. Lastly, EPA does not regularly announce when it has issued an SRE. The statute does not require EPA to share such information publicly. EPA considers an SRE application to contain confidential business information as it includes proprietary information which if disclosed could cause harm to the applicant. EPA states that it "treats both the names of individual petitioners and EPA's decisions on those individual petitions as Confidential Business Information (CBI) under FOIA Exemption 4 (5 U.S.C. 522(b)(4)) pending a final CBI determination by the Office of General Counsel." With such transparency issues, it could be difficult for Congress to conduct oversight of EPA's authority to grant small refinery exemptions. Application and decision timeline. Small refinery exemptions are not applied for or granted on a schedule. A small refinery may petition the EPA for an exemption at any time. In theory, once an exemption is issued for a certain year, the small refinery is no longer obligated to meet its RVO for that year. In actuality, the small refinery may not be able to receive the benefit of the exemption for the year it was granted (e.g., if an SRE is granted after the end of a compliance period and the small refinery has already complied with its obligation). Instead, in some cases the small refinery has been credited the RINs it retired to demonstrate compliance with the year that was exempted, and it may use those RINs in a future year. Also, it is not clear what information must be submitted to EPA for the agency to consider a petition "complete" which would start the 90-day timeline for EPA to make a decision. The current application and decision timeline for small refinery exemptions may contribute to an ultimate annual volume requirement that may not match what was announced in a final rule. Inclusion of SREs in annual standards. The statute requires the EPA Administrator to adjust the percentage standards (i.e., annual volume amounts) for a given year by accounting for renewable fuel from the previous calendar year by small refineries that received an exemption. EPA accounts for volumes attributable to exempt small refineries in its formula for calculating the annual percentage standards. EPA complies with this provision through the RIN trading program. Because SRE petitions can be submitted at any time, EPA has two time periods during which it may address SREs in annual standard calculations: prior to a final rule being issued and after a final rule has been issued. EPA reports in its annual rulemaking if it has approved any SREs prior to issuing a final rule and adjusted its calculation accordingly. For instance, in the 2019 final rule, EPA states: at this time no exemptions have been approved for 2019, and therefore we have calculated the percentage standards for 2019 without any adjustment for exempted volumes. We are maintaining our approach that any exemptions for 2019 that are granted after the final rule is released will not be reflected in the percentage standards that apply to all gasoline and diesel produced or imported in 2019. Since 2011 it has been EPA's policy to not account for the SREs that it issues following the release of a final rule. EPA justifies its position based on the November 30 th statutory deadline for setting annual percentage standards and the need to provide the regulated community with certainty and advance notice of the standards. Based on a review of the RFS final rules from 2014 to the present, most or all SREs have been granted after the November 30 th deadline. In 2019, EPA changed how it calculates the annual percentage standard in order to account for volumes of gasoline and diesel that will be exempted from the renewable volume obligations (see question 14). This may be an issue for Congress if Congress intended small refinery exemptions to be accounted for prior to the release of a final rule. Agency discretion. The statute gives the EPA Administrator certain discretion to evaluate an SRE petition. Data provided by EPA in its small refinery exemption dashboard ( Figure 3 ) suggests the Trump Administration has received more SRE petitions and approved more SREs than the Obama Administration on an annual basis. The extent to which discretion should be a factor in the granting of small refinery exemptions may be an issue for Congress. RFS reset. The statute requires that the EPA Administrator modify the applicable volumes of the RFS in future years starting in 2016 if certain conditions are met (the aforementioned RFS "reset"). According to the Office of Management and Budget (OMB), this "reset" has been triggered for total renewable fuel, advanced biofuel, and cellulosic biofuel. It is unclear when or how EPA will carry out such a reset. Congress may consider the impact a reset would have on many parts of the RFS, including small refinery exemptions. U.S. gasoline consumption. The RFS is a volume mandate, not a percentage mandate. The statutory renewable fuel volumes required to be blended are not tied to U.S. gasoline consumption rates. A general guideline is that most passenger vehicles in the U.S. are equipped to handle E10 (a fuel mixture comprised of 10% ethanol and 90% gasoline). Some might interpret this passenger vehicle acceptance rate as indicating that renewable fuel production should be about 10% of the conventional fuel market. Others might interpret this as an opportunity to push for more renewable fuel use (e.g., E15 year-round, flex-fuel vehicles). In any case, this means the statutory volumes could call for renewable fuel volume amounts that are out of alignment with actual gasoline consumption. It also means that EPA has the authority which it has used multiple times to reduce the RFS statutory volume amounts to more closely match actual conditions. Gasoline consumption has trended downwards for years for a variety of reasons (e.g., fuel economy standards, behavioral choices, economic conditions) and is currently steady, while the statutory renewable fuel portion trends upwards. In short, if the RFS cannot in real-time respond to gasoline consumption changes, it could be argued that the RFS renewable fuel targets become more difficult for some to achieve. If the targets are more difficult to achieve, RFS compliance may become a concern for some (e.g., an increase in compliance costs). This compliance burden may lead to more small refineries requesting an exemption. This may be an issue for Congress, if Congress wants market conditions, not projections, to play a role in renewable fuel use.

In the Energy Policy Act of 2005 ( P.L. 109-58 ; EPAct05), Congress required the U.S. Environmental Protection Agency (EPA) to implement the Renewable Fuel Standard (RFS)—a mandate that requires U.S. transportation fuel to contain a minimum volume of renewable fuel. Since expansion of the RFS in 2007 under the Energy Independence and Security Act ( P.L. 110-140 ; EISA), Congress has had interest in the RFS for various reasons (e.g., limited cellulosic biofuel production, EPA's use of programmatic waiver authority, and RFS compliance costs). Over the last several months, Congress has expressed repeated interest in small refinery exemptions (SRE) from the RFS. The RFS allows small refineries to receive an exemption from the RFS, if they can prove compliance would subject them to disproportionate economic hardship. There is no statutory definition for disproportionate economic hardship, and a small refinery may apply for an exemption at any time. When deciding whether to grant an exemption, EPA is to consult with the Secretary of Energy. This consultation comes in the form of a recommendation from the Department of Energy (DOE) to EPA. The EPA Administrator has 90 days to act on (i.e., grant or deny) an exemption. A small refinery must apply each year for an exemption from compliance for that year. EPA categorizes the majority of small refinery exemption information as confidential business information (CBI). EPA does make publicly available some exemption information, but only in aggregate (e.g., total number of exemptions granted, total exempted volume of gasoline and diesel); there are no publicly available data on individual SREs. There have been legal challenges about small refinery exemptions. Small refineries can and have challenged EPA's denials of their petitions for SREs in court. Various stakeholders have also challenged EPA's methodology for evaluating small refinery exemption petitions. In 2020, the Tenth Circuit vacated EPA's decision to grant three small refinery exemption petitions. It is unclear how this court decision will affect how EPA evaluates SRE petitions in the future. Congress may be interested in small refinery exemptions for multiple reasons. Foremost, Congress may seek clarification on how EPA is currently evaluating SRE petitions, and whether that has changed over time. Some in Congress have raised concerns over transparency in EPA's decision process on SREs, as there is limited public information on the process. Congress may also value additional information about how SREs are being accounted for in annual rulemakings for the RFS. Each year, EPA issues a final rule for the RFS with the coming year's volume requirements (e.g., EPA is to issue the 2021 volume requirements by November 30, 2020). This final rule contains percentage standards that—once obligated parties (e.g., refiners and importers) apply them to their gasoline and diesel sales—are intended to ensure the volumes required are met. The formula for calculating the annual percentage standard includes a variable that accounts for small refinery exemptions granted by the time of the rulemaking. Depending on when the small refinery exemption is granted—prior to the release of a final rule or after—that exemption may or may not be accounted for in the annual percentage standard (to date, most SREs have been granted afterward). In December 2019, EPA announced that it will change how it calculates the annual percentage standard in order to account for volumes of gasoline and diesel that will be exempted from the renewable volume obligations. The impact small refinery exemptions have on the RFS depends on the number of SREs granted, when they are granted, and the amount of gasoline and diesel exempted. Congress may consider several items as it seeks to understand the impact of SREs on the RFS, including transparency, agency discretion, a potential RFS reset, and U.S. gasoline consumption.

crs_R45769

crs_R45769_0

<1. Introduction> The U.S. Constitution establishes a two-step process for the House and Senate to remove federal officials including the President, Vice President, judges, and other civil officers for "Treason, Bribery, or other high Crimes and Misdemeanors." Under the Constitution, the House alone has the power to formally charge that is, impeach a federal official. A House majority can accomplish this by adopting articles of impeachment, which are effectively written accusations (similar to an indictment in ordinary criminal proceedings). The Senate alone has the power to try an impeachment and render a verdict regarding whether the individual should be removed from office and possibly barred from holding future office. Two-thirds of Senators voting must agree to convict and remove an official from office. The Senate could also separately decide to disqualify an officer from holding future federal office. Disqualification requires only a majority vote. The procedures the House has developed for accomplishing this constitutional responsibility are described below. The House has used this process mostly to impeach federal judges, although the House has also impeached two Presidents and one Cabinet official. The Senate has voted to remove eight of these officials, and all of them were federal judges. The summary of the rules and procedures the House might use to impeach a federal official presented here is drawn from published sources of congressional rules and precedents, as well as the public record of past impeachment proceedings. It relies as well upon in-depth research conducted by Betsy Palmer and Susan Navarro Smelcer, formerly of CRS, on the practice in both chambers with respect to the impeachment of federal judges. This report provides an overview of the procedures and should not be treated or cited as an authority on congressional proceedings. Consultation with the Parliamentarian of the House is always advised regarding the possible application of rules and precedents. For more information on impeachment, including a discussion of which federal officers are subject to impeachment and possible grounds for impeachment, see CRS Report R44260, Impeachment and Removal , by Jared P. Cole and Todd Garvey. <2. Overview> The impeachment process may be initiated as the result of various actions and events, including the receipt and referral of information from an outside source, investigations by congressional committees under their general authority, or the introduction of articles of impeachment in the form of a House resolution. Regardless of what might instigate an inquiry into whether impeachment is warranted, there are normally three formal stages of congressional action. First, an impeachment inquiry is authorized, and this is most often accomplished through the adoption of a simple resolution (H.Res.___) directing the Judiciary Committee to investigate an official. Second, the committee conducts its investigation, prepares articles of impeachment, and reports them to the House. Third, the full House considers the articles of impeachment and, if they are adopted, appoints managers from the committee to present the articles in the Senate. As discussed in detail below, the House relies upon many of its usual procedures to consider the resolution explicitly initiating an investigation, conduct the investigation, and consider the articles of impeachment. <3. Initiation of the Process> <3.1. Introduction of a Simple Resolution> A Member can initiate an impeachment process by drafting a simple resolution and placing it in the House hopper, the way all simple resolutions are submitted to the House. If the resolution directly calls for an impeachment, it will be referred to the Committee on the Judiciary. If it instead calls for an investigation of an official by a standing committee or proposes the creation of a special committee for that purpose, the resolution will be referred to the Committee on Rules, which has jurisdiction over the authorization of committee investigations. No special procedures restrict when such a resolution can be submitted, although historically they have been submitted relatively infrequently. <3.2. Raising a Question of the Privileges of the House> A resolution calling for an impeachment can also be offered on the floor by any Member as a question of the privileges of the House instead of being submitted through the hopper. To do so, a Member gives notice of his or her intent to call up such a resolution. The Speaker must then schedule a time to consider the resolution within two legislative days. (The majority and the minority leader do not need to give notice; if either leader raises a qualifying question of privileges of the House on the floor, it is considered immediately.) The full House could dispose of an impeachment resolution raised in this fashion in any number of ways, including by referring it to the Judiciary Committee instead of by voting on the resolution directly. The House could also agree to a motion to table the resolution and thereby dispose of it permanently and adversely. Impeachment has been attempted using this method in recent years, but none of the attempts has resulted in approval of articles of impeachment. In cases in which an official has been impeached, the House has always chosen to conduct an investigation first. A resolution offered from the floor that proposed a committee investigation, instead of directly impeaching an officer, would not give rise to a proper question of the privileges of the House. <3.3. Outside and Preliminary Investigations> Material related to the conduct of a federal official might reach the House and be referred to committee prior to the adoption of a resolution directing a committee to conduct an investigation. Historically, this has included petitions and materials from citizens. In addition, standing committees, under their general investigatory authority, can seek information and research charges against officers prior to the approval of a resolution to authorize an impeachment investigation. With respect to federal judges, the Judicial Conduct and Disability Act of 1980 established a process within the judicial branch for responding to complaints about judges. Findings from those investigations could result in the Judicial Conference of the United States informing the House that the impeachment of a judge may be warranted. A letter reporting that the Judicial Conference had reached such a determination would be referred to the Judiciary Committee. Recent impeachments of federal judges were initiated by resolutions submitted after (or near the time of) the receipt of such a determination from the Judicial Conference. In the last presidential impeachment, a communication from the independent counsel appointed to investigate President Bill Clinton was referred to the Committee on the Judiciary pursuant to an original resolution reported by the Rules Committee. The resolution also directed the Judiciary Committee to review the information from the independent counsel "to determine whether sufficient grounds exist to recommend to the House that an impeachment inquiry be commenced." The House, in this case, later adopted a resolution reported by the Judiciary Committee to authorize an investigation by the committee. <4. Authorization of Committee Investigation> If a resolution authorizing an impeachment investigation was introduced through the hopper and referred to the Rules Committee, that committee would then choose whether to report the resolution to the full House for consideration. If reported, the resolution would be privileged, which means a Member could call it up on the floor, though only at the direction of the Rules Committee. The resolution would then be considered under the hour rule, a method of considering legislation in the House that permits Members to speak for up to an hour but also allows a numerical majority to vote to end debate and limit the opportunity for amendment. Specifically, the Member who called up the resolution would be recognized for one hour. Debate on the resolution would likely last for that hour or even less, because a majority in the House could agree to order the previous question on the resolution. When the House votes to order the previous question, it ends debate and any opportunity for amendment. A motion to recommit the resolution with or without instructions could be offered after the previous question was ordered, but it would not be debatable. The House could also, however, choose to consider the resolution under any of its other regular processes, including suspension of the rules (requiring a two-thirds vote for passage), a rule from the Rules Committee (requiring only a majority vote), or unanimous consent. The two most recent resolutions adopted by the House to authorize an impeachment investigation were taken up by unanimous consent at the request of the Rules Committee chair. Rather than convene a committee meeting to order the resolutions reported with a quorum present, the chair asked unanimous consent that the House discharge the Rules Committee and agree to the resolution. Both of these resolutions concerned federal judges, and they were agreed to without debate. In the three previous instances of judicial impeachments, however, the House did not approve a resolution explicitly authorizing an impeachment inquiry. The Rules of the House since 1975 have granted committees the power to subpoena witnesses and materials, administer oaths, and meet at any time within the United States powers that were previously granted through resolutions providing blanket investigatory authorities that were agreed to at the start of a Congress or through authorizing resolutions for each impeachment investigation. In two of the three recent cases, the House agreed to separate resolutions to allow committee counsel to take affidavits and depositions. If the House does approve an authorizing resolution, then in addition to the Rules Committee, the Judiciary Committee can report an original resolution authorizing an impeachment investigation if impeachment resolutions have been referred to the committee. In the case of the most recent authorization of a presidential impeachment inquiry, the Judiciary Committee reported such a resolution, and the full House debated it. As mentioned above, pursuant to a resolution agreed to by the House, the Judiciary Committee reviewed material submitted by an independent counsel appointed to investigate President Bill Clinton. The Judiciary Committee then reported a resolution ( H.Res. 581 , 105 th Congress) authorizing an investigation into whether sufficient grounds existed for the impeachment of the President. The resolution was privileged for immediate consideration. The chair of the Judiciary Committee called up the resolution and asked unanimous consent that instead of being recognized for the normal one hour, his time be extended to two hours, half of which he would yield to the ranking member of the Judiciary Committee for purposes of debate only. After debate under the terms of this unanimous consent agreement, the House ordered the previous question on the resolution by voice vote, ending further debate of the resolution. A minority-party Representative offered a motion to recommit, and, pursuant to a unanimous consent agreement, the motion was debated for 10 minutes before being defeated on a roll call vote. As noted, absent this unanimous consent agreement, the motion to recommit would not have been debatable. The resolution was then agreed to by a record vote, 258-176. In the 93 rd Congress (1973-1974), multiple resolutions to impeach President Richard M. Nixon were introduced and referred to the Judiciary Committee. The committee began an examination of the charges against the President under its general investigatory authority. The House also approved a resolution, reported by the House Rules Committee, providing additional investigation authority that did not specifically mention impeachment. In late 1973, the House agreed to another resolution that provided for additional expenses of the committee, and floor debate and the report from the Committee on House Administration indicate that the funds were intended in part for the impeachment inquiry. On February 1, 1974, the Judiciary Committee reported an original resolution ( H.Res. 803 ; H.Rept. 93-774) mandating an investigation to determine whether the House should impeach President Nixon and continuing the availability of funds. On February 6, 1974, the chairman of the Judiciary Committee called up the resolution as a question of privilege. It was debated under the hour rule, with the chairman yielding time to other Members for purposes of debate only. The Judiciary Committee chair moved the previous question before any other Member was recognized to control time under the hour rule, and the House ordered the previous question 342-70. The resolution authorizing the investigation was then agreed to, 410-4. <5. Committee Action> The standing rules of the House that affect committee investigations apply as well to impeachment investigations by the Judiciary Committee. A resolution authorizing an impeachment investigation might place additional limitations, or grant additional authorities, to the committee. In addition, the committee itself might adopt rules specific to an impeachment inquiry. It has not been unusual for the Judiciary Committee to authorize subcommittees or to create task forces to conduct impeachment investigations, and in that case the full committee would establish the authority of the subcommittee or task force. <5.1. Investigation and Hearings> Under House Rule XI, committees have the authority to subpoena persons or written records, conduct hearings, and incur expenses (including travel expenses) in connection with investigations. Rule XI, clause 2(h)(2), requires two committee members to take testimony or receive evidence. In past impeachment proceedings, the House has agreed to resolutions authorizing committee staff to take depositions without Members present, and the Judiciary Committee has agreed to internal guidelines for the mode and conduct of depositions. In the 116 th Congress, pursuant to H.Res. 6 , the chairs of all standing committees (except the Rules Committee) as well as the Permanent Select Committee on Intelligence may order the taking of depositions by committee counsel. In modern practice, the federal official under investigation is generally allowed certain rights, including the right to be represented by counsel. If a committee were to conduct hearings, these proceedings would generally be governed by House and committee rules (and any specific rules agreed to in the authorizing resolution). Under House Rule XI, notice of hearings must be provided one week in advance, and members of the committee are guaranteed the right to question witnesses under the five-minute rule. Hearings are generally public, but they could be closed pursuant to regular House rules that allow the committee to agree, by holding a vote in public session with a majority of the committee present, to close a hearing for three specific reasons: the evidence or testimony would endanger national security, compromise sensitive law enforcement information, or would tend to "defame, degrade, or incriminate the witness." Again, the resolution authorizing an impeachment investigation could alter these procedures. The Judiciary Committee conducted multiple public hearings in connection with the impeachment of federal judges in 2009. The committee had created a task force to investigate whether two federal judges should be impeached. The task force conducted hearings during which they heard from a variety of witnesses, including law professors with expertise on impeachable offenses, individuals with information about the crimes the judges were accused of committing, and task force attorneys who reported on the status of the investigation. In 1998, the Judiciary Committee held four hearings in connection with the impeachment of President Clinton. The committee received testimony from 19 experts on the history of impeachment at one hearing and from the independent counsel at another. Various witnessed testified at a third hearing on the consequences of perjury and related crimes. Over two days of hearing in early December 1998, at the request of the Administration, the committee also heard testimony from White House counsel. In recent decades, it has been more common than not that a congressional committee used information provided from another outside investigation. In four of the five judicial impeachment investigations undertaken by the Judiciary Committee since 1980, "the accused judge had either been subject to a federal criminal trial or pled guilty to a federal criminal charge prior to the initiation of impeachment proceedings in the House." In the case of the impeachment of President Bill Clinton, as mentioned above, the results of an independent counsel investigation alleging impeachable offenses were submitted to the House and referred to the Judiciary Committee. <5.2. Markup of Articles of Impeachment> A committee charged with investigating impeachable offences might, after conducting its investigation and reviewing any evidence submitted from other investigations, meet to consider articles of impeachment, and such a meeting is referred to as a markup. The articles of impeachment are in the form of a simple resolution (H.Res.___). The procedures for considering and reporting out an impeachment resolution are the same as those used for other legislation. Notice must generally be given of the proposed meeting, and the text of the articles of impeachment must generally be available 24 hours in advance of the meeting, although House Rule XI, clause 2 (g)(3)(B), provides some exceptions to these requirements. Members of the committee could expect an opportunity to offer amendments to the articles of impeachment, which would be debated under the five-minute rule. Importantly, a majority of the committee must be physically present at the time of the vote to report. Alternatively, after an investigation, the committee might also choose to report a recommendation that impeachment was not warranted. In the case of the two most recent presidential impeachments, the Judiciary Committee held a public, televised markup of the impeachment articles for several days. A motion to recommend a resolution to impeach President Nixon was considered by the Judiciary Committee for six days at the end of July 1974. The committee agreed to special procedures for the markup, such as a 10-hour period for "general debate," and each article of impeachment was considered separately for amendment. The resolution included two articles of impeachment, which were both agreed to, as amended. A third article of impeachment was proposed as an amendment and agreed to, and two additional articles offered as amendments were rejected. The President resigned before the committee reported an impeachment resolution to the full House. In 1998, the Judiciary Committee considered articles impeaching President Clinton for three days in December under procedures modelled after those used in 1974. A unanimous consent agreement provided that the four articles of impeachment included in the chairman's draft resolution would be debated, amended, and voted on separately. Each member of the committee was allotted 10 minutes for an opening statement. The committee considered and agreed to an amendment to Article I and an amendment to Article IV. All four articles were agreed to, and a resolution ( H.Res. 611 , 105 th Congress) was reported to the House. A written report was prepared and several Members submitted additional, minority, and dissenting views, a right protected under House Rule XI, clause 2(l), if notice of intent is given at the time a committee approves a matter. <5.3. Member Access to Information Prior to Full House Consideration> Under House Rule XI, clause 2(e), committee records are the property of the House, and all Members can have access to them. The committee may, however, place reasonable restrictions on where, when, and how Members might access the records. In addition, access to committee investigatory material might be limited, at least for a time, while the committee determines if it qualifies as a committee record under House Rule XI, and, if so, if release is prohibited pursuant to other House rules. A committee might also take actions to protect the confidentiality of investigative materials. The primary mechanism by which an investigating committee can and has chosen to limit access to inquiry information is through the use of executive or closed session. Under House Rule XI, clause 2(g)(1), a committee can operate in executive session by majority vote, a quorum being present, to restrict attendance at a business session to only committee members or others authorized by the committee. Similarly, a committee can receive evidence or testimony as if in executive session, which, under Rule XI, clause 2(k)(7), may only be released through authorization by the committee. Even when access to information received in executive session is granted to Members, the material may be subject by the committee to further conditions under which it may be viewed. In addition, the copying, releasing, or taking notes on materials received in executive session is strictly prohibited without permission of the committee. Executive sessions were periodically used during the inquiries into Presidents Nixon and Clinton. Further restrictions on access to information can be adopted by the House or the investigating committee. As previously mentioned, the Judiciary Committee adopted special procedures by unanimous consent in 1974 that, among other provisions, limited access to information to select individuals within the committee and laid out rules for staff. As a precursor to the formal impeachment inquiry of President Clinton, the House agreed to H.Res. 525 during the 105 th Congress directing the Judiciary Committee to review the independent counsel's report to Congress to determine if impeachment proceedings were warranted. Section 4 of the resolution limited access to executive session material to the Judiciary Committee and employees designated by the chairman and ranking member a more strict requirement than called for under House Rule XI. Notably, the resolution also made 445 pages of the independent counsel's report immediately available to the public and set a deadline by which the rest of the report would be released from its executive session status based on recommendations by the committee. Prior to the adoption of H.Res. 525 , House leadership reportedly discussed at length the issue of access to the independent counsel report by the public, the President, and Members of the House. <6. Consideration of Articles of Impeachment on the House Floor> Although floor consideration of an impeachment resolution largely resembles floor consideration of legislation, there is one difference regarding disorderly language: Under regular House procedures, it is not in order to use language that is personally offensive toward the President, which would include accusations that the President committed a crime or allusions to unethical behavior. During consideration of an impeachment resolution, however, remarks in debate can refer to the alleged misconduct of the President that is under consideration by the House. Members should still abstain from other language "personally offensive" to the President. <6.1. Reported by the Judiciary Committee> Articles of impeachment reported by the Judiciary Committee are privileged for immediate consideration on the House floor. The chair of the committee (or a designee) could call up the resolution containing the articles at any time other business is not pending, and the resolution would be considered immediately under the hour rule. Under this procedure, a majority of the House controls the length of debate and can prevent amendment. After some debate, the majority could vote to order the previous question, which, as mentioned above, brings the House to an immediate vote on the main question: whether to agree to the impeachment resolution, in this case. Passage is by simple majority vote. A motion to recommit the impeachment resolution, with or without instructions, would be in order after the previous question was ordered but before the vote on the resolution. This motion, however, would not be subject to debate. As is always the case, any instructions in the motion to recommit must be germane to the resolution. In the two most recent instances in which the House considered an impeachment resolution of a federal judge, the resolution was called up as privileged and debated for an hour, and no Member offered a motion to recommit. In both cases, a Member demanded a division of the resolution, which allowed the House to vote separately on each article of impeachment. When the House considered a resolution ( H.Res. 611 , 105 th Congress) to impeach President Clinton, the reported resolution was called up as a question of privilege. A unanimous consent request propounded by the majority floor manager that provided for four hours of debate on the resolution, equally divided, and 10 minutes of debate on a motion to recommit was objected to. The House then considered the resolution for several hours, as no Member moved the previous question, until another unanimous consent agreement was propounded and agreed to. This agreement allowed debate to continue until 10 p.m. that night and provided for an additional hour of debate the next day, a Saturday. It further provided that if a motion to recommit with instructions was offered, it would be debatable for 10 minutes. On the second day of consideration, after the previous question was ordered, a Member moved to recommit the impeachment resolution with instructions. The instructions proposed an amendment to censure the President. The Speaker, however, ruled that the amendment in the instructions was not germane. The House sustained the ruling of the Speaker by voting to table an appeal. A Member demanded a division of the resolution, and the House agreed to two of the four articles of impeachment under consideration. In the case of the Nixon impeachment proceedings, the full House never acted on a resolution of impeachment. As noted, President Nixon resigned before the Judiciary Committee reported its recommendation that the President be impeached. The House approved a resolution using the suspension of the rules procedure acknowledging that the Judiciary Committee had approved articles of impeachment, commending the members of the Judiciary Committee for their work, and providing for the printing of its report. Rather than considering an impeachment resolution under the hour rule, the House could also choose to consider an impeachment resolution under the terms of a resolution reported by the Rules Committee (a special rule). This process would operate in the same two-step way it does for major legislation in the House. The House would first debate the Rules Committee-reported resolution setting the terms for consideration of the impeachment resolution. The rule from the Rules Committee could provide for a particular length of debate, structure any amendment process, and potentially structure voting to allow each article to be voted on separately. It could preclude motions that would otherwise be in order under the hour rule, such as a motion to table the resolution. After the House agreed to the rule, it would then consider the impeachment resolution under the terms established by that rule. Finally, consideration and debate of an impeachment resolution could be governed by a unanimous consent agreement. The House might take up the resolution by unanimous consent or call it up as a question of privilege and change the terms of its consideration by unanimous consent, such as was described above in the case of the Clinton impeachment resolution. A unanimous consent agreement can structure consideration just like a special rule, but it is agreed to without a vote and usually with little or no floor debate. The major difference is that, procedurally, it is necessary for all Representatives to support a unanimous consent agreement, while only a simple majority is necessary to agree to a special rule. The fact that the same terms for consideration could be established through a rule can influence unanimous consent agreements. <6.2. Offered on the Floor as a Question of the Privileges of the House> As described in an earlier section of this report, any Member of the House could also offer on the floor a resolution containing articles of impeachment as a "question of the privileges of the House." Taking this action will not necessarily result in a direct vote on the articles of impeachment or even debate of the articles, because the House could choose instead to take a different action on the resolution, such as to refer it to the Judiciary Committee. To raise a question of the privileges of the House, a Member would take the following steps: Draft a resolution containing articles of impeachment. Consult with the Office of the House Parliamentarian to ensure that the resolution qualifies as a question of the privileges of the House. On the House floor, rise to give notice of intent to offer a question of the privileges of the House. The Member giving notice reads the draft resolution in full on the floor. (The majority and minority leader do not need to give notice; a question of the privileges of the House raised by either leader would be considered immediately.) The Speaker is required to schedule consideration of the question of the privileges of the House within two legislative days. At a time scheduled by the Speaker, rise to offer the resolution as a question of the privileges of the House. The Speaker will rule as to whether the resolution constitutes a proper question of the privileges of the House. If it does, the resolution will be assigned a number and will be pending before the House for consideration. A question of the privileges of the House is considered under the hour rule. Often, the House votes to dispose of such resolutions by referring them to committee or by tabling them. The House could also order the previous question to end debate on the resolution and then vote directly on it. However, the House has never impeached an officer without a committee investigation. <7. Appointment and Role of House Managers in the Senate Trial> After the House has agreed to articles of impeachment, it then appoints Members to serve as managers in the Senate trial. In recent practice, the House has appointed managers by agreeing to a House resolution. The House also, by resolution, informs the Senate that it has adopted articles of impeachment and authorizes the managers to conduct the trial in the Senate. The House could agree to separate resolutions or, as has been the case with recent impeachments, to a single resolution accomplishing each of these purposes. Such resolutions are privileged, and sometimes they have been taken up and agreed to by unanimous consent. After the Senate receives the resolution(s) from the House, the Senate informs the House when the managers can present the articles of impeachment to the Senate. At the appointed time, the House managers read the resolution authorizing their appointment and the resolution containing the articles of impeachment on the Senate floor and then leave until the Senate invites them back for the trial. At the trial, the House managers, who might be assisted by outside counsel, present evidence against the accused and could be expected to respond to the defense presented by the accused (or his or her counsel) or to questions submitted in writing by Senators. A full description of Senate procedures in an impeachment trial is beyond the scope of this report. The Senate has a special set of rules agreed to in the 19 th century that provide some guidance for impeachment trial proceedings. However, in modern practice the Senate has agreed to alternative or supplemental procedures both for judicial impeachment trials and the impeachment trial of President Clinton. The 19 th -century impeachment trial rules seemingly require a series of actions by the Senate upon the receipt of articles of impeachment from the House. The Senate, however, just like the House, can set aside its rules by, for example, agreeing to a simple resolution. Under the regular rules of the Senate that govern consideration of legislation, such a resolution would not be subject to any debate restrictions. As a result, in that circumstance, a cloture process, requiring the support of three-fifths of the Senate, would be necessary to reach a vote on the resolution. Once the Senate has convened as a Court of Impeachment, however, the impeachment trial rules, not the regular rules of the Senate, will apply. The Senate impeachment trial rules and related precedents restrict debate on many resolutions and motions. The debate restrictions could allow a simple majority to determine some procedures for responding to articles of impeachment sent from the House.

Under the U.S. Constitution, the House of Representatives has the power to formally charge a federal officer with wrongdoing, a process known as impeachment. The House impeaches an individual when a majority agrees to a House resolution containing explanations of the charges. The explanations in the resolution are referred to as "articles of impeachment." After the House agrees to impeach an officer, the role of the Senate is to conduct a trial to determine whether the charged individual should be removed from office. Removal requires a two-thirds vote in the Senate. The House impeachment process generally proceeds in three phases: (1) initiation of the impeachment process; (2) Judiciary Committee investigation, hearings, and markup of articles of impeachment; and (3) full House consideration of the articles of impeachment. Impeachment proceedings are usually initiated in the House when a Member submits a resolution through the hopper (in the same way that all House resolutions are submitted). A resolution calling for the impeachment of an officer will be referred to the Judiciary Committee; a resolution simply authorizing an investigation of an officer will be referred to the Rules Committee. In either case, the committee could then report a privileged resolution authorizing the investigation. In the past, House committees, under their general investigatory authority, have sometimes sought information and researched charges against officers prior to the adoption of a resolution to authorize an impeachment investigation. Impeachment proceedings could also be initiated by a Member on the floor. A Member can offer an impeachment resolution as a "Question of the Privileges of the House." The House, when it considers a resolution called up this way, might immediately vote to refer it to the Judiciary Committee, leaving the resolution in the same status as if it had been submitted through the hopper. Alternatively, the House might vote to table the impeachment resolution. The House could also vote directly on the resolution, but in modern practice, it has not chosen to approve articles of impeachment called up in this fashion. Instead, the House has relied on the Judiciary Committee to first conduct an investigation, hold hearings, and report recommendations to the full House. Committee consideration is therefore typically the second stage of the impeachment process. In recent decades, it has been more common than not that the Judiciary Committee used information provided from another outside investigation. The committee might create a task force or a subcommittee to review this material and collect any other information through subpoenas, depositions, and public hearings. Impeachment investigations are governed by the standing rules of the House that govern all committee investigations, the terms of the resolution authorizing the investigation, and perhaps additional rules adopted by the committee specifically for the inquiry. If the committee determines that impeachment is warranted, it will mark up articles of impeachment using the same procedures followed for the markup of other legislation. If the Judiciary Committee reports a resolution impeaching a federal officer, that resolution qualifies for privileged consideration on the House floor; its consideration is the third stage of the impeachment process. The resolution can be called up at the direction of the committee and considered immediately under the hour rule in the House. If called up this way, amendments could be precluded if a majority voted to order the previous question. A motion to recommit, with or without instructions, is in order but is not subject to debate. Alternatively, the House might alter these procedures by unanimous consent to, for example, set a longer time for debate or to allow brief debate on a motion to recommit. A resolution reported from the Rules Committee could also be used to structure floor debate. If the House approves the impeachment resolution, it will appoint managers to present and argue its case against the federal officer in front of the Senate.

crs_R45813

crs_R45813_0

<1. Introduction> Consumer finance encompasses the financial lives of individuals and households. Americans aspire for economic advancement and wealth building, a central part of the American dream. Safe and affordable financial services are an important tool for most American households to avoid financial hardship, build assets, and achieve financial security over the course of their lives. Households use three types of financial products regularly: credit, insurance, and financial investments. This report will focus on the first category credit and deposit-taking financial products for personal, family, or household purposes. Most households rely on credit to finance some expenses because they do not have enough assets saved to pay for them. Mortgage debt is by far the largest type of household debt. According to data from the Federal Reserve Bank of New York, as shown in Figure 1 , mortgages account for approximately 67% of household debt. Student loans are the second-largest type of household debt, followed by auto loans and credit cards. These and other major consumer finance markets are discussed in more detail in this report under " Overview of Major Consumer Finance Markets ," which provides a brief overview of each financial product, recent market developments, and related policy issues. Major consumer finance markets examined in this report include mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. In general, this report will focus on the consumer and household perspective, and consumer protection policy issues in each market. This report also discusses two important market structures that allow these consumer financial products to be offered: (1) the consumer credit reporting system and (2) the debt collection market. These aspects of the consumer credit system are important because they facilitate the pricing of credit offers and the resolution of delinquent consumer credit products for most consumer credit markets. The report begins with an overview of U.S. household finances, consumer finance markets, and common policy issues in these markets. <2. Consumer Finance Policy Issues and Regulation> Consumer finance refers to the saving, borrowing, and investment choices that households make over time. These financial decisions can be complex and can affect households' financial well-being both now and in the future. Understanding why and how consumers make financial decisions is important when considering policy issues in consumer financial markets. This section provides an introduction to U.S. households' finances, including a breakdown of a household balance sheet and its components. It then provides background on how consumer financial markets operate and general issues in these markets. The section also describes common policy interventions and considerations when using these policy tools. Lastly, this section provides an overview of the Bureau of Consumer Financial Protection (CFPB) the main regulator responsible for consumer compliance of financial products and services. <2.1. Household Balance Sheet Background> A household's balance sheet is similar to a firm's in that it presents a full financial picture, including the following components of a household's financial position: Assets A point-in-time value of what a household owns; can include liquid wealth , such as a savings account or other financial assets from which the household can easily access funds, and illiquid wealth , such as a car or home that the household owns. Debts A point-in-time value of what a household owes; can include a home mortgage, a student loan, or other types of consumer loans. Net Worth Equal to assets minus debts , measures the wealth of a household, including home equity. Income Wages earned from a job or financial investment returns over a period of time (e.g., a year). Consumption Household spending over a period of time, such as rent, food, clothing, and entertainment. Savings The difference between income and consumption over a period of time. When a household's income is greater than its consumption, it can save or invest this unconsumed income, increasing the household's assets or paying off debt owed, reducing the household's total debts . Borrowing New debts taken out over a period of time. When a household's consumption is greater than its income , it can either spend assets it owns or borrow money, increasing the household's debts . In general, research on household finance suggests that all of the components of a household balance sheet assets, debts, net worth, income, consumption, savings, and borrowing are important to understanding a household's financial experience over time. For example, in the event of a financial shock an unexpected expense such as a car or home repair, a medical expense, or a pay cut households with a lower income or little liquid savings are much more likely to experience difficulty making ends meet. As this example suggests, all of the balance sheet's components need to be accounted for when considering consumer decisionmaking. As demonstrated in Figure s 2 and 3 , household income and net worth in the United States are both distributed unevenly. According to the Federal Reserve Board's (Fed's) Survey of Consumer Finances, the bottom 20% of U.S. households ranked by income have an income below $25,300, whereas the top 10% have an income above $177,100. Likewise, the bottom 25% of U.S. households ranked by net worth have a net worth below $10,300, whereas the top 10% have a net worth above $1,186,300. These distributions reflect the variation of household balance sheets within the United States and are due to many factors, such as age, size of household, and household decisions about jobs, homeownership, and other factors. <2.2. Consumer Finance Markets and Policy Considerations> This report examines household borrowing, with a particular focus on consumer financial products, such as mortgages, credit cards, and auto loans, which allow a household to borrow and make payments. As described in the previous section, consumer behavior in these markets may be driven by other parts of the balance sheet, such as the need to build assets or withstand a financial shock. Three common reasons households use credit are as follows: Asset Building Using credit to make investments can allow a household to build wealth over time. For example, a household can use a mortgage to pay for an asset, such as a house, that may appreciate over time. A household also can use student loans to fund education expenses to make a higher income in the future. In both cases, households are using credit to fund household investments that may lead to greater wealth in the future. Consumption Smoothing Using credit to move income across time periods allows a household to consume future income now. For example, recent college graduates might use credit cards to pay for expenses before their new jobs begin. This money is more valuable to graduates now, before they have wages, than in the future, when they have enough income to meet living expenses. Financial Shocks or Emergencies Using credit to pay for unexpected expenses allows a household to compensate for an emergency, such as a car or home repair, a medical expense, or a pay cut. For example, a consumer might take out a payday loan to repair a car and continue to go to work. This money is more valuable to the consumer during the financial emergency than in the future. Each consumer financial market is unique and governed by various distinct laws and regulations. However, consumer financial markets generally share similar market dynamics. In all of these markets, consumers often act in similar ways when making financial decisions, and firms tend to act in comparable ways across markets to attract consumers and make profits. Therefore, the government tends to consider similar policy interventions and factors when regulating these markets. Mainstream economic theory asserts that competitive free markets generally lead to efficient distributions of goods and services to maximize value for society. Under this theory, each market moves toward an efficient price, at which the supply of goods produced by firms and the amount of goods demanded by consumers equal one another. If consumers demand credit products, then banks or other lenders should want to provide these products to consumers if they can make a profit. Without major barriers for new lenders to enter the market, more lenders should start providing credit to consumers, until the price is no longer excessively profitable to lenders. At this point, the market is at equilibrium, its efficient outcome for society. If these conditions hold, policy interventions cannot improve on the financial decisions that consumers make based on their unique situations and preferences. For this reason, some policymakers are hesitant to disrupt free markets, on the theory that prices determined by market forces lead to efficient outcomes without intervention. The life-cycle model is a prevalent economic hypothesis that assumes households usually want to keep consumption levels and their lifestyles stable over time. For example, severely reducing a household's consumption one month may be more painful for a household than the pleasure of a much higher household consumption level in another month. Therefore, households save and invest during their careers in order to afford a stable income across their lives, including retirement. This model suggests that wealth increases as households age, which generally fits household data in the United States. However, income and wealth inequality continues to exist after controlling for household age, suggesting that age is not the only important factor. There are also circumstances where the life-cycle model fails to correspond to household behavior in the United States. A recent National Bureau of Economic Research (NBER) working paper on behavioral household finance identifies three facts about U.S. household balance sheets. First, income and consumption move together very closely, unlike the stable consumption that the life-cycle model would predict. Second, U.S. households on average tend to have low levels of liquid wealth, such as money in a savings account, and a high incidence of credit card borrowing. Third, most U.S. households have much of their wealth in illiquid assets, such as home equity. These patterns might fit the life-cycle model if borrowing money is inexpensive and illiquid assets have higher returns than liquid assets. However, these assumptions might not apply to all households and other explanations might fit these patterns better. Generally, these three facts are important background to better understand consumer behavior in financial markets. These facts suggest why many U.S. households depend on access to affordable credit and robust consumer financial markets, both for short-term needs and for building wealth over time. In these theoretical frameworks, m arket failures occur when a free market is inefficient due to departures from the standard economic framework, which includes assumptions about perfect information and perfect competition. Market failures can reduce economic efficiency and consumer welfare. In these cases, government policy can potentially correct market failures to bring the market to a more efficient outcome, maximizing social welfare. Yet, policymakers often find it challenging to determine whether a policy intervention will help or harm a particular market's efficiency. The following sections discuss two specific departures from the conditions associated with economic efficiency imperfect information and behavioral biases. These market failures are important to understanding consumer credit markets. <2.2.1. Imperfect Information> Imperfect information, or information asymmetry, is when one party in a transaction (e.g., a firm) has more accurate or more detailed information than the other party (e.g., a consumer). This imbalance can result in inefficient outcomes. For example, ideally consumers in a mortgage market will shop around among lenders for the best interest rate, fees, and other terms for their own personal situations. Yet, acquiring information (e.g., contacting a variety of different lenders to compare loan terms) can be time consuming. Consumers might also be willing to spend more to save time or to have a better experience closing their mortgage. However, if information asymmetry exists for example, if interest and fee costs are hidden, confusing, or difficult to obtain some consumers might choose a mortgage loan that is not optimal based on the criteria they deem to be important. In this case, the mortgage market will not lead to efficient societal outcomes, possibly costing some consumers more for a loan than is necessary and dissuading some consumers who otherwise would from entering the market. Information asymmetries occur in the opposite way as well. Often, lenders might not have accurate or detailed information about a consumer, making it hard for them to estimate a consumer's likelihood of default on a loan. The credit reporting industry developed to give lenders more information about a consumer and make the markets for consumer credit more efficient. For more information on the credit reporting industry, see the section of this report titled " Credit Reporting, Credit Bureaus, and Credit Scoring ." <2.2.2. Behavioral Biases in Consumer Decisionmaking> Behavioral research suggests that humans tend to have biases in rather predictable patterns. This research suggests that the human brain has evolved to quickly make judgments in bounded, rational ways, using heuristics or mental shortcuts to make decisions. These heuristics generally help people make appropriate decisions quickly and easily, but sometimes, they can result in choices that make the decisionmaker worse off financially. Within consumer finance markets, a few of these biases tend to be particularly important: Choice Architecture Research suggests that how financial decisions are framed can affect consumer decisionmaking in many ways. For example, people can be anchored by an initial number, even if it is different from their next choice. In one illustration of this concept, researchers had subjects spin a wheel of fortune with numbers between zero and 100, then asked them the percentage of African countries in the United Nations. The random number generated in the first stage subconsciously affected subjects' guesses in the second stage, even though they were not related. Another example of a decisionmaking bias is defaults . For example, employees are more likely to be enrolled in a 401(K) plan by employer defaults than if they actively need to make a choice. A third example of a framing bias is loss aversion , the idea that people tend to respond more strongly to potential losses than gains. Therefore, when choices are framed as a potential loss, such as "an opportunity you don't want to miss," consumers respond more strongly than they do to potential benefits. Present Bias and Scarcity When people tend to put more value on having something now, rather than in the future, even when there is a large benefit for waiting, this behavior is called present bias . In addition, even when people decide they should do something difficult, such as saving for the future or choosing a retirement plan, self-control and procrastination may prevent them from following through on their intentions. These human biases might lead consumers to make financial decisions that are not optimal. Furthermore, a scarcity mindset can make optimal decisionmaking more difficult. Difficult decisions, such as managing finances, require cognitive bandwidth. When under extreme stress, such as living in poverty, people may tunnel their vision, focusing on immediate needs (e.g., paying current bills), rather than prioritizing based on the big picture (e.g., increasing future income). Self-control might also be a limited resource for humans, where the more self-control a person needs to exert over a day, the harder it is to maintain. These limitations to human cognitive functioning can sometimes lead consumers to make flawed financial decisions. Budgeting Biases ( Mental accounting ) Often, households use mental accounts, amounts of money mentally allocated in advance for different purposes, to make consumption decisions. For example, a household may have a monthly budget for food, clothing, and entertainment. Even though money is fungible, many households act as if spending in one category does not affect spending in another category. This categorization is an intuitive and simple way of thinking about a budget. Although this thinking reduces cognitive effort, it can also lead to predictable biases. For example, research suggests that people have trouble forecasting unusual or infrequent expenses. For this reason, these expenses are generally not fully accounted for in the mental budget, leading to overspending. Although consumers might not be aware of these biases when making financial decisions, they are important because firms can take advantage of them to attract consumers. For example, choice architecture biases might influence how marketing materials are developed, emphasizing certain terms to make a financial product seem more desirable to consumers. In addition, product features may be developed to take advantage of people's present bias, scarcity mindset, or mental accounting mistakes. <2.3. Common Policy Interventions and Considerations> In response to market failures, such as information asymmetry and behavioral biases, the government uses policy interventions intended to bring consumer markets to a more efficient market outcome. Three types of policy interventions are common in consumer finance: Standardized Consumer Disclosures Financial products can be complex and difficult for consumers to fully understand. Mandated consumer disclosures are a common policy intervention in consumer financial markets, generally intended to give consumers more information about the costs and terms before they take out a new financial product, thus reducing asymmetric information market failures. Standardized disclosures can also help consumers shop for the best terms, because all financial product terms are required to be disclosed in the same way. Furthermore, because disclosure structure and formatting are often standardized, mandated consumer disclosures can also account for choice architecture biases. Laws that mandate consumer disclosures in financial markets include the Truth in Lending Act (TILA), which requires standardized disclosures for certain consumer credit products, and the Truth in Savings Act, which requires standardized disclosures for certain bank accounts. Unfair, Deceptive, or Abusive Practices or Acts Consumers seeking loans or financial services could be vulnerable because some consumers may lack financial knowledge or be susceptible to biases described in the above section. For this reason, certain consumer protection laws prohibit unfair, deceptive, or abusive acts or practices in consumer financial markets. These acts and practices can include both individual firm conduct and product features. Fair Lending Fair lending laws prohibit discrimination in credit transactions based upon certain borrower characteristics, such as sex, race, religion, and age. These laws historically have been interpreted to prohibit both intentional discrimination and disparate impact discrimination, in which a facially neutral business decision has a discriminatory effect on a protected class. Federal fair lending laws in consumer financial markets include the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Home Mortgage Disclosure Act (HMDA). <2.3.1. Policy Considerations> The market effects of new laws or regulations are important considerations. Does the policy on average lead the market closer to or farther from its efficient outcome? In consumer financial markets, both households and firms may react to new policy. If all of a policy's potential impacts are not considered, it can have unintended effects and perhaps fail to reach policymakers' objectives. From a consumer perspective, new policy formulations should consider the policy's effect on consumer decisionmaking, the impact on household well-being over time, and whether these effects might vary across the population. For example, a new disclosure policy might improve consumer comprehension, but not consumer decisionmaking, thus failing to affect the market as intended. In other cases, a subset of consumers may be susceptible to a deceptive practice. If a new policy eliminates that deceptive practice in the market, the policy may only affect that subset of consumers who were susceptible, rather than the whole consumer population. From a firm's perspective, new policy formulation should consider both the cost for firms to implement the policy as well as its impact on the market's competitiveness, both within and outside of the regulated market. Another important consideration is the policy's impact on consumer prices and financial product availability. For example, complying with a new regulation might require a firm to bear costs. This might force lenders to raise prices, or lenders who cannot bear the additional costs may leave the market. Higher prices and less choice may result in consumers seeking other credit products outside of the market, or reduce consumers' ability to access credit. <2.4. Bureau of Consumer Financial Protection Bureau> Most experts agree that an important factor in the 2008 financial crisis was a housing bubble that led lenders to relax their underwriting standards (or the process by which a lender determines whether a borrower is creditworthy), which in some cases led to consumer protection abuses. In response, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established the CFPB to implement and enforce federal consumer financial law while ensuring consumers can access financial products and services. The CFPB's statutory purpose is to enable markets for consumer financial services and products to be fair, transparent, and competitive. Dodd-Frank consolidated certain consumer finance-related responsibilities previously held by other regulators in the CFPB and created new authorities unique to the CFPB. The act also directed the CFPB to develop and implement financial education initiatives, collect consumer complaints, and conduct consumer finance research. The CFPB generally has regulatory authority over providers of an array of consumer financial products and services, including deposit taking, mortgages, credit cards and other extensions of credit, loan servicing, consumer reporting data collection, and debt collection associated with consumer financial products. The CFPB's authorities and the breadth of products, services, and entities that fall within its jurisdiction are considerable, but Dodd-Frank imposes some important exceptions to and limitations on those powers. The CFPB's authorities fall into three broad categories: rulemaking , writing regulations to implement laws under its jurisdiction ; supervision , the power to examine and impose reporting requirements on financial institutions; and enforcement of various consumer protection laws and regulations. The CFPB is authorized to prescribe regulations to implement 19 federal consumer protection laws that largely predated Dodd-Frank. These enumerated consumer laws govern a broad and diverse set of consumer financial services and generally apply to any entity offering those services. Dodd-Frank also provided CFPB new power to issue rules declaring certain acts or practices associated with consumer financial products and services to be unlawful because they are unfair, deceptive, or abusive. Other aspects of the CFPB's regulatory power particularly the scope of its supervisory and enforcement authority vary depending on a number of factors, including an institution's size and whether it holds a bank charter. The CFPB is headed by a director appointed by the President with the consent of the Senate for a five-year term. It is located within the Federal Reserve System (Fed), although the Fed does not influence the CFPB's budget or personnel decisions. The Fed also cannot veto a rule issued by the CFPB, but the Financial Stability Oversight Council can overturn a CFPB rule with the vote of two-thirds of its members. The CFPB is funded through the Fed's earnings, rather than through the typical appropriations process. The CFPB requests monetary transfers from the Fed, with a cap on the amount of these transfers based on a formula set in statute. For FY2018, the CFPB's funding cap was $663 million, and the agency's net operating costs were $553 million. <3. Overview of Major Consumer Finance Markets> The following sections examine specific issues within major consumer debt markets: mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. The markets discussed are under the CFPB's jurisdiction, and sometimes that of other regulators as well. Each section briefly describes the financial product, recent market developments, and selected policy issues that may lead each market away from its efficient price or outcomes. These sections focus on the consumer and household perspective as well as consumer protection policy issues in each market. <3.1. Mortgage Lending Market> A mortgage loan is a loan collateralized by a house and its land. Generally, consumers use these loans to purchase a new home or refinance an existing one. These types of mortgages are often called first liens, because if a consumer defaults on the loan, the lender is typically the first in line to be compensated through the proceeds of a home foreclosure. First-lien mortgage loans are usually installment loans, in which the consumer pays off the loan in monthly installments over 15 years or 30 years. Most mortgage loans in the United States have a fixed interest rate and fixed installment amount over the course of the loan, affected by the consumer's credit score and market conditions. Households buying a new home and taking out a mortgage loan to purchase it generally cannot borrow for the house's full value. To limit the risk to the lender, borrowers are typically required to make a down payment, the difference between the house's value and the mortgage loan. If the down payment is less than 20% of the home's value, the borrower is often required to pay for additional insurance. In addition to first-lien purchase mortgages, a consumer may choose to take out a home equity line of credit (often referred to as HELOC) or a smaller installment mortgage loan, which often is a second lien. A second lien means that the lender is second in line, after the first lien holder, to be compensated if the consumer defaults and the home is foreclosed upon. These loans are underwritten using the home's value, but can be used for a variety of different purposes either related to the home or not. For example, second mortgages can be used to renovate the home, pay for college, or consolidate credit card debts. Mortgage loans are by far the largest consumer credit market in the United States, and homes are a large part of most households' wealth. According to the Fed, more than $9 trillion of mortgage debt is currently outstanding, and more than $15.5 trillion in real estate equity is owned by households. As of the first quarter of 2019, 64.2% of U.S. households owned their home. Many people view homeownership as an important way to build wealth over time, through both price appreciation and home equity gained by paying down their mortgages. Nevertheless, because home prices can fluctuate over time, this investment can be risky, especially if the homeowner only stays in the home for a short time. Although homeownership has certain benefits, such as tax benefits like the mortgage interest tax deduction, it also imposes costs on the household, such as mortgage loan closing costs and home maintenance. As noted above, most experts believe that a housing price bubble was a central cause of the 2008 financial crisis. In response, Dodd-Frank reformed the mortgage market by attempting to strengthen mortgage underwriting standards, to reduce the risk that consumers default on their mortgages even if house prices fluctuate in the future. Dodd-Frank also directed the CFPB to update federal mortgage disclosure forms (called the combined TILA/RESPA form) and improve standards for mortgage servicing (a company who manages mortgage loans after the loan is originated). During and after the financial crisis, mortgage lenders tightened underwriting standards, making it harder for consumers to qualify for a loan. Although most borrowers with good credit scores continued to qualify for mortgage credit, other borrowers in weaker financial positions found it more difficult to obtain a mortgage. As the economy has recovered, concerns exist about whether new consumer compliance regulation in the mortgage market has struck the right balance between prudent mortgage underwriting and access to credit for potential borrowers to build wealth. Certain features of mortgages during the mortgage boom that were considered to be particularly risky, such as teaser interest rates and loans with little or no income verification, are now uncommon in the mortgage market. However, research suggests that regulating underwriting standards may have caused lenders to prefer certain borrowers, such as those with lower debt-to-income ratios. Mortgage shopping is another policy issue in this market. Consumers do not tend to shop among lenders for more advantageous mortgage interest rates, even though large price differences exist in the market. According to the CFPB, nearly half of all borrowers only seriously consider one lender or broker before taking out a mortgage. Given the range of interest rates available to a consumer at any given time, the CFPB estimates that a consumer could save thousands of dollars on a mortgage by shopping for the best interest rates. House price affordability has been another policy issue in recent years. In high-cost, large metropolitan areas, house prices rose quickly in the past decade, making it harder for consumers to buy a home in these cities. Likewise, the national homeownership rate has declined by almost 5 percentage points since 2005, from 69.1% to 64.2%. Given that homeownership can help a family build wealth over time, this trend concerns some policymakers. <3.2. Student Loans> Student loans allow students and their families to pay for postsecondary education expenses while they are enrolled in school. Education is an investment intended to allow students to earn higher incomes after they complete school and throughout the rest of their careers. In general, student loans are paid back in installments for example, a fixed payment every month for 10 years. Student loan debt has more than doubled in the past decade. Since 2010, student loan debt has been the second-largest category of consumer debt, after mortgage debt. In academic year 2016-2017, the average amount of student loan debt for a bachelor's degree recipient who borrowed funds to complete the degree was $28,500. Unlike other consumer financial markets, most student loans are originated and owned by the federal government. In general, these federal loans are accessible to large portions of the postsecondary student population and their families with limited underwriting of their creditworthiness, estimated future income, or other estimates of their ability to repay the loan. The Department of Education (ED) manages most of the federal student loan programs. Congress sets interest rates and other loan terms and conditions in statute each year. ED contracts out student loan servicing, sets servicing standards in these contracts, and enforces these servicing standards. The CFPB is the primary regulator for private student loan lending and servicing and has also asserted a role in ensuring compliance with consumer protection laws related to federal student loan servicing. From a regulatory perspective, policymakers continue to debate what role the CFPB should play in the federal student loan industry. Consumer groups advocate for more active CFPB enforcement of consumer protection standards in federal student loan servicing. However, because ED already assumes a significant role in how its contractors service federal student loans and taxpayers are responsible for additional servicing costs and default risk for nonpayment some have questioned the need for the CFPB to regulate in the same space. A major concern in the student loan market is whether students are able to manage their debt after graduation. Moreover, unlike other consumer debts, student loans are generally not dischargeable during a bankruptcy proceeding except in limited circumstances. These concerns have led to efforts to make loan repayment terms more flexible. For example, some federal student loan borrowers now have the option to choose income-driven repayment plans, under which a borrower's monthly loan payments are based on a percentage of the borrower's discretionary income. Loan forgiveness programs have also been developed and expanded in recent years, especially for borrowers in public service occupations. ED manages several of the student loan forgiveness and repayment loan programs. Reports from the CFPB student loan ombudsman have uncovered issues in these programs' implementation such as with payment processing, billing, customer service, and borrower communication that make it difficult for borrowers to know their options, understand the process, and qualify for forgiveness or repayment loan programs. Questions have also arisen regarding student loan availability and whether loans should be limited to certain types of educational programs that enable their students to gain quality employment and successfully pay back their loans. Many students make school choice and curriculum decisions at a young age, when they might not have much experience making financial decisions. In addition, information on program quality and student employment outcomes after graduation is limited. These information asymmetry problems can make it difficult for students to make good financial decisions for their future careers. Questions also exist about the extent to which student loan access causes tuition prices to rise. For example, if access to student loans makes it easier for schools to raise tuition, then it might lead to some students being worse off. Some question whether the availability of student loans might harm the larger economy. For example, researchers debate student loan debt's effects on future macroeconomic performance, including effects on career choice, family formation, home ownership, and retirement savings. <3.3. Automobile Loans> An automobile (auto) loan allows a consumer to finance the cost of a new or used car. Auto loans are usually structured as installment loans, in which a consumer pays a fixed amount of money each month for a predetermined time period, frequently three to seven years. Lenders often require consumers to make a down payment to obtain the loan. Auto loans are secured by the automobile, so if a consumer cannot pay the loan, the lender can repossess the car to recoup the loan's cost. Auto loans are the third-largest consumer credit market. At the end of 2018, 113 million consumers roughly 45% American adults had an auto loan, and auto loan debt outstanding totaled almost $1.3 trillion. According to the CFPB, auto loan terms have increased recently. In 2009, 26% of auto loans originated were for six or more years, whereas in 2017, these loans constituted 42% of originations. This trend may be due in part to rising vehicle costs and consumers keeping their cars longer. Reportedly, most auto loans are arranged at the auto dealership where the car is purchased, referred to as the indirect auto financing market . Indirect auto financing involves the auto dealer forwarding information about the prospective borrower to one or more lenders to solicit potential financing offers. The dealer is often compensated for originating the loan through a discretionary markup, which is the difference between the lender's interest rate and the rate a consumer is charged. The lender may cap the possible size of the dealer markup (e.g., 2.5%) to limit the loan from becoming too susceptible to default. Auto dealers and consumers can negotiate the loan's interest rate within this range, and therefore indirectly determine how much to compensate the auto dealer for the convenience of arranging the loan. Alternatively, consumers can go directly to a bank, credit union, or other lender for an auto loan before making their purchases, avoiding the dealer markup cost. Consumers may prefer arranging auto financing through an auto dealer or directly through a lender, depending on their preferences regarding convenience, cost, and other factors. In either case, the lender usually owns the loan and can service it itself or through a third-party company. In the indirect auto financing market, the dealer markup arrangement can incentivize the auto dealer to negotiate and profit from a higher interest rate with the consumer. The auto dealer may also choose the lender who compensates it the most for example, the lender that allows the largest markup, rather than the lender offering the best terms for the consumer. Although other consumer credit markets include markups, it is less common for bank or credit union lenders to allow an outside broker in the transaction discretion as to the amount of the markup. For example, although the Real Estate Settlement Procedures Act restricts such practices in the mortgage market, after reports of mortgage brokers steering customers to more expensive loans due to "kickbacks" unearned fees for a referral in the lead-up to the financial crisis, Congress in 2010 took actions to further restrict these practices. The information asymmetry in the indirect auto finance market sometimes can lead to higher prices for consumers. Consumers are not always aware that they can negotiate on loan terms when obtaining dealer-arranged financing. For this reason, many consumers do not shop for auto loans. Consumers' lack of awareness combined with auto dealers' discretion on markups may leave them vulnerable to bad actors, making the auto loan market uncompetitive. The CFPB oversees consumer protection compliance for auto lenders, but not for auto dealers' typical activities. Dodd-Frank states that "the Bureau may not exercise any [authority] over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both." The scope of this exclusion continues to be debated, given the key role auto dealers play in the auto lending market. In 2013, the CFPB issued a controversial bulletin providing guidance to indirect auto lenders on how to comply with the Equal Credit Opportunity Act (ECOA). This guidance generally stated that indirect auto lenders should impose controls on or revise and monitor dealer markups to ensure they do not result in disparate impact based on race or other protected classes. From 2013 to 2016, the CFPB, in coordination with the Department of Justice, issued consent orders to settle enforcement actions against American Honda Finance Corporation, Toyota Motor Credit Corporation, Fifth Third Bank, and Ally Financial & Ally Bank for ECOA violations in indirect auto lending markets. The CFPB generally alleged that these institutions violated ECOA by permitting their dealers to charge markups that resulted in disparate impacts on the basis of race and ethnicity. Auto lenders generally do not collect information on the race or ethnicity of borrowers. In the absence of direct evidence, the CFPB used a new proxy methodology, a statistical method developed for estimating race and ethnicity using geography and surname-based information. Although this method may not be able to flawlessly identify race or ethnicity for an individual, aggregate, company-wide estimates of disparate impacts are much more precise. In general, these institutions did not admit or deny the allegations as part of the consent orders but, among other things, paid monetary penalties and agreed to limit their markups to reduce these alleged disparities. The CFPB's indirect auto lender guidance and the resulting enforcement actions were the subject of significant attention and debate. For example, some expressed the view that the guidance went beyond what ECOA and the Dodd-Frank Act require of auto lenders, while others considered it an important step toward addressing discrimination. In 2018, Congress rescinded the guidance pursuant to the Congressional Review Act. Nevertheless, some observers argue that discrimination in auto lending markups continues to be an area of concern. <3.4. Credit Cards and Payments> Retail payment services allow consumers to pay merchants for goods and services without cash, sometimes called a payment transaction . Consumers can use these services to pay bills, make person-to-person payments, or withdraw cash. These services can be found in many consumer financial products, including credit, debit, and prepaid cards and checking accounts. Given the rise of internet shopping, retail payment services have become especially critical for consumers to be able to make daily purchases. The most common methods of payment are debit cards, cash, and credit cards, respectively. Debit and prepaid cards generally are associated with a funded account from which the consumer draws money to pay for transactions. In contrast, credit cards allow a consumer to pay for transactions using credit. According to the CFPB, in 2017, just under 170 million consumers, roughly 70% of the U.S. adult population, had a credit card. Credit cards provide consumers with unsecured revolving credit, meaning the loan is not secured with any collateral if the consumer defaults (and thus, the lender has no recourse to seize any property connected to the loan in case of consumer default). In some cases, credit cards are used for payment transaction convenience and paid in full each month without incurring interest. These types of users are sometimes called transactors . In other cases, credit card users borrow money up to a credit limit and make only a m inimum payment (generally a small portion of the outstanding balance) on the debt each month, incurring interest on the unpaid balance. These types of credit card users are called revolvers . In 2016, average interest rates for general purpose credit cards were just over 17%. Although a consumer can move between transacting and revolving, consumers tend to show persistent payment behavior. According to a Fed survey, roughly half of consumers transact and half revolve. Credit cards are valuable to consumers in part because they are flexible both the amount borrowed and the amount paid can vary each month according to the consumer's needs. For example, if a household experiences a financial shock, such as unemployment or a car or house repair, the household can use credit cards to borrow money quickly and easily, which the household can then pay back when it is able. Credit cards can also be used to smooth consumption over time, which may be particularly valuable to households with tight budgets. However, credit cards also are structured in a way that can take advantage of many consumer decisionmaking biases, which can result in households incurring debt. For example, mental accounting biases can lead to overspending, and credit cards allow households to overspend easily, perhaps without even realizing it until their monthly bill is due. Research suggests that the half of credit card holders who are persistently in credit card debt are likely to be present biased and have little liquid savings. The type of information disclosed in a typical credit card statement may play an important role in how revolving consumers repay credit card debt. Research suggests that many people are anchored by the minimum payment amounts included in each statement, which bias their decisions about how much to pay each month. Specifically, the research suggests these consumers are either paying the minimum payment or employing heuristics to pay near the minimum (e.g., twice the minimum or $20 above the minimum). This cue may unconsciously influence consumers to make a lower payment than they otherwise would. For these reasons, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) established new disclosure requirements for credit cards. The CARD Act changed the periodic disclosure credit card companies are required to make to consumers to include information on how long it will take to pay off a consumer's debt if the consumer makes only the minimum payment. The disclosure also now includes the amount a consumer would have to pay to repay the debt in three years and how much interest the consumer would save by paying the debt off in three years compared with the minimum payment. These changes in the disclosure requirements were intended to nudge consumers to pay more on their credit cards each month, but research suggests that they did not have as big of an effect on consumer payment behavior as intended, in part because online portals which have become a popular method of credit card payment are not required to contain these disclosures. <3.5. Payday and Other Credit Alternative Financial Products106> When consumers face financial shocks, such as unemployment or a car repair, sometimes they need credit to manage the unforeseen event. One option a consumer may access is a short-term, small-dollar loan, which tends to be outstanding for a short period of time and for a small amount of money, generally less than $1,000. Banks and credit unions sometimes provide these types of loans through cash advances or checking account overdraft programs. Many consumers, often those with a low credit score or no credit history, also turn to alternative financial products from a nonbank institution to provide credit when needed. Alternative financial products include payday loans, pawn shop loans, auto title loans, and other types of products from nonbank providers. According to the Federal Deposit Insurance Corporation (FDIC), in 2017, 19.7% of American households did not have access to mainstream credit and 6.9% used a credit alternative financial service. Households that rely on credit alternative financial services are more likely to be lower-income, younger, and a racial or ethnic minority compared to the general U.S. population. Perhaps the best known of these products are payday loans, which have been the subject of significant regulatory, congressional, and media attention. Payday loans are structured as short-term advances that allow consumers to access cash before they receive a paycheck. These loans are designed to be paid back on a consumer's next payday. Payday loans are offered through storefront locations or online for a set fee. The underwriting of these loans is minimal, with consumers required to provide little more than a paystub and checking account information to take out a loan. Rather than paying off the loan entirely when it is due, many consumers roll over or renew these loans. Sequences of continuous rollovers may result in consumers being in debt for an extended period. Because consumers generally pay a fee for each new loan, payday loans can become expensive. In 2010, the Dodd-Frank Act authorized the CFPB to oversee payday lenders for the first time at the federal level, but prohibited the CFPB from imposing an interest rate limit on any type of credit, including payday loans. As of February 2019, 17 states and the District of Columbia either ban or limit the interest rates on these loans. In the payday market, policy disagreements tend to center on balancing access to credit with consumer protection. The academic research is mixed in terms of payday loans' effect on consumer well-being. When consumers have emergencies, short-term, small-dollar credit can help them make ends meet. Payday loans' product features, such as the option to roll over, can allow consumers to pay back their loan flexibly, but also can play into cognitive biases, including present biases and scarcity tunnel vision. Some consumers pay off payday loans quickly, but a sizable minority are in debt for a long period of time a CFPB study found 36% of new payday loan sequences were repaid fully without rollovers, while 15% of sequences extended for 10 or more loans. In October 2017, during the leadership of then-Director Richard Cordray, the CFPB finalized a rule covering payday and other small-dollar, short-term loans that has not yet gone into effect . The 2017 rule asserts that it is "an unfair and abusive practice" for a lender to make certain types of short-term, small-dollar loans "without reasonably determining that consumers have the ability to repay the loans." The rule would mandate underwriting provisions for short-term, small-dollar loans unless made with certain features. In February 2019, the CFPB under Trump-appointed Director Kathy Kraninger issued a proposed rule that would rescind the mandatory underwriting provisions before the 2017 final rule goes into effect. The 2019 proposed rule would leave unchanged other parts of the 2017 rule, such as other payment provisions relating to protections for consumers paying back these loans. Given the concerns about consumer harm from payday and other small-dollar, short-term loans , some financial institutions are interested in exploring other loan models that try to give consumers access to credit for short-term needs at a lower cost and with an easier re pay ment process . For this reason, prudential regulators, such as the Office of the Comptroller of the Currency (OCC) and the FDIC, are exploring ways to encourage banks to offer small-dollar credit products to consumers. However, i t is unclear whether these different types of products can improve outcomes for consumers compared to payday loans , given that the population of consumers these products would target and those consumers' biases concerning money management are likely similar. <3.6. Checking Accounts and Substitutes> Checking accounts allow consumers to deposit money and make payments, for example, using bill pay and paper checks. Frequently, a checking account includes access to a debit card, to increase a consumer's ability to make payment transactions through the account. Checking accounts are generally provided by a bank or credit union, and consumers' deposits are government insured (up to a certain amount) against the institution's failure. In recent years, the availability of free or low-cost checking accounts has reportedly diminished, and fees associated with checking accounts have grown. The most common fees that checking account consumers incur are overdraft and nonsufficient fund fees. Consumers can incur an overdraft when they transact below their account balance, and the bank or credit union covers the negative balance for the consumer for a fee. In general, negative balance episodes are short in duration. According to the CFPB, half of all episodes last three or fewer days, and more than three-quarters last a week or less. Overdraft services can help consumers pay bills on time. However, overdraft fees can be costly, particularly for consumers who are inattentive or tend to overspend due to tight budgets and mental accounting biases. CFPB research suggests that a small number of checking account holders incur most overdraft fees, with 8.3% of consumers overdrafting more than 10 times per year and accounting for 73.7% of overdraft fees. According to the CFPB, these frequent overdrafters tend to be more credit constrained, have lower credit scores, and are less likely to have a general-purpose credit card than the general U.S. population. In 2009, a provision of the CARD Act required consumers to affirmatively opt in for overdraft coverage of ATM withdrawals and nonrecurring deb i t card transactions. Since this requirement was implemented, opt-in rates have tended to vary by bank , from single-digit percentages to more than 40% within particular institutions . Frequent overdrafters who opt in to overdraft services seem to have similar characteristics to those who do not opt in, but tend to pay more in fees. Given this research, consumer advocates have raised concerns about whether overdraft programs are sufficiently transparent and whether consumers receive sufficient disclosures regarding these programs. Advocates have also questioned how financial institution practices influence the opt-in decision. Overdrafts may be caused by the lapse of time between payment authorization, account settlement, and when funds are available to the consumer. Because of these time lapses in the payments system, some consumers may not realize no funds are available when they overdraft their account. For this reason, some argue that a faster payment system or other financial planning products may help consumers keep better track of their balances, preventing overdrafts. Overdraft fees may lead to involuntary checking account closures, leaving some households without access to a bank account. According to the FDIC, in 2017, 6.5% of households were unbanked , meaning that no one in the household had a checking or savings account from an insured institution. Unbanked households tend to be younger and are more likely to be racial or ethnic minorities than the general U.S. population. The main reasons households cite for not having a bank account include insufficient account funds, not trusting banks, and high account fees. Moreover, in 2017, an additional 18.7% of households were underbanked , meaning that the household obtained financial products or services outside of the banking system, products sometimes called alternative financial services. Certain observers contend that financial outcomes for the unbanked and underbanked would be improved if banks which may be a more stable source of relatively inexpensive financial services relative to certain alternatives were more active in serving these customers. For this reason, policymakers and observers will likely continue to explore ways to make banking more accessible to a greater portion of the population. However, it may be expensive for banks to serve these customers for example, they might have low-balance accounts. At least some of these consumers may be served better by alternative financial providers if their products are less expensive or if they provide more customer service than banks. General-purpose prepaid cards may be considered an alternative to a traditional checking account, and they can be obtained through a bank, at retail stores, or online. These cards can be used in payment networks, such as Visa or MasterCard. It is also possible to direct deposit payroll checks onto these cards. But unlike checking accounts, funds on prepaid cards are not always federally insured against an institution's failure. According to the Federal Reserve Bank of Boston, almost half of all unbanked households use a general-purpose prepaid card. <4. Overview of Consumer Finance Market Support Systems> Although each consumer credit market is unique, certain common aspects of the consumer credit system facilitate the pricing of credit offers and the resolution of delinquencies and defaults for most consumer credit markets. This section discusses two of what this report will refer to as market support systems : the consumer credit reporting system (which helps lenders price consumer loans) and the debt collection market (which helps lenders to collect upon consumer default). Notably, in both these market support systems, consumers do not have the ability to choose the financial institution or entity with whom they engage, and therefore are unable to take their business elsewhere if issues arise. For this reason, when consumer abuses occur in these markets, consumer protection laws and regulations may be particularly important. According to the CFPB, credit reporting and debt collection are the consumer finance markets with by far the most complaints, together accounting for 63% of the total complaints the agency received in 2018 (38% and 25%, respectively). <4.1. Credit Reporting, Credit Bureaus, and Credit Scoring> The consumer data industry collects information on consumers, such as financial payment history data, to predict their future financial product performance. This industry includes financial firms who report on consumers' payment behaviors, credit bureaus who collect and store this information, and credit scoring companies that use this data to develop algorithms to predict consumers' future payment behaviors. The three largest credit bureaus Equifax, Experian, and TransUnion provide credit reports nationwide. The consumer data industry is important because it significantly affects consumer access to financial products or opportunities. For example, negative or derogatory information on a credit report, such as information stating that a consumer has paid late or defaulted on a loan, may influence a lender to deny a consumer access to credit. The main statue regulating the credit reporting industry is the Fair Credit Reporting Act (FCRA), enacted in 1970. The FCRA requires "that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit ... in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information." Among other things, the FCRA establishes permissible uses of credit reports and imposes certain responsibilities on those who collect, furnish, and use the information contained in consumers' credit reports. The FCRA also includes consumer protection provisions. Under the FCRA, a lender must advise a consumer when the lender has used their information from a credit reporting agency (CRA) in taking an adverse action (generally a denial of credit) against the consumer. That information must be disclosed free of charge. Consumers have a right to one free credit report every year (from each of the three largest nationwide credit reporting providers) even in the absence of an adverse action (e.g., credit denial). Consumers also have the right to dispute inaccurate or incomplete information in their reports. After a consumer alerts a CRA of such a discrepancy, the CRA must investigate and correct errors, usually within 30 days. The FCRA also limits the length of time negative information may remain on credit reports. Negative debt collection information typically stays on credit reports for 7 years, even if the consumer pays in full for the item in collection; information about a personal bankruptcy stays on a credit report for a maximum of 10 years. The CFPB has rulemaking and enforcement authorities over all CRAs in connection with certain consumer protection laws, including the FCRA; it also has supervisory authority, or the authority to conduct examinations, over the larger CRAs. In July 2012, the CFPB announced that it would supervise CRAs with $7 million or more in annual receipts, which included 30 firms representing approximately 94% of the market. Inaccurate or disputed consumer data within the credit bureaus' reports is an ongoing concern in this market. Inaccurate information in a credit report may limit a consumer's access to credit in some cases or increase the costs to the consumer of obtaining credit in others. In response to this concern, the CFPB has recently encouraged credit bureaus and financial institutions to improve data accuracy in credit reporting. In 2017, the CFPB released a report of its supervisory work in the credit reporting system. The report discusses the CFPB's efforts to work with credit bureaus and financial institutions to improve credit reporting in three specific areas: data accuracy, dispute handling and resolution, and furnisher reporting. As the report describes, credit bureaus and financial firms have worked with the CFPB to develop data governance and quality control programs to monitor data accuracy. In addition, the CFPB has encouraged credit bureaus to improve their dispute and resolution processes, including making them easier and more informative for consumers. When credit reporting disputes arise, consumers sometimes find it difficult to advocate for themselves because they are not aware of their rights and how to exercise them. According to a CFPB report, some consumers are confused about what credit reports and scores are, find it challenging to obtain credit reports and scores, and struggle to understand the contents of their credit reports. The CFPB provides financial education resources on its website to help educate consumers about their rights regarding consumer reporting. The credit bureaus' websites also provide information about how to dispute inaccurate information, and consumers can contact the credit bureaus by phone or mail. However, debates continue regarding whether these efforts are enough to ensure that consumers can effectively advocate for themselves. Data protection and security are important issues in consumer data reporting, particularly following the announcement, on September 7, 2017, of the Equifax cybersecurity breach that potentially revealed sensitive consumer data information for 143 million U.S. consumers. CRAs are subject to the data protection requirements of Section 501(b) of the Gramm-Leach-Bliley Act (GLBA). Section 501(b) requires the federal financial institution regulators to establish appropriate standards for the financial institutions subject to their jurisdiction relating to administrative, technical, and physical safeguard (1) to insure the security and confidentiality of consumer records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access or use of such records or information which could result in substantial harm or inconvenience to any customer. The FTC has the authority to enforce Section 501(b) against CRAs, and it has promulgated rules implementing the GLBA requirement. However, because the FTC has little upfront supervisory or enforcement authority, the agency typically only exercises its enforcement authority after an incident has occurred. <4.2. Debt Collection and Bankruptcy> When a consumer defaults on a debt, her debt obligations are often collected not by the lender to whom she originally owed the debt, but rather by a third-party debt collector (here in after referred to as a debt collector ) that by contract receives a share of the amount collected on behalf of the original lender or buys the debt obligation in full. In general, a robust debt collection market allows lenders to recoup their losses to the maximum extent possible after a consumer defaults on a loan, leading to lower initial loan costs and more access to credit for consumers. Many America ns experience debt collection. According to a CFPB survey, about one-third of consumers with a credit bureau file reported being contacted in the last year by at least one creditor or collector trying to collect on one or more debt s . Consumers with lower incomes and nonprime credit scores were more likely to report experience with debt collection than consumers with higher incomes and prime credit scores. In 2018, debt from unpaid loans or other financial services account ed for approximately 40 % of debt collection revenue. The other 60% of debt collection revenue includes medical, telecom, and other retail debt . The Fair Debt Collection Practices Act (FDCPA), enacted in 1977, is the primary federal statue regulating the debt collection market and aims "to eliminate abusive debt collection practices by debt collectors." Among other things, it prohibits debt collectors from engaging in certain types of conduct (such as misrepresentation or harassment) when seeking to collect debts from consumers, requires that debt collectors disclose certain information to consumers, and grants consumers the right to dispute an alleged debt. The Dodd-Frank Act granted the CFPB authority to write regulations to implement the FDCPA, both regarding debt collectors as defined in the FDCPA and those who collect debt related to a consumer financial product service as defined in the Dodd-Frank Act. The CFPB also has enforcement authorities over the debt collection market and supervisory authority, or the authority to conduct examinations, over nonbank firms with more than $10 million in annual receipts from consumer debt collection activities. The FDCPA requires that, after a debt collector initially contacts a consumer, the collector must send the consumer a validation notice (generally, a notice disclosing certain information about the debt to the consumer). Thereafter, a debt collector can call, send letters, and use other methods to contact the consumer to collect an alleged debt. In general, debt collectors expect that they will collect only a fraction of the face value of any particular debt, knowing that some consumers will never pay back their debt in full. Therefore, when a third-party debt collector contacts a consumer, both parties can negotiate the amount and payment schedule of the debt. Although debt collectors are not required to furnish information about the debt to credit bureaus, they may do so. According to the CFPB, debt collectors generally choose not to furnish data to credit bureaus due to the cost and potential legal liability, though most debt collectors furnish data occasionally. If a consumer does not settle a debt, the debt owner often has several options, such as seizing the collateral for secured loans (e.g., car, home) or garnishing a consumer's wages after obtaining a court order. According to CFPB research, "the cost of filing a claim plays a large role in litigation decisions and varies significantly across jurisdictions based on differences in factors such as filing fees and what types of collections claims can be brought in small claims court." More than half of filed suits lead to default judgments in favor of the debt owner, often because consumers fail to appear in court. Consumers who cannot pay their debts may seek relief through the federal bankruptcy process, which is generally governed by the Bankruptcy Code. In general, the bankruptcy process allows a consumer to enter a court-administered proceeding by which the consumer can discharge certain debts and thus obtain a fresh start. However, consumers may face negative repercussions by choosing bankruptcy, for example, a lower credit score and reduced access to credit for several years afterward. In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), in response to what some perceived as a high number of consumer bankruptcy filings. While BAPCPA made a number of amendments to the Bankruptcy Code, for the purposes of this report, its most notable change was to impose a "means test" to determine whether consumers are eligible for certain relief under the Bankruptcy Code. In addition to the federal bankruptcy process, many states limit the length of time consumers are legally obligated to pay a debt. Ongoing concerns relating to debt collection include debts incorrectly attributed to consumers or for incorrect amounts; consumers' inability to advocate for themselves through the process; and consumers' inability to avoid abusive practices from debt collectors. According to a CFPB survey, more than half of consumers who had been contacted about a debt in collection reported that there was an error as to at least one such debt, and over a quarter disputed the debt with the debt collector. People with higher incomes and older people were more likely than lower-income and younger people to report disputing a debt, although reported errors did not vary significantly based on demographics. These verification issues may exist because debt collectors are not required to obtain a debt's full files from the original lender. Sometimes, the original lender conveys only basic information to the debt collector unless a consumer disputes the debt, reducing costs for debt collectors. In addition, the minimum amount of information that must be included in debt validation notices under FCRA might not be sufficient for some consumers to recognize their debts, according to the CFPB. Recent consumer complaints to the CFPB find similar verification issues. In 2018, the most common debt collection complaints to the CFPB asserted that debt collectors had attempted to collect a debt the consumer did not owe (44%); a consumer received insufficient written notification about a debt, such as not enough information to verify the debt or not learning about a debt until it was on a credit report (24%); and general complaints about a debt collector's communications tactics, such as frequent or repeated calls (12%). To address some of these concerns, the CFPB recently issued a proposed rule that would clarify what information debt collectors should disclose to consumers and how they should communicate with consumers under FCRA. <5. Conclusion> For all of the consumer financial markets described in this report, the societal goal is that each market will create a transparent and competitive price that leads to an efficient market outcome. As described earlier in the report, government policy can potentially correct market failures, such as information asymmetries or behavioral biases, to bring the market to a more efficient outcome, maximizing social welfare. Yet, government policy can lead to unintended consequences as well. Policy changes will typically impose costs and benefits, but these effects can be difficult to calculate in advance of a new law or regulation. It is often challenging to determine whether a policy intervention will help or harm market efficiency.

Consumer finance refers to the saving, borrowing, and investment choices that households make over time. These financial decisions can be complex and can affect households' financial well-being both now and in the future. Safe and affordable financial services are an important tool for most American households to avoid financial hardship, build assets, and achieve financial security over the course of their lives. Understanding why and how consumers make financial decisions is important when considering policy issues in consumer financial markets. Households borrow money for the following common reasons: investments—such as a home or education—to build future wealth, consumption smoothing (i.e., paying later to consume things now), and emergency expenses. Most households rely on credit to finance some of these expenses, because they do not have enough money saved to pay for them. According to the Federal Reserve Bank of New York, mortgage debt is by far the largest type of debt for households, accounting for approximately 67% of household debt. Student debt is the second-largest household debt, followed by auto loans and credit cards. Consumer financial markets generally share similar market dynamics. In all of these markets, consumers often act in similar ways when making financial decisions and firms tend to act in comparable ways to attract consumers. Therefore, the government tends to consider similar policy interventions when regulating in these markets. Competitive free markets generally lead to efficient distributions of goods and services to maximize value for society. Yet sometimes, free markets are inefficient when particular issues arise. Common issues in consumer financial markets include (1) information asymmetries between financial firms and consumers and (2) behavioral biases that predictably bias consumers when making financial decisions. In these cases, government policy can potentially correct market failures to bring the market to a more efficient outcome, maximizing social welfare. In consumer finance, three types of policy interventions are common: (1) standardized consumer disclosures; (2) regulation to prevent deceptive, unfair, or abusive financial institution practices; and (3) regulation to prevent discrimination in consumer-lending markets. Yet, policymakers need to be aware of unintended consequences of proposed policies, and often find it challenging to determine whether a policy intervention will help or harm a particular market's efficiency. In response to the 2007-2009 financial crisis, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203 ) established the Bureau of Consumer Financial Protection (CFPB) to implement and enforce federal consumer financial law while ensuring consumers can access financial products and services. The CFPB's authorities fall into three broad categories: rulemaking , writing regulations to implement laws under its jurisdiction ; supervision , the power to examine and impose reporting requirements on financial institutions; and enforcement of various consumer protection laws and regulations. The CFPB generally has regulatory authority over providers of an array of consumer financial products and services. The major consumer financial markets include mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. In addition, two important market structures allow these consumer financial products to be offered: (1) the consumer credit reporting system and (2) the debt collection market. These aspects of the consumer credit system facilitate the pricing of credit offers and the resolution of delinquent consumer credit products for most consumer credit markets.

crs_R46344

crs_R46344_0

<1. Introduction> This report is an overview of U.S. foreign assistance to the Middle East and North Africa (MENA). It includes a brief historical review of foreign aid levels, a description of specific country programs, and analysis of current foreign aid issues. It also provides analysis of the Administration's FY2021 budget request for State Department and U.S. Agency for International Development (USAID) Foreign Operations and Related Programs (SFOPS) appropriations in the MENA region. Congress authorizes and appropriates foreign assistance and conducts oversight of executive agencies' management of aid programs. As the largest regional recipient of U.S. economic and security assistance ( see Figure 1 below ), the Middle East is perennially a major focus of interest as Congress exercises these powers. The foreign aid data in this report is based on a combination of resources, including USAID's U.S. Overseas Loans and Grants Database (also known as the "Greenbook"), appropriations data collected by the Congressional Research Service from the State Department and USAID, data extrapolated from executive branch agencies' notifications to Congress, and information published annually in the State Department and USAID Congressional Budget Justifications. The release of this report has coincided with the global spread of the Coronavirus Disease 2019, or COVID-19 ( see text box below ). The COVID-19 pandemic is expected to affect all MENA countries, and may significantly affect poorer nations that benefit from U.S. and other international assistance. Much of the data presented in this report predates the COVID-19 pandemic. <2. Foreign Aid to Support Key U.S. Policy Goals> U.S. bilateral assistance to MENA countries is intended to support long-standing U.S. foreign policy goals for the region, such as containing Iranian influence, countering terrorism, preventing the proliferation of weapons of mass destruction, preserving the free-flow of maritime commerce and energy resources, promoting Israeli-Arab peace, and preserving the territorial integrity and stability of the region's states. U.S. foreign assistance (from global accounts/non-bilateral) also is devoted to ameliorating major humanitarian crises stemming from ongoing conflicts in Syria, Yemen, and elsewhere. As in previous years, the bulk of U.S. foreign aid to the MENA region continues to be focused on assistance (mostly military) to three countries: Israel, Egypt, and Jordan. Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. Almost all current U.S. aid to Israel is in the form of military assistance, and U.S. military aid for Israel has been designed to maintain Israel's "qualitative military edge" (QME) over neighboring militaries. U.S. military aid to Egypt and Jordan (which have been at peace with Israel since 1979 and 1994, respectively) is designed to encourage continued Israeli-Arab cooperation on security issues while also ensuring interoperability between the United States and its Arab partners in the U.S. Central Command (CENTCOM) area of responsibility. The United States also has provided economic assistance to some MENA countries focusing on education, water, health, and economic growth initiatives. In part, U.S. bilateral economic assistance is premised on the idea that governments across the MENA region have had increasing difficulty meeting the expectations of their young citizens. Public dissatisfaction over quality of life issues and lack of economic opportunities persist in many MENA countries. According to the Arab Youth Survey , the rising cost of living and unemployment are the two main obstacles facing Middle East youth today. Arab Barometer , a U.S.-funded, nonpartisan research network that provides insight into Arab public attitudes, also notes that widespread youth discontent about their economic prospects translates into broad frustration with government efforts to create employment opportunities. In recent years, as popular protests have proliferated across the MENA region, governments have continued to grapple with systemic socioeconomic challenges, such as corruption, over-reliance on oil, inefficient public sectors, low rates of spending on health and education, and soaring public debt. <3. The Trump Administration's FY2021 Aid Budget Request for the MENA Region> Since 1946, the MENA region has received the most U.S. foreign assistance worldwide, reflecting significant support for U.S. partners in Israel, Egypt, Jordan, and Iraq ( see Figure 2 ). For FY2021, Israel, Egypt, and Jordan combined would account for nearly 13.5% of the total international affairs request. Reducing MENA Aid. For FY2021, the Administration proposes to spend an estimated $6.6 billion on bilateral assistance to the MENA region, a figure that would be nearly equal to the 2020 request but 12% less than what Congress appropriated for 2019 ( see Figure 3 ). In order to achieve this 12% proposed reduction, the Administration's FY2021 request would reduce total military and economic assistance to Iraq, Lebanon, and Tunisia by a combined $544 million. It also seeks to reduce total aid to Jordan by $250 million and, as it did the previous year, does not request Economic Support Fund/Economic Support and Development Fund (ESF/ESDF) for stabilization programs in Syria. In its FY2021 request to Congress, the Administration reiterated from the previous year that it seeks to "share the burden" of economically aiding MENA countries with the international community while aiming to build countries' "capacities for self-reliance." Stabilization Support for Iraq, Syria, and Beyond. For FY2021, the Administration is again requesting that Congress provide it flexibility in allowing up to $160 million in funding appropriated to various bilateral aid accounts to be used for the Relief and Recovery Fund (RRF). The RRF is designed to assist areas liberated or at risk from the Islamic State (IS, also known as ISIL, ISIS, or the Arabic acronym Da'esh ) and other terrorist organizations (see "Potential Foreign Aid Issues for Congress" below). According to the Congressional Budget Justification (CBJ), "ESDF funding in the RRF will allow the State Department and USAID to support efforts in places like Syria, Iraq, Libya, and Yemen, where the situation on the ground changes rapidly, and flexibility is required." Among other things, funds designated for RRF purposes have supported Iraqi communities through contributions to the United Nations Development Program's Funding Facility for Stabilization (UNDP-FFS). The Trump Administration had ended U.S. contributions to stabilization efforts in Syria, but notified Congress of an intended obligation in 2020 and indicates that it may use FY2021 funds for programs in Syria. No Funds for the Palestinians. For the first time in over a decade, an Administration has not requested any U.S. bilateral economic or security assistance aid for the Palestinians (see "Potential Foreign Aid Issues for Congress" section below). The Trump Administration, having clashed repeatedly with Palestinian Authority President Mahmoud Abbas, has significantly reduced bilateral funding to the West Bank and Gaza, and has discontinued contributions to U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) for Palestinian refugees. Moreover, as a result of provisions in the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), no bilateral assistance has been delivered to the Palestinians since January 2019. The Administration did suggest that funds from its re-proposed "Diplomatic Progress Fund" ($225 million) could be used to "resume security assistance in the West Bank" or support critical diplomatic efforts, such as "a plan for Middle East peace." In FY2020, the Administration requested $175 million in ESDF for the Diplomatic Progress Fund, though Congress did not fund it in the FY2020 Further Consolidated Appropriations Act, P.L. 116-94 (referred to herein as P.L. 116-94 ). <4. Select Country Summaries> <4.1. Israel20> Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. To date, the United States has provided Israel $142.3 billion (current, or noninflation-adjusted, dollars) in bilateral assistance and missile defense funding. Almost all U.S. bilateral aid to Israel is in the form of military assistance. In 2016, the U.S. and Israeli governments signed a 10-year Memorandum of Understanding (MOU) on military aid, covering FY2019 to FY2028. Under the terms of the MOU, the United States pledges (pending congressional appropriation) to provide Israel $38 billion in military aid ($33 billion in Foreign Military Financing or FMF grants plus $5 billion in missile defense appropriations). This MOU replaced a previous $30 billion 10-year agreement, which ran through FY2018. Israel is the largest recipient of FMF. For FY2021, the President's request for Israel would encompass approximately 59% of total requested FMF funding worldwide. Israel uses most FMF to finance the procurement of advanced U.S. weapons systems. In March 2020, the Defense Security Cooperation Agency (DSCA) notified Congress of a planned sale to Israel of eight KC-46A Boeing "Pegasus" aircraft for an estimated $2.4 billion. According to Boeing, the KC-46A Pegasus is a multirole tanker (can carry passengers, fuel, and equipment) that can refuel all U.S. and allied military aircraft. The Israeli Air Force's current fleet of tankers was originally procured in the 1970s, and it is anticipated that Israel will be able to use the KC-46A to refuel its F-35 fighters. Israel is the first international operator of the F-35 Joint Strike Fighter, the Department of Defense's fifth-generation stealth aircraft considered to be the most technologically advanced fighter jet ever made. After Japan, Israel will become the second foreign user of the KC-46A. <4.2. Egypt21> Since the 1979 Israeli-Egyptian Peace Treaty, the United States has provided Egypt with large amounts of foreign assistance. U.S. policymakers have routinely justified this aid to Egypt as an investment in regional stability, built primarily on long-running military cooperation and the perceived need to sustain the treaty. Egypt has used FMF to purchase major U.S. defense systems, such as the F-16 fighter aircraft, the M1A1 Abrams battle tank, and the AH-64 Apache attack helicopter. U.S. economic aid to Egypt (funded through ESF) is divided into two components: (1) USAID-managed programs (public health, education, economic development, democracy and governance); and (2) the U.S.-Egyptian Enterprise Fund (EAEF). Since its inception in FY2012, Congress has appropriated $300 million in ESF for the EAEF. Egypt's governance and human rights record has sparked regular criticism from U.S. officials and some Members of Congress (see "Potential Foreign Aid Issues for Congress" section below). Since FY2012, Congress has passed appropriations legislation that withholds the obligation of FMF to Egypt until the Secretary of State certifies that Egypt is taking various steps toward supporting democracy and human rights. With the exception of FY2014, lawmakers have included a national security waiver to allow the Administration to waive these congressionally mandated certification requirements under certain conditions. For FY2019, the Trump Administration has obligated $1 billion in FMF for Egypt, of which $300 million in FY2019 FMF remains withheld until the Secretary issues a determination pursuant to Section 7041(a)(3)(B) of P.L. 116-6 , the FY2019 Consolidated Appropriations Act. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) also withholds $300 million in FMF until a certification or waiver is issued. For the past three fiscal years ( see Table 3 ), Congress has appropriated over $1.4 billion in total bilateral aid for Egypt and has added $30 million to $50 million in ESF above the president's request for USAID programs in Egypt. <4.3. Jordan23> The Hashemite Kingdom of Jordan is also one of the largest recipients of U.S. foreign aid globally. Like Israel, the United States and Jordan have signed an MOU on foreign assistance, most recently in 2018. The MOU, the third such agreement between the United States and Jordan, commits the United States (pending congressional appropriation) to provide $1.275 billion per year in bilateral foreign assistance over a five-year period for a total of $6.375 billion (FY2018-FY2022). U.S. military assistance primarily enables the Jordanian military to procure and maintain U.S.-origin conventional weapons systems. FMF overseen by the State Department supports the Jordanian Armed Forces' multi-year (usually five-year) procurement plans, while DOD-administered security assistance supports ad hoc defense systems to respond to emerging threats. The United States provides economic aid to Jordan for (1) budgetary support (cash transfer), (2) USAID programs in Jordan, and (3) loan guarantees. The cash transfer portion of U.S. economic assistance to Jordan is the largest amount of budget support given to any U.S. foreign aid recipient worldwide. U.S. cash assistance is provided to help the kingdom with foreign debt payments, Syrian refugee support, and fuel import costs (Jordan is almost entirely reliant on imports for its domestic energy needs). ESF cash transfer funds are deposited in a single tranche into a U.S.-domiciled interest-bearing account and are not commingled with other funds. The U.S. State Department estimates that, since large-scale U.S. aid to Syrian refugees began in FY2012, it has allocated more than $1.3 billion in humanitarian assistance from global accounts for programs in Jordan. <4.4. Iraq27> The United States funds military, economic, stabilization, and security programs in Iraq, with most assistance funding provided through the Defense Department Counter-ISIS Train and Equip Fund (CTEF). From FY2015 through FY2020, Congress authorized and appropriated more than $6.5 billion in Defense Department funding for train and equip assistance in Iraq. Iraq began purchasing U.S.-origin weapons systems using its own national funds through the Foreign Military Sales program in 2005, and the United States began providing FMF to Iraq in 2012 in order to help Iraq sustain U.S.-origin systems. Between 2014 and 2015, as Iraq and the United States battled the Islamic State throughout northern and western Iraq, FMF funds were "redirected to urgent counterterrorism requirements" including ammunition and equipment." A $250 million FY2016 FMF allocation subsidized the costs of a $2.7 billion FMF loan to support acquisition, training, and continued sustainment of U.S.-origin defense systems. U.S. economic assistance to Iraq has supported public financial management reform, United Nations-coordinated stabilization programs, and loan guarantees. The Obama Administration and Congress provided a U.S. loan guarantee in 2017 to encourage other lenders to purchase bonds issued by Iraq to cover budget shortfalls. The Trump Administration has directed U.S. stabilization support since 2017 to prioritize programs benefitting persecuted Iraqi religious minority groups. P.L. 116-94 directs stabilization assistance to Anbar province and appropriates bilateral economic assistance, international security assistance, and humanitarian assistance for the Kurdistan Region of Iraq. The act also directs funds to support transitional justice and accountability programs for genocide, crimes against humanity, and war crimes in Iraq. <4.5. Tunisia30> As of early 2020, Tunisia remained the sole MENA country to have made a durable transition to democracy since the 2011 wave of Arab uprisings. U.S. bilateral aid has increased significantly since then, supporting economic growth initiatives, good governance, and security assistance. U.S.-Tunisia security cooperation has expanded since 2011, as Tunisia has sought to maintain its U.S.-origin defense materiel, reform its security institutions, and respond to evolving terrorist threats. The United States has supported Tunisia's security sector reform efforts with $12 million to $13 million per year in State Department-administered funding for law enforcement strengthening and reform. Over the last five years, Congress has appropriated $65 million to $95 million per year in bilateral FMF for Tunisia ( see Table 6 ). DOD has provided substantial additional counterterrorism and border security assistance for Tunisia under its "global train and equip" authority (currently, 10 U.S.C. 333) and separate nonproliferation authorities. Since the Trump Administration issued its first aid budget request (for FY2018), Congress has appropriated, on average, $104 million more in bilateral aid to Tunisia each year than the President requested. As part of its justification for requesting global FMF loan authority in FY2021, the Administration cited a "request from the Government of Tunisia for a $500 million FMF loan to procure U.S.-manufactured light attack aircraft for the Tunisian Armed Forces." Congress did not enact FMF loan authority in prior years in response to previous Trump Administration requests. <4.6. Lebanon32> The United States has sought to bolster forces that could help counter Syrian and Iranian influence in Lebanon through a variety of military and economic assistance programs. U.S. security assistance priorities reflect increased concern about the potential for Sunni jihadist groups such as the Islamic State to target Lebanon, as well as long-standing U.S. concerns about Hezbollah and preserving Israel's qualitative military edge (QME). U.S. economic aid to Lebanon seeks to promote democracy, stability, and economic growth, particularly in light of the challenges posed by the ongoing conflict in neighboring Syria. Congress places several certification requirements on U.S. assistance funds for Lebanon annually in an effort to prevent their misuse or the transfer of U.S. equipment to Hezbollah or other designated terrorists. Hezbollah's participation in the Syria conflict on behalf of the Asad government is presumed to have strengthened the group's military capabilities and has increased concern among some in Congress over the continuation of U.S. assistance to the Lebanese Armed Forces (LAF). FMF has been one of the primary sources of U.S. funding for the LAF, along with the Counter-ISIL Train and Equip Fund (CTEF). According to the State Department, between FY2015 and FY2019, security assistance has averaged $224 million annually in combined State Department and Department of Defense military grant assistance. These funds have been used to procure, among other things, light attack helicopters, unmanned aerial vehicles, and night vision devices. The United States has long provided relatively modest amounts of ESF to Lebanon for scholarships and USAID programs. Since the start of the Syrian civil war, U.S. programs have been aimed at increasing the capacity of the public sector to provide basic services to both refugees and Lebanese host communities, including reliable access to potable water, sanitation, and health services. U.S. programs have also aimed to increase the capacity of the public education system to cope with the refugee influx. For FY2021, the President is requesting $133 million in total bilateral aid to Lebanon, which is 46% less than what Congress provided for Lebanon in FY2020. For the past three fiscal years, Congress has appropriated, on average, $113.5 million per year above the President's request. <5. Regional Program Aid> In addition to assistance provided directly to certain countries, the United States provides aid to Middle Eastern countries through regional programs, including the following. Middle East Regional Partnership Initiative (MEPI) . MEPI is an office within the Bureau for Near Eastern Affairs at the State Department that specifically supports political reform, women's and youth empowerment, quality education, and promoting economic opportunity in the Arab world. Since MEPI's inception in 2002, Congress has allocated it an estimated $1.1 billion in ESF. One of MEPI's contributions to U.S. democracy promotion in the Arab world has been to directly fund indigenous nongovernmental organizations (NGOs). MEPI's Local Grants Program awards grants to NGOs throughout the Middle East in order to build capacity for small organizations. However, in countries with legal restrictions prohibiting foreign funding of local NGOs, U.S. officials and grant recipients may weigh the potential risks of cooperation. Between 2011 and 2013, Egypt arrested and convicted local and foreign NGO specialists on election monitoring, political party training, and government transparency in Egypt. Middle East Regional (MER) . A USAID-managed program funded by ESF, MER supports programs that work in multiple countries on issues such as women's rights, public health, water scarcity, and education. For FY2021, the Administration is requesting $50 million in ESF funding for MER. In recent years, USAID has allocated $10 million to $15 million annually for MER. Near East Regional Democracy (NERD) . A State Department-managed program funded through ESF, NERD promotes democracy and human rights in Iran (though there is no legal requirement to focus exclusively on Iran). NERD-funded training (e.g., internet freedom, legal aid) for Iranian activists takes place outside the country due to the clerical regime's resistance to opposition activities supported by foreign donors. For FY2021, the Administration has bundled its NERD request together with MEPI as part of an $84.5 million ESF request for what it calls "State NEA Regional." For FY2020, Appropriators specified $70 million in ESF for NERD ($55 million base allocation plus $15 million to the State Department's Bureau of Democracy, Human Rights, and Labor or DRL) in Division G of the Joint Explanatory Statement accompanying P.L. 116-94 . Middle East Regional Cooperation (MERC). A USAID-managed program funded through ESF, MERC supports scientific cooperation between Israelis and Arabs. First established in an amendment to the Foreign Operations bill in 1979, MERC was designed to encourage cooperation between Egyptian and Israeli scientists. Today, MERC is an open-topic, peer-reviewed competitive grants program that funds joint Arab-Israeli research covering the water, agriculture, environment, and health sectors. For FY2021, the Administration is not requesting any ESF for MERC. Appropriators specified $5 million for MERC in FY2020 appropriations (Division G of the Joint Explanatory Statement accompanying P.L. 116-94 ). Middle East Multilaterals (MEM) . A small State Department-managed program funded through ESF, MEM supports initiatives aimed at promoting greater technical cooperation between Arab and Israeli parties, such as water scarcity, environmental protection, and renewable energy. For FY2021, the Administration is not requesting any ESF for MEM, and the last time the program was allocated funding was in FY2018 ($400,000). Trans-Sahara Counter-Terrorism Partnership (TSCTP) . A State Department-led, interagency initiative funded through multiple foreign assistance accounts (PKO, NADR, INCLE, DA, and ESF), TSCTP supports programs aimed at improving the capacity of countries in North and West Africa to counter terrorism and prevent Islamist radicalization. Three North African countries Tunisia, Algeria, and Morocco participate in TSCTP; Libya is also formally part of the partnership, but the majority of funding has been implemented in West Africa's Sahel region to date. <6. Funding for Complex Humanitarian Crises> For nearly a decade, the United States has continued to devote significant amounts of foreign assistance resources toward several major humanitarian crises stemming from ongoing conflicts in Syria, Yemen, and elsewhere ( see Figure 4 ). Since 2010, the United States has provided about $16.4 billion in humanitarian response funding to the Middle East. The United States is the largest donor of humanitarian assistance to the Syria crisis and since FY2012 has allocated more than $10.6 billion to meet humanitarian needs using existing funding from global humanitarian accounts and some reprogrammed funding. According to the United Nations, Yemen's humanitarian crisis is the worst in the world, with close to 80% of Yemen's population of nearly 30 million needing some form of assistance. The United States, Saudi Arabia, the United Arab Emirates, and Kuwait are the largest donors to annual U.N. appeals for aid. Since 2011, the United States has provided over $3 billion in emergency humanitarian aid for Yemen. Most of these funds are provided through USAID's Office of Food for Peace to support the World Food Programme in Yemen. During the government of Iraq's confrontation with the Islamic State , the United States was also one of the largest donors of humanitarian assistance. Since 2014, it has provided more than $2.6 billion in humanitarian assistance for food, improved sanitation and hygiene, and assistance for displaced and vulnerable communities to rebuild their livelihoods. The State Department and USAID provide this humanitarian assistance through implementing partners, including international aid organizations and nongovernmental organizations Humanitarian assistance is primarily managed by USAID's Office of Foreign Disaster Assistance (OFDA), USAID's Office of Food for Peace (FFP), and the U.S. Department of State's Bureau of Population, Refugees, and Migration (State/PRM) using "global accounts" (rather than bilateral), such as IDA, FFP, and MRA. <7. Foreign Aid Issues for Potential Consideration> <7.1. Major Changes in U.S. Aid to the Palestinians36> Policy changes during the Trump Administration ( see Chronology below ), coupled with legislation passed by Congress, have halted various types of U.S. aid ( see "U.S. Aid to the Palestinians Since 1950" Text Box ) to the Palestinians. The Administration withheld FY2017 bilateral economic assistance, reprogramming it elsewhere, and ceased requesting bilateral economic assistance after Palestinian leadership broke off high-level political contacts to protest President Trump's December 2017 recognition of Jerusalem as Israel's capital. In January 2019, after Congress passed the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), the Palestinian Authority (PA) ceased accepting any U.S. aid, including security assistance and legacy economic assistance from prior fiscal years. ATCA provided for a defendant's consent to U.S. federal court jurisdiction over the defendant for lawsuits related to international terrorism if the defendant accepted U.S. foreign aid from any of the three accounts from which U.S. bilateral aid to the Palestinians has traditionally flowed (ESF, INCLE, and NADR). The PA made the decision not to accept bilateral aid, most likely to avoid being subjected to U.S. jurisdiction in lawsuits filed by U.S. victims of Palestinian terrorism. Some sources suggested that the Administration and Congress belatedly realized ATCA's possible impact, and began considering how to resume security assistance to the PA and perhaps other types of aid to the Palestinian people after the PA stopped accepting bilateral aid in 2019. In December 2019, Congress passed the Promoting Security and Justice for Victims of Terrorism Act of 2019, or PSJVTA as 903 of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 . PSJVTA changes the legal framework applicable to terrorism-related offenses by replacing the provisions in ATCA that triggered Palestinian consent to personal jurisdiction for accepting U.S. aid. However, because PSJVTA did include other possible triggers of consent to personal jurisdiction based on actions that Palestinian entities might find difficult to stop for domestic political reasons it is unclear whether the Palestinians will accept this "legislative fix" and resume accepting U.S. bilateral aid. Congress also appropriated $75 million in PA security assistance for the West Bank and $75 million in economic assistance in FY2020 ( P.L. 116-94 ), with appropriators noting in the joint explanatory statement that "such funds shall be made available if the Anti-Terrorism Clarification Act of 2018 is amended to allow for their obligation." 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 and possible discussion of Israeli annexation of parts of the West Bank. 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. The Administration also had requested funds for a Diplomatic Progress Fund in FY2020, but Congress instead provided the $150 million in bilateral aid in P.L. 116-94 . Amidst the COVID-19 outbreak, some Members of Congress are concerned that the uncertainty surrounding the status of U.S. aid to the Palestinians may prevent humanitarian aid to combat the disease from reaching the Palestinian population. In late March 2020, several Senators sent a letter to Secretary of State Pompeo urging the Administration "to take every reasonable step to provide medicine, medical equipment and other necessary assistance to the West Bank and Gaza Strip (Palestinian territories) to prevent a humanitarian disaster." In April, the Administration announced that it would provide $5 million in International Disaster Assistance (IDA) to the West Bank as part of its global COVID-19 response. One media report stated that the $5 million in health assistance for hospitals in the West Bank does not "represent a change of policy regarding aid to the Palestinians, but is rather part of a larger decision to fight the spread of the pandemic across the Middle East, according to sources within the administration." <7.2. Debate over Military Aid to Lebanon45> Since the United States began providing military assistance to the Lebanese Armed Forces (LAF) following the 2006 summer war between Israel and Hezbollah, policymakers and foreign policy experts have debated the efficacy of such aid. U.S. military commanders have repeatedly testified before Congress that assistance to the LAF helps foster U.S.-Lebanese cooperation and strengthens the Lebanese government's capacity to counter terrorism. On the other hand, critics of such support have charged that U.S. aid to the LAF risks U.S. equipment falling into the hands of Hezbollah or other designated terrorists. They also contend that the LAF, even with U.S. aid, is unable or unwilling to enforce United Nations Security Council Resolution 1701 (passed after the 2006 war), which calls for the "disarmament of all armed groups in Lebanon." More recently, as Hezbollah has played a key role in supporting the Asad regime in Syria, opponents of U.S. aid to Lebanon assert that Hezbollah and the LAF have more closely coordinated militarily and politically along the Lebanese-Syrian border. In 2019, the Trump Administration withheld $105 million in FMF to the LAF as part of a policy review over the efficacy of its military assistance program to Lebanon. In 2019, lawmakers in the House and Senate also introduced the "Countering Hezbollah in Lebanon's Military Act of 2019," ( S. 1886 and H.R. 3331 ) which would withhold 20% of U.S. military assistance to the LAF unless the President can certify that the LAF is taking measurable steps to limit Hezbollah's influence over the force. According to various reports, both the State and Defense Departments opposed the hold on FMF, calling the LAF a stabilizing institution in Lebanon that has served as a U.S. partner in countering Sunni Muslim extremist groups there. On November 8, 2019, Chairman of the House Foreign Affairs Committee Eliot Engel and Chairman of its Subcommittee on the Middle East, North Africa, and International Terrorism Ted Deutch wrote a letter to the Office of Management and Budget agreeing with previous expert testimony by former U.S. officials who praised the LAF's capabilities. In December 2019, the Administration lifted its hold on FMF to Lebanon (DOD aid to Lebanon had not been withheld). The policy debate coincided with mass protests throughout Lebanon, which forced the LAF to deploy in the streets to maintain order. In December 2019, the Government Accountability Office (GAO) issued its review on U.S. security assistance to Lebanon concluding that "The Departments of State and Defense reported progress in meeting security objectives in Lebanon, but gaps in performance information limit their ability to fully assess the results of security-related activities." In January 2020, Lebanon formed a new government, which drew international scrutiny for being composed entirely of parties allied with the March 8 political bloc (headed by the Christian Free Patriotic Movement, Hezbollah, and the Amal Movement). Nevertheless, U.S. Secretary of Defense Mark Esper remarked in February 2020 that "In terms of security assistance, we've committed a lot to the Lebanese Armed Forces and we will continue that commitment." <7.3. Fiscal Pressures Mount in Iraq53> Years of war, corruption, and economic mismanagement have strained Iraq's economy and state finances, leading to widespread popular frustration toward the political system, and culminating in popular protests across central and southern Iraq. The 2019 national budget ran its largest ever one-year deficit, and in 2020, the COVID-19 pandemic and steep declines in world oil prices delivered two additional shocks to Iraq's already stretched fiscal position. Iraqi authorities have expressed confidence in their ability to withstand low oil prices for the short term. However, with approximately 30% of all Iraqi workers employed by the government, some observers express concern that sustained pressure on state finances and economic activity could lead to more intense street violence and unrest, and/or contribute to an Islamic State resurgence. Iraq's draft 2020 budget assumed an oil export price of $56 per barrel. According to one projection from mid-March 2020 when prices were less than half that level Iraq would have been "likely to earn less than $3 billion per month, given its recent rate of exports leaving a monthly deficit of more than $2 billion just to pay current expenditures." As of May 2020, it appears that without outside assistance, Iraq will need to draw on reserves (around $65 billion as of early 2020), cut salaries, and/or limit social spending to meet budget needs. International financial institutions (IFIs), such as the International Monetary Fund (IMF), could be one source of external financing for Iraq, but Iraq has not met reform targets set under its last round of agreements with the IMF. From 2016 to 2019, the IMF provided over $5 billion in loans to Iraq to help the country cope with lower oil prices and ensure debt sustainability. Iraq would likely face higher borrowing costs for new sovereign debt offerings, and obtaining commitments from Iraqi authorities as preconditions on further U.S. or IFI support may be complicated by Iraq's contested domestic politics and uncertainty over the future of U.S.-Iraq ties. Secretary of State Michael Pompeo announced on April 7 that U.S. officials would engage Iraqi counterparts in a high-level strategic dialogue in June to address the future of the bilateral partnership, including U.S. assistance and the presence of U.S. forces. U.S. forces consolidated their presence to a reduced number of Iraqi facilities in March and April 2020, and the Administration has informed Congress of reductions in U.S. civilian personnel since 2019. <7.4. Stabilization in Areas Liberated from the Islamic State> As Congress considers the President's FY2021 budget request for MENA, Members have continued to discuss what the appropriate level of U.S. assistance should be to stabilize and reconstruct areas recaptured from the Islamic State group (IS, aka ISIS/ISIL). Recent U.S. intelligence estimates warn that an IS-fueled insurgent campaign has begun in Syria and Iraq, foresee billions of dollars in reconstruction costs in liberated areas, and suggest that a host of complex, interconnected political, social, and economic challenges may rise from the Islamic State's ashes. According to the International Crisis Group, In the two years since defeating ISIS, the Iraqi government has made only minimal progress rebuilding post-ISIS areas and reviving their local economies . There is no reason to assume local resentment will lead residents directly back to ISIS, particularly given their bitter recent experience with the group's rule. Still, both Iraqis and Iraq's foreign partners worry about what might happen if these areas remain ruined and economically depressed. Since FY2017, Congress has appropriated over $1 billion in aid from various accounts (ESF, INCLE, NADR, PKO, and FMF ) as part of a "Relief and Recovery Fund (RRF)" to help areas liberated or at risk from the Islamic State and other terrorist organizations. Among several conditions on RRF spending, lawmakers have repeatedly mandated in appropriations language that funds designated for the RRF "shall be made available to the maximum extent practicable on a cost-matching basis from sources other than the United States." Over time, lawmakers have adjusted the RRF's authorities to ensure that assistance be made available for "vulnerable ethnic and religious minority communities affected by conflict." In addition, lawmakers have removed the geographic limitation (Iraq and Syria) on funds appropriated for RRF, and have specified either in bill text or accompanying explanatory statements that RRF funding be made available for Jordan, Tunisia, Yemen, Libya, Lebanon, for countries in East and West Africa, the Sahel, and the Lake Chad Basin region. Congress also has appropriated funding specifically to address war crimes, genocide, and crimes against humanity in Iraq and Syria in recent years, including through the designation of RRF-eligible funds. For stabilization efforts in Iraq, USAID has used ESF and ESF-OCO (Overseas Contingency Operations) funds to contribute to the United Nations Development Program's Funding Facility for Stabilization (FFS). To date, more than $396 million in U.S. stabilization aid has flowed to liberated areas of Iraq, largely through the FFS which remains the main international conduit for post-IS stabilization assistance in liberated areas of Iraq. The Trump Administration also has directed U.S. contributions to the FFS to address the needs of vulnerable religious and ethnic minority communities in Ninewa Plain, western Ninewa, and communities displaced from those areas to other parts of northern Iraq. As U.S. officials continue to seek greater Iraqi and international contributions to stabilization efforts in Iraq, the scale of what is needed to rebuild Iraq has far exceeded international efforts to date. In 2018, experts from the World Bank and the Iraqi government concluded that the country would need $45 billion to repair civilian infrastructure that had been damaged or destroyed since 2014. At the 2018 Kuwait International Conference for Reconstruction of Iraq, the Iraqi government requested $88 billion from the international community for rebuilding efforts it received pledges of $30 billion. According to one United Nations official, as of late 2019, just over $1 billion in reconstruction pledges have been delivered from donors. Stabilization needs in Syria also are extensive the conflict has entered its tenth year and analysts have estimated that the cost of conflict damage and lost economic activity could exceed $388 billion. The Trump Administration generally has supported stabilization programming in areas of Syria controlled by U.S.-backed Kurdish forces and liberated from the Islamic State, while seeking to prevent such aid from flowing to areas of Syria controlled by the government of Syrian President Bashar al Asad. However, in 2018 and 2019, the Administration sought to shift responsibility for the funding of stabilization activities to other coalition partners. In contrast to prior years, the Administration's FY2020 and FY2021 foreign assistance budget requests have sought no Syria-specific funding, but as noted above, the FY2021 request states that "ESDF funding in the RRF will allow the State Department and USAID to support efforts in places like Syria" and other countries. In late 2019, USAID reported that donor funds for stabilization activities in Syria were nearly depleted. In October 2019, the Trump Administration announced that it was releasing $50 million in stabilization funding for Syria to support civil society groups, ethnic and religious minorities affected by the conflict, the removal of explosive remnants, and the documentation of human rights abuses. These funds were notified to Congress in early 2020, and consist primarily of FY2019 ESF-OCO funds, with $14 million in RRF-designated funds from various accounts. The Trump Administration has stated its intent not to contribute to the reconstruction of Asad-controlled areas of Syria absent a political settlement to the country's civil conflict, and to use U.S. diplomatic influence to discourage other international assistance to Asad-controlled Syria. Congress also has acted to restrict the availability of U.S. funds for assistance projects in Asad-held areas. In the absence of U.S. engagement, other actors such as Russia or China could conceivably provide additional assistance for reconstruction purposes, but may be unlikely to mobilize sufficient resources or adequately coordinate investments with other members of the international community to meet Syria's considerable needs. Predatory conditional assistance could also further indebt the Syrian government to these or other international actors and might strengthen strategic ties between Syria and third parties in ways inimical to U.S. interests. A lack of reconstruction, particularly of critical infrastructure, could delay the country's recovery and exacerbate the legacy effects of the conflict on the Syrian population, with negative implications for the country's security and stability. <7.5. Human Rights and Foreign Aid to MENA> In conducting diplomacy in the Middle East and providing foreign aid to friendly states, it has been an ongoing challenge for the United States to balance short-term national security interests with the promotion of democratic principles. At times, executive branch officials and some Members of Congress have judged that cooperation necessary to ensure stability and facilitate counterterrorism cooperation requires partnerships with governments that do not meet basic standards of democracy, good governance, or respect for human rights. Nevertheless, successive Administrations and Congress also at times have used policy levers, such as conditional foreign aid, to demand changes in behavior from partner governments accused of either suppressing their own populations or committing human rights abuses in military operations. In some instances, policymakers have taken action intended to reinforce democratic principles in U.S.-MENA diplomacy and to comply with U.S. and international law, while preserving basic security cooperation. Examples of provisions of U.S. law that limit the provision of U.S. foreign assistance in instances when a possible gross violation of human rights has occurred include, among others: The Foreign Assistance Act (FAA) of 1961, as amended, contains general provisions on the use of U.S.-supplied military equipment (e.g., Section 502B, Human Rights - 22 U.S.C. 2304). Section 502B(a)(2) of the FAA stipulates that, absent the exercise of a presidential waiver, "no security assistance may be provided to any country the government of which engages in a consistent pattern of gross violations of internationally recognized human rights." The Arms Export Control Act (AECA), as amended, contains several general provisions and conditions for the export of U.S.-origin defense articles that may indirectly address human rights concerns. For example, Section 4 of the AECA (22 U.S.C. 2754) states that defense articles may be sold or leased for specific purposes only, including internal security, legitimate self-defense, and participation in collective measures requested by the United Nations or comparable organizations. Section 3(c)(1)(B) of the AECA (22 U.S.C. 2753(c)(1)(B)) prohibits the sale or delivery of U.S.-origin defense articles when either the President or Congress find that a recipient country has used such articles in substantial violation of an agreement with the United States governing their provision or "for a purpose not authorized" by Section 4 of the AECA or Section 502 of the FAA. The "Leahy Laws" Section 620M of the FAA (22 U.S.C. 2378d) and 10 U.S.C. 362 prohibit U.S. security assistance to a foreign security force unit when there is credible information that such unit has committed a gross violation of human rights. In addition to the U.S. Code, annual appropriations legislation contains several general and MENA-specific provisions that restrict aid to human rights violators. Recent annual appropriations legislation conditioning U.S. aid to Egypt is one of the more prominent examples of how policymakers have attempted to leverage foreign aid as a tool to promote U.S. values abroad. Section 7041(a) of P.L. 116-94 contains the most recent legislative language conditioning aid to Egypt. The Act includes a provision that withholds $300 million of FMF funds until the Secretary of State certifies that the Government of Egypt is taking effective steps to advance, among other things, democracy and human rights in Egypt. The Secretary of State may waive this certification requirement, though any waiver must be accompanied by a justification to the appropriations committees. Members of Congress and the broader foreign policy community continue to debate the efficacy of using foreign aid as leverage to promote greater respect for human rights in the Middle East and elsewhere. After the January 2020 death of an American citizen incarcerated in Egypt, one report suggests that the State Department's Bureau of Near Eastern Affairs has raised the option of possibly cutting up to $300 million in foreign aid to Egypt. In 2017, the Trump Administration reduced FMF aid to Egypt by $65.7 million, citing "Egyptian inaction on a number of critical requests by the United States, including Egypt's ongoing relationship with the Democratic People's Republic of Korea, lack of progress on the 2013 convictions of U.S. and Egyptian nongovernmental organization (NGO) workers, and the enactment of a restrictive NGO law that will likely complicate ongoing and future U.S. assistance to the country." <8. FY2020 MENA Legislative Summary in P.L. 116-94> Appendix A. Common Foreign Assistance Acronyms and Abbreviations

Since 1946, the United States has provided an estimated total of $346 billion (obligations in current dollars) in foreign assistance to the Middle East and North Africa (MENA) region. For FY2021, overall bilateral aid requested for MENA countries amounts to $6.6 billion, or about 15% of the State Department's International Affairs budget request. The State Department estimates that the Middle East stands to receive 42% of the geographically specific assistance in the budget request, more than any other region. As in previous years, more than 90% would support assistance for Israel, Egypt, and Jordan. The region also receives a sizable portion of annual emergency humanitarian assistance appropriations, which are not included in the region-specific aid figures. Policy changes during the Trump Administration, coupled with legislation passed by Congress, have halted various types of U.S. aid to the Palestinians. The Administration withheld FY2017 bilateral economic assistance, reprogramming it elsewhere, and ceased requesting bilateral economic assistance after Palestinian leadership broke off high-level political contacts to protest President Trump's December 2017 recognition of Jerusalem as Israel's capital. After Congress passed the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), the Palestinian Authority (PA) ceased accepting any U.S. aid in January 2019, including security assistance and legacy economic assistance from prior fiscal years. Amidst the COVID-19 outbreak, some Members of Congress are concerned that, due to the uncertainty surrounding the status of U.S. aid to the Palestinians, humanitarian aid to combat the disease may not reach the Palestinian population. In April, the Administration announced that it would provide $5 million in International Disaster Assistance (IDA) to the West Bank as part of its global COVID-19 response. The foreign aid data in this report is based on a combination of resources, including the U.S. Agency for International Development's (USAID) U.S. Overseas Loans and Grants (also known as the "Greenbook"), appropriations data collected by the Congressional Research Service from the State Department and USAID, data extrapolated from executive branch agencies' notifications to Congress, and information published annually in the State Department and USAID Congressional Budget Justifications. For foreign aid terminology and acronyms, see the glossary appended to the report. In order to more accurately compare the Administration's FY2021 foreign assistance request to previous years' appropriations, aid figures in this report (except where otherwise indicated) refer only to funding that is administered by the State Department or USAID and requested for individual countries or regional programs. While this represents the majority of U.S. assistance to the Middle East, it is important to note that there are several other sources of U.S. aid to the region, such as International Disaster Assistance (IDA), Migration and Refugee Assistance (MRA), and Transition Initiatives (TI). Likewise, other U.S. federal entities—such as the Departments of Defense, Commerce, and the Treasury, and the Millennium Challenge Corporation—administer additional types of assistance. Funding for such activities is generally not requested for individual countries and regions, and it is largely excluded here. Much of the data presented in this report pre-dates the global spread of the Coronavirus Disease 2019, or COVID-19. All MENA countries, particularly poorer nations that receive foreign assistance, are expected to be affected by the outbreak; however, the extent and scale of the damage to public health and economies across the region is unknown, as is the pandemic's full impact on U.S. aid programs. As of mid-April 2020, the Administration had allocated some emergency humanitarian assistance to the region as a first response to the COVID-19 pandemic. On April 16, the State Department announced that it would provide an estimated $79 million in health assistance to various MENA countries to help prepare laboratory systems, implement a public-health emergency plan for points of entry, and activate case-finding and event-based surveillance for influenza-like illnesses. To date, Congress has appropriated almost $1.8 billion in emergency foreign assistance funds through two supplemental appropriations bills to address the impact of COVID-19. See CRS In Focus IF11496, COVID-19 and Foreign Assistance: Issues for Congress , by Nick M. Brown, Marian L. Lawson, and Emily M. Morgenstern.

crs_R45834

crs_R45834_0

<1. Introduction> In FY2019, an estimated 20 million veterans were living in the United States, of which 9.3 million were enrolled in care through the Department of Veterans Affairs (VA). Chapter 17 of Title 38, U.S.C. , requires the VA to provide health care services to eligible veterans through the Veterans Health Administration (VHA) of the VA, which is one of the largest integrated health care systems in the United States. The VHA is composed of nearly 1,700 VA medical facilities. VA care is not a health insurance program; it is primarily a direct provider of care. Meeting veterans' demand for care has been challenging for the VA. Some veteran patients who seek health care services from the VHA experience barriers to receiving in-person care; for example, by being unable to schedule VA medical appointments in a timely manner or having to travel long distances to reach health care facilities. In conjunction with the Veterans Choice Program (VCP), the recently enacted VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act; P.L. 115-182 ), and other measures that aim to expand veterans' access to care, the VA has attempted to address barriers to in-person care using telehealth in VA health care facilities. According to the VHA, telehealth refers to the use of health informatics, disease management and [t]elehealth technologies to enhance and extend care and case management to facilitate access to care and improve the health of designated individuals and populations with the specific intent of providing the right care in the right place at the right time. <1.1. VA Telehealth Overview> VA telehealth is a mode of health care delivery that extends outside of the "brick-and-mortar" health care facilities of the VHA. Telehealth, in contrast to in-person care, functions using information and communication technology (ICT) to transpire an episode of care to a veteran patient, without requiring the patient to visit a service provider in person. Although telehealth generally supplements in-person care, it does not replace VA in-person care. In this context, the use of ICT to deliver telehealth services does not disrupt a veteran patient's daily life activities, such as working and going to school. Veterans do not need to meet their VA provider in-person to receive VA health care services. This type of nondisruptive access to health care services is likely more convenient than the traditional in-person care services used by veteran patients and their civilian counterparts. Telehealth encourages veteran patients to be actively involved in their health care decisions, because it requires veterans to perform telehealth-related tasks such as downloading mobile applications (apps) to connect with VA providers and staff. A mobile app refers to a software program that runs on certain operating systems of mobile devices (e.g., smartphones and tablets) and computers that transmit data over the internet. (See the " VA Mobile Health (VA Mobile) " section in this report). <1.1.1. Rural Veterans> Legislation and regulations that aim to expand veterans' access to VA telehealth services generally focus on the U.S. population of rural veterans. Many of these veterans experience geographic barriers to accessing in-person VA care, such as having to travel long distances to reach their nearest health care facilities. Of the estimated 9.2 million veterans who were enrolled in the VA health care system in FY2019, approximately 33% of them were rural veterans. According to the VA, "[the U.S. population of rural veterans] is older (56% are over 65), poorer (52% earn less than $35,000 per year), and sicker (a greater number of co-morbidities) than their urban counterparts." In addition to having to travel long distances to reach their nearest health care facilities, rural veterans may experience access barriers to VA telehealth services because they lack access to broadband internet in their communities. Similarly, veterans who live in urban areas also experience access barriers to VA care such as having to wait more than 30 days to receive care through the VA. <1.1.2. Integration with the Private Sector> According to former Under Secretary of the VHA, David J. Shulkin, MD, who later became the VA Secretary, "[t]he fact is that demand for [v]eterans' health care is outpacing VA's ability to supply [the health care services] in-house." President Trump and the Congress have acknowledged the challenges the VA has faced in supplying VA care in-house by enacting measures such as the VA MISSION Act. The VA has since established new partnerships with private sector vendors, such as Philips Healthcare, T-Mobile USA, Inc. (T-Mobile), and Walmart Inc. (Walmart), under the VA's Advancing Telehealth through Local Access Stations program. The VA established these partnerships with the goal of reducing veterans' access barriers to VA in-person care by expanding their access to VA telehealth services. <2. Report Roadmap> To assist Congress as it considers measures on VA telehealth, this report provides an overview of VA telehealth programs and requirements including veteran eligibility and enrollment criteria and VA telehealth copayment requirements; discusses VA providers' authority to provide telehealth services anywhere; discusses the components of VA telehealth; provides an overview of VA teleconsultations; discusses three issues that Congress could choose to consider: (1) access barriers to in-person VA care, (2) lack of access to the internet, and (3) conflicting guidelines for prescribing controlled substances via telehealth across state lines; provides, in Appendix A , a summary table with all abbreviations used in the report; provides, in Appendix B , the history of VA telehealth and a high-level overview of at least one legislative provision that was enacted into law and aims to address VA telehealth, beginning with the 109 th Congress; provides, in Appendix C , a discussion on the VA providers' authority to provide telehealth services anywhere; and provides, in Appendix D , the total number of veterans who received VA telehealth services and the total number of telehealth encounters that transpired during each of the fiscal years FY2009-FY2018. <3. VA Telehealth Programs and Requirements> On July 12, 2016, the VA established the Office of Connected Care (OCC) within the VHA. The goal of OCC is to "deliver [information technology (IT)] health solutions that increase a [v]eteran's access to care and supports a [v]eteran's participation in their health care." OCC administers the following four VA telehealth programs: 1. According to the VA, VA Telehealth Services "[improve] convenience to [v]eterans by providing access to care from their homes or local communities when they need it." 2. My Health e Vet is the web-based electronic health record (EHR) for veteran patients through which veterans can view, and download electronic protected health information (ePHI); 3. VHA Innovation Program is an annual competitive program that allows VA staff and key stakeholders in the private sector to submit innovative ideas on enhancing VA care; and 4. VA Mobile Health (VA Mobile) develops mobile apps. For its telehealth programs, the VA has requested an appropriation of $1.1 billion for FY2020 and an advanced appropriation of $1.7 billion for FY2021. <3.1. Veteran Eligibility, Enrollment, and Access> Not all veterans are eligible to receive VA care, and not every veteran is automatically entitled to medical care from the VHA. Veterans' eligibility for enrollment in the VHA is based on veteran status (i.e., previous military service), service-connected disability, and income. Veterans enrolled in the VA health care system can receive a range of health care services, including primary care and specialty care via telehealth, as authorized under the VA's medical benefits package . The VA medical benefits package refers to a suite of health care services that are covered for eligible veterans, generally at no cost under certain circumstances. In a given year, however, not all enrolled veterans receive their care from the VA either because they do not need services or because they have other forms of health coverage, such as Medicare, Medicaid, or private health insurance. In FY2018, more than 9.3 million veterans were enrolled in VA care. A veteran generally must be enrolled in the VA health care system to access VA telehealth services, which are typically provided on an outpatient basis. A veteran who is not enrolled in VA care can access VA telehealth services under certain circumstances. For example, a veteran who is not enrolled in VA care but who is "tentatively" eligible for VA care could access VA telehealth services on an outpatient basis. Of the 9.3 million veterans who were enrolled in VA care in FY2018, the VA provided 2.29 million telehealth episodes of care to 782,000 veteran patients. An episode of care generally refers to all of the health care services that a VA provider provides to a veteran patient, to treat the veteran's health condition/disability. The Faster Care for Veterans Act of 2016 ( P.L. 114-286 ) required the VA, among other things, to ensure that veterans could schedule their own telehealth appointments. A recent U.S. Government Accountability Office (GAO) report found that neither the Veteran Appointment Request System nor the On-line Patient Self-Scheduling System (OPSS) had the capability to allow veterans to schedule their own telehealth appointments. According to the VHA, access to VA telehealth services is a joint decision between the veteran and his or her care team of VA providers and clinical staff. The care team tells the veteran which clinically appropriate VA care services he or she can access through the VHA. There may be instances when it is clinically appropriate for a veteran to receive in-person care rather than a telehealth service. When the care team decides that it is clinically appropriate for a veteran to receive telehealth services, the veteran would need to opt into accessing VA telehealth services. The veteran patient would then be able to schedule his or her telehealth appointment. <3.1.1. Telehealth Copayment Requirements> A telehealth copayment refers to the out-of-pocket costs that a veteran patient pays for a telehealth encounter. A veteran patient generally pays $15 per primary care outpatient visit and $50 per specialty care visit at VA medical facilities. According to the VA, copay amounts for telehealth are usually less than for VA in-person care. The VHA does not require veterans to pay a copay for health care services to treat a service-connected disability/condition, nor is a copay required if a veteran meets at least one of the following four main criteria: 1. The veteran patient has a service-connected disability/condition that is rated at 50% percent or more. 2. The veteran patient is a former prisoner of war. 3. The veteran has an annual income that is below the income limit. 4. The veteran is a recipient of the Medal of Honor. Other veteran patients can receive free VA care when they receive care under certain circumstances, such as care for military sexual trauma, care that is part of a VA research project, and care that is provided for compensation and pension examinations. Veteran patients who are not exempt from paying VA copays incur the costs of their VA care. The VA determines a veteran patient's copay by evaluating the rendered telehealth encounter against two factors: (1) the location of the veteran patient when the telehealth encounter transpired and (2) the VA's internal business office protocols on copay amounts for VA care. The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ), among other things, allows the VA Secretary to waive veteran patients' copay requirements for telehealth. In March 2012, the VA Secretary began waiving copays for telehealth services provided to veteran patients in their homes. <3.2. VA Provider Eligibility and Training on Telehealth> The Department of Veterans Affairs Codification Act ( P.L. 102-83 ) requires the VA Secretary, among other things, to establish interrelationships and coordinate the delivery of VA health care services with the public and private sectors. Therefore, a health care provider who is either seeking a government position within the VA (referred to as a VA-employed provider ) or seeking to remain as a private sector provider while working with the VA under a contract (referred to as a VA-contracted provider ) is eligible to provide VA care to veterans. A VA provider, either VA-employed or VA-contracted, must hold at least one full, active, current, and unrestricted state license to be eligible to work for or with the VA. The provider can use his or her license to deliver in-person care and telehealth services through the VHA. Each VA provider can decide whether he or she wants to provide VA telehealth services to veteran patients across state lines. The VA MISSION Act, among other things, allows a VA-employed health care provider to provide telehealth services to veteran patients across state lines using only one state license, even in states where the provider is not licensed to practice. ( Appendix C provides an overview of the VA-employed providers' authority to provide telehealth services across state lines using one state license.) A VA-employed provider who chooses to use a single license in this manner must meet the following four statutory requirements of a covered health care professional: 1. the VA provider must be an employee of the VA; 2. the VA Secretary must have authorized the VA provider to provide telehealth services across state lines; 3. the VA provider must agree to adhere to all standards for quality relating to the provision of medicine that is consistent with VA policies; and 4. the VA provider must hold an active, current, full, and unrestricted license, registration, or certification in at least one state to practice in his or her field of medicine. This authority does not extend to VA-contracted providers. Current law does not allow a VA-contracted provider to provide VA health care services, including telehealth, to veteran patients across states lines using a single license in states where the VA-contracted provider is not licensed to practice. A VA-contracted provider, in contrast to a VA-employed provider, must hold a license in each state where the provider chooses to practice. Neither type of provider is required to obtain a specialty license, registration, or certification to practice his or her field of medicine via telehealth through the VHA. The VA encourages its providers to complete the Telehealth Master Preceptor Certification Program. This program offers an educational curriculum on the delivery of VA telehealth, including the VA telehealth modalities used to deliver telehealth services (see the " Telehealth Modalities " section below). The VHA Telehealth Services National Training Center, which is a nationally accredited training center, oversees the program and other telehealth trainings. In FY2018, according to the VA, more than 56,000 VA providers and staff completed at least one training session on telehealth. In that same fiscal year, the VA had provided more than 100,720 telehealth trainings. <4. VA Telehealth Components> VA telehealth encompasses four general components: (1) the internet and wireless data, (2) telehealth modalities, (3) VA Mobile Health, and (4) VA teleconsultations. Each of these components is discussed below. Health informatics and data visualizations are not discussed because they are beyond the scope of this report. <4.1. The Internet and Wireless Data> A veteran patient who chooses to access VA telehealth services must be willing to perform telehealth related tasks, such as accessing a health care service and obtaining his or her ePHI (electronic protected health information), using the internet the vehicle for which a telehealth episode of care transpires. A veteran patient must have access to the internet to access VA telehealth services on mobile devices and computers. In 2017, according to a VA study of 43,600 veteran enrollees, 77% reported using the internet on an occasional or more frequent basis. Of those 77% of veteran enrollees who reported using the internet, the enrollees performed the following telehealth related tasks: 33% scheduled medical appointments, 45% accessed their EHRs (electronic health records), and 77% searched for information on health. The VA's findings reveal that veterans who are enrolled in the VA health care system are using the internet to perform telehealth-related tasks. However, veteran patients do not necessarily have to have their own internet service to perform telehealth related tasks and access VA telehealth services. For example, veteran patients can access the internet from a VA medical facility, a family member's home, or a local library (access to high-speed internet service typically yields the best internet performance). In addition, a veteran who chooses to access VA telehealth services via a mobile device (e.g., smartphones and tablets) must have adequate cellular data storage. The amount of wireless data storage on a mobile device determines whether the veteran will be able to download and use certain components of VA telehealth such as VA mobile apps. <4.1.1. Potential Cybersecurity and Privacy Risks> A veteran patient who chooses to perform telehealth-related tasks on a personal mobile device and computer must consider the potential cybersecurity and privacy risks associated with accessing VA telehealth services. During a telehealth encounter, for example, a veteran patient can view, download, and transmit their ePHI over the internet. According to the Federal Bureau of Investigation, mobile devices and internet connections can be compromised when accessed by an unauthorized party. The VHA cannot ensure that a veteran is accessing VA telehealth services on a trustworthy device via a trustworthy connection that responsibility falls upon the user when the user is accessing the service on their personal device. According to the VA, it "will coordinate restoration activities" with internal and external key stakeholders when veteran patients experience cybersecurity and privacy threats. Certain veteran patients can access VA telehealth services on VA issued mobile devices. According to the Federal Communications Commission, the VA provided 6,000 tablets with 4G LTE connectivity to low-income and rural veterans with the goal of reducing the veterans' broadband infrastructure barriers to telehealth in their homes. These veterans are accessing telehealth services on trustworthy devices via trustworthy connections. The VA's Cybersecurity Program ensures that, among other things, ePHI and personally identifiable information that are transmitted via VA devices and systems are protected against cybersecurity and privacy threats. Of course, cybersecurity and privacy risks are not limited to the U.S. veteran patient population. <4.2. Telehealth Modalities> A telehealth modality refers to the mode in which a telehealth episode of care transpires. VA providers offer telehealth services to veteran patients via one of the following three telehealth modalities: (1) home telehealth, (2) store-and-forward telehealth, and (3) clinical video telehealth. The three VA telehealth modalities are described in more detail below. Note that the VHA does not consider VA Mobile Health as a telehealth modality, even though veterans can use this technology to access telehealth services. The VA considers VA Mobile Health as an "essential element of health care" delivery rather than an ICT tool used to deliver telehealth services. In FY2019, the VA is to begin measuring the VHA's performance in addressing the health care needs of eligible veterans who receive telehealth services via these three VA telehealth modalities. For example, one new measurement would analyze the ratio of "the number of unique [v]eterans served through telehealth services (numerator) and the number of unique [v]eterans that receive care through [the] VHA (denominator)." Using this measurement, the VA anticipates that at least 15% of eligible veteran patients will access VA telehealth services in FY2019. <4.2.1. Home Telehealth (HT)> The home telehealth (HT) modality allows a VA provider who is not located in the same location as a veteran patient to provide the patient with daily case management services for his or her chronic medical conditions, such as chronic heart disease or diabetes. The HT modality allows the VA provider to view medical data and information from a medical device, such as a heart monitor that the veteran patient wears. Telehealth episodes of care via the HT modality generally have no location restrictions unless the veteran patient is on bed rest. From FY2012 to FY2018, the VA provided 6.7 million telehealth encounters via the HT modality to 1.0 million veteran patients. In FY2018, the VA provided 872,705 telehealth episodes of care to 136,741 veteran patients through the HT modality. According to the VA, the case management service that VA providers most often provide to veteran patients via the HT modality is the management of hypertension (commonly known as high blood pressure). Figure 1 illustrates the distribution of services that transpired via the HT modality, for those veterans who received telehealth services for each of the fiscal years FY2012-FY2018. The number of veteran patients who have accessed telehealth services via the HT modality has increased, even though Figure 1 shows a downward trend for the percentage of veteran patients who accessed VA telehealth services via the HT modality. The total population of veteran patients accessing VA telehealth services via the HT modality increased by 142.1%, from 56,484 veteran patients in FY2009 to 136,741 veteran patients in FY2018. However, the number of telehealth encounters that transpired via the HT modality has fluctuated (see Figure 1 and Table D-2 ). The VA provided its financial obligations for the delivery of telehealth services via the HT modality in the agency's FY2020 funding and FY2021 advanced appropriations budget request to the Congress. In FY2019, the VA estimates that $270.6 million was obligated to the delivery of telehealth services via the HT modality. The VA has requested an appropriation of $279.8 million for FY2020 and an advance appropriation of $291 million for FY2021 to deliver telehealth services via the HT modality. <4.2.2. Store-and-Forward Telehealth (SFT)> The store-and-forward telehealth (SFT) modality facilitates the interpretation of patients' clinical information by allowing a VA provider who is not located in the same location as a veteran patient to assist another VA provider who is located in the same location and has provided in-person care to the veteran patient. Examples of the clinical information include data, images, sound, and video medical records from the veteran patient's radiology and dermatology examinations. The veteran patient does not have to be present during the electronic transfer of his or her clinical information. After receiving the clinical information, the VA provider interprets the clinical information for the other VA provider and provides follow-up care instructions for the veteran patient. From FY2009 to FY2018, the VA provided 2.7 million telehealth encounters via the SFT modality to 2.5 million veteran patients. In FY2018, the VA provided 344,853 telehealth episodes of care to 314,487 veteran patients through the SFT modality. According to the VA, it provides captures, stores, and forwards clinical information mostly for teleretinal i magining via the SFT modality to screen for diabetic eye disease in veteran patients. According to the VA, teleretinal imaging refers to a VA provider's use of a special camera to take a picture of a veteran patient's eye. The picture is electronically sent to an eye care specialist. After reviewing the picture, the specialist then reports his or her findings to the veteran patient's primary care provider. Figure 2 illustrates the distribution of services that transpired via the SFT modality, for those veterans who received telehealth services for each of the FY2009-FY2018. The increase in the number of telehealth encounters that have transpired via the SFT modality seems to indicate that VA providers are increasingly seeking the expertise of their peers. VA providers are presumably seeking additional expertise due to the lack of a given expertise in their respective geographic area and the VA's overall shortage of health care providers. <4.2.3. Clinical Video Telehealth (CVT)> The clinical video telehealth (CVT) modality allows a VA provider who is not located in the same location as a veteran patient to view, diagnose, monitor, and treat medical conditions of the veteran patient in real-time. The CVT modality functions by allowing the VA provider and the veteran patient to see each other via an interactive live video technology. Telehealth episodes of care via the CVT modality transpire between different VA sites of care, such as from a VA medical center (VAMC) to a veteran patient's home or from a veteran patient's home to a VA provider's home office. From FY2009 to FY2018, the VA has provided 5.7 million telehealth encounters via the CVT modality to 2.1 million veteran patients. In FY2018, the VA provided 1,074,422 telehealth episodes of care to 393,370 veteran patients through the CVT modality. According to the VA, the telehealth service that veteran patients accessed the most via the CVT modality is telemental health , which refers to the delivery of a mental health service via telehealth. Figure 3 illustrates the percentage of veterans who received telehealth services and the number of telehealth encounters that transpired via the CVT modality, for each of the fiscal years FY2009-FY2018. The upward trends in both the percentage of veterans who received telehealth services and the number of telehealth encounters that transpired via the CVT program seem to illustrate that veteran patients are increasingly interested in receiving VA telehealth services via this modality. Veteran patients' interest in the CVT program might stem from it being well established and publicized. The program is the VA's oldest method of telehealth delivery. Additionally, veterans have been able to access telemental health care services via the CVT modality since the VA started providing telehealth services. This report discusses the history of VA telehealth in Appendix B . <4.3. VA Mobile Health (VA Mobile)> VA Mobile allows veterans to access certain health services and ePHI via VA mobile apps on mobile devices (e.g. smartphones) and computers. According to the National Center for Veterans Analysis and Statistics (NCVAS), 97.9% of veterans who were enrolled in the VHA in 2016 owned a smartphone and 78.3% owned a computer (i.e., a laptop, desktop, or notebook computer). Veterans can access the VA mobile apps at any time, regardless of where the veteran is located. According to the VA, "VA Mobile Health aims to improve the health of [v]eterans by providing technologies that expand clinical care beyond the traditional office visit [via mobile apps]." VA Mobile has four overall functions: first, it allows veteran patients to connect and schedule medical appointments with VA providers; second, it provides veterans with access to health care information on topics such as mental health and weight management; third, it allows VA providers to provide case management of veteran patients' disabilities/illnesses from afar; and fourth, it allows VA providers to disseminate best practices among themselves, with the goal of improving the health outcomes of veteran patients. As a reminder, the VA does not consider VA Mobile to be one of the three modalities for the delivery of health diagnostics or health services. <4.3.1. VA App Store> VA mobile apps, such as those illustrated in Figure 4 , are located in the virtual VA App Store. The VA App Store is a public-facing web-based store that offers 47 mobile apps available to veterans, their caregivers, and VA providers. About two-thirds of the mobile apps in the virtual VA App Store are for veterans and their caregivers. The remainder of the apps are for VA providers. Veterans who are not enrolled in the VHA may access some of the VA mobile apps. Not all of the mobile apps are specific to health care. VA mobile apps provide veterans with access to a range of VA benefit services and information, such as conferring with a VA pharmacist, reviewing current disability benefits, and obtaining information on depression. Veterans who are not enrolled in the VHA, for example, can also access social apps, such as the VA-Department of Defense (DOD) Veteran Link app, which is a secure social networking app for veterans and current servicemembers. <4.3.2. Required Login Credentials> The public can view the different VA mobile apps in the VA App Store; however, only veterans, their caregivers, and VA providers with certain access accounts can download and use the apps. To download VA mobile apps, a veteran must have login credentials for at least one of the following three accounts: (1) a DOD Self-Service Logon (DS Logon) account, (2) a My Health e Vet account, or (3) an ID. me account. A general overview of each of the three accounts, which are all free to veterans, is provided below. DOD Self-Service L ogon (DS Logon) Account is a federal account that authenticates a veteran's affiliation with the VA and DOD. This secure self-service account allows the veteran to access multiple VA and DOD websites and apps. The veteran can request either a Level 1 (Basic) or a Level 2 (Premium) account, both of which are free. Level 1(Basic) Account allows a veteran to view general information located on a VA and DOD website. Level 2 (Premium) Account allows a veteran to view personal information on VA and DOD websites. The veteran must prove his or her identity to get a Premium Account by answering a set of questions. MyHealth e Vet Premium Account is a federal account that authenticates a veterans' enrollment in VA care. It authorizes a veteran patient to complete health care-related tasks, such as viewing his or her electronic health record, reordering medications, and contacting his or her health care provider via a secure messaging technology. ID. me Account is a private sector account that, in this context, authenticates a veterans' affiliation to the VA and DOD. This account "provides secure identity proofing, authentication, and group affiliation verification for government and businesses across sectors." It is also free to veterans. <4.3.3. Required Operating Platforms> The veteran's electronic device must operate using either a w eb-based platform , an iOS platform , or an Android platform for a VA mobile app to work on the device. A web-based platform refers to an operating system that has a web-browser such as Internet Explorer and Google Chrome. A VA web-based app such as MyHealth e Vet, which is the electronic health record (EHR) for veterans, is accessible over the internet. An iOS platform refers to the operating system installed on Apple, Inc. (Apple) electronic devices such as the iPhone and iPad. A VA iOS-app is available to veterans who use Apple devices. A veteran who has an Apple device can download VA iOS apps from the VA App Store and from the Apple App Store. A veteran who does not have an Apple electronic device will not be able to access a VA iOS app on a non-Apple device. An Android platform refers to the operating system installed on non-Apple electronic devices (e.g., companies such as Samsung and LG). A VA Android app is available to veterans with devices that do not have the iOS operating platform installed on them. A veteran who has an electronic device with an Android operating system can download VA Android apps from the VA App Store and the Google Play Store, which is a mobile app on an Android device. A veteran who does not have an Android device will not be able to access a VA Android app on a non-Android electronic device. <4.3.4. VA Video Connect (VVC)> The VA Video Connect (VVC) is a mobile app that veteran patients can download from the virtual VA App Store. The VVC app functions by allowing a veteran patient to connect via live video with a VA provider regardless of where the veteran or provider is located, through the CVT modality. The veteran patient can use the VVC app on a mobile device. To access the VVC app, the veteran patient's mobile device must contain a web camera, speakers, and microphone. In addition, the device must be able to connect to and have access to the Internet. According to the VA, the VVC "uses encryption to ensure privacy in each session." The VA launched the VVC app in August 2017 and has recorded 105,300 telehealth visits via the VVC app from October 2017 to September 2018. <4.3.5. The VA's Partnerships with Philips Healthcare and T-Mobile> The VA has partnered with private sector vendors Philips Healthcare and T-Mobile to expand veterans' access to the VVC app. Philips Healthcare currently partners with the VA by providing veterans with a "virtual connected care" through the company's Virtual Medical Center. This new partnership with Philips Healthcare aims to place telehealth information and communication technology equipment in 10 posts at the facilities of two veteran service organizations (VSOs) recognized by the President, Congress, and the VA Secretary for the representation of veterans: Veterans of Foreign Wars and the American Legion. The placement of the equipment in the VSO posts would expand VA telehealth services to veterans who are likely to be members of and who frequently visit those two VSOs. However, the program would not exclude non-VSO members from accessing VA telehealth services at the VSO sites. A positive outcome from this pilot program could encourage veterans who are not members of VSOs to visit VSO sites to access VA telehealth services. The VA's partnership with T-Mobile would allow veterans with this wireless service to access the VVC app via their mobile device without incurring additional charges or reducing plan data allotments. According to a VA press release, "veterans will be able to connect to appointments on their mobile devices for no extra charge, regardless of their current data plan." The VA did not provide in its press release the amount of the "extra charge" that veteran patients would have incurred from accessing the VVC app on their mobile devices. It is likely that other veterans who do not have T-Mobile as their wireless service provider would incur the unknown extra charge for accessing the VVC app. The VA has not yet announced any plans to partner with all wireless service providers to ensure that veteran patients who access the VVC app on their mobile devices will not incur additional charges. <5. VA Telehealth Services> The telehealth services that the VA provides to veteran patients align with their respective VA in-patient care services. A VA health care service does not change when a VA provider delivers the service via telehealth. For example, a veteran patient who chooses to access telemental health services via the VVC app on a mobile device would receive the same type of mental health services he or she would have received in-person. According to the VA Secretary, the VHA is the largest U.S. provider of telehealth services, having provided 2.29 million telehealth episodes of care to 782,000 veteran patients in FY2018. Of those 782,000 veteran patients, 9% of them were female and 45% of them live in rural areas. Veteran patients can access a range of telehealth services through the VHA. These telehealth services can be grouped into the following seven categories, in alphabetical order: 1. consultative and evaluative telehealth services, 2. disease and illness-specific telehealth services, 3. gender-specific telehealth services, 4. preventative telehealth services, 5. rehabilitative telehealth services, 6. rural-specific telehealth services, and 7. wellness telehealth services. According to the VA, the agency will provide general VA health care services to veteran patients and refer them to private health care providers for health care services that those providers provide "most effectively and efficiently." The VA's decision to refer such services to the private sector might stem from the agency's shortage of VA providers. A veteran can access VA telehealth services from various VA sites of care , such as VA medical facilities, mobile telehealth clinics, and non-VA sites of care such as the homes, work places, and schools of veterans. A veteran, who seeks VA care, including VA telehealth services at non-VA medical facilities and nonfederal facilities from non-VA providers, must receive prior authorization from the VA before accessing such services. The VA generally authorizes a veteran to seek VA care from a non-VA provider when [the existing] VA facilities or other government facilities are not capable of furnishing economical hospital care or medical services because of geographic inaccessibility or are not capable of furnishing care or services required. The VA continues to develop new telehealth services to meet the needs of veterans. According to the VA FY2019 funding and FY2020 advanced appropriations budget request to Congress, for example, the Comprehensive Opioid Management in Patient Aligned Care Teams (COMPACT) team is "testing a telehealth-based self-management training system to promote improved care for [v]eterans receiving chronic opioid therapy." <5.1. The VA's Partnership with Walmart> On December 6, 2018, the VA announced a new partnership with Walmart that aims to reduce access barriers to VA care that underserved veterans experience. Through this partnership, which is part of the VA's Advancing Telehealth through Local Access Stations program, the VA is establishing a pilot program whereby underserved veterans in certain locations would access VA telehealth services in donated spaces at Walmart retail stores. Walmart would provide the VA with operational support. According to Walmart, the prospective locations will be based on "the number of veterans and the health resources offered." The VA has stated that its decision to partner with Walmart is based on the fact that more Americans live near a Walmart store than a VA medical center (VAMC). According to the VA, [90%] of Americans live within ten miles of a Walmart. Ninety percent of veterans [do not] live within ten miles of a [VAMC]. The VA reported to Congress that there were an estimated 172 VAMCs in 2019. For that same calendar year, the VA also reported to Congress that there were other VA medical facilities within the VA health care system, including 23 health care centers, 300 vet centers, and 728 community-based outpatient clinics. The VA has not yet stated how many veterans live near other VA medical facilities in relation to Walmart stores. This information would be helpful to Congress as it considers measures relating to the use of existing VA spaces. This prospective pilot program has raised some concerns, however, because according to the Veterans Rural Health Advisory Committee (VRHAC), Walmart is encountering some of the same challenges that the VHA has met when expanding telehealth services to rural veterans, such as keeping pace with technology for virtual care and the expansion of bandwidth. However, such challenges could be location-specific and not representative of all Walmart retail store locations. <5.2. VA Teleconsultations> Current law (Chapter 17 of Title 38 of the U.S. Code ) refers to teleconsultation as "the use by a health care specialist of telecommunications to assist another health care provider in rendering a diagnosis or treatment." The law defines teleconsultation in relation to VA's delivery of mental health and traumatic brain injury assessments. The VA extends its use of teleconsultations in the delivery of VA care with the goal of improving veteran patients' health care outcomes, particularly those of rural veterans. For example, the VA has adopted and modified the Project Extension for Community Healthcare Outcomes (Project ECHO) learning model, which the Expanding Capacity for Health Outcomes Act ( P.L. 114-270 ) required the HHS Secretary to examine and report on, to create a Specialty Care Access Network-Extension for Community Healthcare Outcomes (SCAN-ECHO) learning model. , Project ECHO is a global, technology-enabled collaborative learning model, whereby medical educators and specialty care health care providers disseminate best practices to primary care and rural health care providers, with the goal of improving the health outcomes of rural and underserved patients. The best practices are disseminated through different modalities such as teleECHO , which is the delivery of medical education such as patient case-based learning through a virtual network. TeleECHO is delivered through a hub-and - spoke model , which refers to a structure whereby a central point (the "hub") disseminates information to different connecting points (the "spokes"). The VA launched SCAN-ECHO in 2011, with the goal of expanding VA care to rural veterans and veterans that live in medically underserved areas. According to the VA, SCAN-ECHO refers to an approach to provide specialty care consultation, clinical training, and clinical support from specialty care teams to rural primary care providers (PCPs) using video teleconferencing equipment. VA teleconsultations generally transpire under SCAN-ECHO using the hub-and-spoke model. The "hubs" are the specialty care providers who are on specialty care teams, and the "spokes" are the PCPs who are on patient aligned care teams (PACTs). According to the VA, SCAN-ECHO transpires when [PCPs] present a patient's case using multi-site videoteleconferencing equipment. Providers then take information back to the patient for discussion and collaborative decision making. The specialty care team collaborates, culminating in a recommended treatment plan. In addition to case presentations, formal clinical education is provided. The Expanding Capacity for Health Outcomes Act (ECHO Act; P.L. 114-270 ) required the HHS Secretary to examine technology-enabled collaborative learning and capacity-building models and report the findings to Congress no later than two years after enactment. In February 2019, the Office of the Assistant Secretary for Planning and Evaluation (ASPE), within HHS, submitted the required report to Congress. ASPE retrieved information about SCAN-ECHO from the VA and found that the VA has evaluated the use of SCAN-ECHO for medical conditions and health care services such as chronic liver disease, diabetes, and women's and transgender health care services. For example, ASPE found that the VA studied the difference in health outcomes of 62,750 veterans with chronic liver disease between 2011 and 2015. Of those 62,750 veteran patients, 513 of them had received virtual teleconsultations with VA providers who were participating in SCAN-ECHO. According to ASPE, "those receiving the intervention were much less likely to die than those who had no SCAN-ECHO consultation over the same time period." SCAN-ECHO is an example of the VA's efforts to expand the capability of VA telehealth to "underproductive providers to assist access-challenged providers." <6. Issues for Congress> The VA is leveraging the use of telehealth with the goal of expanding veterans' access to VA care. Based on its experience with telehealth to date, the VA has stated that increased access to telehealth could reduce the use of VA travel benefits by veterans and reduce hospital admissions. Telehealth is not a new form of health care delivery. It is a multibillion dollar industry in both the federal and private sectors, showing upward trends in telehealth access, utilization, innovation, and spending. Discussed below are three issues that Congress may choose to examine while considering additional topics related to veterans and telehealth services: (1) access barriers to in-person VA care continues to exist, (2) some veterans lack access to the internet, and (3) VA providers' guidelines for prescribing controlled substances via telehealth are different. <6.1. Access Barriers to In-Person VA Care Continue to Exist> According to the VA, the agency cannot meet veterans' demand for VA in-patient care. Congress and the VA have considered measures and initiatives to expand veterans' access to VA care using telehealth. The expansion of VA telehealth does not address the access barriers that veteran patients' face when seeking in-person VA care. Instead, telehealth provides veterans with an alternate way to access health care services through the VHA. The VA is predicting that the U.S. veteran population will decrease by 32% from 20.0 million veterans in 2017 to 13.6 million veterans in 2037. This prediction does not equate to a lower number of veterans seeking, enrolling in, and accessing VA care in the future. For example, more than three-fourths of the 13.6 million veterans that the VA projects will be in the U.S. veteran population in 2037 might choose to enroll in and access care through the VA health care system. Congress may consider whether the VA should continue to expand veterans' access to VA in-person care in VA brick-and-mortar buildings and/or through VA telehealth services by assessing how such modes of delivery effect the cost and quality of care (in addition to timely access). <6.2. Some Veterans Lack Access to the Internet> The overarching goal of the MISSION Act and VA final rule on telemedicine is to expand veteran patients' access to care using telehealth. The use of telehealth services requires that veteran patients have access to the internet to connect to VA telehealth providers. Veteran patients who do not have readily accessible internet connections would likely have difficulty reaching their VA providers. According to the National Center for Veterans Analysis and Statistics (NCVAS), an estimated 20.1% of veterans did not have internet access in 2016. In April 2018, for example, the GAO found that some veterans who live on the U.S. Pacific Islands such as Guam and American Samoa, could not access the internet because of damaged cables and equipment failures that occurred during inclement weather. The VA is investigating ways to expand veteran patients' access to VA telehealth services to address veterans' lack of access to the i nternet . Specifically, t he agency is evaluating the feasibility of non-VA facilities (e.g., libraries, schools, and post offices) serving as i nternet /online hotspots, and retaining VA kiosks where veteran patients can access telehealth services. Congress and the President have responded to this divide by enacting measures such as the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 ( P.L. 115-141 ; RAY BAUM's Act of 2018). The RAY BAUM's Act of 2018 required, among other things, the Federal Communications Commission (FCC) to submit a report to Congress on promoting broadband internet access to veterans, particularly to rural veterans and veterans with low incomes. The FCC submitted the report to the Senate Committee on Commerce, Science, and Transportation and the House Committee on Energy and Commerce in May 2019. According to the FCC's report, the 2.2 million veteran households that do not have access to broadband internet experience barriers when adopting broadband such as the inability to pay for the service and the lack of broadband development in their geographic location. In future discussions regarding this issue, Congress may consider the costs associated with deploying broadband infrastructure in underserved geographic areas. According to the VA, some veteran patients are given tablets "that operate over 4G LTE mobile broadband to support VA Video Connect," where infrastructure is lacking. <6.3. Conflicting Guidelines for Prescribing Controlled Substances via Telehealth across State Lines> Congress continues to address concerns regarding the prescribing of controlled substances such as opioids. The VA MISSION Act and the VA's final rule do not address the prescribing of controlled substances to veteran patients who are not receiving services from within VA medical facilities, or who are not in the same state as the prescribing physician, as permitted under the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (Ryan Haight Act; P.L. 110-425 ). Section 311(h)(1) of the Controlled Substance Act (CSA), which was added by Section 3 of the Ryan Haight Act, authorized the special registration for telemedicine with the goal of increasing patients' access to practitioners that can prescribe controlled substances via telemedicine in limited circumstances. Current law defines a practitioner as a physician, dentist, veterinarian, scientific investigator, pharmacy, hospital, or other person licensed, registered, or otherwise permitted, by the United States or the jurisdiction in which he practices or does research, to distribute, dispense, conduct research with respect to, administer, or use in teaching or chemical analysis, a controlled substance in the course of professional practice or research. The registration would enable a practitioner to deliver, distribute, dispense, or prescribe via telemedicine a controlled substance to a patient who has not been medically examined in person by the prescribing practitioner. While the CSA authorized the special registration for telemedicine, practitioners have not been able to apply for this special registration. The Drug Enforcement Administration (DEA) has yet to finalize a rule on the registration's application process and procedures and the limited circumstances that warrant it. The Ryan Haight Act expressly exempts VA providers and VA-contracted providers from needing to obtain a special registration in each state where the providers choose to practice, if they meet two conditions. First, the providers must prescribe the controlled substance within the scope of their employment at the VA. Second, the providers must either (1) hold at least one state registration to prescribe a controlled substance or (2) prescribe in a VA health care facility while using the registration of that facility. The special registration, though not implemented yet by the DEA, the MISSION Act, or the VA's final rule on telehealth, might confuse VA providers about whether they must hold a license in each state where they intend to prescribe controlled substances to veteran patients. The special registration would allow a VA provider to prescribe a controlled substance in a state where the provider is not licensed to practice. The MISSION Act and the VA's final rule on telehealth, in contrast to the special registration, do not preempt state laws regarding the prescribing of controlled substances. VA providers must be licensed in each state where the provider intends to prescribe a controlled substance. Congress could consider encouraging the VA to develop guidelines on how its providers would prescribe controlled substances to veteran patients who are not receiving telehealth services from within VA health care facilities. Appendix A. Abbreviations Used in This Report Appendix B. History of VA Telehealth For decades, the VA has provided telehealth services to veteran patients to improve health care access and to address delivery challenges, such as shortages of in-patient beds and health care providers skilled in the delivery of veteran-centric care. In the 1950s and 1960s, for example, the VA had difficulties in recruiting psychiatrists and neurologists. In FY1961, there were 18,722 eligible veterans on a waiting list to receive VA inpatient care for psychiatric and neurological health care conditions. That same year, the VA started testing the use of telehealth, with the goal of addressing the aforementioned challenges that veteran patients were experiencing when trying to access VA in-person care for psychiatry and neurology services. According to the VA's Annual Report for FY1961, the VA tested the use of telehealth by using the closed-circuit television ( CCTV) technology as a telehealth modality. The CCTV technology refers to a system that "links a camera to a video monitor using a direct transmission system." VA physicians and therapists at a VA medical facility in Oklahoma City, OK, had used the CCTV technology to disseminate best practices and trainings on therapy and psychiatry with the goal of improving veteran patients' health care outcomes. According to the VA, its use of telehealth using the CCTV technology was a success because [t]he results indicate that this form of communication can be a valuable tool in the treatment of psychiatric patients and in the training of personnel in psychiatric service. In addition, it shows the potential in a number of other medical applications, such as, for example, an education technique in surgical training. Since then, the VA has aimed to address veterans' access barriers to VA in-person care using updated telehealth technologies and equipment, which are discussed under the " VA Telehealth Components " heading in this report. Legislative History of VA Telehealth The Congress has passed several laws that address VA telehealth. Provided below is a high-level legislative history of VA telehealth, to help inform any future congressional discussion on this issue. For each Congress, beginning with the 109 th (January 3, 2005 to January 3, 2007) there is a brief narrative summarizing at least one legislative provision that aims to address VA telehealth. This list may not be comprehensive. Veterans Benefits, Health Care, and Information Technology Act of 2006 (109 th Congress) The Veterans Benefits, Health Care, and Information Technology Act of 2006 ( P.L. 109-461 ), among other things, required the VA Secretary to increase the number of VA medical facilities that are capable of providing readjustment counseling services via telehealth. Veterans' Mental Health and Other Care Improvements Act of 2008 (110 th Congress ) The Veterans' Mental Health and Other Care Improvements Act of 2008 ( P.L. 110-387 ), among other things, required the VA Secretary to develop a pilot program to assess the feasibility and advisability of providing certain veterans with peer outreach, peer support, readjustment counseling and other mental health services, using telehealth to the extent practicable. Caregivers and Veterans Omnibus Health Services Act of 2010 (111 th Congress) The Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ), among other things, allows the VA Secretary to contract with community mental health centers and other qualified health entities with the goal of expanding veterans' access to VA telehealth services. Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 (112 th Congress) The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ), among other things, allows the VA Secretary to waive veteran patients' copay requirements for telehealth. The Veterans Access, Choice, and Accountability Act of 2014 (113 th Congress ) The Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 ), among other things, requires the VA Secretary to improve veterans' access to VA telehealth via mobile vet centers and mobile medical facilities. The Faster Care for Veterans Act of 2016 (114 th Congress) The Faster Care for Veterans Act of 2016 ( P.L. 114-286 ), among other things, requires the VA Secretary to ensure that veteran patients can schedule their own medical appointments for VA telehealth services. John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (115 th Congress) The John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 ( P.L. 115-182 ; VA MISSION Act of 2018), among other things, removes all geographic barriers to VA telehealth and therefore allows veterans to access VA telehealth services in their communities from any location in the United States, U.S. territories, District of Columbia, and Commonwealth of Puerto Rico. Appendix C. VA Provider Authority to Provide Telehealth Services Anywhere Veteran patients who cannot access telehealth because of provider shortage gaps may benefit from having access to out-of-state telehealth providers in non-VA health care facilities. Generally, states determine whether a health care provider can provide a health care service across state lines because states handle provider licensure. Each state has the authority to establish its own licensure requirements, and each state licensing board has its own eligibility requirements for health care providers. Due to state-specific licensing laws, a health care provider licensed and certified in one state may not be able to provide health care services to patients located in another state where the provider is not licensed. State licensing laws can cause some health care providers to experience geographical and licensing-related barriers to providing health care services across state lines to rural and underserved populations. On August 3, 2017, the White House and the VA announced the Anywhere to Anywhere initiative, which aims to remove the geographic barriers that veterans might experience when accessing VA care. Under this initiative, a veteran patient can access VA telehealth services anywhere from a VA provider located outside of a VA health care facility. The initiative is a joint effort between the VHA, the White House Office of American Innovation, and the Department of Justice. The VA's attempt to expand veterans' access to VA care via telehealth under this initiative was threatened by its providers' experiences of geographic and licensing barriers to delivering the services across state lines. On October 30, 2017, a House Committee on Veterans Affairs report found that the continued expansion of telemedicine across the VA health care system is constrained by restrictions on the ability of VA providers to practice telemedicine across state lines without jeopardizing their state licensure and facing potential penalties for the unauthorized practice of medicine. On May 11, 2018, the VA published a final rule in the Federal Register to exempt its providers who deliver care via telehealth from certain state licensing laws and regulations. Two major elements of the final rule changed the VHA's existing practice delivery: (1) VA providers may deliver telehealth services outside of VA health care facilities and (2) state licensing boards may no longer deny or revoke a VA provider's license if he or she provides a telehealth service in a state where the provider is not licensed to practice in non-VA health care facilities. According to the VA, the prohibition addresses the concerns of some VA providers that chose not to provide telehealth services across state lines in non-VA health care facilities because their state licensing boards might take action against their licenses for doing so. In March 2018, for example, the VA Pacific Island Health Care System reported to the GAO that it had concerns about delivering a telehealth service to a veteran patient in his or her home because a state could require VA providers to be licensed in the state where the patient resides. The final rule does not preempt state laws regarding the prescribing of controlled substances, nor does it extend beyond the telehealth provider's employment at the VA or extend to VA-contracted providers. A VA-contracted provider must continue to practice under the laws and regulations of his or her state of licensure. The rule became effective on June 11, 2018, five days after the enactment of the VA MISSION Act. The VA MISSION Act, among other things, removed all geographic barriers to VA telehealth and therefore, allowed veterans to access VA telehealth services in their communities from any location in the United States, U.S. territories, District of Columbia, and Commonwealth of Puerto Rico. According to Chapter 17 of Title 38 of the U.S. Code , (d) Relation to State Law. (1) The provisions of this section shall supersede any provisions of the law of any State to the extent that such provision of State law are inconsistent with this section. (2) No State shall deny or revoke the license, registration, or certification of a covered health care professional who otherwise meets the qualifications of the State for holding the license, registration, or certification on the basis that the covered health care professional has engaged or intends to engage in activity covered by subsection (a). The VA MISSION Act codified the core principles of the above-mentioned final rule with the goal of protecting VA providers against possible liability issues stemming from state licensure laws. This authority is given only to VA providers that meet the statutory requirement of a "covered health care professional." According to the VA, nearly 10,000 VA providers gained the authority to provide out-of-state telehealth services to veteran patients in non-VA health care facilities in states where the provider is not licensed to practice. Appendix D. Total Number of Veteran Patients who Had Received VA Telehealth Services and Total Number of Telehealth Encounters that Transpired, FY2009-FY2018

The Veterans Health Administration (VHA), of the Department of Veterans Affairs (VA), is leveraging the use of telehealth with the goal of expanding veterans' access to VA care. Telehealth generally refers to the use of information and communication technology to deliver a health care service. It is a mode of health care delivery that extends beyond the "brick-and-mortar" health care facilities of the VHA. VA telehealth services are generally provided on an outpatient basis and supplement in-person care. Such services do not replace VA in-person care. The VA copay requirements for telehealth are the same as for VA in-person care, but in some cases may be lower than the copays for VA in-person outpatient health care services delivered through the VHA. President Trump and Congress have recently enacted measures such as the VA Maintaining Internal Systems and Strengthening Integrated Outside Networks of 2018 (VA MISSION Act; P.L. 115-182 ) that aim to address the access barriers that veterans may experience when accessing VA telehealth services across states lines. The VA MISSION Act, among other things, removes all geographic and licensing barriers to VA telehealth, thereby allowing veterans to access VA telehealth services in their communities from any location in the United States, U.S. territories, District of Columbia, and Commonwealth of Puerto Rico. VA Telehealth Modalities In FY2018, more than 9.3 million veterans were enrolled in VA care. In that same fiscal year, the VA provided 2.29 million telehealth episodes of care to 782,000 veteran patients collectively using the following three VA telehealth modalities: (1) home telehealth, (2) store-and-forward telehealth, and (3) clinical video telehealth. The VA has developed VA mobile applications (apps), which refer to software programs that run on certain operating systems of mobile devices (e.g., smartphones and tablets) and computers that transmit data over the internet that veterans can access as telehealth applications. Veterans can access VA mobile apps on cellular and mobile devices that operate using either a web-based platform, an iOS platform, or an Android operating platform. VA Telehealth Partnerships and Access According to the VA, it cannot meet the health care demands of veteran patients in-house and therefore, it has established partnerships with private sector vendors to help address veterans' demand for VA care. For example, the VA's partnership with the wireless service provider T-Mobile would allow a veteran who has T-Mobile as a cellular wireless service provider to access the VA Video Connect app without incurring additional charges or reducing plan data allotments. VA Teleconsultations VA providers can use telehealth platforms and applications to consult with one another, which is referred to as a teleconsultation by section 1709A(b) of title 38 of the U.S. Code . The VA has adopted and modified the Project Extension for Community Healthcare Outcomes (Project ECHO) learning model, which the Expanding Capacity for Health Outcomes Act ( P.L. 114-270 ) required the Secretary of the Department of Health and Human Services to examine and report on, to create a Specialty Care Access Network-Extension for Community Healthcare Outcomes (SCAN-ECHO) learning model. The VA's SCAN-ECHO is a similar approach that aims to connect underproductive providers to assist access-challenged providers, using the hub-and- spoke model , which refers to a structure whereby a central point (referred to as the "hub") disseminates information to different connecting points (referred to as the "spokes"). Topics Covered in This Report This report provides background information on VA telehealth, including veteran eligibility and enrollment criteria, VA telehealth copayment requirements, and VA providers' authority to provide telehealth services anywhere. The report also discusses the components of VA telehealth. It also discusses three issues that Congress could choose to consider: (1) access barriers to in-person VA care, (2) lack of access to the internet, and (3) conflicting guidelines for prescribing controlled substances via telehealth across state lines.

crs_R45780

crs_R45780_0

<1. Introduction> The United States is currently experiencing the longest economic expansion in its history. Although short-term forecasts are predicting continued economic expansion, some economists have expressed uncertainty over how long the expansion will continue. History has shown that economic expansions inevitably give way to economic slowdowns. If the next slowdown is significant, the economy could enter a recession, which is typically characterized by falling output and rising unemployment. Predicting when the economy may transition from expansion to recession, however, is notoriously difficult, as the ebb and flow of the economy is determined by many different factors, including a number that lie outside the country's borders. Countercyclical fiscal policy may help to stabilize the economy when it enters a recession. Countercyclical fiscal policy refers to short-term tax and spending adjustments to stimulate consumer and business demand in an effort to counteract economic contraction and return the economy to its potential. Effective fiscal stimulus does not always require contemporaneous legislative action by Congress. There are certain "automatic stabilizers" that work without congressional action to lower taxes and increase spending as the economy weakens. As a result, an economic slowdown or recession does not necessarily warrant a policy response. However, Congress has a range of options it could consider when designing a stimulus package should a recession occur and automatic stabilizers are not sufficient to counteract it. This report identifies and summarizes options Congress may consider in response to a recession. The analysis begins by reviewing the features effective countercyclical fiscal policies are commonly thought to have, and then distinguishes between countercyclical and growth-oriented policies. Next, the report summarizes and evaluates potential fiscal policy options that Congress could consider. The options presented are drawn from those policies considered during the Great Recession for which estimates of their potential economic impact exist. The report concludes with a brief discussion about enacting fiscal stimulus in the context of the country's long-run budget outlook. <2. Effective Countercyclical Fiscal Policy> Effective fiscal policy in response to recessions of average duration and severity is usually considered to have three general features: it is timely, targeted, and temporary. For fiscal policy to be effective in returning the economy to its potential, it must stimulate the economy at the appropriate time. Implemented too early, and there is a risk that fiscal tools are wasted and not available if the downturn becomes more severe. Implemented too late, and there is a risk that the downturn becomes so severe that much more fiscal (and monetary) stimulus is needed to stabilize the economy. Alternatively, the economy could have already returned to a path toward full potential on its own, in which case untimely stimulus risks overheating the economy. Timely implementation of fiscal policy is made inherently difficult by three well-known lags: the lag in recognizing a recession, the lag in negotiating and implementing a policy response, and the lag between policy implementation and when the economy is affected. A targeted fiscal stimulus will produce the most "bang for the buck," or, in economics jargon, involve changes with the largest "multipliers." Fiscal policy multipliers measure the change in economic output in response to a dollar change in taxes or a dollar change in spending. For example, a multiplier of 1.5 means that $1.00 of stimulus will lead to a $1.50 change in output. Conversely, a multiplier of 0.75 means that $1.00 of stimulus will lead to a $0.75 change in output. Larger multipliers suggest larger stimulative effects. Economists use multipliers to estimate the impact a particular fiscal policy, or collection of polices, will have on the economy. On the revenue side, it appears that the largest multipliers are associated with tax reductions that are targeted at lower-income households and those with less access to liquid assets. These individuals are more likely, out of necessity, to increase their spending in response to a tax cut or rebate than those with higher incomes or more accessible forms of wealth. Business tax reductions also are estimated to stimulate demand, but most analyses find the multiplier effects to be smaller than those of well-targeted individual tax reductions. This finding is the result of research that indicates businesses are slow to respond to investment tax incentives, that business tax rate reductions primarily benefit existing capital rather than new investment, and that hiring incentives do not directly address the primary factor that influences the decision to bring on more employees, which is the demand for businesses' products and services. Direct spending increases usually register as highly stimulative on a per-dollar basis, although some spending increases are able to work their way more quickly into the economy than others. For example, spending on unemployment benefits and food stamp assistance increase automatically during a recession and are targeted at households most vulnerable during a downturn. As a result, their potential to stimulate demand are usually estimated to be quite large. Assistance to state and local governments to relieve budgetary pressures and maintain spending are estimated to be moderately cost effective. Spending on infrastructure, while believed to have a significant impact on the economy given enough time, can take many months to take effect due to the length of time it takes to plan and complete such projects. Temporary stimulus can help to contain the budgetary impact of tax reductions and spending increases, which, in turn, can increase the effectiveness of the stimulus by mitigating the adverse effect large deficits can have on long-term growth. Although fiscal stimulus must result in a deficit to affect overall spending, deficits themselves are not necessarily problematic. Large and sustained deficits, however, can have undesirable effects. For example, as the economy starts to recover from a downturn, continued deficits can lead to higher interest rates as the government competes with the private sector for loanable funds. Higher interest rates can counteract the stimulus as the government's need to finance deficits "crowds out" private-sector investment and consumption. These higher interest rates can also attract borrowing from abroad, causing the dollar to appreciate and reducing net exports. Deficits can also harm longer-run economic growth since they reduce national saving, which is closely linked to the capital formation process that is critical for economic growth. <3. Countercyclical Versus Growth-Oriented Policies> Before discussing potential policy options for countering an economic downturn, it is useful to distinguish between countercyclical fiscal policies and growth-oriented policies. Some confusion arises because of the terminology used and the time frame in question. Economists view cyclical fluctuations, also known as the business cycle, as short-run phenomena that occur as the result of various external "shocks" that temporarily move the economy away from its long-run growth path. These transitory shocks often influence the economy via changes in total spending or, in economic terms, aggregate demand. During a recession, total spending generally falls below the economy's productive capacity, resulting in rising unemployment and falling capital utilization. In an expansion, total spending rises until it matches the economy's productive capacity, requiring firms to deploy previously idle resources. Countercyclical fiscal (and monetary) policies have the potential to affect aggregate demand (i.e., total spending) and decrease the severity of fluctuations in the economy that occur over the business cycle. In contrast to the business cycle, economic growth is a long-run phenomenon that is tied to factors that determine the productive capabilities of the economy. Thus, whereas countercyclical policies tend to focus on the demand side of the economy, growth-oriented polices target the supply side with the goal of influencing the sources of growth mainly, the quantity and quality of employed labor, the amount of capital, and the level of technology. The sources of long-run growth are taken to be more or less fixed in the short run, making them less of a concern over a single business cycle. Growth-oriented policies therefore take a longer-term approach to structuring the government's tax and spending initiatives with the aim of improving the incentives to work, invest, and innovate. Part of this approach is minimizing uncertainty over tax and spending policy itself, so that households and businesses can make long-lasting decisions that will support growth. Another part of this approach is prudent management of deficits and the debt so that high interest rates do not inhibit growth factors, such as investment. This report analyzes policy options from a countercyclical, and not a long-term growth, perspective. <4. Potential Countercyclical Fiscal Policy Tools> Countercyclical fiscal policy tools may be sorted into two categories automatic stabilizers and discretionary changes that require legislative action. Automatic stabilizers are features built into the economy's tax and transfer system that lower taxes and increase spending as the economy weakens. They take effect automatically without the need for congressional action. Discretionary policies refer to legislative changes to individual and business taxes, and to government spending enacted in response to economic conditions. The distinction between the two can become blurred; automatic stabilization policies can be modified in response to an economic downturn by legislative action, and discretionary changes could be made to take effect and expire automatically if certain criteria are met. The following sections review a select set of policy options that are often considered in response to a recession. The options are drawn from the Congressional Budget Office (CBO) and Moody's Analytics, both of which estimated the impact of specific policies or approaches in response to the Great Recession. While a general approach to stimulating a weakened economy with reduced taxes and increased spending is often advocated, specific policies have different impacts on the economy and differing administrative complexities. CBO's and Moody's estimates provide insight into which specific policy options may be most worthwhile to implement during the next downturn. The policy options presented or variations of them are ones commonly considered when designing a fiscal stimulus package and are not unique to either CBO or Moody's. However, policymakers may consider that the economy has the potential to return to full employment without intervention. As such, one policy option is to allow the economy to correct itself. Fiscal policy's estimated impact in response to the next recession is likely different from the impact estimated by CBO and Moody's in response to the Great Recession. Generally accepted economic theory holds that fiscal policy has a greater impact on the economy the further it is from full employment. This is because there is a greater abundance of idle resources that can be brought back into producing goods and services. The Great Recession was the most severe downturn since the Great Depression, and the economy was far from full employment. Thus, estimates of the impact of stimulus at that time may be an upper bound for fiscal policy's stimulative effect. Additionally, hindsight has allowed economists to improve their estimation techniques. Still, the relative magnitudes estimated by CBO and Moody's will conceivably still hold if they are updated in the future. It is important to briefly discuss the inherent difficulty of estimating the exact impact specific fiscal policies could have on the economy. All of the estimates presented below (and elsewhere) are based on models that rely on a set of assumptions about how individuals and businesses may react to policy changes, and on assumptions about how the Federal Reserve may adjust monetary policy to accommodate or to offset a fiscal policy change. The assumptions are subject to significant uncertainty. It is also never known what would happen in the absence of a particular stimulus package change (i.e., the counterfactual). As a result, the focus should be on the relative magnitudes of policies' impacts and not on individual point estimates. One set of CBO estimates presented below is qualitative. Still, the estimates presented in this section were made using conventional methods and provide a starting point for understanding how specific policies may affect the economy. <4.1. Automatic Stabilizers> The automatic stabilizers that receive the most attention are the progressive structure of the income tax system and Unemployment Compensation (UC) benefits. During an economic downturn, more taxpayers begin to move into lower marginal tax brackets as employment and incomes fall, reducing the proportion of income subject to tax and helping to cushion the fall in spending. Likewise, with rising unemployment, more individuals will have met the conditions required to qualify for UC benefits (i.e., state government spending increases), which provide some income support and, in turn, can help mitigate the negative impact rising unemployment has on aggregate demand. Other programs that may act as automatic stabilizers include the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp program), Medicaid, and Temporary Assistance for Needy Families (TANF). Automatic stabilizers are attractive because they can be designed to satisfy the three criteria for effective countercyclical policy. These programs take effect automatically in a timely fashion to help stabilize demand as the economy begins to weaken and even before a recession has been declared. Therefore, the lag between recognition and implementation is reduced. Automatic stabilizers are also targeted to individuals whose incomes are falling, which suggests a large "bang for the buck." And finally, these programs generally continue to provide support if the downturn becomes more severe, but gradually taper off as the economy begins to improve, making them temporary. However, if the recession is long enough, some individuals may exhaust their benefits before the recession is over. For example, UC benefits may be claimed by an individual for six months or less in most cases. Making adjustments to automatic stabilizers in response to a recession is discussed in the " Government Spending " section. While an attractive first line of defense against a weakening economy, automatic stabilizers may not provide enough stimulus to counteract a severe or prolonged economic downturn. In such cases, the stabilizers may need to be adjusted or supplemented with additional fiscal tools. Modifying automatic stabilizers before or in response to a recession for example, by expanding or extending coverage arguably crosses into the realm of discretionary fiscal policy. Potential modifications to current automatic stabilizers are discussed in the " Direct Payments and Transfers to Households " section of the report, along with estimates of the economic impact of these changes. Neither CBO nor Moody's estimated the impact of the baseline automatic stabilizers. <4.2. Individual Tax Relief> Enacting individual tax relief to boost demand is an option for stimulating the economy since personal consumption accounts for approximately 70% of U.S. GDP. Tax cuts or rebates that are spent will have the largest impact; tax cuts that are saved do not lead to additional spending and therefore have no stimulative impact. As discussed previously, tax relief directed toward lower- and moderate-income households appears to provide the most "bang for the buck." Delivering targeted tax relief to these households, however, can be complicated by the fact that many of them do not pay income taxes and may not file tax returns. Additionally, careful consideration is needed about how to deliver any tax relief so that household incomes are increased as soon as possible. Table 1 summarizes CBO's and Moody's estimates of the impact of several individual tax policies discussed in more detail below that were considered, and in some cases enacted, in response to the Great Recession. <4.2.1. Lump-Sum Rebates> One way to provide an infusion of money directly into the budgets of lower- and moderate-income households is to issue tax "rebates." Limitations on the administrative aspects of delivering such rebates, sometimes also referred to as "lump-sum" or "cash" rebates, has resulted in the stimulus being structured as an advanced tax credit based on a prior year's income, but used to offset a future year's tax liabilities. This was the general approach used most recently in response to the 2001 recession and again during the Great Recession. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) provided a lump-sum rebate check of up to $600 for joint filers, $500 for head of household filers, and $300 for single filers. However, the rebate was actually an advanced credit for taxes to be paid on income earned in 2001. The advanced credit was based on taxpayers' 2000 tax returns. Taxpayers then included the credit when completing their 2001 tax returns and were allowed to keep any overpayment if the credit they received (estimated using their 2000 returns) was too large. Individuals who had no tax liability in 2000 were ineligible for the credit. Eligible rebate recipients received their checks between July and October of 2001. The legislation was enacted in early June. The Economic Stimulus Act of 2008 (ESA; P.L. 110-185 ) also provided a tax rebate to individuals. Like the 2001 rebate, the ESA rebate was actually an advanced credit for 2008 taxes, based on returns filed in 2007. Unlike the 2001 rebate, the ESA rebate was made partly refundable to target lower-income households. The rebate was equal to the lesser of $600 ($1,200 for joint filers) and the individual's 2007 tax liability. Since the calculation depended on taxes paid in 2007, lower-income households who did not need to file a 2007 return would have been ineligible for a rebate. However, the law stipulated that for those who had not filed a 2007 tax return, but whose total income was at least $3,000, the rebate was equal to $300 ($600 for joint filers). Rebate recipients also were eligible for an additional $300 rebate per child under the age of 17. Disbursements of rebate checks mostly occurred between the end of April and middle of May of 2008. <4.2.2. Making Work Pay Tax Credit and Payroll Tax Holiday> An alternative to issuing lump sum rebates is to spread the tax reduction over time. The American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) attempted such an approach by creating the Making Work Pay (MWP) tax credit, which was available in 2009 and 2010. The MWP tax credit was equal to 6.2% of a taxpayer's earned income up to $400 for single filers and $800 for joint filers. Because individuals must pay 6.2% of their income toward the Social Security portion of payroll taxes, and because the credit was fully refundable, the credit effectively eliminated the Social Security tax on the first $6,450 of a single filer's income and the first $12,900 of joint filers' income. The credit began phasing out for workers with incomes exceeding $75,000 ($150,000 for joint filers), and was not available to those with incomes greater than $95,000 ($190,000 for joint filers). The refundability of the credit helped to benefit lower-income households. The MWP tax credit expired at the end of 2010. Following the expiration of the MWP credit, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) enacted a payroll tax "holiday." The holiday reduced workers' share of the Social Security payroll tax by 2 percentage points, from 6.2% to 4.2% on income up to $106,800 for 2011. The analogous tax for self-employed workers was reduced similarly from 12.4% to 10.4%. Because payroll taxes are withheld from each paycheck a worker receives, the reduction provided a benefit spread out over the year. The holiday did not benefit the lowest-income workers as much as the MWP credit because to receive the same $400 benefit, an individual needed to earn $20,000. Additionally, workers whose income was not subject to the Social Security tax did not benefit from the holiday because they had no tax to be reduced. The holiday was extended two more times, once through February 2012, and then again through the end of 2012. Both the MWP tax credit and the payroll holiday assisted only individuals who were working. Because unemployment typically increases during a recession, neither of these policies assisted those who had lost their job. However, unemployed individuals did receive UC benefits. <4.2.3. Reduction in Individual Income Tax Rates> Taxes could be reduced by lowering individual income tax rates. The Internal Revenue Service (IRS) would need to publish new withholding tables to enable employers to adjust employee withholdings so the reduction would be reflected in workers' paychecks. The IRS could make this change rather quickly; new withholding tables were published within two months of the enactment of P.L. 115-97 , commonly referred to as the Tax Cuts and Jobs Act, or TCJA. A drawback of an across-the-board tax rate reduction, from a short-term stimulus perspective, is that it would not have the maximum effect on demand. To have maximum effect, tax reductions must target lower- and moderate-income households because the spending of these households is most responsive to increases in after-tax income. However, an across-the-board income tax rate reduction is not well-targeted to these households because they pay little or no income taxes, and therefore would not benefit much, or at all, from a tax rate reduction. At the same time, many of those who would not benefit from an income tax rate reduction are working and therefore paying payroll taxes. Because the stimuluative effect of an across-the-board rate reduction is low, so too is its cost effectiveness. Although households in the lower tax brackets would receive a benefit, the majority of such a tax reduction would flow to taxpayers at the upper end of the income distribution. This is because higher-income households pay a disproportionate share of income taxes. But as previously discussed, these households are estimated not to be as responsive to increases in after-tax income as lower- and moderate-income households. Combined with a likely large revenue loss from an across-the-board rate reduction, this implies that the "bang for the buck" would be low. The stimulative effect is further diminished if sizable deficits lead to higher interest rates, crowding out private investment. The cost associated with this approach could be reduced by limiting the reduction to the lower brackets. However, because of the marginal structure of the income tax, many upper-income households would receive a tax cut, albeit small relative to their income, because a portion of their earnings falls within the lower tax brackets. The costs could also be contained by making the reduction temporary, but compared to other options, it would still be relatively expensive. <4.2.4. Reduction in Dividend and Capital Gains Taxes> A reduction in taxes on capital gains and dividends is another option for providing individual tax relief as a countercyclical measure. Currently, long-term capital gains and dividends are taxed at rates of 0%, 15%, or 20%, depending on an individual's tax bracket. Capital gains and dividends qualify as long term if the underlying asset has been held for at least a year. Short-term capital gains are taxed at the individual's ordinary income tax rate; the maximum individual income tax rate in 2019 is 37%. Long-term capital gains and dividends have received preferential tax treatment to varying degrees since the Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ). Prior to 1990, capital gains and dividends had been taxed at ordinary rates as the result of the Tax Reform of 1986 ( P.L. 99-514 ). Capital gains and dividends tax rates were last reduced (to 0% and 15%) in an attempt to stimulate the economy by the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ). The American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) increased the top rate to 20% for high-income individuals, resulting in the current three-rate regime. The Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) added a 3.8% tax on high-income individuals, bringing the effective top tax rate to 23.8%. The effectiveness of reducing taxes on capital gains and dividends in stimulating the economy is likely to be small. The overwhelming majority of capital gains and dividends income is received by taxpayers in the upper end of the income distribution, which implies the majority of any tax reduction would accrue to these taxpayers. For example, the Urban-Brookings Tax Policy Center (TPC) estimates that 95.8% of the tax on long-term capital gains and dividends is paid by taxpayers in the top 20% of the income distribution, and 76.5% is paid by taxpayers in the top 1%. Although there is an argument that lower taxes on investment income may be beneficial for longer-term growth, effective stimulus must increase demand in the short run. <4.3. Business Tax Incentives> The economy can also be stimulated by boosting business spending. The primary focus when targeting business spending has been new investment, which is a component of aggregate spending (demand). Business investment, while comprising a smaller share of GDP than consumer spending, is much more volatile than consumer spending and hence typically decreases more during recessions. However, the decline in investment spending may be in direct response to the decline in overall spending, which makes it difficult for policy to induce businesses to invest more. This section reviews a number of possible business tax incentives that Congress may consider during the next recession. Table 2 summarizes CBO's and Moody's estimates of the impact of several business tax polices discussed in more detail below that were considered, and in some cases enacted, in response to the Great Recession. <4.3.1. Provide Incentives for Investment> Incentives that directly target new investment are thought to be one of the more effective stimulus policies among business tax incentives. Two general approaches for encouraging investment are by accelerating depreciation or offering an investment tax credit. Accelerated depreciation allows a business to deduct from its income the cost of an investment faster than its useful (economic) life would dictate and, as a result, increases the after-tax return on eligible new investments. The most accelerated form of depreciation is expensing, and it allows a business to deduct the full cost of a qualified investment in the year it is purchased instead of spreading the deduction over a number of years. Accelerated depreciation is not currently available as a stimulus option since the 2017 tax revision ( P.L. 115-97 ) provided expensing for equipment through 2022, followed by a four-year phase-out period. An investment tax credit would allow a business to offset its tax liability by an amount equal to a fraction of its investment. The amount of investment that occurs in response to a tax credit depends on how responsive investment is to reduced investment costs. The empirical literature has not generally found total investment to be considerably responsive to tax incentives. Intuitively, this can be explained by the fact that investments require large and one-off expenditures involving durable assets that require time to plan and incorporate into the production process. The responsiveness of investment to tax incentives may be lower during recessions than more normal times since recessions are periods of heightened uncertainty, which reduces the desire to make investments. If investment incentives are to be included in a stimulus package, they are likely to be more effective if they are available for a short period of time to encourage businesses to take advantage of them and to limit the budgetary impact. <4.3.2. Reduce the Corporate Income Tax Rate> Reducing the corporate income tax rate could provide stimulus by increasing new corporate investment. Historically, however, corporate tax rate reductions have not been part of stimulus packages. When compared to alternative options, the short-term stimulus effect of a corporate rate reduction is likely to be small. This is for two primary reasons. First, investment incentives are most effective when they stimulate new investment. Although a reduction in the corporate tax rate would encourage some new investment by increasing the after-tax return to investment, it would also, and primarily, provide a windfall benefit to existing capital. Thus, the "bang for the buck" is expected to be quite low. Second, investment decisions are made with an eye toward future economic conditions since many assets are long-lived. If a rate reduction is temporary, or if corporate decisionmakers suspect rates will be higher in the future, the incentive to invest is lower. A rate reduction in response to the next recession may even be smaller than could be expected in the past because P.L. 115-97 permanently lowered the corporate tax rate from 35% to 21%. <4.3.3. Net Operating Loss Carrybacks> Allowing net operating losses to be carried back could provide tax relief for some businesses. When a business experiences a loss it owes no tax in that year (known as a loss year ). Currently, the business may use a loss to reduce future taxes by claiming it as a deduction against income earned after the loss year. This process is known as carrying forward a loss , and a business may carry a loss forward indefinitely until there is no more loss to be deducted. Prior to the 2017 tax revision ( P.L. 115-97 ), businesses were able to use losses to obtain a refund for past taxes paid, a process known as carrying back a loss . Losses had generally been limited to a two-year carryback since 1997, but this was temporarily extended to five years during the Great Recession. Businesses prefer to carry losses back rather than carry them forward because carrybacks produce an immediate and certain benefit, whereas carryforwards reduce taxes at some uncertain time in the future. Allowing losses to be carried back would help some firms with cash flow problems. A business in a loss position may have trouble making payroll and covering other operating expenses. Carryback losses would provide these firms with an infusion of cash and potentially allow them to ride out an economic downturn with less need to lay off workers. It would also allow firms in a loss position (or close to it) to benefit more from immediate expensing, which would help investment. The stimulative effects of loss carrybacks are generally thought to be small because they are not tied to increased investment or employment. Economic uncertainty may overshadow the incentive to invest during a recession, and profitable investment opportunities are less available during a recession. <4.3.4. Hiring Incentives> The tax code could be used to directly target rising unemployment during a recession via a hiring tax credit. During a downturn businesses cut back on hiring, and, depending on the severity of the recession, lay off employees. One way to address the reduction in the demand for employees is to reduce the cost of hiring and retaining workers by offering a tax credit tied to firms' payroll costs. To be most effective, only hiring and retention that would not otherwise occur would be eligible. This is inherently difficult because it is impossible to know whether a business is being encouraged to hire an employee or simply claiming the tax incentive because it is eligible. Past attempts to better target hiring and retention incentives have resulted in complex administrative issues, which have discouraged participation. These issues have created some skepticism over the effectiveness of this policy, and the literature has found mixed results. A deeper structural relationship between the employment decisions of firms and the performance of the economy would likely limit even a well-designed hiring incentive during a recession. The demand for labor by firms depends on the demand for its products and services. If consumers are withholding spending on goods and services, the firms' desire to hire workers to fill orders and produce goods is reduced regardless of a hiring incentive. <4.4. Government Spending> The government can boost aggregate demand directly with increased spending. Like tax incentives, spending policies can take many forms, but three broad categories are helpful for classifying government spending: direct payments and transfers to households, aid to states and local governments, and government purchases of goods and services. This section discusses each of these categories. Table 3 summarizes CBO's and Moody's estimates of the impact of several spending policies discussed in more detail below that were enacted in response to the Great Recession. <4.4.1. Direct Payments and Transfers to Households> Examples of direct payments and transfers to households include extending or enhancing UC benefits and increasing SNAP (formerly the Food Stamp program) benefits. These options would boost the disposable income of unemployed or underemployed individuals, who could be expected to spend nearly all of the stimulus. Therefore, the stimulative effect of direct payments and transfers to households in distress is believed to be large. These policies may also be comparatively simple to enact and administer because they would build on programs already in place. Congress has extended UC benefits in response to eight recessions in recent history. Extending the duration of UC benefits would give individuals who are unemployed more time to secure employment. Congress could also, or additionally, enhance the benefit amount recipients received. In addition to extending the duration of UC benefits, ARRA ( P.L. 111-5 ) also increased the amount eligible beneficiaries received by $25 each week. ARRA also provided for a tax exclusion up to the first $2,400 of unemployment benefits received. The increase in the standard deduction enacted by P.L. 115-97 , however, reduces the ability of an exclusion to enhance benefits. There is no consensus about how long of an extension or how large of an enhancement is appropriate. If the appropriate balance is not struck, there could be adverse effects, particularly with respect to accepting gainful employment once the economy has improved. SNAP benefits were also increased across-the-board during the Great Recession by ARRA ( P.L. 111-5 ). SNAP households' monthly benefit amounts are calculated using a maximum benefit and household-specific circumstances (such as household size). The ARRA provision specifically increased the maximum monthly benefit by 13.6%, thereby increasing the food purchasing power of eligible low-income households. Though the ARRA increase was originally expected to be effective through 2018, the duration of the increase in SNAP benefits was subsequently shortened to March 31, 2014, by P.L. 111-226 , and then to October 31, 2013, by P.L. 111-296 to offset the cost of these bills. <4.4.2. Aid to States and Local Governments> Aid to states and localities could support aggregate demand if their budgets become strained due to an economic downturn. Most states have balanced-budget requirements that limit their ability to carry out independent countercyclical policy. As states and municipalities experience budgetary pressure from declining tax revenue, state and local governments may need to raise taxes and cut spending, including laying off employees. Therefore, aid to states and localities, while not generally believed to be as stimulative as direct transfers to individuals, is predicted to be moderately effective at combating a downturn as a "defensive" stimulus that can help to maintain services, taxes, and employment. Typically aid to states has been provided through existing programs. Assistance could be provided through a general revenue transfer, although this approach is not typically used. In the past, one way Congress has provided aid to states is via Medicaid enhancement. In response to the Great Recession, ARRA ( P.L. 111-5 ) temporarily increased the federal medical assistance percentage (FMAP) by 6.2 percentage points. FMAP is the rate at which the federal government reimburses states for Medicaid expenditures and is used for determining the federal government's share of a number of other domestic social policy programs, such as the State Children's Health Insurance Program (CHIP) and foster care and adoption assistance. ARRA also provided funding to support state and local first responders, as well as school systems. <4.4.3. Infrastructure> Direct federal infrastructure investment, and aid to state and local governments to invest in infrastructure, is an option for supporting demand and stimulating the economy. Economic downturns often experience a drop in overall investment by the private sector. By making expenditures in public works, the government can offset the reduction in private investment while at the same time making investments in long-lived projects that will reap a benefit after the downturn has passed. Examples of types of infrastructure investments the government may make include roads, bridges, railroads, ports, airports, energy grids, and management of water resources, among others. Infrastructure investment may not be the ideal policy tool to combat a mild recession. The "bang for the buck" measure for government investment is usually estimated to be high, but infrastructure projects take a long time to get under way and a longer time to complete. There is a good chance that a recession could be over by the time the stimulus from such investment affects the economy. This does not mean that infrastructure investment is not desirable, and it may be justified based on longer-term growth policies. <5. Stimulus and the Budget Outlook> The United States' recent budget deficits and the country's long-run budget outlook could influence the size of any stimulus package. The FY2018 real (inflation-adjusted) deficit equaled 3.8% of gross domestic product (GDP), which was higher than the average federal deficit since FY1969 (2.9% of GDP). Real deficits are projected to increase over the next 10 years. In its latest economic forecast, the Congressional Budget Office (CBO) projected that U.S. debt held by the public would also increase over the next 10 years, from 77.8% of GDP in FY2018 to 92.7% of GDP in FY2029. Large and persistent budget deficits can hamper economic growth by lowering the rate of capital formation via reduced national saving, and can potentially offset short-term economic stimulus. At the same time, high levels of debt relative to GDP can constrain a country's borrowing capacity. There are no signs that federal borrowing capacity will be exhausted in the short term. However, Congress may consider the consequences of exhausted fiscal space in designing the next potential stimulus package since it would increase both deficits and the debt.

Although the United States is currently experiencing its longest economic expansion, history has shown that economic expansions inevitably give way to economic slowdowns. If the next slowdown is significant, the economy could enter a recession, which is typically characterized by falling output and rising unemployment. Short-term forecasts are predicting continued economic expansion, but predicting when the economy may transition from expansion to recession is notoriously difficult, as the ebb and flow of the economy is determined by many different factors, including a number that lie outside the country's borders. This report identifies and summarizes options Congress may consider in response to a possible recession. Recognizing that the economy has the potential to return to full employment without intervention, one policy option is simply to allow the economy to correct on its own with the support of certain "automatic stabilizers" already in place. Automatic stabilizers work without congressional action to lower taxes and increase spending as the economy weakens. Examples include the progressive structure of the income tax system and Unemployment Compensation (UC) benefits, among others. Congress also has a range of other options it could consider when designing a stimulus package should a recession occur and automatic stabilizers are not sufficient to counteract it. The options presented in this report are drawn from the Congressional Budget Office (CBO) and Moody's Analytics, both of which estimated the impact of specific policies or approaches in response to the Great Recession. While a general approach to stimulating a weakened economy with reduced taxes and increased spending is often advocated, specific policies have different impacts on the economy and differing administrative complexities. CBO's and Moody's estimates provide insight into which specific policy options may be most worthwhile to implement during the next downturn. The policy options presented—or variations of them—are ones commonly considered when designing a fiscal stimulus package and are not unique to either CBO or Moody's. The United States' recent budget deficits and the country's long-run budget outlook could influence the size of any stimulus package. Large and persistent budget deficits can hamper economic growth by lowering the rate of capital formation via reduced national saving, and can potentially offset short-term economic stimulus. At the same time, high levels of debt relative to gross domestic product can constrain a country's borrowing capacity. There are no signs that federal borrowing capacity will be exhausted in the short term. However, the consequences of exhausted fiscal space may be worth considering in designing the next stimulus package since it would increase both deficits and the debt.

crs_RL30788

crs_RL30788_0

<1. Introduction> The Senate's procedures are not based solely on its standing rules. Rather, the foundations of Senate procedure also include the body's standing orders, published precedents, rulemaking statutes, constitutional mandates, committee rules, party conference rules, and informal practices. Various reference sources provide information about how and when these procedural authorities of the Senate govern specific parliamentary situations, and together, they establish the framework by which the Senate conducts its business. This report discusses the contents, format, and availability of reference sources that provide information about contemporary procedures in the Senate. The report covers official documents that set forth the Senate rules, precedents, or other sources of parliamentary authority, such as the Senate Manual , Riddick's Senate Procedure , and the rules adopted by Senate committees. The report also discusses publications on procedure from committees and offices of the Senate and the rules of the Senate's party conferences. Prior to describing the individual parliamentary reference sources, this report reviews some principles of Senate parliamentary procedure that are applicable when using and evaluating information from these sources. The report then covers the Senate's official parliamentary reference sources. These are documents that set forth authoritative statements of Senate rules, procedures, and precedents. Senators often cite these official sources when raising a point of order or defending against one. Finally, the report reviews the rules of the party conferences, as well as a number of additional publications of committees and other offices of the Senate. Although these resources do not themselves constitute official parliamentary authorities of the Senate, they nevertheless provide background information on official parliamentary authorities. Text boxes throughout the report provide information on how to consult a source, or group of sources, with an emphasis on online access. This report aims to present access points to these reference sources that are relevant for Senators and congressional staff and does not present an exhaustive list of websites and other locations where these references can be found. Two appendixes supplement the information on parliamentary reference sources provided throughout the report. Appendix A provides a selected list of CRS products on Senate procedure. An overview of the two primary websites through which many of the resources included in this report can be accessed is provided in Appendix B . This report assumes a basic familiarity with Senate procedures. Official guidance on Senate procedure is available from the Office of the Senate Parliamentarian. CRS staff can also assist with clarifying Senate rules and procedures. <2. Principles of Senate Parliamentary Practice> The Senate applies the regulations set forth in its various parliamentary authorities in accordance with several principles that remain generally applicable across the entire range of parliamentary situations. Among these principles may be listed the following: (1) Senate procedures derive from multiple sources; (2) the Senate has the constitutional power to make its own rules of procedure; (3) Senators must often initiate enforcement of their rules; (4) the Senate conducts much of its business by unanimous consent; (5) the Senate usually follows its precedents; and (6) the Senate adheres to many informal practices. Each of these principles is discussed below. <2.1. Multiple Sources of Senate Procedure> The standing rules of the Senate may be the most obvious source of Senate parliamentary procedure, but they are by no means the only one. Other sources of Senate procedures include: requirements imposed by the Constitution, standing orders of the Senate, precedents of the Senate, statutory provisions that establish procedural requirements, rules of procedure adopted by each committee, rules of the Senate's party conferences, procedural agreements entered into by unanimous consent, and informal practices that the Senate adheres to by custom. In order to answer a question about Senate procedure, it is often necessary to take account of several of these sources. For example, Rule XIX of the Senate's standing rules provides that "the presiding officer shall recognize the Senator who shall first address him." When several Senators seek recognition at the same time, however, there is precedent that "priority of recognition shall be accorded to the majority leader and minority leader, the majority manager and minority manager, in that order." This precedential principle can have consequences on the Senate floor. For example, it allows the majority leader the opportunity to be recognized to offer the debate-ending motion to table or to propose amendments. Familiarity with this Senate practice, and not the standing rule alone, is key to an understanding of how the Senate conducts its business. <2.2. Constitutional Rulemaking Authority of the Senate> Article I of the Constitution gives the Senate the authority to determine its rules of procedure. There are two dimensions to the Senate's constitutional rulemaking authority. First, the Senate can decide what rules should govern its procedures. The Senate exercises this rulemaking power when it adopts an amendment to the standing rules, or creates a new standing rule, by majority vote. The Senate also uses its rulemaking power when it creates standing orders and when it enacts rulemaking provisions of statutes such as those included in the Congressional Budget and Impoundment Control Act of 1974. Standing orders and rulemaking provisions of law have the same standing and effect as the Senate's standing rules, because all are created through an exercise of the Senate's constitutional rulemaking authority. The second dimension to the Senate's rulemaking authority is that the chamber can decide when its rules of procedure should not govern. In practical terms, this means the Senate can waive its rules by unanimous consent. Under a provision of Senate Rule V, the body can also suspend its rules by a two-thirds vote, although this course is procedurally difficult and rare. The Senate has no established means to supersede its rules by majority vote, an option that is available to the House through the adoption of a "special rule." The Senate can achieve the effect of waiving a rule if a majority votes either to overrule a decision of the presiding officer to sustain a point of order or, instead, votes not to sustain a point of order that has been submitted to the Senate for decision. Action of this kind not only sets the rule aside for the immediate situation but also thereby establishes a precedent to govern subsequent rulings of the presiding officer regarding the meaning and applicability of that rule. <2.3. Enforcing the Senate Rules and Precedents> The Senate's presiding officer (whether it is the Vice President or a Senator of the majority party) does not always call a violation of Senate rules to the chamber's attention. The Senate can violate its procedures unless a Senator, at the right moment, makes a point of order that the proposed action violates the standing rules, a constitutional provision, or another authoritative source of procedure (i.e., standing order, rulemaking statute, or unanimous consent agreement). When a point of order is raised, the presiding officer usually makes a ruling without debate. Under Rule XX, the presiding officer has the option of submitting "any question of order for the decision of the Senate." This is rare but may occur if the existing rules and precedents do not speak clearly on the parliamentary question at hand. Any Senator can appeal the ruling of the presiding officer on a point of order. The Senate might then decide, usually by majority vote, to uphold or overturn the presiding officer's decision. This vote establishes a precedent that guides the presiding officer in deciding future questions of order unless this precedent is overturned by another decision of the Senate or by a rules change. Some rulemaking statutes require a supermajority vote to overturn on appeal the presiding officer's ruling on a point of order. Parliamentary actions taken on the basis of an informal practice, or pursuant to a rule of one of the Senate's party conferences, are not enforceable on the Senate floor. While informal practices and party conference rules can affect actions taken in Senate committee and the Senate floor, they are not invoked through an exercise of the Senate's constitutional rulemaking authority. Hence, they do not have the authority of Senate rules and procedures. Informal practices evolve over the years as custom and party conference rules are adopted and enforced by each party. <2.4. The Senate's Reliance on Unanimous Consent> The Senate's standing rules emphasize the rights of individual Senators, in particular by affording each Senator the right to debate at length and the right to offer amendments that are not relevant to the bill under consideration. It would be difficult for the Senate to act on legislation in a timely fashion if Senators always exercised these two powerful rights. For this and other reasons, the Senate often agrees, by unanimous consent, to operate outside its standing rules. In practice, Senate business is frequently conducted under unanimous consent (UC) agreements. UC agreements may be used to bring up a measure, establish how the measure will be considered on the floor, and control how the Senate will consider amendments. Given the fact that it takes only one Senator to object to a UC agreement, each agreement is carefully crafted by the majority leader in consultation with the minority leader, leaders of the committee with jurisdiction over the bill in question, and other Senators who express an interest in the legislation. The agreement is then orally propounded on the floor, usually by the majority leader, and takes effect if no Senator objects. Once entered into, a UC agreement has the same authority as the Senate's standing rules and is enforceable on the Senate floor. Consent agreements have the effect of changing "all Senate rules and precedents that are contrary to the terms of the agreement." Once entered into, UC agreements can be altered only by unanimous consent. <2.5. The Importance of Precedents> The published precedents of the Senate detail the ways in which the Senate has interpreted and applied its rules. The precedents both complement and supplement the rules of the Senate. As illustrated by the example of according priority recognition to the majority leader, it may be necessary to refer to the precedents for guidance on how the Senate's rules are to be understood. The brevity of the Senate's standing rules often makes the body's precedents particularly important as a determinant of proceedings. Precedents are analogous to case law in their effect. Just as attorneys in court will cite previous judicial decisions to support their arguments, Senators will cite precedents of the Senate to support a point of order, defend against one, or argue for or against an appeal of the presiding officer's ruling on a point of order. Similarly, the presiding officer will often support his or her ruling by citing the precedents. In this way, precedents influence the manner in which current Senate rules are applied by relating past decisions to the specific case before the chamber. Most precedents are established when the Senate votes on questions of order (i.e., on whether to uphold or overturn a ruling of the presiding officer or on a point of order that the presiding officer has submitted to the body) or when the presiding officer decides a question of order and the ruling is not appealed. Historically, the Senate follows such precedents until "the Senate in its wisdom should reverse or modify that decision." Precedents can also be created when the presiding officer responds to a parliamentary inquiry. Precedents do not carry equal weight. Inasmuch as the Senate itself has the ultimate constitutional authority over its own rules, precedents reflecting the judgment of the full Senate are considered the most authoritative. Accordingly, precedents based on a vote of the Senate have more weight than those based on rulings of the presiding officer. Responses of the presiding officer to parliamentary inquiries have even less weight, because they are not subject to a process of appeal through which the full Senate could confirm or contest them. In addition, more recent precedents generally have greater weight than earlier ones, and a precedent that reflects an established pattern of rulings will have more weight than a precedent that is isolated in its effect. All precedents must also be evaluated in the historical context of the Senate's rules and practices at the time the precedents were established. Senators seeking precedents to support or rebut an argument may consult the Senate Parliamentarian's Office. <2.6. The Senate's Unofficial Practices> Some Senate procedural actions are based on unofficial practices that have evolved over the years and become accepted custom. These practices do not have the same standing as the chamber's rules, nor are they compiled in any written source of authority. Although these unofficial practices cannot be enforced on the Senate floor, many of them are well established and customarily followed. Some contemporary examples of unofficial practices include respecting "holds" that individual Senators sometimes place on consideration of specific measures and giving the majority leader or a designee the prerogative to offer motions to proceed to the consideration of a bill, recess, or adjourn. <3. The Senate Manual and Authorities It Contains> The Senate Manual compiles in a single document many of the chief official parliamentary authorities of the Senate. The publication, prepared under the auspices of the Senate Committee on Rules and Administration, appears periodically in a new edition as a Senate document. The current edition, which was issued in the 113 th Congress, contains the text of the following parliamentary authorities (the titles given are those found in the Manual ): Standing Rules of the Senate; Nonstatutory Standing Orders Not Embraced in the Rules, and Resolutions Affecting the Business of the Senate; Rules for Regulation of the Senate Wing of the U.S. Capitol and Senate Office Buildings; Rules of Procedure and Practice in the Senate When Sitting on Impeachment Trials; Cleaves' Manual of the Law and Practice in Regard to Conferences and Conference Reports ; General and Permanent Laws Relating to the U.S. Senate; and Constitution of the United States of America. The following sections of this part of the report discuss each of these authorities in more detail. The Manual contains a general table of contents and an index. Some of the respective components in the Manual have their own tables of contents and indices that provide additional details about that source. Individual provisions of each procedural authority are assigned section numbers that run throughout the Manual in a single sequence and always appear in bold type. The section numbers assigned to the standing rules correspond to the numbers of the rules themselves. For example, paragraph 2 of Senate Rule XXII, which sets forth the cloture rule, is found at section 22.2 of the Manual . The indices to the Manual direct readers to these section numbers. The indices indicate, for example, that the motion to adjourn is covered in Manual sections 6.4, 9, and 22.1. For this reason, the document is cited by section number rather than page number. <3.1. Standing Rules of the Senate> The Senate does not re-adopt its standing rules at the beginning of each new Congress but instead regards its rules as continuing in effect without need for re-adoption. The Senate follows this practice on grounds that it is a continuing body; only one-third of its membership enters on new terms of office after every biennial election, so a quorum is continuous. Changes to the standing rules are proposed in the form of Senate resolutions, which can be adopted by majority vote. At the start of the 116 th Congress, there were 44 standing rules of the Senate. The standing rules of the Senate are set forth at the beginning of the Manual . The standing rules appear with footnotes indicating amendments adopted since their last general revision in 1979. The footnotes cite the resolution adopted by the Senate to make the rules change. The Manual presents the standing rules with an itemized table of contents and a detailed, separate index. <3.2. Permanent Standing Orders> From time to time, the Senate adopts a resolution or agrees to a unanimous consent request to create a standing order of the Senate. A standing order, while not embraced in the standing rules, operates with the same authority as a standing rule and is enforceable on the Senate floor in the same way. A standing order remains in effect until repealed by the Senate unless otherwise specified in the order itself. The standing orders the Senate has created by adopting resolutions and that remain in effect are compiled in the Manual in sections 60-139. This is the only readily available compilation of permanent standing orders currently in effect. In addition to setting forth the text of these standing orders, the Manual provides (1) a heading stating the subject matter of each and (2) a citation to the Senate resolution(s) that created and amended it. Footnotes provide supplementary information, such as noting when references in the standing order (e.g., the name of a committee) were changed. <3.3. Laws Relating to the Senate> The most voluminous component of the Manual presents a compilation of "General and Permanent Laws Relating to the U.S. Senate." The statutory excerpts appear in their codified version (i.e., organized under the relevant title, chapter, and section of the United States Code ). The Manual provides a separate table of contents to the provisions included, but it sets forth the provisions themselves without citation or commentary. Although most of the selected provisions address the administration and operations of the Senate, some of them bear on questions related to Senate procedure, such as those concerning Senators' oaths of office, officers of the Senate, and investigative procedure in Senate committees. The compilation also includes "rulemaking statutes," or statutory provisions that establish procedures for Senate action on specified measures. Rulemaking provisions of statute are discussed further in the section below on " Rulemaking Statutes and Budget Resolutions ." <3.4. Constitution> The U.S. Constitution imposes several procedural requirements on the Senate. For example, Article I, Section 5, requires the Senate to keep and publish an official Journal of its proceedings, requires a majority quorum to conduct business on the Senate floor, and mandates that a yea and nay vote take place upon the request of one-fifth of the Senators present. The Constitution also bestows certain exclusive powers on the Senate: Article II, Section 2, grants the Senate sole authority to provide advice and consent to treaties and executive nominations, and Article I, Section 3, gives the Senate the sole power to try all impeachments. The Manual presents the text of the Constitution and its amendments. The Manual places bold brackets around text that has been amended, and a citation directs readers to the Manual section containing the amendment. The Manual also provides historical footnotes about the ratification of the Constitution and each amendment, as well as a special index to the text. <3.5. Additional Parliamentary Resources Included in the Manual> <3.5.1. Rules for Regulation of the Senate Wing> Senate Rule XXXIII authorizes the Senate Committee on Rules and Administration to make "rules and regulations respecting such parts of the Capitol ... as are or may be set apart for the use of the Senate." The rule is framed to extend this authority to the entire Senate side of the Capitol complex and explicitly includes reference to the press galleries and their operation. Several of the regulations adopted by the Committee on Rules and Administration under this authority have a bearing on floor activity, including ones addressing (1) the floor duties of the secretaries for the majority and for the minority, (2) the system of "legislative buzzers and signal lights," and (3) the "use of display materials in the Senate chamber." <3.5.2. Rules for Impeachment Trials> The Senate has adopted a special body of rules to govern its proceedings when sitting as a Court of Impeachment to try impeachments referred to it by the House of Representatives. The Senate treats these rules, like its standing rules, as remaining permanently in effect unless altered by action of the Senate. On occasion, the Senate has adopted amendments to these rules. <3.5.3. Cleaves' Manual on Conferences> Cleaves' Manual presents a digest of the rules, precedents, and other provisions of parliamentary authorities governing Senate practice in relation to the functioning of conference committees and conference reports as they stood at the end of the 19 th century. Although rules and practices governing conferences to resolve legislative differences between the House and the Senate have since altered in many respects, and many of the precedents now applicable to conferences were established after Cleaves' Manual was prepared, many of the principles set forth in Cleaves' Manual still apply to current practice. As presented in the Senate Manual , Cleaves' Manual includes excerpts from the Manual of Parliamentary Practice prepared by Thomas Jefferson as Vice President at the turn of the 19 th century, as well as statements by other Vice Presidents and by Speakers, excerpts from Senate rules, statements of principles established by precedent, and explanatory notes. In addition, a section at the end sets forth forms for conference reports and joint explanatory statements. <3.6. Annotated Excerpt from the Manual> The page below displays an excerpt from the section of the Manual that presents the Constitution. The excerpt shows the format of the Manual , and the annotations explain some of the key features for using the reference, such as distinguishing between the Manual section numbers in bold text and the Manual page numbers at the bottom of the page. <4. Other Official Senate Parliamentary Authorities> <4.1. Riddick's Senate Procedure> Riddick's Senate Procedure , often referred to simply as Riddick's , is the most comprehensive reference source covering Senate rules, precedents, and practices. Its principal purpose is to present a digest of precedents established in the Senate. The current edition, published in 1992, covers significant Senate precedents established from 1883 to 1992. It was written by Floyd M. Riddick, Parliamentarian of the Senate from 1964 to 1974, and Alan S. Frumin, Parliamentarian of the Senate from 1987 to 1995 and 2001 to 2012 and Parliamentarian Emeritus since 1997. As implied by its full title, Riddick's Senate Procedure: Precedents and Practices presents Senate precedents as well as discussions of the customary practice of the Senate. It is organized around procedural topics, which are presented in alphabetical order. For each procedural topic, the volume first presents a summary of the general principles governing that topic followed by the text of relevant standing rules, constitutional provisions, or rulemaking provisions of statute. Summaries of the principles established by individual precedents are then presented under subject headings and subtopics organized in alphabetical order. For example, the topic "Cloture Procedure" has a subject heading "Amendments After Cloture," which is further divided into 18 topics, such as "Drafted Improperly" and "Filing of Amendments." Footnotes provide citations to the date, the Congress, and the session when each precedent was established and to the Congressional Record or Senate Journal pages where readers can locate the pertinent proceedings (e.g., "July 28, 1916, 64-1, Record , pp. 11748-50"). Footnote citations beginning with the word see indicate proceedings based on presiding officers' responses to parliamentary inquiries. Citations without see indicate precedents created by ruling of the presiding officers or by votes of the Senate. An appendix to Riddick's Senate Procedure contains sample floor dialogues showing the terminology that Senators and the presiding officer use in different parliamentary situations. Examples of established forms used in the Senate (e.g., for various types of conference reports, the motion to invoke cloture) are also provided. Useful supplementary information appears in brackets throughout the appendix. The appendix also has a separate index. The publication's main index is useful for locating information on specific topics of Senate procedure. The table of contents lists only the main procedural topics covered in the book. <4.2. Standing Orders by Unanimous Consent> In addition to the standing orders created by resolution, the Senate also establishes standing orders by agreeing to unanimous consent requests. These agreements usually make these standing orders effective only for the duration of a Congress or some other limited period. The current Senate practice is to adopt an established package of these standing orders at the beginning of each successive Congress. Standing orders of this kind are not included in the Senate Manual but appear only in the Congressional Record on the day they are adopted. For example, on the first day of the 116 th Congress in 2019, the Senate adopted 11 unanimous consent agreements re-establishing standing orders from the previous Congress on topics such as the procedures for allowing Members' staff access to the Senate floor during the consideration of matters and when the Senate Ethics Committee is permitted to meet. <4.3. Unanimous Consent (UC) Agreements> UC agreements also include orders that function as parliamentary authorities in the Senate. These consent agreements establish conditions for floor consideration of specified measures, which, in relation to those measures, override the regulations established by the standing rules and other Senate parliamentary authorities. Commonly, agreements of this kind may set the time for taking up or for voting on the measure, limit the time available for debate, or specify what amendments and other motions are in order. UC agreements constitute parliamentary authorities of the Senate because, once propounded and accepted on the Senate floor, they are enforced just as are the Senate's standing rules and other procedural authorities. UC agreements are propounded orally, and therefore, they are printed in the Congressional Record . Those that are accepted are printed at the front of the Senate's daily Calendar of Business and Executive Calendar until they are no longer in effect. <4.4. Committee Rules of Procedure> Rule XXVI, paragraph 2, of the Senate's standing rules requires that each standing committee adopt written rules of procedure and publish these rules in the Congressional Record not later than March 1 of the first session of each Congress. Committee rules cover important aspects of the committee stage of the legislative process, such as the procedures for preparing committee reports and issuing subpoenas, and committees are responsible for enforcing their own rules. Subcommittees may also have their own supplemental rules of procedure. Committee rules of procedure do not supersede those established by the standing rules of the Senate. Each committee's rules appear in the Congressional Record on the day they are submitted for publication. Some committees also publish their rules in a committee print, or in the committee's interim or final "Legislative Calendar," and many post them on their websites. In addition, the Senate Committee on Rules and Administration issues a document each Congress that compiles the rules of procedure adopted by all Senate committees. This document, Authority and Rules of Senate Committees , also presents the jurisdiction statement for each committee from Rule XXV of the Senate's standing rules as well as related information, such as provisions of public law affecting committee procedures. <4.5. Rulemaking Statutes and Budget Resolutions> The constitutional grant to each chamber of Congress of authority over its own rules permits the Senate to establish procedural regulations through simple resolutions, which are adopted by the Senate alone. In certain cases, the Senate institutes procedures through provisions included in statutory measures (bills and joint resolutions), which can become effective only through agreement between both houses and presentation to the President (or through concurrent resolutions, which require agreement between both houses). Given that these procedures are created through an exercise of each chamber's constitutional rulemaking authority, they have the same standing as Senate and House rules. A statute or concurrent resolution that contains "rulemaking provisions," in this sense, often incorporates a section titled "Exercise of Rulemaking Power." This section asserts the rulemaking authority of each chamber by declaring that the pertinent provisions "shall be considered as part of the rules of each House" and are subject to being changed "in the same manner ... as in the case of any other rule of such House" that is, for example, by adoption of a simple resolution of the Senate. In the Senate, statutory rulemaking provisions are principally of three kinds: (1) those derived from Legislative Reorganization Acts, (2) those establishing expedited procedures for consideration of specific classes of measures, and (3) those derived from the Congressional Budget Act and related statutes governing the budget process. In addition, provisions regulating action in the Senate (or House of Representatives, or both) in the congressional budget process may be contained in congressional budget resolutions, which are concurrent resolutions adopted pursuant to the Congressional Budget Act. <4.5.1. Legislative Reorganization Acts> The Legislative Reorganization Act of 1946 (P.L. 79-601, 60 Stat. 812) and the Legislative Reorganization Act of 1970 (P.L. 91-510, 84 Stat. 1140) are important rulemaking statutes that affected legislative procedures. Many rulemaking provisions in these statutes were later incorporated into the Senate's standing rules, and some others appear in the compilation of Laws Relating to the Senate presented in the Senate Manual , as discussed earlier. <4.5.2. Expedited Procedures> The term rulemaking statute is most often used in connection with laws that include provisions specifying legislative procedures to be followed in the Senate or the House, or both, in connection with the consideration of a class of measure also specified by the statute. This type of rulemaking statute, commonly referred to as "expedited procedures" or "fast track" provisions, defines special procedures for congressional approval or disapproval of specified actions proposed to be taken by the executive branch or independent agencies. A well-known example includes the Congressional Review Act, which provides for special procedures Congress can use to overturn a rule issued by a federal agency. Some of these expedited procedures are listed in the Senate Manual section titled "General and Permanent Laws Relating to the U.S. Senate." <4.5.3. Budget Process Statutes> Four of the most important rulemaking statutes define specific procedures for considering budgetary legislation: the Congressional Budget and Impoundment Control Act of 1974 (commonly known as the Congressional Budget Act), the Balanced Budget and Emergency Deficit Control Act (the "Gramm-Rudman-Hollings Act"), the Budget Enforcement Act of 1990, and the Budget Control Act of 2011. For example, Section 305(b) of the Congressional Budget Act defines Senate floor procedures for considering the congressional budget resolution. <4.5.4. Procedural Provisions in Budget Resolutions> When adopted, the chief purpose of the concurrent resolution on the budget (provided for in the Congressional Budget Act) is to establish, between the House and the Senate, a budget plan for the fiscal year. The Senate has often included in this congressional budget resolution supplementary procedural regulations to govern subsequent action on spending bills or other budget-related measures. Many of these procedural provisions institute new points of order that, similar to those established by the Congressional Budget Act itself, are available against budgetary measures or provisions contained in these measures. For example, beginning in 1993, some budget resolutions have established "pay-as-you-go" (PAYGO) procedures for Senate consideration of legislation affecting direct spending and revenues. The procedures established by these provisions may be made applicable only to budgetary action for the coming year or an established time period, but they may also be established as permanent procedures that are altered or abolished only by further action in a subsequent budget resolution. Procedures set forth in congressional budget resolutions are not comprehensively compiled in a single source and may best be identified by examining the texts of adopted congressional budget resolutions for successive years. <5. Rules of Senate Party Conferences> The rules of the conferences of the two parties in the Senate are not adopted by the Senate itself, and accordingly, they cannot be enforced on the Senate floor. Conference rules may nevertheless affect proceedings of the Senate, for they may cover topics such as the selection of party leaders, meetings of the conference, and limitations on committee assignments for conference members. The Senate Republican Conference adopted rules for the 116 th Congress that are available online. <6. Publications of Senate Committees and Offices> Some publications prepared by committees and offices of the Senate provide valuable information about Senate parliamentary procedure and practices. While these publications are not official parliamentary reference sources, they often make reference to official sources such as the Senate's standing rules and published precedents. <6.1. Electronic Senate Precedents> Senators and their staff may access, via Webster (which is not available to the public), the Electronic Senate Precedents , a catalog of recent precedents compiled by the Office of the Parliamentarian. These unofficial documents, provided by the Office of the Secretary of the Senate, are updated periodically to reflect precedents on topics such as cloture and germaneness of amendments that were established after the publication of Riddick's Senate Procedure (1992). <6.2. A Compendium of Laws and Rules of the Congressional Budget Process> A Compendium of Laws and Rules of the Congressional Budget Process , a print of the House Committee on the Budget, presents the text of the Congressional Budget and Impoundment Control Act of 1974, the Gramm-Rudman-Hollings Act, and additional information related to the budget making process, such as House and Senate rules affecting the budget process. Although this document was printed by the House Budget Committee, it presents valuable information related to the budgetary process in the Senate. <6.3. Senate Cloture Rule> Senate Cloture Rule , a print prepared for the Senate Committee on Rules and Administration by CRS, was last issued during the 112 th Congress (2011-12). The print covers the rule's history and application through its publication and may be useful to those wanting a more detailed knowledge of the cloture rule. Significantly, however, this print does not capture precedents established during the 113 th (2013-14) and 115 th (2017-18) Congresses that changed the vote thresholds for invoking cloture on various presidential nominations or the change to the post-cloture debate time established during the 116 th Congress. <6.4. Treaties and Other International Agreements> Treaties and Other International Agreements: The Role of the United States Senate , was prepared as a print for the Senate Committee on Foreign Relations by CRS. The print provides detailed information about the Senate's advice and consent role, covers the procedures that govern all stages of Senate consideration of treaties and international agreements, and discusses congressional oversight of treaties and other international agreements. The latest edition (S.Prt. 106-71) appeared in the 106 th Congress. <6.5. Enactment of a Law> Enactment of a Law presents a concise summary of the legislative process. This document, prepared by Robert B. Dove, former Parliamentarian of the Senate, explains Senate floor procedures and the functions of the various Senate officials, such as the Secretary of the Senate, the Sergeant at Arms, and the Senate Parliamentarian. <6.6. How Our Laws Are Made> How Our Laws Are Made , first published in 1953 by the House Committee on the Judiciary, provides a summary of the legislative process from the drafting of legislation to final approval and presidential action. While this document focuses on House procedures, it includes a review of Senate committee and floor procedures prepared by the Office of the Parliamentarian of the Senate. Although the document is intended for nonspecialists, its summary descriptions of House procedures serve as a useful reference source. Appendix A. Selected CRS Products on Senate Procedure Most of these reports are available to congressional staff through the CRS home page at http://www.crs.gov . These reports may also be accessed through the Congressional Process, Administration, and Elections section of the CRS website at https://www.crs.gov/iap/congressional-process-administration-and-elections . CRS Report 98-853, The Amending Process in the Senate , by Christopher M. Davis. CRS Report R41003, Amendments Between the Houses: Procedural Options and Effects , by Elizabeth Rybicki. CRS Report RL30862, The Budget Reconciliation Process: The Senate's "Byrd Rule , " by Bill Heniff Jr. CRS Report 96-708, Conference Committee and Related Procedures: An Introduction , by Elizabeth Rybicki. CRS Report RL30360, Filibusters and Cloture in the Senate , by Valerie Heitshusen and Richard S. Beth. CRS Report 98-865, Flow of Business: A Typical Day on the Senate Floor , by Christopher M. Davis. CRS Report R43563, "Holds" in the Senate , by Mark J. Oleszek. CRS Report RS20668, How Measures Are Brought to the Senate Floor: A Brief Introduction , by Christopher M. Davis. CRS Report 98-425, Invoking Cloture in the Senate , by Christopher M. Davis. CRS Report 96-548, The Legislative Process on the Senate Floor: An Introduction , by Valerie Heitshusen. CRS Report 98-306, Points of Order, Rulings, and Appeals in the Senate , by Valerie Heitshusen. CRS Report R42929, Procedures for Considering Changes in Senate Rules , by Richard S. Beth. CRS Report 98-696, Resolving Legislative Differences in Congress: Conference Committees and Amendments Between the Houses , by Elizabeth Rybicki. CRS Report RL33939, The Rise of Senate Unanimous Consent Agreements , by Walter J. Oleszek. CRS Report RL31980, Senate Consideration of Presidential Nominations: Committee and Floor Procedure , by Elizabeth Rybicki. CRS Report 98-308, Senate Legislative Procedures: Published Sources of Information , by Christopher M. Davis. CRS Report 98-311, Senate Rules Affecting Committees , by Valerie Heitshusen. CRS Report 96-452, Voting and Quorum Procedures in the Senate , coordinated by Elizabeth Rybicki. Appendix B. Senate Parliamentary Reference Information Available Online The vast majority of the referenced links found throughout this report can be accessed through one of two "gateway" websites maintained by legislative branch organizations: Congress.gov (a website of the Library of Congress) and govinfo.gov (a website of GPO). Each of these sites provides an entry point for research into Senate procedures. The websites provided for the documents discussed in this report are current as of the report's publication date. Congress.gov http://www.congress.gov Congress.gov is the official website for U.S. federal legislative information. The site is designed to provide access to accurate, timely, and complete legislative information for Members of Congress, legislative agencies, and the public. Congress.gov also contains information on topics such as nominations, public laws, communications, and treaties. It is presented by the Library of Congress using data from the Office of the Clerk of the U.S. House of Representatives, the Office of the Secretary of the Senate, GPO, Congressional Budget Office, and CRS. govinfo.gov https://www.govinfo.gov/ Govinfo.gov is a service of the GPO. The website provides public access to official publications of the Congress.

The Senate's procedures are determined not only by its standing rules but also by standing orders, published precedents, committee rules, party conference rules, and informal practices. The Constitution and rulemaking statutes also impose procedural requirements on the Senate. Official parliamentary reference documents and other publications set forth the text of the various authorities or provide information about how and when they govern different procedural situations. Together, these sources establish the parameters by which the Senate conducts its business. They provide insight into the Senate's daily proceedings, which can be unpredictable. In order to understand Senate procedure, it is often necessary to consider more than one source of authority. For example, the Senate's standing rules provide for the presiding officer to recognize the first Senator who seeks recognition on the floor. By precedent, however, when several Senators seek recognition at the same time, the majority leader is recognized first, followed by the minority leader. This precedent may have consequences for action on the floor. This report reviews the coverage of Senate parliamentary reference sources and provides information about their availability to Senators and their staff. Among the resources presented in this report, four may prove especially useful to understand the Senate's daily order of business: the Senate Manual, Riddick's Senate Procedure, the rules of the Senate standing committees, and the publication of unanimous consent agreements. The Senate sets forth its chief procedural authorities in a Senate document called the Senate Manual (S.Doc. 113-1), a new edition of which appears periodically. The Manual contains the text of the Senate's standing rules, permanent standing orders, laws relating to the Senate, and the Constitution, all of which establish key Senate procedures. The most recent version of the Manual can be accessed online at govinfo.gov, a website of the Government Publishing Office (GPO) at https://www.govinfo.gov/content/pkg/SMAN-113/pdf/SMAN-113.pdf. It is also accessible via the Senate resources page of Congress.gov (a website of the Library of Congress) at https://www.congress.gov/resources/display/content/Senate. Riddick's Senate Procedure (S.Doc. 101-28) presents a catalog of Senate precedents arranged alphabetically on topics ranging from adjournment to recognition to voting. Summaries of the precedents are accompanied by citations to the page and date in the Congressional Record or the Senate Journal on which the precedent was established. Individual chapters of Riddick's Senate Procedure are available for download through govinfo.gov at https://www.govinfo.gov/app/details/GPO-RIDDICK-1992. A searchable version is also accessible via the Senate resources page of Congress.gov at https://www.congress.gov/resources/display/content/Senate. The Senate's standing rules require each standing committee to adopt its own rules of procedure. These rules may cover topics such as how subpoenas are issued. Each Congress, the Senate Committee on Rules and Administration prepares a compilation of these rules and other relevant committee materials, such as jurisdiction information, in a document titled Authority and Rules of Senate Committees. The most recent version (S.Doc. 115-4) is available via govinfo.gov at https://www.govinfo.gov/content/pkg/CDOC-115sdoc4/pdf/CDOC-115sdoc4.pdf. To facilitate the legislative process, the Senate often conducts its business through unanimous consent agreements that may schedule the time for taking up a measure or specify what motions are in order during its consideration. These can be found, via Congress.gov, in the Congressional Record (https://www.congress.gov/) and the Senate Calendar of Business or the Executive Calendar (https://www.congress.gov/resources/display/content/Calendars+and+Schedules).

crs_R46355

crs_R46355_0

<1. Introduction> The Strategic Petroleum Reserve (SPR), the world's largest supply of emergency crude oil, has played a role in U.S. energy policy for over 40 years. The SPR's focus has evolved as conditions in the U.S. and world oil markets have changed. As created, the SPR's purpose was to "diminish the vulnerability of the United States to the effects of a severe energy supply interruption, and provide limited protection from the short-term consequences of interruptions in supplies of petroleum products." Additionally, as a signatory to the International Energy Program (IEP) agreement, the United States is obligated to maintain strategic petroleum stock holdings in preparation for a coordinated response during an emergency. Due to changes to the oil market over the past several years, the role of the SPR may be of congressional interest. From the mid-1970s through the present day, the United States has absorbed a number of significant spikes in the price of crude oil and petroleum products from supply disruptions. Whether driven by disruptions in the physical supply of petroleum, unexpected demand growth, or by uncertainties owing to international conflicts and instabilities, oil price volatility has had consequences for the U.S. economy. The price of crude oil historically rises or falls with the world economy. However, supply generally does not smoothly follow demand, and numerous factors can impact crude oil prices (e.g., supply, demand, available supply, value of the dollar, geopolitical risks). Thus, oil prices can be volatile. Volatility in crude oil prices can disrupt or enable oil industry investments and production factors that can have a ripple effect on the global economy. The oil market also responds to geopolitical events. Crude oil and petroleum products are globally traded commodities and as such, global price fluctuations affect U.S. prices and the economy. Several signs suggest an oil market that may be better equipped to respond to supply disruptions: a trend in lower crude oil prices beginning in 2014, the role of Organization of the Petroleum Exporting Countries (OPEC), new U.S. capacity in the market, and evolving consumption patterns. Technological advancements employed in the United States have added significantly to U.S. crude oil production. In December 2015, Congress lifted restrictions on U.S. crude oil exports. The United States is exporting crude oil at record levels, causing U.S. crude oil and petroleum product net imports to decline. According to U.S. Energy Information Administration (EIA) data, the United States was a net exporter of crude oil and petroleum products from September 2019 through January 2020, the most recent data. However, oil markets remain volatile. An oversupplied oil market, as experienced in early 2020, can contribute to lower crude oil prices. While low crude oil prices can often mean lower gasoline prices for consumers, it also can create economic challenges for oil producers and others along the supply chain, some of which may lead to long-term impacts. During a time of oversupply and low prices, some policymakers have discussed the possibility of having the Department of Energy (DOE) purchase crude oil to increase oil stockpiles in the SPR. However, such a purchase would require appropriations from Congress. <2. Background> The creation of the SPR came about because of events during the 1973 Arab-Israeli War. The Organization of Arab Petroleum Exporting Countries (OAPEC) reduced crude oil production and imposed an embargo on the United States and other countries supporting Israel. While some Arab crude oil did reach the United States, the average actual nominal price of imported crude oil tripled from 1973 to 1974. Petroleum, a globally traded commodity, is subject to international demand and supply conditions; in the absence of additional regulations, a petroleum-consuming nation pays the market price for petroleum, even in a supply emergency. However, the availability of strategic stocks can help mitigate the magnitude of the market's reaction to a crisis or guarantee supply to certain consumers (e.g., the military, strategic industries). Congress's motivation in creating the SPR focused on a deliberate and dramatic physical supply disruption and on mitigating the economic effects of a shortage stemming from international events. In the event of a supply interruption, proponents reasoned that introducing petroleum into the U.S. market from the SPR could offset the lost supply and in doing so help calm markets, mitigate sharp price spikes, and reduce economic disruptions. Congress did not necessarily design the SPR to provide price support in the event of an oversupplied market. However, 42 U.S.C. 6240 does authorize the Secretary of Energy to acquire crude oil for the SPR with the objective of minimizing costs, so long as there are appropriated funds to do so. <2.1. International Energy Agency> The OAPEC embargo fostered the establishment of the International Energy Agency (IEA). The IEA develops coordinated plans and measures among member countries for emergency responses to energy crises. Strategic reserves are one of the policies included in the agency's International Energy Program (IEP) agreement. Signatories to the agreement, including the United States, are committed to maintain petroleum stocks equivalent to 90 days of their prior year's net imports, developing programs for demand restraint in the event of emergencies, and agreeing to participate in allocation of oil deliveries to balance a shortage among IEA members. Net-exporting members do not have a stock-holding obligation. These measures of days of protection assume a total curtailment of oil supply to importing nations, a scenario that is highly unlikely. IEA member countries can meet the 90-day obligation through a combination of stock holdings by industry, a separate agency, and the government. Numerous oil industry firms hold commercial stocks of crude oil at refineries, bulk terminals, and in pipelines. The purpose of these stocks is to ensure the continuous operation of the refining industry, which transforms crude oil into petroleum products used by consumers. In the United States, commercial stocks do not necessarily provide a level of security proportional to that of the SPR, as they are inherently market driven, not government operated. Companies may have an economic rationale to lower commercial stocks in spite of a security context. In some other countries, this may not necessarily be the case, as the government may own or be the major shareholder in the oil companies (e.g., Equinor in Norway), also known as national oil companies (NOCs). NOCs operate under government ownership or are under the influence of national governments. <2.2. Energy Policy and Conservation Act> In response to the embargo, and to fulfill IEP obligations, Congress authorized the creation of an SPR in 1975 under the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ). In 1975, U.S. crude oil production averaged at 8.3 million barrels per day, while U.S. consumption of petroleum was nearly double, at 16.3 million barrels per day. The EPCA originally established the SPR to hold up to 1 billion barrels of "petroleum products," defined in 42 U.S.C. 6202(3) as "crude oil, residual fuel oil, or any refined petroleum product (including any natural liquid and any natural gas liquid product)." Congress intended the SPR to help prevent or mitigate a repetition of the economic disruption that the 1973 Arab embargo had caused. The U.S. federal government, through the U.S. Department of Energy (DOE), manages the SPR. According to IEA data for January 2020, the SPR held emergency petroleum stocks equivalent to approximately 274 days of the previous year's net imports and U.S. industry had 423 days' worth of commercial stocks, for a total of around 697 days of net imports when combined, well above the IEA obligation. <2.3. SPR Specifications> The SPR's current capacity is physically limited to 713.5 million barrels, with current inventory at about 635 million barrels. In 1975, EPCA required that the SPR provide enough storage for at least 150 million barrels of petroleum and up to 1 billion barrels. In 1978, Congress authorized an expansion of the SPR's physical capacity to 750 million barrels, and in 2005 directed further expansion to the authorized 1 billion barrels. Advocates for expansion argued that the SPR would need to be larger for the United States to be able to maintain stocks equivalent to 90 days of net imports. At this time the United States was viewed as a growing importer of crude oil. In 2005, DOE evaluated several sites in the Gulf Coast as a possible location for an additional 160 million barrels of new capacity. However, oil produced using hydraulic fracturing and horizontal drilling techniques started coming to market in significant amounts in 2010. In FY2011, the Obama Administration cancelled SPR expansion plans, citing a U.S. Energy Information Administration (EIA) projection that, "U.S. petroleum consumption and dependence on imports will decline in the future and the current Reserve's projection will gradually increase to 90 days by 2025." <2.3.1. Petroleum Storage> EPCA authorizes use of the SPR to hold stocks of crude oil or any refined petroleum product. However, the SPR only holds crude oil. It does not hold refined petroleum products, as some other countries' reserves do. According to DOE, this decision was based on findings from an analysis conducted in preparation for the 1977 SPR Plan. The findings suggested that then, as now, the United States had sufficient domestic refining capacity to meet domestic demand. The SPR could also buy time for the crisis to resolve or for diplomacy to seek some resolution before a potentially severe oil shortage escalated the crisis. Additionally, according to DOE, petroleum products are less flexible and degrade more quickly as compared to crude oil. Further, U.S. import dependency recently has largely been on crude oil, not petroleum products the United States has been a net exporter of petroleum products since late 2010. As a result, potential supply disruptions would most likely affect the United States through the disruption of crude oil, and not necessarily petroleum products. Generally, two key characteristics, density (i.e., specific gravity) and sulfur content, are the metrics used to classify crude oil types. The density is measured using API gravity, a scale developed by the American Petroleum Institute, that expresses the "lightness" or "heaviness" of crude oils on an inverted scale (i.e., the lower the API gravity, the heavier or denser the crude oil). The SPR does not contain heavy crude oil (i.e., crude oil with an API gravity below 22.3 degrees). Sulfur content of crude oil is generally rated on a scale of "sweet" to "sour" sour crude oils have a higher sulfur content compared to sweet crude oils. The SPR contains both sweet and sour crude oils. Should the prospect of releasing SPR oil arise, the relevant question may be whether to release sweet or sour crude oil to the market. For example, in 2011, President Obama ordered a sale of 30 million barrels of light sweet crude oil to offset a curtailment in Libya's production of a similar crude during the First Libyan Civil War. In other situations, it may be more strategic to release heavier crude, as most U.S. Gulf Coast refineries are optimized to process heavy crude. <2.3.2. SPR Sites> The SPR physically comprises four sites, two in Texas and two in Louisiana. The sites offer access to both marine terminals and pipeline systems needed for moving crude oil to and from the SPR ( Figure 1 ). Crude oil at each site is stored in salt caverns created within naturally occurring geologic salt deposits along the coast. According to DOE, these sites provide a higher level of security and affordability, compared to other options such as above-ground tanks or rock mines. A life extension program (LEP I), initiated in 1993, cost $324 million and addressed essential improvements to ensure drawdown capability across the four sites. While LEP I did address its objective of assuring maximum rate for drawdown capability, it did not address significant equipment needs across the systems. In 2015, a second life extension program (LEP II) began upgrading equipment at the four SPR sites. <2.3.3. Drawdown Capacity> The SPR has a maximum drawdown rate of roughly 4.4 million barrels per day for 90 days (396 million barrels over the 90-day period) due to capacity constraints in the pipelines and marine terminals servicing the reserve. After 90 days, the rate would begin to decline as the caverns deplete. According to DOE, the crude oil takes about 13 days from a presidential decision to enter the market, due to processing sales and preparation for distribution assets. The first major drawdown was in early 1991 (the Persian Gulf War). During the Persian Gulf War the peak lost production was around 4.3 million barrels per day of combined Iraqi and Kuwaiti crude oil. Refilling the SPR after an ordered drawdown remains at presidential discretion. This might be done at a time when the price of crude oil declines, or political and market conditions make it economically advantageous to do so. For example, to replace inventories sold in 2005 in response to Hurricane Katrina, DOE purchased crude oil on the open market in 2009. More recently, DOE purchased crude oil in 2015 to refill sold inventory during the 2014 test sale. The IEA obligates its members to hold a 90-day supply equivalent to net imports. The SPR infrastructure has a drawdown maximum of 396 million barrels over a 90-day period. If the U.S. obligation (previous year's net imports) were to exceed 396 million barrels, it could not draw it all down within 90 days. As long as the supply disruption remains below the maximum drawdown rate and others (countries or industry) are able to supply the market, there may not be cause for concern. Alternatively, Congress could authorize an expansion of SPR infrastructure to increase the maximum drawdown rate. <3. SPR Authorities> Authority for drawdown and sale of petroleum from the SPR is codified into law under 42 U.S.C. 6241. There are several authorized reasons to release oil from the SPR. Presidential authority to authorize a drawdown depends on (1) making the determination that a severe energy supply interruption exists or (2) a finding that a drawdown would prevent an impact of a severe domestic supply disruption. Further, IEP obligates the United States to join in an IEA-coordinated response to a supply disruption. Other sales have been authorized for various reasons including to generate revenue to reduce the budget deficit, to test the functionality of the SPR, and to fund the modernization of the SPR. Additionally, authorities exist for the acquisition of crude oil to fill the SPR, and the option for exchanges in specific scenarios outlined below. Once a drawdown is authorized, DOE releases SPR oil by conducting a public sale to the highest bidder in a competitive auction. DOE publishes a "notice of sale" that includes the volume, characteristics, and location of the petroleum for sale; delivery dates and procedures for submitting offers; and measures for assuring performance and financial responsibility. Bids are reviewed by DOE and awards offered. DOE estimates that oil could enter the market roughly two weeks after the appearance of a notice of sale. Through 2019, the SPR released over 230 million barrels for various purposes ( Figure 2 ). Presidents have ordered releases on three occasions, some 58.9 million barrels in total, in response to severe energy supply interruptions in coordination with other IEA member countries. The SPR has also provided exchanges totaling around 75 million barrels through 2019 to mitigate temporary supply interruptions. The borrowers repay their loans by replacing the crude oil plus an additional smaller volume as a premium. The SPR has had three test sales. In 2014, DOE initiated a test sale to determine if recent infrastructure changes could impact the SPR's drawdown capabilities and to exercise sales procedures. The test ran successfully with some lessons learned, including some pipeline and storage capacity limitations. A number of other sales reached around 88 million barrels through 2019 were authorized for various reasons (e.g., to generate revenue to reduce the budget deficit as well as to modernize the SPR). <3.1. Emergency Drawdowns> The 1975 EPCA authorizes drawdown of the SPR by obligation under the IEP or upon a finding by the President that there is a "severe energy supply interruption." Codified in law under 42 U.S.C. 6241(d)(2), such an interruption exists when the President determines that A. An emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; B. A severe increase in the price of petroleum products has resulted from such emergency situation; and C. Such price increase is likely to cause a major adverse impact on the national economy. One recent example of a coordinated IEA release occurred in 2011 to offset a curtailment in Libya's supply of crude during the First Libyan Civil War. The IEA announced a total release from all member countries of 60 million barrels. In accordance with IEA obligations and as directed by the President under the authority of 42 U.S.C. 6241(d)(2), the U.S. Department of Energy Secretary Chu announced a sale of 30 million barrels from the SPR. In 1990, Congress amended EPCA via P.L. 101-383 to extend SPR drawdown and sales in the event of a domestic supply interruption. In 1989, the Exxon Valdez oil spill interrupted the shipment of Alaskan oil, triggering spot shortages and price increases. The amendment expanded authorities under EPCA by providing options for an SPR drawdown to prevent or reduce the impact of a severe domestic supply interruption if the President finds that A. a circumstance, other than those described in subsection (d), exists that constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration; B. action taken under this subsection would assist directly and significantly in preventing or reducing the adverse impact of such shortage; C. the Secretary has found that action taken under this subsection will not impair the ability of the United States to carry out obligations of the United States under the international energy program; and D. the Secretary of Defense has found that action taken under this subsection will not impair national security. This authority limits the Secretary of Energy to selling no more than 30 million barrels of SPR petroleum over a maximum 60-day period. Additionally, the authority permits a drawdown only when the SPR inventory is above 340 million barrels. <3.2. Test Sale> Under 42 U.S.C. 6241(g), the Secretary of Energy is authorized to test a drawdown and sale or exchange from the SPR to conduct an evaluation of the procedures. Tests have a maximum limit of up to 5 million barrels. Under law, the Secretary of Energy determines the appropriate sale price and it may not be at a price less than 95% of comparable crude oil sold at the time. The statute requires the Secretary of Energy to notify Congress 14 days before a test. <3.3. Acquisitions and Exchanges> Since 1975, the Secretary of Energy has had several authorized methods to acquire petroleum for the SPR: direct purchases, royalty-in-kind transfers (RIK), deferrals and exchanges, or other means. The Secretary of Energy is authorized specific powers (including oil acquisition) outlined in 42 U.S.C. 6239 in order to maintain and operate the SPR. Initially, through an interagency agreement, the Department of Defense, on behalf of DOE, acquired crude oil for the SPR using appropriated funds to meet congressionally mandated target fill rates until those funds were exhausted. By December 1994, the SPR had been filled to 591.7 million barrels. Purchases for the SPR were then suspended to divert funds to SPR maintenance and life extension. Starting in 1999, filling of the SPR resumed via an RIK program. As an alternative to appropriated funds, DOE proposed accepting transfers of a portion of the royalty payments collected by the Department of the Interior (DOI) for Gulf of Mexico crude oil leases in the form of RIK crude oil rather than as revenues. While RIK avoided the necessity of making outlays for purchasing crude oil, it equivalently reduced royalty revenues by settling obligations in oil rather than in payments to the U.S. Treasury. In mid-November of 2001, President George W. Bush ordered the SPR filled to 700 million barrels, principally through crude oil acquired as RIK. Between fiscal year (FY) 2000 through FY2007, DOI estimates that RIK deliveries totaled roughly $4.6 billion. In 2009, Secretary of the Interior Ken Salazar announced the end of the RIK program. Additionally outlined in 42 U.S.C. 6240 are the various objectives and procedures for the Secretary of Energy to acquire crude oil for the SPR. Within the parameters codified into law, the Secretary may acquire petroleum products through purchase or exchange. For purchase, Congress must appropriate funds to the SPR. During an exchange (also sometimes referred to as a loan), an entity borrows SPR crude and later replaces it with a similar quality crude, "plus payment of an in-kind premium determined according to the period negotiated for return." An entity can request an exchange if unexpected circumstances impede crude oil supplies and no other alternative is available. <3.4. Mandated and Modernization Sales> In 2015, Congress began mandating sales of SPR oil. Mandated sales direct the Secretary of Energy to sell a specified quantity of SPR oil. There are mandated quantities prescribed for specific fiscal years from 2017 through 2028. Proceeds from mandated sales are deposited into the general fund of the U.S. Treasury. Since 2015, Congress has enacted seven laws containing provisions mandating the sale of SPR oil. These mandated sales from the SPR have committed 271 million barrels of oil for sale through FY2028. Actual sales through FY2019 total 34.93 million barrels, nearly consistent with the mandated sales required by enacted legislation of 35 million barrels. In addition to mandated sales, modernization sales under various laws authorize the Secretary of Energy to draw down and sell SPR oil with sales restricted by a total dollar amount, rather than volume of oil, from FY2017 through FY2020. Proceeds from these sales are to be deposited in the Energy Security and Infrastructure Modernization Fund (ESIMF). Law requires the fund to be used for construction and maintenance of SPR facilities. Statutes that authorized SPR modernization crude oil sales, and appropriated money to the ESIMF, are for fiscal years 2017 through 2019. <4. Policy Considerations> Congress originally created the SPR to provide security against severe petroleum supply interruptions and to adhere to IEP obligations. The SPR's role has expanded over the years as conditions in the U.S. and world oil market have changed. Today those market conditions continue to shift and as such, Congress may consider further modifications to SPR legislation. Some policy considerations include If the United States maintains net export status, should Congress reconsider the size of the SPR? Further, U.S. public and commercial oil stocks are well over the 90-day IEP obligation. However, some view the oil in the SPR as a national security asset that the United States should maintain at current levels. Releases from oil reserves tend to balance supply disruptions in the short term and provide psychological support to the market that may stabilize oil prices. Should Congress consider expanding the role of the SPR to provide economic security by alleviating extreme price volatility? Given the change in conditions, Congress may consider different options for utilizing the SPR. The section that follows discusses some of these developments and possible policy options. <4.1. Size of the SPR> The role of the United States in the global oil market has shifted since the 1970s during a time of rapidly rising prices and perceived resource scarcity. In addition to creating the SPR, Congress, through the EPCA, restricted U.S.-produced crude oil exports. Trade policy with respect to oil has undergone significant changes in recent years to accommodate technological and market developments. As the U.S. oil market moved toward higher production levels, some policies have come into question. Consequently, in December 2015, Congress passed the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) which repealed Section 103 of EPCA ( P.L. 94-163 ), removing any restrictions to crude oil exports. <4.1.1. Net Export Status> Net-exporters of oil do not have a stockholding obligation under the IEP. Some have noted that with the reduction of net imports, the size of the SPR could be reconsidered. For similar reasons to lifting restriction on crude oil exports, and with the relatively recent increases in domestic crude oil production, some stakeholders see less need for an oil stockpile. They contend the change in oil markets warrants a reduction in the size of that stockpile. U.S. crude oil and petroleum product imports have been in decline. The EIA reports that in September 2019, the United States exported 89,000 million barrels per day more crude oil and petroleum products than it imported. The EIA further projected that, in most forecasts, the United States will be a net petroleum exporter on an annual basis around 2020. However, even if the United States reaches net export status, EIA and IEA projections indicate that the United States may return to a net importer between 2040 and 2050. Some contend maintaining the stockpile has value, regardless of net export status. For instance, Keisuke Sadamori, IEA's Director for Energy Markets and Security, testified during a Senate hearing in 2019, oil security is not only an issue for net-importers, and security concerns such as regional extreme weather events and terrorist attacks can affect all countries. In a global market, even in net exporting countries, oil consumers will be economically harmed by spiking oil prices, and if a disruption tips the world economy into recession, the pain will be felt by exporting and importing countries alike. Finally, the United States is not guaranteed to remain a net exporter indefinitely. In May 2018, the Government Accountability Office (GAO) released a report on the future of the SPR analyzing DOE's planning approach. GAO recommended that DOE should expand or amend their planning approach to include "an additional analysis that takes into account private-sector response, oil market projections, and costs and benefits of a wide range of different SPR sizes." Additionally, market conditions may be changing. Since January 2020, oil prices have fallen due to of a number of factors including overproduction and constrained demand, largely due to a reduction in travel from the COVID-19 pandemic. Prolonged periods of depressed prices could affect U.S. oil production, exports, employment, and industry consolidation. If U.S. production and subsequently exports were to decline, the prospect of the United States becoming a net exporter may be delayed or eliminated. <4.1.2. Public vs. Commercial Stocks> IEA members can use both public and commercial stocks to meet their 90-day obligation. In January 2020, the United States had 423 days of net imports of commercial crude oil stocks, equaling around 697 days when combined with SPR stocks, according to IEA methodology. Both public and privately held oil stocks have important roles to play in providing security in times of oil market disruptions. Similarly, both public and private oil stocks have some role in oil price determination and movements. As the world oil market and the U.S. market evolve, it is reasonable to reassess the role of each of these components of U.S. energy security. Management of commercial stocks can affect the price of oil in multiple ways. These effects are limited by the storage capacity of the system as a whole, but that capacity can be augmented or reduced. Numerous oil industry firms hold commercial stocks of crude oil at refineries, bulk terminals, and in pipelines. The purpose of these stocks is to ensure the continuous operation of the refining industry, which transforms crude oil into petroleum products used by consumers. Commercial oil companies are more likely to store oil for the short-term, rather than as a long-term security stock. Some experts contend that commercial stocks cannot provide a level of security proportional to that of the SPR. The role of sales from the SPR into the commercial market during a supply disruption is linked to the size of commercial stocks and the availability of additional production capacity. Generally, the level of private oil stocks closely follows the level of oil production and changes in the price of oil. If global supply is greater or less than current demand, commercial stocks of oil may rise or fall accordingly. In a market where there is no physical shortage, oil companies may have limited interest in purchasing SPR oil unless they want to build crude oil stocks or have spare refining capacity to turn the crude into useful products. Conversely, during a supply disruption, commercial stocks would likely move to market before the SPR, as DOE must solicit buyers through a Notice of Sale. Further, the SPR takes approximately 13 days from an initial decision to hold a sale to ultimate delivery of that oil. For instance, in response to the attack against Saudi Arabia's oil production in September 2019, President Trump authorized the release of oil from the SPR, as needed. In response to prior events, presidents have ordered a release in coordination with other IEA member countries. In this case, the IEA did not announce a coordinated release, but monitored the situation closely. Although the United States had the capacity to replace most of the Saudi oil taken off the market by the attack, no release from the SPR occurred as commercial stocks supplied the market and prices stabilized. Generally, according to GAO, most experts interviewed in the May 2018 report agreed that the private sector is in a better position to respond to supply disruptions than they were in the 1970s. Conversely, DOE noted in the same report that the United States does not have a requirement for the private sector to respond to a supply disruption. Further, according to GAO, DOE does not have analysis on how the private sector would respond to supply disruptions. <4.2. Price Volatility> Petroleum is a globally traded commodity and subject to international demand and supply conditions. Volatility in crude oil prices can disrupt or enable oil industry investments and production factors that can have a ripple effect on the global economy. However, the storage of petroleum can provide some price relief or even alleviate a physical shortage of supply to certain consumers (e.g., the military, strategic industries). Congress's motivation in creating the SPR focused on a deliberate and dramatic physical supply disruption and on mitigating the economic effects of a shortage stemming from international events. As market conditions continue to change, Congress may consider options for utilizing the SPR in an oversupplied low oil price environment. <4.2.1. Low Price Environment> Global oil prices declined nearly 60% between January and mid-April 2020, as a result of a number of factors. These factors included reduced demand and economic impacts related to the evolving COVID-19 pandemic, and the failure of OPEC and a group of non-OPEC countries (OPEC+), including Russia, to come to an agreement regarding oil production during their March 2020 meeting. While low oil prices are generally positive for consumers (translating into lower gasoline prices) and oil refiners (translating into lower costs), sustained low prices could result in financial stress for companies operating in the U.S. oil exploration and production (E&P) sector. Due to these recent developments, a plan to sell crude oil as required in FY2020 by P.L. 116-94 from the SPR was suspended. Discussions transitioned from selling oil from the SPR to purchasing oil to fill it to capacity. Acquiring crude oil direct purchases or royalty-in-kind for SPR storage could absorb a limited amount of market oversupply. Physical SPR capacity is approximately 713.5 million barrels, while actual inventories are 635 million barrels. At the direction of President Trump, DOE issued a solicitation to purchase an initial 30 million barrels of crude oil as part of a plan to acquire 77 million barrels. However, on March 25, 2020, DOE cancelled this solicitation, noting, "Given the current uncertainty related to adequate Congressional Appropriations for crude oil purchases associated with the March 19, 2020 solicitation, the Department is withdrawing the solicitation. Should funding become secure for the planned purchases, the Department will reissue the solicitation." Whether increasing SPR inventories might contribute to oil market rebalancing is uncertain. Even if Congress appropriated funding to purchase crude oil, the SPR's available capacity is limited (currently around 77 million barrels) and the impact could be marginal depending on a number of factors (i.e., duration and volume of crude oil oversupply). However, Congress authorized the SPR to store up to 1 billion barrels. While not an immediate solution, Congress could consider appropriating funds to expand the SPR's physical capacity to the authorized 1 billion barrels. On April 2, 2020, DOE (under exchange authority 42 U.S.C. 6239(f)(5)) announced a solicitation for the storage of 30 million barrels in exchange for a fixed premium of barrels, returning the difference by March 31, 2021. This would allow crude oil to be temporarily stored in the SPR sites, potentially providing some financial relief to some U.S. producers. Several petroleum associations applauded the effort, stating, for example, "The oil producers of Louisiana praise the President, his administration, and Louisiana's federal delegation for taking swift, decisive action to help support the nation's energy producers with the SPR's exchange for storage." However, challenges remain, as spare storage capacity at Cushing, OK (the designated delivery point for NYMEX crude oil futures contracts) is limited or unavailable. The futures price is a contract, usually monthly, for delivery of a certain amount of crude oil, on a specified date in the future, and at a particular location (Cushing, OK, for West Texas Intermediate (WTI) crude oil). As available storage becomes more limited, futures prices may continue to fall as owners of crude oil discount their price in order to entice buyers. This apparently was the case with WTI where some traders grew concerned over storage availability in Cushing, forcing some to sell their futures contracts. Despite federal efforts to make capacity available at the SPR and other measures, Cushing storage capacity is a key factor for WTI prices. When acquiring petroleum for the SPR, the Secretary is to consider, to the extent possible, four objectives under 42 U.S.C. 6240. Among these, the Secretary is to minimize market impacts from purchases. Acquiring SPR crude oil to reduce oversupply and increase prices could conflict with that objective. However, the degree of impact on the market may be hard to determine, and a threshold level is not explicitly defined. Furthermore, included in DOE's objectives is to minimize the cost and presumably depending on prices in March 2021 when the above noted exchange expires DOE's exchange could result in a comparatively low-cost petroleum acquisition. <4.2.2. High Price Environment> Crude oil price increases generally result from actual or anticipated market tightening; that is, an increase in demand, a reduction in supply, or both. There is a general recognition that a release from the SPR would likely only provide temporary relief from rising prices; however, high prices alone are not an authorized circumstance to trigger a release from the SPR. High prices are generally a consequence of a severe supply interruption. For instance, in 2011, the price increases were thought to be largely attributable to the loss of Libyan production during the revolution in that country. The judgment that a release of crude oil from the SPR provides some temporary relief from rising prices seems well founded. The U.S. government bases its notice of sale on the previous five-day average of the price of the grade of crude oil it intends to sell, and accepts bids it considers responsive. If the notice itself does not prompt, or contribute to, a softening of prices, there may be limited interest on the part of the oil industry in bidding on SPR supply. Although the possibility exists that prices might decline if additional refined product is released into the market, it is impossible to predict what long-term quantitative effect an SPR crude drawdown would have. For example, in response to prolonged oil supply disruption from the Libyan Civil War, the IEA coordinated a petroleum release on June 23, 2011. Following the announcement of a 30 million barrel release of oil from the SPR, the price of crude oil declined by about 5% that day. About one week later, prices began to exceed pre-announcement levels. The announcement of the SPR release stated that the oil would be delivered to market by the end of August 2011. Oil prices began to decline in that month and generally declined through September 2011. However, several other factors may have contributed to the price of crude oil. For instance, the prices of crude oil declined in May 2011 following the death of Osama bin Laden and a rise in the U.S. dollar. Some observers do not support use of the SPR to mitigate high crude oil prices. These observers prefer allowing the market to resolve itself and for government not to intervene. Further, observers may contend that market conditions and current and anticipated geopolitical events are affecting prices more than short-term physical supply concerns or that speculative bidding in the oil commodity futures market has driven price volatility more than the current supply-demand balance. In this context, use of the SPR would have limited impact on market conditions. Congress could reduce the size of the SPR and sell off excess petroleum for the benefit of other programs while still maintaining the 90-day net import requirement. However, determining the optimal level of oil holdings in the SPR is likely to remain controversial. Analytical tools common in public policy analysis, such as cost-benefit analysis, dynamic programming, or other optimization techniques, depend on determining the value of variables that are highly uncertain in this case. The responsiveness of the adjustment of oil quantities on both the demand and the supply sides of the market, the price volatility of oil, and the probabilities of different degrees of political/military disruption in the oil market are all uncertain. In addition the 90-day net import requirement is a dynamic calculation based on a combination of market factors. <4.2.2.1. Appendix. SPR Site Specifications> Bayou Choctaw The Bayou Choctaw storage site is located in Iberville Parish, LA. The site has six storage caverns, with a storage capacity of 76 million barrels, and an inventory of 71.8 million barrels, as of April 2020. The Bayou Choctaw site began full operation in 1987 and has remained operational since then. In November 2011, DOE acquired a replacement cavern for Cavern 20, after it had experienced leaching, which posed an environmental risk. Bayou Choctaw has a design drawdown rate of 0.5 million barrels per day, and a design fill rate of 110 thousand barrels per day. (The other three SPR storage sites have a combined fill rate specified as 225 thousand barrels per day.) Big Hill The Big Hill storage site is located in Jefferson County, TX. The site has 14 storage caverns, a combined storage capacity of 170 million barrels, and a cavern inventory of 143.3 million barrels as of April 2020. The Big Hill site began full operation in 1991 and has remained operational since then. Big Hill has a design drawdown rate of 1.1 million barrels per day. Section 168 of the EPCA authorizes foreign oil to be stored in unused space to increase world oil stockpiling. In 1998, the U.S. Commerce Department designated Big Hill as a special purpose Foreign Trade Zone, which exempts foreign oil storage from customs or certain taxes. DOE noted in their SPR calendar year 2016 annual report to Congress that despite this designation, Big Hill has not stored foreign oil. Bryan Mound The Bryan Mound storage site is located in Brazoria County, TX. The site has 19 storage caverns with a total storage capacity of 247.1 million barrels, and a cavern inventory of 230.2 million barrels as of April 2020. The Bryan Mound site began operation in 1986 and has remained operational since then. In 2013, after failing a Mechanical Integrity Test (MIT), one of Bryan Mound's then-20 storage caverns was determined to be at risk. It was subsequently emptied, bringing the total to 19 caverns. Pumping to transfer the oil to other caverns began in March 2015 and completed in December 2016. Additionally, in 2018, two of the three aboveground storage tanks at Bryan Mound were unusable and required maintenance. This reduces the site's drawdown rate from 1.5 million barrels per day to 1.35 million barrels per day. According to DOE's Strategic Petroleum Reserve Annual Report for Calendar Year 2018 , these tanks are to be converted to external floating roof tanks during the SPR Modernization Program Life Extension 2 Project. West Hackberry The West Hackberry storage site is located in Cameron Parish, LA. The site has 21 operable storage caverns with a combined storage capacity of 220.4 million barrels, and a cavern inventory of 189.7 million barrels as of April 2020. The West Hackberry site began full operation in 1988 and has remained operational since then. In 2012, Cavern 6 had a well stability issue and plans to remove oil from the cavern were instituted. In December 2017, all accessible oil was transferred out of Cavern 6 to the other 21 storage caverns.

Crude oil price volatility has consequences for the U.S. and global economy. The Strategic Petroleum Reserve (SPR), the U.S. stockpile of petroleum, has played a role in U.S. energy policy for over 40 years. The need for a stockpile of petroleum to help protect against supply disruptions became apparent after the 1973-1974 Arab oil embargo, during which time the average price of imported crude oil tripled. The oil embargo also fostered the establishment of the International Energy Agency (IEA), an intergovernmental organization, and the development of coordinated plans and measures among IEA members for emergency responses to energy crises. Strategic petroleum stock holdings are one policy included in the agency's International Energy Program (IEP) agreement. As an IEA member and IEP signatory, the United States must meet certain stock holding thresholds and be prepared for a coordinated response during an emergency. In 1975, Congress passed the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) authorizing the creation of the SPR for storage of petroleum products to reduce the impact of supply disruptions and to carry out IEP obligations. The United States uses the SPR to meet its IEP requirements. The U.S. federal government, through the U.S. Department of Energy (DOE), manages the SPR. EPCA authorizes the SPR to hold stocks of crude oil or any refined petroleum product. However, the SPR currently only holds crude oil. Since 1975, Congress has enacted several laws that have expanded the role of the SPR. Through 2019, the SPR has released over 230 million barrels of crude oil for various authorized purposes. Presidents have ordered releases on three occasions in response to severe energy supply interruptions in coordination with other IEA member countries. Other sales authorized for various reasons (e.g., to generate revenue to reduce the budget deficit as well as to modernize the SPR) have reached around 88 million barrels through 2019. Three test sales have confirmed SPR operability. The Secretary of Energy has several authorized methods to acquire petroleum for the SPR: direct purchases, royalty-in-kind transfers (RIK), deferrals and exchanges, or other means. Government analysis indicates that the United States has been a net exporter of crude oil and petroleum products from September 2019 through January 2020. The IEP does not require net exporters to maintain a petroleum stockpile. IEA members can use both public and commercial stocks to meet their obligation. Both public and privately held oil stocks have important roles to play in providing security in times of oil market disruptions. Similarly, both public and private oil stocks have some role in oil price determination and movements. However, there may be benefits to maintaining SPR oil stockpiles, as the oil market can often be unpredictable, as demonstrated by dramatic demand/supply shifts and subsequent low oil prices experienced in early 2020. Several signs have suggested oil markets may be more able to adjust to supply disruptions (though not necessarily an oversupply). The changing role of the United States in world petroleum markets has driven a debate on how best to utilize the SPR. Congress's motivation in creating the SPR focused on a deliberate and dramatic physical supply disruption and on mitigating the economic effects of a shortage stemming from international events. As market conditions continue to evolve, and the United States experiences new market conditions, Congress may consider options for utilizing the SPR in an oversupplied, low oil price environment.

crs_R45880

crs_R45880_0

<1. Introduction> Congress passed the Uranium Mill Tailings Radiation Control Act of 1978 (UMTRCA, P.L. 95-604 ) in the wake of environmental and public health concerns about exposures to radiological and non-radiological waste material originating from Cold War era uranium mill tailing sites. Title I of UMTRCA authorized a remedial action program for uranium mill tailing sites that were inactive prior to the law's enactment in 1978. Under Title I of UMTRCA, the federal government was mostly responsible for financing the remediation and decommissioning of Title I sites, most of which produced uranium for nuclear weapons and other defense purposes. Title II of UMTRCA authorized federal agencies to regulate uranium mill tailings produced at commercially licensed facilities still operating on or after 1978. For Title II sites, Congress intended that commercial uranium mill operators, not the federal government, pay for site decommissioning and tailings stabilization activities. The federal government assumes responsibility for both Title I and Title II uranium mill sites transferred to long-term federal management after site decommissioning has been completed. As of FY2019, the Department of Energy Office of Legacy Management (DOE-LM) administers long-term federal management at 31 Title I sites and six Title II sites. DOE-LM manages surface tailings and groundwater monitoring programs at sites under long-term federal management in an effort to minimize any unintended release of potentially radiological or non-radiological material. Long-term monitoring and maintenance activities may include stabilization of the engineered repository of uranium mill tailings and groundwater remediation or monitoring, if necessary. As of FY2019, 23 Title II sites remain owned by commercial operators, who are permitted to operate under the Nuclear Regulatory Commission (NRC) or an NRC agreement state license. When the Title II site operator has completed all site decommissioning requirements, the license is to be transferred to DOE for long-term federal management. This report presents the historical context for the law, the status of implementation since enactment, and selected issues for Congress. UMTRCA does not authorize the regulation of uranium mining the process of physically removing uranium ore from the earth or the disposal of waste material produced by uranium mining. The regulation of uranium mining and the remediation of abandoned uranium mines are not discussed in this report. <1.1. Uranium Mill Tailings> Uranium milling is the process of converting mined uranium ore to uranium concentrate, also known as yellowcake uranium. Milling is common to a number of mineral extraction industries and refers to the physical and chemical processes necessary to concentrate minerals from mined ore. Uranium milling operations use a series of physical (crushing and grinding the mined ore) and chemical processes (acid or alkaline solutions, ion exchange) to concentrate the mineralized uranium ore into yellowcake uranium. Heap leaching, a specific type of uranium milling operation, involves sprinkling sulfuric acid or another solvent directly over the ore in large earthen collection pits. The acidic stream trickles through the ore and dissolves uranium and that stream is collected and processed. Yellowcake uranium produced from the milling process is subsequently converted and enriched for civilian nuclear power production ( Figure 1 ). Tailings are the waste material produced from milling operations. The milling process produces tailings initially as a slurry material, which is disposed of in a settling pond. The slurry tailings material dries, resulting in a sand-like material. Milling operations produce a large quantity of tailings relative to the amount of uranium concentrate produced. NRC estimated that 2.4 pounds of yellowcake uranium oxide is produced from 2,000 pounds of uranium ore. Public health and environmental concerns from uranium milling has been associated with various aspects of historical operations and tailings disposal. The U.S. Environmental Protection Agency (EPA) has identified four health exposure routes from uranium mill tailings: 1. Increased risk of lung cancer from the diffusion of radon gas indoors if tailings material is used for construction material, 2. Inhalation of radon gas or ingestion of small particles directly emitted from the mill piles into the atmosphere, 3. Exposure to gamma radiation produced by radioactive decay products within the tailings, and 4. Wind and water erosion and mobilization of radioactive and other constituents into surface and groundwater. Physical and geochemical mechanisms can liberate trace metals and radionuclides within the tailings into groundwater or surface water. The hazards associated with the release of various radiological and non-radiological constituents from uranium tailings may persist for hundreds or thousands of years. <2. Brief History of Uranium Milling in the United States> During the 1950s and 1960s, the U.S. Atomic Energy Commission, a predecessor federal agency to DOE and NRC, procured uranium concentrate by funding domestic uranium ore mining exploration and development, entering into private purchasing contracts with domestic milling companies, and purchasing foreign produced uranium concentrate. The majority of domestic uranium concentrate production prior to 1971 primarily supported the development of nuclear weapons and naval reactors. From 1947 to 1971, annual domestic uranium concentrate production ranged from 20 million pounds to 35 million pounds ( Figure 2 ). After 1971, uranium mill operators produced uranium concentrate primarily for the production of civilian nuclear power. The 1970s were a period of growth for the U.S. nuclear power industry, as 59 nuclear reactors were first connected to the electricity grid between 1970 and 1979. NRC estimated in 1978 that over 109 uranium mills would be required by the year 2000 to support the fuel requirements of the growing reactor fleet. However, domestic uranium concentrate production in the United States decreased by roughly 92% from 1978 to 1993 ( Figure 2 ). By 2000, one active U.S. uranium mill, two partially active U.S. uranium mills, and three in-situ recovery (ISR) facilities combined to produce 4 million pounds of uranium concentrate. Continued growth by the domestic civilian nuclear power industry did not materialize as anticipated in 1978. Numerous factors led to decrease of domestic uranium production. In particular, U.S. nuclear power growth was far less than envisioned by Congress and federal agencies in 1978, as U.S. nuclear plant orders virtually halted after that year and dozens of previous orders were canceled. While the number of operational uranium mills was less than originally envisioned, potential risks from the uranium mills that did operate continue to present technical and regulatory challenges. The awareness of the technical and economic challenges posed during the decommissioning and long-term management of uranium mill tailings have increased since 1978. As of the second quarter of 2018, the U.S. uranium concentrate facilities consisted of one uranium mill and six ISR facilities in operation. <3. Uranium Mill Tailings Radiation Control Act of 1978> The Uranium Mill Tailings Radiation Control Act of 1978 (UMTRCA; P.L. 95-604 ) includes three titles: Title I authorized the remediation of uranium mill tailings inactive prior to the law's enactment in 1978. Title II authorized the regulation of commercial uranium mills operating on or after 1978. Title III directed the NRC to consult with the state of New Mexico to study and designate two mill tailings sites in New Mexico. By 1998, DOE completed site decommissioning for all Title I sites, with the exception of the site located at Moab, UT. Legislation to authorize cleanup at Moab was enacted subsequent to UMTRCA. Title I provisions do not authorize remedial actions for sites in operation on or after 1978, which are addressed under Title II. Provisions under Title III have been resolved. <3.1. Title I Remedial Action Program for Inactive Uranium Mill Sites> Title I was enacted to address the environmental and public health risks associated with residual radioactive material produced at "inactive" uranium mill sites generated in support of the federal uranium procurement program during the mid-1940s through the 1970s. The majority of the uranium concentrate produced during this time period was for the development of nuclear weapons, nuclear fuel production, and other Atomic Energy Commission programs. After the federal procurement contracts ended in the early 1970s, operations at some uranium mills ceased and licenses were terminated with few environmental remediation requirements. Prior to 1978, federal agencies lacked legal authority to regulate uranium mill tailings. In 1966, federal agencies issued a "Joint Federal Agency Position Regarding Control of Uranium Mill Tailings" urging planning management and stabilization of the mill tailings as the responsibility of the individual owners. Yet without a legally binding regulatory program, DOE subsequently noted that actions resulting from the Joint Position were "far from satisfactory." Multiple communities used uranium mill tailings as construction material for civilian building projects. The characteristically "sandy" uranium tailings were attractive to construct roads, sewers, farmlands, foundations in office buildings, schools, homes, and other structures. These sites became known as vicinity properties . In one instance, DOE reported that a uranium mill operator left a front-end loader on site for members of the public to take as much uranium tailings material as they could handle. NRC stated that 270,000 metric tons of uranium tailings at Grand Junction were used for building materials. In 1972, growing concerns about environmental and public health risks from uranium mill tailings used as construction material led to Congress appropriating funds for remedial action of contaminated sites near Grand Junction, CO. Section 201 of the 1972 Atomic Energy Commission Appropriation Authorization (P.L. 92-314) "assumes the compassionate responsibility of the United States to provide to the state of Colorado financial assistance to undertake remedial action to limit the exposure of individuals to radiation emanating from uranium mill tailings which have been used as a construction related material in the area of Grand Junction, Colorado." The legislation addressing issues at Grand Junction served as the template for the remedial action program authorized under Title I of UMTRCA. <3.1.1. Definitions, Scope of Remedial Actions, and Site Inventory> Section 101 of UMTRCA defines key terms and identifies federal agencies authorized to implement UMTRCA. A processing site is defined as "(A) any site, including the mill, containing residual radioactive materials at which all or substantially all of the uranium was produced for sale to any Federal agency prior to January 1, 1971 under a contract with any Federal agency and (B) any other real property or improvement thereon which (i) is in the vicinity of such site, and (ii) is determined by the Secretary [of Energy], in consultation with the [NRC], to be contaminated with residual radioactive materials derived from such site." Vicinity properties are off-site properties where uranium mill tailings were used as construction material prior to the law's enactment. A lesser amount of vicinity properties were adjacent sites contaminated by wind-borne dispersion of mill tailings particles. By 1999, DOE reported that it had remediated 5,300 vicinity properties. DOE's authority to perform surface remedial actions at Title I UMTRCA sites, including vicinity properties, expired on September 30, 1998. Residual radioactive material is defined under Section 101 as "waste (which the Secretary determines to be radioactive) in the form of tailings resulting from the processing of ores for the extraction of uranium and other valuable constituents of the ores; and other waste (which the Secretary determines to be radioactive) at a processing site which relate to such processing, including any residual stock of unprocessed ores or low-grade materials." Tailings are defined as "the remaining portion of a metal-bearing ore after some of all of such metal, such as uranium, has been extracted." DOE's remedial action efforts aimed to permanently isolate the residual radioactive material from the environment. Residual radioactive material was enclosed in engineered repositories consisting of multiple layers of relatively non-permeable materials and capped with rip-rap. These layers are intended to prevent the release of radon gas, limit downward infiltration and water seepage through the tailings piles, and minimize the erosion of repository by natural wind and water. The repository is designed to stabilize residual radioactive material for at least 200 years and up to 1,000 years. A disposal site identifies the location where the engineered tailings repository is sited, which is either at the original processing site or an alternative location. D isposal site is not explicitly defined by statute under Title I. However, EPA regulations define disposal site as "the region within the smallest perimeter of residual radioactive material (excluding cover materials) following completion of control." The distinction between a processing site and disposal site has bearing on long-term federal management obligations. Under UMTRCA, DOE is required to consult with the EPA to prioritize which sites pose a potential health hazard. However, DOE is not bound by EPA's site priority evaluation, and nothing in the statute precludes DOE from proceeding with remedial actions on lower priority sites. UMTRCA instructed DOE to consult with NRC to develop site-specific boundaries. Site designations under this section are not subject to judicial review. Section 102 lists 22 processing sites originally designated under the Title I. The number of Title I and Title II sites has expanded, and a full inventory of UMTRCA sites is presented in Table A-1 and Table A-2 . <3.1.2. Cooperative Agreements> Section 103 authorized DOE to enter into cooperative agreements with states or tribes to perform remedial actions at inactive uranium mill tailing sites. Cooperative agreements between DOE-LM and states are subject to NRC concurrence. Under Section 103, any cooperative agreement between DOE and states are conditional on the site owner releasing DOE of liability associated with any issues occurring during remedial actions. Section 103 authorizes DOE, NRC, and EPA access to any site for inspection and enforcement subject to the establishment of a cooperative agreement. Section 105 authorizes cooperative agreements between DOE and Indian tribes in consultation with the Department of the Interior's Bureau of Land Management (BLM), similar to provisions in Section 103, when processing sites are located on Indian lands. <3.1.3. Land Acquisition and Transfer> Generally, DOE remediated the inactive uranium mill tailings and constructed a repository at the original processing site location. However, Congress was aware of instances where inactive uranium mill tailings were located on a floodplain or directly adjacent to a stream or river. In those instances, designing, constructing, and maintaining an engineered repository for the uranium mill tailings located next to a stream may have been technically infeasible. UMTRCA authorizes agencies to determine whether an alternative disposal site was necessary to protect human health and the environment. Section 104 authorizes the state, under a cooperative agreement with DOE, to purchase surface and subsurface rights and transport tailings materials to an alternative disposal site. When NRC and DOE determined that an alternative disposal site was necessary, DOE constructed repositories that were separate from the original inactive uranium mill tailings. The management of the original processing site was returned to the state. Section 104 outlines four options for the state to manage the processing site: (1) sell the land, (2) retain the land, (3) donate the land for public or recreational purposes, or (4) transfer the land to the federal government. The state provides appropriate documentation of remedial actions on the processing site to future purchasers. DOE manages Title I disposal sites under a general NRC license. UMTRCA authorized DOE to obtain the surface and subsurface mineral rights for the disposal site. The acquisition of subsurface interests was required conditional to a cooperative agreement. Congress intended to avoid situations where the extraction of underlying minerals by subsurface mineral rights owners could disrupt the stabilized tailings. Under UMTRCA, inactive uranium mill tailings located on federal public lands are transferred to DOE as a public land withdrawal. Section 104(h) authorizes BLM to sell or lease rights to federal lands located within the disposal site boundary. BLM is required to follow all applicable U.S. laws to sell or lease and provide assurances that the stabilized residual radioactive materials will not be disturbed by mineral development activities. Any prospective mineral developer is subject to licensing. If the stabilized site is disturbed, the private operator must perform site remediation at no cost to the federal government. Section 106 authorizes the purchase of land to develop a consolidated disposal site. The section discourages use of any National Park System, National Wildlife Refuge System, and National Forest System lands. If land is acquired in a state where uranium milling has not occurred, the acquisition is subject to state concurrence. <3.1.4. Financial Responsibility> During the debate leading to the enactment of UMTRCA, Congress recognized that no clear entity was responsible for the cleanup of inactive uranium mill tailings among the federal government, states, and private site operators. In 1978, the U.S. General Accounting Office (now the Government Accountability Office, GAO) proposed that the federal government was most responsible to fund a cleanup program, as the majority of the uranium produced for the generation of uranium mill tailings was purchased at that time under federal supply contracts for the Manhattan Engineering District and other defense programs. In drafting UMTRCA, Congress decided that the federal government should be responsible for most of the remedial action costs at Title I sites and that the states where the Title I sites are located should share a portion of the costs. Section 107 establishes the financial responsibilities for remedial actions for the federal government and the cooperative states. Under Section 107, the federal government is responsible for 90% of the remediation costs, including costs for land acquisition and cleanup of buildings and structures in the vicinity. Under a cooperative agreement, a state commits the remaining 10% share of the remediation costs. The federal government was responsible for all remedial action costs at processing sites located on Indian lands pursuant to a cooperative agreements under Section 105. <3.1.5. Development of Remediation Standards> Congress authorized EPA to promulgate health and environmental standards for uranium mill tailing sites. Section 108 directed DOE to perform remedial actions in accordance with general health and environmental standards promulgated by the EPA pursuant to Section 275 of the Atomic Energy Act of 1954 (AEA, P.L. 83-703), amended by Section 206 under UMTRCA. EPA finalized standards for Title I sites, under 40 C.F.R. Part 192, Subparts A, B, C, on January 11, 1995. <3.1.6. UMTRA Amendments of 1988> DOE identified groundwater contamination at UMTRCA sites during implementation. Groundwater contamination remains an ongoing issue at several sites. In the late 1980s, DOE expressed concern that groundwater contamination issues could not be resolved in a specified period of time. Congress enacted the Uranium Mill Tailings Remedial Action Amendments Act of 1988 (UMTRA, P.L. 100-616 ), which amended Section 112 of UMTRCA to extend indefinitely DOE's authority to perform groundwater remediation. UMTRA provides DOE groundwater remedial authority for Title I sites only. <3.2. Title II Regulation of Uranium Mills, 1978 and After> Title II of UMTRCA amended the AEA to authorize the regulation of licensed commercial uranium mills on or after the enactment of UMTRCA. Title II includes provisions authorizing the mechanism for transfer of land and mill tailings to the federal government; establishing regulatory roles of the states and federal agencies; and authorizing agencies to enter into bonding, surety, or other financial arrangements with a licensee to cover the costs of a federal agency administering long-term federal management. <3.2.1. Byproduct Material and Site Transfer> Section 201 amended Subsection 11e of the AEA to include mill tailings under the definition of byproduct material . Under Section 201, byproduct material is defined as "the tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its source material content." Section 202 amended the AEA by adding Section 83 authorizing the federal government to retain the byproduct material where the tailings are disposed of for long-term management. UMTRCA allows for the state, at its discretion, to retain the site under long-term management, but no state has elected to do so. Pursuant to Section 202, any license issued that "results in the production of any byproduct material" must comply with NRC decommissioning standards, and byproduct material and the land where it was disposed of must be transferred to long-term federal management. The site is transferred to long-term federal management when NRC, or the state, determines that the site decommissioning has met all applicable requirements. Unlike Title I sites, UMTRCA does not authorize DOE to perform remedial actions at Title II sites under long-term federal management. Section 202 authorizes DOE, as the custodial agency, to "carry out maintenance, monitoring, and emergency measures, but shall take no other action pursuant to such license, rule or order, with respect to such property and materials unless expressly authorized by Congress after the date of the enactment of this Act." NRC may exempt the requirement for long-term federal management prior to the termination of the license if long-term federal management is found "not necessary or desirable to protect the public health, safety, or welfare or to minimize or eliminate danger to life or property." The process to transfer a Title II site from an NRC license to long-term federal management is described in regulation and guidance. For Title II sites transferring federal public lands to long-term federal management under DOE, "DOE must apply to BLM for permanent withdrawal of federal land and minerals from BLM's inventory." Any transfer of BLM lands is subject to National Environmental Policy Act review. The U.S. Army Corps of Engineers, state governments, and local governments may become involved with the land transfer depending on the location of the site and the land ownership. In the majority of UMTRCA public land withdrawals, DOE maintains full regulatory jurisdiction of surface and subsurface interests associated with the disposal site. More recently, there has been interest in alternative uses at federally managed disposal sites. As a result, BLM and DOE have proposed a "partial-jurisdiction" regulatory structure at certain sites. The DOE would regulate the mill tailings repository and ensure that statutory maintenance and monitoring requirements are met. BLM would lease surface and subsurface rights for alternative uses of the land (grazing, recreational, etc.) and mineral development (oil and gas, uranium, etc.). <3.2.2. Federal Regulatory Authority> Section 205 of UMTRCA amended Section 84 of the AEA authorizing NRC as the principle federal regulator of Title II sites through issuance and enforcement of source and byproduct material licenses. Section 205 directs NRC to manage byproduct materials in manner that protects public health and environment from radiological and non-radiological hazards associated with the processing, possession, and transfer of byproduct materials. In establishing license conditions that would achieve protectiveness, Section 205 also allows NRC to consider costs and other factors. NRC and agreement states are also responsible for ensuring that licensees manage byproduct material in a manner that conforms to generally applicable standards promulgated by EPA. Section 206 of UMTRCA amended Section 275 of the AEA authorizing EPA to set generally applicable environmental and health standards. Congress intended standards to be consistent (to the maximum extent practicable) with the standards required under Subtitle C of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 (RCRA). Congress did not intend EPA standards to be site-specific in order to provide the agencies flexibility to address surface and groundwater issues at a broad range of sites. UMTRCA authorizes EPA to revise these standards periodically. On October 7, 1983, EPA published the final rule for applicable standards for Title II uranium mill tailings sites. The NRC determines whether the licensee has fulfilled all applicable decommissioning standards and license requirements prior to termination of the license and transfer of the site to long-term federal management. The NRC may delegate regulatory authority to an agreement state for issuing and enforcing byproduct material licenses in a manner that conforms to NRC requirements. NRC retains oversight authority over agreement states, and the state ensures that the licensee remains in federal regulatory compliance. Four UMTRCA Title II sites are listed on the National Priorities List under the Comprehensive Environmental Response, Compensation, and Liability Act ( P.L. 96-510 ), which authorizes remediation and enforcement actions against the releases of hazardous substances into the environment. At these four sites, NRC, EPA, and the state regulate remediation efforts by operating under a signed memorandum of agreement, which identifies the various agencies' responsibilities. Congress authorized DOE to implement remedial action programs under Title I and designated DOE as the federal agency responsible for long-term federal management of UMTRCA sites. DOE-LM was established in 2003 and manages environmental contamination at sites associated with legacy activities during World War II and the Cold War. As of FY2019, DOE-LM manages 19 Title I disposal sites, 12 Title I processing sites, and six of 29 Title II disposal sites. DOE-LM anticipates that it will assume custody of 17 additional Title II disposal sites over the next decade. UMTRCA processing and disposal sites are located in 12 states ( Figure 3 ). Site names and title descriptions are presented in the appendix ( Table A-1 ) . <3.2.3. State Regulatory Authority> Section 204 of UMTRCA amended Section 274b of the AEA authorizing NRC to enter into agreements with states allowing the states to regulate uranium milling operations through the issuance and enforcement of radioactive material licenses. Such agreement states retain the primary regulatory authority over licenses for radioactive materials on the determination that their regulations are as stringent as those of NRC. The agreement state is responsible for issuing and enforcing the license to ensure that the licensee manages byproduct material in a manner that conforms to federal requirements. Section 204 of UMTRCA includes requirements for procedures for rulemaking, environmental analysis, and judicial review. NRC oversees agreement state programs through inspections, training, and varying degrees of participation in rulemakings or other administrative activities. <3.2.4. Financial Arrangements> Congress intended the NRC to regulate licenses in a manner such that decommissioning requirements would be so stringent as to minimize the need for long-term maintenance and monitoring activities. Section 203 amended Section 161 of the AEA authorizing NRC to enter into short- and long-term bonding, surety, or other financial arrangements with uranium mill licensees. Short-term financial arrangements pay any remaining decommissioning costs if the operator becomes insolvent or otherwise incapable of completing all NRC decommissioning requirements. Long-term financial arrangements pay for the costs for DOE to perform long-term maintenance and monitoring after the license has been transferred to long-term federal management. <4. Status of Implementation> The legislative history suggests that public health and environmental concerns at the time were generally focused on preventing exposure to radiological emissions released into the air, such as radon gas. Many in Congress also expressed concern about potential exposure risks associated with the unrestricted use of radioactive tailings material used as fill material for buildings and other construction projects. Less understood at the time of UMTRCA's original enactment was the dispersion and migration of radiological and non-radiological contaminants in groundwater, which has been an issue at some UMTRCA sites. DOE's surface remedial authority expired in 1998 for Title I sites. DOE continues to administer groundwater remediation and monitoring programs at Title I sites under long-term federal management. The Moab processing site in Utah is the only Title I site that has not transferred to long-term federal management. <4.1. Disposal Site Tailings Stabilization> Prior to UMTRCA, federal regulatory agencies had little authority to regulate tailings, and methods were not required under federal law to mitigate the erosion of tailings. Inactive uranium mill tailings piles were often susceptible to natural dispersal by wind, water, and human disturbances associated with unintended access to the tailings material. Under Title I of UMTRCA, state and federal agencies designed disposal sites as engineered repositories, which are intended to stabilize inactive uranium mill tailings for hundreds of years. As of 1994, the GAO reported for Title I remedial actions that "DOE spent $2 billion on surface cleanup activities through fiscal year 1994 and expects to spend about $300 million more through 1998." Since 1998, when DOE's surface remedial authority expired, expenditures at Title I sites have been for groundwater remediation, disposal site stabilization, and monitoring activities. For Title II sites, private licensees are required to fund site decommissioning to all applicable requirements. After decommissioning of the site by the licensee, the disposal site is transferred to DOE-LM for long-term federal management. So far, six Title II sites have transferred to DOE-LM, while the decommissioning of the remaining Title II sites remains ongoing. Given the groundwater, stabilization, and erosion management issues experienced at Title I sites, DOE-LM may encounter similar challenges at Title II disposal sites once they are transferred to long-term federal management. The DOE-LM efforts to stabilize Title I and Title II disposal sites present continuing challenges. Natural factors such as wind erosion, intense rainfall and precipitation, and droughts can deteriorate the physical integrity of the disposal site and potentially cause the unintended release of contaminants. Vegetation can aid in stabilizing tailings and minimizing erosion. Annual monitoring and maintenance costs may vary from year to year depending on the variability in climatic events. <4.2. Groundwater Contamination and Monitoring> Some uranium mill operations have resulted in groundwater contamination from unlined surface tailings ponds, leach pads, and dissolution of hazardous constituents from water seepage through the tailings piles. Radiological and non-radiological contaminants may migrate if uncontrolled, remain in appreciable quantities, or naturally decrease in the aquifer depending upon site-specific geological characteristics. NRC has characterized groundwater contaminant plumes at some UMTRCA sites as up to three miles long. As such, off-site migration of groundwater contamination has been an issue at some UMTRCA sites. DOE has applied active and passive groundwater remediation strategies at UMTRCA sites. Active groundwater restoration methods such as pump-and-treat have been used with varying results. DOE has implemented natural flushing , a passive treatment method, to manage groundwater contamination. Natural flushing relies upon monitoring to characterize the movement rate and distribution of the contaminant plume. DOE-LM often applies institutional controls at UMTRCA sites in conjunction with groundwater remediation programs. Institutional controls which include providing alternative water sources, site use restrictions, drilling restrictions, fencing, and signs are intended to minimize risks associated with exposures to impacted groundwater. For example, issues with persistent groundwater contamination at the Riverton, WY, Title I processing site prompted DOE to develop institutional controls at that site to minimize residents' groundwater use. DOE's institutional controls included certain restrictions and notifications for developing new water wells and arranging alternative sources of water within the control boundary. DOE-LM administers groundwater monitoring programs at several UMTRCA sites. DOE develops a long-term surveillance plan as part of the NRC general license requirements. Included in the long-term surveillance plan are detailed site-specific groundwater monitoring requirements. Groundwater monitoring requirements include the types of groundwater constituents sampled, the frequency of groundwater sampling, and the location and number of monitoring wells necessary to characterize the groundwater contamination. For Title I sites, the 1988 UMTRA amendment authorized DOE to perform groundwater remediation indefinitely. However, DOE is not authorized to perform groundwater remediation at Title II sites under long-term federal management. At Title II sites under long-term federal management, DOE is authorized to perform maintenance and monitoring and to take emergency measures when necessary to protect public health. In the debate leading to the enactment of UMTRCA, some Members expressed the intent to prevent "additional and costly remedial action" unless appropriated by Congress through legislative action. The annual funding needs for UMTRCA sites under long-term federal management are dependent on the degree of site-specific monitoring and maintenance requirements and, for Title I sites, groundwater remediation costs. <4.3. Moab Processing Site, Utah> By the late 1990s, Title I disposal sites were constructed and transferred to long-term federal management, with the exception of the Moab site in Utah. DOE-EM administers the Moab site remediation. The Moab site was originally designated as a Title II site under UMTRCA. The enactment of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 ( P.L. 106-398 ) in October 2000 designated Moab from a Title II site to a Title I site. In designating Moab as a Title I site, Congress terminated the specific license under Title II and transferred the ownership to DOE and the remaining decommissioning costs to the federal government. Uranium mill tailings at the Moab site are located on the north bank of the Colorado River. DOE-EM constructed a railway specifically for this project to transport the tailings to a disposal site, Crescent Junction, located approximately 30 miles to the north. DOE transports tailings and performs groundwater remediation at the site. DOE-EM reports that it had transported 59% of the roughly 16 million tons of uranium mill tailings by the end of December 2018. DOE-EM anticipates project completion by 2034. DOE had incurred costs of $527 million by the end of FY2018 and estimated the total lifecycle costs to range from $1.186 billion to $1.197 billion. Funding for Moab is appropriated annually in the Energy and Water Development and Related Agencies appropriations bill under the Non-Defense Environmental Cleanup account. <5. Selected Issues for Congress> Site remediation costs and time frames have exceeded amounts originally envisioned by Congress, the agencies, and the licensees due to an evolving understanding of the complexities and risks posed by unintended releases of contaminants from uranium mill tailings. In 1995, the GAO reported that DOE's total surface remediation costs were $2.3 billion, exceeding original 1982 estimates by $621 million. Additionally, long-term federal costs to manage disposal sites and persistent groundwater contamination remain uncertain due to unforeseen challenges and site-specific monitoring and maintenance needs. For Title II sites, six sites have been transferred to DOE-LM as of FY2019. Licensees of remaining Title II sites continue to decommission and transfer their sites to DOE-LM. Prior to long-term federal management, UMTRCA directs federal and state regulatory agencies to apply the stringency of decommissioning requirements on a licensee so that the degree of long-term monitoring and maintenance requirements are minimized. DOE-LM manages a Title II site once the NRC or the state transfers the license from the licensee following decommissioning. In certain instances, NRC, DOE-LM, state agencies, and licensees have disagreed about the adequacy of decommissioning, the degree of long-term monitoring, and the amount of funding needed to perform long-term federal management requirements. In some instances, differences in views among the agencies have affected the timing of decommissioning and license transfers to DOE-LM. In other instances, licensees have lacked adequate funding to complete decommissioning. The following sections describe selected issues regarding proposed legislation, site-specific issues decommissioning, and long-term financial assurance. <5.1. Cheney Disposal Cell Reauthorization> DOE and residents continue to discover and excavate contaminated material at vicinity properties (i.e., buildings, roads, and sidewalks) around Grand Junction, CO, where uranium mill tailings were used as construction material prior to the enactment of UMTRCA. Discovered byproduct material from vicinity properties is disposed in the Cheney disposal cell, located 15 miles southeast of the Grand Junction processing site. DOE constructed the Cheney disposal cell in 1990 to accept residual radioactive material from the Title I Grand Junction processing site and vicinity properties contaminated by the use of uranium tailings as building materials. Under Section 112 of UMTRCA, DOE's authority to accept byproduct material at the Cheney disposal cell is scheduled to expire at the end FY2023 or until the cell reaches capacity, whichever comes first. DOE would be prohibited to operate the Cheney disposal cell after FY2023 absent the enactment of reauthorizing legislation. In the 116 th Congress, the House passed H.R. 347 authorizing DOE to dispose of residual radioactive material from processing sites and byproduct material from vicinity sites in the Cheney disposal cell through FY2031. Similar versions of this legislation were introduced in the 115 th Congress. <5.2. Title II Uranium Reimbursements> Thirteen Title II uranium mills produced uranium concentrate under both federal procurement contracts and commercial civilian nuclear power production. Title X of the Energy Policy Act of 1992 ( P.L. 102-486 ) authorized reimbursements to pay Title II licensees for remedial costs proportional to the quantity of byproduct material produced under federal procurement contracts. Reimbursement payments under Title X do not absolve the licensees from completing site decommissioning. DOE-EM administers reimbursement payments to eligible Title II sites with funds appropriated from the Uranium Enrichment Decontamination and Decommissioning Fund, established under Title XI of the Energy Policy Act of 1992, to support remediation of federal uranium enrichment facilities. Title X reimbursements are subject to annual appropriations in the Energy and Water Development and Related Agencies appropriations bill. In 2000, eight years after the authorization of Title X reimbursements, the 106 th Congress recognized that the implementation of decommissioning by licensees was more costly and taking longer than originally envisioned. As of 2019, Title II licensees eligible for Title X continue to face similar decommissioning challenges. For example, committee report language in the FY2019 Energy and Water Development and Related Agencies appropriations bill directs DOE to use funds to "reimburse licensees for approved claim balances in a timely manner and to avoid accumulating balances and liabilities." From FY1994 to FY2018, DOE reported that $355 million was reimbursed to 13 licensees. According to DOE, there were $26 million in approved but unpaid claims as of FY2018, and estimated remaining program liability was $99 million for the remaining sites eligible for reimbursements. <5.3. Transfer Status and Funding> Various technical, financial, and regulatory issues have affected the timing of the transfer of Title II sites to long-term federal management. NRC's statutory responsibility is to regulate uranium mills and tailings for Title II sites in a manner that allows a licensee to complete site decommissioning in manner so stringent that little long-term maintenance and monitoring would be required. Congress intended NRC to mitigate financial burdens to the licensees while requiring that all decommissioning requirements be fully met. The transfer of the remaining Title II sites to DOE-LM for long-term federal management would remain pending until NRC determines that the licensee has completed all decommissioning requirements. NRC estimates specific dates for some Title II sites, while others are listed as "to be determined." Table A-1 identifies Title I and Title II sites that have transferred to long-term federal management, and Table A-2 identifies Title I and Title II sites that have not yet transferred to long-term federal management. DOE-LM would become responsible for long-term federal management of Title II sites currently licensed by NRC or an NRC agreement state upon the completion of decommissioning and site transfer. For some Title II sites, DOE-LM and NRC have reached differing conclusions regarding the adequacy of decommissioning, the degree and type of long-term monitoring requirements, and the funds needed to pay for long-term monitoring and maintenance costs. Section 203 of UMTRCA authorized NRC to collect a bond or other financial arrangement to pay for the costs in the event that a licensee was unable to fulfill all of their decommissioning requirements. UMTRCA does not authorize the use of federal funding to pay for the decommissioning of Title II sites. In the event that the bond were insufficient to pay for the full decommissioning costs, UMTRCA provides no additional mechanism for funding to complete decommissioning. In some instances, Title II licensees have lacked adequate financial resources to complete NRC's decommissioning requirements. If left unreclaimed, exposure risks from releases of radiological and non-radiological contaminants may present issues to affected communities. The magnitude of public health and environmental risks posed by unreclaimed tailings may vary among individual sites. <5.4. Long-Term Financial Assurance> For sites that have transferred to long-term federal management, DOE-LM administers Title I and Title II sites under an NRC general license. UMTRCA authorized long-term monitoring and maintenance costs at Title I sites to be paid by the federal government. For Title II sites, Congress intended that the licensee would pay for any necessary long-term monitoring and maintenance costs using a one-time long-time surveillance charge (LTSC). Annual costs are largely dependent on the extent of site-specific groundwater monitoring and intermittent maintenance activities on the repository. Under current federal law there are different statutory authorities for DOE-LM to perform remediation at Title I sites and Title II sites under long-term federal management. For Title I sites, Congress authorized DOE-LM to implement groundwater remediation indefinitely, recognizing the ongoing remediation challenges at some Title I sites after decommissioning. UMTRCA does not provide DOE-LM remedial authority for Title II sites under long-term federal management. At Title II sites under long-term federal management, DOE-LM is authorized to perform monitoring, maintenance, and emergency measures. Emergency measures is not explicitly defined by statute, potentially raising issues of interpretation in the event of future remedial action needs. Selected issues with Title I and Title II long-term financial assurance are discussed in the following sections. <5.4.1. Title I Sites> Congress provides funding for the long-term federal management of Title I sites through DOE annual appropriations. For Title I sites under long-term federal management, program funding for DOE-LM is funded under Environmental and Other Defense Activities account in the Energy and Water Development and Related Agencies appropriations bill. DOE-EM continues to administer remediation at the Moab site in Utah. Funding for the Moab site is appropriated annually in the Energy and Water Development and Related Agencies appropriations bill under the Non-Defense Environmental Cleanup account. DOE annual expenditures can vary from site to site depending on costs related to many factors, including the degree of groundwater remediation or monitoring and disposal site maintenance. For example, from 2008 and 2012, an interagency report from January 2013 noted that total DOE expenditures at the Tuba City disposal site were $13.96 million (approximately $2.8 million per year), while total expenditures at the Mexican Hat disposal site were $110,000 (approximately $22,000 per year). Neither DOE-LM annual budget justifications nor annual appropriations bills specify funding for annual long-term federal management costs by site or for the site inventory as a whole. Annual funding for DOE-LM is presented in annual budget requests and appropriations as a single line-item. In all, DOE-LM oversees over 100 sites contaminated by radiological, chemical, and hazardous wastes associated with the legacy of nuclear weapons production during World War II and the Cold War. UMTRCA processing and disposal sites constitute 37 of those sites. Congress appropriated $159 million to DOE-LM in the Energy and Water Development and Related Agencies Appropriations Act, 2019 ( P.L. 115-244 ), the same amount as requested. <5.4.2. Title II Sites> For Title II sites, Congress intended that commercial uranium mill operators will pay for site decommissioning and the costs for a federal agency to perform long-term federal management. To cover these long-term federal management costs, NRC requires licensees to pay an LTSC upon the transfer of the site to DOE. Section 203 of UMTRCA provides NRC authority to collect this LTSC from the licensee to pay for DOE's costs to perform long-term maintenance, monitoring, and emergency measures. This one-time LTSC fee is deposited as a miscellaneous receipt into the General Fund of the U.S. Treasury when each site license is transferred to DOE. In the 1980 Final Generic Environmental Impact Statement for uranium milling, NRC described the justification for the minimum LTSC fee based on the assumption that average long-term monitoring at UMTRCA Title II sites would cost $2,500 per year. NRC assumed an average annual real rate of return, and each licensee is required to pay the minimum one-time L TSC of $ 250,000 (in 1978 dollars, adjusted for inflation). NRC has not revised the minimum LTSC since regulations were promulgated in 1985. NRC allows for the minimum LTSC fee to be increased based on expected site-specific surveillance or controls requirements if needed. UMTRCA does not authorize a mechanism to recover additional fees from licensees once the license has been transferred to DOE-LM. The adequacy of the LTSC to cover DOE's costs to perform long-term maintenance and monitoring has been an issue. In 1995, the GAO recommended that NRC improve "the accuracy of the one-time charge made to owner/operators to ensure that this charge fully covers future costs at their sites." In 2014, the DOE Office of Inspector General (IG) found that DOE-LM had spent $4.25 million at six Title II sites under long-term management. During the same three-year period, the IG report found that the available funds from the LTSC fees were $0.148 million. To the extent that the LTSC fees are insufficient to cover annual monitoring and maintenance costs, DOE-LM would be responsible to carry out long-term management responsibilities, subject to availability of annual appropriations. DOE-LM has discretion to allocate appropriated funding among eligible sites under long-term federal management. If the current minimum LTSC do not fully cover annual long-term federal management costs for the remaining Title II sites when they transfer to DOE-LM, the IG report states "the total cost to the American taxpayers could be significant." Yet, there is a limited availability of information by site and by year for DOE-LM's monitoring and maintenance costs at UMTRCA sites under long-term management. DOE-EM has provided life-cycle cost ranges and completion date estimates for Environmental Management sites, including the Moab site, in annual budget justifications. CRS was unable to identify DOE cost estimates for any other UMTRCA site. The federal government will be responsible for the long-term management costs for all UMTRCA sites once transferred to DOE-LM. Potential issues for Congress may include the decommissioning and transfer status of the remaining Title II sites, the adequacy of funding to complete decommissioning at certain sites if the licensee is unable to fulfill its obligations, and the adequacy of the long-term surveillance charges to meet future long-term management needs. <5.4.2.1. Appendix. Appendix>

In the wake of increasing concerns in the 1970s about human health and environmental risks posed by inactive uranium mill tailings, Congress enacted the Uranium Mill Tailings Radiation Control Act of 1978 (UMTRCA). Uranium milling operations generate uranium concentrate, also known as "yellowcake" uranium, and waste material, called tailings , which can harbor and liberate radioactive and non-radioactive constituents. Title I of UMTRCA authorized a remedial action program for uranium mill tailings sites that were inactive prior to 1978, which produced uranium concentrate under federal procurement contracts primarily for nuclear weapons and other defense purposes. Title II of UMTRCA authorized the regulation of uranium mills and tailings sites that were operating on or after the law's enactment, which largely produced uranium concentrate for civilian nuclear power plants. UMTRCA does not provide regulatory authority over uranium mining (the physical removal of uranium ore from the earth), waste material produced from uranium mining, or remediation of inactive uranium mine sites. The Department of Energy (DOE) is the federal agency responsible for implementing the remedial action program and administering long-term federal management of the tailings. The site remediation costs have exceeded costs originally envisioned by Congress, the agencies, and the licensees due to an evolving understanding of the complexities and risks posed by unintended releases of contaminants from uranium mill tailings. As part of the remediation action, the uranium mill tailings are enclosed in engineered repositories, located at disposal sites, which are designed to prevent unintended release of potentially hazardous constituents for hundreds of years. DOE's authority to perform surface remediation at Title I sites expired on September 30, 1998. Groundwater contamination has compounded the technical complexity and timeline of remedial actions at certain sites. Congress amended UMTRCA in 1988 to authorize DOE to perform groundwater remediation without expiration under the Uranium Mill Tailings Remedial Action Amendments Act (UMTRA). UMTRCA requires the transfer of both Title I and Title II disposal sites to long-term federal management. As of FY2019, the Department of Energy, Office of Legacy Management (DOE-LM) administers long-term federal management at 31 Title I sites, excluding the site at Moab, UT. Title II sites are regulated by the U.S. Nuclear Regulatory Commission (NRC) or an NRC agreement state and transferred to DOE-LM for long-term federal management when NRC, or the state, determines that applicable standards have been met. As of FY2019, six of 29 Title II sites have transferred to DOE-LM, and 23 Title II sites remain privately owned under an NRC or an agreement state license. DOE-LM expects to take long-term management responsibilities of the 23 remaining Title II sites by 2048. Under UMTRCA, Congress established that the federal government pay for long-term monitoring and maintenance costs at Title I sites, subject to annual appropriations to DOE-LM. For Title II sites, Congress intended that the licensee would pay for any long-term management costs with a one-time long-term surveillance charge (LTSC). In the event that the LTSCs are not sufficient to cover annual monitoring and maintenance costs, DOE-LM would be responsible to carry out long-term management responsibilities, subject to availability of annual appropriations. The long-term management efforts to stabilize tailings and monitor groundwater have proven more challenging, and expensive, than originally expected. The federal government will be responsible for long-term management of all UMTRCA sites once transferred to DOE-LM. Potential oversight issues for Congress may include understanding the decommissioning and transfer status of the remaining Title II sites, the adequacy of funding to complete decommissioning at certain sites if the licensee is unable to fulfill its obligations, and the adequacy of LTSCs to meet future management needs.

crs_R46280

crs_R46280_0

<1. Introduction> The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility criteria. These benefits and services include, among other things, hospital and medical ca re; disability compensation and pensions; education; vocational rehabilitation and employment services; assistance to homeless veterans; home loan guarantees; administration of life insurance, as well as traumatic injury protection insurance for servicemembers; and death benefits that cover burial expenses. The department carries out its programs nationwide through three administrations and the Board of Veterans' Appeals (BVA). The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The Veterans Benefits Administration (VBA) is responsible for, among other things, providing disability compensation, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans cemeteries; providing grants to states for establishing, expanding, or improving state veterans cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. In addition to providing health care services to veterans and certain eligible dependents, the VHA is statutorily required to serve as a contingency backup to the Department of Defense (DOD) medical system during a national security emergency and to provide support to the National Disaster Medical System and the Department of Health and Human Services (HHS) as necessary in response to national crises. The department is also required to take appropriate actions to ensure VA medical centers are prepared to protect veteran patients and staff during a public health emergency. <2. Novel Coronavirus (COVID-19)13> On December 31, 2019, the World Health Organization (WHO) was informed of a cluster of pneumonia cases in Wuhan City, Hubei Province of China. Illnesses have since been linked to a disease caused by a previously unidentified strain of coronavirus, designated Coronavirus Disease 2019, or COVID-19. On January 30, 2020, an Emergency Committee convened by the WHO Director-General declared the COVID-19 outbreak to be a Public Health Emergency of International Concern (PHEIC). On January 31, the Secretary of Health and Human Services (HHS) declared a public health emergency under Section 319 of the Public Health Service Act (42 U.S.C. 247d). On March 11, 2020, the WHO characterized the COVID-19 outbreak as a pandemic. Two days later, on March 13, the President declared the COVID-19 outbreak a national emergency, beginning March 1, 2020. The VHA plays a significant role in the domestic response to a pandemic. It is one of the largest integrated direct health care delivery systems in the nation, caring for more than 7.1 million patients in FY2020 and providing 123.8 million outpatient visits at approximately 1,450 VA sites of care. The VHA employs a workforce of 337,908 full-time equivalent employees (FTEs), largely composed of health care professionals. In addition, the VHA has a statutory mission to contribute to the overall federal emergency response capabilities. <2.1. Scope and Limitations> This report provides an overview of VA's response thus far to this rapidly evolving COVID-19 pandemic. It does not provide an exhaustive description of all of the department's activities, and it is based on very limited publicly available information from VA. It is organized as follows: first, it provides details on VHA's, VBA's, and NCA's response activities; second, it provides details on VA's emergency preparedness ("Fourth Mission") activities to provide support to the overall federal emergency response; and lastly, it briefly describes congressional activity as it pertains to VA and veterans. The Appendix provides a summary of VHA's emergency authorities. <3. Medical Care for Veterans During the COVID-19 Outbreak> VHA's provision of medical care to veterans in response to the COVID-19 outbreak includes implementing mitigation strategies at VHA facilities, as well as testing and treating veterans diagnosed with or suspected of having COVID-19. (A general description of medical care to veterans is provided in other CRS reports. ) In late February 2020, VA provided information to congressional oversight committees on the number of positive and presumptive positive cases of COVID-19. On March 13, 2020, the department began publishing this information publicly on its website, which it updates on a regular basis. The number of positive diagnoses is likely to grow as testing for COVID-19 becomes more widespread. VA has reported on the measures it has taken to contain and mitigate further exposure. It has issued guidance for patients, implemented mitigation strategies at VHA facilities, and begun testing patients who present symptoms consistent with COVID-19. <3.1. Guidance for Patients> VA is advising veterans who may be sick or who are exhibiting flu-like symptoms not to come to a VA facility. Instead, patients are advised to call their health care providers, even if they already have a scheduled appointment. Alternatively, patients can send a secure message through the VHA online portal, My HealtheVet, or schedule a telehealth appointment. In addition, VA is advising patients to budget additional time for appointments due to enhanced screening measures at VA facilities. These enhanced screening measures, as well as other mitigation strategies at VHA facilities, are described below. <3.2. Mitigation at VHA Facilities> On March 10, 2020, VA announced safeguards to protect nursing home residents and spinal cord injury patients. As of that date, no visitors are allowed at either VA nursing homes or spinal cord injury/disorder (SCI/D) centers. The only exception to this policy is if a veteran is in the last stages of life, in which case VA allows visitors in the veteran's room only. VA is not accepting any new admissions to nursing homes and is limiting new admissions to SCI/D centers. VA began implementing enhanced screening procedures at all sites of care to screen for respiratory illness and COVID-19 exposure. Enhanced screening procedures are determined at the local level, so they vary at each facility. However, VA has designed standardized screening questions for each facility. Each VA medical center is implementing a two-tiered system to mitigate the potential for spread of the virus, creating a zone for active COVID-19 cases and a passive zone for care unrelated to COVID-19. VA has canceled all elective surgeries and limited routine appointments. <3.3. COVID-19 Testing and Treatment30> This section describes the current VA policy on testing patients for COVID-19 and treatment following a COVID-19 diagnosis. <3.3.1. COVID-19 Diagnostic Testing> On March 13, 2020, the department began publishing the number of positive cases of COVID-19, and the number of tests conducted, on its public website, which it updates on a regular basis. Individual medical centers have discretion on where to send samples for testing. Samples can be tested at the Palo Alto VA Medical Center, state public health labs, or private labs. Individual providers decide whether to test for COVID-19 on a patient-by-patient basis. However, VA has advised providers that patients must be exhibiting respiratory symptoms and have another factor, such as recent travel or known exposure to someone who tested positive. Generally, diagnostic testing is a covered service under VA's standard medical benefits package, which is available to all veterans enrolled in the VA health care system. Some veterans are required to pay copayments for care that is not related to a service-connected disability. However, routine lab tests are exempt from copayments. VA has not announced whether cost-sharing for the COVID-19 diagnostic test is included under the exemption for routine lab tests. The Families First Coronavirus Response Act ( P.L. 116-127 ), enacted on March 18, 2020, allows VA to waive any copayment or other cost-sharing requirements charged to veterans for COVID-19 testing or medical visits during any period of this public health emergency. VA has not publicly announced whether cost-sharing for the COVID-19 diagnostic test will be waived for all veterans who are subject to cost-sharing. (For a discussion of P.L. 116-127 , see the " Congressional Response " section of this report.) <3.3.2. COVID-19 Treatment> VA has not indicated whether it has developed a treatment plan for patients diagnosed with COVID-19. Treatment depends largely on the severity of symptoms that each patient experiences. VA is handling coverage and cost of treatment for COVID-19 as it would for any other treatment for a condition that is not service-connected. Treatment for COVID-19 is a covered benefit under the VA standard medical benefits package. However, some veterans may have to pay copayments for both outpatient and inpatient care. Normal coverage rules apply for veterans who report to urgent care or walk-in clinics. To be eligible, a veteran must be enrolled in the VA health care system and must have received VA care in the past 24 months preceding the episode of urgent or walk-in care. Eligible veterans needing urgent care must obtain care through facilities that are part of VA's contracted network of community providers. These facilities typically post information indicating that they are part of VA's contracted network. If an eligible veteran receives urgent care from a noncontracted provider or receives services that are not covered under the urgent care benefit, the veteran may be required to pay the full cost of such care. Certain veterans are required to pay copayments for care obtained at a VA-contracted urgent care facility or walk-in retail health clinic. In addition, normal rules apply for veterans who report to non-VA emergency departments. To be eligible for VA payment or reimbursement, a veteran's non-VA care must meet the following criteria: The emergency care or services were provided in a hospital emergency department or a similar facility that provides emergency care to the public. The claim for payment or reimbursement for the initial evaluation and treatment was for a condition of such a nature that a prudent layperson would have reasonably expected that delay in seeking immediate medical attention would have been hazardous to life or health. A VA or other federal facility or provider was not feasibly available and an attempt to use them beforehand would not have been considered reasonable by a prudent layperson. At the time the emergency care or services were furnished, the veteran was enrolled in the VA health care system and had received medical services from the VHA within the 24-month period preceding the furnishing of such emergency treatment. The veteran was financially liable to the provider of emergency treatment for that treatment. The veteran had no coverage under a health plan contract that would fully cancel the medical liability for the emergency treatment. If the condition for which the emergency treatment was furnished was caused by an accident or work-related injury, the veteran is required pursue all claims against a third party for payment of such treatment first. <4. Homeless Veterans> Veterans experiencing homelessness live in conditions that could make them particularly vulnerable to COVID-19. Those who are unsheltered lack access to sanitary facilities. For those sleeping in emergency shelters, conditions may be crowded, with short distances between beds, and there may be limited facilities for washing and keeping clean. While VA itself administers programs to assist veterans experiencing homelessness, there are several grants for nonprofit and public entities to provide housing and services to homeless veterans. These include the Homeless Providers Grant and Per Diem program (transitional housing and services), the Supportive Services for Veteran Families (short- to medium-term rental assistance and services), and Contract Residential Services (housing for veterans participating in VA's Health Care for Homeless Veterans program). VA released guidance on March 13, 2020, for its grantees that administer programs for veterans who are homeless. The guidance suggests grantees take a number of actions: Develop a response plan, or review an existing plan, and coordinate response planning with local entities, including health departments, local VA medical providers, and Continuums of Care. Plans should address staff health, potential staff shortages, and acquisition of food and other supplies, as well as how to assist veteran clients. Prevent infection through methods recommended by the CDC, such as frequent handwashing, wiping down surfaces, and informing clients about prevention techniques. In congregate living facilities, such as those provided through VA's Grant and Per Diem program, keep beds at least three feet apart (preferably six, if space permits), sleep head-to-toe, or place barriers between beds, if possible. Develop questions to ask clients about their health to determine their needs and how best to serve them. For new clients, interviews should occur prior to entry into a facility (such as over the phone), if possible, or in a place separate from other clients. If a client' answers to questions indicate risk of COVID-19, separate them from other program participants (have an isolation area, if possible), clean surfaces, and reach out to medical professionals. If isolation is not practical, reach out to other providers who might be able to isolate. <5. Veterans Benefits Administration (VBA)> On March 18, 2020, the Veterans Benefits Administration (VBA) announced via Facebook and Twitter that all regional offices will be closed to the public starting March 19. While the regional offices are to remain open to ensure the continuity of benefits, the offices are to no longer accept walk-ins for claims assistance, scheduled appointments, counseling, or other in-person services. VBA is directing veterans who have claims-specific questions or any questions to use the Inquiry Routing & Information System (IRIS) or to call 1-800-827-1000. A March 16, 2020, Government Executive news article explained that VBA is facing "network operationality" issues after several regional offices told their employees to telework full time. VBA headquarters, in Washington, DC, then rescinded the telework directives due to the information technology issues. VBA is to continue performing tests on the network throughout the week. According to the article, a VA spokesperson said that regional office directors are to make decisions on work flexibility based on "the circumstances in their communities" but must discuss all plans with "central office leadership." <5.1. Educational Assistance> In FY2020, over 900,000 individuals are expected to receive veterans educational assistance from the GI Bills (e.g., the Post-9/11 GI Bill), Veteran Employment Through Technology Education Courses (VET TEC), Veterans Work-Study, Veterans Counseling, and VetSuccess on Campus (VSOC). As a result of COVID-19, some participants' training and education may be disrupted, and some participants may receive a lower level of or no benefits. These concerns may directly affect beneficiaries in several ways, including the following: Some students may be required to stop out, discontinue working, or take a leave of absence as a result of their own illness. Some training establishments, educational institutions, and work-study providers may close temporarily or permanently. Some training establishments, educational institutions, and work-study providers may be required to reduce participants' hours, enrollment rate, or rate of pursuit. Some educational institutions may transition some courses to a distance learning format. Some educational institutions may require students living on campus to move off campus. Individuals receiving benefits in foreign countries may encounter any of the above circumstances while residing in a foreign country whose COVID-19 situation may differ from that in the United States, or may stop out, discontinue working, or take a leave of absence and return to the United States. A related issue is that, in the past, GI Bill benefits could not be paid for pursuit of online courses that had not been previously approved as online courses. Given this limitation, VA requested that school-certifying officials "temporarily refrain from making any adjustments to enrollment certifications" pending subsequent VA guidance and/or legislative action. On March 12, 2020, VA reminded GI Bill participants and school-certifying officials of its ability to continue paying benefits as participants and institutions react to the COVID-19 emergency. In particular, VA may continue to pay GI Bill benefits for up to four weeks following the temporary closure of an educational institution under an established policy based on an executive order of the President, or due to an emergency situation. Other limitations noted in the correspondence would be alleviated by recently passed legislation (see the " Congressional Response " section of this report for a discussion of S. 3503 ). <6. National Cemetery Administration (NCA)> The National Cemetery Administration (NCA) has provided limited information for the survivors and dependents of veterans who have passed away and are scheduled to be buried in National Cemetery. As of March 18, 2020, NCA has provided some guidance for both families and funeral directors regarding interments and services for veterans. For f amilies and v isitors . VA National Cemeteries remain open to visitors and for interments, but visitors should follow their local communities' restrictions on visitations and travel. For families who prefer to inter now but hold the committal service at a later date, NCA says it will work to accommodate those requests. For families who prefer to have the committal service now, NCA asks them to adhere to CDC recommendations for group gatherings. For f uneral d irectors . NCA is asking funeral directors to follow the CDC guidelines and recommendations on group gatherings for families who proceed with full committal services. In addition, NCA informed organizers that it has discouraged all cemetery personnel from handshaking and any unnecessary physical contact with family members and funeral organizers. NCA is to work with the funeral directors and families to accommodate future committal services for those who decide to postpone. NCA has set up an "Alerts" web page for the public to check cemetery operating status and is directing the public to its Facebook and Twitter pages for the most recent operating information. <7. Emergency Preparedness ("Fourth Mission")> In 1982, the Department of Veterans Affairs (VA)-Department of Defense (DOD) Health Resources Sharing and Emergency Operations Act ( P.L. 97-174 ) was enacted to serve as the primary health care backup to the military health care system during and immediately following an outbreak of war or national emergency. Since then, Congress has provided additional authorities to VA to "use its vast infrastructure and resources, geographic reach, deployable assets, and health care expertise, to make significant contributions to the Federal emergency response effort in times of emergencies and disasters." Among other authorities, VHA may care for nonveterans, as well as veterans not enrolled in the VA health care system. This applies in situations where the President has declared a major disaster or emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.) (the Stafford Act), or where the HHS Secretary has declared a disaster or emergency activating the National Disaster Medical System established pursuant to Section 2811(b) of the Public Health Service Act (42 U.S.C. 300hh-11(b)). The President's March 13, 2020, declaration of a national emergency under Section 501(b) of the Stafford Act allows VA to use this authority. According to VA, during declared major disasters and emergencies, service-connected veterans receive the highest priority for VA care and services, followed by members of the Armed Forces receiving care under 38 U.S.C. Section 8111A, and then by individuals affected by a disaster or emergency described in 38 U.S.C. Section 1785 (i.e., individuals requiring care during a declared disaster or emergency or during activation of the National Disaster Medical System [NDMS]). In general, care is prioritized based on clinical need that is, urgent, life-threating medical conditions are treated before routine medical conditions (see the Appendix ). During a disaster or emergency, VA can support HHS by providing resources to civilian health care systems. Furthermore, VA's National Acquisition Center can assist with acquisition and logistical support, such as by providing ventilators, medical equipment and supplies, and pharmaceuticals. Generally, if a state, tribal, or territorial government needs resources, they can request assistance from the federal government through their local HHS Regional Emergency Coordinator (REC). The HHS REC is to then submit a task order to the HHS Secretary's Operations Center (SOC) to be fulfilled by HHS, VA, or another federal agency. VA cannot receive direct requests for assistance from state and local governments. <8. Congressional Response> <8.1. Funding and Cost-Sharing> On March 14, 2020, the House passed the Families First Coronavirus Response Act ( H.R. 6201 ). The Senate passed the measure on March 18, and the President signed it into law the same day as P.L. 116-127 . The act provides $30 million for VHA's medical services account to fund health services and related items pertaining to COVID-19. In addition, the act provides $30 million for VHA's medical community care account. These funds are available until September 30, 2022. Among other things, the act allows VA to waive any copayment or other cost-sharing requirements for COVID-19 testing or medical visits during any period of this public health emergency. <8.2. Education Assistance> S. 3503 , as passed by the Senate on March 16, 2020, and then passed by the House on March 19, 2020, allows VA to continue to provide GI Bill benefits from March 1, 2020, through December 21, 2020, for courses at educational institutions that are converted from in-residence to distance learning by reason of an emergency or health-related situation. S. 3503 further permits VA to pay the Post-9/11 GI Bill housing allowance as if the courses were not offered through distance learning throughout the same period. With the exception of those covered under this S. 3503 exemption, Post-9/11 GI Bill participants enrolled exclusively in distance education are eligible for no more than one-half the national average of the housing allowance. <8.3. Emergency Supplemental Appropriations Request60> On March 17, 2020, the Administration submitted to Congress a supplemental appropriations request. The Administration seeks $16.6 billion for FY2020 for VA's response to the COVID-19 outbreak. This includes $13.1 billion for the medical services account. According to the request, this additional amount would provide funding for "healthcare treatment costs, testing kits, temporary intensive care unit bed conversion and expansion, and personal protective equipment." The request also includes $2.1 billion for the medical community care account to provide three months of health care treatment provided in the community in response to COVID-19. VA assumes that about 20% of care for eligible veterans will be provided in the community, since community care facilities would be at full capacity with nonveteran patients. Furthermore, the request includes $100 million for the medical support and compliance account for the provision of 24-hour emergency management coordination overtime payments; for costs associated with travel and transport of materials; and to enable VHA' s Office of Emergency Management to manage its response to COVID-19. The emergency supplemental appropriations request also includes $175 million for the medical facilities account to upgrade VA medical facilities to respond to the virus. The request also includes $1.2 billion for the information technology systems account to upgrade telehealth and related internet technology to deliver more health care services remotely. <8.3.1. Appendix. VHA Emergency Powers>

The Department of Veterans Affairs (VA) provides a range of benefits to eligible veterans and their dependents. The department carries out its programs nationwide through three administrations and the Board of Veterans' Appeals (BVA). The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The Veterans Benefits Administration (VBA) is responsible for, among other things, providing disability compensation, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans cemeteries; providing grants to states for establishing, expanding, or improving state veterans cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. With a vast integrated health care delivery system spread across the United States, VHA is also statutorily required to serve as a contingency backup to the Department of Defense (DOD) medical system during a national security emergency and to provide support to the National Disaster Medical System and the Department of Health and Human Services (HHS), as necessary, in support of national emergencies (also referred to as the "Fourth Mission" of the VHA). Based on limited information from VA, this report provides an overview of VA's response to the Coronavirus Disease 2019 (COVID-19) pandemic that is affecting communities throughout the United States. It also discusses recent congressional action as it pertains to the veterans' benefits and services, as well as the supplemental appropriations for the department.

crs_R46010

crs_R46010_0

<1. Introduction> For roughly the first 100 years of the electric power industry, electricity generation occurred mostly in large, c entralized power plants. Partly in response to the energy crisis of the 1970s, Congress established policies to promote, among other things, alternatives to centralized power plants, including generation capacity located on customer property. Customer-sited generation is a type of distributed generation (DG) and can be located on commercial, industrial, or residential properties. One policy intended to promote DG is net metering. In the Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ) Congress encouraged states to adopt net metering, defined in the law as service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period. State net metering policies may be relevant to congressional discussions about the role of renewable energy sources, like solar, in the nation's electricity system. Solar photovoltaic (PV) is the most commonly deployed energy type participating in net metering, comprising 97% of net metering capacity in 2018. Other federal and state policies (e.g., tax incentives, renewable portfolio standards, carbon pricing) may interact with net metering policies to determine the deployment pace of distributed solar energy sources and other types of DG. Also, some Members of Congress may be interested in how some states have modified their net metering policies in recent years, including the effect of those modifications on stakeholders. Some recent state policy changes are expected to expand solar energy development, while others are expected to slow it. Among other options, Congress could choose to restrict, encourage, or require certain kinds of state policy modifications, or take no action on state net metering policies, depending on congressional priorities. This report provides background information and discusses current issues related to net metering policy. <2. What Is Net Metering?> Net metering policies determine how electricity customers with distributed generation are compensated for electricity they deliver to the grid. Net metering is frequently used to mean a policy of net energy metering (NEM), which specifies that electricity delivered to the grid from a net metering customer is compensated on a one-to-one basis for electricity purchased from the grid. Every unit of electricity generated by the customer (typically expressed in kilowatt-hours, kWh) is subtracted from the amount of electricity they consume, for billing purposes. This is frequently described as "the meter running backward." Other analyses and discussions sometimes distinguish different policy options, including: buy-all, sell-all , under which a utility buys all electricity generated by the net metering customer at one (usually, lower) rate and sells all the electricity consumed by the customer at a different rate (usually the same retail rate charged to any other customer); and net billing , under which electricity delivered to the grid is compensated at a pre-determined value, which might be measured as a rate or a fixed amount. This report will generally use the term net metering to refer to any of these policies since they are closely related to each other, in that they provide financial support for DG. <3. How Common Is Net Metering?> As of April 2019, 45 states had net metering policies in place that require utilities to offer net metering to customers. Some of these policies include alternatives to net energy metering. Further, some of these policies predate EPACT05. In the states that do not require utilities to offer net metering, some utilities voluntarily offer net metering service to customers. According to the U.S. Energy Information Administration (EIA), almost 2 million customers participated in net metering programs in the United States in 2018, compared to over 153 million electricity customers overall. In other words, about 1% of U.S. electricity customers in 2018 participated in net metering. The number of net metering customers increased from 2013 to 2018 as shown in Figure 1 . Data before 2013 also show growth in net metering participation, but EIA changed the way it reported net metering data beginning in 2013, so these data are not shown below, in the interest of consistency. Net metering participation can be measured in other ways, such as total net metering capacity or the amount of electricity delivered to the grid from net metering generators. According to the EIA data, these measures have seen average annual increases similar to customer count. Levels of net metering participation vary by state, as shown in Figure 2 . In many states, less than 0.1% of electricity customers participate in net metering. Hawaii has the highest participation rate, with over 15% of customers participating in the state's net metering programs. Some potentially relevant factors for the differences among states include design of state net metering policies, presence of other state policies such as renewable portfolio standards (which may incentivize renewable DG), average electricity prices, and solar resource quality. A full analysis of the factors behind different state participation rates is beyond the scope of this report. <4. Overview of Electricity Ratemaking> This section provides an overview of how electricity rates are set in general, in order to clarify major areas of debate for state net metering policies. Electricity ratemaking is the process of allocating to customers the total costs that utilities incur when producing and delivering electricity. Many complexities and local factors influence ratemaking. A full discussion is beyond the scope of this report. As an illustrative example, this section discusses typical ratemaking considerations for vertically-integrated investor-owned utilities. In its service territory, this type of utility owns and operates all parts of the electricity system, from electricity generation to transmission and distribution to customers. State regulators conduct the ratemaking process and approve rates that the utility can charge its customers. Regulators design rates so that utilities can recover their costs through customers' bill payments. These costs generally include: the costs of building and operating power plants, including fuel costs and compliance with any applicable regulations (e.g., environmental, safety, reliability); the costs of building and maintaining transmission and distribution systems (i.e., the grid); regular utility operating costs, such as ensuring reliable grid operation (i.e., grid services) or collecting meter data for billing; any programmatic costs, such as bill relief for low-income consumers or implementation of other public policies; and a return on the utility investments (i.e., return on equity or ROE). A common method for setting rates is to establish volumetric rates (sometimes called flat rates). All customers within a given type, or customer class, will pay the same rate expressed in cents per kilowatt-hour (cents/kWh). The more electricity a customer uses, the higher a bill they will have. Customers' bills will vary each month based on the amount of electricity they consume. Regulators estimate a value for the volumetric rate that will allow the utility to recover its total costs, based on projections of total sales for all customer classes. In this way, the costs for electricity generation, transmission, distribution, and other utility expenses are shared among all customers. Costs associated with customer service (e.g., billing, connections) sometimes are separated from the electricity rate and recovered in a separate customer charge. This charge would appear as a fixed value on the customer's bill and would not change from month to month. Customer charges are additional to rates. In other words, a customer's bill would have volumetric charges (rate times kWh consumed) plus a fixed customer charge. Some customer classes, such as large industrial facilities or institutions, consume so much electricity that utilities might make special system modifications for them. In some cases, utilities recover these costs in a demand charge that is only paid by those high-consuming customers. Like customer charges, demand charges are generally additional to volumetric charges and do not typically change from month to month. <5. Net Metering Compensation> EPACT05 encouraged states to adopt net metering, but the law did not specify how customers should be compensated. States with net metering have taken different approaches in implementing their policies, and many states have revised their compensation approaches in recent years. These decisions may affect DG markets. As one study from the National Renewable Energy Laboratory observed, "compensation mechanisms impact DG deployment because they strongly influence the value proposition of a DG investment for individual customers." This section describes some elements of states' approaches to implementing net metering. <5.1. Retail Rates for Net Metering Customers> A common approach to net metering is to compensate net metering customers at the utility's approved retail rate of electricity. This is frequently described as a net energy metering (NEM) policy, or simply net metering. A 2019 review of state net metering policy revisions describes how state policymakers initially viewed the retail rate as a "close-enough proxy" for rate setting, as follows: Initially, NEM was largely understood to be an administratively simple, rough-justice approach that was acceptable at a time when markets for solar PV and other DG were uneconomic. In many of the initial decisions about NEM, policy makers assumed that the retail rate was a close-enough proxy for the value of solar or value of DG, and the total numbers of participating customers and kilowatt hours being credited at the retail price were relatively small ... the small number of participating customers multiplied by the small quantity of energy each would deliver to the grid, meant that any error associated with under- or over-estimating the true value would be small. Retail rates provide relatively high compensation for net metering generation (see Figure 3 ). As described above (under "Overview of Electricity Ratemaking"), this is because the retail rate for any electric utility customer reflects the total costs the utility incurs for delivering electricity, including generating electricity and maintaining the grid. Retail rates may encourage net metering participation to a greater extent than other compensation approaches because customers can recover the upfront costs of a DG system more quickly. Some stakeholders have noted the possibility that compensating net metering customers at the retail rate may result in increased costs for non-net metering customers. This possibility, known as a cost shift or cross-subsidy, arises from the fact that the ratemaking process allocates total utility costs among all customers. Net metering customers generate electricity for their own consumption, which reduces the amount of utility-provided electricity they need (and, consequentially, the utility's costs to produce electricity). However, self-generation does not necessarily reduce the amount of other utility-provided services a customer uses (or, generally, the utility's costs to provide those services, such as maintaining the grid). For example, solar net metering customers might consume electricity from the grid at night and derive reliability benefits from the grid even when the sun is shining. Over time, rates for non-net metering customers could increase so the utility could recover the costs of maintaining the grid that are not recovered from net metering customers. Some stakeholders also have noted that residential net metering customers have tended to have higher incomes than non-net metering customers, raising potential equity concerns over cross-subsidies. Studies disagree on the extent to which non-net metering customers may be cross-subsidizing net metering customers. Studies have used different methodologies in estimating cross-subsidies, including which costs and benefits are included and over what timeframe the costs and benefits are considered. These methodological differences may help explain the lack of a consensus view on the magnitude of cross-subsidies. Also, any observed cross-subsidies may be affected by local factors, such as DG penetration and electricity demand growth, which may change over time. As a result, an estimate conducted in one state in one year cannot necessarily be extrapolated to all states in all future years. One synthesis of estimates conducted in or around 2015 found that net metering cost shifts range from $444 to $1,752 per net metering customer per year. Observers may disagree on how much of a cross-subsidy is large enough to warrant policy action. Net metering, and any associated cross-subsidies, is only one factor affecting electricity rates. A 2017 study assessed the potential rate effects of a variety of factors, including net metering, energy efficiency, natural gas prices, state renewable portfolio standards, the federal Clean Power Plan (which was never implemented), and utility capital expenditures. That study found that the rate effects of DG would likely be increases between 0.03 cents/kWh and 0.2 cents/kWh, compared to increases up to 3.6 cents/kWh caused by other factors. The possible presence of a cost shift does not necessarily mean that non-net metering customers are transferring money to net metering customers. The extent to which this might occur would depend, among other things, on net metering participation rates and ratemaking decisions made by regulators. There could be a delay in addressing cost shifts through normal ratemaking processes because those processes have inherent time lags. Further, cost shifts are not unique to DG. As noted in a guide for state regulators, "cost shifting, or subsidies, is unavoidable in practical rate design but regulators endeavor to mitigate these effects in the larger context of the many, often conflicting, rate design principles." <5.2. Responses to Retail Rates Concerns> Some states are seeking to move from the "close-enough proxy" of the retail rate to more precise allocations of system costs and benefits to net metering customers. Often state policy debates focus on addressing concerns about potential cross-subsidies from retail rate compensation. Conceptually, states are exploring two options: adding fixed charges (e.g., customer charge, demand charge) to net metering customers' bills or changing the compensation rate. In practice, states are considering variations of these options, and some states have implemented one of these options or both at the same time. <5.2.1. Fixed Charges> Adding fixed charges to net metering customers' bills is meant to allow utilities to recover costs for grid maintenance and operation. At the same time, this approach might preserve some perceived advantages for compensating net metering customers at the retail rate (e.g., administrative simplicity, ease of understanding). Proponents of this approach typically include utilities and some advocates for low-income customers. They often assert that adding fixed charges (or other revisions like alternative compensation rates) reduces cost shifting and increases fairness. Opponents typically include the solar industry and environmental advocates. They often contend that net metering promotes competition in the electricity industry and that fixed charges (or other revisions that would discourage DG) ignore societal benefits that DG (especially solar energy) can provide. In addition, while the concept of adding fixed charges may be straightforward, determining a value for fixed charges that accurately reflects net metering customers' use of the grid has been complex and controversial in practice. <5.2.2. Alternative Compensation Rates> Some states have adopted an alternative compensation rate that attempts to represent the energy costs the utility avoids when net metering customers supply some of their own energy (see Figure 3 ). This approach, referred to in this report as an avoided cost rate, is sometimes called an energy rate, a wholesale rate, a supply rate, or variations of these terms. While the retail rate reflects all costs associated with producing energy, operating and maintaining the grid, and other utility expenses, an avoided cost rate primarily reflects costs associated with producing energy. Some states also might consider network upgrades required to reliably integrate DG, especially solar PV. Depending on circumstances, the avoided cost rate might be estimated by a regulator using an independent methodology or by referral to wholesale electricity markets. Avoided cost rates are usually lower than retail rates. Another alternative compensation rate applies to net metering customers with installed solar PV. Under this method, net metering customers are compensated according to a value of solar (VOS) rate. As illustrated in Figure 3 , this approach reflects many of the same considerations as an avoided cost rate and, additionally, reflects estimated societal benefits associated with distributed solar PV (e.g., reduced air emissions). Solar advocates generally favor inclusion of societal benefits in all aspects of net metering policy and rate design. Some states (and stakeholders) may consider reduced greenhouse gas emissions a benefit of distributed solar PV as well. VOS is often calculated to be larger than avoided cost rates but smaller than retail rates, though states could potentially determine a VOS rate greater than the retail rate, depending on the perceived benefits of solar included in the analysis. A related compensation rate applies to any distributed energy resource (DER), not just distributed solar generation, and reflects estimated grid and societal benefits of DERs. New York is one state taking this approach. Regardless of which rate is set (i.e., avoided cost or VOS) and how it is calculated, it could be applied in either a buy-all, sell-all net metering arrangement or a net billing arrangement (see definitions in the section " What Is Net Metering? "). Points of debate about alternative compensation approaches have included which costs and benefits to consider, and how to quantify them. One challenge around quantification is that costs and benefits of DG can be time- and location-specific. Another challenge is that costs and benefits might change as the level of DG penetration changes. States vary in their approach to evaluating net metering, as evidenced by a 2018 analysis conducted for the U.S. Department of Energy (DOE). That analysis, which reviewed 15 state studies of net metering costs and benefits released between 2014 and 2017, noted that states used various assumptions, and that "the set of value categories included, and whether these categories represent costs or benefits, have a significant impact on the overall results of a given study." <6. Other State Net Metering Policy Provisions> In addition to differing in net metering compensation, state net metering policies differ in a variety of other aspects. Some differences pertain to provisions on program caps, source eligibility, credit retention, and system ownership. Provisions in these areas can affect deployment of DG. <6.1. Program Caps> Program caps, sometimes called aggregate capacity limits, set limits on the number of customers or amount of generation capacity that may participate. Program caps can be expressed in units of power (e.g., megawatts; MW), a percentage of electricity demand over some period of time, or other measures as determined by a state. The choice of whether to have program caps and, if so, how to define them can affect the amount of DG that a state's net metering policy might promote. Program caps may be established to reduce risks to the electricity system, such as potential reliability risks from DG, or reduce the likelihood that cross-subsidies would occur. Caps also might reduce the potential for sales losses or other negative financial impacts for utilities. On the other hand, program caps might create a barrier to achieving other policy goals, for example the renewable energy goals that some states have. <6.2. Source Eligibility> States specify which generation sources can participate in net metering, often based on capacity limits (i.e., generator size) and technology type. Solar energy is the dominant energy source for net metering capacity, but some states allow other energy types to participate as well. Whether a non-solar project will participate is usually due to cost factors, but other factors such as customer type (e.g., residential, commercial, or industrial) and location (e.g., urban, rural) may be influential as well. For example, combined heat and power facilities might be attractive mostly to large commercial and industrial customers that use steam. Distributed wind projects might be attractive mostly to farms or other customers with relatively large acreage. <6.3. Credit Retention> Net metering customers often have periods when their electricity consumption exceeds their generation and periods when the opposite is true. When net metering generation exceeds consumption, net metering customers can deliver this surplus generation to the grid. Many state net metering policies compensate net metering customers in some way for the total amount of electricity they generate, but some states only compensate the surplus generation (i.e., the amount delivered to the grid). Typically, if a net metering customer has a surplus over an entire billing period, the customer receives a credit on the next bill. States have different provisions for how long credits can carry over. Credit retention policies can determine the extent to which customers might reduce their total electricity costs to $0. <6.4. System Ownership> Many net metering customers have a single generator located behind a single electricity meter. A single-family home with a rooftop solar installation is one example. Other arrangements are possible though, and some states allow these. Aggregate net metering applies to single customers with multiple electricity meters on their property, for example farms, municipalities, or school districts. Shared net metering applies to multiple customers associated with the same net metering generation capacity, for example participants in community solar projects (sometimes called solar gardens). A version of shared net metering called virtual net metering applies when the shared project is located onsite, for example multi-family dwellings. A related policy is whether third party participation is allowed. In third party participation arrangements, such as solar leasing and power purchase agreements, the solar system is owned by an entity other than the electricity consumer on whose property the system is installed. <7. Areas of Congressional Interest> Some Members of Congress have introduced legislation addressing aspects of states' net metering policies. Some proposals would influence state policies directly. For example, S.Amdt. 3120 in the 114 th Congress would have limited the ability of state regulators to move net metering customers to lower compensation rates or to add fixed charges to their bills. S.Amdt. 3053 , also in the 114 th Congress, would have required state regulators to consider the extent to which their net metering policies created cross-subsidies. H.R. 4175 in the 116 th Congress would require states to consider adopting net billing policies for community solar. Other legislation would require studies to better understand the costs and benefits of net metering. For example, in a committee report on an FY2017 appropriations bill, Congress requested a DOE study on "the costs and benefits of net-metering and distributed solar generation to the electrical grid, utilities and ratepayers." DOE transmitted the report to Congress in 2019. In the 116 th Congress, S. 346 and H.R. 1009 would require the National Academies of Sciences, Engineering, and Medicine to study various aspects of net metering such as alternative incentives for DG, net metering planning and operating techniques, and consumer and industry incentives for net metering.

Net metering is a policy that allows electricity customers with their own generation capacity to be financially compensated for the energy they produce. Net metering is widely regarded as having an important role in deployment of distributed generation (DG), especially solar energy. State and local governments have authority to establish net metering policies, and some have done so for many years. Congress took action to encourage net metering in the Energy Policy Act of 2005 (EPACT05), and the policy now exists, in some form, in 45 states. Recent state net metering policy modifications, and potential effects on solar energy deployment, may be relevant to congressional discussions regarding the role of renewable energy sources in the nation's electricity system. Solar photovoltaic panels (e.g., rooftop solar) accounted for 97% of the generation capacity participating in net metering programs in 2018. Net metering participation roughly quadrupled from 2013 to 2018, according to data from the U.S. Energy Information Administration. Hawaii has the highest participation rate of any state, with 15% of electricity customers participating in net metering in 2018. In a majority of states, however, net metering customers account for less than 1% of total electricity customers. States differ in the way net metering customers are compensated. A common method is the retail rate, under which energy from net metering capacity offsets energy consumed from the grid in a one-to-one fashion. This method is often described as the "meter running backward." Retail rate compensation was initially adopted, in large part, for its administrative simplicity. Some stakeholders continue to prefer it for the relatively high payments it gives to net metering customers. Other stakeholders criticize retail rate compensation as overcompensating net metering customers for the electricity they produce. Part of this criticism comes from the fact that electricity retail rates reflect not just costs associated with generating electricity, but also costs associated with building, maintaining, and operating the transmission and distribution systems ("the grid"). Electricity rates are typically designed so that utilities can recover their total costs associated with providing electricity. If a sufficiently large number of customers participate in net metering, costs might increase for non-net metering customers in order to pay for the grid benefits. This possibility is known as a cross-subsidy, or sometimes a cost shift. In addition to these concerns about fairness, some critics of retail rate compensation raise concerns about equity, because historically most net metering customers have had above-average incomes. Empirical evidence of the cost increases for non-net metering customers is mixed, partly because studies make different assumptions about costs and benefits associated with DG. Some projections in different states have quantified a potential cross-subsidy, but projections in other states have concluded that the value of cross-subsidies are approximately zero. States have considered, and in some cases adopted, alternative compensation approaches to address concerns over cross-subsidies. One type of approach adds a fixed charge to net metering customers' bills to reflect the costs of maintaining the grid. Another type of approach provides an alternative compensation rate (i.e., not the retail rate) that net metering customers receive for the energy they deliver to the grid. Options for alternative compensation rates are avoided cost rates, which reflect primarily the utility's cost of producing electricity, and value of solar (VOS) rates, which additionally consider societal benefits such as reduced air emissions. Generally, rates that consider more benefits (and avoided costs) associated with DG have a higher monetary value and might promote greater levels of DG penetration. States have included different costs and benefits in analyses conducted to estimate alternative compensation rates, resulting in different monetary values for alternative rates. Even if states opted to include the same types of costs and benefits, they might derive different values for rates, since the relative costs and benefits of DG can vary based on local circumstances. Relevant local circumstances include overall penetration of DG, average and marginal electricity costs, congestion in transmission and distribution systems, and potentially other factors. Other state net metering policy provisions can affect deployment of DG. They relate to whether to adopt program caps, thereby limiting the number of participants; which technology type and what size generator are eligible; how long customers can "carry over" credits associated with surplus electricity generation; and what types of system ownership arrangements may participate in net metering. A related consideration is whether third parties, such as solar leasing firms, may develop DG in the state. Some Members of Congress have expressed interest in various aspects of net metering policy since passage of EPACT05. Legislation has sought to limit revisions that states can make to net metering policies; expand access to net metering for different types of electricity generation; and estimate costs and benefits associated with net metering, among other topics.

crs_R46217

crs_R46217_0

<1. Introduction> Many Indo-Pacific nations have responded to China's growing willingness to exert its influence in the region and globally as well as to the perception that the United States' commitment to the region may be weakening. In part those actions have fostered developing new strategies to strengthen their geopolitical position independent of the United States. Regional states have been concerned about numerous Chinese actions, including its extensive military modernization, its more assertive pursuit of maritime territorial claims and efforts to control international or disputed waters, placement of military assets on artificial islands it has created in the South China Sea, efforts to suppress international criticism or pushback through coercive diplomatic or economic measures, and its expanding global presence, including its military base at Djibouti. Economic dynamics may also be playing a role in governments' policymaking, as economic interdependence between China and virtually all its neighbors remains very strong, and the Belt and Road Initiative (BRI) may further deepen trade and investment links between China and regional states. That increased economic interdependence, coupled with China's increasing assertiveness and willingness to use economic levers for political reasons, may be heightening Indo-Pacific nations' strategic mistrust of Beijing. Other shifts affecting the geostrategic balance in the region include the rise of North Korea as a nuclear power, Japan's nascent reacquisition of power projection capabilities, and the introduction of new military technologies (e.g., drones, anti-ship missiles) that appear to challenge traditional elements of military power, which could potentially erode U.S. (and other large military powers') traditional military advantages. Indo-Pacific nations recently appear to be accelerating the adoption of hedging strategies, at least in part because of the Trump Administration's perceived retreat from the United States' traditional role as guarantor of the liberal international order. Understanding these strategies may be important for Congress as it addresses U.S. diplomatic, security, and economic interests in the region and exerts oversight over the Trump Administration's policies towards U.S. allies and partners. The Trump Administration has sent conflicting signals about its posture in Asia. The Administration's 2018 National Defense Strategy emphasizes the need to "Strengthen Alliances and Attract New Partners." In addressing the need to "expand Indo-Pacific alliances and partnerships" the document states, "We will strengthen our alliances and partnerships in the Indo-Pacific to a networked security architecture capable of deterring aggression, maintaining stability, and ensuring free access to common domains to preserve the free and open international system." Similarly, the Department of Defense Indo-Pacific Strategy Report: Preparedness, Partnerships, and Promoting a Networked Region of June 2019 calls for a "more robust constellation of allies and partners." In an address to the U.S. Naval Academy in August 2019, Secretary of Defense Mark Esper described the Indo-Pacific as "our priority theater" and stated allies and partners want us to lead but to do that we must also be present in the region. Not everywhere, but we have to be in the key locations. This means looking at how we expand our basing locations, investing more time and resources into certain regions we haven't been to in the past. Counter to these statements' emphasis on allies and partners, however, the Trump Administration has appeared to some less-engaged on regional issues, sending lower-level officials to key regional summits, withdrawing from the proposed Trans-Pacific Partnership (TPP) trade agreement, and canceling joint exercises with South Korea. In addition, President Trump has openly questioned the value many of the United States' alliance relationships, particularly with Japan and South Korea. As a result, some observers note that U.S. allies and partners also may be increasingly concerned over aligning too closely with the United States at a time when the United States' commitment to the region is questioned, even as many in the region hope that the United States continues to play a dominant or balancing role in Asia. For many in Asia, the strategic picture has been complicated further by the Trump Administration's trade policies, which are sometimes perceived as asking partners to choose between the United States and China both critical trade and investment relationships that have been crucial to their economic successes over the past few decades. In response to these developments, some allies and partners are expanding their defense budgets, embarking on major arms purchases, and looking to create new defense and security networks to strengthen their collective ability to maintain their independence from Chinese influence. Within this evolving context, regional states are adjusting their strategic calculations. A number of trends appear to be emerging across the Indo-Pacific: Several regional states have sought to develop new intra-Asian security partnerships to augment and broaden existing relationships. Japan, Australia, and India are among the most active in this regard; Numerous Asian states have adopted an "Indo-Pacific" conception of the region, strategically linking the Indian and Pacific Ocean regions. However, the concept remains vague and not all states agree on what it means; Many regional states have increased defense spending, although spending as a percentage of GDP has been relatively steady, and some have adopted more outward-looking defense strategies. Congress has sought to address questions about whether these developments present the United States with challenges and/or opportunities to promote U.S. interests in the Indo-Pacific, and to assess the efficacy of the Trump Administration's strategy towards the region. Some Members of Congress have also sought to demonstrate Congress's commitment to maintaining and expanding both alliance and other relationships in the Indo-Pacific. In December 2018, for instance, the 115 th Congress passed, and President Trump signed into law, the Asia Reassurance Initiative Act of 2018 (ARIA; P.L. 115-409 ), which provides a broad statement of U.S. policy for the Indo-Pacific region and establishes a set of reporting requirements for the executive branch regarding U.S. policy in the region. ARIA emphasizes the need to "expand security and defense cooperation with allies and partners" and to "sustain a strong military presence in the Indo-Pacific region." It states that "Without strong leadership from the United States, the international system, fundamentally rooted in the rule of law, may wither.... It is imperative that the United States continue to play a leading role in the Indo-Pacific." In addition to numerous pieces of legislation aimed at addressing challenges associated with China, the 116 th Congress has also introduced numerous pieces of legislation that seek to emphasize U.S. commitment to the region, including to U.S alliances and partnerships, and to guide U.S. policy. Relevant legislation includes: S. 2547 Indo-Pacific Cooperation Act of 2019; S.Res. 183 Reaffirming the vital role of the United States-Japan alliance in promoting peace, stability, and prosperity in the Indo-Pacific region and beyond, and for other purposes; H.Res. 349 Reaffirming the vital role of the United States-Japan alliance in promoting peace, stability, and prosperity in the Indo-Pacific region and beyond; S.Res. 67 Expressing the sense of the Senate on the importance and vitality of the United States alliances with Japan and the Republic of Korea, and our trilateral cooperation in the pursuit of shared interests; H.Res. 127 Expressing the sense of the House of Representatives on the importance and vitality of the United States alliances with Japan and the Republic of Korea, and our trilateral cooperation in the pursuit of shared interests; S. 985 Allied Burden Sharing Report Act of 2019; H.R. 2047 Allied Burden Sharing Report Act of 2019; and H.R. 2123 United States-India Enhanced Cooperation Act of 2019. <2. Japan> <2.1. Indo-Pacific Vision and Strategic Context> Since Prime Minister Shinzo Abe delivered a speech before the Indian Parliament in 2007 during his first term, Japan has been at the forefront of promoting the concept of the Indian Ocean and Pacific Ocean regions as a single strategic space. Japan is driven, among other things, by its fear of China's increasing power and influence in the region. Although Sino-Japanese relations have stabilized in 2018 and 2019 following several years of heightened tensions, Tokyo's security concerns about China's intentions have been exacerbated by a territorial dispute over a set of islands in the East China Sea (known as the Senkakus in Japan and the Diaoyutai in China), where China has sought over the past decade to press its claims through a growing civilian and maritime law enforcement presence. Abe is reportedly anxious to establish a regional order that is not defined by China's economic, geographic, and strategic dominance, and has sought new partners who can offer a counterweight to China's clout. Expanding the region to include the South Asian subcontinent some claim that Abe himself coined the concept of the "Indo-Pacific" broadens the strategic landscape. Japan's insecurity is heightened by perceptions that the United States may be a waning power in the region. Japan wants the United States to remain a dominant presence, and the Trump Administration's Free and Open Indo-Pacific formulation asserts that the United States must demonstrate leadership and stay engaged. Japan's Free and Open Indo-Pacific strategy differs from the U.S. formulation in some ways, particularly in how the region is defined geographically. Tokyo has a broader view of the Indo-Pacific, encompassing not just the Indian Ocean but extending to the east coast of Africa while the U.S. concept does not. Japan and India are working together to develop an Asia Africa Growth Corridor (AAGC), which seeks to coordinate their efforts with other countries to develop regional economic linkages, connectivity, and networks between Asia and Africa. (The AAGC is also a component of the India Japan Joint Vision 2025 for the Indo-Pacific Region, a joint statement signed by the leaders of Japan and India in 2018 to deepen defense cooperation and to facilitate the sale of defense equipment from Japan to India. ) Because of constitutional limitations on Japan's military, Tokyo's Indo-Pacific focus is on infrastructure improvement, trade and investment, and governance programs, another key difference from the Trump Administration's Indo-Pacific strategy, which includes significant military and security elements. Despite legal limitations, the Abe government is seeking to increase its security cooperation as part of its Indo-Pacific strategy. In December 2018, Japan released a pair of documents that are intended to guide its national defense efforts, including the defense budget, over the next decade the National Defense Pro gram Guidelines for FY2019 and B eyond and the Medium Term Defense Program ( FY2019 - FY2023 ) . With concerns over China and North Korea at their heart, the guidelines layout a continued dual strategy of strengthening Japan's own defense program while also strengthening security cooperation with the United States and other countries. The 2019 National Defense Program Guidelines show stark shifts in content from previous iterations. Importantly, the document emphasizes Japan's own defense efforts independent of the security cooperation with the United States, stating upfront that as a matter of national sovereignty "Japan's defense capability is the ultimate guarantor of its security and the clear representation of the unwavering will and ability of Japan as a peace-loving nation." The document calls for enhancing Japan's capabilities in traditional security domains (land, air, and sea), such as with increasing the use of unmanned vehicles and operationally flexible Short Take-Off and Vertical Landing (STOVL) fighter aircraft. It also highlights the importance of "new domains" such as cyber, space, and the electromagnetic spectrum. Overall, Japan aims for efforts with the United States to remain on a similar trajectory as the past, but it places more emphasis on cooperation with Australia and India, and less with South Korea. <2.2. Relations with the United States> Japanese leaders particularly Prime Minister Shinzo Abe have deepened defense cooperation with the United States for the past two decades as part of their efforts to ensure China does not become a regional hegemon. Among Abe's efforts to strengthen the alliance are updating the bilateral defense guidelines, re-interpreting a constitutional clause to allow for collective self-defense activities, pushing legislation through the Japanese parliament to allow for broader engagement with the United States, and pressing for the construction of a controversial U.S. Marine air base in Okinawa. Japan continues to put its alliance with the United States at the center of its security strategy, despite some significant differences with U.S. foreign policy under the Trump Administration that could threaten Tokyo's desire to keep the United States engaged in the region. Many in Japan are anxious that President Trump's approach to dealing with North Korea may marginalize Tokyo's primary concerns with North Korea's short and medium-range missile capabilities and the fate of several Japanese nationals abducted by North Korean agents in the 1970s and 1980s. Japan has also expressed disappointment with the U.S. decision to withdraw from the Paris Climate Accord. Japan was also dismayed at the U.S. decision to withdraw from the TPP in 2017. Japan views the multilateral trade agreement as a fundamental element of its Indo-Pacific strategy, and led the effort to salvage the agreement, now known as the TPP-11 (or as the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, or CPTPP). The pact entered into force at the end of 2018. Although Japan reached a limited trade agreement with the United States in 2019, it received no assurance that the Trump Administration will not impose tariffs on its auto industry. In 2020 Japan is due to re-negotiate its burden sharing arrangement that offsets the cost of stationing U.S. military forces on its territory and anticipates that the Trump Administration will demand a significant increase in Japan's contribution. <2.3. Defense Spending> Japan's supplementary 2019 Medium Term Defense Program lays out a detailed picture of intended activities. The Program projects a five-year expenditure plan that would cost 27,470 billion (about US$250 billion ), although it also suggests the annual defense budget target would be 25,500 billion, or US$232 billion. The 2019 Medium Term Defense Program indicates that the majority of the increased budget will be spent on more up-to-date weapons technology, such as the continued replacement of old F-15 jets with F-35As and the introduction of STOVL F-35s. Another major expense is plans to procure a new type of destroyer and to retrofit one of their current destroyer-class vessels (Izumo-class helicopter carrier) with capabilities to accommodate the STOVL aircraft. Further, the program calls for the procurement of a variety of missiles and missile-defense systems. In this area Japan has already agreed to expand its Aegis ballistic missile defense systems at a reported cost of $2.15 billion , announced plans to build new medium- and long-range cruise missiles , and agreed to a much smaller purchase joint strike missiles that will give it land-attack capabilities from the air for the first time. These advanced systems enhance Self Defense Forces (SDF, Japan's name for its military) capabilities and underscore Japan's commitment to shoulder more of its security needs instead of relying on U.S. protection. The Program calls for "reorganization of the major SDF units," and personnel levels are expected to increase by about three percent since the 2000s. <2.4. Emerging Strategic Relationships> Japan's defense relationships with countries other than the United States are less developed but Japan is actively working to expand its security partnerships beyond the United States. Some analysts suggest these efforts reflect concern about the durability of the U.S. alliance and a general need to diversify security partners. <2.4.1. Australia> Ties with Australia have become increasingly institutionalized and regular. Australia is Japan's top energy supplier, and a series of economic and security pacts have been signed under Abe, including a $40 billion gas project, Japan's biggest ever foreign investment. In 2007, the two nations reached agreement on a Joint Declaration on Security Cooperation , and in 2017, Tokyo and Canberra signed an updated acquisition and cross-servicing agreement (ACSA). As another U.S. treaty ally, Australia uses similar practices and equipment, which may make cooperation with Japan more accessible. Although Japan had some difficult World War II history with Australia , Abe himself has made efforts to overcome this potential obstacle to closer defense ties. In 2014, during the first address to the Australian parliament by a Japanese Prime Minister, Abe explicitly referenced "the evils and horrors of history" and expressed his "most sincere condolences towards the many souls who lost their lives. " In 2018, Abe visited Darwin, the first time a Japanese leader visited the city since Imperial Japanese forces bombed it during World War II. In 2018, Japan and Australia "reiterated their determination to work proactively together and with the United States and other partners to maintain and promote a free, open, stable and prosperous Indo-Pacific founded on the rules-based international order. " Despite advancements, Canberra and Tokyo do have some differences; for example they have struggled to conclude a visiting forces agreement over a variety of concerns, including Japan's adherence to the death penalty, which could mean that an Australian soldier convicted of a heinous crime could face a death sentence, which contravenes Australia's legal system. <2.4.2. India and the "Quad"> The concept of the Free and Open Indo-Pacific is particularly appealing to Japan because of its strong relationships with India and Australia, and Abe has pursued cooperation with these maritime democracies and the United States as part of the "quad" grouping. During Abe's first stint as Prime Minister in 2006-2007, he pursued tighter relations with India, both bilaterally and as part of his "security diamond" concept. Under Abe and Prime Minister Narendra Modi, interest in developing stronger ties intensified, and the two countries have developed more bilateral dialogues at all levels of government, supported each other on areas of mutual concern, and bolstered educational and cultural exchanges. Analysts point to mutual respect for democratic institutions, as well as shared strategic and economic interests, that have allowed the relationship to flourish. Japan and India both of which have long-standing territorial disputes with China have sought to increase their bilateral cooperation in apparent response to alarms raised by China's actions over the past decade perceived as too assertive or even aggressive. Japanese companies have made major investments in India in recent years, most notably with the $100 billion Delhi-Mumbai Industrial Corridor project, and Japanese investment already plays a central role in providing regional alternatives to China's BRI. In October 2018 Prime Ministers Abe and Modi reaffirmed their commitment to bilateral economic and defense cooperation at the 13 th annual India Japan Summit. Japan and India have expanded joint military exercises to include army and air force units in addition to the annual Malabar naval exercise. Many analysts see engaging India in a broader security framework as the primary challenge to establishing a quadrilateral arrangement. The United States has treaty alliances with both Japan and Australia, and Japan and Australia have also developed a sophisticated security partnership in the past decade. India, however, appears to have been more reluctant to sign on to international commitments from its legacy as a "non-aligned movement" state and is more reluctant to antagonize Beijing. <2.4.3. The Association of Southeast Asian Nations (ASEAN)> Japan has maintained a consistent level of economic and diplomatic engagement with ASEAN countries for several decades. Although more limited, Japan also has expanded the security dimension of its relationships with several Southeast Asian countries under Abe's stewardship. Maritime security has been a particular focus with Vietnam, the Philippines, and Malaysia. Japan has participated in a multitude of regional fora that address maritime issues and has deployed its Coast Guard to work with ASEAN countries. Japan promotes cooperation and provides resources to address anti-piracy, counter-terrorism, cyber security, and humanitarian assistance and disaster response in Southeast Asia. <2.4.4. The North Atlantic Treaty Organization (NATO)> Japan also has sought to deepen ties with the North Atlantic Treaty Organization (NATO). Japan is considered NATO's longest standing partner outside of Europe, and recently has participated in exercises in the Baltic Sea with the Standing NATO Maritime Group One . With an emphasis on maritime security, Japan participates in the Partnership Interoperability Platform (which seeks to develop better connectivity b etween NATO and partner forces) , provides financial support for efforts to stabilize Afghanistan, and takes part in assorted other NATO capacity building programs . <3. India> <3.1. Indo-Pacific Vision and Strategic Context> New Delhi broadly endorses the Free and Open Indo-Pacific strategy pursued by Washington, and India benefits from the higher visibility this strategy provides for India's global role and for its immediate region. Despite its interest in working more closely with the United States, India has not fully relinquished the "nonalignment" posture it maintained for most of the Cold War (more recently pursuing "strategic autonomy" or a "pragmatic and outcome-oriented foreign policy" ). It continues to favor multilateralism and to seek a measure of balance in its relations with the United States and neighboring China. New Delhi sees China as a more economically and militarily powerful rival, and is concerned about China's growing presence and influence in South Asia and the Indian Ocean region. Thus, Prime Minister Modi has articulated a vision of a free, open, and inclusive Indo-Pacific, and India has engaged Russia, Japan, Australia, and other Indo-Pacific countries as potential balancers of China's influence while remaining wary of joining any nascent security architectures that could antagonize Beijing. While India endorses the United States' Free and Open Indo-Pacific strategy, its own approach differs in significant ways. [I]t gives equal emphasis to the term 'inclusive' in the pursuit of progress and prosperity, including all nations in this geography and "others beyond who have a stake in it"; it does not see the region as a strategy or as a club of limited members; it does not consider such a geographical definition as directed against any country; nor as a grouping that seeks to dominate. Some observers have described India's foreign policy under Modi as having new dynamism as India seeks to transform its Look East policy into an Act East policy. The inaugural Singapore-India-Thailand Maritime Exercise (SITMEX) was held in the Andaman Sea in September 2019 and has been viewed by observers as "a tangible demonstration of intra-Asian security networking." By some accounts, India is poorly suited to serve as the western anchor of the Free and Open Indo-Pacific, given its apparent intention to maintain strategic autonomy, and its alleged lack of will and/or capacity to effectively counterbalance China. Moreover, many in India consider a Free and Open Indo-Pacific conception that terminates at India's western coast (as the Trump Administration's conception appears to do) to be "a decidedly U.S.-centric, non-Indian perspective" that omits a huge swath of India's strategic vista to the west. <3.2. Relations with the United States> Most analysts consider that the Modi/BJP victory in spring 2019 parliamentary elections has empowered the Indian leader domestically and on the global stage. Given Modi's reputation for a "muscular" foreign policy, this could lead to a greater willingness to resist Chinese assertiveness and move closer to the United States while not abandoning multilateral approaches. Yet challenges with the United States loom: many Indian strategic thinkers say their country's national interests are served by continued engagement with Russia and Iran, and thus contend there will be limits to New Delhi's willingness to abide "America's short-term impulses." While New Delhi generally welcomes the U.S. Free and Open Indo-Pacific strategy, Indian leaders continue to demur from confronting China in most instances. <3.3. Defense Spending> Since 2009, India's budget has grown at an average annual rate of 9%. However, as a percentage of the country's GDP, defense expenditures have decreased. More than half (51%) of India's 2019-2020 defense budget is allocated for salaries and pensions, including 70% for the Indian Army. While military modernization efforts continue, they are not taking place at the rate called for by many Indian defense analysts. Much of the country's defense equipment falls into the "vintage" category, including more than two-thirds of the Army's wares. Over the past decade capital outlays (which include procurement funds) have declined as a proportion of the total defense budget. This decline has contributed to a slowing of naval and air force acquisitions, in particular, and a continued heavy reliance on defense imports (about 60% of India's total defense equipment is imported, the bulk from Russia). Stalled reforms in the defense sector have delayed modernization efforts, which some analysts say are already hampered by ad hoc decision making and a lack of strategic direction. In the words of one senior observer, "In fact, it is India's dependence on arms imports and their corrupting role that are at the root of the Indian armed forces' equipment shortages and the erosion in the combat capabilities." New Delhi seeks to diversify its defense suppliers, recently making more purchases from Israel and the United States, among others. <3.4. Emerging Strategic Relationships> India is pursuing bilateral relations with Japan and Australia in a manner largely consistent with the strategic objectives of the Trump Administration's Free and Open Indo-Pacific strategy, while India's bilateral relations with China, Russia and Iran could present challenges for that strategy. Despite India's interest in engaging with other regional powers in the Indo-Pacific, the 2019 Modi/BJP election win is expected to see a continuation of New Delhi's multilateralist approach to international politics in Asia, continuing to pursue stable relations with all powers, including China and Russia. India is a full member of the Shanghai Cooperation Organization (SCO), a regional grouping that also includes China, Russia, Pakistan and several Central Asian nations, and conducts regular trilateral summits with China and Russia. It has been resistant to outright confrontation with Beijing, even as it resists Chinese "assertiveness" in South Asia. <3.4.1. Japan and Australia> India's deepening "strategic partnership" with Japan is a major aspect of New Delhi's broader "Act East" policy and is a key axis in the greater Indo-Pacific strategies broadly pursued by all three governments now participating in a newly established U.S.-Japan-India Trilateral Dialogue. U.S., Indian, and Japanese naval vessels held unprecedented combined naval exercises in the Bay of Bengal in 2007, and trilateral exercises focused on maritime security continue. India-Australia defense engagement is underpinned by the 2006 Memorandum on Defence Cooperation and the 2009 Joint Declaration on Security Cooperation. India and Australia also develop their maritime cooperation through the AUSINDEX biennial naval exercise. <3.4.2. China> India's relations with China have been fraught for decades, with signs of increasing enmity in recent years. Areas of contention include major border and territorial disputes, China's role as Pakistan's primary international benefactor, the presence in India of the Dalai Lama and a self-described Tibetan "government," and China's growing influence in the Indian Ocean region, which Indians can view as an encroachment in their neighborhood. New Delhi is ever watchful for signs that Beijing seeks to "contain" Indian influence both regionally and globally. China's BRI with "flagship" projects in Pakistan is taken by many in India as an expression of Beijing's hegemonic intentions. Despite these multiple areas of friction in the relationship, China is India's largest trade partner, and New Delhi's leaders are wary of antagonizing their more powerful neighbor and emphasize an "inclusive" vision for the Indo-Pacific region. There is cooperation on some issues, including on global trade and climate change. A mid-2018 summit meeting in Wuhan, China, was seen as a mutual effort to reset ties and "manage differences through dialogue;" this "Wuhan spirit" was carried into a subsequent informal summits, the most recent held in Chennai, India, in October 2019. <3.4.3. Russia> India maintained close ties with Russia throughout much of the Cold War, and it continues to rely on Russia for the bulk of its defense imports, as well as significant amounts of oil and natural gas. With the 2017 enactment of the Countering America's Adversaries Through Sanctions Act (CAATSA, P.L. 115-44 ), India's continued major arms purchases from Russia most prominently a multi-billion-dollar deal to purchase the Russian-made S-400 air defense system could trigger U.S. sanctions. <3.4.4. Iran> India has also had historically friendly relations with Iran, a country that lately has supplied about 10-12% of India's energy imports. It also opposes Tehran's acquisition of nuclear weapons and supports the Joint Comprehensive Plan of Action. Historically averse to unilateral (non-UN) sanctions, New Delhi until recently enjoyed an exemption from U.S. efforts targeting Iran's energy sector. In April 2019, the Trump Administration announced an end to such exemptions, and India is reported to have fully ceased importation of Iranian oil in early May, while informing Washington that the move "comes at a cost." New Delhi considers its $500 million investment in Iran's Chabahar port crucial to India's future trade and transit with Central Asia (the project is exempt from U.S. sanctions ). <4. Australia> <4.1. Indo-Pacific Vision and Strategic Context> Australia is responding to increasing geopolitical uncertainty and the rise of China in the Indo-Pacific region by maintaining a strong alliance relationship with the United States, increasing defense spending, purchasing key combat systems from a variety of suppliers, and seeking to develop strategic partnerships with Japan, India and others. Australia, situated between the Indian and Pacific Oceans, increasingly thinks of itself as deeply embedded in the Indo-Pacific region. This is evident in the emphasis on the Indo-Pacific concept in the Australian Government's 2017 Foreign Policy White Paper. While Australia's focus early in its history was on its place within the British Empire and the "tyranny of distance" that placed it on the periphery of the world for much of its history, it now finds itself situated in a region that has accounted for the majority of global economic growth over the past two decades. Leading Australian strategic thinkers view the Indo-Pacific as a largely maritime, strategic, and geo-economic system "defined by multi-polarity and connectivity in a globalized world." While Australia shares the values of the Free and Open Indo-Pacific concept, and many in Australia are concerned with China's growing influence in Australia, the South Pacific and the Indian Ocean, it is Australia's geography, as well as its broader interests, that are at the core of its Indo-Pacific strategy. Australian Minister for Defence Linda Reynolds stated: Australia's Indo Pacific vision reflects our national character and also our very unique sensibilities. We want a region that is open and inclusive; respectful of sovereignty; where disputes are resolved peacefully; and without force or coercion. We want a region where open markets facilitate the free flow of trade, of capital and of ideas and on where economic and security ties are being continually strengthened. We want an Indo-Pacific that has ASEAN at its heart and is underpinned by the rule of law with the rights of all states being protected. Australia's vision is also one that includes a fully-engaged United States. Popular Australian attitudes towards China have changed in recent years. Australian perceptions of China have been shaped, to a large extent, by the economic opportunity that China represents. Revelations regarding China's attempts to influence Australia's domestic politics, universities, and media, have negatively influenced Australians' perceptions of China and the Australian government is undertaking a number of measures to counter China's growing influence in the country. On June 28, 2018, the Australian parliament passed new espionage, foreign interference and foreign influence laws "creating new espionage offences, introducing tougher penalties on spies and establishing a register of foreign political agents." In August 2018, Australia blocked Chinese telecommunications firm Huawei from involvement in Australia's 5-G mobile network. Canberra also has been focused on Chinese political engagement, investment, and influence operations globally, particularly in the Pacific Islands, a region Australia considers strategically important to its own national interest. In responding to reports of China's reported efforts to establish a military presence in Vanuatu, former Australian Prime Minister Malcolm Turnbull stated, "We would view with great concern the establishment of any foreign military bases in those Pacific island countries." Australia has also been concerned about the impact of Chinese development aid to Pacific island states, which, as tracked by the Australian Lowy Institute Mapping Foreign Assistance in the Pacific project, increased significantly from 2006 to 2016, with cumulative aid commitments totaling $1.78 billion over that period. It has responded with a significant policy pivot to step up its own focus on the South Pacific. This is demonstrated by a number of recent actions, including Prime Minister Morrison's visit to Vanuatu and Fiji, increased aid from Australia to Pacific island states, and Australia, Papua New Guinea and the United States' joint development of the Lombrum naval facility on Manus Island in Papua New Guinea. The Pacific Islands receive 31% of Australia's foreign assistance budget of $3.1 billion. Australia, New Zealand, and the United States held an inaugural Pacific Security Cooperation Dialogue in June 2018 "to discuss a wide range of security issues and identify areas to strengthen cooperation with Pacific Island countries on common regional challenges." Responding to China's growing influence is a key driver of Canberra's Indo-Pacific strategy, and Australia has taken a number of steps to develop its economic engagement in the Pacific both independently and in coordination with the U.S. and Japan. Australia, Japan and the United States have shared understandings of the need for developing sustainable and economical alternatives to China's Belt and Road geo-economic strategy even as the three nations have somewhat different perspectives on the Free and Open Indo-Pacific concept. By some estimates, there is a need for $26 trillion in infrastructure development in Asia through 2030. Australia's 2017 Department of Foreign Affairs and Trade (DFAT) white paper pointed out that: Even as growth binds the economies of the Indo-Pacific, trade and investment and infrastructure development are being used as instruments to build strategic influence, as well as to bring commercial advantage. In the past, the pursuit of closer economic relations between countries often diluted strategic rivalries. This geo-economic competition could instead accentuate tension. Export Finance Australia provides loans, guarantees, bonds, and insurance options to "enable SMEs, corporates and governments to take on export-related opportunities, and support infrastructure development in the Pacific region and beyond." In February 2018, the Overseas Private Investment Corporation and Australia's Department of Foreign Affairs and Trade signed a bilateral Memorandum of Understanding on joint infrastructure investment in the Pacific. In November 2018, the United States, Australia and Japan moved forward with their coordinated effort to address regional infrastructure needs. Australia's Department of Foreign Affairs and Trade (DFAT) and Export Finance and Insurance Corporation (Efic), the Japan Bank for International Cooperation (JBIC), and the U.S. Overseas Private Investment Corporation (OPIC) signed a Trilateral Memorandum of Understanding (MOU) to operationalize the Trilateral Partnership for Infrastructure Investment in the Indo-Pacific. Through the MOU, we intend to work together to mobilize and support the deployment of private sector investment capital to deliver major new infrastructure projects, enhance digital connectivity and energy infrastructure, and achieve mutual development goals in the Indo-Pacific. This effort has been described as "an obvious reaction to China's regional ambitions." Australia also supports the Pacific Islands Forum, a multilateral organization aimed at enhancing cooperation among Pacific governments. <4.2. Relations with the United States> A traditional cornerstone of Australia's strategic outlook is the view that the United States is Australia's most im portant strategic partner and a key source of stability in the Asia-Pacific region. The ongoing strength of the bilateral defense relationship with the U.S., as well as growing multilateral connections, was demonstrated through the July 2019 Talisman Sabre military exercise that included 34,000 personnel from the U.S. and Australia as well as embedded troops from Canada, Japan, New Zealand and the United Kingdom and observers from India and South Korea. In 2018, however, heightened concern emerged in Australia about its relationship with the United States under President Trump's leadership. At the same time, Australians' support for the Australia-New Zealand United States (ANZUS) Alliance remains high. A 2019 Lowy Institute poll found that 73% of Australians feel that the alliance with the U.S. "is a natural extension of our shared values and ideals." One recent study conducted at the United States Studies Centre at the University of Sydney is concerned that the United States "no longer enjoys military primacy in the Indo-Pacific and its capacity to uphold a favourable balance of power is increasingly uncertain." It recommends that, "A strategy of collective defence is fast becoming necessary as a way of offsetting shortfalls in America's regional military power and holding the line against rising Chinese strength." The 2019 Australia-U.S. Ministerial (AUSMIN) consultations "emphasized the need for an increasingly networked structure of alliances and partnerships to maintain an Indo-Pacific that is secure, open, inclusive and rules-based." It also "welcomed a major milestone in the Force Posture Initiatives, as the rotational deployment of U.S. Marines in Darwin has reached 2,500 personnel in 2019. The principals emphasized the value of Marine Rotational Force Darwin (MRF-D) in strengthening the alliance, and in deepening engagement with regional partners." MRF-D was a key project of the Obama Administration's "rebalance to Asia" strategy. Following the 2019 AUSMIN meeting, Australian Prime Minister Scott Morrison announced on August 21 that Australia would join the U.S.-led effort to protect shipping in the Strait of Hormuz. <4.3. Defense Spending> Australia's budget for 2019-20 focused on building defense by enhancing our regional security, building defence capability and supporting Australia's sovereign defence industry. The Budget maintains the Government's commitment to grow the Defence budget to two per cent of GDP by 2020 21. The Government will allocate Defence [A]$38.7 billion in 2019-20. Over the decade to 2028 the Australian government is investing more than A$200 billion in defense capabilities . (1A $ =0.69US $ ) This investment includes a number of key weapons systems including the F-35 Joint Strike Fighter, P-8A Poseidon maritime surveillance aircraft, and upgrades to the EA-18G Growler electronic attack aircraft and E-7A Wedgetail battle space management aircraft. The Royal Australian Air Force took delivery of 2 F-35A Joint Strike fighters in December 2018. These are the first of a total of 72 F-35A aircraft ordered by Australia. Australia has also moved to acquire nine British BAE Systems designed Hunter class frigates valued at A$35 billion. The purchase of the Hunter class frigates is expected to improve interoperability between the Australian and British navies while enhancing British ties to a Five Power Defence Arrangement (FPDA) partner. Australia will also purchase 12 Shortfin Barracuda submarines designed by DCNS of France for A$50 billion. Australi a is also acquiring 211 Combat R econnaissance Vehicles and unmanned maritime patrol aircraft including the Triton. <4.4. Emerging Strategic Relationships> Shifts in the geostrategic dynamics of Asia are leading Australia to hedge, increasingly by partnering with other Asian states, against the relative decline of U.S. engagement in the region. Australian efforts to develop broader security cooperation relationships can be seen in the AUSINDEX exercise between Australia and India, through the Pacific Endeavor naval deployment, which visited India, Indonesia, Malaysia, Singapore, Sri Lanka, Thailand and Vietnam, and through the inclusion of Japan in the U.S.-Australia Talisman Sabre exercise for the first time in 2019. Increasing numbers of high level visits and joint military exercises between Australia and India point to common concerns "about a rising China and its strategic consequences on the Indo-Pacific strategic order." Such developments also mark change in the regional security architecture which has been grounded in the post-war San Francisco "hub-and-spoke" system of U.S. alliances. This shift towards security networks in which middle powers in Asia increasingly rely on each other could build on and complement these states' ties with the United States. In its white paper outlining its strategy for pursuing deeper partnerships in the Indo-Pacific, the government noted, The Indo Pacific democracies of Japan, Indonesia, India and the Republic of Korea are of first order importance to Australia, both as major bilateral partners in their own right and as countries that will influence the shape of the regional order. We are pursuing new economic and security cooperation and people-to-people links to strengthen these relationships. Australia will also work within smaller groupings of these countries, reflecting our shared interests in a region based on the principles ... Australia remains strongly committed to our trilateral dialogues with the United States and Japan and, separately, with India and Japan. Australia is open to working with our Indo Pacific partners in other plurilateral arrangements. Another recent example of Australia's efforts to develop new economic and security cooperation with regional states includes Australia's developing relationship with Vietnam. Bilateral trade between Australia and Vietnam grew by 19.4% in 2018 to $7.72 billion. Australia and Vietnam officially upgraded their relationship to a "Strategic Partnership" during a visit to Australia by Vietnamese Prime Minister Nguyen Xuan Phuc in March 2018 and Australian naval ships visited Cam Ranh Bay in May 2019 as part of increasing naval cooperation between the two nations. This was followed by a visit by Australian Prime Minister Scott Morrison to Vietnam in August 2019. During the official visit, Morrison and Prime Minister Nguyen Xuan Phuc reportedly discussed rising tensions in the South China Sea. At their joint news conference, Phuc stated, "We are deeply concerned about the recent complicated developments in the East Sea (South China Sea) and agree to cooperate in maintaining peace, stability, security, safety and freedom of navigation and overflight." <5. European Countries> In recent years, some European countries, particularly France and the United Kingdom (UK), have deepened their strategic posture in the Indo-Pacific. Although both countries remain relatively modest powers in the region, a growing French and British presence can support U.S. interests. Through their strategic relations, arms sales, and military-to-military relationships, France and the UK have the ability to strengthen the defense capabilities of regional states and help shape the regional balance of power. In recent years, France and the UK are networking with like-minded Indo-Pacific nations to bolster regional stability and help preserve the norms of the international system. These efforts reinforce the United States' goal of maintaining regional stability by strengthening a collective deterrent to challenges to international security norms. Such challenges include China's construction and militarization of several artificial islands in the South China Sea, its increasingly aggressive behavior in asserting its maritime claims, and the extension of PLA Navy patrols into the Indian Ocean. Additionally, some European countries have dispatched naval vessels to the East China Sea to help enforce United Nations Security Council resolutions against North Korea, providing opportunities for cooperation with the United States and other U.S. partners on other issues, such as the South China Sea. <5.1. France> France has extensive interests in the Indo-Pacific region. These include 1.6 million French citizens living in French Indo-Pacific territories and an extensive exclusive economic zone (EEZ) of 9 million square kilometers derived from those territories. France has regional military installations in its territories as well as in Djibouti and the UAE and reportedly sends its warships into the South China Sea. In total, about 7,000 French military personnel are deployed to five military commands in the region. France is part of the FRANZ Arrangement with Australia and New Zealand and is a member of the Quadrilateral Defense Coordination Group with Australia, New Zealand, and the United States. The French Territory of New Caledonia, which voted to remain part of France in a November 4, 2018, referendum, has a population of approximately 270,000 and 25% of the world's nickel reserves. In the lead-up to the referendum, French President Emmanuel Macron stated "in this part of the globe China is building its hegemony we have to work with China but if don't organize ourselves, it will soon be a hegemony which will reduce our liberties, our opportunities which we will suffer." Macron reportedly is planning to organize a meeting of Pacific island nations in 2020. Although France and the United Kingdom continue to be the European countries with the most far-reaching presence in the Indo-Pacific, some analysts point to several factors that might limit the French government's ability to realize its growing ambitions in the region. These include a crowded strategic environment in which other countries are increasingly vying for regional influence; a domestic climate of weak economic growth and budgetary pressures on defense forces that are carrying out prolonged military operations in Africa and the Middle East, as well as counter-terrorism operations in mainland France; and a continued desire to maintain sound economic and diplomatic relations with China. <5.1.1. Emerging Strategic Relationships> France has long been engaged in the Indo-Pacific region, but its defense activities have deepened in recent years. It is maintaining existing ties with its territories in the South Pacific and the Indian Ocean while developing strategic relations with key regional states including India, Australia, Japan, and Vietnam. A number of factors are contributing to France's growing ambitions in the region, including concerns about China's growing influence. The French government's July 2019 defense strategy for the Indo-Pacific identifies the following strategic dynamics characterizing the current geopolitical landscape in the region: The Structuring effect of the China-U.S. competition, which causes new alignments and indirect consequences;The decline of multilateralism, which results from diverging interests, challenge to its principles and promotion of alternative frameworks;The shrinking of the geostrategic space and the spillover effects of local crises to the whole region. In response to these dynamics, the French government aims to reaffirm its strategic autonomy, the importance of its alliances, and its commitment to multilateralism. The government's stated strategic priorities in the region are: Defend and ensure the integrity of [France's] sovereignty, the protection of [French] nationals, territories and EEZ;Contribute to the security of regional environments through military and security cooperation;Maintain free and open access to the commons, in cooperation with partners, in a context of global strategic competition and challenging military environments;Assist in maintaining strategic stability and balances through a comprehensive and multilateral action. <5.1.1.1. India> France and India expanded their strategic partnership during Macron's March 2018 visit to India. India and France have agreed to hold biannual summits, signed an Agreement Regarding the Provision of Reciprocal Logistics Support, and "agreed to deepen and strengthen the bilateral ties based on shared principles and values of democracy, freedom, rule of law and respect for human rights." Among other agreements, the two governments issued a Joint Strategic Vision of India-France Cooperation in the Indian Ocean Region which states, "France and India have shared concerns with regard to the emerging challenges in the Indian Ocean Region." India signed a deal with France to purchase 36 Dassault Rafale multi-role fighter aircraft in 2016 for an estimated $8.7 billion. France and India also hold the annual Varuna naval exercise. <5.1.1.2. Australia> France is also developing its bilateral strategic and defense relationships with Australia, Japan, and Vietnam. While visiting Australia in May 2018, Macron stated that he wanted to create a "strong Indo-Pacific axis to build on our economic interests as well as our security interests." Several agreements were signed during Macron's visit to Australia, and Australia and France agreed to work together on cyberterrorism and defense. French company DCNS was previously awarded an estimated $36.3 billion contract to build 12 submarines for Australia. Australia and France held their inaugural Defense Ministers meeting in September 2018. <5.1.1.3. Other> French President Macron and Japanese Prime Minister Abe agreed to increase their cooperation to promote stability in the Indo-Pacific during Abe's visit to France in October 2018. France and its former colony Vietnam signed a Defense Cooperation Pact in 2009, and upgraded relations to a Strategic Partnership in 2013. A detachment of French aircraft visited Vietnam in August 2018 after taking part in exercise Pitch Black in Australia. <5.2. The United Kingdom> The UK also appears to be shifting its external focus to place relatively more emphasis on the Indo-Pacific. The UK's pending withdrawal from the European Union ("Brexit") may drive it to seek expanded trade relations in the Indo-Pacific region. Speaking to the Shangri La Dialogue in Singapore in 2018, then-UK Secretary of State for Defence Gavin Williamson stated: Standing united with allies is the most effective way to counter the intensifying threats we face from countries that don't respect international rules. Together with our friends and partners we will work on a more strategic and multinational approach to the Indian Ocean region focusing on security, stability and environmental sustainability to protect our shared prosperity. In 2018, three Royal Navy ships were deployed to the Indo-Pacific region and in April 2018, the UK opened a new naval support facility in Bahrain that will likely be capable of supporting the new aircraft carriers HMS Queen Elizabeth and HMS Prince of Wales . It is reported that HMS Queen Elizabeth could be deployed to the Pacific soon after entering active service in 2020. In August 2018, the HMS Albion sailed near the disputed Paracel Islands waters that China considers its territorial seas but which are also claimed by others in a sovereignty dispute. A Royal Navy spokesman stated that "HMS Albion exercised her rights for freedom of navigation in full compliance with international law and norms." China strongly protested the operation, describing it as a provocation. <5.2.1. Emerging Strategic Partnerships> The UK has Commonwealth ties to numerous states across the Indo-Pacific littoral. UK forces participate in annual exercises of the Five Power Defence Arrangement (FPDA), a regional security group of Australia, Malaysia, New Zealand, Singapore, and the UK that was established in 1971. The UK also has a battalion of Gurkha infantry based in Brunei. The UK opened new High Commissions in Vanuatu, Tonga, and Samoa in 2019, and signed a new Defence Cooperation Memorandum of Understanding with Singapore on the sideline of the 2018 Shangri-La Dialogue. In December 2018, then-Defence Secretary Gavin Williamson generated headlines with an interview in which he stated the UK would seek new military bases in Southeast Asia; observers speculated that Brunei and Singapore would be the most likely locations. In 2013, Australia and the UK signed a new Defence and Security Cooperation Treaty that provides an enhanced framework for bilateral defense cooperation. The treaty builds on longstanding defense cooperation through the FPDA and intelligence cooperation through the Five Eyes group that also includes Canada, New Zealand, and the United States. Australia has also signed an agreement with UK defense contractor BAE Systems to purchase nine new Type 26 frigates in a deal worth an estimated $25 billion. In August 2017, the UK and Japan agreed on a Joint Declaration on Security Cooperation pledging to enhance the two countries' global security partnership. The two nations also hold regular Foreign and Defense Ministerial Meetings. Then-British Foreign Secretary Jeremy Hunt met with Japanese Foreign Minister Taro Kono in Tokyo in September 2018 and Kono welcomed the further presence of the UK in the Indo-Pacific region. In September 2018, the HMS Argyll and Japan's largest warship, the Kaga helicopter carrier, held exercises in the Indian Ocean and in October 2018, the UK and Japan held a joint army exercise in central Japan. Alongside indications of the UK's increasing focus on the region, observers also note that resource constraints and competing priorities could limit the degree to which the UK reengages with the Indo-Pacific. Bilateral cooperation, such as the participation of UK forces in France's 2018 Jeanne d'Arc naval operation in the Asia-Pacific, could potentially develop into a platform whereby other European countries might become more engaged. At the same time, regional states may view a more engaged Europe as a potential alternative to the U.S. as they hedge against a rising China and feel uncertainty U.S. leadership in the region. <6. ASEAN and Member States> The 10 members of the Association of Southeast Asian Nations (ASEAN), Southeast Asia's primary multilateral grouping, see a range of challenges resulting from the region's evolving strategic dynamics. Many Southeast Asian observers are unsettled by the prospect of extended strategic and economic rivalry between the United States in China, and the effect it would have on stability and economic growth in the region. New formulations of an Indo-Pacific region have raised concern for some in ASEAN, as they could lead to new diplomatic and security architectures that may weaken ASEAN's role in regional discussions or may not include all ASEAN's members. ASEAN as a grouping is constrained by its members' widely diverging views of their strategic and economic interests, and by the group's commitment to decision-making via consensus. However, ASEAN's individual members have responded to new regional dynamics in various ways. Many have expanded defense spending to deepen their own capabilities and hedge against uncertainties including those caused by China's rise. Some, particularly Indonesia, have rhetorically adopted Indo-Pacific visions of the region, but these have not markedly changed substantive strategic postures. In July 2019, ASEAN's leaders agreed to a five-page statement called the ASEAN Outlook on the Indo-Pacific. Some observers noted that ASEAN's statement was likely driven by other "Indo-Pacific" plans from the United States, Japan, and India, and by the group's desire not to be sidelined in the development of new ideas of Asian regionalism. ASEAN has long seen itself at the center of Asia's multilateral diplomacy a concept the group's members refer to as "ASEAN centrality." Founded in part as a forum for dialogue that would prevent intra-regional conflict and help protect member states from great power influence, it has not traditionally taken a major security role, but rather has seen itself as a diplomatic hub that convenes other powers to discuss security and economic issues. Over the past few decades, East Asia's regional institutions have almost all centered around ASEAN as a "neutral" convening power. U.S. Administration officials have sought to reassure ASEAN of its continued importance in the Indo-Pacific formulation. "ASEAN is literally at the center of the Indo-Pacific," Secretary of State Mike Pompeo said in July 2018, "and it plays a central role in the Indo-Pacific vision that America is presenting." The Indo-Pacific Outlook statement sought to define a role for ASEAN in shaping Indo-Pacific diplomatic, security, and economic arrangements. It welcomed the linkage of the Asia-Pacific and Indian Ocean regions, and stated that "it is in the interest of ASEAN to lead the shaping of their economic and security architecture . This outlook is not aimed at creating new mechanisms or replacing existing ones; rather it is an outlook intended to enhance ASEAN's community building process and to strengthen and give new momentum for existing ASEAN-led mechanisms." The statement did envision a role for ASEAN to "develop, where appropriate, cooperation with other regional and sub-regional mechanisms in the Asia-Pacific and Indian Ocean regions on specific areas of common interests." The statement listed four areas of cooperation for the nations of the Indo-Pacific: maritime cooperation; efforts to improve connectivity; efforts to meet the 2030 U.N. Agenda for Sustainable Development; and economic cooperation in areas such as trade facilitation, the digital economy, small and medium sized enterprises, and addressing climate change and disaster risk reduction and management. ASEAN convenes and administratively supports a number of regional forums that include other governments, including the United States, such as the 27-member ASEAN Regional Forum (ARF), the 16 member East Asia Summit (EAS), numerous "ASEAN+1" dialogues between the group and its partners, as well as several other multilateral groupings. While many of the region's pressing security challenges, such as North Korea's nuclear proliferation, China-Taiwan tensions, or India-Pakistan rivalries, do not directly involve ASEAN's members, they argue that their ability to convene other powers in diplomacy is a core ASEAN role. That said, ASEAN has moved into a more active security role in recent years. The ASEAN Defense Ministers Meeting-Plus (ADMM+) is a regional security forum that includes ASEAN's 10 members and the eight ASEAN partners the United States, China, Japan, South Korea, Australia, New Zealand, India, and Russia. With U.S. backing, it has become more active in recent years, hosting multilateral dialogues and exercises in areas such as humanitarian assistance/disaster relief and maritime rescue. In 2018, ASEAN conducted a multilateral naval exercise with China, and in September 2019, it did so with the United States moves that analysts called a strong signal of the group's desire to avoid working too closely to one military or the other. ASEAN's members have long sought to navigate changes in the regional security environment in ways that protect their own individual and collective interests, while avoiding being either dominated by external powers or drawn into external conflicts. In recent years, many observers believe China has sought to drive wedges between ASEAN's members based on their diverse interests particularly the extensive investment by Chinese firms in smaller countries such as Cambodia and Laos and has had some success due to the group's insistence in governing by consensus. Since 2013, ASEAN has been engaged in negotiations with China to develop a Code of Conduct for parties in the South China Sea, but it has generally rejected suggestions such as Beijing's proposal that parties pledge not to conduct military exercises with "outside" countries. <6.1. Indonesia> Indonesia is a strong proponent of Indo-Pacific conceptions of the region, considering itself to be at the geographic midpoint linking the Pacific and Indian Ocean regions. Most observers saw the ASEAN Outlook on the Indo-Pacific statement as an initiative driven most strongly by Indonesia. However, Indonesia's role as a founder and leader of the Non-Aligned Movement continues to shape its foreign policy, and Jakarta has been hestitant to deepen security partnerships too far with either the United States or China. That reluctance makes Indonesia a relatively passive actor in the broad Indo-Pacific security architecture. U.S.-Indonesia security cooperation has deepened over the past decade as the Indonesian government sought to expand the country's external defense capabilities, with the two militaries conducting more than 240 military engagements annually, including efforts to intensify maritime security cooperation and combat terrorism. In 2015, President Joko Widodo's government announced plans to increase military spending to 1.5% of GDP from recent levels below 1%, focusing particularly on maritime capabilities, although spending has not increased at such a pace. Indonesia, however, is increasingly involved in rising South China Sea tensions. Indonesia has long had a delicate relationship with China, marked by deep economic interdependence (China is a major consumer of Indonesian natural resources) but considerable strategic mistrust. Periodic violence directed at the Indonesian-Chinese community throughout Indonesian history casts further complications on Jakarta-Beijing relations. A 2018 Pew survey found that 53% of Indonesians had a positive view of China, down from 66% in 2014 and 73% in 2005. (The same poll, conducted in spring 2018, found that 42% of respondents had a positive view of the United States, a number that has dropped from 63% in 2009, and also that 22% of Indonesians believe it would be better for the world if China was the world's leading power, while 43% said it would be better if the United States occupied that role.) <6.2. Singapore> Singapore is one of the United States' closest security partners in Southeast Asia. Its security posture is guided by its desire to serve as a useful balancer and intermediary between major powers in the region, and its efforts to avoid and hedge against anything that would force it to "choose" between the United States and China. In recent years Singapore has been an enthusiastic participant in new defense partnerships, but it has also been relatively skeptical, at least rhetorically, of the Trump Administration's Free and Open Indo-Pacific concept. While it has urged continued U.S. engagement in Asia, it has also been careful to warn that anti-China rhetoric or efforts to "contain" China's rise would be counterproductive. In a May 2019 speech in Washington DC, Singapore Foreign Minister Vivian Balakrishnan said "viewing China purely as an adversary to be contained will not work in the long term, given the entire spectrum of issues that will require cooperation between the U.S. and China." In 2019, Singapore was reportedly the last nation to agree to ASEAN's Indo-Pacific Outlook statement, viewing it as an unproductive move that did not address broader security issues but which would inevitably raise tensions with China, and prospectively the United States. In questions about Singapore's view of the Trump Administration's FOIP concept, Singapore Foreign Minister Vivian Balakrishnan said in May 2018: "Frankly right now, the so-called free and open Indo-Pacific has not yet fleshed out sufficient level of resolution to answer these questions that I've posed.... We never sign on to anything unless we know exactly what it means." That said, Singapore has worked to develop new security arrangements. Singapore maintains a close security partnership with Australia: The two nations signed an agreement in 2016 under which Singapore would fund an expansion of military training facilities in Australia and would gain expanded training access in Australia, as well as enhanced intelligence sharing in areas such as counter-terrorism. In September 2019, Singapore held the first trilateral naval exercise with India and Thailand in the Andaman Sea, and agreed in November 2019 to make this an annual exercise. Singapore is also negotiating with India on an agreement that could allow the Singapore armed forces to use Indian facilities for live-fire drills an important consideration for Singapore, given its small size. Singapore retains strong security ties with the United States, formalized in the 2005 "Strategic Framework Agreement." The agreement builds on the U.S. strategy of "places-not-bases" a concept that aims to provide the U.S. military with access to foreign facilities on a largely rotational basis, thereby avoiding sensitive sovereignty issues. The agreement allows the United States to operate resupply vessels from Singapore and to use a naval base, a ship repair facility, and an airfield on the island-state. The U.S. Navy also maintains a logistical command unit Commander, Logistics Group Western Pacific in Singapore that serves to coordinate warship deployment and logistics in the region. Singapore is a substantial market for U.S. military goods, and the United States has authorized the export of over $37.6 billion in defense articles to Singapore since 2014. In particular Singapore has purchased aircraft, parts and components, and military electronics, and has indicated interest in procuring four F-35 jets. Over 1,000 Singapore military personnel are assigned to U.S. military bases, where they participate in training, exercises, and professional military education. Singapore has operated advanced fighter jet detachments for training in the continental United States for the past 26 years. Singapore adheres to a one-China policy, but has an extensive relationship with Taiwan, including a security agreement under which Singapore troops train in Taiwan an agreement that Beijing has occasionally asked it to terminate. Generally, Singapore has managed to avoid damaging its strong relations with Beijing. Of late, Singapore has worked to smooth its ties with China perhaps at least partly as a hedge against possible U.S. disengagement from the region. That being said, Singapore has judiciously pushed back against Chinese behavior it sees as problematic; in 2016, Singapore supported an international tribunal's ruling against China's assertions of sovereignty over extensive waters in the South China Sea. <6.3. Vietnam> Since the establishment of diplomatic relations between the United States and the Socialist Republic of Vietnam in 1995, the two countries' often overlapping strategic and economic interests have led them to incrementally expand relations across a wide spectrum of issues. For the first decade and a half of this period, cooperation between the two countries' militaries was embryonic, largely due to Vietnam's reluctance to advance relations more rapidly. By the late 2000s, however, China's actions in the South China Sea appear to have caused the Vietnamese government to take a number of steps to increase their freedom of action. First, Vietnam began trying to increase its defense capabilities, particularly in the maritime sphere. In the words of two analysts, these efforts "for the first time" have given Vietnam "the ability to project power and defend maritime interests." From 2009 to 2019, Vietnam increased its military budget by over 80% in dollar terms, to around $5.3 billion. In 2009, Vietnam signed contracts to purchase billions of dollars of new military equipment from Russia, its main weapons supplier, including six Kilo-class submarines. It has also begun engaging in more maritime military diplomacy with its neighbors, and for the first time has begun dispatching peacekeepers to United Nations missions. Second, as Vietnamese leaders perceived the strategic environment as continuing to deteriorate against them during the current decade, they deepened their cooperation with potential balancers such as the United States, Japan, and India. With the United States, Vietnam is one of the recipient countries in the Defense Department's $425 million, five-year Southeast Asia Maritime Security Initiative, first authorized in the FY2016 National Defense Authorization Act ( P.L. 114-92 ). In December 2013, the United States announced it would provide Vietnam with $18 million in military assistance, including new coast guard patrol boats, to enhance Vietnam's maritime security capacity, assistance that the Trump Administration has expanded. The United States also has transferred to Vietnam a decommissioned U.S. Coast Guard Hamilton-class cutter, under the Excess Defense Articles program. The cutter is Vietnam's largest coast guard ship. The United States in recent years also has provided Vietnam with Scan Eagle Unmanned Aerial Vehicles (UAVs) and T-6 trainer aircraft. In a largely symbolic move, in March 2018, the USS Carl Vinson conducted a four-day visit to Da Nang, the first U.S. aircraft carrier to visit Vietnam since the Vietnam War. Vietnam's willingness to openly cooperate with the United States' Indo-Pacific strategy is limited by a number of factors, however. Since the late 1980s, Vietnam's leaders explicitly have pursued what they describe as an "omnidirectional" foreign policy by cultivating as many ties with other countries as possible, without becoming overly dependent on any one country or group of countries. Some have referred to this approach as a "clumping bamboo" strategy, behaving like bamboo that will easily fall when standing alone but will remain standing strong when growing in clumps. In practice, this has meant Vietnam often pairs its outreach to the United States and other powers like Japan and India with similar initiatives with China. Despite increased rivalry with Beijing, Vietnam regards its relationship with China as its most important bilateral relationship, and Hanoi usually does not undertake large-scale diplomatic or military moves without first calculating Beijing's likely reaction. The two countries have Communist Party-led political systems, providing a party-to-party channel for conducting relations, and contributing to often similar official world-views. China also is Vietnam's largest bilateral trading partner. One corollary to Vietnam's omnidirectional approach is its official "Three Nos" defense policy: no military alliances, no aligning with one country against another, and no foreign military bases on Vietnamese soil to carry out activities against other countries. This approach, which barring a major shock likely will continue into the medium term, is likely to limit Vietnam's willingness to explicitly become a full partner in many of the elements of the Trump Administration's Indo-Pacific strategy, particularly if they are presented as explicitly aimed against China. That said, Vietnam has demonstrated in the past that it is willing to stretch the limits of its "Three Nos" policy. This has been particularly true in areas of defense cooperation such as military training and arms sales that can be undertaken quietly and/or portrayed as not aimed at one specific country. Many Vietnam watchers therefore expect that in the absence of a major shock such as a U.S.-Vietnam trade war or open Sino-Vietnam military conflict Vietnam will continue its approach of quietly and incrementally expanding its cooperation with the United States and its partners. <7. Questions for Congress> Based on the above, it appears that a key development in the strategic landscape of the Indo-Pacific is that U.S. allies and partners are developing closer strategic relations across the region as a way of hedging against the rise of China and the potential that the United States will either be less willing or less able to be strategically engaged. Given this, a key question for Congress is how the United States should respond to this emerging dynamic. Do these emerging intra-Asian strategic relationships support U.S. strategic objectives across the Indo-Pacific and if so, to what extent, and in what ways, should to the United States support them? Some analysts question whether the Trump Administration's skepticism of allies is affecting, or may affect, U.S. ability to work with Japan, South Korea, and Australia in developing new security arrangements. In particular, Trump Administration requests for large increases in allies' monetary contributions to basing cost has raised significant concerns about what future alliance arrangements may look like. Similarly, some question whether the Administration's lack of interest in multilateral trade agreements such as the TPP may affect perceptions of regional allies and partners about broader U.S. commitment to the region. These raise questions Congress may consider, including: What are the United States' key interests in the region and have they changed over time? What role does cooperation with U.S. allies play in ensuring U.S. interests are promoted as the region's new security architecture develops? What is the proper mix of diplomatic, economic, defense, foreign assistance, and soft power that should be used in such an effort? Some political developments in the region may also play a role in how Congress addresses these questions. In the Philippines and Thailand, both U.S. treaty allies, political developments have led to what many observers describe as a decline in democratic institutions. In India, a partner and important participant in Indo-Pacific arrangements, many are concerned about increasing intolerance and human rights abused against religious minorities. These developments raise questions such as: What role should Congress play in helping the Trump Administration, and future administrations, articulate U.S. strategy to the region and to what extent should American values, as well as U.S. interests, inform such an approach? Congress has consistently played an important role in guiding and helping set U.S. policy in Asia. As noted above, the Asia Reassurance Initiative Act of 2018 (ARIA; P.L. 115-409 ), states: "Without strong leadership from the United States, the international system, fundamentally rooted in the rule of law, may wither.... It is imperative that the United States continue to play a leading role in the Indo-Pacific." Congress may assess how growing military spending and new security arrangements affect that goal.

China's growing confidence in asserting itself regionally and internationally, combined with longstanding concerns about whether the United States has the capacity or commitment to remain the region's dominant actor, is leading U.S. allies and partners to adjust their strategic posture. This report seeks to outline some of these changes and to outline the perspectives of Indo-Pacific nations seeking to navigate a changing geopolitical environment, including by recasting their conception of the region to draw in new potential counterweights to China such as India, prioritizing new defense acquisitions to bolster indigenous security capacities, and seeking out new, networked security partnerships. Several Indo-Pacific nations over the past decade have substantially increased defense spending to prepare for new challenges; in some cases they have also sought more extensive roles in shaping the regional security architecture. Some are seeking to develop new intra-Asian security partnerships and strengthen existing strategic relationships. Japan, Australia, and India are among the most active in these regards. The Trump Administration similarly has articulated strategic objectives in an expansive region from East Asia to South Asia and the Indian Ocean, and has increased defense spending. Some actions taken by President Trump, however—including his questioning of alliance relationships, his opposition to multilateral trade agreements, and possibly his moves to retreat from U.S. security commitments elsewhere in the world—have, in the view of many, sent conflicting signals to and undermined confidence in U.S. alliances and partnerships in the Indo-Pacific region. Many observers have pointed to the value of U.S. allies and partners in protecting U.S. security and values and questioned the economic elements of the Administration's Indo-Pacific strategy, arguing that the Administration has not come forward with an adequate replacement to fill the gap in U.S. engagement that was opened when President Trump withdrew from the proposed Trans-Pacific Partnership (TPP) trade agreement. Developing a better understanding of how the United States' Indo-Pacific allies and partners are positioning themselves to adapt to this evolving strategic landscape can inform Congress's oversight of U.S. policies and approaches to the region. It can also aid Congress as it makes funding decisions for U.S. armed forces and foreign assistance or considers strategic aspects of potential trade agreements or other economic initiatives in the region. Within this context Congress may consider a number of questions. What are U.S. allies and partners' perceptions of U.S. power and commitment to the Indo-Pacific? How are these perceptions changing? If these perceptions are negative, how are they affecting U.S. interests and what should be done to change them? How are Indo-Pacific countries responding to China's growing economic influence and military power? What impact has President Trump had on the United States' relationship with key allies and partners in the Indo-Pacific and what effect, if any, has this had on U.S. interests? How have regional states responded to the Trump Administration's Free and Open Indo-Pacific strategy? Is the strategy calibrated to gain regional support to achieve U.S. interests? Is it well understood in the region, and is its implementation sufficient to convince the region of U.S. commitment? If not, what should change, and in what ways? Do new security partnerships in Asia raise policy questions or opportunities in areas such as new arms sales, training, or exercises? This report will compare various nations' approaches to bolstering their collective security through increased defense spending and evolving security networks and strategic linkages, and identify options for the United States, and for Congress specifically in light of answers to the above questions.

crs_R46191

crs_R46191_0

<1. Introduction> Approximately 27 million trips are taken on public transportation on an average day. Federal assistance to public transportation is provided primarily through the public transportation program administered by the Department of Transportation's (DOT's) Federal Transit Administration (FTA). The federal public transportation program was authorized from FY2016 through FY2020 as part of the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ). This report discusses the major issues that may arise as Congress considers reauthorization. In federal law, public transportation also known as public transit, mass transit, and mass transportation includes local buses, subways, commuter rail, light rail, paratransit (often service for the elderly and disabled using small buses and vans), and ferryboats, but excludes Amtrak, intercity buses, and school buses (49 U.S.C. 5302). About 48% of public transportation trips are made by bus, 38% by heavy rail (also called metro and subway), 5% by commuter rail, and 6% by light rail (including streetcars). Paratransit accounts for about 2% of all public transportation trips, and ferries about 1%. Public transportation accounts for about 3% of all daily transportation trips and about 7% of commute trips. Although ridership is heavily concentrated in a few large cities and their surrounding suburbs, especially the New York City metropolitan area, public transportation is provided in a wide range of places including small urban areas, rural areas, and Indian land. <2. The Federal Public Transportation Program> Most federal funding for public transportation is authorized in multiyear surface transportation acts. The FAST Act authorized $61.1 billion for five fiscal years beginning in FY2016, an average of $12.2 billion per year. The authorization for FY2020 is $12.6 billion. Of the total five-year amount, 80% was authorized from the mass transit account of the Highway Trust Fund. Funding authorized from the Highway Trust Fund is provided as contract authority, a type of budget authority that may be obligated prior to an appropriation. The other 20% was authorized from the general fund of the U.S. Treasury as appropriated budget authority. Funding for public transportation is sometimes provided under other authorities. The FY2018, FY2019, and FY2020 appropriations acts ( P.L. 115-141 , P.L. 116-6 , P.L. 116-94 ), for example, provided additional general fund money for several programs that typically receive funding only from the Highway Trust Fund, thereby raising the general fund share of federal public transportation expenditures to about 28% in FY2018, 26% in FY2019, and 21% in FY2020. Funding for the Public Transportation Emergency Relief Program, which provides grants for emergency repairs following natural disasters or other emergencies, is typically from the general fund provided in supplemental appropriations acts. Transit projects can also be funded with money transferred (or "flexed") from federal highway programs by state and local officials. In FY2016, the last year for which data are available, $1.3 billion in highway funds was flexed to transit. Excluding flexed highway funds and emergency relief funding, funding provided in FY2017 through FY2020 was above the level authorized in the FAST Act ( Figure 1 ). There are six major programs for public transportation authorized by the FAST Act: (1) Urbanized Area Formula; (2) State of Good Repair; (3) Capital Investment Grants (CIG) (also known as "New Starts"); (4) Rural Area Formula; (5) Bus and Bus Facilities; and (6) Enhanced Mobility of Seniors and Individuals with Disabilities. Typically, funding for all of these programs, except CIG, comes from the mass transit account of the Highway Trust Fund. CIG funding comes from the general fund. There are also a number of other much smaller programs ( Figure 2 ). <3. Reauthorization Issues> <3.1. Program Funding> The average of $12.2 billion per year authorized for the federal public transportation program in the FAST Act represented about a 14% increase (unadjusted for inflation) from the previous authorization, the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ). The Senate Committee on Environment and Public Works reported a bill in August 2019 ( S. 2302 ) that would reauthorize highway infrastructure programs through FY2025 with a 27% increase over the funding provided by the FAST Act. A similar increase in the annual authorization of public transportation funding would provide for federal expenditures of about $15.5 billion per year. A higher level of federal funding might improve the condition and performance of public transportation infrastructure. One indicator of the condition of public transportation infrastructure is the reinvestment backlog, which DOT defines as "an indication of the amount of near-term investment needed to replace assets that are past their expected useful lifetime." DOT estimated the reinvestment backlog to be $98 billion in 2014, about 13% of the total value of transit assets. In its biennial Conditions and Performance report, DOT projects how various future spending levels might affect the condition of public transportation infrastructure. The most recent report was published in November 2019 and used 2014 as the base year for projections. Capital expenditures on public transportation in 2014, DOT noted, totaled $17.7 billion from all sources, including federal, state, and local government support. Of this amount, $11.3 billion was spent on preserving the existing system and $6.4 billion on expansion. If this spending pattern were to continue over the 20 years between 2015 and 2034, DOT estimates, the investment backlog would grow to $116 billion (in 2014 inflation-adjusted dollars), an increase of 18%. DOT constructed two scenarios to estimate how much spending would be needed to eliminate the backlog and accommodate new riders. Under the assumption of low ridership growth, DOT estimated, $23.4 billion would be needed annually, an increase of about 32% (in 2014 inflation-adjusted dollars). In a scenario projecting high ridership growth, $25.6 billion would be needed annually, an increase of 45% (in 2014 inflation-adjusted dollars). DOT did not estimate the spending necessary if ridership is stagnant or dropping. However, it did estimate that $18.4 billion annually (adjusted for inflation) would eliminate the reinvestment backlog over 20 years if there was no spending on expansion. The focus of the federal public transportation program is on capital expenditures, but the program also supports operational expenses in some circumstances, as well as safety oversight, planning, and research. Greater federal support for transit operations could increase the quantity of transit service offered or reduce fares. In the past, particularly in the 1970s and early 1980s, such support caused the costs of providing service to increase, particularly through increases in wages and fringe benefits and by expanding services on routes with less demand. With greater flexibility to use federal funding for operating expenses, transit agencies could neglect maintenance and asset renewal, leading to a more rapid decline in the condition of capital assets. Existing flexibility to use capital funds for maintenance may help agencies preserve equipment and facilities. DOT does not make any recommendations about the relative shares of public transportation funding that should be borne by federal, state, and local governments. The federal share of government spending on public transportation has been around 15% to 20% over the past 30 years. A higher level of funding by the federal government may not necessarily translate into more spending overall if transit providers substitute federal dollars for their own. <3.1.1. Highway Trust Fund Issues> The solvency of the Highway Trust Fund and its two accounts, the highway account and the mass transit account, is a major issue in reauthorization of funding for the public transportation program. Outlays from the mass transit account have outpaced receipts for over a decade, an imbalance the Congressional Budget Office (CBO) projects will continue in the future under current law. For the five-year period beginning in FY2021, CBO expects the gap between revenues and outlays to total $26 billion, an average of $5.2 billion annually ( Table 1 ). The primary revenue source for the Highway Trust Fund is motor fuel taxes, which were last raised in 1993. Currently, of the 18.3 cents-per-gallon tax on gasoline and 24.3 cents-per-gallon tax on diesel that go to the Highway Trust Fund, 2.86 cents is deposited in the mass transit account. Congress has chosen to transfer general fund monies into the mass transit account to permit a higher level of spending than motor fuel tax revenues alone could sustain. These transfers have totaled $29 billion since they began in 2008. The FAST Act transferred $18.1 billion to the mass transit account from the general fund. According to FTA, a balance of at least $1 billion in the mass transit account is required to ensure that the agency has sufficient funds to make mandated payments to transit agencies. CBO estimates that if Congress were to extend current law without providing for further transfers from the general fund to the mass transit account, the balance in the mass transit account would be about $300 million at the end of FY2021 and would reach zero at some point in FY2022. This would likely require FTA to slow payments to transit agencies. Outlays also outpace receipts in the highway account, but solvency problems are expected to arrive earlier in the mass transit account. Bringing the receipts and outlays of the mass transit account into balance would involve a cut in program spending, an increase in revenues paid into the account, or a combination of the two. An increase in revenues could involve a commitment to regular transfers from the general fund. With the highway account facing similar problems, another possible change would be to redirect revenues from the mass transit account to the highway account and to fund the transit account with a general fund appropriation each year. This likely would make transit funding less certain, and it would not make up the entire shortfall in the highway account. <3.2. Financing> In addition to grants, the federal government supports public transportation infrastructure with direct loans and tax preferences for municipal bonds. Changes to two major federal loan programs relevant to public transportation the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and the Railroad Rehabilitation and Infrastructure Finance (RRIF) program could be considered in reauthorization. TIFIA provides long-term, low-interest loans and other types of credit assistance for the construction of surface transportation projects (23 U.S.C. 601 et seq.). Although the maximum federal share of project costs that may be provided by the TIFIA program was raised in MAP-21 from 33% to 49%, DOT has stated that it will provide more than 33% only in exceptional circumstances. To date, TIFIA has not covered more than 33% of the cost of any project. By limiting the TIFIA share in this way, DOT appears to be trying to maximize the leveraging of nonfederal resources, but it may be excluding projects that may not be financially viable without greater federal assistance. Public transportation projects typically cover a relatively small share of their costs from user fees, thus they usually need more government support than highway and bridge projects. Congress could direct DOT to consider a higher federal share in more circumstances or across the board. Some project sponsors have stated that the lengthy process and upfront costs for obtaining TIFIA assistance led them not to seek TIFIA loans. The FAST Act required DOT to expedite projects thought to be lower-risk those requesting $100 million or less in credit assistance with a dedicated revenue stream unrelated to project performance and standard loan terms but this has apparently not had a significant effect: two projects have received TIFIA loans of less than $100 million since the passage of the FAST Act. Congress could make small TIFIA loans more attractive by changing a requirement that project sponsors obtain two credit ratings; at present, that requirement applies to TIFIA loans for projects with debt of $75 million or more. Less stringent requirements for credit ratings may increase the risk to the government of these loans. Reauthorization legislation also could incorporate various proposals that have been suggested to speed up approvals, such as requiring more frequent meetings of the DOT officials who make recommendations on project loans to the Secretary of Transportation (known as the Council on Credit and Finance), hiring additional staff to more quickly assess applications, and mandating that DOT regularly publish information about the time it takes loan applications to reach milestones. The RRIF program was originally created to support freight railroads, particularly small freight railroads known as short lines, but loans are increasingly being made to commuter railroads. Legislative changes have made RRIF loans more attractive to commuter railroads. Recent changes also permit loans for transit-oriented development, that is economic development projects, including commercial and residential development, physically or functionally related to a passenger rail station. Several large loans have been made to transit agencies for commuter rail projects in the past few years, including $908 million to the Dallas Area Rapid Transit to finance a project from Dallas-Fort Worth Airport, $220 million to the Massachusetts Bay Transportation Authority for positive train control (PTC), and almost $1 billion to the New York Metropolitan Transportation Authority, also for PTC. The federal government requires project sponsors to make a payment known as a credit risk premium to offset the risk of a default. No federal funding has been authorized to pay the credit risk premiums for RRIF borrowers, although $25 million was made available for this purpose in the 2018 appropriations act. To enhance the attractiveness of RRIF for public transportation projects, Congress could authorize a federal subsidy for the credit risk premium from the Highway Trust Fund. Alternatively, Congress could provide for the credit risk premium from the general fund directly or as part of another program. For example, the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) makes RRIF credit risk premiums eligible for grants under the BUILD Transportation Discretionary Grants Program. Another RRIF-related proposal is to extend the authority to provide loans for transit-oriented development projects, which expires on September 30, 2020. <3.3. Capital Investment Grants (CIG) Program> Because the CIG program receives funding from the general fund, not the Highway Trust Fund, appropriators have greater influence over its funding than they do over other transit programs. Nevertheless, the authorization sets a benchmark for the program's funding level, creates the program's overall structure, and can provide more or less discretion for FTA in the program's implementation. These characteristics could be more important in reauthorization than usual because of disagreements about the existence and operation of the program between Congress and the Trump Administration. During the Obama Administration, FTA, among others, recommended significant increases in CIG funding to accommodate demand by project sponsors, especially because projects to expand the capacity of existing transit facilities, known as Core Capacity projects, were made eligible for funding beginning in FY2013. FTA noted in its FY2017 budget submission that the number of projects in the CIG "pipeline" had grown from 37 in FY2012 to 63 in FY2016. In addition, FTA asked Congress in its FY2017 budget request to increase annual CIG funding from the $2.3 billion authorized by the FAST Act to $3.5 billion, to accelerate projects to "not only potentially lower financing costs incurred on these projects, but also allow FTA to better manage the overall program given the ever growing demand for funds." For FY2018 and FY2019, the Trump Administration proposed that funding should be limited to projects with existing commitments from the federal government, and that CIG funding should be phased out. In its funding recommendation for FY2018, FTA noted that "future investments in new transit projects would be funded by the localities that use and benefit from these localized projects." House and Senate appropriators rejected this approach, directing FTA to continue working with project sponsors to develop projects, including issuing project evaluation ratings, and requiring the allocation of appropriations, with deadlines, to projects that have met the program requirements. With pressure for continued operation of the program, FTA has made several announcements of allocations of CIG funding to new projects. In July 2019, FTA stated that from the beginning of the Trump Administration in January 20, 2017, FTA had made CIG funding commitments to 25 new projects totaling $7.63 billion. It appears that FTA has dropped its call for phasing out the program; it recommended funding of $1.5 billion in FY2020, including $500 million for new projects. Congress agreed to nearly $2 billion for the program in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). <3.3.1. New York and New Jersey Gateway Program> The Gateway Program, which involves a set of projects in a 10-mile section of the Northeast Corridor (NEC) between Penn Station in Newark, NJ, and Penn Station in New York City, would be designed to improve intercity passenger rail service by Amtrak, which owns the underlying infrastructure, as well as commuter rail service provided by New Jersey (NJ) Transit. NJ Transit ridership in the corridor is approximately 50 million passenger trips per year, making this among the most heavily traveled public transportation routes in the country. The project sponsors the Port Authority of New York and New Jersey, in cooperation with the Gateway Program Development Corporation, New Jersey Transit Corporation, and Amtrak have proposed $7 billion in CIG program funding for the costliest Gateway Program project to date. The $14 billion project is for the construction of a new tunnel under the Hudson River, the restoration of the current tunnel that was damaged by Hurricane Sandy in 2012, and the preservation of the Hudson Yards right-of-way linking the proposed new tunnel with Pennsylvania Station in New York City. In addition, the project sponsors propose to borrow several billion dollars for tunnel construction from the federal government through the RRIF program. NJ Transit, the lead sponsor of the $1.6 billion Portal North Bridge project across the Hackensack River in New Jersey, has proposed a CIG grant to cover about half the cost. The Gateway Program overall is estimated to cost about $30 billion. The federal amount sought for the Gateway Program is equal to several years of funding for CIG, at recent funding levels, and could potentially overwhelm a program that is responsible for aiding projects throughout the country. The largest CIG grant since FY2007 is $2.6 billion. FTA typically pays out such grants in smaller amounts over a prolonged construction period; single-year allocations of funding for individual projects have rarely exceeded $200 million. The proposed use of federal loans in conjunction with federal grants for the Gateway Program is also controversial. The statute governing TIFIA (23 U.S.C. 603(b)(8)) states that proceeds from a TIFIA loan "may" be used as a nonfederal share of project costs if the loan will be repaid from nonfederal funds. The Trump Administration has been critical of CIG project sponsors using both federal grants and loans on public transportation projects. In June 2018, FTA circulated a letter stating the following: given the competitive nature of this discretionary program, the [CIG] statute specifically urges FTA to consider the extent to which the project has a local financial commitment that exceeds the required non-government share of the cost of the project. To this end, FTA considers U.S. Department of Transportation loans in the context of all Federal funding sources requested by the project sponsor when completing the CIG evaluation process, and not as separate from the Federal funding sources. The appropriations committees have taken action to prevent this policy from being implemented. For instance, Section 165 of Division G of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), states that "none of the funds made available under this Act may be used for the implementation or furtherance of new policies detailed in the 'Dear Colleague' letter distributed by the Federal Transit Administration to capital investment grant program project sponsors on June 29, 2018." In a potential reauthorization, Congress could seek to eliminate permanently DOT's discretion to block project sponsors from combining CIG grants and TIFIA loans on a single project. Bills pending in the House, H.R. 731 and H.R. 1849 , would allow recipients of TIFIA and RRIF support to elect to have the loans treated as nonfederal funds. <3.3.2. Expediting CIG Projects> Applying for CIG funding requires the development of extensive data and the preparation of many detailed reports and other documents, all of which are reviewed by FTA in making project approval determinations. Legislative changes in MAP-21 and the FAST Act sought to simplify the process. For example, MAP-21 reduced the number of separate FTA approvals for more expensive projects from four to three, and for less expensive projects from three to two. The less expensive projects, known as small starts projects, are those that cost $300 million or less to build and require $100 million or less of CIG funding. Moreover, MAP-21 authorized the use of project justification warrants in certain cases "that allow a proposed project to automatically receive a satisfactory rating on a given criterion based on the project's characteristics or the characteristics of the project corridor." The FAST Act created an Expedited Project Delivery for Capital Investment Grants Pilot Program to more quickly review up to eight projects involving public-private partnerships in which the federal grant is 25% or less of the project cost. The federal share of a CIG project is typically about 50%. There have been no comprehensive evaluations of whether these changes have resulted in projects progressing more quickly through the CIG pipeline. However, there are options that could be considered to further speed CIG projects. For instance, the threshold for projects to qualify as small starts could be increased, and the use of warrants could be permitted in more circumstances. FTA has been slow to implement the Expedited Project Delivery for Capital Investment Grants Pilot Program. Increasing the permitted maximum federal share of project costs under the pilot program, currently 25%, might make the program more attractive to transit agencies. <3.4. Falling Public Transportation Ridership> According to data from the American Public Transportation Association (APTA), annual transit ridership reached a modern-era high of 10.7 billion trips in 2014. Since then, it has fallen by almost 8% to 9.9 billion trips in 2018. National trends in public transportation ridership are not necessarily reflected at the local level; thus, different areas may have different reasons for growth or decline. But at the national level, the two factors that most affect public transportation ridership are competitive factors and the supply of transit service. Several competitive factors, notably increased car ownership, the relatively low price of gasoline over the past few years, and the growing popularity of bikeshare, scooters, and ridesourcing services such as Lyft and Uber, appear to have reduced transit ridership. The amount of transit service supplied has generally grown over time, along with government investment, but average fares have risen faster than inflation, possibly deterring riders. The future of public transportation ridership in the short to medium term is likely to depend on population growth, the public funding commitment to supplying transit, and factors that make driving more or less attractive, such as the price of parking, the extent of highway congestion, and the implementation of fuel taxes, tolls, and mileage-based user fees. Under current law, federal grants to transit agencies are based mainly on population, population density, and the amount of service provided. Congress could address the issue of declining ridership by tying the allocation of federal formula funds to agencies' success in boosting ridership or fare revenue. Over the long term, the introduction of fully autonomous vehicles could reduce transit ridership, unless restrictions or fees make them an expensive alternative. However, there is significant uncertainty about when, or whether, fully autonomous vehicles will affect ridership. Given this uncertainty, federal capital funding might focus on buses, which last about 10 years, and not new rail systems that take many years to build and will remain in service for decades. Another option would be to redirect CIG funding from building new rail systems and lines to refurbishing rail transit in the large and dense cities where rail transit currently carries large numbers of riders. The emergence of new mobility options may have reduced transit ridership, but it also may present an opportunity for transit agencies to provide new services to improve customer mobility. FTA has funded some pilot projects through the Research, Development, Demonstration, and Deployment program. An option in reauthorization would be to fund a program that focuses on boosting transit ridership through mobility and technological innovations. <3.5. Climate Change> Surface transportation is a major source of carbon dioxide (CO 2 ) in the atmosphere, the main human-related greenhouse gas (GHG) contributing to climate change. At the same time, the effects of climate change on environmental conditions, such as extreme heat and global sea level rise, pose a threat to transportation infrastructure. Surface transportation reauthorization may seek to address environmental conditions with mitigation provisions that aim to reduce GHG emissions from surface transportation and adaptation provisions that aim to make the surface transportation system more resilient. S. 2302 , the reauthorization bill reported by the Senate Committee on Environment and Public Works in August 2019, included provisions that address climate change. GHG emissions from the transportation sector come mainly from passenger cars and light trucks. Public transportation might contribute to a reduction of GHG emissions if trips made in personal vehicles, particularly single-occupant trips, are made by trains and buses instead. The efficiency of public transportation in terms of GHG emissions depends, in part, on the amount of ridership in relation to the amount of transit supplied. GHG emissions from public transportation are also dependent on the sources of fuel used to power trains and buses, including the way in which electricity is generated. Specific policy options that might be considered to reduce GHG gases from public transportation vehicles could include funding for alternatives to diesel-powered buses, particularly electric buses using electricity generated from renewable sources. This could include a higher level of funding for the Low or No Emission Vehicle (Lo-No) Program. In the FAST Act, the discretionary Lo-No Program was funded as a $55 million annual set-aside from the Bus and Bus Facilities Program. Another possibility would be to require buses purchased using federal funds to have low or no emissions. Electric buses cost more to purchase than traditional diesel-powered buses, although the lifecycle cost is comparable. To overcome this, the federal government could offer low-interest or no-interest loans for the nonfederal share of the cost of buying electric buses. Adaptation is action to reduce the vulnerabilities and increase the resilience of the transportation system to the effects of climate change. Although much of the funding administered by FTA can be used to assess the potential impacts of climate change on public transportation infrastructure and to apply adaptation strategies, there is currently no dedicated surface transportation funding for adaptation projects. Reauthorization could create a new grant program dedicated to adaptation planning and projects or require that funds from other programs be set aside for such purposes. <3.6. Emergency Relief Program> The Public Transportation Emergency Relief (ER) Program (49 U.S.C. 5324; 49 C.F.R. 602) provides federal funding on a reimbursement basis to states, territories, local government authorities, Indian tribes, and public transportation agencies for damage to public transportation facilities or operations as a result of a natural disaster or other emergency and to protect assets from future damage, so-called resilience projects. FTA's ER program does not have a permanent annual authorization. Rather, all funds are authorized on a "such sums as necessary" basis and require an appropriation from the Treasury's general fund. Because of this, FTA cannot provide funding immediately after a disaster or emergency is declared. Transit agencies, therefore, typically rely on the Federal Emergency Management Agency (FEMA) to fund immediate needs beyond the capacity of state and local government. This could slow the response of transit agencies and blur the lines of responsibility between FTA and FEMA if funds are later appropriated for the ER program. Adding a quick-release mechanism to FTA's ER program would allow FTA funds to be approved and distributed within a few days of a disaster. Such a program already exists for the Federal Highway Administration, with an annual authorization of funds from the Highway Trust Fund, and FTA's program could similarly be authorized an amount from the mass transit account of the fund. Such an authorization, however, would place a new claim on resources of the mass transit account. The FTA's ER program does not have a limit on the amount that can be spent on resilience projects. Although this may allow for better projects, it can result in Congress appropriating larger amounts than might otherwise be necessary, and it could also be a way for transit agencies to fund betterments and new facilities that have little direct connection to the goals of repairing damages and making the transit systems resilient to future natural hazards. A separate resilience program and changes to the ER program may be a more effective way to protect public transportation infrastructure from future disasters. <3.7. Public Transportation Safety> Public transportation is a relatively safe mode of passenger transportation compared with traveling by car and light truck. The fatality rate per passenger mile for cars and light trucks is about double that of transit buses and five times that of heavy rail. While the fatality rate per passenger mile for commuter rail is more comparable with cars and light trucks, most commuter rail fatalities are nonusers, such as trespassing pedestrians and those in vehicles struck at grade crossings. The federal government's role in public transportation safety has been expanded significantly since 2008. One of the major changes was the requirement in the Rail Safety Improvement Act of 2008 ( P.L. 110-432 ) for commuter railroads, along with Amtrak and freight railroads, to install positive train control (PTC), systems that use signals and sensors to monitor and control railroad operations. The federal requirement for PTC resulted in significant capital costs for commuter rail agencies, of which about 10% has been borne by the federal discretionary and formula funds. In addition to the initial costs of installing PTC, commuter rail agencies claim that there will be ongoing costs associated with PTC estimated to be about $160 million per year. Consequently, PTC implementation may have a detrimental effect on the overall financial condition of commuter rail agencies, and, without more funding from federal, state, or local government, may have a detrimental effect on the condition of commuter rail assets. Commuter rail agencies have proposed the creation of a new federal PTC funding program that could pay some or all of these ongoing costs. Separately, proposals have been advanced to dedicate federal funding for commuter railroads to improve the safety of highway-rail grade crossings. <3.8. Buy America> With the aim of protecting American manufacturing and manufacturing jobs, Buy America laws place domestic content restrictions on federally funded transportation projects. Buy America requirements vary according to the specific DOT funding program and administering agency. For projects funded by FTA there is a 100% U.S.-made requirement for iron, steel, and manufactured goods. However, Buy America does not apply to rolling stock if more than 70% of components, by value, are produced domestically and final assembly is in the United States. An addition to Buy America law in the National Defense Authorization Act for Fiscal Year 2020 ( P.L. 116-92 , 7613) prohibits transit agencies purchasing railcars and buses from certain government-owned, -controlled or -subsidized companies, such as the China Railway Rolling Stock Corporation and BYD, even if they are otherwise Buy America-compliant. Waivers of Buy America requirements can be provided by DOT agencies under certain circumstances, but these can be difficult and time-consuming to obtain. To speed up the waiver process, Congress could require that a waiver decision be made within a specific number of days. Each DOT agency has its own Buy America requirements, creating complications when a project involves funding from more than one of the agencies. Congress might seek to standardize Buy America requirements across the department. Other proposals have been to make Buy America requirements more stringent. For example, the Buy America 2.0 Act ( H.R. 2755 , 116 th Congress) would increase the share of public transit rolling stock components and subcomponents that must be produced in the United States by five percentage points annually beginning in FY2021, reaching 100% by FY2026. Such measures may make it more costly and time-consuming for transit agencies to procure vehicles.

The federal public transportation program is currently authorized through FY2020 as part of the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ). This report highlights several major issues that may arise as Congress considers program reauthorization. Public transportation includes local buses, subways, commuter rail, light rail, paratransit (often service for the elderly and disabled using small buses and vans), and ferryboat, but excludes Amtrak, intercity buses, and school buses. The FAST Act authorized $61.1 billion for five fiscal years beginning in FY2016, an average of $12.2 billion per year. Of the total amount, 80% was authorized from the mass transit account of the Highway Trust Fund, and 20% was authorized from the general fund of the U.S. Treasury. Most federal funding from the mass transit account is distributed to transit agencies through formula programs. Most of the general funding authorized is for the Capital Investment Grants (CIG) Program, also known as New Starts, which provides discretionary funding for large capital projects to create and extend rail and bus rapid transit systems. Reauthorization issues discussed in this report include the following: Funding levels and the solvency of the mass transit account . Annual spending from the mass transit account is projected to exceed annual revenues by about $5 billion through FY2025. Bringing receipts and expenditures into balance would require a cut in spending of the federal transit program, an increase in revenues paid into the account, or a combination of the two. Revenue options include increasing taxes that are dedicated to the mass transit accounts and transferring money from the general fund. C hanges to two federal loan programs that may be used for transit capital expenditures , t he Transportation Infrastructure Finance and Innovation Act (TIFIA) program and the Railroad Rehabilitation and Infrastructure Finance (RRIF) program . Issues include TIFIA's share of project costs, the speed and cost of obtaining a loan, and the authorization of federal funding to pay the credit risk premium of RRIF loans. Declining public transportation ridership . Options include linking federal formula funds to transit agencies' success in boosting ridership; redirecting CIG funding from building new rail facilities to refurbishing lines in dense cities where rail transit currently carries large numbers of riders; and funding research projects to explore partnerships between transit agencies and firms offering new mobility options such as ridesharing and bike sharing. F unding the CIG program . CIG has been proposed as a major source of funding for the Gateway Program, which is intended to build new rail tunnels and repair existing tunnels between New Jersey and New York. The amount sought for the Gateway Program is equal to several years of funding for CIG, at recent funding levels, and could overwhelm a program that is responsible for aiding projects throughout the country. Public transportation and climate change. Congress may consider how to reduce greenhouse gas emissions from surface transportation and adaptation provisions that aim to make the public transportation system more resilient. Options considered might include dedicated funding for resilience projects and greater funding for buying low and no emission buses. Buy America . This law places domestic content restrictions on federally funded transportation projects, including procurement of rolling stock. Issues that might arise include the share of components and subcomponents that have to be domestically sourced, the availability of waivers, and the standardization of requirements across modes.

crs_R46119

crs_R46119_0

<1. Introduction> Since 2009, the federal government has been shifting its data storage needs to cloud-based services and away from agency-owned, in-house data centers. This shift is intended to achieve two goals: reduce the total investment by the federal government in information technology (IT), which currently stands at about $90 billion each year, and realize other stated advantages of cloud adoption , including efficiency, accessibility, collaboration, reliability, and security. However, challenges remain as agencies shift to cloud services. According to a survey conducted in September 2018, federal IT managers continue to express long-held concerns about security in certain cloud environments, the complexity of migrating existing ("legacy") applications to the cloud, a lack of skilled staff to manage certain cloud environments, and uncertain funding. This report explains what cloud computing is, including different models for cloud deployment and services, and describes the federal government's planning for IT reform. It also provides information on assessments that have been conducted on agency cloud adoption. Finally, the report provides a summary of recent congressional action and presents some possible mechanisms for Congress to monitor agencies as they implement cloud computing. <2. What Is Cloud Computing?> Cloud computing is a new name for an old concept: the delivery of computing services from a remote location. Cloud computing services are delivered through a network, usually the internet. Some analysts see this approach as analogous to the networked delivery of electricity, water, and other utilities through the electric grid, water delivery systems, and other distribution infrastructure. In some ways, cloud computing is reminiscent of computing before the advent of the personal computer, when users shared the power of a central mainframe computer through video terminals or other devices. Cloud computing, however, is much more powerful and flexible, and information technology advances may permit the approach to become nearly ubiquitous. Cloud computing differs from local computing, in which local machines perform most tasks and store the relevant data. Some cloud services are adaptations of familiar applications, such as email and word processing. Others are new services that never existed as a local application, such as social networks. As cloud computing has developed, varied and sometimes nebulous descriptions of what it is and what it is not have been commonplace. Such ambiguity can create uncertainties that may impede innovation and adoption. The National Institute of Standards and Technology (NIST) has developed standardized language describing cloud computing to help clear up that ambiguity: Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model promotes availability and is composed of five essential characteristics, three service models, and four deployment models. The first sentence of the definition basically states that cloud computing is a way of providing convenient, flexible access to a broad range of computing resources over a network. The characteristics and models referred to in the second sentence provide the specificity necessary to clarify what cloud computing is and is not, described below. <2.1. Characteristics of Cloud Computing6> Cloud computing differs from local computing in many ways. NIST has identified five characteristics in particular: On-demand self-service: A user can directly access the needed computing capabilities from the source, no matter what specific resource is required. An analogy is that a television viewer or radio listener can change stations at will. Broad network access: A user is not tied to one location but can access resources from anywhere the network (typically the internet) is available. Resource pooling: Many users share the same overall set of resources from a provider, using what they need, without having to concern themselves with where those resources originate. An analogy is that homeowners and businesses do not need to know which specific power plants generated the electricity they are using [although some do care, and specifically buy power from "green" sources]. Rapid elasticity: Users can quickly increase or decrease their use of a computing resource in response to their immediate needs. An analogy is that electricity customers can use as little or as much power as they need, within the capacity of their connections to the grid. Measured service: The amount of usage by a customer is monitored by the provider and can be used for billing or other purposes. An analogy is the metered use of electricity, water, natural gas, and other utilities. <2.2. Deployment Models7> NIST has identified four standard models, or types, of cloud computing that can be implemented to satisfy the varying needs of users or providers. Those models public, private, community, and hybrid vary in where the hardware is located, what entity is responsible for maintaining the system, and who can use system resources. An extensive list of deployment model adoption by federal agencies is in the April 2019 report by the Government Accountability Office, Cloud Computing: Agencies Have Increased Usage and Realized Benefits, but Cost and Savings Data Need to Be Better Tracked . <2.2.1. Public> In public cloud (sometimes called external cloud ) computing, a provider supplies one or more cloud-computing services to a large group of independent customers, such as the general public. Customers use the service over the internet through web browsers or other software applications. Providers usually sell these services on a metered basis, an approach that is sometimes called "utility computing." Some common examples of services using a public cloud model include internet backup and file synchronization and web-based media services. Public clouds may have price and flexibility advantages over other deployment models, but security and other concerns could restrict federal use. The public cloud deployment model is used predominantly by businesses with low privacy concerns. <2.2.2. Private> A private cloud (sometimes called an internal cloud ) works like public cloud computing, but on a private network controlled and used by a single organization. It is a cloud used by a company itself rather than its customers. Private clouds may provide services that are similar to those provided by public cloud providers, but potentially with fewer risks. Potential disadvantages include cost and logistical challenges associated with purchasing and managing the required hardware and software. Private clouds can provide internal services such as data storage as well as external services to the public or other users. <2.2.3. Community> A community cloud allows a group of organizations with similar requirements to share infrastructure, thereby potentially realizing more of the benefits of public cloud computing than is possible with a purely private cloud. Because a community cloud has a much smaller user base than a public cloud, it may be more expensive to establish and operate, but it may also allow for more customization to meet the users' needs. It may also meet user-specific security and other requirements more effectively than a public cloud. Just like private cloud, community cloud is technically no different from public cloud. The only difference is who is allowed to use it. <2.2.4. Hybrid> A hybrid cloud uses a combination of internal (private or community) and external (public) providers. For example, a user could employ a private or community cloud to provide applications and store current data, but use a public cloud for archiving data. The flexibility of this deployment model may make it particularly attractive to many organizations. By combining different deployment models, users can choose the right balance for their organization between legal compliance, security, and scalability. <2.3. Service Models11> Cloud computing can provide various kinds of services, ranging from basic computing tasks to the provision of sophisticated applications. While these services can be categorized in different ways, the NIST definition uses three basic service models , described below. <2.3.1. Software as a Service (SaaS)> In the SaaS model, customers use applications that the provider supplies and makes available remotely on demand, rather than using applications installed on a local workstation or server. SaaS is the most readily visible and simplest service model to the end user. In many cases, SaaS applications are accessible through hardware or software "thin clients." Examples include web-based services such as Google Apps and online storage such as DropBox. <2.3.2. Platform as a Service (PaaS)> With PaaS, customers create applications on the provider's infrastructure using tools, such as programming languages, supplied by the provider. Facebook is one example of such an application. Such a platform could include hosting capability and development tools to facilitate building, testing, and launching a web application. The user controls the applications created via the platform, and the provider controls and maintains the underlying infrastructure, including networks, servers, and platform upgrades. <2.3.3. Infrastructure as a Service (IaaS)> IaaS providers supply fundamental computing resources that customers can use however they wish. Customers can install, use, and control whatever operating systems and applications they desire, as they might otherwise do on desktop computers or local servers. The provider maintains the underlying cloud infrastructure. Examples of IaaS are Amazon Web Services and Microsoft Azure. <2.3.4. Service Model Comparison> A simple local-computing analogy for these three kinds of services would be the purchase of a desktop computer, which serves as infrastructure on which the user installs a chosen operating system such as Windows or Linux and uses it as a platform to create custom applications and run whatever software is needed. By providing these infrastructure, platform, and software services remotely, a cloud provider frees its customers from having to provide local infrastructure and support. In the case of IaaS, the user need not have a local workstation, using instead a thin client with minimal need for computing power. <3. Federal Agency Cloud Adoption16> Planning for cloud adoption by federal agencies began with the 2010 publication by the Federal Chief Information Officer (CIO) of "A 25-Point Implementation Plan to Reform Federal IT Management." The reforms put forth in the plan were focused on eliminating barriers that were impeding effective management of IT programs throughout the federal government. In the plan, the Federal CIO recognized that too many past federal IT projects had run over budget, fallen behind schedule, or failed to deliver promised functionality. The plan stated that the federal government would shift to a "Cloud First" strategy, which it stated would be more economical, faster, and more flexible. Increased cloud adoption is also a stated goal of the Federal Information Technology Acquisition Reform Act (FITARA), enacted on December 19, 2014. Among other provisions, FITARA required the Federal CIO, in conjunction with federal agencies, to refocus the Federal Data Center Consolidation Initiative (FDCCI) to include adoption of cloud services. The FDCCI was superseded by the Data Center Optimization Initiative (DCOI) in August 2016. In the 2017 "Report to the President on Federal IT Modernization," the Office of Management and Budget (OMB) pledged to update the federal government's legacy Federal Cloud Computing Strategy ("Cloud First"). Fulfilling this requirement, the Administration developed a new strategy, Cloud Smart, published as a draft on September 24, 2018. The DCOI was updated in June 2019. Among other requirements, the updated DCOI placed a freeze on funds or resources to build new agency-owned data centers or significantly expand existing agency-owned data centers without approval from OMB. It also requires agencies to evaluate options for the consolidation and closure of existing data centers, in alignment with the Cloud Smart Strategy. <3.1. The Cloud Smart Strategy> On June 24, 2019, the Federal CIO issued the Cloud Smart Strategy to provide agencies with practical implementation guidance to achieve the potential of cloud-based technologies. The new strategy is founded on three pillars: Security: Modernize security policies to focus on risk-based decisionmaking, automation, and moving protections closer to data. Procurement: Improve the ability of agencies to purchase cloud solutions through repeatable practices and sharing knowledge. Workforce: Upskill, retrain, and recruit key talent for cybersecurity, acquisition, and cloud engineering. Across these areas, the strategy identifies 22 "action items" to be completed not later than December 2020. As of November 2019, over half had been completed. (See Table 1 and Table 2 . ) <4. 2019 GAO Report> In April 2019, the Government Accountability Office (GAO) published a report examining the status of cloud adoption at 16 agencies. GAO found that 10 of the agencies reported increasing their use of cloud services from FY2016 through FY2019. All 16 agencies had made progress in implementing cloud services, meaning they had established assessment guidance, performed assessments, and implemented services, but the extent of their progress varied. For example, not all had followed OMB guidance that directs agencies to review all IT investments for compatibility with cloud services. GAO also found that 16 agencies reported an increase in their cloud service spending since 2015. 13 of the 16 agencies saved a total of $291 million to date from using cloud services. 15 of the 16 agencies identified significant benefits from acquiring cloud services, including improved customer service and the acquisition of more cost-effective options for managing IT services. 15 of the 16 agencies identified nine cloud investments that enhanced the availability of weather-related information; facilitated collaboration and information sharing among federal, state, and local agencies related to homeland security; and provided benefits information to veterans. In collecting the information requested by GAO, agency CIOs identified the following challenges: Spending data were not consistently tracked. Different methods were used to calculate cloud spending costs. Interpreting changes in OMB and related guidance created confusion regarding what spending data should be tracked. As a result of these challenges, GAO concluded that agency-reported cloud spending and savings figures were likely underreported. GAO made one recommendation to OMB on cloud savings reporting, and 34 recommendations to the 16 agencies on cloud assessments and savings. To OMB, GAO recommended that agencies be required to explicitly report, at least on a quarterly basis, the savings and cost avoidance associated with cloud computing investments. The 34 recommendations to the agencies included directing CIOs to establish guidance to assess new and existing IT investments for suitability for cloud computing services; complete an assessment of existing IT investments for suitability for migration to a cloud computing service; and establish a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. <5. Congressional Activity: 116th Congress> Congress has conducted ongoing oversight of IT acquisitions, including cloud computing activity, for many years. This section summarizes cloud-related legislation and hearings in the 116 th Congress. <5.1. Legislation> The Federal Risk and Authorization Management Program (FedRAMP) Authorization Act ( H.R. 3941 ), introduced on July 24, 2019, by Representative Gerald Connolly, would establish a risk management, authorization, and continuous monitoring process to "leverage cloud computing services using a risk-based approach consistent with the Federal Information Security Modernization Act of 2014." <5.2. Hearings> On July 17, 2019, the House Committee on Oversight and Reform Subcommittee on Government Operations held a hearing titled "To the Cloud! The Cloudy Role of FedRAMP in IT Modernization." The purpose of this hearing was to examine the extent to which FedRAMP has reduced duplicative efforts, inconsistencies, and cost inefficiencies associated with the cloud security authorization process. On October 18, 2019, the Committee on Financial Services Task Force on Artificial Intelligence (AI) held a hearing, "AI and the Evolution of Cloud Computing: Evaluating How Financial Data Is Stored, Protected, and Maintained by Cloud Providers." Among other topics, the hearing explored how AI could be used to improve cloud management functions. <5.2.1. FITARA Scorecard> Since November 2015, a year after FITARA became law, the House Committee on Oversight and Reform has held two FITARA oversight hearings per year. These hearings provide a "scorecard" on various aspects of FITARA implementation, including data center optimization, which is an indication of the extent of agency adoption of cloud computing. Thus far in the 116 th Congress, these hearings were held on June 26, 2019, and December 11, 2019. <6. Options for Congress> As Congress monitors the progress of federal departments and agencies in implementing cloud computing, its options for ongoing oversight include holding hearings; requesting review of an agency's status by either the agency itself or the GAO; and assessing the agency's progress and projected goals against the stated goals of the Cloud Smart Strategy. <6.1. Hearings> Committees might choose to focus hearings on OMB, which oversees the management of the Cloud Smart Strategy at the agency level. This role makes OMB the central point of information regarding the status of agency planning and implementation. If OMB management practices for cloud computing are lacking, the impact could potentially affect the performance of all agencies. Consistent congressional review of OMB's management practices with respect to the Cloud Smart Strategy could help to detect and correct problems in a timely manner. Alternatively, or in addition, committees might choose to hold hearings to receive status reports directly from the CIOs of particular agencies under their jurisdictions. <6.2. Review of Agency Cloud Computing Plans and Implementation Assessments> As plans to migrate to cloud services within the federal government are created and implemented, policymakers may choose to monitor how agencies are following federal directives and responding to GAO assessments. Such monitoring could be achieved through assessments conducted internally by a department or agency itself, externally by GAO, or directly by a committee of jurisdiction. A model for internal assessments and reporting could be based on progress made on the uncompleted items of the Cloud Smart Strategy. <6.3. Review of External Status Reports> GAO conducts status reports on cloud adoption across the federal agencies, such as the April 2019 report discussed above, but it has not issued separate reports focused on the status of individual departments or agencies. When examining shortcomings in individual agencies' implementation of the Cloud Smart Strategy, as identified by GAO, Congress might consider requesting follow-up reviews focused on particular challenges.

Cloud computing is a new name for an old concept: the delivery of computing services from a remote location, analogous to the way electricity, water, and other utilities are provided to most customers. Cloud computing services are delivered through a network, usually the internet. Utilities are also delivered through networks, whether the electric grid, water delivery systems, or other distribution infrastructure. In some ways, cloud computing is reminiscent of computing before the advent of the personal computer, where users shared the power of a central mainframe computer through video terminals or other devices. Cloud computing, however, is much more powerful and flexible, and information technology advances may permit the approach to become ubiquitous. As cloud computing has developed, varied and sometimes nebulous descriptions of what it is and what it is not have been commonplace. Such ambiguity can create uncertainties that may impede innovation and adoption. The National Institute of Standards and Technology has developed standardized language describing cloud computing to help clear up that ambiguity: Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model promotes availability and is composed of five essential characteristics, three service models, and four deployment models. Since 2009, the federal government has been shifting its data storage needs to cloud-based services and away from agency-owned, in-house data centers. This shift is intended to achieve two goals: reduce the total investment by the federal government in information technology (IT), which currently stands at about $90 billion each year, and realize other stated advantages of cloud adoption: efficiency, accessibility, collaboration, rapidity of innovation, reliability, and security. However, challenges remain as agencies shift to cloud services. According to a survey conducted in September 2018, federal IT managers expressed concerns about security in certain cloud environments, the complexity of migrating existing ("legacy") applications to the cloud, a lack of skilled staff to manage certain cloud environments, and uncertain funding. Planning for cloud adoption by federal agencies began with the 2010 publication of "A 25-Point Implementation Plan to Reform Federal IT Management." More recently, in the 2017 "Report to the President on Federal IT Modernization," the Office of Management and Budget (OMB) pledged to update the government's legacy Federal Cloud Computing Strategy ("Cloud First"). Fulfilling this requirement, the Administration developed a new strategy, "Cloud Smart," which was published on September 24, 2018. The new strategy is founded on what the Administration considers the three key pillars of successful cloud adoption: security, procurement, and workforce. In the 116 th Congress, there has been one cloud-related bill introduced and two hearings directly related to cloud computing: The Federal Risk and Authorization Management Program (FedRAMP) Authorization Act ( H.R. 3941 ) was introduced on July 24, 2019, by Representative Gerald Connolly. The bill would formally establish within the General Services Administration a risk management, authorization, and continuous monitoring process consistent with the Federal Information Security Modernization Act of 2014." On July 17, 2019, the House Committee on Government Reform Subcommittee on Government Operations held a hearing, "To the Cloud! The Cloudy Role of FedRAMP in IT Modernization." The purpose of the hearing was to examine the extent to which FedRAMP has reduced duplicative efforts, inconsistencies, and cost inefficiencies associated with the cloud security authorization process. On October 18, 2019, the Committee on Financial Services Task Force on Artificial Intelligence (AI) held a hearing, "AI and the Evolution of Cloud Computing: Evaluating How Financial Data Is Stored, Protected, and Maintained by Cloud Providers." Among other topics, the hearing explored how AI could be used to improve cloud management functions. Additionally, there have been two hearings on the implementation status of the Federal Information Technology Acquisition Reform Act. These hearings provide an update on data center optimization, which is an indication of the extent of agency adoption of cloud computing.

crs_R45825

crs_R45825_0

The Constitution's Supremacy Clause provides that "the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." This language is the foundation for the doctrine of federal preemption, according to which federal law supersedes conflicting state laws. Federal preemption of state law is a ubiquitous feature of the modern regulatory state and "almost certainly the most frequently used doctrine of constitutional law in practice." Indeed, preemptive federal statutes shape the regulatory environment for most major industries, including drugs and medical devices, banking, air transportation, securities, automobile safety, and tobacco. As a result, "[d]ebates over the federal government's preemption power rage in the courts, in Congress, before agencies, and in the world of scholarship." These debates over federal preemption implicate many of the themes that recur throughout the federalism literature. Proponents of broad federal preemption often cite the benefits of uniform national regulations and the concentration of expertise in federal agencies. In contrast, opponents of broad preemption often appeal to the importance of policy experimentation, the greater democratic accountability that they believe accompanies state and local regulation, and the "gap-filling" role of state common law in deterring harmful conduct and compensating injured plaintiffs. These broad normative disputes occur throughout the Supreme Court's preemption case law. However, the Court has also identified different ways in which federal law can preempt state law, each of which raises a unique set of narrower interpretive issues. As Figure 1 illustrates, the Court has identified two general ways in which federal law can preempt state law. First, federal law can expressly preempt state law when a federal statute or regulation contains explicit preemptive language. Second, federal law can impliedly preempt state law when its structure and purpose implicitly reflect Congress's preemptive intent. The Court has also identified two subcategories of implied preemption: "field preemption" and "conflict preemption." Field preemption occurs when a pervasive scheme of federal regulation implicitly precludes supplementary state regulation, or when states attempt to regulate a field where there is clearly a dominant federal interest. In contrast, conflict preemption occurs when compliance with both federal and state regulations is a physical impossibility ("impossibility preemption"), or when state law poses an "obstacle" to the accomplishment of the "full purposes and objectives" of Congress ("obstacle preemption"). Figure 1. Preemption TaxonomySource: CRS. While the Supreme Court has repeatedly distinguished these preemption categories, it has also explained that the presence of an express preemption clause in a federal statute does not preclude implied preemption analysis. In Geier v. American Honda Motor Co ., the Court held that although a preemption clause in a federal automobile safety statute did not expressly displace state common law claims involving automobile safety, the federal statute and associated regulations nevertheless impliedly preempted those claims based on conflict preemption principles. Congress must therefore consider the possibility that the laws it enacts may be construed as impliedly preempting certain categories of state law even if those categories do not fall within the explicit terms of a preemption clause. This report provides a general overview of federal preemption to inform Congress as it crafts laws implicating overlapping federal and state interests. The report begins by reviewing two general principles that have shaped the Court's preemption jurisprudence: the primacy of congressional intent and the "presumption against preemption." The report then discusses how courts have interpreted certain language that is commonly used in express preemption clauses. Next, the report reviews judicial interpretations of statutory provisions designed to insulate certain categories of state law from federal preemption ("savings clauses"). Finally, the report discusses the Court's implied preemption case law by examining illustrative examples of its field preemption, impossibility preemption, and obstacle preemption decisions. <1. General Preemption Principles> <1.1. The Primacy of Congressional Intent> The Supreme Court has repeatedly explained that in determining whether (and to what extent) federal law preempts state law, the purpose of Congress is the "ultimate touchstone" of its statutory analysis. The Court has further instructed that Congress's intent is discerned "primarily" from a statute's text. However, the Court has also noted the importance of statutory structure and purpose in determining how Congress intended specific federal regulatory schemes to interact with related state laws. Like many of its statutory interpretation cases, then, the Court's preemption decisions often involve disputes over the appropriateness of consulting extra-textual evidence to determine Congress's intent. <1.2. The Presumption Against Preemption> In evaluating congressional purpose, the Court has at times employed a canon of construction commonly referred to as the "presumption against preemption," which instructs that federal law should not be read to preempt state law "unless that was the clear and manifest purpose of Congress." The Court regularly appealed to this principle in the 1980s and 1990s, but has invoked it inconsistently in recent cases. Moreover, in a 2016 decision, the Court departed from prior case law when it held that the presumption no longer applies in express preemption cases. The Court's repudiation of the presumption in express preemption cases can be traced to the growing popularity of textualist approaches to statutory interpretation, as many textualists have expressed skepticism about such "substantive" canons of construction. Unlike "semantic" or "linguistic" canons, which express rules of thumb concerning ordinary uses of language, substantive canons favor or disfavor particular outcomes even when those outcomes do not follow from the most natural reading of a statute's text. Because of these effects, prominent textualists have expressed suspicion about substantive canons' legitimacy. According to textualist critics of the presumption against preemption, a statute's inclusion of a preemption clause provides sufficient evidence of Congress's intent to preempt state law. These critics contend that in light of this clear expression of congressional intent, preemption clauses should be given their "ordinary meaning" rather than any narrower constructions that the presumption might dictate. The Supreme Court ultimately adopted this position in its 2016 decision in Puerto Rico v. Franklin California Tax-Free Trust . The Court has also endorsed certain narrower exceptions to the presumption against preemption. Specifically, the Court has declined to apply the presumption in cases involving (1) subjects which the states have not traditionally regulated, and (2) areas in which the federal government has traditionally had a "significant" regulatory presence. In Buckman Company v. Plaintiffs' Legal Committee , for example, the Court declined to apply the presumption when it held that federal law preempted state law claims alleging that a medical device manufacturer had defrauded the Food and Drug Administration during the pre-market approval process for its device. The Court refused to apply the presumption in Buckman on the grounds that states have not traditionally policed fraud against federal agencies, reasoning that the relationship between federal agencies and the entities they regulate is "inherently federal in character." Likewise, in Arizona v. Inter Tribal Council of Arizona, Inc. , the Court declined to apply the presumption in holding that the National Voter Registration Act preempted a state law requiring voter-registration officials to reject certain registration applications. In refusing to apply the presumption, the Court explained that state regulation of congressional elections "has always existed subject to the express qualification that it terminates according to federal law." Similarly, the Court has declined to apply the presumption in cases involving areas in which the federal government has traditionally had a "significant" regulatory presence. In United States v. Locke , the Court held that the federal Ports and Waterways Safety Act preempted state regulations regarding navigation watch procedures, crew English language skills, and maritime casualty reporting based in part on the fact that the state laws concerned maritime commerce an area in which there was a "history of significant federal presence." In such an area, the Court explained, "there is no beginning assumption that concurrent regulation by the State is a valid exercise of its police powers." However, the status of the Locke exception to the presumption against preemption is unclear. In its 2009 decision in Wyeth v. Levine , the Court invoked the presumption when it held that federal law did not preempt certain state law claims concerning drug labeling. In allowing the claims to proceed, the Court acknowledged that the federal government had regulated drug labeling for more than a century, but explained that the presumption can apply even when the federal government has long regulated a subject. This reasoning stands in some tension with the Court's conclusion in Locke that the presumption does not apply when states regulate an area where there has been a "history of significant federal presence." Whether the presumption continues to apply in fields traditionally regulated by the federal government accordingly remains unclear. <2. Language Commonly Used in Express Preemption Clauses> Congress often relies on the language of existing preemption clauses in drafting new legislation. Moreover, when statutory language has a settled meaning, courts often look to that meaning to discern Congress's intent. This section of the report discusses how the Supreme Court has interpreted federal statutes that preempt (1) state laws "related to" certain subjects, (2) state laws concerning certain subjects "covered" by federal laws and regulations, (3) state requirements that are "in addition to, or different than" federal requirements, and (4) state "requirements," "laws," "regulations," and "standards." While preemption decisions depend heavily on the details of particular statutory schemes, the Court has assigned some of these phrases specific meanings even when they have appeared in different statutory contexts. <2.1. "Related to"> Preemption clauses frequently provide that a federal statute supersedes all state laws that are "related to" a specific matter of federal regulatory concern. The Supreme Court has characterized such provisions as "deliberatively expansive" and "conspicuous for [their] breadth." At the same time, however, the Court has cautioned against strictly literal interpretations of "related to" preemption clauses. Instead of reading such clauses "to the furthest stretch of [their] indeterminacy," the Court has relied on legislative history and purpose to cabin their scope. The following subsections discuss the Court's interpretation of three statutes that contain "related to" preemption clauses: the Employee Retirement Income Security Act, the Airline Deregulation Act, and the Federal Aviation Administration Authorization Act. <2.1.1. Employee Retirement Income Security Act> The Employee Retirement Income Security Act (ERISA) contains perhaps the most prominent example of a preemption clause that uses "related to" language. ERISA imposes comprehensive federal regulations on private employee benefit plans, including (1) detailed reporting and disclosure obligations, (2) schedules for the vesting, accrual, and funding of pension benefits, and (3) the imposition of certain duties of care and loyalty on plan administrators. The statute also contains a preemption clause providing that its requirements preempt all state laws that "relate to" regulated employee benefit plans. In interpreting this provision, the Supreme Court has identified two categories of state laws that are preempted by ERISA because they "relate to" regulated employee benefit plans: (1) state laws that have a "connection with" such plans, and (2) state laws that contain a "reference to" such plans. The Court has held that state laws have an impermissible "connection with" ERISA plans if they govern or interfere with "a central matter of plan administration." In contrast, state laws that indirectly affect ERISA plans are not preempted unless the relevant effects are particularly "acute." Applying these standards, the Court has held that ERISA preempts state laws governing areas of "core ERISA concern," like the designation of ERISA plan beneficiaries and the disclosure of data regarding health insurance claims. In contrast, the Court has held that ERISA does not preempt state laws imposing surcharges on certain types of insurers and mandating wage levels for specific categories of employees who work on public projects. The Court has explained that these state laws are permissible because they affect ERISA plans only indirectly, and that ERISA preempts such laws only if the relevant indirect effects are particularly "acute." The Court has also held that ERISA preempts state laws that contain an impermissible "reference to" ERISA plans. Under the Court's case law, a state law will contain an impermissible "reference to" ERISA plans where it "acts immediately and exclusively upon ERISA plans," or where the existence of an ERISA plan is "essential" to the state law's operation. In Mackey v. Lanier Collection Agency & Service, Inc. , for example, the Court held that ERISA which does not prohibit creditors from garnishing funds in regulated employee benefit plans preempted a state statute that prohibited the garnishment of funds in plans "subject to . . . [ERISA]." Because the challenged state statute expressly referenced ERISA plans, the Court held that it fell within the scope of ERISA's preemption clause even if it was enacted "to help effectuate ERISA's underlying purposes." Similarly, in Ingersoll-Rand Company v. McClendon , the Court held that ERISA which provides a federal cause of action for employees discharged because of an employer's desire to prevent a regulated pension from vesting preempted an employee's state law claim alleging that he was terminated in order to prevent his regulated pension from vesting. The Court reasoned that ERISA preempted this state law claim because the action made "specific reference to" and was "premised on" the existence of an ERISA-regulated pension plan. Finally, in District of Columbia v. Greater Washington Board of Trade , the Court held that ERISA preempted a state statute that required employers providing health insurance to their employees to continue providing coverage at existing benefit levels while employees received workers' compensation benefits. The Court reached this conclusion on the grounds that ERISA regulated the relevant employees' existing health insurance coverage, meaning that the state law specifically referred to ERISA plans. <2.1.2. Airline Deregulation Act> The Airline Deregulation Act (ADA) is another example of a statute that employs "related to" preemption language. Enacted in 1978, the ADA largely deregulated domestic air transportation, eliminating the federal Civil Aeronautics Board's authority to control airfares. In order to ensure that state governments did not interfere with this deregulatory effort, the ADA prohibited states from enacting laws " relating to a price, route, or service of an air carrier." The Supreme Court's interpretation of the ADA's preemption clause has largely followed its ERISA decisions in applying the "connection with" and "reference to" standards. In Morales v. Trans World Airlines, Inc ., for example, the Court relied in part on its ERISA case law to conclude that the ADA preempted state consumer protection statutes prohibiting deceptive airline fare advertisements. Specifically, the Court reasoned that because the challenged state statutes expressly referenced airfares and had a "significant effect" on them, they "related to" airfares within the meaning of the ADA's preemption clause. <2.1.3. Federal Aviation Administration Authorization Act> The Federal Aviation Administration Authorization Act of 1994 (FAAA) is a third example of a statute that utilizes "related to" preemption language. While the FAAA (as its title suggests) is principally concerned with aviation regulation, it also supplemented Congress's deregulation of the trucking industry. The statute pursued this objective with a preemption clause prohibiting states from enacting laws " related to a price, route, or service of any motor carrier . . . with respect to the transportation of property." In interpreting this language, the Supreme Court has relied on the "connection with" standard from its ERISA and ADA case law. However, the Court has also acknowledged that the clause's "with respect to" qualifying language significantly narrows the FAAA's preemptive scope. In Rowe v. New Hampshire Motor Transport Association , the Supreme Court relied in part on its ERISA and ADA case law to hold that the FAAA preempted certain state laws regulating the delivery of tobacco, including a law that required retailers shipping tobacco to employ motor carriers that utilized certain kinds of recipient-verification services. The Court reached this conclusion for two principal reasons. First, the Court reasoned that the requirement had an impermissible "connection with" motor carrier services because it "focuse[d] on" such services. Second, the Court concluded that the state law fell within the terms of the FAAA's preemption clause because of its effects on the FAAA's deregulatory objectives. Specifically, the Court reasoned that the state law had a "connection with" these objectives because it dictated that motor carriers use certain types of recipient-verification services, thereby substituting the state's commands for "competitive market forces." However, the Court has also held that the FAAA's "with respect to" qualifying language significantly narrows the statute's preemptive scope. In Dan's City Used Cars, Inc. v. Pelkey , the Court relied on this language to hold that the FAAA did not preempt state law claims involving the storage and disposal of a towed car. Specifically, the Court held that the FAAA did not preempt state law claims alleging that a towing company (1) failed to provide the plaintiff with proper notice that his car had been towed, (2) made false statements about the condition and value of the car, and (3) auctioned the car despite being informed that the plaintiff wanted to reclaim it. In allowing these claims to proceed, the Court observed that the FAAA's preemption clause mirrored the ADA's preemption clause with "one conspicuous alteration" the addition of the phrase "with respect to the transportation of property." According to the Court, this phrase "massively" limited the scope of FAAA preemption. And because the relevant state law claims involved the storage and disposal of towed vehicles rather than their transportation , the Court held that they did not qualify as state laws that "related to" motor carrier services "with respect to the transportation of property." <2.1.4. Conclusion> The Supreme Court's case law concerning "related to" preemption clauses reflects a number of general principles. The Court has consistently held that state laws "relate to" matters of federal regulatory concern when they have a "connection with" or contain a "reference to" such matters. Generally, state laws have an impermissible "connection with" matters of federal concern when they prescribe rules specifically directed at the same subject as the relevant federal regulatory scheme, or when their indirect effects on the federal scheme are particularly "acute." As a corollary to the latter principle, the Court has made clear that state laws having only "tenuous, remote, or peripheral" effects on an issue of federal concern are not sufficiently "related to" the issue to warrant preemption. In contrast, a state law contains an impermissible "reference to" a matter of federal regulatory interest (and therefore "relates to" such a matter) when it "acts immediately and exclusively upon" the matter, or where the existence of a federal regulatory scheme is "essential" to the state law's operation. Finally, the inclusion of qualifying language can narrow the scope of "related to" preemption clauses. As the Court made clear in Dan's City , the scope of "related to" preemption clauses can be significantly limited by the addition of "with respect to" qualifying language. <2.2. "Covering"> The Supreme Court has interpreted a preemption clause that allowed states to enact regulations related to a subject until the federal government adopted regulations "covering" that subject as having a narrower effect than "related to" preemption clauses. The Court reached this conclusion in CSX Transportation, Inc. v. Easterwood , where it interpreted a preemption clause in the Federal Railroad Safety Act allowing states to enact laws related to railroad safety until the federal government adopted regulations "covering the subject matter" of such laws. In Easterwood , the Court explained that "covering" is a "more restrictive term" than "related to," and that federal law will accordingly "cover" the subject matter of a state law only if it "substantially subsume[s]" that subject. Applying this standard, the Court held that federal laws and regulations did not preempt state law claims alleging that a train operator failed to maintain adequate warning devices at a grade crossing where a collision had occurred. The Court allowed these claims to proceed on the grounds that the relevant federal regulations which required states receiving federal railroad funds to establish a highway safety program and "consider" the dangers posed by grade crossings did not "substantially subsume" the subject of warning device adequacy. Specifically, the Court reasoned that the federal regulations did not "substantially subsume" this subject because they established the "general terms of the bargain" between the federal government and states receiving federal funds, but did not reflect an intent to displace supplementary state regulations. However, the Easterwood Court held that federal law preempted other state law claims alleging that the relevant train traveled at an unsafe speed despite complying with federal maximum-speed regulations. In holding that these claims were preempted, the Court reasoned that federal maximum-speed regulations "substantially subsumed" (and therefore "covered") the subject of train speeds because they comprehensively regulated that issue, reflecting an intent to preclude additional state regulations. Accordingly, while the Court has made clear that "covering" preemption clauses of the sort at issue in Easterwood have a narrower effect than "related to" clauses, specific determinations that federal law "covers" a subject will depend heavily on the details of particular regulatory schemes. <2.3. "In addition to, or different than"> A number of federal statutes preempt state requirements that are "in addition to, or different than" federal requirements. The Supreme Court has explained that these statutes preempt state law even in cases where a regulated entity can comply with both federal and state requirements. The Court adopted this position in National Meat Association v. Harris , where it interpreted a preemption clause in the Federal Meat Inspection Act (FMIA) prohibiting states from imposing requirements on meatpackers and slaughterhouses that are "in addition to, or different than" federal requirements. In Harris , the Court held that certain California slaughterhouse regulations were "in addition to, or different than" federal regulations because they imposed a distinct set of requirements that went beyond those imposed by federal law. Because the California requirements differed from federal requirements, the Court explained, they fell within the plain meaning of the FMIA's preemption clause even if slaughterhouses were able to comply with both sets of restrictions. Preemption clauses that employ "in addition to, or different than" language often raise a second interpretive issue involving the status of state requirements that are identical to federal requirements ("parallel requirements"). The Supreme Court has interpreted two statutes employing this language to not preempt parallel state law requirements. In instructing lower courts on how to assess whether state requirements in fact parallel federal requirements, the Court has explained that state law need not explicitly incorporate federal standards in order to avoid qualifying as "in addition to, or different than" federal requirements. Rather, the Court has indicated that state requirements must be " genuinely equivalent" to federal requirements in order to avoid preemption under such clauses. One lower court has interpreted this instruction to mean that state restrictions do not genuinely parallel federal restrictions if a defendant could violate state law without having violated federal law. The Court has also explained that state requirements do not qualify as "in addition to, or different than" federal requirements simply because state law provides injured plaintiffs with different remedies than federal law. Accordingly, absent contextual evidence to the contrary, preemption clauses that employ "in addition to, or different than" language will allow states to give plaintiffs a damages remedy for violations of state requirements even where federal law does not offer such a remedy for violations of parallel federal requirements. <2.4. "Requirements," "Laws," "Regulations," and "Standards"> Federal statutes frequently preempt state "requirements," "laws," "regulations," and/or "standards" concerning subjects of federal regulatory concern. These preemption clauses have required the Supreme Court to determine whether such terms encompass state common law actions (as opposed to state statutes and regulations) involving the relevant subjects. The Supreme Court has explained that absent evidence to the contrary, a preemption clause's reference to state "requirements" includes state common law duties. In contrast, the Court has interpreted one preemption clause's reference to state "law[s] or regulation[s]" as encompassing only "positive enactments" and not common law actions. The Court reached this conclusion in Sprietsma v. Mercury Marine , where it considered the meaning of a preemption clause in the Federal Boat Safety Act of 1971 (FBSA) prohibiting states from enforcing "a law or regulation" concerning boat safety that is not identical to federal laws and regulations. The FBSA also includes a "savings clause" providing that compliance with the Act does not "relieve a person from liability at common law or under State law." In Sprietsma , the Court held that the phrase "a law or regulation" in the FBSA did not encompass state common law claims for three reasons. First, the Court reasoned that the inclusion of the article "a" before "law or regulation" implied a "discreteness" that is reflected in statutes and regulations, but not in common law. Second, the Court concluded that the pairing of the terms "law" and "regulation" indicated that Congress intended to preempt only positive enactments. Specifically, the Court reasoned that if the term "law" were given an expansive interpretation that included common law claims, it would also encompass "regulations" and thereby render the inclusion of that latter term superfluous. Finally, the Court reasoned that the FBSA's savings clause provided additional support for the conclusion that the phrase "law or regulation" did not encompass common law actions. Lastly, while the Court had the opportunity to determine whether a preemption clause's use of the term "standard" encompassed state common law actions in Geier v. American Honda Motor Co., Inc. , it ultimately declined to take up that question and resolved the case on other grounds discussed in greater detail below. <3. Savings Clauses> Many federal statutes contain provisions that purport to restrict their preemptive effect. These "savings clauses" make clear that federal law does not preempt certain categories of state law, reflecting Congress's recognition of the need for states to "fill a regulatory void" or "enhance protection for affected communities" through supplementary regulation. The law regarding savings clauses "is not especially well developed," and cases involving such clauses "turn very much on the precise wording of the statutes at issue." With these caveats in mind, this section discusses three general categories of savings clauses: (1) "anti-preemption provisions," (2) "compliance savings clauses," and (3) "remedies savings clauses." <3.1. Anti-Preemption Provisions> Some savings clauses contain language indicating that "nothing in" the relevant federal statute "may be construed to preempt or supersede" certain categories of state law, or that the relevant federal statute "does not annul, alter, or affect" state laws "except to the extent that those laws are inconsistent" with the federal statute. Certain statutes containing this "inconsistency" language further provide that state laws are not "inconsistent" with the relevant federal statute if they provide greater protection to consumers than federal law. Some courts and commentators have labeled these clauses "anti-preemption provisions." While the case law on anti-preemption provisions is not well-developed, some courts have addressed such provisions in the context of defendants' attempts to remove state law actions to federal court. Specifically, certain courts have relied on anti-preemption provisions to reject removal arguments premised on the theory that federal law "completely" preempts state laws concerning the relevant subject. In Bernhard v. Whitney National Bank , for example, the U.S. Court of Appeals for the Fifth Circuit relied on an anti-preemption provision in the Electronic Funds Transfer Act to reject a defendant-bank's attempt to remove state law claims involving unauthorized funds transfers to federal court. A number of federal district courts have also adopted similar interpretations of other anti-preemption provisions. <3.2. Compliance Savings Clauses> Some savings clauses provide that compliance with federal law does not relieve a person from liability under state law. The principal interpretive issue with such clauses is whether they limit a statute's preemptive effect (a question of federal law) or are instead intended to discourage the conclusion that compliance with federal regulations necessarily renders a product nondefective as a matter of state tort law. While the Supreme Court has not adopted a generally applicable rule concerning the meaning of compliance savings clauses, it has concluded that such clauses can support a narrow interpretation of a statute's preemptive effect. In Geier v. American Honda Motor Co., Inc. , the Court relied in part on a compliance savings clause in the National Traffic and Motor Vehicle Safety Act (NTMVSA) to hold that the statute did not expressly preempt state common law claims against an automobile manufacturer. The NTMVSA contains (1) a preemption clause prohibiting states from enforcing safety standards for motor vehicles that are not identical to federal standards, and (2) a "savings clause" providing that compliance with federal safety standards does not "exempt any person from any liability under common law." In Geier , the Court explained that although it was "possible" to read the NTMVSA's preemption clause standing alone as encompassing the state law claims, that reading of the statute would leave the Act's savings clause without effect. The Court accordingly held that the NTMVSA did not expressly preempt the state law claims based in part on the Act's savings clause. Similarly, in Sprietsma v. Mercury Marine , the Court reasoned that a nearly identical savings clause in the FBSA "buttresse[d]" the conclusion that state common law claims did not qualify as "law[s] or regulation[s]" within the meaning of the statute's preemption clause. The Court has accordingly relied on compliance savings clauses to inform its interpretation of express preemption clauses, but has not held that such clauses automatically insulate state laws from preemption. <3.3. Remedies Savings Clauses> Some savings clauses provide that "nothing in" a federal statute "shall in any way abridge or alter the remedies now existing at common law or by statute." While the case law on these "remedies savings clauses" is limited, the Supreme Court has interpreted one such clause as evincing Congress's intent to disavow field preemption, but not as preserving state laws that conflict with federal objectives. <3.4. "State" Versus "State or Political Subdivision Thereof"> Some savings clauses limit a federal statute's preemptive effect on certain laws enacted by "State[s] or political subdivisions thereof," while others by their terms protect only "State" laws. The Supreme Court has twice held that savings clauses that by their terms applied only to "State" laws also insulated local laws from preemption. In Wisconsin Public Intervenor v. Mortier , the Court held that the Federal Insecticide, Fungicide, and Rodenticide Act did not preempt local ordinances regulating pesticides based in part on a savings clause providing that "State[s]" may regulate federally registered pesticides in certain circumstances. In concluding that the term "State" included political subdivisions of states, the Court relied on the principle that local governments are "convenient agencies" by which state governments can exercise their powers. Similarly, in City of Columbus v. Ours Garage & Wrecker Service , the Court held that the Interstate Commerce Act (ICA) did not preempt municipal safety regulations governing tow-truck operators based in part on a savings clause providing that the ICA "shall not restrict the safety regulatory authority of a State with respect to motor vehicles." Relying in part on its reasoning in Mortier , the Court explained that absent a clear statement to the contrary, Congress's reference to the regulatory authority of a "State" should be read to preserve "the traditional prerogative of the States to delegate their authority to their constituent parts." <4. Implied Preemption> As discussed, federal law can impliedly preempt state law even when it does not do so expressly . Like its express preemption decisions, the Supreme Court's implied preemption cases focus on Congress's intent. The Supreme Court has recognized two general forms of implied preemption. First, "field preemption" occurs when a pervasive scheme of federal regulation implicitly precludes supplementary state regulation, or when states attempt to regulate a field where there is clearly a dominant federal interest. Second, "conflict preemption" occurs when state law interferes with federal goals. <4.1. Field Preemption> The Supreme Court has held that federal law preempts state law where Congress has manifested an intention that the federal government occupy an entire field of regulation. Federal law may reflect such an intent through a scheme of federal regulation that is "so pervasive as to make reasonable the inference that Congress left no room for States to supplement it," or where federal law concerns "a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject." Applying these principles, the Court has held that federal law occupies a variety of regulatory fields, including alien registration, nuclear safety, aircraft noise, the "design, construction, alteration, repair, maintenance, operation, equipping, personnel qualification, and manning" of tanker vessels, wholesales of natural gas in interstate commerce, and locomotive equipment. <4.1.1. Examples> <4.1.1.1. Grain Warehousing> In its 1947 decision in Rice v. Santa Fe Elevator Corp oration , the Supreme Court held that federal law preempted a number of fields related to grain warehousing, precluding even complementary state regulations of those fields. In that case, the Court held that the federal Warehouse Act and associated regulations preempted a variety of state law claims brought against a grain warehouse, including allegations that the warehouse had engaged in unfair pricing, maintained unsafe elevators, and impermissibly mixed different qualities of grain. The Court discerned Congress's intent to occupy the relevant fields from an amendment to the Warehouse Act that made the Secretary of Agriculture's authorities "exclusive" vis- -vis federally licensed warehouses. Because the text and legislative history of this amendment reflected Congress's intent to eliminate overlapping federal and state warehouse regulations, the Court held that federal law occupied a number of fields involving grain warehousing. As a result, the Court concluded that the Warehouse Act preempted certain state law claims that intruded into those federally regulated fields, even if federal law established standards that were "more modest" and "less pervasive" than those imposed by state law. <4.1.1.2. Immigration: Alien Registration> The Court has also held that federal law preempts the field of alien registration. In its 1941 decision in Hines v. Davidowitz , the Court held that federal immigration law which required aliens to register with the federal government preempted a Pennsylvania law that required aliens to register with the state, pay a registration fee, and carry an identification card. In reaching this conclusion, the Court explained that because alien regulation is "intimately blended and intertwined" with the federal government's core responsibilities and Congress had enacted a "complete" regulatory scheme involving that field, federal law preempted the additional Pennsylvania requirements. The Court reaffirmed these general principles from Hines in its 2012 decision in Arizona v. United States . In Arizona , the Court held that the Immigration and Nationality Act (INA), which requires aliens to carry an alien registration document, preempted an Arizona statute that made violations of that federal requirement a crime under state law. In holding that federal law preempted this Arizona requirement, the Court explained that like the statutory framework at issue in Hines , the INA represented a "comprehensive" regulatory regime that "occupied the field of alien registration." Specifically, the Court inferred Congress's intent to occupy this field from the INA's "full set of standards governing alien registration," which included specific penalties for noncompliance. The Court accordingly held that federal law preempted even "complementary" state laws regulating alien registration like the challenged Arizona requirement. However, the Court has also made clear that other types of state laws concerning aliens do not necessarily fall within the preempted field of alien registration . In its 1976 decision in De Canas v. Bica , the Court held that federal law did not preempt a California law prohibiting the employment of aliens not entitled to lawful residence in the United States. The Court reached this conclusion on the grounds that nothing in the text or legislative history of the INA which did not directly regulate the employment of such aliens at the time suggested that Congress intended to preempt all state regulations concerning the activities of aliens. Instead, the Court reasoned that while the INA comprehensively regulated the immigration and naturalization processes, it did not address employment eligibility for aliens without legal immigration status. As a result, the Court held that the challenged California law fell outside the preempted field of alien registration. The Court has also upheld several state laws regulating the activities of aliens since De Canas . In Chamber of Commerce v. Whiting , for example, the Court held that federal law did not preempt an Arizona statute allowing the state to revoke an employer's business license for hiring aliens who did not possess work authorization. The Court has accordingly made clear that the preempted field of alien registration does not encompass all state laws concerning aliens. <4.1.1.3. Nuclear Energy: Safety Regulation> The Supreme Court has also held that federal law preempts the field of nuclear safety regulation. However, the Court has explained this field does not encompass all state laws that affect safety decisions made by nuclear power plants. Instead, the Court has concluded that state laws fall within the preempted field of nuclear safety regulation if they (1) are motivated by safety concerns and implicate a "core federal power," or (2) have a "direct and substantial" effect on safety decisions made by nuclear facilities. This division of authority is the result of a regulatory regime that has changed significantly over the course of the 20th century. Before 1954, the federal government maintained a monopoly over the use, control, and ownership of nuclear technology. However, in 1954, the Atomic Energy Act (AEA) allowed private entities to own, construct, and operate nuclear power plants subject to a "strict" licensing and regulatory regime administered by the Atomic Energy Commission (AEC). In 1959, Congress amended the AEA to give the states greater authority over nuclear energy regulation. Specifically, the 1959 Amendments allowed states to assume responsibility over certain nuclear materials as long as their regulations were "coordinated and compatible" with federal requirements. While the 1959 Amendments reserved certain key authorities to the federal government, they also affirmed the states' ability to regulate "activities for purposes other than protection against radiation hazards." Congress reorganized the administrative framework surrounding these regulations in 1974, when it replaced the AEC with the Nuclear Regulatory Commission (NRC). The Supreme Court has held that while this regulatory scheme preempts the field of nuclear safety regulation, certain state regulations of nuclear power plants that have a non-safety rationale fall outside this preempted field. The Court identified this distinction in Pacific Gas and Electric Company v. State Energy Resources Conservation & Development Commission , where it held that federal law did not preempt a California statute regulating the construction of new nuclear power plants. Specifically, the California statute conditioned the construction of new nuclear power plants on a state agency's determination concerning the availability of adequate storage facilities and means of disposal for spent nuclear fuel. In challenging this state statute, two public utilities contended that federal law made the federal government the "sole regulator of all things nuclear." However, the Court rejected this argument, reasoning that while Congress intended that the federal government regulate nuclear safety , the relevant statutes reflected Congress's intent to allow states to regulate nuclear power plants for non-safety purposes. The Court then concluded that the California law survived preemption because it was motivated by concerns over electricity generation and the economic viability of new nuclear power plants not a desire to intrude into the preempted field of nuclear safety regulation. In addition to holding that the AEA does not preempt all state statutes and regulations concerning nuclear power plants, the Court has upheld certain state tort claims related to injuries sustained by power plant employees. In Silkwood v. Kerr-McGee Corp oration , the Court upheld a punitive damages award against a nuclear laboratory arising from an employee's injuries from plutonium contamination. In upholding the damages award, the Court rejected the laboratory's argument that the award impermissibly punished and deterred conduct related to the preempted field of nuclear safety. Instead, the Court concluded that federal law did not preempt such damages awards because it found "no indication" that Congress had ever seriously considered such an outcome. Moreover, the Court observed that Congress had failed to provide alternative federal remedies for persons injured in nuclear accidents. According to the Court, this legislative silence was significant because it was "difficult to believe" that Congress would have removed all judicial recourse from plaintiffs injured in nuclear accidents without an explicit statement to that effect. The Court also reasoned that Congress had assumed the continued availability of state tort remedies when it adopted a 1957 amendment to the AEA. Under the relevant amendment, the federal government partially indemnified power plants for certain liabilities for nuclear accidents a scheme that reflected an assumption that plaintiffs injured in such accidents retained the ability to bring tort claims against the power plants. Based on this evidence, the Court rejected the argument that Congress's occupation of the field of nuclear safety regulation preempted all state tort claims arising from nuclear incidents. The Court applied this reasoning from Silkwood six years later in English v. General Electric Company , where it held that federal law did not preempt state tort claims alleging that a nuclear laboratory had retaliated against a whistleblower for reporting safety concerns. In allowing the claims to proceed, the Court rejected the argument that federal law preempts all state laws that affect plants' nuclear safety decisions. Rather, the Court explained that in order to fall within the preempted field of nuclear safety regulation, a state law must have a "direct and substantial" effect on such decisions. While the Court acknowledged that the relevant tort claims may have had "some effect" on safety decisions by making retaliation against whistleblowers more costly than safety improvements, it concluded that such an effect was not sufficiently "direct and substantial" to bring the claims within the preempted field. In making this assessment, the Court relied on Silkwood , where it held that the relevant punitive damages award fell outside the field of nuclear safety regulation despite its likely impact on safety decisions. Because the Court concluded that the type of damages award at issue in Silkwood affected safety decisions "more directly" and "far more substantially" than the whistleblower's retaliation claims, it held that the retaliation claims were not preempted. <4.1.2. Conclusion> A determination that federal law preempts a field has powerful consequences, displacing even state laws and regulations that are consistent with or complementary to federal law. However, because of these effects, the Court has cautioned against overly hasty inferences that Congress has occupied a field. Specifically, the Court has rejected the argument that the comprehensiveness of a federal regulatory scheme is sufficient to conclude that federal law occupies a field, explaining that Congress and federal agencies often adopt "intricate and complex" laws and regulations without intending to assume exclusive regulatory authority over the relevant subjects. The Court has accordingly relied on legislative history and statutory structure in addition to the comprehensiveness of federal regulations in assessing field preemption arguments. The Court has also adopted a narrow view of the scope of certain preempted fields. For example, the Court has rejected the proposition that federal nuclear energy regulations preempt all state laws that affect the preempted field of nuclear safety regulation, explaining that state laws fall within that field only if they have a "direct and substantial" effect on it. As a corollary to this principle, the Court has held that in certain contexts, generally applicable state laws are more likely to fall outside a federally preempted field than state laws that "target" entities or issues within the field. In O neok, Inc. v. Learjet, Inc. , for example, the Court held that state antitrust claims against natural gas pipelines fell outside the preempted field of interstate natural gas wholesaling because the relevant state antitrust law was not "aimed" at natural gas companies and instead applied broadly to all businesses. Finally, the Court's case law underscores that Congress can narrow the scope of a preempted field with explicit statutory language. In Pacific Gas , for example, the Court held that the preempted field of nuclear safety regulation did not encompass state laws motivated by non-safety concerns based in part on a statutory provision disavowing such an intent. While the Court has subsequently narrowed the circumstances in which it will apply Pacific Gas 's purpose-centric inquiry to state laws affecting nuclear energy, it has reaffirmed the general principle that Congress can circumscribe a preempted field's scope with such "non-preemption clauses." <4.2. Conflict Preemption> Federal law also impliedly preempts conflicting state laws. The Supreme Court has identified two subcategories of conflict preemption. First, federal law impliedly preempts state law when it is impossible for regulated parties to comply with both sets of laws ("impossibility preemption"). Second, federal law impliedly preempts state laws that pose an obstacle to the "full purposes and objectives" of Congress ("obstacle preemption"). The two subsections below discuss these subcategories of conflict preemption. <4.2.1. Impossibility Preemption> The Supreme Court has held that federal law preempts state law when it is physically impossible to comply with both sets of laws. To illustrate this principle, the Court has explained that a hypothetical federal law forbidding the sale of avocados with more than 7% oil content would preempt a state law forbidding the sale of avocados with less than 8% oil content, because avocado sellers could not sell their products and comply with both laws. The Court has characterized impossibility preemption as a "demanding defense," and its case law on the issue is not as well-developed as other areas of its preemption jurisprudence. However, the Court extended impossibility preemption doctrine in two recent decisions concerning prescription drug labeling. <4.2.1.1. Example: Generic Drug Labeling> In PLIVA v. Mensing and Mutual Pharmaceutical Co. v. Bartlett , the Court held that federal regulations of generic drug labels preempted certain state law claims brought against generic drug manufacturers because it was impossible for the manufacturers to comply with both federal and state law. In both cases, plaintiffs alleged that they suffered adverse effects from certain generic drugs and argued that the drugs' labels should have included additional warnings. In response, the drug manufacturers argued that the Hatch-Waxman Amendments (Hatch-Waxman) to the Food, Drug, and Cosmetic Act preempted the state law claims. Under Hatch-Waxman, drug manufacturers can secure Food and Drug Administration (FDA) approval for generic drugs by demonstrating that they are equivalent to a brand-name drug already approved by the FDA. In doing so, the generic drug manufacturers need not comply with the FDA's standard preapproval process, which requires extensive clinical testing and the development of FDA-approved labeling. However, generic drug makers that use the streamlined Hatch-Waxman process must ensure that the labels for their drugs are the same as the labels for corresponding brand-name drugs, meaning that generic manufacturers cannot unilaterally change their labels. In both PLIVA and Bar t lett , the Court held that the Hatch-Waxman Amendments preempted the relevant state law claims because it was impossible for the generic drug manufacturers to comply with both federal and state law. Specifically, the Court reasoned that it was impossible for the drug makers to comply with both sets of laws because federal law prohibited them from unilaterally altering their labels, while the state law claims depended on the existence of a duty to make such alterations. In other words, the Court reasoned that it was impossible for the manufacturers to comply with both their state law duty to change their labels and their federal duty to keep their labels the same. In reaching this conclusion in PLIVA , the Court rejected the argument that it was possible for manufacturers to comply with both federal and state law by petitioning the FDA to impose new labeling requirements on the corresponding brand-name drugs. The Court rejected this argument on the grounds that impossibility preemption occurs whenever a party cannot independently comply with both federal and state law without seeking "special permission and assistance" from the federal government. Similarly, in Bartlett , the Court rejected the argument that it was possible for generic drug makers to comply with both federal and state law by refraining from selling the relevant drugs. The Court rejected this "stop-selling" argument on the grounds that it would render impossibility preemption "all but meaningless." As a result, an evaluation of whether it is "impossible" to comply with both federal and state law must presuppose some affirmative conduct by the regulated party. Despite its decisions in PLIVA and Bartlett , the Court has rejected impossibility preemption arguments made by brand-name drug manufacturers, who are entitled to unilaterally strengthen the warning labels for their drugs. In Wyeth v. Levine , the Court held that federal law did not preempt a state law failure-to-warn claim brought against the manufacturer of a brand-name drug, reasoning that it was possible for the manufacturer to strengthen its label for the drug without FDA approval. However, the Wyeth Court noted that an impossibility preemption defense may be available to brand-name drug manufacturers when there is "clear evidence" that the FDA would have rejected a proposed change to a brand-name drug's label. <4.2.2. Obstacle Preemption> Federal law also impliedly preempts state laws that pose an "obstacle" to the "full purposes and objectives" of Congress. In its obstacle preemption cases, the Court has held that state law can interfere with federal goals by frustrating Congress's intent to adopt a uniform system of federal regulation, conflicting with Congress's goal of establishing a regulatory "ceiling" for certain products or activities, or by impeding the vindication of a federal right. However, the Court has also cautioned that obstacle preemption does not justify a "freewheeling judicial inquiry" into whether state laws are "in tension" with federal objectives, as such a standard would undermine the principle that "it is Congress rather than the courts that preempts state law." The subsections below discuss a number of cases in which the Court has held that state law poses an obstacle to the accomplishment of federal goals. <4.2.2.1. Example: Foreign Sanctions> The Supreme Court has concluded that state laws can pose an obstacle to the accomplishment of federal objectives by interfering with Congress's choice to concentrate decisionmaking in federal authorities. The Court's decision in Crosby v. National Foreign Trade Council illustrates this type of conflict between state law and federal policy goals. In Crosby , the Court held that a federal statute imposing sanctions on Burma preempted a Massachusetts statute that restricted state agencies' ability to purchase goods or services from companies doing business with Burma. The Court identified several ways in which the Massachusetts law interfered with the federal statute's objectives. First, the Court reasoned that the Massachusetts law interfered with Congress's decision to provide the President with the flexibility to add or waive sanctions in response to ongoing developments by "imposing a different, state system of economic pressure against the Burmese political regime." Second, the Court explained that because the Massachusetts statute penalized certain individuals and conduct that Congress explicitly excluded from federal sanctions, it interfered with the federal statute's goal of limiting the economic pressure imposed by the sanctions to "a specific range." In identifying this conflict, the Court rejected the state's argument that its law "share[d] the same goals" as the federal act, reasoning that the additional sanctions imposed by the state law would still undermine Congress's intended "calibration of force." Finally, the Court concluded that the Massachusetts law undermined the President's capacity for effective diplomacy by compromising his ability "to speak for the Nation with one voice." <4.2.2.2. Example: Automobile Safety Regulations> The Court has concluded that some federal laws and regulations evince an intent to establish both a regulatory "floor" and "ceiling" for certain products and activities. The Court has interpreted certain federal automobile safety regulations, for example, as not only imposing minimum safety standards on carmakers, but as insulating manufacturers from certain forms of stricter state regulation as well. In Geier v. American Honda Motor Co. , the Court held that the National Traffic and Motor Vehicle Safety Act (NTMVSA) and associated regulations impliedly preempted state tort claims alleging that an automobile manufacturer had negligently designed a car without a driver's side airbag. While the Court rejected the argument that the NTMVSA expressly preempted the state law claims, it reasoned that the claims interfered with the federal objective of giving car manufacturers the option of installing a "variety and mix" of passive restraints. The Court discerned this goal from, among other things, the history of the relevant regulations and Department of Transportation (DOT) comments indicating that the regulations were intended to lower costs, incentivize technological development, and encourage gradual consumer acceptance of airbags rather than impose an immediate requirement. The Court accordingly held that the NTMVSA impliedly preempted the state law claims because they conflicted with these federal goals. However, the Court has rejected the argument that federal automobile safety standards impliedly preempt all state tort claims concerning automobile safety. In Williamson v. Mazda Motor of America, Inc. , the Court held that a different federal safety standard did not preempt a state law claim alleging that a carmaker should have installed a certain type of seatbelt in a car's rear seat. While the regulation at issue in Williamson allowed manufacturers to choose between a variety of seatbelt options, the Court distinguished the case from Geier on the grounds that the DOT's decision to offer carmakers a range of choices was not a "significant" regulatory objective. Specifically, the Court reasoned that because the DOT's decision to offer manufacturers a range of options was based on relatively minor design and cost-effectiveness concerns, the state tort action did not conflict with the purpose of the relevant federal regulation. <4.2.2.3. Example: Federal Civil Rights> The Court has also held that state law can pose an obstacle to federal goals where it impedes the vindication of federal rights. In Felder v. Casey , the Court held that 42 U.S.C. 1983 (Section 1983) which provides individuals with the right to sue state officials for federal civil rights violations preempted a state statute adopting certain procedural rules for bringing Section 1983 claims in state court. Specifically, the state statute required Section 1983 plaintiffs to provide government defendants 120 days' written notice of (1) the circumstances giving rise to their claims, (2) the amount of their claims, and (3) their intent to bring suit. The Court held that federal law preempted these requirements because the "purpose" and "effect" of the requirements conflicted with Section 1983's remedial objectives. Specifically, the Court reasoned that the requirements' purpose of minimizing the state's liability conflicted with Section 1983's goal of providing relief to individuals whose constitutional rights are violated by state officials. Moreover, the Court concluded that the state statute's effects interfered with federal objectives because its enforcement would result in different outcomes in Section 1983 litigation based solely on whether a claim was brought in state or federal court. <4.2.3. Conclusion> The Supreme Court has held that state law can conflict with federal law in a number of ways. First, state law can conflict with federal law when it is physically impossible to comply with both sets of laws. While the Court has characterized this type of impossibility preemption argument as a "demanding defense," its decisions in PLIVA and Bartlett arguably extended the doctrine's scope. In those cases, the Court made clear that impossibility preemption remains a viable defense even in instances in which a regulated party can petition the federal government for permission to comply with state law or stop selling a regulated product altogether. State law can also conflict with federal law when it poses an "obstacle" to federal goals. In evaluating congressional intent in obstacle preemption cases, the Court has relied upon statutory text, structure, and legislative history to determine the scope of a statute's preemptive effect. Relying on these indicia of legislative purpose, the Court has held that state laws can pose an obstacle to federal goals by interfering with a uniform system of federal regulation, imposing stricter requirements than federal law (where federal law evinces an intent to establish a regulatory "ceiling"), or by impeding the vindication of a federal right. While obstacle preemption has played an important role in the Court's preemption jurisprudence since the mid-20th century, recent developments may result in a narrowing of the doctrine. Indeed, commentators have noted the tension between increasingly popular textualist theories of statutory interpretation which reject extra-textual evidence as a possible source of statutory meaning and obstacle preemption doctrine, which arguably allows courts to consult such evidence. Identifying this alleged inconsistency, Justice Thomas has categorically rejected the Court's obstacle preemption jurisprudence, criticizing the Court for "routinely invalidat[ing] state laws based on perceived conflicts with broad federal policy objectives, legislative history, or generalized notions of congressional purposes that are not embodied within the text of federal law." The Court's recent additions may also presage a narrowing of obstacle preemption doctrine, as some commentators have characterized Justices Gorsuch and Kavanaugh as committed textualists. Indeed, the Court's 2019 decision in Virginia Uranium, Inc. v. Warren suggests that Justices Gorsuch and Kavanaugh may share Justice Thomas's skepticism toward obstacle preemption arguments. In that case, Justice Gorsuch authored an opinion joined by Justices Thomas and Kavanaugh in which he rejected the proposition that implied preemption analysis should appeal to "abstract and unenacted legislative desires" not reflected in a statute's text. While Justice Gorsuch did not explicitly endorse a wholesale repudiation of what he characterized as the "purposes-and-objectives branch of conflict preemption," he emphasized that any evidence of Congress's preemptive purpose must be sought in a statute's text and structure.

The Constitution's Supremacy Clause provides that federal law is "the supreme Law of the Land" notwithstanding any state law to the contrary. This language is the foundation for the doctrine of federal preemption, according to which federal law supersedes conflicting state laws. The Supreme Court has identified two general ways in which federal law can preempt state law. First, federal law can expressly preempt state law when a federal statute or regulation contains explicit preemptive language. Second, federal law can impliedly preempt state law when Congress's preemptive intent is implicit in the relevant federal law's structure and purpose. This report begins with an overview of certain general preemption principles. In both express and implied preemption cases, the Supreme Court has made clear that Congress's purpose is the "ultimate touchstone" of its statutory analysis. The Court's analysis of Congress's purpose has at times been informed by a canon of statutory construction known as the "presumption against preemption," which instructs that federal law should not be read as preempting state law "unless that was the clear and manifest purpose of Congress." However, the Court has recently applied the presumption somewhat inconsistently, raising questions about its current scope and effect. Moreover, in 2016, the Court held that the presumption no longer applies in express preemption cases. After reviewing these general themes in the Supreme Court's preemption jurisprudence, the report turns to the Court's express preemption case law. In this section, the report analyzes how the Court has interpreted federal statutes that preempt (1) state laws "related to" certain subjects, (2) state laws concerning certain subjects "covered" by federal laws and regulations, (3) state requirements that are "in addition to, or different than" federal requirements, and (4) state "requirements," "laws," "regulations," and "standards." While preemption decisions depend heavily on the details of particular statutory schemes, the Court has assigned some of these phrases specific meanings even when they have appeared in different statutory contexts. Finally, the report reviews illustrative examples of the Court's implied preemption decisions. In these cases, the Court has identified two subcategories of implied preemption: "field preemption" and "conflict preemption." Field preemption occurs when a pervasive scheme of federal regulation implicitly precludes supplementary state regulation, or where states attempt to regulate a field where there is clearly a dominant federal interest. Applying these principles, the Court has held that federal law occupies a number of regulatory fields, including alien registration, nuclear safety regulation, and the regulation of locomotive equipment. In contrast, conflict preemption occurs when simultaneous compliance with both federal and state regulations is impossible ("impossibility preemption"), or when state law poses an obstacle to the accomplishment of federal goals ("obstacle preemption"). The Court has extended the scope of impossibility preemption in two recent decisions, holding that compliance with both federal and state law can be "impossible" even when a regulated party can (1) petition the federal government for permission to comply with state law, or (2) avoid violations of the law by refraining from selling a regulated product altogether. In its obstacle preemption decisions, the Court has concluded that state law can interfere with federal goals by frustrating Congress's intent to adopt a uniform system of federal regulation, conflicting with Congress's goal of establishing a regulatory "ceiling" for certain products or activities, or by impeding the vindication of a federal right.

crs_R46197

crs_R46197_0

<1. "The Afghanistan Papers"> On December 9, 2019, the Washington Post published a series of documents termed "the Afghanistan Papers" (herineafter "the Papers"). The Papers comprise two sets of documents: Notes and transcripts of interviews with more than 400 U.S. and other policymakers conducted between 2014 and 2018 by the Special Inspector General for Afghanistan Reconstruction (SIGAR), and Approximately 190 short memos (referred to as "snowflakes") from former Secretary of Defense Donald Rumsfeld, dating from 2001 to 2004. The Washington Post contends that "the Lessons Learned interviews broadly resemble the Pentagon Papers, the Defense Department's top-secret history of the Vietnam War," although the SIGAR interviews and Pentagon Papers differ in several key ways. Perhaps most importantly, the Pentagon Papers were a contemporaneous recounting of the Vietnam War based mostly on classified material from the Office of the Secretary of Defense; the SIGAR Lessons Learned documents are unclassified records of interviews with a wide array of policymakers carried out as many as 15 years after the events described. The documents, and the Washington Post stories that accompany them, suggest that U.S. policies in Afghanistan often were poorly planned, resourced, and/or executed. These apparent shortcomings contributed to several outcomes that either were difficult to assess or did not fulfill stated U.S. objectives. The documents, released at a time when the United States is engaged in talks with the Taliban aimed at ending the 18-year U.S. military presence in the country, have attracted attention, and some Members of Congress have called for further investigation into U.S. policy in Afghanistan. However, there is debate over how revelatory the SIGAR interviews are, with some analysts contending that the information they contain was available at the time and remains so today (see " Reactions to "the Afghanistan Papers" below). <1.1. SIGAR "Lessons Learned" Interviews> SIGAR, an independent investigative body created by Congress in 2008, conducted interviews with hundreds of U.S. and other policymakers as part of a lessons learned project, a self-assigned effort to "identify and preserve lessons from the U.S. reconstruction experience in Afghanistan, and to make recommendations to Congress and executive agencies on ways to improve our efforts in current and future operations." Since 2015, SIGAR has published seven lessons learned reports on topics such as corruption, counternarcotics, and U.S. efforts to reintegrate ex-combatants. The Washington Post obtained the interview notes and transcripts after submitting a series of Freedom of Information Act (FOIA) requests beginning in August 2016. In response to an October 2017 lawsuit against SIGAR filed by the newspaper, SIGAR released the first document, a 10-page 2015 interview with Michael Flynn (who had served in several senior military capacities in Afghanistan). SIGAR subsequently released other requested documents to the Washington Post . After federal agencies reviewed the documents to determine whether they contained classified material, the final batch of interviews was delivered in August 2019. In total, SIGAR conducted 428 interviews with U.S., European, and Afghan officials. Sixty-two interviewees are identified while 366 are redacted; the Washington Post has sued SIGAR to disclose those names because, it argues, "the public has a right to know which officials criticized the war." SIGAR contends that those individuals should be seen as whistleblowers and may face professional or other harm if their identities are made public. As of January 2020, a decision from the U.S. District Court in Washington, DC, remains pending. <1.1.1. Main Themes> In reviewing the Papers, which total roughly 2,000 pages and evade simple characterization, several key themes emerge, as outlined below. Dates in parentheses or noted in the text indicate when the interview was conducted. Quotes in this report, unless noted in the text as direct quotes from transcripts, are from SIGAR notes of interviews; CRS cannot independently verify or otherwise characterize the documents and the interviews the documents purport to describe. At least four of the named interviewees have contested the views attributed to them by SIGAR. <1.1.2. Negative Effects of U.S. Funding> The most frequently discussed subject in the SIGAR interviews was (a) the large sum of U.S. money ($132 billion in development assistance since 2001) that poured into Afghanistan and (b) the extent to which much of it was reportedly wasted, stolen, exacerbated existing problems, or created new ones. Nearly every SIGAR interviewee who discussed the issue argued that Afghanistan, one of the world's poorest and least developed countries in 2001, was unable to make use of the amount of financial resources that the U.S. and its international partners channeled into the country. Variations of the phrase "absorptive capacity" were repeated throughout the SIGAR interviews. One unnamed national security official offered some specificity, saying that Ashraf Ghani, then the Afghan Finance Minister and now President, had said in 2002 that "the Afghan capacity to absorb money was $2 billion a year, max. Everything else was wasted money" (October 1, 2014). The United States alone has contributed over $7 billion a year on average since 2001. In answering why the United States delivered so much money into Afghanistan, many interviewees pointed to U.S. domestic politics. One U.S. Agency for International Development (USAID) official said, "How much money was put into political, military, and development [aid] became a proxy for our commitment" (December 9, 2015). This was largely driven by executive branch agencies, according to one unnamed official, who observed that the U.S. Office of Management and Budget (OMB) proposed reductions between 2005 and 2007 because money from previous years remained unspent (April 13, 2015). However, other policymakers rejected these reductions, arguing that "the political signal by a budget reduction at [a] turning point in the war effort would adversely affect overall messaging and indirectly reconstruction efforts on the ground. The articulation of goals for the purpose of budgeting and programming was largely secondary to the political implications of budgeting." However, some of those interviewed by SIGAR faulted Congress, not executive branch agencies, for wasteful spending. The same USAID official quoted above (December 9, 2015) said, "The Hill was complicit. They gave more money than was requested. Every year they asked why we weren't doing our jobs, but they gave the same amount of money or more." Douglas Lute, the Deputy National Security Advisor for Iraq and Afghanistan under President George W. Bush and President Obama, noted that Congress was subject to the same kinds of political pressures that drove executive branch officials to push for higher budgets in the absence of evidence that the funds would be effective: In terms of appropriations, Congress appropriated what the administration asked for.... The thought is that if we don't spend, [the Government Accountability Office] or committees on the Hill will stop us from getting more funding. This leads to spend, spend, spend. The reason this is happening: no one is paying attention in an interagency sense to resources.... We were also pouring money into huge infrastructure projects to obligate money that was appropriated to show we could spend it. And we were building infrastructure in ways that Afghanistan could never sustain or even use in some cases. This approach to resource allocation extended down the chain of command, according to some interview subjects. An unnamed U.S. Army civil affairs officer said that costs kept rising because "We had no reason to negotiate or hold contractors' feet to the fire because the money kept coming no matter what.... We didn't get credit for saving money; in fact, we got credit for spending it" (July 12, 2016). Another said (on June 27, 2016) that because he or she was not given guidance on how to measure the impact of certain projects, "dollar figures were always the metric. No one said that money spent should be our metric, but without guidance, it was the only metric we could use.... We did not stop and look back at what happened and whether it was effective. The emphasis was on completing more projects." What was the impact of this flow of money on Afghanistan itself? Nearly all SIGAR interviewees contended that U.S. funding improved conditions in the country with regard to health, education, and other human development indicators, at least partly given the low level of the country's development in 2001 (see " Other Voices: U.S. Efforts as Relatively Successful " below). However, some positive assessments were qualified: one unnamed Afghan official said that "Yes, we have made gains, and generally speaking, life is better for people." However, he or she goes on to ask, "When we compare the gains to the resources, were the gains enough? No. ... Were the gains that were made sustainable? No. Most of the gains remain fragile" (October 21, 2015). For some interviewees, this influx of money also created or exacerbated problems. One of the problems most often raised was the money's apparent role in helping drive corruption, which continues to undermine the very Afghan state that the funds were intended to support. Andrew Wilder, the Vice President of Asia Programs at the United States Institute of Peace, said in his SIGAR interview that, "Giving Afghans so much money actually delegitimized the government, which was either perceived to become more corrupt or actually became more corrupt as a result, and favored specific communities at the expense of others" (January 25, 2017). Beyond the possibility for Afghans to redirect U.S. aid flows for political purposes, several interviewees argued that U.S. assistance had a structural bias that created perverse incentives for Afghans. Former Afghan deputy cabinet minister Tariq Esmati said (on December 12, 2016) that "all the attention was to the insecure districts. And the districts that were relatively secure also became insecure in order to get some programs." One USAID official put it more bluntly: development programs targeted "worse case scenarios and [the] most insecure areas" which "rewarded bad behavior. Governors in [more secure areas] would come to Kabul and ask, "what do I have to do to get love from [the] Americans, blow some shit up?" (November 18, 2016). In many cases, interviewees pointed to the grant contracting system to explain why so much money was wasted and to argue that few of the benefits were actually reaped by Afghans themselves. A senior U.S. official said (on December 11, 2015) We would buy American products, American grain, American consultants, American security experts, and they would implement our aid programs . The Afghans used to tell me that somewhere between 10-20% actually shows up in Afghanistan, and less than 10% ever gets to a village. So you [the United States] tell us [the Afghans] that you just spent a billion dollars as we see $50 million worth of roads. You [the United States] hire a big contractor and inside the beltway consultant, who then hires 15 subcontractors. The first guy takes 20%, then next level takes 20% who would go hire a bunch of expensive American experts to do [for 10 times the price] what Afghan diaspora refugees or Indian experts could do.... [These Americans we hire] travel to Afghanistan first class or at least business class with five security guys each.... The money you spend doesn't get to the village, doesn't really help the Afghan government. Beyond the practical effect of enabling corruption, some interviewees argued that ready U.S. money warped Afghan political culture (from a July 31, 2015, interview with a U.N. official): Afghan perceptions of the US were shaped by the Emergency Loya Jirga and Constitutional Loya Jirga [consultative assemblies held in 2002-2003].... Religious leaders were approached [and they] received nice packages from the US in return for accepting certain measures on women, human rights. The perception that was started in that period: If you were going to vote for a position that the [U.S. government] favored, you'd be stupid to not get a package for doing it. So that even those in favor would ask for compensation.... So from the beginning, their experience with democracy was one in which money was deeply embedded. <1.1.3. Unclear U.S. Goals> Many of the interviewees argued that, from the beginning, the U.S. engagement in Afghanistan, supported by the flow of money noted above, lacked a clear goal. One unnamed former National Security Council (NSC) staffer said, "I don't think we had an end state in mind. We kept planning; conditions kept changing. We were solving problems but there was no end state vision that you could point to" (January 5, 2015). According to many respondents, lack of clarity was a product of how many objectives the U.S. had in Afghanistan. One USAID official (May 18, 2015) described U.S. policy as having "a present under the Christmas tree for everyone. By the time you were finished you had so many priorities and aspirations it was like no strategy at all. If you have 50 priorities then you don't have any priorities at all." This confusion reportedly extended even into specific areas of U.S. policy. An unnamed former United Nations official said in a June 1, 2015, interview that "on reconstruction, there was not a clear understanding of what we were trying to achieve; [there were] no clear objectives." On counternarcotics (CN), a former State Department official said that it was "unclear what the goal of CN was" (June 29, 2015). <1.1.4. Competing Priorities> The proliferation of U.S. goals in Afghanistan apparently led to another complication: U.S. actions to achieve some of these objectives undermined others. Interviewees repeatedly discussed this dynamic, particularly when referring to the U.S. project as being divided into military and nonmilitary lines of effort. According to interviewees, when U.S. security interests clashed with interests less directly tied to security, the former almost always prevailed. The two areas that the interviews identified as particularly compromised, given an emphasis on security or other issues, were counternarcotics and anti-corruption. A State Department counternarcotics contractor told SIGAR on September 16, 2016, that "To the best of my knowledge chief of mission [in the U.S. embassy] never carried [the] message about CN to [the] Afghan government. Attitude was 'got so much else on my plate I have no time to deal with drugs.'" A senior U.S. official put it simply: "They [the United States] would payoff local leaders to not fight them and would turn away when local leaders grew poppy" (March 29, 2016). On anti-corruption, the contrast may have been even clearer: a USAID official said that the view of senior U.S. officials was "Be patient, we can get back to corruption. We have higher priorities on getting the bad guys" (August 24, 2015). In July 2015, a Treasury Department official attributed the U.S. "failure to be more aggressive" on prosecuting those responsible for the 2010 collapse of Kabul Bank (KB) to the higher importance placed on security objectives: "Petraeus made the point that yes KB is bad, but we're fighting a war here, there are bigger issues at stake." Sometimes even U.S. counternarcotics and anti-corruption goals, which appeared symbiotic according to some interviewees, were at odds: a former U.S. defense official said on May 17, 2016, that U.S. payments to governors to reduce poppy cultivation actually "undermined good governance. People saw us as complicit working with corrupt governors to take out opposition" when those governors targeted the opium cultivation of their political opponents but left alone opium cultivation of their allies. Some U.S. officials argued that these contradictions were unavoidable, and that the United States had no choice but to pursue security interests over other, and by definition secondary, objectives. A former U.S. official at the U.S. Embassy said (on May 31, 2015) of the U.S. decision to partner with warlords with records of corruption or human rights abuses, "I'm not so sure we should have done it any differently. These 'warlords' equaled the ground force that just defeated the Taliban and al Qaeda on the ground with US SOF [Special Operations Forces]. ... [T]hese weren't just random bandits running around." <1.1.5. Organizational Confusion and Competition> While U.S. efforts in Afghanistan were dominated by the Department of Defense, given the wide array of U.S. interests in Afghanistan, U.S. policy formulation and execution required input from many federal departments and agencies. The problems associated with trying to coordinate among all of these entities, and with the complex series of bureaucratic structures erected to facilitate that coordination, were another consistent theme of the SIGAR interviews. By most accounts, interagency coordination was a consistent problem that various structures failed to solve. The performance of the Washington, D.C.-based Afghanistan Interagency Operation Group (AOIG), which was created in 2003, was co-chaired by the Department of State and National Security Council, and met weekly, generally received favorable reviews from interviewees. The State Department's Coordinator for Reconstruction and Stabilization (SCRS), on the other hand, attracted particular criticism: various officials stated that it was "expensive and time-consuming ... initially structured to fail and at the end it only made life horrible for everybody else" (June 25, 2015) and "failed at the operation level" (July 10, 2015). The State Department's Special Representative for Afghanistan and Pakistan (SRAP), established in 2009 and closed in 2017, also generally was criticized. One typical critique, from an unnamed State Department official in a December 10, 2014, interview, said that "the model is not sustainable. Desk officers are supposed to develop regional experience throughout their career so they have a couple of languages and they continually rotate back to their area or region of specialization.... The SRAP set up created parallel structures." Anti-corruption, counternarcotics, and other mission priorities rarely fit neatly under one agency or department's purview. The wide range of actors with equities in programs in these areas arguably bred not just confusion but competition. One former development contractor said about counternarcotics (interview on June 8, 2016) that there was "nobody really in charge, no one on top of the heap and saying to everyone this is what you need to do. Competitive personalities [were] not concerned about what makes sense but could they build their career." That competition, in turn, also presented opportunities for Afghans to exploit. An unnamed former US ambassador described for SIGAR interviewers on December 14, 2015, that "[former Afghan president Hamid] Karzai was trying to figure out how to manipulate the U.S., manipulating different U.S. agencies against one another for leverage. The mission starts to lose coherence; you have agencies snapping at each other' s ankles [italics original]." Surveying the numerous problems of interagency coordination, Marin Strmecki, Secretary of Defense Rumsfeld's special advisor on Afghanistan, recommended (interview on October 19, 2015) a more unified command structure: When we operate in something like [Afghanistan], there needs to be unity of command, not unity of effort. So if it is a situation [where] there is a lot of lead flying in the air, it makes sense for the general of whatever task force that is deployed to be in charge of both the military and civilian elements. So the ambassador would essentially be his chief political officer. He should be able to give orders to that chief political officer just as he would another subordinate. Similarly, if it is more a stabilization operations and there is not as much lead flying in the air, the military should be put under the ambassador . Our current system works if you are lucky and you get a Khalilzad and Barno or a Petraeus and Crocker, where for some reason they all agree on the priorities and work well together. They are in sync. That is basically luck. <1.1.6. Lack of Expertise> Multiple SIGAR interviewees criticized U.S. policies that they claimed either failed to generate relevant expertise within the U.S. government or even disincentivized the creation or application of that expertise in Afghanistan. For instance, regional subject matter expertise was a frequently cited problem. A number of interviewees criticized the United States for not training U.S. staff in local languages. Without knowledge of these languages, U.S. officials were reportedly less able to learn from, build trust with, or effectively partner with Afghan counterparts. Former director of intelligence for the NATO-led military effort Michael Flynn said that when we get to Afghanistan [in 2009], there is only one officer on the ISAF staff that could speak Dari but he was only there briefly. The Air Force pulled him out in like July and sent him to Japan.... [W]e laughed about it because this is how insane this [system] is.... Even today, we are still in Afghanistan and you go tell me how many actual U.S. members of the military or policy [community], or from State who speak Dari or Pashto. That is a shame and that is a policy decision. The most commonly cited problem, regardless of the interviewee's national origin, position in government, or time of service in Afghanistan, was the loss of expertise and trust brought about by short-term deployments. A commonly repeated theme, as one U.S. official put it (April 12, 2016), was that the U.S. did not have one "14 year engagement, [but] had 14 1-year engagements." Numerous interviewees described the problems created by short tours as the greatest detriment to U.S. policy success: "At the strategic level, the single most disabling factor was our failure to maintain long-term leadership at the Embassy and at our military commands. We should have someone in the job for 3 to 5 years for continuity" (former U.S. official at the embassy in Kabul, May 31, 2015). "If you take away one thing, the one year rotation for USAID, DOS [Department of States] and DOD [Department of Defense] personnel is the biggest obstacle to success and the biggest single factor in our failure" (former USAID official David Marsden, December 3, 2015). "Biggest problem was turnover of people the result is no institutional memory" (June 27, 2016). The interview records suggest that there was no consensus on how to solve this problem. One proffered solution was higher pay for government employees deployed to Afghanistan: Strmecki said in his interview that talented staff leave "the government for our contractors and NGOs and our other implementing partners because [they] pay them so much more." However, one unnamed legal advisor who worked in Kabul said (on October 30, 2017) higher pay for some U.S. positions meant that those who filled the jobs "had very little understanding of the culture they came in because the salary was lucrative.... [T]hey saw this as a couple of years of opportunity to get rid of their house mortgages." Lack of expertise arguably exacerbated many of the other problems facing U.S. policy. At times, Afghans reportedly exploited the lack of knowledge and institutional memory to shape U.S. policy to meet their own ends. In one extreme case, Afghanistan expert Thomas Johnson described how "we were used by the tribes" because suspects taken into custody by the United States as terrorists were actually "traditional tribal enemies that [U.S. partners] claimed were Taliban" (January 7, 2016). <1.1.7. Multinational Coalition: Too Many Cooks?> U.S. efforts in Afghanistan have been aided from the outset by a multinational coalition. From combat, to training Afghan forces, to providing development assistance, U.S. allies and partners have made significant contributions. However, this work has not been without complications, and many of the SIGAR interviewees who worked on coordinating U.S. and international efforts discussed what they saw as deficiencies. The system that emerged in Afghanistan became known as the "lead nation" system, whereby each policy area was overseen by a different country: for example, Italy focused on developing Afghanistan's justice sector, Germany worked with Afghan police, and the British initially were responsible for counternarcotics. However, according to former National Security Advisor Stephen Hadley, "With this [multilateral] approach, everyone had small pieces of the sector and it then meant that [their respective policy areas] became everyone's second or third order priority so nothing got done." Generally, interviewees who observed or participated in the system described it as disorganized: John Wood, NSC director for Afghanistan 2007-2009, said, "Everyone has a piece of the pie but [there's] no coherence.... Each lead nation left to determine how to approach things each changed frequently. Even if things lined up with the lead nation none of them moving at same pace" (June 17, 2015). The difference in pacing and approach was explained by an unnamed NSC staffer, who argued "tasks were conditioned by what countries were willing to do," which "created some tensions between the coalition and the nation states" (July 14, 2015). <1.1.8. Iraq as a Distraction> Those U.S. officials SIGAR interviewed who worked on Afghanistan in the first decade of the war held a near-universal judgment that the U.S. invasion of Iraq in March 2003 distracted U.S. attention and diverted U.S. financial and other resources, allowing the Taliban to regroup. Former U.S. Ambassador to NATO Nicholas Burns described Iraq as the "higher priority" and Afghanistan as "the less acute theater." According to an unnamed NSC staffer (October 21, 2014) More specifically regarding why the U.S. and Department of Defense were anxious for someone else to take a robust leading role in Afghanistan, it was so we could have greater resources and capability to prioritize Iraq. ... From early spring 2002, during my time at the Secretary's office, until 2011, Afghanistan has to be looked at with one eye on what is happening in Iraq. Even in the early and tail end (2009-2011) days, either materially or politically, it all seemed to be about Iraq. It was hard to come to terms with the reality that your whole portfolio is a secondary effort or, at worst, an "economy of force" mission. Your job was not to win, it was to not lose We are bleeding resources away as things get worse in Iraq, and we were looking for more ways to make do in Afghanistan . In hindsight, there was a window between late 2002-2003 and early 2005 where there was relative peace in Afghanistan. The Taliban was on its heels and people were not that disillusioned. One official (interviewed on September 23, 2015) said that between 2005 and 2007, "Iraq was all we could handle." Another said that a "significant pressure in the 2003 to 2010 timeframe was the draw of resources toward Iraq and away from Afghanistan" (April 13, 2015). By the time the United States began to draw down forces in Iraq and refocus on Afghanistan, many observers argued that the damage was already done: the Afghan state's military and governing capabilities (both effectively nonexistent in 2001) had not been adequately developed, allowing for the rise of a new Taliban insurgency that further undermined those abilities. One unnamed U.S. official said in a February 9, 2016, interview, "In all honesty, Afghanistan got neglected when we went to Iraq and when we got back to Afghanistan, we didn't have enough capacity." <1.1.9. Pakistan's Support for the Taliban> The war in Iraq arguably distracted U.S. policymakers from dealing with Pakistan's role in facilitating the Taliban's comeback. Early on, Pakistan "was not seen as bad guys," according to an international aid consultant in an October 9, 2015, interview. A number of interviewees, particularly senior U.S. officials, attributed the Taliban's resurgence, and the resulting failure of the U.S. to solidify gains in Afghanistan, to material support for the group from, and its safe havens in, Pakistan. A good deal of material related to the sensitive issue of Pakistani support for the Taliban appeared to be redacted, but the issue still emerged throughout the interviews. Most interviewees who addressed the subject argued that U.S. and Pakistani interests in Afghanistan were fundamentally incompatible. One unnamed DOD or NSC staffer told SIGAR in an October 1, 2014, interview, "The belief that Pakistan's national interest aligned with the US because [then-Pakistani leader Pervez] Musharraf joins the [U.S.] effort after 9/11 is a false belief." According to this view, the positive role Pakistan played with regard to Al Qaeda blinded U.S. policymakers to the Pakistanis' support for the Taliban. As Strmecki said in his October 19, 2015, interview, Because of people's personal confidence in Musharraf and because of things he was continuing to do in helping police up a bunch of the al-Qaeda in Pakistan, there was a failure to perceive the double game that he starts to play by late 2002, early 2003. You are seeing the security incidents start to go up and it is out of the safe havens. I think that the Afghans and Karzai himself, are bringing this up constantly even in the earlier parts of 2002. They are meeting unsympathetic ears because of the belief that Pakistan was helping us so much on al-Qaeda. With U.S. attention to the issue reportedly low, Pakistan maintained support for the Taliban in order to maintain some of Pakistan's influence in Afghanistan. In at least one account, Pakistani leaders were forthright in private about this strategy. In the transcript of his January 11, 2016, interview with SIGAR, Ryan Crocker, who served as U.S. ambassador to both Pakistan (2004-2007) and Afghanistan (2011-2012), quoted then-head of Pakistan's intelligence agency (ISI, Inter-Services Intelligence) Ashfaq Kayani as telling him You know, I know you think we're hedging our bets, you're right, we are because one day you'll be gone again, it'll be like Afghanistan the first time [when the United States turned away from Afghanistan after the Soviet withdrawal in 1989], you'll be done with us, but we're still going to be here because we can't actually move the country. And the last thing we want with all of our other problems is to have turned the Taliban into a mortal enemy, so, yes, we're hedging our bets. <1.1.10. Other Problems> Beyond the main themes discussed above, other issues impacting U.S. policymaking in Afghanistan surfaced throughout the SIGAR interviews: Positivity bias (e.g., Flynn interview on November 11, 2015: "As intelligence makes it way up higher [within the bureaucracy], it gets consolidated and really watered down; it gets politicized because once policymakers get their hands on it, and frankly once operational commanders get their hands on it, they put their twist to it . Operational commanders, State Department policymakers, and Department of Defense policymakers are going to be inherently rosy in their assessments.") Not considering greater inclusion of or interaction with the Taliban at the outset (e.g., U.N. official on August 27, 2015: "Lesson learned: if you get a chance to talk to the Taliban, talk to them . At that moment [2001], most Taliban commanders were interested in joining the government.") Powers granted to Afghanistan's central government (e.g., unnamed U.S. official, October 18, 2016: "why did we create centralized gov't in a place that has never had one set us up for failure") <1.1.11. Other Voices: U.S. Efforts as Relatively Successful> Some of the officials interviewed by SIGAR lauded arguable gains made and facilitated by the international community's work in Afghanistan since 2001, a perspective not generally included in the Washington Post stories. A number of interviewees argued, as one unnamed U.S. official did on June 2, 2015, "There's not enough recognition of the scale of achievements in Afghanistan . Afghanistan has given a higher return on investment than almost any other reconstruction effort. From 2002-2012, [Afghanistan] made more progress in human development than any other country." Others contended (as referenced above) that one cannot assess the success or failure of U.S. efforts without considering the state of the country in 2002: "We have to remember what we were starting with in Afghanistan. Afghans were starting with nothing. Social and economic development was at the lowest level possible. And that's why Taliban and al Qaeda found a home there, and why we went in . You must look at where we were, what we tried to do, and where we got to" (unnamed senior State Department official April 26, 2016). Some officials outside the United States echoed these sentiments in their interviews. A Danish official said on June 30, 2015, despite corruption and all of the other problems, "we'd be worse off without our [Afghanistan] intervention. The development side has had an impressive record." Abdul Jabar Naimee, who has served as governor of several eastern Afghan provinces, said in his March 6, 2017, interview I am seeing that in the [W]est a thinking is going that they helped the Afghans but it was useless. This is a completely a wrong assumption. In the three provinces where I have been working as governor, in all the three places when I have share[d] programs with the people, or I have participated in the projects['] events, I have seen people are happy with the help they have received . The assumption that people of Afghanistan are not happy with the help that was done for their improvement, this assumption is wrong, people are grateful for the help and they still benefit from the work that was done. <1.2. Snowflakes (Rumsfeld Memos)8> Former Secretary of Defense Donald Rumsfeld's "snowflakes" (the last of which is dated December 22, 2004), unlike the SIGAR interviews, provide a contemporaneous view into one senior policymaker's thinking over the first several years of the U.S. effort in Afghanistan. Because they are brief and relatively informal, there are risks in taking them as representative of U.S. policy as a whole, but their on-the-ground perspective could still be useful in assessing U.S. policy in Afghanistan. They may also demonstrate that various perceptions noted in the SIGAR interviews such as that Afghanistan was less of a priority than Iraq had merit. Many of the approximately 200 snowflakes are minor; some notable excerpts are below. Rumsfeld apparently did not anticipate long-term U.S. financial support for Afghan security forces. In an April 8, 2002, memo to Secretary of State Colin Powell, Rumsfeld wrote, "The U.S. spent billions freeing Afghanistan and providing security. We are spending a fortune every day. There is no reason on earth for the U.S. to commit to pay 20 percent for the Afghan army. I urge you to get DoS turned around on this the U.S. position should be zero [underline original]. We are already doing more than anyone." Rumsfeld expressed continual concern about not having a plan (e.g., "I am convinced we have to have a plan for Afghanistan and that nobody else in the government is going to do it unless we do. What do you propose?" (October 17, 2002) Rumsfeld expressed an eagerness to reduce U.S. commitments in Afghanistan. In a September 25, 2003, memo to Under Secretary of Defense for Policy Doug Feith, he wrote, "We need a good conceptual speech that describes where the responsibility is (and moves the blame if it fails away from the U.S.), namely on the Afghan people and on the international community." Rumsfeld sought greater input over non-Department of Defense equities. He wrote to White House Chief of Staff Andrew Card on August 19, 2002, requesting "that I have an opportunity to interview any person who is proposed for Ambassador to Afghanistan, before the selection gets made and before the President is involved. The post is very important for the Department of Defense and I would like to have a good sense of who it might be and why." There is some evidence that Afghanistan, by 2003, may not have been a major focus for Rumsfeld. Rumsfeld received a November 7, 2003, letter from Afghan Uzbek leader Abdul Rashid Dostum, who painted a picture of widespread Taliban activity and said "please do not forget the battle against terrorist and extremists in Afghanistan." Rumsfeld forwarded the letter in a memo to CENTCOM Commander General John Abizaid on November 18, 2003, describing the letter as "worrisome" and saying "if he [Dostum] is correct that the Taliban are in control of that many areas within Afghanistan, that is news to me." <1.3. Reactions to "the Afghanistan Papers"> The Washington Post 's "Afghanistan Papers" have attracted significant attention, though policymakers and outside analysts disagree about whether they contain new and relevant information and, if so, what effect this information should have on U.S. policy in Afghanistan going forward. In Congress, most of the Members who reacted publicly did so to reiterate previous calls to remove U.S. troops from Afghanistan. Senator Tom Udall spoke on the Senate floor about the Papers on December 12, voicing support for S.J.Res. 12 , introduced in March 2019 by Udall and Senator Rand Paul. The resolution would, among other provisions, mandate the removal of all U.S. forces from Afghanistan within a year of enactment. Senator Kirsten Gillibrand called for Senate hearings to investigate "these deeply concerning revelations about the Afghan war," and Representative Max Rose said that the Papers demonstrated that "the time to end this war and bring our troops home honorably is now." Top U.S. defense officials largely defended the U.S. conduct of the war, arguing that the Papers did not constitute evidence that former officials had lied to the American public, and that the Papers, as part of a Lessons Learned project, were structured to invite criticism, in hindsight, of the war effort. Pentagon Spokesman Jonathan Hoffman said on December 12, 2019, I would quibble with the idea that we weren't providing [accurate information] in the past. I think what we see from the report from the Washington Post is, looking at individuals giving retrospectives years later on what they may have believed at the time ... those statements appeared for the most part to be people looking back retrospectively on things that they had said previously and using hindsight to speak to comments they had made. Secretary of Defense Mark Esper dismissed claims that officials had lied, saying, "For 18 years now, the media has been over there [in Afghanistan] . The Congress has been there multiple times . We've had the SIGAR there. We've had IGs there. This has been a very transparent it's not like this war was hiding somewhere and now all of a sudden there's been a revelation . So [the] insinuation that there's been this large-scale conspiracy is just, to me, ridiculous." Chairman of the Joint Chiefs of Staff General Mark Milley, appearing alongside Esper, said, "I know that I and many, many others gave assessments at the time based on facts that we knew at the time. And those were honest assessments, and they were never intended to deceive neither the Congress nor the American people." SIGAR Special Inspector General John Sopko wrote a December 17, 2019, letter to the editor of the Washington Post disputing some of the Post 's characterizations and saying that "the Afghanistan Papers is an important contribution to public discourse about the war in Afghanistan. But it is not a 'secret' history. SIGAR has written about these issues for years, including in seven Lessons Learned reports and more than 300 audits and other products." On January 15, 2020, Sopko testified in front of the House Foreign Affairs Committee that U.S. policy in Afghanistan has been characterized by "institutional hubris and mendacity" and that "We have incentivized lying to Congress.... [T]he whole incentive is to show success and to ignore failure and when there's too much failure, classify it or don't report it." Outside observers have offered differing views of the Papers. One concurred with the Post 's assessment that in the Papers, "officials' indictment of policies for which they themselves were responsible lays bare the massive institutional deceit that forms the heart of what the United States has done" in Afghanistan. Other observers have taken a softer line. One wrote, "it is apparent from the documents that many officials in power attempted to 'spin' a spiraling Afghanistan conflict for the public," though they did so because "the U.S. government has every incentive to paint a better picture of progress than is the reality on the ground." Still others have argued that the Papers contain little that has not already been readily and publicly available for years: "the only new information here is the identity of those making the criticisms." Those making this argument have pointed to reports from SIGAR (including their seven publicly released Lessons Learned reports for which the interviews in "the Afghanistan Papers" were conducted) and other inspectors general, as well as media, academic, and other public accounts. One summarizes, "In short, if you're surprised by the Afghanistan Papers, you haven't been paying attention." Another observer criticizes the Post for "putting sensationalist spin on information that was not classified, has already been described in publicly available reports, only covers a fraction of the 18 years of the war, and falls far short of convincingly demonstrating a campaign of deliberate lies and deceit." Given that there has been evidence of shortcomings in the U.S. war and development effort for years, one observer argues that "Afghanistan is best seen, not as a morality play, but as a classic foreign policy dilemma in which all the options are bad ones": Reasonable people can debate, with the benefit of hindsight, whether the United States should have accepted these risks as the price of avoiding another two decades of war. But the tragic dilemma of Afghanistan is that there have always been costs of withdrawal as well as costs of continued intervention. <2. Possible Questions for Congress> "The Afghanistan Papers" raise a number of potential questions for Congress to consider as Members evaluate the Trump Administration's Afghanistan policies. U.S. Strategy . What role, if any, has Congress played in compelling successive executive branch administrations to articulate U.S. strategy and/or policy goals in Afghanistan? What are the means by which Congress has attempted to shape or influence those goals? What have been the most and least effective of those means? Congressional Oversight . Members of Congress have conducted oversight of executive branch policy through various means, including appointing a special inspector general, public and closed hearings, Member and staff delegations to Afghanistan, letters to executive branch officials, and public statements. What have been the most and least effective methods of congressional oversight? U.S Aid: Budgeting. To what extent has Congress scrutinized executive branch funding requests? Have appropriated U.S. funding levels differed from those requests and if so, what changes have been made and why? To what extent have congressional budgeting decisions in Afghanistan been made due to political expediency? How, if at all, can Members of Congress insulate budgeting or other policymaking processes from political pressures? U.S. Aid: Conditionality. What conditions has Congress imposed on U.S. aid to Afghanistan and why? How, if at all, have those conditions impacted the delivery of U.S. aid, Afghan government actions, U.S.-Afghan relations, and congressional interactions with the executive branch? What kinds of changes, if any, to the Foreign Assistance Act or other relevant pieces of legislation might make U.S. development assistance more effective? Reporting . What has been the impact of congressionally mandated reporting on policy or outcomes? How, if at all, does Congress use these reports? What are the most and least useful reports that Congress receives on U.S. military and development efforts in Afghanistan? How, if at all, does Congress require agencies to evaluate their programs, and how does this inform reports to Congress? Has there been any evolution in specific monitoring and evaluation requirements? Bureaucracy. How has Congress shaped executive branch structure? Have these efforts been helpful? How direct a role should Congress play in mandating the establishment or nature of offices or other bureaucratic structures within the executive branch that work on Afghanistan? Personnel Issues . To what extent have U.S. efforts in Afghanistan been hampered by the frequent personnel turnover cited by many SIGAR interviewees? How, if at all, have congressional actions improved, undermined, or otherwise affected the ability of federal agencies to train and deploy capable workforces in Afghanistan? What congressional action, if any, is needed to help the executive branch, or individual departments, address this issue? Recommendations . What are the most important things that Congress could have been doing over the past 18 years to ensure U.S. success in Afghanistan? What can (and should) Congress do going forward?

On December 9, 2019, the Washington Post published a series of documents termed "the Afghanistan Papers." The Papers comprise two sets of documents: about 1,900 pages of notes and transcripts of interviews with more than 400 U.S. and other policymakers that were carried out between 2014 and 2018 by the Special Inspector General for Afghanistan Reconstruction (SIGAR), and approximately 190 short memos (referred to as "snowflakes") from former Secretary of Defense Donald Rumsfeld, dating from 2001 to 2004. The documents, and the Washington Post stories that accompany them, suggest that U.S. policies in Afghanistan often were poorly planned, resourced, and/or executed. These apparent shortcomings contributed to several outcomes that either were difficult to assess or did not fulfill stated U.S. objectives. Key themes of the SIGAR interviews include N egative effects of U.S. funding. The most frequently discussed subject in the SIGAR interviews was (a) the large sum of U.S. money ($132 billion in development assistance since 2001) that poured into Afghanistan and (b) the extent to which much of it was reportedly wasted, stolen, exacerbated existing problems, or created new ones, particularly corruption. Unclear U.S. g oals . Many of the interviewees argued that, from the beginning, the U.S. engagement in Afghanistan, supported by the money noted above, lacked a clear goal. Competing p riorities . The proliferation of U.S. goals in Afghanistan led to another complication: U.S. actions to achieve some of these objectives seemed to undermine others. Organizational confusion and competition. While U.S. efforts in Afghanistan were dominated by the Department of Defense, given the wide array of U.S. interests in Afghanistan, U.S. policy formulation and execution required input from many federal departments and agencies. The problems associated with trying to coordinate among all of these entities was a consistent theme. Lack of e xpertise . Multiple SIGAR interviewees criticized U.S. policies that they claimed failed to generate relevant expertise within the U.S. government or even disincentivized the creation or application of that expertise in Afghanistan. Disorganized m ulti national coalition . Many of the SIGAR interviewees who worked on coordinating U.S. and international efforts discussed what they saw as a disorganized system. Iraq as a distraction. U.S. officials who were working on Afghanistan in the first decade of the war held a nearly universal judgment, in SIGAR interviews, that the U.S. invasion of Iraq in March 2003 distracted U.S. attention and diverted U.S. financial and other resources. Pakistan 's support for the Taliban . A number of interviewees, particularly senior U.S. officials, attributed the Taliban's resurgence, and the failure of the U.S. to solidify gains in Afghanistan, to material support for the group from, and its safe havens in, Pakistan. Other voices: U.S. efforts as relatively successful. Some of the officials interviewed by SIGAR lauded arguable gains made and facilitated by the international community's work in Afghanistan since 2001, a perspective not generally included in the Washington Post stories. The documents, released at a time when the United States is engaged in talks with the Taliban aimed at ending the 18-year U.S. military presence in the country, have attracted significant attention. Some Members of Congress have called for further investigation into U.S. policy in Afghanistan. However, there is debate over how revelatory the SIGAR interviews are: policymakers and outside analysts disagree about whether they contain new and relevant information and, if so, how the information should affect U.S. policy in Afghanistan going forward.

crs_R45994

crs_R45994_0

Land management is a principal mission for four federal agencies: the Bureau of Land Management (BLM), the Fish and Wildlife Service (FWS), and the National Park Service (NPS), all in the Department of the Interior (DOI), and the Forest Service (FS) in the Department of Agriculture (USDA). Together, these agencies administer approximately 610 million acres, about 95% of all federal lands. In addition, the agencies have various programs that provide financial and technical assistance to state or local governments, other federal agencies, and/or private landowners. Each year, the four agencies receive billions of dollars in appropriations for managing federal lands and resources and related purposes (e.g., state and local grant programs). Together, the four agencies had total appropriations of $16.36 billion in FY2018. Most of the FY2018 funds $13.19 billion (81%) came from discretionary appropriations enacted by Congress through appropriations laws. However, each of the agencies also has mandatory appropriations provided under various authorizing statutes enacted by Congress. Laws authorizing mandatory appropriations allow the agencies to spend money without further action by Congress. In FY2018, the four agencies together had $3.17 billion in mandatory appropriations, which was 19% of the total appropriations for the year. Each of the four agencies had a dozen or more mandatory accounts in FY2018. Many of them were relatively small, with funding of less than $5.0 million each, for instance. However, several mandatory accounts each exceeded $100.0 million. This report focuses on the mandatory appropriations for the four major federal land management agencies. It first discusses issues for Congress in considering whether to establish mandatory appropriations for programs or activities. Next, it briefly compares the FY2018 mandatory appropriations of the four agencies. The report then provides detail on the FY2018 mandatory accounts of each of the four federal agencies, as well as additional context on these appropriations over a five-year period (FY2014-FY2018). <1. Issues for Congress> The Constitution (Article I, 9) prohibits withdrawing funds from the Treasury unless the funds are appropriated by law. A number of issues arise for Congress in deciding the type of appropriations to provide and the terms and conditions of appropriations. One consideration is whether mandatory (rather than discretionary) appropriations best suit the purposes of the program or activity and Congress's role in authorizing, appropriating, and conducting oversight. Another question is how to fund any mandatory appropriations namely, whether through general government collections (in the General Fund of the Treasury) or through a specific collection (e.g., from a particular activity or tax). A third issue is how to use the funds in a mandatory account, such as for agency activities, revenue sharing with state and local governments, or grant programs. <1.1. Mandatory vs. Discretionary Appropriations> Congress may consider various factors in deciding whether to provide discretionary or mandatory appropriations for a program or activity. A key consideration is whether authorizing or appropriating laws will control funding. Discretionary spending programs generally are established through authorization laws, which might authorize specific levels of funding for one or more fiscal years. However, the annual appropriations process determines the extent to which those programs actually will be funded, if at all. Mandatory spending is controlled by authorization laws. For this type of spending, the program usually is created and funded in the same law, and the law typically includes language specifying that the program's funding shall be made available "without further appropriation." Many of the mandatory appropriations covered in this report are provided under laws within the purview of the House Committee on Natural Resources and the Senate Committee on Energy and Natural Resources. In contrast, discretionary appropriations are provided through appropriations laws within the purview of the House and Senate Committees on Appropriations. The frequency with which Congress prefers to review program funding can be a factor in deciding whether to establish mandatory or discretionary appropriations. Authorizing laws (providing mandatory appropriations) generally are permanent and are reviewed not on a particular schedule but rather on an as-needed basis, as determined by the authorizing committees. On the one hand, this can foster stability in mandatory funding, in that the funding mechanisms may not be revised frequently. On the other hand, mandatory appropriations may fluctuate if they depend on revenue sources that might vary from year to year, such as on economic conditions. In contrast, Congress generally provides discretionary appropriations on an annual basis. This allows for program funding to be adjusted from year to year in response to changing conditions and priorities, and it provides Congress with opportunities for regular program oversight. However, this approach may provide less certainty of funding from year to year, as each program essentially competes with other congressional priorities within overall budget constraints. Congress has chosen to fund some programs or activities with both mandatory and discretionary appropriations. In these cases, both the authorizing laws and the appropriations laws govern a portion of program funding. This approach may allow annual review and decisionmaking on discretionary appropriations to supplement mandatory funding; it also may allow flexibility in providing each type of funding for a different purpose. However, this dual approach may be less efficient or reliable than one type of funding. <1.2. Funding Sources> Congress determines the funding source(s) that support mandatory appropriations. Although many factors may influence the selection of a funding source, a primary consideration is whether the monies should come from government collections in the General Fund of the Treasury or a specific collection, which often is deposited in a special account. The General Fund is the default for government collections unless otherwise specified in law, and it contains monies under a variety of authorities. Many if not all Americans might contribute to the General Fund, for example through income or other taxes. This source might be favored for some mandatory appropriations because it allows central funds to support federal lands managed on behalf of the general public. In practice, few of the FY2018 mandatory accounts for the four land management agencies received funding from the General Fund. One account that received monies from the General Fund is BLM and FS payments under the Secure Rural Schools and Community Self-Determination Act of 2000 (SRS). SRS authorized an optional, alternative revenue-sharing payment program for FS generally and for BLM for certain counties in Oregon. The payment amount is determined by a formula based in part on historical revenue payments. Funding for the payment derives from agency receipts and transfers from the General Fund of the Treasury. Alternatively, Congress may choose to fund mandatory accounts for the four land management agencies from specific collections. In FY2018, specific collections derived from agency receipts, taxes, license fees, tariff and import duties, and donations, among other sources. This approach might be preferred because the revenues derive from activities related to land management and use, especially if the collections are used to invest in the lands and communities from which they are derived. In FY2018, nearly all mandatory appropriations for the four federal land management agencies were funded by specific collections. Many of these appropriations derived from agency receipts under laws that provide for the collection and retention of money from the sale, lease, rental, or other use of the lands and resources under the agencies' jurisdiction. Agency land uses contributing to receipts included timber harvesting, recreation, and livestock grazing. Under some laws, agencies retain 100% of their receipts (e.g., each agency's Operation and Maintenance of Quarters account). Other laws direct an agency to retain a portion of receipts; for instance, BLM's Southern Nevada Public Land Sales account contains 85% of receipts from certain BLM land sales and exchanges in Nevada. Still other laws allow an agency to decide the amount of receipts to be deposited in a special account. The FS Knutson-Vandenberg Trust Fund, for example, contains revenue generated from timber sales, with the amount of deposits determined by FS on a case-by-case basis. Federal excise taxes and fuel taxes funded (at least in part) other FY2018 mandatory appropriations. For example, excise taxes, charged on specific items or groups of items, funded two major FWS programs Federal Aid in Wildlife Restoration (sometimes referred to as Pittman-Robertson) and Federal Aid in Sport Fish Restoration (sometimes referred to as Dingell-Johnson). Under both programs, the taxes are paid primarily by the people who might benefit from the subsequent expenditures. For the Wildlife Restoration program, taxed items include certain guns, ammunition, and bows and arrows, with the funds primarily used for wildlife restoration programs. Under the Sport Fish Restoration program, the taxed items include sport fishing equipment; this program also receives taxes on motor boat and small engine fuels. The appropriations are used for sport fish restoration programs. Under licensing fee programs, land users might pay for a particular activity, with the receipts intended to benefit these users or support a related agency program. In FY2018, licensing fees were used for a major FWS program the Migratory Bird Conservation Account. Under this program, hunters purchase "Duck Stamps" in order to hunt waterfowl and collectors purchase the stamps for collection and conservation purposes. FWS primarily uses the funds derived from these purchases to acquire lands and easements and to protect waterfowl habitat, with the lands and easements added to the National Wildlife Refuge System. Licensing fees also were used in FY2018 to support two relatively small FS programs Smokey Bear and Woodsy Owl with the proceeds shared between the licensing contractor and FS (for wildfire prevention and environmental conservation initiatives, respectively). Tariffs and import duties funded some FY2018 mandatory accounts. For instance, FS's Reforestation Trust Fund receives tariffs collected on imported wood products, up to $30.0 million annually. In addition, import duties on fishing boats and tackle support FWS's Sport Fish Restoration account, and import duties on certain arms and ammunition support FWS's Migratory Bird Conservation account. The federal land management agencies have authority to accept donations from individuals and organizations for agency projects and activities. All but FS have mandatory authority for some or all donations. For instance, in FY2018, FWS and NPS each had a primary mandatory account comprised of the donations. BLM had two relatively small mandatory accounts containing donations for particular purposes (i.e., rangeland improvements and cadastral surveys.) <1.3. Uses of the Funds> Laws that establish mandatory accounts typically specify how the monies will be used. A general question for Congress is whether the receipts should be retained for use by the collecting agency or shared with state or local governments or other entities or individuals. For accounts retained for agency use, there are additional considerations. These considerations include whether the monies should be available for a broad array of agency activities or restricted to more narrow purposes, such as Administration priorities, purposes related to the activities that generated the receipts, or activities exclusively at the sites that generated the revenues. For shared accounts, additional considerations include how to divide the funds (e.g., among states) and whether and how to provide revenue-sharing payments or establish grant programs. <1.3.1. Agency Activities> Some of the FY2018 mandatory accounts of the four federal land management agencies were authorized to be used by the agencies. Supporters have viewed this approach as fostering reinvestment in lands from which revenues were derived, which can support continued land uses. Critics contend that agency discretion over use of receipts could incentivize revenue-generating uses over other priorities, such as habitat conversation. Some of the mandatory FY2018 accounts were available to be used for broad purposes. For example, the four agencies' Recreation Fee accounts can be used for maintenance and facility enhancement, visitor services, law enforcement, and habitat restoration, among other purposes. Similarly, the NPS account for Concession Franchise Fees is authorized for visitor services and high-priority resource management programs and operations. Under both of these fee programs, most of the fees are retained at the collecting site. Other FY2018 mandatory accounts funded specific agency activities related to the derivation of the receipts. For example, receipts of salvage timber sales fund the FS Timber Salvage Sale Fund; the appropriations can be used to prepare, sell, and administer other salvage sales. As another example, the NPS Transportation Systems Fund is derived from fees for public transportation services within the National Park System. It is used for costs of transportation services in the collecting park units. <1.3.2. State and Local Compensation> Some mandatory spending authorities require revenue sharing with state or local governments, essentially as compensation for the tax-exempt status of federal lands. The accounts commonly provide for compensation based on a specified share of agency receipts. Issues of debate have centered on the level of and basis for compensation and the extent to which consistent and comprehensive compensation should be made across federal lands. In FY2018, some of the compensation programs encompassed a broad land base (e.g., all national forests), whereas others had a much narrower base (e.g., the national forests in three counties in northern Minnesota). In addition, some programs specified the allowed uses of the funds, and others were not restricted. FS payments to states, for example, can be used only on roads and schools, whereas BLM sharing of grazing receipts can be used generally for the benefit of the counties in which the lands are located . For some lands or resources, there is no compensation. Where there is compensation, the proportion granted to state and local governments has varied widely, even among programs of one agency. For BLM, for instance, the proportion of revenues from land sales that is shared with states is generally 4% (of gross proceeds) but is 15% for Nevada for certain land sales in the state. In addition, the state share of grazing fee receipts is 12.5% within grazing districts but 50% outside of grazing districts. Some (but not all) compensation programs reduce payments under the Payments in Lieu of Taxes Program. <1.3.3. Grant Programs> Still other mandatory accounts provide funding for states (and other entities) through formula or competitive grants. They typically provide federal money to accomplish some shared goal or purpose. The area of the state and the size of the population are common parameters used in calculating payments for formula grants. Further, payments typically are made for less than 100% of project costs. For instance, in two FWS grant programs with formula allocations (Wildlife Restoration and Sport Fish Restoration), states and territories may receive a maximum of 75% of costs of projects related, respectively, to wildlife restoration and sport fish habitat (among other purposes). Some observers have viewed the combination of a formula fixed in law and mandatory spending as giving states substantial predictability of federal funding. Other mandatory accounts are allocated for grants through competition among projects. For example, under the Migratory Bird Conservation account, waterfowl habitat acquisitions must be approved by a federally appointed panel based on nominations of the Secretary of the Interior, among other requirements. <2. Agency Accounts with Mandatory Appropriations> <2.1. Overview and Comparison> This section provides information on the mandatory appropriations for each of the four federal land management agencies. It first presents a brief comparison of the number and dollar amounts of mandatory accounts for the four agencies collectively. It then provides detail on each agency's FY2018 mandatory appropriations. For each agency, the discussion separately describes each account with at least $5.0 million in mandatory appropriations in FY2018, including the enabling legislation and the source and use of the funds. It then collectively summarizes each agency's accounts with less than $5.0 million in FY2018 mandatory appropriations. For each agency, the section provides a table showing the amount of mandatory appropriations for each account and a figure comparing the accounts. Collectively, in FY2018, the four agencies received $3.17 billion in mandatory appropriations, which was 19% of their total mandatory and discretionary appropriations of $16.36 billion. Discretionary appropriations of $13.19 billion accounted for the remaining 81% of total appropriations for the four agencies. The total dollar amount of mandatory appropriations varied widely among the agencies, from $300.4 million for BLM to $1.46 billion for FWS, as did the percentage of each agency's total appropriation that was mandatory (from 10% for FS to 45% for FWS). Figure 2 shows total appropriations for each agency and the portions that were discretionary and mandatory. Specifically, in FY2018, mandatory appropriations were as follows, in order of increasing amounts: $300.4 million for BLM, which was 18% of total agency discretionary and mandatory appropriations ($1.65 billion); $704.9 million for NPS, which was 17% of total agency discretionary and mandatory appropriations ($4.16 billion); $705.1 million for FS, which was 10% of total agency discretionary and mandatory appropriations ($7.29 billion); and $1.46 billion for FWS, which was 45% of total agency discretionary and mandatory appropriations ($3.27 billion). In FY2018, the four agencies operated with a total of 68 mandatory accounts. FWS had the fewest accounts (12), followed by NPS (16), BLM (18), and FS (22). Moreover, the amount of mandatory appropriations ranged widely among accounts, from less than $0.1 million (for several accounts) to $829.1 million (for FWS's Federal Aid in Wildlife Restoration). In general, most of the accounts were relatively small. Specifically, of the 68 accounts, 33 (49%) each had mandatory appropriations of less than $5.0 million, 24 (35%) each had mandatory appropriations of between $5.0 million and $50.0 million, 3 (4%) each had mandatory appropriations of between $50.0 million and $100.0 million, and 8 (12%) each had mandatory appropriations exceeding $100.0 million. <2.2. Bureau of Land Management> BLM currently administers 246 million acres, heavily concentrated in Alaska and other western states. BLM lands, officially designated as the National System of Public Lands, include grasslands, forests, high mountains, arctic tundra, and deserts. BLM had 18 accounts with mandatory spending authority in FY2018. Seven of these accounts had appropriations each exceeding $5.0 million, with the largest account containing $157.8 million. The accounts typically are funded from agency receipts of various sorts. Although several are compensation programs that provide for revenue sharing with state or local governments, most accounts fund BLM activities. Table 1 and Figure 3 show the BLM mandatory appropriations for FY2018. FY2018 mandatory appropriations for BLM for all 18 accounts were $300.4 million. This amount was 18% of total BLM mandatory and discretionary appropriations of $1.65 billion in FY2018. Discretionary appropriations of $1.35 billion accounted for the remaining 82% of total BLM appropriations. <2.2.1. Southern Nevada Public Land Sales and Earnings on Investments (Federal Funding)> Several laws authorize the sale of some public lands in Nevada. The most extensive authority is the Southern Nevada Public Land Management Act (SNPLMA). Under this authority, BLM is authorized to sell or exchange land in Clark County, NV, with a goal of allowing for community expansion and economic development in the Las Vegas area. Of total receipts, 85% are deposited in a special account, which may be used for activities in Nevada, such as federal acquisition of environmentally sensitive lands; capital improvements; and development of parks, trails, and natural areas in Clark County. (The other 15% of receipts are allocated to the state of Nevada, as discussed in " Payments to Nevada from Receipts on Land Sales ," below.) The FY2018 mandatory appropriation for this account was $157.8 million. Appropriations vary depending on the amount and value of lands sold. Over the five years from FY2014 to FY2018, the annual mandatory appropriation increased from $51.6 million in FY2014, although FY2018 was the only year in which the appropriation exceeded $100.0 million. <2.2.2. Oil and Gas Permit Processing Improvement Fund> The Oil and Gas Permit Processing Improvement Fund was established by the Energy Policy Act of 2005. The fund supports BLM's oil and gas management program and includes 50% of rents from onshore mineral leases as well as revenue from fees charged by BLM for applications for permits to drill (APDs). BLM uses the receipts from both sources for the coordination and processing of oil and gas use authorizations on onshore federal and Indian trust mineral estate land. The receipts generally are targeted for use in particular areas; receipts from onshore mineral leases are used by BLM "project offices," and not less than 75% of the revenue from APD fees is to be used in the state where collected. The FY2018 mandatory appropriation for the Oil and Gas Permit Processing Improvement Fund was $40.2 million. Appropriations have varied based on factors such as the number of active, nonproducing leases (on which rents are paid) each year, the number of APDs issued each year, and the addition of APD fees to the fund beginning in FY2016. Over the five years from FY2014 to FY2018, the annual mandatory appropriation increased overall from $14.1 million in FY2014, with the highest funding level in FY2018 ($40.2 million). The appropriation averaged $24.1 million annually over the five-year period. <2.2.3. Secure Rural Schools> The Oregon and California (O&C) and Coos Bay Wagon Road (CBWR) grant lands are lands that were granted to two private firms, then returned to federal ownership for failure to fulfill the terms of the grants. The federal government makes revenue-sharing payments to the western Oregon counties where these lands are located to compensate for the tax-exempt status of federal lands. Under the Act of August 28, 1937, the payments for the O&C lands are 50% of receipts (mostly from timber sales). Under the Act of May 24, 1939, CBWR payments are up to 75% of receipts but cannot exceed the taxes that a private landowner would pay. The funds may be used for any governmental purpose. Because of declining receipts, Congress enacted the Secure Rural Schools and Community Self-Determination Act of 2000 (SRS) to provide alternative payments initially through FY2006 based in part on historic rather than current receipts. The law has been amended and payments have been reauthorized several times. Most recently, the 115 th Congress provided SRS payments for FY2017 and FY2018. Under SRS, most of the funds are paid to the O&C and CBWR counties for governmental purposes. BLM retains a small portion of the funds for use on the O&C and CBWR lands. SRS payments are disbursed after the fiscal year ends. The FY2018 mandatory appropriation to cover the FY2017 SRS payment was $35.2 million. Over the five years from FY2014 to FY2018, the appropriation fluctuated between $35.2 million in FY2018 and $39.6 million in FY2014, except in FY2017. In FY2017, the appropriation for SRS was $0, due to the (temporary) expiration of the SRS program. Because of the expiration, payments to the O&C counties reverted to the revenue-sharing payments authorized under the aforementioned 1937 and 1939 statutes and were $22.9 million in FY2017. <2.2.4. Recreation Enhancement Act, Bureau of Land Management> The Federal Lands Recreation Enhancement Act (FLREA) authorizes five agencies, including BLM, to charge and collect fees for recreation. The program initially was authorized for 10 years but has been extended, most recently through September 30, 2020. FLREA authorizes different kinds of fees, outlines criteria for establishing fees, and prohibits charging fees for certain activities or services. Under the law, BLM charges standard amenity fees in areas or circumstances where a certain level of services or facilities is available and expanded amenity fees for specialized services. The agency retains the collected fees. In general, at least 80% of the revenue is to be retained and used at the site where it was collected, with the remaining fees used agency-wide. Under law, the Secretary of the Interior can reduce the amount of collections retained at a collecting site to not less than 60% for a fiscal year, if collections are in excess of reasonable needs. The law gives BLM (and other agencies in the program) broad discretion in using revenues for specified purposes, which primarily aim to benefit visitors directly. Purposes include facility maintenance, repair, and enhancement; interpretation and visitor services; signs; certain habitat restoration; and law enforcement. The Secretary of the Interior and the Secretary of Agriculture may use a portion of the revenues to administer the recreation fee program. The FY2018 mandatory appropriation for BLM's Recreation Enhancement Act was $26.8 million. Appropriations vary depending on fee rates, the number of locations charging fees, and the number of visitors to BLM lands. Over the five years from FY2014 to FY2018, the annual mandatory appropriation increased overall from $17.7 million in FY2014 to $26.8 million in FY2018, the highest funding level. The appropriation averaged $22.2 million annually over the five-year period. <2.2.5. Payments to Nevada from Receipts on Land Sales> As noted in " Southern Nevada Public Land Sales and Earnings on Investments (Federal Funding) ," SNPLMA allocates 15% of receipts from land sales near Las Vegas to the state of Nevada. Specifically, it allocates 5% of receipts to the state's general education program and 10% of receipts to the Southern Nevada Water Authority for water treatment and transmission facilities in Clark County. (The other 85% of receipts under SNPLMA are deposited in a special federal account, as discussed above.) The FY2018 mandatory appropriation for payments to Nevada from receipts on land sales was $12.6 million. Over the five years from FY2014 to FY2018, the annual mandatory appropriation fluctuated from a low of $5.1 million in FY2014 to a high of $15.8 million in FY2017 and averaged $10.7 million. <2.2.6. Forest Ecosystem Health and Recovery> The Forest Ecosystem Health and Recovery Fund was created by the Department of the Interior and Related Agencies Appropriations Act, 1993. Its purposes and authority have been amended several times. Under current law, funds are derived from the federal share (i.e., the monies not granted to the states or counties) of receipts from the sale of salvage timber from any BLM lands. Salvage sales involve the timely removal of insect-infested, dead, damaged, or down trees that are commercially usable, to capture some of the economic value of the timber resource before it deteriorates or to remove the associated trees for forest health purposes. In general, the fund is used to respond to forest damage and to reduce the risk of catastrophic damage to forests (e.g., through severe wildfire). More specifically, the money can be used to plan, prepare, administer, and monitor salvage timber sales, as well as to reforest salvage timber sites. It also can be used for actions that address forest health problems that could lead to catastrophic damage, such as tree density control and hazardous fuels reduction. The FY2018 mandatory appropriation for the Forest Ecosystem Health and Recovery Fund was $9.6 million. Appropriations vary from year to year, in part because sales and associated deposits may occur over multiple years. They also vary due to factors that influence tree mortality (e.g., catastrophic wildfires, insect infestations), market fluctuations for the demand and price of the associated harvested wood products, and the expiration or reauthorization of SRS payments. Over the five years from FY2014 to FY2018, the annual mandatory appropriation averaged $7.7 million, ranging from a low of $3.3 million in FY2017 to a high of $12.0 million in FY2015. <2.2.7. Timber Sales Pipeline Restoration> The Timber Sales Pipeline Restoration Fund was authorized by the Omnibus Consolidated Rescissions and Appropriations Act, 1996, for BLM (and FS; see " Forest Service " section below). The fund contains the federal share of receipts (i.e., the monies not granted to the states or counties) from certain canceled-but-reinstituted O&C timber sales. The account operates as a revolving fund, with 75% of the receipts from timber sales used to prepare additional sales (other than salvage). The other 25% of the receipts is to be used for recreation projects on BLM land. Under law, when the Secretary of the Interior finds that the allowable sales level for the O&C lands has been reached, the Secretary may end payments to this fund and transfer any remaining money to the General Fund of the Treasury as miscellaneous receipts. The FY2018 mandatory appropriation for the Timber Sales Pipeline Restoration Fund was $7.5 million. Appropriations vary from year to year, in part because sales and associated deposits may occur over multiple years. They also vary based on market fluctuations for the demand and price of the associated harvested wood products and the expiration or reauthorization of SRS payments. Over the five years from FY2014 to FY2018, the annual mandatory appropriation fluctuated from a low of $0.4 million in FY2017 to a high of $9.8 million in FY2015 and averaged $5.2 million annually. <2.2.8. Accounts with Less Than $5.0 Million> BLM had 11 additional accounts with mandatory appropriations of less than $5.0 million each in FY2018. These accounts collectively received $10.9 million in mandatory appropriations in FY2018 and ranged from less than $0.1 million to $3.3 million, as shown in Table 1 . Three of the accounts are payment programs under which BLM shares proceeds of land sales or land uses (e.g., livestock grazing) with states and counties. Under some authorities, the states and counties may use the payments for general purposes, such as for the benefit of affected counties; other laws specify particular purposes for which the payments can be used, such as for schools and roads. Various sources fund the other eight accounts, with BLM retaining the proceeds for particular purposes, as follows: Two of the accounts are funded by land sales in particular areas and are used for purposes including land acquisition, resource preservation, and the processing of land use authorizations. Two accounts are funded by contributions for cadastral surveys and for administering and improving grazing lands and are used for these purposes. One account is funded from rents paid by BLM employees living in government housing and is used to maintain and repair the housing. One account is funded by revenues from mineral lease sales on a particular site and is used to remove environmental contamination. One account is funded primarily by fees collected from commercial users of roads under BLM jurisdiction and is used to maintain the areas. One account is funded by timber receipts under stewardship contracts and is used for purposes including other stewardship contracts. <2.3. Fish and Wildlife Service> FWS administers the National Wildlife Refuge System (NWRS), which consists of land and water designations. The system includes wildlife refuges, waterfowl production areas, and coordination areas, as well as mostly territorial lands and submerged lands and waters within mainly marine wildlife refuges and marine national monuments. FWS also manages other lands within and outside of the NWRS. FWS had 12 accounts with mandatory spending authority in FY2018. Seven of these accounts had appropriations each exceeding $5.0 million, and the largest had $829.1 million. Funding mechanisms for these accounts vary, including receipts; excise and fuel taxes; and fines, penalties, and forfeitures. In addition, three of the accounts receive discretionary appropriations in addition to the mandatory appropriations shown in this report. Several accounts, including some of the largest, provide grants to states (and other entities); other accounts fund agency activities or provide compensation to counties. Table 2 and Figure 4 show the FWS mandatory appropriations for FY2018. FY2018 mandatory appropriations for all 12 FWS accounts were $1.46 billion. This amount was 45% of total FWS mandatory and discretionary appropriations of $3.27 billion in FY2018. Discretionary appropriations of $1.81 billion accounted for the remaining 55% of total FWS appropriations. <2.3.1. Federal Aid in Wildlife Restoration (Pittman-Robertson)> In 1937, the Federal Aid in Wildlife Restoration Act created the Federal Aid in Wildlife Restoration Fund, also known as the Pittman-Robertson Fund, in the Treasury. As amended, the act directs that excise taxes on certain guns, ammunition, and bows and arrows be deposited into the fund each fiscal year for allocation and dispersal in the year following their collection. The Appropriations Act of August 31, 1951, provided for mandatory appropriations for the excise taxes deposited into the Pittman-Robertson Fund in the year after they are collected. Many programs are funded from the Pittman-Robertson Fund. The majority of the annual funding is allocated to states and territories, which can receive funding to cover up to 75% of the cost of FWS-approved wildlife restoration projects, including acquisition and development of land and water areas. Funding also is provided for hunter education programs and multistate conservation grants. FWS is authorized to use a limited amount of the funds to administer the program. In addition, interest on balances in the account is allocated to the North American Wetlands Conservation Fund. Pittman-Robertson received $829.1 million in mandatory appropriations in FY2018. This amount included $17.8 million for projects under the North American Wetlands Conservation Act (see " North American Wetlands Conservation Fund "). The mandatory appropriation for Pittman-Robertson varies based on the amount of federal excise taxes collected. Over the five years from FY2014 to FY2018, annual mandatory appropriations varied by more than $100 million, with a low of $725.5 million in FY2016 and a high of $829.1 million in FY2018. The appropriation averaged $790.0 million annually over the five-year period. <2.3.2. Federal Aid in Sport Fish Restoration (Dingell-Johnson)> In 1950, Congress passed the Federal Aid in Sport Fish Restoration Act, now known as the Dingell-Johnson Sport Fish Restoration Act. The act authorized funding equal to the amount of taxes collected on certain sport fishing equipment to be allocated to the states to be used to carry out sport fish restoration activities. The Appropriations Act of August 31, 1951, provided for mandatory appropriations for the amounts used to carry out the act. Since its passage, the Dingell-Johnson Act has been amended several times to add additional programs and to modify the source of funding. In 1984, funding for this act became part of a larger Aquatic Resources Trust Fund established in the Deficit Reduction Act of 1984. In 2005, the account name was changed to the Sport Fish Restoration and Boating Fund. In its current form, the fund receives deposits from five sources: (1) taxes on motorboat fuel (after $1 million is credited to the Land and Water Conservation Fund); (2) taxes on small engine fuel used for outdoor power equipment; (3) excise taxes on sport fishing equipment, such as fishing rods, reels, and lures; (4) import duties on fishing boats and tackle; and (5) interest on unspent funds in the account. Deposits into the fund are available for appropriation in the year after they are collected. As amended, the Dingell-Johnson Act funds many programs through the Dingell-Johnson Fund. The majority of funds are used for formula grants to states and territories for projects to benefit sport fish habitat, research, inventories, education, stocking of sport fish into suitable habitat, and more. The states and territories can receive funding to cover up to 75% of the cost of restoration projects, including acquiring and developing land and water areas. In addition to funds apportioned to states for sport fish restoration projects, funding is allocated to administer various other FWS programs, including Boating Infrastructure Improvement, National Outreach, Multistate Conservation Grants, Coastal Wetlands, Fishery Commissions, and the Sport Fishing and Boating Partnership Council. In addition, FWS uses monies from the fund to carry out projects identified through the North American Wetlands Conservation program. Dingell-Johnson received $439.2 million in mandatory appropriations in FY2018. This amount included $17.2 million for projects under the North American Wetlands Conservation Act (see " North American Wetlands Conservation Fund " for more information). The mandatory appropriation for Dingell-Johnson fluctuates from year to year, because the amount of deposits into the fund varies annually. Over the five years from FY2014 to FY2018, annual mandatory appropriations varied by more than $35 million, with a low of $406.8 million in FY2014 and a high of $442.3 million in FY2016. The appropriation averaged $430.9 million annually over the five-year period. <2.3.3. Migratory Bird Conservation Account61> The Migratory Bird Conservation Account was created in 1934 as the repository for revenues derived from the sale of Migratory Bird Hunting and Conservation Stamps, commonly known as Duck Stamps. In addition to revenues from Duck Stamps, the fund receives deposits from import duties on certain arms and ammunition, as well as other sources. Funding in the Migratory Bird Conservation Account can be used for the printing and sales costs of Duck Stamps and for the Secretary of the Interior to acquire lands and easements and protect waterfowl habitat, with the lands and easements added to the NWRS. Prior to acquisition of a property for addition to the NWRS, the Migratory Bird Conservation Commission must approve the property from a list of properties that the Secretary of the Interior nominates for acquisition. Also prior to acquisition, the state in which the acquisition is to occur must enact a law consenting to acquisition by the United States, FWS must consult with the state, and the state's governor must approve the acquisition. The Migratory Bird Conservation Account received $81.3 million in mandatory appropriations in FY2018. The mandatory appropriation for the Migratory Bird Conservation Account varies from year to year based on fluctuations in deposits from the sale of Duck Stamps and import duties. Over the five years from FY2014 to FY2018, annual mandatory appropriations varied by nearly $20 million, with a low of $62.6 million in FY2015 and a high of $82.3 million in FY2017. The appropriation averaged $72.7 million annually over the five-year period. <2.3.4. Cooperative Endangered Species Conservation Fund> Unlike the other mandatory accounts, the mandatory appropriation for the Cooperative Endangered Species Conservation Fund (CESCF) is not directly available for allocation and disbursal. Rather, the mandatory appropriation is paid into a special fund, known as the CESCF, from which funding may be made available in subsequent years through further discretionary action by Congress. As such, the mandatory appropriation for CESCF is different from the mandatory appropriations for other FWS accounts. The mandatory appropriation that is annually deposited into the CESCF consists of an amount equal to 5% of the combined amount covered in the Federal Aid in Sport Fish Restoration and Federal Aid in Wildlife Restoration accounts and an amount equal to the excess balance above $500,000 of the sum of penalties, fines, and forfeitures received under the Endangered Species Act and the Lacey Act. Funding made available from the CESCF through discretionary appropriations supports grant funding programs that assist states with the conservation of threatened and endangered species and the monitoring of candidate species on nonfederal lands. The CESCF received $74.7 million in mandatory appropriations in FY2018. The mandatory appropriation for the CESCF varies from year to year due to fluctuations in Pittman-Robertson and Dingell-Johnson and in the penalties, fines, and forfeitures collected. Over the five years from FY2014 to FY2 018, annual mandatory appropriations varied by more than $8 million, between a low of $67.7 million in FY2016 and a high of $75.9 million in FY2017. <2.3.5. North American Wetlands Conservation Fund> The North American Wetlands Conservation Act was enacted in 1989 to provide funding mechanisms to carry out conservation activities in wetlands ecosystems throughout the United States, Canada, and Mexico. The funding supports partnerships among interested parties to protect, enhance, restore, and manage wetland ecosystems, and it requires that the partner stakeholders match the federal funding at a minimum rate of one to one. Mandatory funding for the program comes from court-imposed fines for violations of the Migratory Bird Treaty Act. Additional mandatory funding is derived from interest earned on funds from excise taxes on hunting equipment under Pittman-Robertson and transfers from Dingell-Johnson. (See " Federal Aid in Wildlife Restoration (Pittman-Robertson) " and " Federal Aid in Sport Fish Restoration (Dingell-Johnson) " for more information.) The North American Wetlands Conservation Fund received $11.5 million in mandatory appropriations in FY2018. The mandatory appropriation for the North American Wetlands Conservation Fund varies from year to year due to fluctuations in fines related to violations of the Migratory Bird Treaty Act. Over the five years from FY2014 to FY2018, mandatory appropriations varied by more than $8 million, with a low of $11.4 million in FY2017 and a high of $19.6 million in FY2015. The appropriation averaged $16.2 million annually over the five-year period. <2.3.6. National Wildlife Refuge Fund> The Refuge Revenue Sharing Act was enacted to compensate counties for the loss of revenue due to the tax-exempt status of NWRS lands administered by FWS. The National Wildlife Refuge Fund, also called the Refuge Revenue Sharing Fund, accumulates net receipts from the sale of certain products, which are used to pay the counties in the year following their collection pursuant to the act. The act also authorizes FWS to deduct funds from the receipts to cover certain costs related to revenue-producing activities. Counties receive payments for FWS-managed lands that were acquired (fee lands) or reserved from the public domain. Counties receive a payment for fee lands based on a formula that pays the greater of (1) $0.75 per acre, (2) three-fourths of 1% of fair market value of the land, or (3) 25% of net receipts. Payments for reserved lands are 25% of the net receipts. In a given year, if receipts are not sufficient to cover the payments, the act authorizes annual discretionary appropriations to make up some or all of the difference. If receipts exceed the amount needed to cover payments, the excess is transferred to the Migratory Bird Conservation Account. From FY2014 to FY2017, mandatory and discretionary spending together provided between 20% and 30% of the full, authorized level in the formula, with mandatory appropriations making up between 28% and 41% of the total. The National Wildlife Refuge Fund received $9.4 million in mandatory appropriations in FY2018. The mandatory appropriation for the National Wildlife Refuge Fund fluctuates from year to year due to changes in revenues collected that determine the available funding. Over the five years from FY2014 to FY2018, annual mandatory appropriations varied by more than $4 million, with a low of $7.0 million in FY2014 and a high of $11.4 million in FY2016. <2.3.7. Federal Lands Recreation Enhancement Act83> In general, FLREA allows national wildlife refuge managers to retain not less than 80% of entrance and user fees collected at the refuge to improve visitor experiences, protect resources, collect fees, and enforce laws relating to public use, among other purposes. The remaining amount (up to 20%) is to be made available for agency-wide distribution. In practice, some FWS regions have chosen to return 100% of funds to the collecting sites. The Recreation Fee Program received $7.5 million in mandatory appropriations in FY2018. Appropriations vary depending on fee rates, the number of locations charging fees, and the number of visitors to FWS lands. Over the five years from FY2014 to FY2018, the annual mandatory appropriation increased by more than $2 million, with a low of $5.1 million in FY2014 and a high of $7.5 million in FY2018. <2.3.8. Accounts with Less Than $5.0 Million> FWS had five additional accounts with mandatory appropriations of less than $5.0 million each in FY2018. These accounts collectively received $7.8 million in mandatory appropriations in FY2018, and they ranged from $0.2 million to $4.0 million, as shown in Table 2 . These accounts receive funding from donations and receipts collected for certain activities. For some accounts, the activities are restricted to selected refuges or properties. In general, these funds are used for fish and wildlife conservation purposes or for the maintenance or conservation of specific FWS-administered resources. Specific purposes include the following: The Contributed Funds account consists of donations, which are used to support various fish and wildlife conservation projects. The Operations and Maintenance of Quarters Fund receives the rents and charges from employees occupying FWS quarters and is used to maintain the structures. The Lahontan Valley and Pyramid Lake Fish and Wildlife Fund uses the receipts associated with a water rights settlement in Nevada to support restoration and enhancement of wetlands and fisheries in the area. Proceeds from the sale of certain lands in the area also are deposited in the fund. The Proceeds from Sales Fund uses the receipts from sales of resources on U.S. Army Corps of Engineers land managed by FWS to cover the expenses of managing those sales and carrying out development, conservation, and maintenance of these lands. The Community Partnership Enhancement Fund supports collaboration with local groups (e.g., state, local, or academic organizations) whose contributions support local refuges. <2.4. Forest Service> FS is charged with conducting forestry research, providing assistance to nonfederal forest owners, and managing the 193-million-acre National Forest System (NFS). The NFS consists of national forests, national grasslands, land utilization projects, and several other land designations. FS had 22 accounts with mandatory spending authority in FY2018. Of the 22 accounts, 10 had mandatory appropriations each exceeding $5.0 million in FY2018, with the largest account containing $234.6 million. The remaining 12 accounts had appropriations of less than $5 million each in FY2018 (and half of those had less than $1 million each). Agency receipts fund many of these accounts, although one is supplemented by the General Fund of the Treasury, as needed. Almost all of the accounts support agency activities, but one is for a compensation program. In addition, import tariffs fund one account and license fees fund another. Table 3 and Figure 5 show the FS mandatory appropriations for FY2018. FY2018 mandatory appropriations for FS for all 22 accounts were $705.1 million. This amount was nearly 10% of total FS mandatory and discretionary appropriations of $7.29 billion in FY2018. Discretionary appropriations of $6.58 billion accounted for the remaining 90% of total FS appropriations. <2.4.1. Payment to States Funds> Payment to States Funds provide compensation or revenue-sharing payments to specified state and local governments. The payments are required based on different laws with varying (but sometimes related) purposes and disbursement formulas, as summarized below. The funds generally consist of receipts from sales, leases, rentals, or other fees for using NFS lands or resources (e.g., timber sales, certain recreation fees, and communication site leases). 25% R evenue- S haring P ayments . The Act of May 23, 1908, requires states to receive annual payments of 25% of the average gross revenue generated over the previous seven years on the national forests in the state, for use on roads and schools in the counties containing those lands. Funded through receipts, the payment is made to the state after the end of the fiscal year. The state cannot retain any of the funds but allocates the payment to the counties based on the area of national forest land in each county. SRS P ayments . SRS authorized an optional, alternative payment to both the FS 25% revenue-sharing payments and the BLM payments to the counties in Oregon containing the O&C and CBWR lands. The payment amount is determined by a formula that is based in part on historical revenue payments and that declines overall by 5% annually. Similar to the 25% revenue-sharing payments, the payment is made after the end of the fiscal year and the bulk of the payment is to be used for roads and schools in the counties containing the national forests. The agency may retain a portion of the payment for use on specified projects. Funding for the payment first comes from receipts and, if necessary, is supplemented through transfers from the General Fund of the Treasury. The original authorization for SRS payments expired at the end of FY2006, but Congress reauthorized the payments several times (through various laws) and payments were made annually from FY2001 through FY2016. The authorization expired for the FY2016 SRS payment, and counties received the 25% revenue-sharing payment for one year, in FY2017. Congress then reauthorized the SRS payments for two years (FY2017 and FY2018). SRS payments are disbursed after the fiscal year ends, so the FY2017 payment was made in FY2018 and the FY2018 payment was made in FY2019. National Grassland Fund P ayments . These payments are authorized by the Bankhead-Jones Farm Tenant Act, which requires payments of 25% of net (rather than gross) receipts directly to the counties for roads and schools in the counties where the national grasslands are located. These payments are sometimes referred to as Payments to Counties, because the payment is made directly to the counties and the allocation is based on the national grassland acreage in each county. Payments to Minnesota Counties . Enacted in 1948, this program pays three northern Minnesota counties 0.75% of the appraised value of the land, without restrictions on using the funds. The FY2018 mandatory appropriation for the Payment to States Funds was $234.6 million. The funding level in this account varies annually, depending on fluctuations in revenue from the NFS and whether SRS is authorized. For example, over the five years from FY2014 to FY2018, annual mandatory appropriations averaged $269.6 million. The FY2018 appropriation was lower than the annual average, and the FY2017 appropriation ($73.1 million) was much lower than the annual average. These low figures occurred primarily because of the expiration of SRS payments in FY2017. SRS payments are generally higher than 25% payments and often require supplemental funding from the General Fund of the Treasury. <2.4.2. Cooperative Work Knutson-Vandenberg Trust Fund> The Knutson-Vandenberg (K-V) Trust Fund was established by the Act of June 6, 1930, and is funded through revenue generated by timber sales. The agency determines the amount collected on each sale, which can be up to 100% of receipts from the sale. The fund is used for two purposes. First, the fund is used on the site of the timber sale to reforest and improve timber stands or to mitigate and enhance non-timber resource values. Second, unobligated balances from the fund may be used for specified land management activities within the same FS region in which the timber sale occurred. The K-V Trust Fund received $187.2 million in mandatory appropriations in FY2018. Because the deposits are determined on a sale-by-sale basis, the balance in the fund varies from year to year. Over the five years from FY2014 to FY2018, mandatory appropriations ranged from a low of $61.5 million in FY2015 to a high of $250.0 million in FY2014. The average annual mandatory appropriation was $155.7 million. <2.4.3. Recreation Fee Program, Forest Service> FS charges and collects recreational fees under several programs and deposits those funds into the Recreation Fees account to be used for specified purposes. Under FLREA, FS is one of five federal agencies authorized to charge, collect, and retain fees for specified recreational activities on federal lands. FLREA directs that at least 80% of the fees collected from FS are to be available without further appropriation for use at the site where they were collected. FS typically uses the money for visitor services, law enforcement, and other purposes authorized under FLREA. In addition to FLREA, FS is authorized to collect and retain fees at two specific sites: Grey Towers National Historic Site and the Shasta-Trinity National Recreation Area (NRA). FS is authorized to use the fees collected at the Grey Towers National Historic Site for program support and administration. The agency may use the fees collected at the Shasta-Trinity NRA for the same purposes as FLREA, as well as for direct operating or capital costs associated with the issuance of a marina permit. FS also administers the multiagency National Recreation Reservation Service program, which collects reservation fees for those recreational facilities on federal lands that allow reservations. FS is responsible for collecting the fees and issuing pass-through payments to other agencies. The FY2018 mandatory appropriation for the Recreation Fee Program was $100.6 million. Appropriations vary depending on fee rates, the number of locations charging fees, and the number of visitors to FS lands. Over the five years from FY2014 to FY2018, mandatory appropriations ranged from a low of $70.7 million in FY2014 to a high of $100.6 million in FY2018. The average annual mandatory appropriation during the period was $87.2 million. <2.4.4. Timber Salvage Sale Fund> The Timber Salvage Sale Fund is funded through receipts from timber sales (or portions of sales) designated as salvage by the agency, and its funds may be used to prepare, sell, and administer other salvage sales. Salvage sales involve the timely removal of insect-infested, dead, damaged, or down trees that are commercially usable to capture some of the economic value of the timber resource before it deteriorates or to remove the associated trees for stand improvement. The fund may be used for timber sales with any salvage component. The FY2018 mandatory appropriation for the FS Timber Salvage Sale Fund was $41.9 million. Appropriations vary from year to year, based on factors that influence tree mortality (e.g., catastrophic wildfires, insect infestations) and market fluctuations for the demand and price of the harvested timber. From FY2014 to FY2018, mandatory appropriations ranged from a low of $33.2 million in FY2014 to a high of $41.9 million in FY2018. The mandatory appropriation averaged $37.5 million annually over the five-year period. <2.4.5. Cooperative Work Other Trust Fund> This trust fund collects deposits from cooperators and partners for use on NFS lands or for funding research programs. The deposits may be made under an assortment of instruments, including cooperative agreements, permits, or contracts, and with a variety of partners, for services involving any aspect of forestry ranging from timber measurement to fire protection, among others. These services vary widely in scope and duration, and the associated deposits also vary widely, commensurate with the scale of those services. The deposits may be made pursuant to a specific agreement or project, or they may include funds pooled from multiple cooperators for later spending on related projects. The amount of deposits is specified in each instrument. The FY2018 mandatory appropriation for the trust fund was $39.4 million. Because the fund consists of deposits under many individual cooperative agreements or other instruments, the funding level varies considerably from year to year. Over the five years from FY2014 to FY2018, mandatory appropriations ranged from a low of $34.6 million in FY2014 to a high of $84.1 million in FY2016. The mandatory appropriation averaged $48.2 million annually over the five-year period. <2.4.6. Reforestation Trust Fund> The Reforestation Trust Fund was created in 1980 to eliminate the backlog of reforestation and timber stand improvement work on NFS lands. Deposits to this account come from tariffs on specified imported wood products, up to $30.0 million annually. Funds may be used for a range of activities related to reforestation (e.g., site preparation for natural regeneration, seeding, or tree planting) and to improve timber stands (e.g., removing vegetation to reduce competition, fertilization). In FY2018, the Reforestation Trust Fund received $27.2 million in mandatory appropriations. Funding generally has been at or around the maximum of $30.0 million annually. Over the five years from FY2014 to FY2018, the mandatory appropriation averaged $29.4 million annually. <2.4.7. Stewardship Contracting Fund108> Congress authorized FS and BLM to combine timber sale contracts and land restoration services contracts into stewardship contracts . This allows the agencies to retain and use the revenue generated from the sale of timber to offset the cost of specified restoration work on their lands. FS and BLM each are authorized to retain any receipts in excess of the cost of the restoration work in their respective Stewardship Contracting Funds and to use those funds on future stewardship contracts. In FY2018, the mandatory appropriation for the Stewardship Contracting Fund was $23.6 million. Funding varies based on the extent that there are receipts in excess of costs. Over the five years from FY2014 to FY2018, mandatory appropriations ranged from a low of $11.2 million in FY2014 to a high of $23.6 million in FY2018 and averaged $15.8 million annually. <2.4.8. Cost Recovery (Land Uses)> FS is authorized to collect and retain fees to cover the costs of processing and monitoring certain special-use authorizations for the use and occupancy of NFS lands. The processing and monitoring fees are based on the estimated number of hours it will take FS to process the application (or renew the authorization) and to monitor the activity to ensure compliance with the authorization. The rates are updated annually to adjust for inflation. The FY2018 mandatory appropriation for Cost Recovery (Land Uses) was $11.0 million. Funding varies based on the number and type of special-use authorizations. From FY2014 to FY2018, mandatory appropriations ranged from a low of $5.4 million in FY2014 to a high of $11.0 million in FY2018 and averaged $7.8 million annually. <2.4.9. Operation and Maintenance of Forest Service Quarters> This account allows the agency to collect rent from employees who use government-owned housing and to use the funds to maintain and repair the structures. The FY2018 mandatory appropriation was $10.0 million. Over the five years from FY2014 to FY2018, funding was relatively consistent and mandatory appropriations averaged $9.0 million annually. <2.4.10. Brush Disposal> This account receives money from timber purchasers. The fund is used on timber sale sites to dispose of treetops, limbs, and other debris from timber cutting; reduce fire and insect hazards; assist reforestation; and conduct related activities. FS identifies the amount required to cover the costs of those activities for each timber sale. The FY2018 mandatory appropriation for Brush Disposal was $7.6 million. From FY2014 to FY2018, mandatory appropriations ranged from a low of $7.6 million in FY2018 to a high of $9.7 million in FY2015. The appropriation averaged $8.3 million annually. <2.4.11. Accounts with Less Than $5.0 Million> FS had 12 additional accounts with mandatory appropriations of less than $5.0 million each in FY2018, all of which can be used on specified agency activities. These accounts collectively received $21.8 million in mandatory appropriations in FY2018, and they ranged from less than $0.1 million to $4.7 million, as shown in Table 3 . Nine of these accounts are funded through receipts or fees for use of NFS lands or resources, with FS retaining the proceeds for particular purposes, as follows. Three accounts are associated with the sale of timber or non-timber wood products and may be used for implementation of additional timber sales, payment for road construction associated with timber sales, or program administration. Four accounts are associated with land use fees. Of these, two accounts are funded through land use fees for specific purposes (e.g., commercial filming or photography, organizational camps) and two accounts are funded through land use fees in specific areas; the funds in those accounts generally may be used for program administration and other specified purposes. Two accounts are funded through land sales and are used for purposes such as land acquisition, building maintenance, rehabilitation, and construction. Of the remaining three accounts, one is funded through licensee royalty fees and used to support nationwide initiatives related to wildfire prevention and environmental conservation. Another account is funded through recoveries from judgements, settlements, bond forfeitures, and related actions from permittees or timber purchasers who fail to complete the required work, and the funds are used to complete the work or repair any associated damage. The other account is funded through revenue generated from recycling or other waste reduction or prevention programs; its funds are used to implement other recycling, waste reduction, or prevention programs. <2.5. National Park Service> NPS administers the National Park System, with 80 million acres of federal land in all 50 states and the District of Columbia. The system contains 419 units with diverse titles, including national park, national preserve, national historic site, national recreation area, and national battlefield, among others. NPS had 16 accounts with mandatory spending authority in FY2018. Of these, 11 accounts had mandatory appropriations each exceeding $5.0 million; the largest had $301.5 million. Funding sources for the accounts vary and include agency receipts, offshore energy development revenues, District of Columbia payments, the General Fund of the Treasury, donations, and an endowment. Almost all of the accounts support agency activities, but one is for recreation assistance grants to states and another is a compensation program. Table 4 and Figure 6 show NPS mandatory appropriations for FY2018. FY2018 mandatory appropriations for all 16 NPS accounts totaled $704.9 million. This amount was 17% of the $4.16 billion total for NPS mandatory and discretionary appropriations combined in FY2018. Discretionary appropriations of $3.46 billion accounted for the remaining 83% of total NPS appropriations. <2.5.1. Recreation Fee Program> Like other federal land management agencies, NPS charges, retains, and spends recreation fees under FLREA. FLREA authorizes NPS to charge entrance fees at park units and to charge certain recreation and amenity fees for specialized uses of park facilities and services. FLREA directs that, in general, at least 80% of the fees collected at a park unit are to be available without further appropriation for use at the site where they were collected. In practice, NPS's policy is to allow park units that collect less than $0.5 million annually to retain 100% of collections at the site; park units that collect over $0.5 million annually retain up to 80% of collections. Funds not retained at the collecting site are placed in a centralized account for use agency-wide, including at sites where fee collection is infeasible or relatively low. NPS projects compete for funding from this centralized account, and the NPS director ultimately selects projects for funding. NPS generally has discretion in using its collections for purposes specified in FLREA. These purposes include maintaining and improving recreation facilities, providing visitor services, providing law enforcement related to public use and recreation, and restoring certain wildlife habitats. Under an agency policy that took effect in FY2018, parks are to obligate 55% of new allocations to deferred maintenance projects. In FY2018, NPS revenues from the Recreation Fee Program were $301.5 million. Over the five years from FY2014 to FY2018, program revenues increased by approximately 65%, owing to entrance fee increases and growth in the numbers of park visitors, among other factors. The recreation fees averaged $251.8 million annually over the five-year period. NPS typically collects more under FLREA than the other four agencies in the program combined (BLM, FS, FWS, and the Bureau of Reclamation). <2.5.2. Concession Franchise Fees> NPS concessioners contract with the agency to provide visitor services such as lodging and food within the parks. The National Park Service Concessions Management Improvement Act of 1998 directs that all franchise fees and other monetary considerations from NPS concessions contracts be deposited into a special account. NPS is authorized to use most of these funds at the collecting park for visitor services and high-priority resource management programs and operations. This account is gradually replacing an earlier type of concessions funding the concessions improvement accounts (see " Concessions Improvement Accounts ," below) as concessions contracts are renewed. In FY2018, NPS received $126.3 million in concession franchise fees, a 2% increase over FY2017 receipts ($123.8 million). Over the FY2014-FY2018 period, NPS concession franchise fee receipts averaged $108.3 million annually. Agency revenues from concession franchise fees increased by nearly 50% over five years (FY2014-FY2018), as park visitation increased and as older concessions contracts were replaced by new contracts awarded under the 1998 act. NPS has stated that, under the 1998 act, "the Service has experienced increased competition for contracts, which has resulted in improved visitor services, higher revenue, and increased returns to the government." <2.5.3. GOMESA Mandatory Land Acquisition and State Assistance> The Gulf of Mexico Energy Security Act of 2006 (GOMESA) provides mandatory appropriations to the Land and Water Conservation Fund's (LWCF's) state assistance program, which is administered by NPS. The funding consists of a percentage of revenues from qualified offshore oil and gas leases in the Gulf of Mexico. GOMESA revenues for the LWCF are exclusively for the state grant program (rather than for land acquisition by the federal land management agencies). The GOMESA revenues are used for formula grants to states for outdoor recreation purposes, including recreational planning, acquiring recreational lands and waters, and developing outdoor recreation facilities. In FY2018, the LWCF state assistance program received $62.6 million under GOMESA. Historically, mandatory appropriations to the LWCF state assistance program under GOMESA had been relatively small compared to other NPS mandatory accounts. For instance, during the five-year period from FY2014 to FY2018, the funding constituted less than $1.5 million for each year except FY2018 ($62.6 million). GOMESA entered a new revenue-sharing phase in FY2017 often referred to as Phase II in which qualified leasing revenues from an expanded geographic area are shared with the LWCF (and with certain states). This has resulted in higher revenue shares than in GOMESA's first decade. Because the law specifies that revenues shall be shared with recipients in the fiscal year immediately following that in which they are received, FY2018 was the first fiscal year that reflected Phase II revenue sharing. <2.5.4. Donations> The NPS Donations account includes donated funds received by the Secretary of the Interior for the National Park System under the authority of the NPS Organic Act. The account does not represent all donations to NPS; for example, it excludes in-kind contributions of goods and services. Donations are tracked to assure that the funds are used for the purposes for which they were donated. In FY2018, the mandatory appropriation from donations was $47.1 million. Annual donations may fluctuate considerably from year to year. For FY2014-FY2018, donation amounts ranged from a low of $47.1 million in FY2018 to a high of $159.1 million in FY2015. Over the five-year period, donations averaged $84.1 million annually. Changes may be due to variations in the number and size of major gifts NPS receives in a given year. Some donations are tied to federal matching programs whose funding may fluctuate or expire. For instance, the Helium Stewardship Act (discussed in " Construction Helium Act ," below) provided mandatory appropriations to NPS in FY2018 and FY2019 that incentivized matching donations. <2.5.5. Annuity Benefits for U.S. Park Police> The Annuity Benefits for U.S. Park Police program reimburses the District of Columbia for benefit payments to U.S. Park Police annuitants that exceed deductions from salaries of active members of the U.S. Park Police. The program applies to Park Police hired before January 1, 1984. Payments are made to retirees, surviving spouses, and dependents. Since FY2002, the program has operated as a permanent appropriation; prior to that, payments were funded through NPS discretionary appropriations. In FY2018, mandatory appropriations for the annuity benefits were $44.3 million. The appropriations stayed relatively steady from FY2014 to FY2018. For example, FY2017 appropriations were $44.6 billion and FY2016 appropriations were $44.8 billion. Over time, payments from the program may be expected to gradually decline, as the program applies only to the annuitants of Park Police hired prior to 1984. <2.5.6. Transportation Systems Fund> NPS is authorized to collect fees for the use of public transportation services within the National Park System. All the fees must be used on costs associated with transportation services in the park unit in which they were collected. Currently, 19 park units have approval to collect transportation fees. In FY2018, NPS had $28.1 million in mandatory appropriations from transportation fees. Annual park visitation levels and other factors affect the collections. In addition, the number of parks approved to charge a transportation fee has grown, from 14 parks in FY2014 to the current 19. Annual collections generally grew over five years from $17.4 million in FY2014 to $28.1 million in FY2018, but the FY2018 amount was lower than FY2017 ($28.6 million). <2.5.7. Land and Water Conservation Fund Contract Authority> The Land and Water Conservation Fund Act of 1965 gives NPS contract authority for the acquisition of lands and waters, not to exceed $30 million of the money authorized to be appropriated each fiscal year. For FY2018, Congress provided NPS with LWCF contract authority of $28.0 million. In earlier years, including FY2014-FY2017, Congress had rescinded this contract authority in annual appropriations laws. <2.5.8. Operation and Maintenance of Quarters> NPS is authorized to provide employees with government-owned or government-leased housing when conditions of employment or availability of housing warrant this arrangement. The NPS also is authorized to provide employees with related facilities, such as furniture, equipment, and utilities. Under law, the NPS charges rental rates for housing and fees for facilities based on their "reasonable value" to the employees. The agency may collect the rents and charges through payroll deductions or other arrangements, and the collections are deposited into a special fund. NPS uses the funds to operate and maintain agency housing in units of the National Park System. For FY2018, NPS reported mandatory appropriations of $22.4 million for operation and maintenance of quarters. Over the five-year period from FY2014 to FY2018, the receipts were relatively steady, ranging from a low of $21.2 million in FY2016 to a high of $23.1 million in FY2014. <2.5.9. Construction Helium Act> The Helium Stewardship Act of 2013 authorized mandatory appropriations totaling $50 million over two fiscal years (FY2018 and FY2019) to pay the federal funding share of NPS challenge cost-share projects aimed at addressing deferred maintenance and correcting deficiencies in NPS infrastructure. The projects require at least a 50% match from a nonfederal funding source (including in-kind contributions). The act provided $20 million of the funding in FY2018 and $30 million in FY2019. After sequestration, NPS reported $18.7 million as the FY2018 mandatory appropriation. <2.5.10. Concessions Improvement Accounts> Some older NPS concessions contracts, developed under the Concessions Policy Act of 1965, require the concessioner to deposit a portion of gross receipts or a fixed sum of money in a separate bank account. With NPS approval, a concessioner may spend the funds for facilities that directly support the concession's visitor services. The FY2018 mandatory appropriation for the Concessions Improvement Accounts was $12.1 million. The amounts deposited in the Concessions Improvement Accounts have varied from year to year. Annual collections are affected by multiple factors, such as changes in numbers of park visitors, the gradual replacement of the Concessions Improvement Accounts with contracts using concessions franchise fees (described in " Concession Franchise Fees ," above), and other factors. From FY2014 to FY2018, annual appropriations ranged from a low of $3.5 million in FY2015 to a high of $12.1 million in FY2018. <2.5.11. Park Buildings Lease and Maintenance Fund> The Park Buildings Lease and Maintenance Fund consists of the rent money derived from leases on NPS buildings and other property under various statutes. The Secretary of the Interior is authorized to enter into a lease with any person or governmental entity for the use of buildings and property throughout the National Park System. Rental payments under these leases are deposited into a special account, which may be used for infrastructure needs of NPS units, including facility refurbishment, repair and replacement, and maintenance of the leased properties. Separately, NPS and other agencies are authorized to lease historic properties to any person or organization provided the lease will ensure the preservation of the property. NPS retains the proceeds of these leases to defray the costs of administration, maintenance, repair, and related expenses on the leased property or other properties on the National Register of Historic Places. In FY2018, NPS received $9.6 million in mandatory appropriations from the leasing of park properties. The amount was similar to FY2017 collections of $9.4 million but represented an increase of about 20% over FY2014 collections of $7.9 million. <2.5.12. Accounts with Less Than $5.0 Million> NPS had five additional accounts with mandatory appropriations of less than $5.0 million each in FY2018. These accounts collectively received $4.1 million in mandatory appropriations in FY2018, and they ranged from less than $0.1 million to $2.3 million, as shown in Table 4 . Two of the accounts expend fees collected from park users to support improvements at a range of parks; these are the Deed Restricted Parks Fee Program, which applies to park units where deed restrictions prohibit entrance fees and allows those parks to use other recreation fees for projects that enhance the visitor experience, and the Filming and Photography Special Use Fee Program, which provides for the collection of commercial filming and photography fees at park units and authorizes their use for purposes similar to those in the Recreational Fee Program. The other three accounts are specific to individual park units. The account for Payment for Tax Losses on Land Acquired for Grand Teton National Park uses certain visitor fees from Grand Teton and Yellowstone National Parks to compensate the state of Wyoming for tax losses due to federal land acquisitions for Grand Teton. The account for Delaware Water Gap, Route 209 Operations consists of fees from commercial vehicles at Delaware Water Gap National Recreation Area, which may be used for the operation and maintenance of U.S. Route 209 within the park boundaries. The account for Preservation, Birthplace of Abraham Lincoln consists of an endowment to preserve the Abraham Lincoln Birthplace National Historic Site in Kentucky.

Management of lands and resources is a principal mission for four federal agencies—the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), Forest Service (FS), and National Park Service (NPS). Most of the appropriations for these agencies come from discretionary appropriations enacted by Congress through annual appropriations laws. However, each of the agencies also receives mandatory appropriations under provisions of authorizing statutes enacted by Congress. Under these laws, the agencies spend money without further action by Congress. A number of issues arise for Congress in deciding the type of appropriations to provide and the terms and conditions of appropriations. One consideration is whether mandatory (rather than discretionary) appropriations best suit the purposes of the program or activity and Congress's role in authorizing, appropriating, and conducting oversight. Another question is how to fund any mandatory appropriation—namely, whether through general government collections (in the General Fund of the Treasury) or through a specific collection (e.g., from a particular activity or tax). A third issue is how to use the funds in a mandatory account, such as for agency activities, revenue sharing with state and local governments, or grant programs. In FY2018, the four agencies together had $3.17 billion in mandatory appropriations, which was 19% of their total discretionary and mandatory appropriations for the year ($16.36 billion). This funding was provided through 68 separate accounts, of which each agency had a dozen or more. The dollar amount of mandatory appropriations varied widely among the agencies (from $300.4 million for BLM to $1.46 billion for FWS), as did the percentage of each agency's total appropriations that was mandatory (from 10% for FS to 45% for FWS). (See the figure below.) BLM had 18 accounts with mandatory spending authority in FY2018. Of these, seven had mandatory appropriations each exceeding $5.0 million, with the largest account containing $157.8 million. The accounts typically are funded from agency receipts of various sorts. Most accounts support BLM activities, although several are compensation programs that share revenue with state or local governments. FY2018 total mandatory appropriations for BLM were $300.4 million, which was 18% of combined BLM mandatory and discretionary appropriations of $1.65 billion. FWS had 12 accounts with mandatory spending authority in FY2018. Of these, seven had mandatory appropriations each exceeding $5.0 million, and the largest had $829.1 million. Funding mechanisms for these accounts vary, including receipts; excise and fuel taxes; and fines, penalties, and forfeitures. Several accounts, including some of the largest, provide grants to states (and other entities); other accounts fund agency activities or provide compensation to counties. FY2018 total mandatory appropriations for FWS were $1.46 billion, which was 45% of combined FWS mandatory and discretionary appropriations of $3.27 billion. FS had 22 accounts with mandatory spending authority in FY2018. Of these, 10 had mandatory appropriations each exceeding $5.0 million, with the largest account containing $234.6 million. Agency receipts fund many accounts, although one is supplemented by the General Fund of the Treasury, as needed. Almost all accounts support agency activities, but one is for a compensation program. FY2018 total mandatory appropriations for FS were $705.1 million, which was nearly 10% of combined FS mandatory and discretionary appropriations of $7.29 billion. NPS had 16 accounts with mandatory spending authority in FY2018. Of these, 11 had mandatory appropriations each exceeding $5.0 million; the largest had $301.5 million. Funding sources for the accounts vary, including agency receipts, offshore energy development revenues, District of Columbia payments, the General Fund of the Treasury, donations, and an endowment. Almost all of the accounts support agency activities, but one is for recreation assistance grants to states and another is a compensation program. FY2018 total mandatory appropriations for NPS were $704.9 million, which was 17% of the combined NPS mandatory and discretionary total of $4.16 billion. Source: CRS, based on sources including FY2020 agency budget justifications, which contain FY2018 actual funding levels, and FY2018 appropriations laws, including Division G of P.L. 115-141 , P.L. 115-72 , and P.L. 115-123 and accompanying explanatory statements .

crs_R45995

crs_R45995_0

<1. Introduction> On June 4, 2019, the House passed the American Dream and Promise Act of 2019 ( H.R. 6 ) on a vote of 237 to 187. Title I of the bill, the Dream Act of 2019, would establish a process for certain unauthorized immigrants who entered the United States as children (known as unauthorized childhood arrivals) to obtain lawful permanent immigration status. This vote on H.R. 6 was one of several House and Senate floor votes since 2018 and the only successful one on legislation to grant some type of immigration relief to unauthorized childhood arrivals. As commonly used, the term "unauthorized childhood arrivals" encompasses both individuals who entered the United States unlawfully and individuals who entered legally but then lost legal status, by, for example, overstaying an authorized temporary period of stay. There is no single set of requirements that defines an unauthorized childhood arrival. Individual bills include their own criteria. This report considers House and Senate measures on unauthorized childhood arrivals that have seen legislative action since 2001, focusing in particular on legislation considered in the 115 th and 116 th Congresses. It also discusses the related Deferred Action for Childhood Arrivals (DACA) initiative and DACA-related data. The material is presented chronologically to trace the development of legislative proposals on unauthorized childhood arrivals and highlight the interplay between legislative action on these measures and developments related to the DACA initiative. <2. Original Dream Acts in the 107th and 108th Congresses> Legislation on unauthorized childhood arrivals dates to 2001. That year, the Development, Relief, and Education for Alien Minors (DREAM) Act ( S. 1291 ) was introduced in the 107 th Congress to provide a pathway to lawful permanent resident (LPR) status for eligible individuals. LPRs can live and work in the United States permanently and can become U.S. citizens through the naturalization provisions in the Immigration and Nationality Act (INA). In most cases, LPRs must reside in the United States for five years before they can naturalize. S. 1291 sought to provide immigration relief to unauthorized childhood arrivals who, like the larger unauthorized population, were typically unable to work legally and were subject to removal from the United States. Many policymakers viewed this subset of the unauthorized population more sympathetically than unauthorized immigrants on the whole because unauthorized childhood arrivals had arrived in the United States as children and were thus not generally seen as being responsible for their unlawful status. Although not all subsequent bills to grant LPR status to unauthorized childhood arrivals were entitled the "DREAM Act" and no subsequent bill included exactly the same provisions as S. 1291 , such legislation came to be known generally as the "Dream Act" and its intended beneficiaries as "Dreamers." In general, the potential beneficiaries of such bills did not have an avenue under the INA to become LPRs. The most common way for a foreign national to adjust status (become an LPR while in the United States) is through INA provisions that require the individual to be eligible for an immigrant visa and to have such a visa immediately available to him or her through the permanent immigration system. Individuals are most often eligible for immigrant visas based on a qualifying family relationship (to a U.S. citizen or LPR) or an employment tie. Among the other criteria to adjust status under these provisions, the individual must have been "inspected and admitted or paroled into the United States"; thus, individuals who entered the United States unlawfully are not eligible. In addition, with limited exceptions, an individual is not eligible for adjustment of status if he or she falls in a disqualified category, such as someone who engaged in unauthorized employment or "who has failed (other than through no fault of his own or for technical reasons) to maintain continuously a lawful status since entry into the United States." S. 1291 in the 107 th Congress and a subsequent DREAM Act bill ( S. 1545 ) introduced in the 108 th Congress were reported by the Senate Judiciary Committee. Neither bill saw further action. <2.1. Framework for Subsequent Proposals> S. 1545 , as reported in the 108 th Congress, contained the basic features of many later proposals to provide LPR status to unauthorized childhood arrivals. It applied to foreign nationals who were "inadmissible or deportable from the United States" this is how the bill described its target unauthorized population. The grounds of inadmissibility in the INA are the grounds on which a foreign national can be denied admission to the United States. The grounds of deportability are the grounds on which a foreign national can be removed from the United States. S. 1545 , as reported, proposed a two-stage process for eligible individuals to become LPRs. Criteria to obtain conditional status (stage 1) included continuous presence in the United States for five years prior to the date of the bill's enactment, initial entry into the United States before age 16, and satisfaction of specified educational requirements. Criteria to become a full-fledged LPR (stage 2) included completion of at least two years in a bachelor's or higher degree program or in the Armed Forces, subject to a hardship exception. At either stage, an applicant could have been disqualified if he or she was inadmissible to or deportable from the United States under specified grounds in the INA. S. 1545 would have granted qualifying childhood arrivals conditional LPR status. Describing that status, Department of Homeland Security (DHS) regulations state, "Unless otherwise specified, the rights, privileges, responsibilities and duties which apply to all other lawful permanent residents apply equally to conditional permanent residents, including but not limited to the right to apply for naturalization (if otherwise eligible)." Regarding naturalization, S. 1545 provided that the time spent in conditional LPR status would have counted toward the LPR residence requirement for naturalization. At the same time, it stated that an individual could only apply to naturalize once the conditional basis of his or her status were removed (and he or she was a full-fledged LPR). Other provisions in S. 1545 addressed eligibility for higher education benefits. The bill provided that individuals obtaining LPR status under its terms would only be eligible for certain forms of federal student aid under Title IV of the Higher Education Act of 1965, namely federal student loans, federal Work-Study programs, and services. Unlike LPRs generally, they would seemingly not have been eligible for grant aid (e.g., federal Pell Grants). At the same time, S. 1545 proposed to eliminate a provision enacted in 1996 as part of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) that restricts the ability of states to provide higher education benefits to certain unauthorized immigrants. Section 505 of IIRIRA reads: an alien who is not lawfully present in the United States shall not be eligible on the basis of residence within a State (or a political subdivision) for any postsecondary education benefit unless a citizen or national of the United States is eligible for such a benefit (in no less an amount, duration, and scope) without regard to whether the citizen or national is such a resident. <3. Legislative Activity in the 109th through the 111th Congresses> Beginning in the 109 th Congress, proposals on unauthorized childhood arrivals which had received action in earlier Congresses as stand-alone bills were incorporated into larger measures. In the 109 th through the 111 th Congresses, several measures to grant LPR status to unauthorized childhood arrivals were considered on the Senate and the House floors. <3.1. 109th Congress> In the 109 th Congress, the Senate passed a major immigration reform bill, the Comprehensive Immigration Reform Act of 2006 ( S. 2611 ), with a DREAM Act subtitle. The Senate vote was 62 to 36. The House did not consider the bill. The DREAM Act provisions in Senate-passed S. 2611 were similar to those in stand-alone S. 1545 , as reported in the 108 th Congress. Like the earlier bill, S. 2611 would have established a mechanism for an eligible unauthorized childhood arrival to become a conditional LPR and then, after meeting additional requirements, have the conditional basis of his or her status removed and become a full-fledged LPR. Applicants also would have had to clear inadmissibility and deportability criteria similar to those under S. 1545 . These DREAM Act provisions were separate from other legalization provisions in S. 2611 , and applicants under the DREAM Act provisions would not have been subject to the same requirements as applicants under the general legalization provisions. This more generous treatment of unauthorized childhood arrivals reflected a widely held belief that they were different and less responsible for their unlawful status than other unauthorized immigrants. Although the DREAM Act provisions in Senate-passed S. 2611 and S. 1545 , as reported, were similar, there were some differences. For example, under S. 1545 , as noted, the noneducational route through which a conditional LPR could become a full-fledged LPR required service in the Armed Forces. The comparable route under Senate-passed S. 2611 encompassed service in the broader uniformed services. <3.2. 110th Congress> In the 110 th Congress, there was an unsuccessful vote in the Senate to invoke cloture on a bill to provide for comprehensive immigration reform ( S. 1639 ) that included a DREAM Act subtitle among other legalization provisions. The vote was 46 to 53. S. 1639 differed from earlier bills on unauthorized childhood arrivals in notable ways. For example, unlike S. 2611 , the immigration reform bill passed by the Senate in the 109 th Congress, S. 1639 's DREAM Act provisions were tied to other legalization provisions in the bill. Under S. 1639 , the first step to LPR status for an unauthorized childhood arrival was the same as for any unauthorized immigrant: to obtain temporary legal status under a new "Z" nonimmigrant category. Among the eligibility requirements for Z status were continuous presence in the United States since a specified date and clearance of inadmissibility and ineligibility criteria that were stricter than under S. 2611 . Other requirements for obtaining Z status under S. 1639 included submission of biometric data for security and law enforcement background checks and satisfaction of any applicable federal tax liabilities. Z nonimmigrant status would have been granted for an initial period of four years and could have been extended in four-year increments. Applicants for extensions would have had to satisfy, among other criteria, escalating requirements concerning knowledge of the English language and U.S. civics, unless they qualified for an exception. These requirements were based on the English and civics requirements for naturalization. S. 1639 would have established different pathways to LPR status for Z nonimmigrants. A DREAM Act pathway to LPR status, which would have been quicker than the standard pathway provided in the bill, would have been available to Z nonimmigrants who met an additional set of requirements. These included being under age 30 on the date of enactment, being under age 16 at the time of initial U.S. entry, and having completed at least two years in either a bachelor's or higher degree program or the uniformed services. The "under age 30" requirement was new; earlier bills receiving action did not include maximum age provisions. S. 1639 would have deemed individuals obtaining LPR status under its DREAM Act pathway to meet the LPR residence requirement for naturalization eight years after the date of enactment. S. 1639 also addressed eligibility for higher education benefits. As under the earlier bills discussed above, individuals obtaining LPR status under S. 1639 's DREAM Act pathway would have been eligible for federal student loans, federal Work-Study programs, and services, but seemingly not grant aid. Unlike these other bills, S. 1639 would not have fully repealed the IIRIRA Section 505 restriction on state provision of post-secondary educational benefits, but would have rendered it ineffective for Z nonimmigrants. Other legislation on unauthorized childhood arrivals considered in the 110 th Congress included another major immigration reform bill ( S. 1348 ). The Senate voted against invoking cloture on both S. 1348 and a substitute amendment to the bill. These votes occurred prior to the introduction of S. 1639 . After the unsuccessful cloture vote on S. 1639 , the Senate considered a stand-alone DREAM Act bill ( S. 2205 ). It did not invoke cloture on the motion to proceed to the bill, by a vote of 52 to 44. This vote on S. 2205 brought to the fore competing views among supporters of providing LPR status to unauthorized childhood arrivals about the relationship between that issue and other components of immigration reform. Some supporters pressed for passage of the stand-alone bill arguing that the situation of unauthorized childhood arrivals was urgent. Another view held, however, that enacting a pathway to LPR status for unauthorized childhood arrivals in a narrow bill would hurt the prospects of achieving broader reform (including more controversial proposals for the legalization of other unauthorized immigrants). <3.3. 111th Congress> In the 111 th Congress, the House approved a DREAM Act amendment to an unrelated bill, the Removal Clarification Act of 2010 ( H.R. 5281 ) on a vote of 216 to 198. The Senate rejected a motion to invoke cloture on a motion to agree to the House-passed DREAM Act amendment to H.R. 5281 , by a vote of 55 to 41. This House-passed version of the DREAM Act would have established a three-stage process for individuals who were inadmissible or deportable from the United States to obtain LPR status. In stage 1, as in many previous bills, a successful applicant would have been granted conditional status. This proposal, however, would have granted conditional status in the form of conditional nonimmigrant status, which is not an existing status under immigration law. An individual would have applied in stage 2 to have his or her conditional nonimmigrant status extended, and in stage 3 to be granted LPR status. Under this DREAM Act amendment, an individual who became an LPR could naturalize after three years in LPR status. The DREAM Act amendment to H.R. 5281 included eligibility requirements concerning continuous presence, age at entry, and educational attainment, as well as inadmissibility and ineligibility criteria. It also included some of the same types of requirements as S. 1639 in the 110 th Congress pertaining to maximum age, submission of biometric data, satisfaction of any applicable federal tax liability, and knowledge of English and U.S. civics although the specific requirements were not necessarily the same, and did not necessarily apply at the same stage of the legalization process, in the two measures. Unlike earlier bills receiving action, the House-passed amendment would have established "surcharges" on applications for conditional status. While S. 1639 would have imposed penalty fees on applications for Z status, that bill would have made these fees inapplicable or refundable in the case of applicants who met its DREAM Act criteria. Like the DREAM Act provisions in S. 1639 and earlier bills receiving action, the House-passed DREAM Act amendment would have made individuals who obtained conditional nonimmigrant or LPR status under its terms eligible for federal student aid in the form of federal student loans, federal Work-Study programs, and services, but seemingly not grant aid. Unlike earlier bills receiving action, the House-passed measure contained no IIRIRA Section 505 repeal language. <4. Establishment of DACA> On June 15, 2012, DHS issued a memorandum announcing the DACA initiative. The memorandum stated that certain individuals who were brought to the United States as children and met other criteria would be considered for deferred action for two years, subject to renewal. DHS has described deferred action as "a use of prosecutorial discretion to defer removal action against an individual for a certain period of time." In remarks delivered that same day, President Barack Obama called on Congress to pass DREAM Act legislation, citing in particular the House-passed bill in the 111 th Congress. He indicated that "in the absence of any immigration action from Congress to fix our broken immigration system," his Administration had tried "to focus our immigration enforcement resources in the right places." He portrayed the DACA initiative as an extension of those efforts, stating that "[e]ffective immediately, the Department of Homeland Security is taking steps to lift the shadow of deportation from these young people." President Obama made clear that DACA relief was not a permanent solution. Instead, he characterized it as "a temporary stopgap measure." The eligibility criteria for an initial two-year grant of DACA were broadly similar to those in earlie r DREAM Act bills. DHS's U.S. Citizenship a nd Immigration Services (USCIS), which administers DACA, published the eligibility criteria for an i ni tial DACA grant and a renewal on its website . The criteria for an initial DACA grant were (1) under age 31 on June 15, 2012; (2) under age 16 at time of entry into the United States; (3 ) continuous ly resident in the Unite d States since June 15, 20 07 ; (4 ) physically present in United S tates on June 15, 2012, and at the time of requesting DACA ; (5) no t in lawful status on June 15, 2012; (6) in school, graduated from high school or obtained general education development certificate, or honorably d ischarged from the Armed Forces; and (7 ) not convicted of a felony, a significant misdemeanor, or three or more misdemeanors, and not otherwise a threat to national se curity or public safety . In addition, with specified exceptions, an individual had to be a t least age 15 to request DACA. Individuals granted deferred action could receive employment authorization. According to USCIS, " Under existing regulations, an individual whose case has been deferred is eligible to receive employment authorization for the period of deferred action, prov ided he or she can demonstrate ' an ec onomic necessity for employment ' . " To request DACA from USCIS, an applicant had to submit Form I-821D, " Consideration of Deferre d Action for Childhood Arrivals " ; an application for employment authorization (Form I-765) and a related worksheet (Form I-765WS) ; and required fees. Currently, as discussed later in this report, individuals who have never been granted DACA cannot submit initial requests. Individuals who have been granted DACA in the past, however, continue to be able to submit requests. To be considered for a two-year renewal, a DACA recipient must satisfy the following criteria: (1) did not depart from the United States on or after August 15, 2012, without first obtaining permission to travel, (2) has continuously resided in the United States since submitting his or her latest approved DACA request, and (3) has not been convicted of a felony, a significant misdemeanor, or three or more misdemeanors, and is not a threat to national security or public safety. To request a renewal of DACA, an individual must submit the same forms and fees as for an initial request. As of the date of this report, these fees total $495. <5. Legislative Activity in the 113th Congresses> The next significant legislative developments related to unauthorized childhood arrivals occurred in the 113 th Congress when the Senate approved a major immigration reform bill with DREAM Act provisions. The bill, the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), was passed on a 68-32 vote. The House did not consider S. 744 . S. 744 proposed to establish a general legalization program for individuals in the United States who were not in nonimmigrant status or other specified lawful status and a special DREAM Act pathway to LPR status for certain aliens who had entered the country as children. Under S. 744 , unauthorized childhood arrivals, like other unauthorized immigrants, would first have applied for a newly created status registered provisional immigrant (RPI) status. The requirements for RPI status included continuous presence in the United States since a specified date, satisfaction of any applicable federal tax liability, and submission of biometric and biographic data for national security and law enforcement clearances. RPI status would have been granted for an initial period of six years and could have been extended in six-year increments. Applicants for RPI status would have been subject to specified inadmissibility and ineligibility criteria. Under S. 744 , DHS could have adopted streamlined RPI procedures for DACA recipients. It could have granted RPI status to a DACA recipient upon completion of renewed national security and law enforcement clearances unless the agency determined that the individual had engaged in conduct making him or her ineligible for RPI status. S. 744 would have established a special DREAM Act pathway to LPR status for RPIs who had been in RPI status for at least five years, had initially entered the United States when they were under age 16, and, subject to a hardship exception, had completed either two years of higher education or four years of service in the uniformed services. Such individuals also would have had to submit biometric and biographic data for national security and law enforcement background checks and would have had to meet the English language and civics requirements for naturalization, unless exempted. S. 744 would have authorized DHS to adopt streamlined procedures for DACA recipients to obtain LPR status. With respect to naturalization, an alien granted LPR status under the DREAM Act provisions in S. 744 would have been considered to be an LPR (and therefore accumulating time toward the residency requirement for naturalization) during the period in RPI status. In most cases, however, an alien could not have applied for naturalization while in RPI status. S. 744 would have placed restrictions on federal student aid under Title IV of the Higher Education Act for RPIs who had entered the United States before age 16. This group would only have been eligible for federal student loans, federal Work-Study programs, and services. In addition, the bill would have repealed Section 505 of IIRIRA, which, as discussed, restricts the provision of postsecondary educational benefits for aliens who are not lawfully present. <6. DACA Since 2017> On September 5, 2017, Attorney General Jeff Sessions announced that DACA was being terminated. A related memorandum released by DHS the same day rescinded the 2012 memorandum that established the initiative. As part of the rescission, DHS had planned to "execute a wind-down" of DACA, under which no new initial DACA requests would have been accepted after September 5, 2017, and no new renewal requests would have been accepted after October 5, 2017. This wind-down did not proceed as planned, however, because DACA recipients and others filed federal lawsuits challenging the legality of the rescission. Under rulings in these cases, to date, individuals who have been granted DACA in the past continue to be able to submit DACA requests. Individuals who have never been granted DACA cannot submit new initial requests. The U.S. Supreme Court is scheduled to hear arguments on the DACA rescission on November 12, 2019. Individuals who have been granted DACA in the past and whose DACA grants have expired or been terminated are still able to apply for a renewal. As of August 1, 2019, USCIS has reinstated its past DACA "late renewal policy," under which an individual whose previous DACA grant expired more than one year ago or whose previous DACA grant was terminated must submit an initial DACA request rather than a renewal request. According to USCIS data on the DACA population, there were approximately 689,000 active DACA recipients as of September 4, 2017, and approximately 669,080 active DACA recipients as of April 30, 2019. Regarding the latter group, about 80% were born in Mexico, 53% were female, and the median age was 25. In notes accompanying the September 4, 2017, data tables, USCIS indicated that the total number of individuals who had ever been granted DACA as of that date was approximately 800,000. This number excluded individuals whose initial grants of DACA were later terminated. Of those 800,000 individuals, USCIS reported that about 40,000 had become LPRs and about 70,000 had either failed to apply to renew their DACA grants or had their renewal applications denied. As of July 31, 2019, according to USCIS data, the total number of individuals who had ever been granted DACA was 822,063. This number excluded individuals whose initial grants of DACA were later terminated. Of those 822,063 individuals, 73,043 had become LPRs and 4,448 had become citizens. These data on DACA recipients can be compared with estimates of the DACA-eligible population. According to an analysis by the Migration Policy Institute (MPI), an estimated 1,307,000 unauthorized individuals were immediately eligible for DACA in 2016 based on the eligibility requirements for an initial DACA grant that MPI was able to model. In addition, an estimated 398,000 met the age, residence, and immigration status criteria but not the educational requirements. MPI updated its estimates of the DACA-eligible population as of 2018 based on the original DACA eligibility requirements and subject to the same model limitations as the 2016 estimates. It estimated that, as of 2018, 1,302,000 individuals met the DACA eligibility requirements and an additional 356,000 met the age, residence, and immigration status criteria but not the educational requirements. <7. Legislative Activity in the 115th and 116th Congresses> In the fall of 2017, following the DACA rescission announcement, President Donald Trump and several Members of Congress discussed a possible deal on unauthorized childhood arrivals. Initially, these talks focused on a package combining provisions to "enshrine the protections of DACA into law" with border security provisions. Other immigration issues were subsequently introduced into the discussion, and in January 2018 the White House released its "Framework on Immigration Reform & Border Security." This proposal called for legal status for DACA-eligible individuals as well as enhancements to border security and interior immigration enforcement and changes to the permanent immigration system. In the 115 th and 116 th Congresses, the Senate and the House have considered measures containing provisions to grant legal status to DACA recipients and unauthorized childhood arrivals along with other immigration provisions. <7.1. 115th Congress> In 2018, both the Senate and the House considered immigration legislation that contained language on unauthorized childhood arrivals. A greater number of proposals to provide immigration relief to this population received floor consideration in the 115 th Congress than in any prior Congress. Neither chamber passed any of these measures. <7.1.1. Senate Amendments to H.R. 2579> In February 2018, the Senate considered three immigration proposals with language on unauthorized childhood arrivals as floor amendments to an unrelated bill, the Broader Options for Americans Act ( H.R. 2579 ). The Senate rejected motions to invoke cloture on all three amendments. <7.1.1.1. S.Amdt. 1955> The Senate considered provisions on unauthorized childhood arrivals as Subtitle A of S.Amdt. 1955 , the Uniting and Securing America (USA) Act of 2018. Subtitle A was substantively identical to Title I of two bills with the same USA Act name, as introduced in the 115 th Congress S. 2367 and H.R. 4796 . S.Amdt. 1955 would have established a mechanism for certain childhood arrivals who were inadmissible to or deportable from the United States or were in temporary protected status (TPS) to become LPRs in most cases through a two-stage process. Applicants would have been considered for conditional LPR status in stage 1. To receive such status, an applicant would have had to meet requirements including continuous presence in the United States since December 31, 2013; initial U.S. entry before age 18; no inadmissibility under specified grounds in the INA and no other specified ineligibilities; and either college admission, acquisition of a high school diploma or comparable credential, or enrollment in secondary school or a comparable educational program. S.Amdt. 1955 would have directed DHS to grant conditional LPR status to a DACA recipient unless the individual had subsequently engaged in conduct that would make him or her ineligible for DACA. Applicants also would have had to submit biometric and biographic data for security and law enforcement background checks. Conditional LPR status would have been valid for eight years. In stage 2, a conditional LPR would have had to meet a second set of requirements to have the conditional basis of his or her status removed and become a full-fledged LPR. Among these requirements were achievement of one of the following, subject to a hardship exception: (1) attainment of a college degree, completion of at least two years in a bachelor's or higher degree program, or completion of at least two years in a postsecondary vocational program, (2) service in the uniformed services for the obligatory period, or (3) employment for at least three years and at least 80% of the time the alien had valid employment authorization. The other stage 2 requirements included submission of biometric and biographic data for security and law enforcement background checks, continued clearance of the inadmissibility and ineligibility criteria for conditional LPR status, and, unless subject to an exception due to a disability, satisfaction of the English language and U.S. civics requirements for naturalization. Under S.Amdt. 1955 , a conditional LPR could have applied to have the condition on his or her status removed at any time after meeting the stage 2 requirements. The time spent in conditional status would have counted as time in LPR status for purposes of naturalization, but the individual could not have applied for naturalization while in conditional status. In addition, the bill would have provided that an applicant meeting all the stage 1 and stage 2 requirements at the time of submitting his or her initial application would have been granted full-fledged LPR status directly (without first being granted conditional status). Earlier bills receiving floor action did not include such a provision. Regarding postsecondary education, S.Amdt. 1955 would have repealed Section 505 of IIRIRA. The measure did not include any language concerning federal student aid. On February 15, 2018, the Senate voted (52 to 47) not to invoke cloture on S.Amdt. 1955 . <7.1.1.2. S.Amdt. 1958> S.Amdt. 1958 , the Immigration Security and Opportunity Act, would have established a two-stage pathway to LPR status for certain childhood arrivals who were inadmissible to or deportable from the United States. It incorporated some eligibility requirements for applicants at both stages that were not included in S.Amdt. 1955 . Under S.Amdt. 1958 , to obtain conditional LPR status in stage 1 an individual would have had to either be a DACA recipient or meet a set of requirements. For a DACA recipient to qualify, he or she could not have engaged in any conduct since being granted DACA that would have made the individual ineligible for DACA protection. Requirements applicable to a non-DACA recipient included continuous presence in the United States since June 15, 2012; initial U.S. entry before age 18; no inadmissibility under specified grounds in the INA and no other specified ineligibilities; and either satisfaction of educational requirements like those under S.Amdt. 1955 , or enlistment or service in the Armed Forces. In addition, a non-DACA recipient would have had to meet a maximum age requirement having a birthdate after June 15, 1974 and to have satisfied any applicable federal tax liability. All stage 1 applicants also would have had to submit biometric and biographic data for security and law enforcement background checks. Conditional LPR status under S.Amdt. 1958 would have been valid for seven years. To have the conditional basis of his or her status removed and become a full-fledged LPR, a conditional LPR would have had to meet a second set of requirements. These stage 2 requirements included satisfaction of one of the following: (1) acquisition of a college degree or completion of at least two years in a program for a bachelor's or higher degree, (2) service in the uniformed services for at least two years, or (3) employment for at least three years and at least 75% of the time the alien had valid employment authorization. Other requirements included submission of biometric and biographic data for security and law enforcement background checks, continued clearance of the inadmissibility and ineligibility criteria for conditional LPR status, satisfaction of the English language and civics requirements for naturalization, and satisfaction of any applicable federal tax liability. Under S.Amdt. 1958 , the time spent in conditional status would have counted as time in LPR status for purposes of naturalization. In general, however, beneficiaries could not have been naturalized until 12 years after they had received conditional status. This period could have been reduced by up to two years for DACA recipients. S.Amdt. 1958 also would have limited the ability of the parents of its beneficiaries to obtain LPR status in the United States. Earlier measures receiving legislative action did not include such restrictions. S.Amdt. 1958 would have prevented a parent from obtaining LPR status based on an immigrant petition filed by a child who had received conditional permanent resident status under the bill if the parent had assisted in the child's unlawful entry into the United States. The amendment did not include any language on federal student aid or Section 505 of IIRIRA. On February 15, 2018, the Senate voted (54 to 45) not to invoke cloture on S.Amdt. 1958 . <7.1.1.3. S.Amdt. 1959> Provisions on unauthorized childhood arrivals comprised Title III of S.Amdt. 1959 , the SECURE and SUCCEED Act. Title III, named the SUCCEED Act, was broadly similar to a Senate bill of the same name ( S. 1852 ), as introduced in the 115 th Congress, despite differences between the two measures. S.Amdt. 1959 would have established a three-stage process for unauthorized childhood arrivals to obtain LPR status. Applicants who met an initial set of requirements would have been granted conditional temporary resident status (rather than conditional LPR status, as under the other two Senate amendments). These requirements, which incorporated some of the initial criteria for DACA, included continuous presence in the United States since June 15, 2012; initial U.S. entry before age 16; a birthdate after June 15, 1981; not being in lawful status on June 15, 2012; no inadmissibility or deportability under specified grounds in the INA and no other specified ineligibilities; and educational or military requirements based on the applicant's age on the date of enactment. Those under age 18 would have had to be in school. Those age 18 and older would have had to have earned a high school diploma or comparable credential, been admitted to college, or served or enlisted in the Armed Forces. As under one or both of the other amendments discussed, all stage 1 applicants would also have needed to submit biometric and biographic data for security and law enforcement background checks and to satisfy any applicable federal tax liability. In addition, S.Amdt. 1959 included some requirements to obtain conditional status that were not found in the other amendments. Among them, an applicant age 18 or older would have had to acknowledge being notified that if he or she violated a term of conditional temporary resident status, he or she would be ineligible for any immigration relief or benefits, with limited exceptions. Conditional temporary resident status would have been valid for an initial period of seven years or until the alien turned age 18, if longer. Under S.Amdt. 1959 , an alien's initial period of conditional temporary residence would have been extended for five years if the alien met additional requirements. These included satisfying one of the following: (1) college graduation or college attendance for at least eight semesters, (2) service in the Armed Forces for at least three years, or (3) a combination of college attendance, military service, and/or employment, as specified, for at least four years. After seven years in conditional temporary resident status, an alien could have applied for LPR status subject to another set of requirements. These requirements included continued compliance with the requirements for conditional temporary resident status, submission of biometric and biographic data for security and law enforcement background checks, satisfaction of the English language and civics requirements for naturalization (unless exempt due to a disability), and payment of any applicable federal tax liability. Like S.Amdt. 1958 , S.Amdt. 1959 would have placed limitations on the ability of its beneficiaries to naturalize and the ability of the family members of its beneficiaries to obtain lawful immigration status under existing law. The provisions in S.Amdt. 1959 , however, were more restrictive than those in S.Amdt. 1958 . An individual would have had to wait at least seven years after being granted LPR status to apply for naturalization. S.Amdt. 1959 would also have provided that a parent or other family member of an alien granted conditional temporary resident status or LPR status could not have gained any status under the immigration laws based on a parental or other family relationship. The amendment did not include any language on federal student aid or Section 505 of IIRIRA. On February 15, 2018, the Senate voted (39 to 60) not to invoke cloture on S.Amdt. 1959 . <7.1.2. House Bills> In June 2018, the House considered two major immigration reform bills with provisions on unauthorized childhood arrivals. Notably, unlike the Senate amendments discussed above and the bills considered in prior Congresses, these bills would not have established new mechanisms for unauthorized childhood arrivals to apply for LPR status on their own behalf. One bill ( H.R. 4760 ), which would have applied only to DACA recipients, would have provided eligible individuals with a renewable temporary status. The other ( H.R. 6136 ) would have enabled eligible individuals to adjust to LPR status in the United States if they were otherwise eligible for immigrant visas. Neither bill passed. <7.1.2.1. H.R. 4760> The Securing America's Future Act of 2018 ( H.R. 4760 ) would have established a process for certain unauthorized childhood arrivals to obtain a new temporary immigration status contingent nonimmigrant (CNI) status. To be eligible for CNI status, individuals would have had to have on the bill's date of enactment valid work authorization that was issued pursuant to the DACA initiative (thus, they would have needed to be current DACA recipients). Among the other eligibility criteria for CNI status, individuals would have had to be enrolled in and attending an educational institution full-time, or to have earned a high school diploma, General Educational Development certificate, or high school equivalency certificate. Applicants for CNI status also would have had to submit biometric and biographic data for security and law enforcement checks and clear specified INA inadmissibility and deportability criteria and other specified ineligibilities. The latter ineligibilities were stricter than those under the Senate amendments considered in the 115 th Congress and earlier bills on unauthorized childhood arrivals. Applicants also would have had to pay a border security fee. CNI status would have been granted for a period of three years and could have been extended in three-year increments. Contingent nonimmigrants would have been eligible for employment authorization and could have traveled outside the United States and been permitted to return. H.R. 4760 would not have provided a pathway to LPR status. On June 21, 2018, the House voted (193 to 231) not to pass H.R. 4760 . <7.1.2.2. H.R. 6136> Like H.R. 4760 , the related Border Security and Immigration Reform Act of 2018 ( H.R. 6136 ) would have established a process for certain unauthorized childhood arrivals to obtain CNI status. This bill included many of the same eligibility and ineligibility criteria for CNI status as H.R. 4760 , but it would not have been as restrictive. For example, it would not have been limited to individuals who had DACA. Among other, specific differences between the criteria in the two bills, H.R. 4760 would have required applicants for CNI status to be under age 31 on June 15, 2012, which is a requirement for DACA, and also to be under age 31 at the time of filing the CNI application. H.R. 6136 would have required applicants to meet the former age requirement but not the latter. Under H.R. 6136 , CNI status would have been granted for a period of six years and could have been extended in six-year increments. Contingent nonimmigrants would have been eligible for employment authorization and could have traveled outside the United States and been permitted to return. In a key difference from H.R. 4760 , H.R. 6136 would have created a means for CNIs who met certain criteria to become LPRs through the INA adjustment of status provisions. As mentioned in the earlier discussion of the original Dream Act proposals, foreign nationals in the United States who have immigrant visas immediately available to them (based, for example, on an immigrant visa petition filed by a qualified family member) and meet other criteria can become LPRs without having to leave the country. However, in order to adjust to LPR status through these provisions, individuals (except for certain battered immigrants) must have been "inspected and admitted or paroled into the United States." They also must be admissible to the United States for permanent residence under the grounds enumerated in the INA. In addition, with limited exceptions, these adjustment of status provisions are inapplicable to an individual who has engaged in unauthorized employment or "who has failed (other than through no fault of his own or for technical reasons) to maintain continuously a lawful status since entry into the United States." H.R. 6136 would have provided that in applying the INA adjustment provisions to a CNI who has been in that status for five years, the CNI would have been considered to be inspected and admitted into the United States. It also would have provided that in making determinations about the CNI's admissibility to the United States, specified grounds of inadmissibility, including grounds related to unlawful presence and lack of proper documentation, would not have applied. The bill, however, did not explicitly address other disqualifications under the adjustment of status provisions, such as for unauthorized employment. The limited permanent immigration relief offered by H.R. 6136 can be seen as occupying a middle ground between H.R. 4760 's renewable temporary status and the special pathways to permanent resident status proposed under the Senate amendments. On June 27, 2018, the House voted (121 to 301) not to pass H.R. 6136 . <7.2. 116th Congress> As of the date of this report, legislative activity in the 116 th Congress on unauthorized childhood arrivals has occurred in the House in connection with the American Dream and Promise Act of 2019 ( H.R. 6 ). This bill contains a Title I (Dream Act) on unauthorized childhood arrivals and a Title II (American Promise Act) on nationals of certain countries designated for TPS or deferred enforced departure (DED). Unlike other bills on unauthorized childhood arrivals that have seen floor action in recent Congresses H.R. 6 does not address an array of immigration issues. The House passed H.R. 6 on June 4, 2019, by a vote of 237 to 187. The Dream Act title of H.R. 6 would establish a mechanism for certain childhood arrivals who are inadmissible or deportable from the United States or who have TPS or are covered by a grant of DED to become LPRs in most cases through a two-stage process. To obtain conditional LPR status in stage 1, an individual would need to meet a set of requirements, including continuous presence in the United States for at least four years since the date of enactment, initial U.S. entry before age 18, no inadmissibility under specified grounds in the INA and no other specified ineligibilities, and satisfaction of educational requirements. These educational requirements could be satisfied in various ways, including, as in some earlier bills, by attainment of a high school diploma or comparable credential or by enrollment in secondary school or a program to obtain a high school diploma or comparable credential. They also could be satisfied by obtaining a credential from a career and technical education school that provides education at the secondary level. DACA recipients who meet the requirements for a DACA renewal, as in effect in January 2017, would be subject to streamlined application procedures to be established by DHS. All applicants would need to submit biometric and biographic data for security and law enforcement background checks. Conditional LPR status would be valid for 10 years. In stage 2, a conditional LPR would have to meet a second set of requirements to have the conditional basis of his or her status removed and become a full-fledged LPR. Among these requirements are achievement of one of the following, subject to a hardship exception: (1) attainment of a college degree, completion of at least two years in a program for a bachelor's or higher degree, or acquisition of a recognized postsecondary credential from an area career and technical education school; (2) service in the uniformed services for at least two years; or (3) earned income for at least three years and at least 75% of the time the alien had valid employment authorization. The other stage 2 requirements include submission of biometric and biographic data for security and law enforcement background checks, continued clearance of the inadmissibility and ineligibility criteria for conditional LPR status, and satisfaction of the English language and U.S. civics requirements for naturalization, subject to an exception due to disability. Under H.R. 6 , a conditional LPR could apply to have the condition on his or her status removed at any time after meeting the stage 2 requirements. The time spent in conditional status would count as time in LPR status for purposes of naturalization, but the individual could not apply for naturalization while in conditional status. In addition, like S.Amdt. 1955 in the 115 th Congress, the bill would provide that an applicant meeting all the stage 1 and stage 2 requirements at the time of submitting his or her initial application would be granted full-fledged LPR status directly (without first being granted conditional status). Regarding postsecondary education, H.R. 6 would not place any restrictions on its beneficiaries' eligibility for federal student aid and would not repeal Section 505 of IIRIRA. <8. Conclusion> The Trump Administration's efforts to end the DACA program have focused renewed attention on the issue of unauthorized childhood arrivals. Passage of H.R. 6 in the House in the 116 th Congress can be seen as a result of this renewed attention. This bill is the latest of several measures to grant LPR status to unauthorized childhood arrivals, and the first in more than five years, to have passed one chamber. The question remains, however, if this bill or another measure to grant legal status to DACA recipients or unauthorized childhood arrivals will be enacted into law.

On June 4, 2019, the House passed the American Dream and Promise Act of 2019 ( H.R. 6 ) on a vote of 237 to 187. Title I of the bill, the Dream Act of 2019, would establish a process for certain unauthorized immigrants who entered the United States as children (known as unauthorized childhood arrivals) to obtain lawful permanent immigration status. This vote on H.R. 6 was the latest in a line of House and Senate floor votes on legislation to grant some type of immigration relief to unauthorized childhood arrivals. As commonly used, the term "unauthorized childhood arrivals" encompasses both individuals who entered the United States unlawfully, and individuals who entered legally but then lost legal status by violating the terms of a temporary visa. There is no single set of requirements that defines an unauthorized childhood arrival. Individual bills include their own criteria. Legislation on unauthorized childhood arrivals dates to 2001. The earliest bills, which received Senate committee action in the 107 th and 108 th Congresses, only addressed unauthorized childhood arrivals. More recent proposals receiving legislative action have combined provisions on unauthorized childhood arrivals with other immigration provisions—in some cases, these have been major bills to reform the immigration system, such as Senate-passed S. 744 in the 113 th Congress. None of these bills have been enacted into law. Most measures on unauthorized childhood arrivals that have seen legislative action have proposed mechanisms for eligible individuals to become lawful permanent residents (LPRs), typically through a two-stage process. Criteria to obtain a conditional or temporary status (stage 1) commonly include continuous presence in the United States for a minimum number of years prior to the date of the bill's enactment, initial entry into the United States as a minor, and satisfaction of specified educational requirements. Criteria to become a full-fledged LPR (stage 2) typically include satisfaction of additional educational requirements or service in the Armed Forces, or, in some cases, employment. Proposals to grant legal immigration status to unauthorized childhood arrivals also require applicants to clear criminal and security-related ineligibility criteria. In June 2012, following unsuccessful efforts in the 111 th Congress to enact legislation to grant LPR status to unauthorized childhood arrivals, the Department of Homeland Security (DHS) announced the Deferred Action for Childhood Arrivals (DACA) initiative. Under this initiative, eligible unauthorized childhood arrivals could receive renewable two-year protection from removal and work authorization. The eligibility criteria for an initial grant of DACA were broadly similar to those in earlier bills on unauthorized childhood arrivals and included continuous residence in the Unite d States since June 2007 , initial U.S. entry before age 16 , and satisfaction of educational requirements or service in the Armed Forces. In September 2017, Attorney General Jeff Sessions announced that DACA was being terminated. Due to court rulings to date, however, past recipients continue to be able to request DACA. The U.S. Supreme Court is scheduled to hear arguments on the DACA rescission on November 12, 2019. According to USCIS data, there were approximately 669,080 active DACA recipients as of April 30, 2019, and the total number of individuals who had ever been granted DACA was 822,063 as of July 31, 2019. These DACA recipient numbers can be compared to estimates of the DACA-eligible population. The Migration Policy Institute has estimated that as of 2018, 1,302,000 individuals met the original DACA eligibility requirements and an additional 356,000 met the age, residence, and immigration status criteria but not the educational requirements. It remains to be seen whether H.R. 6 , as passed by the House, or another measure to grant legal status to unauthorized childhood arrivals will be enacted into law.

crs_R45978

crs_R45978_0

<1. Introduction> Congress plays an overarching role in shaping outdoor recreation throughout the nation through legislation and oversight. Congress's role in outdoor recreation resources, policies, and programs often involves the agencies that manage recreation resources on federal lands and waters. However, Congress also has supported crosscutting legislative, analytic, and planning efforts dedicated to outdoor recreation broadly, and it has established programs that facilitate recreation on nonfederal lands. Legislation, hearings, and congressional reports have indicated the significance of outdoor recreation economic activity as a decisionmaking consideration in many contexts, not just those involving federal lands. As Congress continues to debate outdoor recreation issues including provision of federal resources, planning efforts, and funding data on the size, distribution, and relative importance of the outdoor recreation economy may inform these debates. <2. Outdoor Recreation Jobs and Economic Impact Act> In April 2016, the Secretary of the Interior announced that the Department of the Interior would sign a memorandum of understanding with the Department of Commerce to undertake a feasibility study to analyze outdoor recreation's impact on the U.S. economy. The Secretary noted that "credible data on the tangible economic benefits of public lands" would be a valuable resource for stakeholders, including Congress, and that the study would count the contributions of the outdoor recreation economy in a "comprehensive and impartial" way. Later that year, Congress explicitly authorized these efforts through passage of the Outdoor Recreation Jobs and Economic Impact Act. In addition to ensuring the availability of economic data on outdoor recreation, the act ensured methodological uniformity with other statistical activities of the Bureau of Economic Analysis (BEA) that analyze the economic impact of private industries. The act directed the Secretary of Commerce, acting through BEA, to assess and analyze the outdoor recreation economy of the United States and its contributions to the economy generally. The act required the Secretary to consider employment, sales, and contributions to travel and tourism, in addition to any other items the Secretary considered appropriate. Consequently, BEA developed the Outdoor Recreation Satellite Account (ORSA), an account using the same data and methods as BEA's gross domestic product (GDP) statistics. BEA released the first ORSA prototype statistics for comment in February 2018, and it released the first official ORSA statistics in September 2018. BEA released the most recent ORSA statistics on September 20, 2019. Congress has indicated general approval of the ORSA and directed BEA to develop regional statistics in future years; BEA included state-level prototype statistics in the 2019 release. The House Appropriations Committee also directed the Department of Commerce, in coordination with the agencies of the Federal Recreation Council, to continue to refine the account and to report on the feasibility of identifying amounts allocated by the federal government to outdoor recreation efforts. <3. The National Outdoor Recreation Economy> <3.1. About the Outdoor Recreation Satellite Account> BEA prepares the ORSA statistics as required by the Outdoor Recreation Jobs and Impact Act. The most recent ORSA statistics, released in September 2019, measured the period from 2012 to 2017. The ORSA "measures the size of the outdoor recreation economy and the link between outdoor recreation and the broader U.S. economy." BEA constructed the ORSA by isolating outdoor recreation spending and production from the broader industries and categories that BEA already tracked. BEA compiles data into industry accounts (e.g., retail trade, manufacturing, construction, and others) and uses all this data to calculate gross domestic product (GDP). The ORSA is a satellite account in that it isolates and combines the parts of many individual industries that are related to outdoor recreation. For example, as described by BEA, existing industry accounts show "the production of all apparel, whereas the ORSA shows the production of apparel used specifically for outdoor recreation activities, such as wetsuits and hiking boots." The ORSA divides outdoor recreation activity into core activities and supporting activities. Core activities include the production and purchase of goods and services used directly for outdoor recreation, such as equipment, fuel, concessions, and fees. Supporting activities are defined as goods and services that facilitate access to outdoor recreation activities, such as travel and tourism expenses, local trips, construction, and government expenditures that support outdoor recreation (including local, state, and federal spending). BEA also organizes its statistics using conventional and broad views of outdoor recreation. The conventional activities include "all recreational activities undertaken for pleasure that generally involve some level of intentional physical exertion and occur in nature-based environments outdoors," such as camping, fishing, hiking, and hunting. Other activities include additional activities undertaken for pleasure that occur outdoors that may not meet the conventional definition (i.e., do not require intentional physical exertion or occur in a nature-based setting), such as outdoor concerts and festivals and games and sports fields. The two categories of activities can be combined to generate a broad view of the outdoor recreation economy. BEA calculates the ORSA from the same data used to calculate GDP broadly. As such, the ORSA is directly comparable to other BEA products, including other satellite accounts, like those for arts and cultural production. In addition, the estimates used to create the ORSA follow internationally recognized standards for national accounting, including creating GDP, value added, and other measures. Thus, in theory, the ORSA results can be compared to other measures of GDP, gross output, and value added, although differing assumptions, data, and methods may influence to what degree other measures are equivalent to ORSA statistics. As described above, the ORSA combines data from many different BEA industries; thus, although very general comparisons can be made, direct comparisons risk double-counting. For example, comparing the size of the ORSA to the size of the apparel industry would be inaccurate, because some value added from the apparel industry is included in the ORSA. <3.2. Outdoor Recreation Satellite Account Estimates> According to the ORSA statistics, in 2017, the current-dollar value added of the outdoor recreation economy was $427 billion. The outdoor recreation economy accounted for 2.2% of GDP. As shown in Figure 1 , supporting activities, such as construction and travel and tourism expenses, accounted for approximately half of outdoor recreation value added in 2017, approximately $213.9 million current dollars. Conventional outdoor recreation accounted for 30.7% of value added. Other recreation accounted for 19.3%. BEA organizes its accounts by industry. BEA reports that the arts, entertainment, recreation, accommodation, and food services industry was the largest contributor to the outdoor recreation economy in 2017, accounting for $112.9 billion of current-dollar outdoor recreation value added. The second-largest industry in 2017 was retail trade, accounting for $95.7 billion of current-dollar value added. Figure 2 provides a full breakdown of contribution to value added by industry. BEA reported that the outdoor recreation economy generated approximately 5.1 million jobs in 2017. The arts, entertainment, recreation, accommodation, and food services industry was the largest industry included in the ORSA for both compensation ($67.3 billion current dollars) and employment (2.1 million) in 2017. Retail trade was the second-largest industry for both compensation ($49.8 billion current dollars) and employment (1.6 million) in 2017. The largest amount of value added in 2017 from an individual conventional outdoor recreation activity (as defined by BEA) came from boating/fishing, accounting for approximately $21 billion in current-value dollars, or approximately 5% of value added from outdoor recreation (see Figure 3 ). The activities that generated the most value added are not necessarily the most popular, according to an FS participation survey. For example, although equestrian activities were among the six largest activities in terms of value added, an FS survey found that equestrian activities were among the three smallest activities for number of participants (see " National Outdoor Recreation Participation " for more information). Although much of the economic activity tracked by BEA to calculate value added can be linked to a specific activity (see " About the Outdoor Recreation Satellite Account "), some economic activity cannot. For example, multiuse apparel and accessories (such as backpacks, bug spray, and other items) that can be used for many activities accounted for approximately $48.6 billion in current dollars, or over 11% of value added. In real terms, the outdoor recreation economy grew 3.9% between 2016 and 2017, faster than the 2.4% growth for the overall U.S. economy. Real gross output, compensation, and employment all grew faster in the outdoor recreation economy than in the overall economy in 2017. Between 2012 and 2017, the outdoor recreation economy grew by approximately 9.9%. In 2017, BEA released prototype statistics on the percentage of each state's GDP from outdoor recreation (see Figure 4 ). BEA's preliminary results found that Hawaii, Montana, Maine, Vermont, and Wyoming had the five highest proportions of state GDP from outdoor recreation. However, other measures of economic importance vary considerably by state. For example, California, Florida, and Texas had the highest total outdoor recreation value added. Wyoming, Hawaii, and Alaska and Maine (tied) had the highest percentage of state employment from outdoor recreation. The relative importance of recreation in individual states depends on the size of the outdoor recreation economy, the state's economy generally, and the state's employment and compensation patterns. It is unclear to what extent these estimates may change if BEA adjusts its methods for calculating state statistics. Official state statistics are scheduled for release in fall 2020. Other Estimates of Economic Activity In addition to the estimates created by BEA, researchers, advocacy groups, and industry associations create estimates of the outdoor recreation economy. Many groups estimate impacts of individual activities, sectors, geographic areas, or outdoor recreation areas (e.g., angling, winter snow sports, a given watershed, or a given state). The broadest of these is the Outdoor Industry Association's (OIA's) Outdoor Recreation Economy report, which has been produced annually since 2006. Prior to publication of the ORSA, OIA estimates were sometimes cited to gauge the size of the outdoor recreation economy as a whole. According to OIA's 2017 report, the outdoor recreation economy generated $887 billion in consumer spending, the majority of which ($702 billion) was trip and travel spending, including airfare, lodging, fuel, groceries, tickets, lessons, guides, and other unspecified expenses spent anywhere away from home. OIA estimates that the outdoor recreation economy directly supports 7.6 million jobs. OIA also estimates that the outdoor recreation economy generates $65.3 billion in federal tax revenue and $59.2 billion in state and local tax revenue. OIA's estimates of the size of the outdoor recreation economy, and other estimation efforts, cannot be directly compared to the ORSA. This may be due to differences in method, assumptions, measurement, or statistics reported. Specifically, the OIA reports measure consumer spending and tax revenue, which are not part of the ORSA and are not directly comparable to any statistic reported in the ORSA. OIA's estimate of jobs (7.6 million) is higher than BEA's estimate of jobs (5.2 million), but it is unclear to what extent the data reported are similar in measurement or whether they represent the same year. BEA excluded exports and imports in its calculation, and these figures may be captured in OIA's statistics. BEA states that external reports on the outdoor recreation economy that include "activities with a high share of spending on imported goods and services (such as apparel) will likely have higher estimates than the ORSA." BEA also states that other reports may include spending on items not used for outdoor recreation (for example, bicycles used for commuting). In general, because other reports do not give the same statistics as the ORSA, and due to methodological differences, it is unclear whether (and to what degree) the ORSA and other reports may or may not be in disagreement, despite apparent large differences in results. The results of the ORSA and OIA reports have certain broad commonalities. For example, both reports find that large amounts of economic activity are driven by activities requiring relatively expensive purchases, such as vehicles (for example, boating or off-highway vehicle activities). Both reports also find that expenses related to travel, such as lodging, airfare, and food away from home, constitute large shares of the economic activity generated by outdoor recreation. <3.3. National Outdoor Recreation Participation> According to one source, measures of national trends in outdoor recreation participation are based primarily on the National Survey on Recreation and the Environment (NSRE), a population-based survey conducted by the U.S. Forest Service (FS), sampling all areas of the country and participation in 17 outdoor activities. The NSRE measures both participation (the number of respondents who report engaging in the activity at least once over the course of a year) and consumption (the number of times the respondent indicates engaging in the activity). The survey does not estimate the total number of participants in outdoor recreation generally, only participation rates in the 17 activities studied. The most recent NSRE was completed for the period 1999-2009, and an update is ongoing. The NSRE estimated that, for the activities considered, a maximum of 194 million people (visiting developed sites) and a minimum of 8 million people (primitive skiing) participated every year (see Table 1 for additional details). FS estimated that approximately 82% of NSRE respondents participated in visiting developed sites, the activity with the highest participation rate. In terms of the frequency with which participants engaged in each activity (shown as "Activity Days" in Table 1 ), FS estimated that participants engaged in the most popular activity (viewing nature) over 32.4 billion times; this activity, however, is a major outlier, and participants engaged in the next several most popular activities between 8.3 billion and 1.8 billion times. Between 1999 and 2009, FS estimated that participation in nature-based outdoor recreation generally increased. The number of U.S. participants in the surveyed activities increased by 7.1% over this period. Certain activities, such as those oriented toward viewing and photographing nature, off-highway vehicle activities, and several physically challenging activities (e.g., kayaking, snowboarding, surfing) had relatively large increases in participation compared to the average over this period. More people overall participate in outdoor recreation in the eastern United States than in the western United States, in large part because most of the U.S. population resides in the East. However, participation rates (measured as the number of participants per hundred people) are higher in the West for all activities except hunting and fishing. In addition to this broad trend, demographic factors, such as population size, age, gender, race, ethnicity, education, and income, are correlated with the rate of outdoor recreation. For example, relative to the general population, people engaging in hunting and fishing are more likely to be rural residents, and people engaging in skiing and snowboarding are more likely to be urban residents. Availability of and proximity to recreation settings also are highly correlated with the rate of outdoor recreation participation. The amount of recreation that occurs on lands of differing ownership for example, federal, state, local, and private likely varies widely by activity and location (see section on " Recreation Visits to Federal Lands " for further discussion of recreation on federal lands). Approximately 60% of lands in the United States are privately owned, and approximately 28% of the total land area is federally owned; the remainder is in a mix of state, local, tribal, and other ownerships. Over 92% of federal land is located in 11 western states and Alaska. The uneven distribution of federal land between the eastern and western United States influences what lands provide outdoor recreation opportunities in different regions of the United States, particularly given that, for some federal land management agencies, at least half of visits to the properties they administer come from people who live within 50 miles. FS found that private lands were a more important recreation setting in the East, with the total number of recreation visits on private lands in the East nearly four times the number in the West. In the West, respondents reported that they spent the majority of activity days in all surveyed activities on publicly owned lands of any kind. In contrast, respondents in the East spent the majority of activity days in some surveyed activities on private lands and some on publicly owned lands. <4. Outdoor Recreation on Federal Lands> The ORSA statistics measures the state of the outdoor recreation economy generally. From the standpoint of public lands management, there is often congressional interest in how the government's provision of recreational opportunities translates into economic activity in communities around federal recreation resources. Legislation, hearings, and congressional reports have indicated the significance of this economic activity as a policy consideration in contexts involving federal lands. In the past decade, federal agencies and interagency groups have conducted studies measuring economic contributions specific to federal lands. Because these studies examine multiple agencies under a single framework, and because they report value added, the results are comparable to one another. In the sense that value added is a consistent concept, they also may be generally comparable to other measures of value added, such as the ORSA results, although differences in methods, data, and assumptions mean any comparison can be, at best, highly general. According to these studies, in FY2017 dollars, visitors spent approximately $54 billion in the local economies of federal recreation areas in FY2012 and $49.8 billion in FY2016, generating $55 billion in value added in FY2012 and $53.9 billion in value added in FY2016 (see Table 2 ). The studies indicate that outdoor recreation on federal lands directly supported 880,000 jobs in FY2012 and 826,000 jobs in FY2016. The authors of the studies in Table 2 limited their studies of visitor spending to areas within 50 miles of the federal recreation site. The authors state that this limitation provides a conservative estimate. Although research suggests that many visits to federal recreation sites do indeed originate from nearby, the nationwide estimates discussed above (see " The National Outdoor Recreation Economy ") indicate that a large proportion of economic activity derives from travel-related expenses. If the travel-related portion of economic activity related to federal sites is not being captured in these results because that activity occurs more than 50 miles from the federal recreation site, these studies may undercount the true value. Similarly, results of national studies indicate that activities requiring major purchases (e.g., vehicles) account for a large proportion of the outdoor recreation economy. If visitors do not report such expenditures, it also may result in undercounting. The agencies used different methods to measure visitation and economic activity; thus, estimates may be only generally comparable. <4.1. Federal Lands' Recreation Resources and Uses> Federal lands comprise approximately 640 million acres in the United States, about 28% of the total land area. Approximately 92% (573 million acres) of federal lands are located in 11 western states and Alaska, with over one-third (224 million acres) of all federal land in Alaska alone. The Forest Service (FS) and the Bureau of Land Management (BLM) manage the majority of federal land. Nearly all federal land is open and available to the public for recreation. Although there is considerable overlap in the recreation opportunities across agencies, some agencies could be considered to have dominant niches. FS and BLM offer a range of opportunities, from camping, picnicking, and birdwatching in developed settings to activities in undeveloped backcountry, motorized recreation, and others. Opportunities on Fish and Wildlife Service land emphasize wildlife, fish, and birds. The National Park Service (NPS) is associated with "iconic natural and cultural resources." Opportunities on land owned by the Bureau of Reclamation, National Oceanic and Atmospheric Administration, and U.S. Army Corps of Engineers (USACE) tend to center on water and underwater resources. Although some agencies' resources are used mostly by locals, all agencies have resources with regional, national, or international markets. <4.2. Recreation Visits to Federal Lands> Table 3 presents information from various sources on recreation visits to federal lands from FY2012 to FY2017. In general, these statistics are not comparable to the NSRE estimates given above due to differences in measurement. The statistics indicate that, in general over this period for agencies with complete data, FS and NPS had the most visits. These statistics underscore that size and location are imperfect predictors of recreation resource use; USACE, for example, has higher visitation than several agencies that manage more federal land area. These differences may be due to proximity to population centers, the types of resources available on different lands, and other factors.

Congress plays an overarching role in shaping outdoor recreation throughout the nation through legislation and oversight. As Congress continues to debate outdoor recreation issues—including provision of federal resources, planning efforts, and funding—data on the size, distribution, and relative importance of the outdoor recreation economy may inform these debates. Both historical and recent legislative and executive efforts centered on outdoor recreation have identified the economic importance of outdoor recreation. In 2016, Congress passed the Outdoor Recreation Jobs and Economic Impact Act ( P.L. 114-249 ), which directed the Bureau of Economic Analysis (BEA) in the Department of Commerce to create an account that would measure the outdoor recreation economy. BEA released the first official Outdoor Recreation Satellite Account (ORSA) statistics in September 2018 and updated them in September 2019. According to the ORSA statistics, in 2017, the current-dollar value added of the outdoor recreation economy was $427 billion, or 2.2% of gross domestic product (GDP). ORSA statistics show that supporting activities, such as construction and travel and tourism expenses, accounted for approximately half of value added. Conventional outdoor recreation activities, as defined by BEA, accounted for another 30.7% of real outdoor recreation gross output; o ther recreation accounted for 19.3%. The outdoor recreation economy grew by 3.9% in 2017, faster than the 2.4% growth for the overall U.S. economy, and has grown approximately 9.9% since 2012. Real gross output, real compensation, and real employment all grew faster in the outdoor recreation economy than in the overall economy in 2016. BEA reports that the "arts, entertainment, recreation, accommodation, and food services industry" was the largest contributor to the outdoor recreation economy in 2017, accounting for $112.9 billion of current-dollar outdoor recreation value added, followed by retail trade. These two sectors were also the largest industries included in the ORSA statistics for both compensation ($67.3 billion) and employment (2.1 million) in 2017. BEA released prototype statistics for states, which found that Hawaii, Montana, Maine, Vermont, and Wyoming had the five highest proportions of state GDP generated from outdoor recreation in 2017. In addition to the ORSA statistics, which are measured for the nation as a whole or for individual states, federal agencies sometimes measure the specific economic impact of federal lands. According to some studies, visitors to federal lands generated $55 billion in value added in FY2012 and $53.9 billion in value added in FY2016 (FY2017 dollars). Differences in methods, data, and assumptions mean any comparison between these figures and the ORSA statistics can be highly general at best. It is difficult to precisely measure the total amount of outdoor recreation that Americans engage in, due to differences in data collection, measurement, definitions, and other factors between sources. One source, the National Survey on Recreation and the Environment (NSRE), measures the number of people who engage in 17 different outdoor activities and how often they do so. According to the NSRE, over 194 million respondents (approximately 82% of respondents) engage in the most popular form of outdoor recreation (visiting developed sites) in a given year. Americans report engaging in the most popular surveyed activity, viewing nature, over 32.4 billion times in a given year, although this activity is a major outlier. Rates of participation in surveyed activities vary substantially and can depend on geographic location, proximity to recreation resources, demographic factors, and other influences. In FY2017, lands managed by the four federal land management agencies (the Bureau of Land Management, Fish and Wildlife Service, Forest Service, and National Park Service) had approximately 596 million visits. Lands managed by other federal agencies (the Bureau of Reclamation, National Oceanic and Atmospheric Administration, and United States Army Corps of Engineers) also had significant visitation. Visits to the lands of these other agencies sometimes exceeded visits to lands managed by the four federal land management agencies. Although publicly owned lands (including federal lands) generally have the greatest amount of recreation visits, private lands can dominate certain types of recreation, particularly in the eastern United States.

crs_R46284

crs_R46284_0

<1. Introduction> The Small Business Administration (SBA) administers several types of programs to support small businesses, including direct disaster loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; loan guaranty and venture capital programs to enhance small business access to capital; small business management and technical assistance training programs to assist business formation and expansion; and contracting programs to increase small business opportunities in federal contracting. Congressional interest in the SBA's programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Congressional interest, however, has become especially acute in the wake of the Coronavirus Disease 2019 (COVID-19) pandemic's widespread adverse economic impact on the national economy, including productivity losses, supply chain disruptions, major labor dislocation, and significant financial pressure on both businesses and households. P.L. 116-123 , the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, was the first act during the 116 th Congress that included provisions targeting SBA assistance to small businesses adversely affected by COVID-19. The act provided the SBA an additional $20 million for SBA disaster assistance administrative expenses and deemed the coronavirus to be a disaster under the SBA's Economic Injury Disaster Loan (EIDL) program. This change made economic injury from the coronavirus an eligible EIDL expense. Congress followed with P.L. 116-136 , the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act makes numerous changes to SBA programs, including the creation of the Paycheck Protection Program (PPP), which are loans 100% guaranteed by the SBA with a maximum term of 10 years and a maximum interest rate of no more than 4%. These loans are available to small businesses, small 501(c)(3) nonprofit organizations, and small 501(c)(19) veterans organizations and are eligible for loan forgiveness. The SBA announced that the loans will have a two-year term at a 1.0% interest rate. The CARES Act provides deferment relief for PPP loans and existing loans made under the 7(a), 504/CDC, and Microloan programs. The act also appropriates $349 billion for PPP loan guarantees and subsidies (to remain available through FY2021), $10 billion for Emergency EIDL grants, $675 million for the SBA's salaries and expenses account, $25 million for the SBA's Office of Inspector General (OIG), $265 million for entrepreneurial development programs ($192 million for small business development centers (SBDCs), $48 million for women's business centers (WBCs), and $25 million for SBA resource partners to provide online information and training), and $17 billion for subsidies for the SBA's 7(a), 504/CDC, and Microloan programs. A summary of the CARES Act's major small business-related provisions is presented in the Appendix . The SBA started accepting PPP loan applications on April 3, 2020. Because the SBA neared its $349 billion authorization limit for section 7(a) lending, which includes the PPP, the SBA stopped accepting new PPP loan applications on April 15, 2020. More than 1.66 million PPP loans totaling nearly $342.3 billion were approved by nearly 5,000 lenders. Most of the loans (74%) were for less than $150,000 (see Table 1 ). The SBA also stopped accepting COVID-19-related EIDL and Emergency EIDL grant applications on April 15, because the SBA was approaching its disaster loan assistance credit subsidy limit. COVID-19-related EIDL and Emergency EIDL grant applications already received continued to be processed on a first-in first-out basis. The SBA began accepting new EIDL and Emergency EIDL grant applications on a limited basis on May 4 to accommodate agricultural businesses that were provided EIDL eligibility by the Paycheck Protection Program and Healthcare Enhancement Act ( P.L. 116-139 ). The SBA is also processing applications from agricultural businesses that had submitted an EIDL application prior to the legislative change. Those agricultural businesses do not need to reapply. All other EIDL loan applications that were submitted before the SBA stopped accepting new applications on April 15 are being processed on a first-in, first-out basis. A summary of the Paycheck Protection Program and Healthcare Enhancement Act's major small business-related provisions is presented in the Appendix . As of May 17, 2020, the SBA had approved 252,340 COVID-19-related EIDL loans, totaling $24.8 billion. As of May 8, the SBA had approved just over three million Emergency EIDL grants, totaling nearly $9.9 billion. The SBA resumed the acceptance of PPP applications on April 27, 2020, following enactment of the Paycheck Protection Program and Health Care Enhancement Act. The act increased the SBA's section 7(a) loan authorization limit from $349 billion to $659 billion, and appropriated $321.335 billion to support that level of lending. The act also appropriated $50 billion for EIDL, $10 billion for Emergency EIDL grants, and $2.1 billion for SBA salaries and expenses. As of May 16, 2020, the SBA had approved, after cancellations, more than 4.3 million PPP loans totaling more than $513 billion (see Table 1 ). For comparative purposes, that loan approval amount is more than the amount the SBA has approved in all of its loan programs, including disaster loans, during the last 29 years (from October 1, 1991 through December 31, 2019; $509.9 billion). On May 15, 2020, the House passed H.R. 6800 , the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) . The HEROES Act , among other provisions, would expand PPP eligibility to include all 501(c) nonprofit organizations and appropriate another $10 billion for Emergency EIDL grants . A summary of the HEROES Act's major small business-related provisions is presented in the Appendix . This report begins with an overview of SBA disaster loans and discusses various issues related to providing disaster assistance to small businesses adversely affected by COVID-19. It presents an overview and discussion of SBA access to capital programs (including the 7(a) loan guarantee, 504/CDC loan guarantee, and Microloan program), SBA management and technical training programs (SBDCs, WBCs, SCORE, and Microloan technical assistance), and SBA contracting programs. <2. Disaster Loans> <2.1. Overview> SBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the federal government. The SBA's disaster loans are unique in two respects: (1) they go directly to the ultimate borrower, and (2) they are not limited to small businesses. SBA disaster loans for physical damage are available to individuals, businesses of all sizes, and nonprofit organizations in declared disaster areas. SBA disaster loans for economic injury (EIDL) are available to eligible small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, nonprofit organizations in declared disaster areas. The SBA issues about 80% of its direct disaster loans to individuals and households (renters and property owners) to repair and replace homes and personal property. The SBA disbursed $401 million in disaster loans in FY2016, $889 million in FY2017, $3.59 billion in FY2018, and $1.5 billion in FY2019. <2.2. Types of Disaster Loans> The SBA Disaster Loan Program includes home disaster loans, business physical disaster loans, and EIDLs. This report focuses on the EIDL program because it is currently being used to address the adverse economic impact of COVID-19 on small businesses and other EIDL-eligible organizations. P.L. 116-123 , the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, deemed the coronavirus to be a disaster under the EIDL program. This change made economic injury from the coronavirus an eligible EIDL expense. The act also provided the SBA an additional $20 million for disaster loan administrative expenses. For a discussion of all SBA disaster loans, see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress , by Bruce R. Lindsay. <2.3. Economic Injury Disaster Loans> EIDLs provide up to $2 million for working capital (including fixed debts, payroll, accounts payable and other bills that cannot be paid because of the disaster's impact) to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, nonprofit organizations meet their financial obligations and operating expenses that cannot be met as a direct result of the disaster. Public nonprofit organizations and several specific business types are not eligible for EIDL assistance. Ineligible businesses include, but are not limited to, the following: businesses that do not meet the SBA's small business eligibility criteria, including the SBA's size standards; businesses that derive more than one-third of their annual gross revenue from legal gambling activities; casinos and racetracks; religious organizations; political and lobbying concerns; government-owned concerns (expect for businesses owned or controlled by a Native American tribe); and businesses determined by the SBA to have credit available elsewhere. EIDL loan amounts are based on actual economic injury and financial needs, regardless of whether the business or eligible nonprofit suffered any property damage. If an applicant is a major source of employment, the SBA may waive the $2 million statutory limit. In addition, EIDL loan proceeds cannot be used to refinance long-term debt, expand facilities, pay dividends or bonuses, or for relocation. Applicants must have a credit history acceptable to the SBA, the ability to repay the loan, and present collateral for all EIDL loans over $25,000 if available. The SBA collateralizes real estate or other assets when available, but it will not deny a loan for lack of collateral. EIDL interest rates are determined by formulas established in law (discussed later) and are fixed for the life of the loan. EIDL interest rate ceilings are statutorily set at no more than 4% per annum. EIDL applicants are not eligible if the SBA determines that the applicant has credit available elsewhere. EIDL loans can have maturities up to 30 years. The SBA determines an appropriate installment payment based on each borrower's financial condition, which, in turn, determines the loan term. There are no prepayment penalties. SBA EIDL assistance is not automatically available. It must be requested in one of two ways: (1) a state or territory governor can submit a request to the President for a major disaster declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or (2) a state or governor can submit a request for SBA EIDL from the SBA Administrator under the Small Business Act. There was some initial concern that COVID-19 would not be a declarable disaster under the Small Business Act because it did not meet the legal definition for a disaster. As mentioned, to prevent any potential ambiguity, Title II of P.L. 116-123 deemed the coronavirus a disaster under Section 7(b)(2)(D) of the Small Business Act, making economic injury from the coronavirus an eligible expense under the SBA's Economic Injury Disaster Loan program. <2.4. Initial EIDL Response to COVID-19> On March 16, 2020, the SBA Administrator began issuing declarations for SBA EIDLs in response to states seeking SBA disaster assistance for small businesses. The SBA changed its requirement that a state or territory "provide documentation certifying that at least five small businesses have suffered substantial economic injury as a result of the disaster, with at least one business located in each declared county/parish." Under new criteria, states and territories now "are only required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where the businesses are located." The SBA announced that under the new criteria EIDL assistance may be available statewide instead of just within specific identified counties in declarations related to COVID-19. <2.5. EIDL Funding> Prior to the CARES Act's enactment, the SBA had about $1.1 billion in disaster loan credit subsidy available to support about $7 billion to $8 billion in disaster loans. Loan credit subsidy is the amount provided to cover the government's cost of extending or guaranteeing credit. The loan credit subsidy amount is about one-seventh of the cost of each disaster loan. The credit subsidy amount is used to protect the government against the risk of estimated shortfalls in loan repayments. There was some concern that the SBA's funding for disaster loan credit subsidies would have proven to be insufficient to meet the demand for disaster loans now that EIDL eligibility has been extended to economic injuries related to COVID-19. The CARES Act addressed this issue by providing an additional $10 billion to support the EIDL program. As mentioned, the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139) appropriated an additional $50 billion for EIDL and $10 billion for Emergency EIDL grants. <2.6. Surge Issues and Loan Processing Times> Historically, the majority (80%) of SBA disaster loans have been for individuals and households. The significant number of businesses that will likely apply for EIDL assistance because of the economic damage the coronavirus caused may require the SBA to enhance its disaster business loan portfolio and increase staff to meet demand. As mentioned, in anticipation of increased EIDL demand, Title II of P.L. 116-123 provided the SBA with an additional $20 million, to remain available until expended, for SBA Disaster Loan Program administrative expenses. A Government Accountability Office (GAO) report found that the SBA provided disaster loans in roughly 18 days or less in response to Hurricanes Harvey, Irma, and Maria in 2017. Although the 2017 hurricanes created a high demand at that time for SBA disaster loans, it is unclear if GAO's findings can be extrapolated to the current COVID-19 pandemic. The sheer volume of EIDL applications in response to COVID-19 could be significantly higher because COVID-19 affects a much larger number of small businesses and organizations. In addition, the time needed for the SBA to expand the disaster loan portfolio and hire and train new and existing staff could compromise loan processing times. Loan processing times may be of significant concern to Congress and business owners alike. If loans are not processed quickly enough, businesses nationwide may suffer economic damage and, potentially, collapse. Consequently, Congress may examine options that could expedite loan processing, such as increased staffing and surge capabilities, waiving application requirements, and the use of expedited loans or bridge loans. <2.6.1. Expedited Disaster Loans and Bridge Loans> In response to criticism of SBA's disaster loan processing following the Gulf Coast hurricanes of 2005 and 2008, Congress passed P.L. 110-234 , the Small Business Disaster Response and Loan Improvements Act of 2008. The act created several programs to improve the disaster loan processing. Among them were the following: Expedited Disaster Assistance Loan Program (EDALP) to provide eligible EIDL applicants with expedited access to short-term guaranteed loans of up to $150,000. Immediate Disaster Assistance Program (IDAP) to provide eligible EIDL applicants with guaranteed bridge loans of up to $25,000 from private-sector lenders, with an SBA decision within 36 hours of a lender's application on behalf of a borrower. Private Disaster Assistance Program (PDAP) to make guaranteed loans available to homeowners and eligible EIDL applicants in an amount up to $2 million. The SBA, however, had difficulty implementing these programs. In his statement before the House Committee on Small Business, then-acting (and now the current) SBA Inspector General, Hannibal "Mike" Ware, stated, In the wake of disasters like Hurricane Sandy, congressional representatives expressed concern that SBA did not effectively develop and utilize programmatic innovations intended to assist in disbursing funds quickly and effectively. For instance, SBA did not implement statutory provisions of the Immediate Disaster Assistance Program (IDAP), Economic Injury Disaster Assistance Program (EDAP), and the Private Disaster Assistance Programs (PDAP), collectively known as the "Guaranteed Disaster Assistance Programs" mandated by Congress in 2008. These provisions were enacted with the expectation that they would allow SBA to provide expedited disaster loans in partnership with private sector lenders. These provisions remain unimplemented. He added that the SBA had difficulty implementing the programs because private lenders were reluctant to participate in the program. He mentioned the following impediments: [the] cost of program participation under the current pricing structure and the lender's lack of infrastructure to deliver loans that meet SBA standards (such as evaluating eligibility and duplication of benefits); loan terms that include longer maturities than conventional lending practices; the high cost of providing these loans; inadequate collateral security; and their lack of expertise in the home loan sector. Lenders were also concerned that loan guarantees would be denied due to improper eligibility determinations. Because these programs had limited use, Congress included a provision in P.L. 115-141 , the Consolidated Appropriations Act, 2018 , which permanently cancelled $2.6 million in unobligated balances available for the IDAP and the EDALP. The CARES Act addressed loan processing issues by authorizing the SBA Administrator, in response to economic injuries caused by COVID-19, to waive the "credit not available elsewhere" requirement, approve an applicant based solely on their credit score, not require applicants to submit a tax return or tax return transcript for approval, waive any rules related to the personal guarantee on advances and loans of not more than $200,000, and waive the requirement that the applicant needs to be in business for the one-year period before the disaster declaration (except that no waiver may be made for a business that was not in operation on January 31, 2020). <2.7. SBA EIDL Repayment and Forgiveness> Under present law and regulations, the first SBA EIDL payment is normally due five months after disbursement. However, on March 23, 2020, the SBA announced that it would defer payments on existing disaster loans through December 31, 2020, "to help borrowers during this unprecedented time." The SBA also announced that payments on new EIDL loans would be deferred for one year (interest does accrue). The CARES Act provides "impacted borrowers" adversely affected by COVID-19 complete payment deferment relief on a covered loan in its Paycheck Protection Program (PPP). The deferment may be for not less than six months and not more than one year if the borrower was in operation on February 15, 2020, and has an application for a covered loan approved or pending approval on or after the date of enactment. The SBA announced that PPP loan payments will be deferred for six months. However, interest will continue to accrue on these loans during the six-month deferment. The CARES Act also provides for PPP loan forgiveness under specified conditions related to the borrower's retention of employees. Loan forgiveness is rare, but has been used in the past to help businesses that were having difficulty repaying their loans. For example, loan forgiveness was granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane Disaster Relief Act of 1965. Section 3 of the act authorized the SBA Administrator to grant disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and Mississippi as a result of the hurricane. The act stated that, to the extent such loss or damage is not compensated for by insurance or otherwise, (1) shall at the borrower's option on that part of any loan in excess of $500, (A) cancel up to $1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than $1,800 over a period not to exceed three years; and (2) may lend to a privately owned school, college, or university without regard to whether the required financial assistance is otherwise available from private sources, and may waive interest payments and defer principal payments on such a loan for the first three years of the term of the loan. <2.8. Disaster Grants> Historically, businesses that suffer uninsured loss as a result of a major disaster declaration are not eligible for Federal Emergency Management Agency (FEMA) grant assistance, and grant assistance from other federal sources is limited. On some occasions, Congress has provided disaster assistance to businesses through the Department of Housing and Urban Development's (HUD's) Community Development Block Grant (CDBG) program. The CDBG program provides loans and grants to eligible businesses to help them recover from disasters as well as grants intended to attract new businesses to the disaster-stricken area. In a few cases, CDBG has also been used to compensate businesses and workers for lost wages or revenues. Although the President issued the first major disaster declaration to New York for COVID-19, CDBG disaster assistance is not available for all major disasters. States can use CDBG funding to respond to emergencies or other "urgent needs" through the conventional CDBG entitlement and states program, but existing (or future) CDBG monies generally must be reprogrammed in consultation with HUD to respond to the emergency. For these reasons, CDBG is generally used for long-term recovery needs rather than providing immediate, direct disaster assistance. Thus, Congress could consider providing business grants through FEMA or the SBA. Enlisting FEMA to administer the program may offer several benefits. First, FEMA already has grant processing operations in place. It might be relatively easier to expand the operations to include small businesses disaster grants rather than establishing new grant-making operations within SBA. Second, having FEMA administer the small business disaster grant program may limit duplication of administrative functions between FEMA and SBA. Third, it would provide access to FEMA's Disaster Relief Fund (DRF) which at the time of this writing has roughly $41 billion for disaster assistance activities. In contrast, Congress could decide to have SBA administer the program because it already has a framework in place to evaluate business disaster needs and disaster loan eligibility. Congress may need to make statutory changes to SBA's disaster loan account or authorize a new account to receive appropriations for disaster grants. Another concern about providing grants to businesses is whether businesses provided SBA EIDL will be eligible for grant assistance. For example, in some cases homeowners and businesses that accepted disaster loans were deemed ineligible for disaster grants. This may make some businesses reluctant to apply for SBA EIDL and instead hold out for the possibility of a grant. Congress may therefore allow businesses to use grant money to pay down their SBA EIDL. Another potential concern is waste, fraud, and abuse. For example, Section 1210 of the Disaster Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254 ) prohibits the President from determining loans as duplicative assistance provided all federal assistance is used toward loss resulting from an emergency or major disaster under the Stafford Act. Consequently, businesses that obtain SBA EIDL and a grant for the same purposes would conceivably not be required to pay back the duplicative award. Congress could consider limiting grants to relatively small businesses as compared to what is considered a small business according to SBA size standards. For example, business grants could be limited to businesses with 10 or fewer employees. The CARES Act authorizes the SBA Administrator to provide up to $10,000 as an advance payment in the amount requested within three days after receiving an EIDL application from an eligible entity. Applicants are not required to repay the advance payment, referred to in the CARES Act as an Emergency EIDL grant, even if subsequently denied an EIDL loan. Due to anticipated demand, the SBA limited Emergency EIDL grants to $1,000 per employee, up to a maximum of $10,000. The CARES Act addresses waste, fraud, and abuse by providing the SBA's OIG $25 million for oversight of the SBA's administration of its lending programs and for investigations to serve as a general deterrent to fraud, waste, and abuse. <2.9. SBA EIDL Interest Rates> According to the SBA's March 17, 2020, press release, SBA EIDL interest rates for COVD-19 are 3.75% for businesses and 2.75% for nonprofit organizations. SBA disaster loan interest rates have been a long-standing congressional concern. First, there is concern about the ability of disaster victims to pay off their loans. Second, there is concern about how interest rates are determined given the complexity of the statutory language about disaster loan interest rates. 15 U.S.C. 636(d)(5)(C)) states that interest rates are "in the case of a business, private nonprofit organization, or other concern, including agricultural cooperatives, unable to obtain credit elsewhere, not to exceed 4 per centum per annum." To determine EIDL interest rates, SBA uses a formula under 15 U.S.C. 636(d)(4)(A): Notwithstanding the provisions of the constitution of any State or the laws of any State limiting the rate or amount of interest which may be charged, taken, received, or reserved, the maximum legal rate of interest on any financing made on a deferred basis pursuant to this subsection shall not exceed a rate prescribed by the Administration, and the rate of interest for the Administration's share of any direct or immediate participation loan shall not exceed the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans and adjusted to the nearest one-eighth of 1 per centum, and an additional amount as determined by the Administration, but not to exceed 1 per centum per annum: Provided, That for those loans to assist any public or private organization for the handicapped or to assist any handicapped individual as provided in paragraph (10) of this subsection, the interest rate shall be 3 per centum per annum. Congress could request SBA to reevaluate its interpretation of 15 U.S.C. 636(d)(4)(A) and provide detailed information explaining how the formula provides nonprofit organizations with lower interest rates than small businesses. Alternatively, Congress could change the formula under the Small Business Act if it considered the language ambiguous, or it could designate an interest rate (including a zero interest rate) for all SBA EIDL for the duration of COVID-19. <3. SBA Capital Access Programs> <3.1. Overview> The SBA has authority to make direct loans but, with the exception of disaster loans and loans to Microloan program intermediaries, has not exercised that authority since 1998. The SBA indicated that it stopped issuing direct business loans primarily because the subsidy rate was "10 to 15 times higher" than the subsidy rate for its loan guaranty programs. Instead of making direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions." With few exceptions, to qualify for SBA assistance, an organization must be both a for-profit business and small. <3.2. What Is a "Small Business"?> To participate in any of the SBA loan guaranty programs, a business must meet the Small Business Act's definition of small business . This is a business that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; is not dominant in its field on a national basis; and does not exceed size standards established, and updated periodically, by the SBA. The business may be a sole proprietorship, partnership, corporation, or any other legal form. <3.3. What Is "Small"?48> The SBA uses two measures to determine if a business is small: SBA-derived industry specific size standards or a combination of the business's net worth and net income. For example, businesses participating in the SBA's 7(a) loan guaranty program are deemed small if they either meet the SBA's industry-specific size standards for firms in 1,047 industrial classifications in 18 subindustry activities described in the North American Industry Classification System (NAICS) or do not have more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carryover losses) for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. The SBA's industry size standards vary by industry, and they are based on one of the following four measures: the firm's (1) average annual receipts in the previous three (or five) years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small and average annual receipts for most other industries. The SBA's size standards are designed to encourage competition within each industry. They are derived through an assessment of the following four economic factors: "average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms." The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors "as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses." <3.4. SBA Loan Guarantee Programs> <3.5. Overview> The SBA provides loan guarantees for small businesses that cannot obtain credit elsewhere. Its largest loan guaranty programs are the 7(a) loan guaranty program, the 504/CDC loan guaranty program, and the Microloan program. The SBA's loan guaranty programs require personal guarantees from borrowers and share the risk of default with lenders by making the guaranty less than 100%. In the event of a default, the borrower owes the amount contracted less the value of any collateral liquidated. The SBA can attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund offset. Most types of businesses are eligible for loan guarantees. A list of ineligible businesses (such as insurance companies, real estate investment firms, firms involved in financial speculation or pyramid sales, and businesses involved in illegal activities) is contained in 13 C.F.R. 120.110. With one exception, nonprofit and charitable organizations are also ineligible. Most of these programs charge fees to help offset program costs, including costs related to loan defaults. In most instances, the fees are set in statute. For example, for 7(a) loans with a maturity exceeding 12 months, the SBA is authorized to charge lenders an up-front guaranty fee of up to 2% for the SBA guaranteed portion of loans of $150,000 or less, up to 3% for the SBA guaranteed portion of loans exceeding $150,000 but not more than $700,000, and up to 3.5% for the SBA guaranteed portion of loans exceeding $700,000. Lenders who have a 7(a) loan that has a SBA guaranteed portion in excess of $1 million can be charged an additional fee not to exceed 0.25% of the guaranteed amount in excess of $1 million. 7(a) loans are also subject to an ongoing servicing fee not to exceed 0.55% of the outstanding balance of the guaranteed portion of the loan. In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses. In an effort to assist small business owners, the SBA has, from time-to-time, reduced its fees. For example, in FY2019, the SBA waived the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reduced the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan. In addition, pursuant to P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, the SBA is required to waive the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program (up to and including $350,000) "except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero." The SBA's goal is to achieve a zero subsidy rate, meaning that the appropriation of budget authority for new loan guaranties is not required. <3.6. 7(a) Loan Guaranty Program57> The 7(a) loan guaranty program is named after the section of the Small Business Act that authorizes it. The loans are made by SBA lending partners (mostly banks but also some other financial institutions) and partially guaranteed by the SBA. Borrowers may use 7(a) loan proceeds to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. 7(a) loan proceeds may be used to acquire land (by purchase or lease); improve a site (e.g., grading, streets, parking lots, landscaping), including up to 5% for community improvements such as curbs and sidewalks; purchase one or more existing buildings; convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts. In FY2019, the SBA approved 51,907 7(a) loans to 46,111 small businesses totaling $23.2 billion. In FY2019, there were 1,708 active lending partners providing 7(a) loans. The 7(a) program's current guaranty rate is 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (up to a maximum guaranty of $3.75 million, or 75% of $5 million). Although the SBA's offer to guarantee a loan provides an incentive for lenders to make the loan, lenders are not required to do so. A 7(a) loan is required to have the shortest appropriate term, depending upon the borrower's ability to repay. The maximum term is 10 years, unless the loan finances or refinances real estate or equipment with a useful life exceeding 10 years. In that case, the loan term can be up to 25 years, including extensions. Lenders are permitted to charge borrowers fees to recoup specified expenses and are allowed to charge borrowers "a reasonable fixed interest rate" or, with the SBA's approval, a variable interest rate. The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register . In May 2020, the maximum allowable fixed interest rates are 11.25% for 7(a) loans of $25,000 or less; 10.25% for loans over $25,000 but not exceeding $50,000; 9.25% for loans over $50,000 up to and including $250,000; and 8.25% for loans greater than $250,000. Maximum interest rates allowed on variable-rate 7(a) loans are pegged to either the prime rate, the 30-day London Interbank Offered Rate (LIBOR) plus 3%, or the SBA optional peg rate, which is a weighted average of rates that the federal government pays for loans with maturities similar to the guaranteed loan. The allowed spread over the prime rate, LIBOR base rate, or SBA optional peg rate depends on the loan amount and the loan's maturity (under seven years or seven years or more). The adjustment period can be no more than monthly and cannot change over the life of the loan. <3.7. The 504/CDC Loan Guaranty Program64> The 504/CDC loan guaranty program uses Certified Development Companies (CDCs), which are private, nonprofit corporations established to contribute to economic development within their communities. Each CDC has its own geographic territory. The program provides long-term, fixed-rate loans for major fixed assets, such as land, structures, machinery, and equipment. Program loans cannot be used for working capital, inventory, or repaying debt. A commercial lender provides up to 50% of the financing package, which is secured by a senior lien. The CDC's loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a guaranteed debenture. The small business must contribute at least 10% as equity. To participate in the program, small businesses cannot exceed $15 million in tangible net worth and cannot have average net income of more than $5 million for two full fiscal years before the date of application. Also, CDCs must intend to create or retain one job for every $75,000 of the debenture ($120,000 for small manufacturers) or meet an alternative job creation standard if they meet any one of 15 community or public policy goals. Maximum 504/CDC participation in a single project is $5 million and $5.5 million for manufacturers and specified energy-related projects; the minimum is $25,000. There is no limit on the project size. Loan maturity is 10 years for equipment and 20 or 25 years for real estate. Unguaranteed financing may have a shorter term. The maximum fixed interest rate allowed is established when the debenture backing the loan is sold and is pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues. The SBA is authorized to charge CDCs a one-time, up-front guaranty fee of up to 0.5% of the debenture (0.5% in FY2020), an annual servicing fee of up to 0.9375% of the unpaid principal balance (0.3205% for regular 504/CDC loans and 0.322% for 504/CDC debt refinance loans in FY2020), a funding fee (not to exceed 0.25% of the debenture), an annual development company fee (0.125% of the debenture's outstanding principal balance), and a one-time participation fee (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). In addition, CDCs are allowed to charge borrowers a processing (or packaging) fee of up to 1.5% of the net debenture proceeds and a closing fee, servicing fee, late fee, assumption fee, Central Servicing Agent (CSA) fee, other agent fees, and an underwriters' fee. In FY2019, the SBA approved 6,099 504/CDC loans to 6,008 small businesses totaling nearly $5.0 billion. In FY2019, 212 CDCs provided at least one 504/CDC loan. <3.8. 504/CDC Refinancing Program> During the Great Recession (2007-2009), Congress authorized the SBA to temporarily allow, under specified circumstances, the use of 504/CDC program funds to refinance existing commercial debt (e.g., not from SBA-guaranteed loans) for business expansion under the 504/CDC program. In 2010, Congress authorized, for two years, the expansion of the types of projects eligible for refinancing of existing debt under the 504/CDC program to include projects not involving business expansion, provided the projects met specific criteria. In the 114 th Congress, Congress 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. Specifically, each CDC is required to limit its refinancing so that, during any fiscal year, the new refinancing does 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. Commercial loans eligible for the 504/CDC Refinancing program being used to finance long-term fixed asset debt cannot have a loan-to-value (LTV) ratio of more than 90% of the fair market value of the eligible fixed asset(s) serving as collateral. Loans that are used to partly refinance eligible business operating expenses (e.g., salaries, rent, utilities) cannot exceed an LTV ratio of more than 85% of the fair market value of the collateral. The fees associated with the 504/CDC Refinancing program are the same as the 504/CDC Loan Guaranty program except the ongoing guaranty servicing fee may vary. In FY2020, the annual guaranty servicing fee is 0.3205% for regular 504/CDC loans and 0.322% for 504/CDC debt refinance loans. In FY2019, the SBA approved 166 refinancing loans totaling $154.8 million. <3.9. The Microloan Program72> The Microloan program provides direct loans to qualified nonprofit intermediary Microloan lenders that, in turn, provide "microloans" of up to $50,000 to small businesses and nonprofit child care centers. Microloan lenders also provide marketing, management, and technical assistance to Microloan borrowers and potential borrowers. The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, by P.L. 105-135 , the Small Business Reauthorization Act of 1997. Although the program is open to all small businesses, it targets new and early stage businesses in underserved markets, including borrowers with little to no credit history, low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who generally do not qualify for conventional loans or other, larger SBA guaranteed loans. Microloans can be used for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. Loans cannot be made to acquire land or property. Loan terms are up to seven years. The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate, adjusted to the nearest one-eighth percent (called the Base Rate), less 1.25% if the intermediary maintains a historic portfolio of Microloans averaging more than $10,000 and less 2.0% if the intermediary maintains a historic portfolio of Microloans averaging $10,000 or less. The Base Rate, after adjustment, is called the Intermediary's Cost of Funds. The Intermediary's Cost of Funds is initially calculated one year from the date of the note and is reviewed annually and adjusted as necessary (called recasting). The interest rate cannot be less than zero. On loans of more than $10,000, the maximum interest rate that can be charged to the borrower is the interest rate charged by the SBA on the loan to the intermediary, plus 7.75%. On loans of $10,000 or less, the maximum interest rate that can be charged to the borrower is the interest charged by the SBA on the loan to the intermediary, plus 8.5%. Rates are negotiated between the borrower and the intermediary and typically range from 7% to 9%. The SBA does not charge intermediaries up-front or ongoing service fees under the Microloan program. In FY2019, 5,533 small businesses received a Microloan, totaling $81.5 million. The average Microloan was $14,735 and the average interest rate was 7.5%. <3.10. SBA Loan Enhancements to Address the Great Recession> Many of the proposals under consideration to address the capital needs of small businesses adversely affected by the COVID-19 pandemic were used to address the severe economic slowdown during and immediately following the Great Recession (2007-2009). The main difference is that given the unique nature of the COVID-19 pandemic's impact on households, especially physical distancing and the resulting decrease in consumer spending, there is an added emphasis today on SBA loan deferrals, loan forgiveness, and expanded eligibility, including, for the first time, specified types of nonprofit organizations. During the 111 th Congress, P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the SBA an additional $730 million, including $375 million to temporarily subsidize the 7(a) and 504/CDC loan guaranty programs' fees ($299 million) and to temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% ($76 million). ARRA also included provisions designed to increase the amount of leverage issued under the SBA's Small Business Investment Company (SBIC venture capital) program. SBICs provide loans and equity investments in small businesses. ARRA's funding for the fee subsidies and 90% maximum loan guaranty percentage was about to be exhausted in November 2009, when Congress passed the first of six laws to provide additional funding to extend the loan subsidies and 90% maximum loan guaranty percentage. P.L. 111-118 , the Department of Defense Appropriations Act, 2010, provided the SBA $125 million to continue the fee subsidies and 90% maximum loan guaranty percentage through February 28, 2010. P.L. 111-144 , the Temporary Extension Act of 2010, provided the SBA $60 million to continue the fee subsidies and 90% maximum loan guaranty percentage through March 28, 2010. P.L. 111-150 , an act to extend the Small Business Loan Guarantee Program, and for other purposes, provided the SBA authority to reprogram $40 million in previously appropriated funds to continue the fee subsidies and 90% maximum loan guaranty percentage through April 30, 2010. P.L. 111-157 , the Continuing Extension Act of 2010, provided the SBA $80 million to continue the SBA's fee subsidies and 90% maximum loan guaranty percentage through May 31, 2010. P.L. 111-240 , the Small Business Jobs Act of 2010, provided $505 million (plus an additional $5 million for administrative expenses) to continue the SBA's fee subsidies and 90% maximum loan guaranty percentage from the act's date of enactment (September 27, 2010) through December 31, 2010. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to use funds provided under the Small Business Jobs Act of 2010 to continue the SBA's fee subsidies and 90% maximum loan guaranty percentage through March 4, 2011, or until available funding is exhausted. On January 3, 2011, the SBA announced that the fee subsidies and 90% maximum guarantee percentage ended because funding for these enhancements had been exhausted. In addition to providing additional funding for fee subsidies, P.L. 111-240 , among other provisions increased the 7(a) program's gross loan limit from $2 million to $5 million; increased the 504/CDC Program's loan 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 eligibility for low-interest refinancing under the SBA's 504/CDC program for qualified debt; temporarily increased for one year the SBAExpress Program's loan limit from $350,000 to $1 million (expired on September 26, 2011); increased the Microloan Program's loan limit for borrowers from $35,000 to $50,000; and increased the loan limits for Microloan intermediaries after their first year in the program from $3.5 million to $5 million; authorized the U.S. Treasury to make up to $30 billion of capital investments for a Small Business Lending Fund ($4 billion was issued); authorized to be appropriated $1.5 billion for the State Small Business Credit Initiative Program; authorized a three-year Intermediary Lending Pilot Program to allow the SBA to make direct loans to not more than 20 eligible nonprofit lending intermediaries each year totaling not more than $20 million. The intermediaries, in turn, would be allowed to make loans to new or growing small businesses, not to exceed $200,000 per business; established an alternative size standard for the 7(a) and 504/CDC loan programs to enable more small businesses to qualify for assistance; and provided small businesses with about $12 billion in tax relief. There were also efforts during the 111 th and 112 th Congresses to require the SBA to reinstate direct lending to small businesses. During the 111 th Congress H.R. 3854 , the Small Business Financing and Investment Act of 2009, was passed by the House on October 29, 2009, by a vote of 389-32. It would have authorized a temporary SBA direct lending program. During the 112 th Congress H.R. 3007 , the Give Credit to Main Street Act of 2011, introduced on September 21, 2011, and referred to the House Committee on Small Business, would have authorized the SBA to provide direct loans to small businesses that have been in operation as a small business for at least two years prior to its application for a direct loan. The maximum loan amount would have been the lesser of 10% of the firm's annual revenues or $500,000. H.R. 5835 , the Veterans Access to Capital Act of 2012, introduced on May 18, 2012, and referred to the House Committee on Small Business, would have authorized the SBA to provide up to 20% of the annual amount available for guaranteed loans under the 7(a) and 504/CDC loan guaranty programs, respectively, in direct loans to veteran-owned and -controlled small businesses. <3.11. Current Issues, Debates, and Lessons Learned> During the 111 th Congress (2009-2010), there was a consensus in Congress that the federal government had to take decisive action to address the capital needs of small businesses, primarily as a means to promote job retention and creation. Similar sentiments are being expressed today as Congress considers proposals to assist small businesses adversely affected by the COVID-19 pandemic. Many Members of Congress argued during the 111 th Congress that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation. Given the coronavirus's widespread adverse economic impact, including productivity losses, supply chain disruptions, labor dislocation, and financial pressure on businesses and households, there has been relatively little concern expressed about federal fiscal restraint during the current pandemic. The debate has been primarily over which specific policies would have the greatest impact and which types of small businesses and small business owners should be helped the most. As mentioned, many of the enhancements to the SBA's capital access programs that were made during the 111 th Congress, such as increasing loan limits, providing fee subsidies, increasing loan guaranty percentages, and expanding eligibility criteria are being considered again. These changes had a demonstrated impact on small business lending during and immediately following the Great Recession. SBA lending increased. For example, the SBA's OIG found that SBA 7(a) loan approvals increased 39% and 504/CDC loan approval increased 73% from March to July 2009, largely due to ARRA's fee reductions and increased loan guarantee percentages. Lending volume remained below pre-recession levels, but was much higher than before the fee reductions and increase in the loan guarantee percentage were implemented. The OIG also noted that the increased loan volume "may be impacting Agency staffing requirements and program risk.... Without adequate training and supervision, the increased demands on loan center staff could impact the quality of Agency loan reviews." Also, in 2012, the SBA issued a press release lauding P.L. 111-240 's impact on SBA loan volume: With loan volume steadily increasing for the past six quarters, the U.S. Small Business Administration's loan programs posted the second largest dollar volume ever in FY 2012, supporting $30.25 billion in loans to small businesses. That amount was surpassed only by FY 2011, which was heavily boosted by the loan incentives under the Small Business Jobs Act of 2010. The data demonstrate that ARRA and the Small Business Jobs Act of 2010 helped small businesses access capital. However, because the SBA primarily gathers data on program output (e.g., loan volume, number of small businesses served, default rates) as opposed to program outcomes (e.g., small business solvency, job creation, wealth generation) it is difficult to know how effective these programs were in assisting small businesses or if other approaches might have produced better (or different) results. Among the lessons learned from earlier small business stimulus packages is that additional funding for the SBA OIG to conduct oversight of the SBA's implementation of stimulus changes could help Congress in its oversight responsibilities. Additional funding for the SBA OIG to conduct investigations of potentially fraudulent behaviors by borrowers and lenders could also prove useful in deterring fraud, waste, and abuse. In addition, requiring the SBA to periodically report to Congress and on its website both output and outcome performance data could help Congress in its oversight responsibilities and assure the public that the taxpayer's dollars are being spent both efficiently and effectively. <4. SBA Entrepreneurial Development Programs85> <4.1. Overview> The SBA has provided technical and managerial assistance to small businesses since it began operations in 1953. Initially, the SBA provided its own small business management and technical assistance training programs. Over time, the SBA has relied increasingly on third parties to provide that training. Congressional interest in the SBA's management and technical assistance training programs has increased in recent years, primarily because these programs are viewed as a means to assist small businesses create and retain jobs. The FY2020 budget appropriated $239 million, funding about 14,000 resource partners, including 63 lead small business development centers (SBDCs) and nearly 900 SBDC local outreach locations, 125 women's business centers (WBCs), and 350 chapters of the mentoring program, SCORE. The SBA reports that nearly a million aspiring entrepreneurs and small business owners receive mentoring and training from an SBA-supported resource partner each year. Most of this training is free, and some is offered at low cost. The Department of Commerce also provides management and technical assistance training for small businesses. For example, its Minority Business Development Agency provides training to minority business owners to assist them in obtaining contracts and financial awards. <4.2. Small Business Development Centers> SBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small businesses in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. SBDCs are funded by SBA grants and matching funds equal to the grant amount. SBDC funding is allocated on a pro rata basis among the states (including the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa) by a statutory formula "based on the percentage of the population of each State, as compared to the population of the United States." If, as is currently the case, SBDC funding exceeds $90 million, the minimum funding level is "the sum of $500,000, plus a percentage of $500,000 equal to the percentage amount by which the amount made available exceeds $90 million." There are 63 lead SBDC service centers, one located in each state (four in Texas and six in California), the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa. These centers manage more than 900 SBDC outreach locations. In FY2020, the SBA was provided $135 million for SBDC grants through the regular appropriations process and an additional $192 million in supplemental funding for SBDC grants in the CARES Act. In FY2019, SBDCs provided technical assistance training and counseling services to 254,821 unique SBDC clients, and 17,810 new businesses were started largely as a result of SBDC training and counseling. <4.3. Microloan Technical Assistance> Congress authorized the SBA's Microloan lending program in 1991 ( P.L. 102-140 , the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1992) to address the perceived disadvantages faced by women, low-income, veteran, and minority entrepreneurs and business owners gaining access to capital to start or expand their business. The program became operational in 1992. Initially, the SBA's Microloan program was authorized as a five-year demonstration project. It was made permanent, subject to reauthorization, by P.L. 105-135 , the Small Business Reauthorization Act of 1997. The SBA's Microloan Technical Assistance Program is affiliated with the SBA's Microloan lending program but receives a separate appropriation. This program provides grants to Microloan intermediaries for management and technical training assistance to Microloan program borrowers and prospective borrowers. There are currently 144 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico. Under the Microloan program, intermediaries are eligible to receive a Microloan technical assistance grant "of not more than 25% of the total outstanding balance of loans made to it." Grant funds may be used only to provide marketing, management, and technical assistance to Microloan borrowers, and no more than 50% of the funds may be used to provide such assistance to prospective Microloan borrowers and no more than 50% of the funds may be awarded to third parties to provide that technical assistance. Grant funds also may be used to attend required training. In most instances, intermediaries must contribute, solely from nonfederal sources, an amount equal to 25% of the grant amount. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind contributions paid for under nonfederal programs. The SBA does not require Microloan borrowers to participate in the Microloan Technical Assistance Program. However, intermediaries typically require Microloan borrowers to participate in the training program as a condition of the receipt of a microloan. Combining loan and intensive management and technical assistance training is one of the Microloan program's distinguishing features. The SBA was provided $34.5 million for Microloan Technical Assistance grants in FY2020. <4.4. Women's Business Centers> The WBC Renewable Grant Program was initially established by P.L. 100-533 , the Women's Business Ownership Act of 1988, as the Women's Business Demonstration Pilot Program, targeting the needs of socially and economically disadvantaged women. The act directed the SBA to provide financial assistance to private, nonprofit organizations to conduct demonstration projects giving financial, management, and marketing assistance to small businesses, including start-up businesses, owned and controlled by women. The WBC program was expanded and provided permanent legislative status by P.L. 109-108 , the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006. Since the program's inception, the SBA has awarded WBCs a grant of up to $150,000 per year. WBC initial grants are currently awarded for up to five years, consisting of a base period of 12 months from the date of the award and four 12-month option periods. The SBA determines if the option periods are exercised and makes that determination subject to the continuation of program authority, the availability of funds, and the recipient organization's compliance with federal law, SBA regulations, and the terms and conditions specified in a cooperative agreement. WBCs that successfully complete the initial five-year grant period may apply for an unlimited number of three-year funding intervals. During their initial five-year grant period, WBCs are required to provide a nonfederal match of one nonfederal dollar for each two federal dollars in years one and two (1:2), and one nonfederal dollar for each federal dollar in years three, four, and five (1:1). After the initial five-year grant period, the matching requirement in subsequent three-year funding intervals is not more than 50% of federal funding (1:1). The nonfederal match may consist of cash, in-kind, and program income. Today, there are 125 WBCs located throughout most of the United States and the territories. In FY2019, WBCs provided technical assistance training and counseling services to 64,527 unique WBC clients, and 2,087 new businesses were started largely as a result of WBC training and counseling. In FY2020, the SBA was provided $22.5 million for WBC grants in the regular appropriations process and an additional $48 million in supplemental funding for WBC grants in the CARES Act. <4.5. SCORE (formerly the Service Corps of Retired Executives)> SCORE was established on October 5, 1964, by then-SBA Administrator Eugene P. Foley as a national, volunteer organization, uniting more than 50 independent nonprofit organizations into a single, national nonprofit organization. The SBA currently provides grants to SCORE to provide in-person mentoring, online training, and "nearly 9,000 local training workshops annually" to small businesses. SCORE's 350 chapters and more than 800 branch offices are located throughout the United States and partner with more than 10,000 volunteer counselors, who are working or retired business owners, executives and corporate leaders, to provide management and training assistance to small businesses "at no charge or at very low cost." In FY2019, SCORE provided technical assistance training and counseling services to 195,242 unique SCORE clients, and 480 new businesses were started largely as a result of SCORE training and counseling. In FY2020, the SBA was provided $11.7 million for SCORE grants. <4.6. Current Issues, Debates and Lessons Learned> Congress provided additional funding for SBA entrepreneurial development programs during and immediately following the Great Recession. For example, ARRA provided an additional $24 million for Microloan Technical Assistance grants. The Small Business Jobs Act of 2010 provided SBDCs an additional $50 million and temporarily waived SBDC, Microloan Technical Assistance, and WBC matching requirements. Similar proposals have been made to address the COVID-19 pandemic. For example, S. 3518 , the COVID-19 RELIEF for Small Businesses Act of 2020, as introduced, would provide an additional $150 million for SBA's entrepreneurial development programs, including $40 million for SBDCs, $18.75 for WBCs, $1 million to SCORE, and $50 million for M icroloan T echnical A ssistance grants . The bill also would waive SBDC , Microloan Technical Assistance, and WBC grant matching requirements . The CARES Act appropriates $265 million for entrepreneurial development programs ($192 million for SBDCs, $48 million for WBCs, and $25 million for SBA resource partners to provide online information and training). The act also waives SBDC and WBC matching requirements. Congress could require the SBA's resource partners to report to the SBA both output and outcome performance data for these grants and to require the SBA to report that information to Congress and make that information available to the public on the SBA website. <5. SBA Contracting Programs109> <5.1. Overview> Federal agencies are required to facilitate the maximum participation of small businesses as prime contractors, subcontractors, and suppliers. For example, federal agencies are generally required to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased. Several SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs, subcontracting programs, and other assistance (e.g., contracting technical training assistance and oversight of the federal small business goaling program and the Surety Bond Guarantee program). <5.2. 8(a) Program112> The SBA's 8(a) Minority Small Business and Capital Ownership Development Program provides business development assistance to businesses owned and controlled by persons who are socially and economically disadvantaged, have good character, and demonstrate a potential for success. Although the 8(a) Program was originally established in the 1980s for the benefit of disadvantaged individuals, Congress expanded the program to include small businesses owned by four disadvantaged groups. Small businesses owned by Alaska Native Corporations (ANCs), Community Development Corporations (CDCs), Indian tribes, and Native Hawaiian Organizations (NHOs) are also eligible to participate in the 8(a) Program under somewhat different requirements. Federal agencies are authorized to award contracts for goods or services, or to perform construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate the function of executing contracts to the procuring agencies and often does so. Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded through either a restricted competition limited to just 8(a) participants (a set aside) or on a sole source basis, with the contract amount generally determining the acquisition method used. For individually owned small businesses, when the contract's anticipated total value, including any options, is less than $4 million ($7 million for manufacturing contracts), the contract is normally awarded without competition (as a sole source award). In contrast, when the contract's anticipated value exceeds these thresholds, the contract generally must be awarded via a set aside with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price. Similar to other participants, firms owned by ANCs, CDCs, NHOs, and Indian tribes are eligible for 8(a) set asides and may receive sole source awards valued at less than $4 million ($7 million for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also receive sole source awards in excess of $4 million ($7 million for manufacturing contracts) even when contracting officers reasonably expect that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price. NHO-owned firms may receive sole source awards from the Department of Defense under the same conditions. The 8(a) program is designed to help federal agencies achieve their statutory goal of awarding at least 5% of their federal contracting dollars to small disadvantaged businesses. In FY2018, the federal government awarded $29.5 billion to 8(a) firms. <5.3. Historically Underutilized Business Zone Program117> The SBA oversees the Historically Underutilized Business Zones (HUBZones) Program. The program assists small businesses located in HUBZone-designated areas through set asides, sole source awards (so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million, or $7 million for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open competitions. The HUBZone program targets assistance to small businesses located in areas with low income, high poverty, or high unemployment. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone. The HUBZone contracting program is designed to help federal agencies achieve their statutory goal of awarding at least 3% of their federal contracting dollars to HUBZone small businesses. In FY2018, the federal government awarded $9.8 billion to HUBZone-certified small businesses. <5.4. Service-Disabled Veteran-Owned Small Business Program> The SBA oversees the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program. The program allows agencies to set aside contracts for SDVOSBs. Federal agencies may award sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). For purposes of this program, veterans with service-related disabilities are defined as they are under the statutes governing veterans affairs. The SDVOSB contracting program is designed to help federal agencies achieve their statutory goal of awarding at least 3% of their federal contracting dollars to SDVOSBs. In FY2018, the federal government awarded $22.5 billion to SDVOSBs. <5.5. Women-Owned Small Business Program> The SBA oversees the Women-Owned Small Businesses (WOSB) Program. Under this program, federal contracting officers may set aside federal contracts (or orders) for WOSBs and Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) in industries in which the SBA determines WOSBs are substantially underrepresented in federal procurement. Federal contracting officers can also set aside federal contracts for EDWOSBs exclusively in industries in which the SBA determines WOSBs are underrepresented in federal procurement. The WOSB Program is designed to help federal agencies achieve their statutory goal of awarding at least 5% of their federal contracting dollars to WOSBs. Federal agencies may award sole source contracts to WOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). In FY2018, the federal government awarded $23.4 billion to WOSBs. <5.6. SBA Surety Bond Program123> The SBA's Surety Bond Guarantee Program has been operational since April 1971. It is designed to increase small business' access to federal, state, and local government contracting, as well as private sector contracting, by guaranteeing bid, performance, payment, and specified ancillary bonds "on contracts for small and emerging contractors who cannot obtain bonding through regular commercial channels." The program guarantees individual contracts of up to $6.5 million, and up to $10 million for federal contracts if a federal contracting officer certifies that such a guarantee is necessary. The $6.5 million limit is periodically adjusted for inflation. The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs. In FY2019, the SBA guaranteed 9,905 bid and final surety bonds (a payment bond, performance bond, or both a payment and performance bond) with a total contract value of nearly $6.5 billion. A surety bond is a three-party instrument between a surety (who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. Surety bonds encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions. Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government. <5.7. Current Issues, Debates and Lessons Learned> Congress included enhancements for small business contracting in both ARRA (increased funding and higher maximum bond amounts for the SBA Surety Bond program) and the Small Business Jobs Act of 2010 (new restrictions on the consolidation or bundling of contracts that make it more difficult for small businesses to be awarded the contract). The CARES Act authorizes federal agencies to modify a contract's terms and conditions to reimburse contractors at the minimum billing rate not to exceed an average of 40 hours per week for any paid leave (including sick leave) the contractor provides to keep its employees or subcontractors in a ready state through September 30, 2020. Eligible contractors are those whose employees or subcontractors cannot perform work on a federally-approved site due to facility closures or other restrictions because of COVID-19 and cannot telework because their job duties cannot be performed remotely. <6. Concluding Observations> In response to the Great Recession, Congress took a number of actions to enhance small businesses' access to capital, management and training programs, and contracting opportunities. The goal then, as it is now, was to provide small businesses with the resources necessary to survive the economic downturn and retain or create jobs. Some of the CARES Act's provisions (e.g., fee waivers, increased loan limits, and increased guarantee percentages) were used in legislation passed during the 111 th Congress to address the severe economic slowdown during and immediately following the Great Recession (2007-2009). The main difference between that legislation and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness, and greatly expanded eligibility, including, for the first time, specified types of nonprofit organizations. The CARES Act's inclusion of loan deferral and forgiveness is, at least partly, due to the unique economic dislocations and reduction in consumer spending resulting from individuals and households engaging in physical distancing to avoid COVID-19 infection. As mentioned, because COVID-19's adverse economic impact is so widespread, including productivity losses, supply chain disruptions, labor dislocation, and financial pressure on businesses and households, there has been relatively little concern expressed about federal fiscal restraint during the current pandemic. The debate has been primarily over which specific policies would have the greatest impact and which types of small businesses and small business owners should be helped the most. Among the lessons learned from the 111 th Congress is the potential benefits that can be derived from providing additional funding for the SBA's Office of Inspector General and the Government Accountability Office. GAO and the SBA's OIG can provide Congress information that could prove useful as Congress engages in congressional oversight of the SBA's administration of the CARES Act, provide an early warning if unforeseen administrative problems should arise, and, through investigations and audits, serve as a deterrent to fraud. Requiring the SBA to report regularly on its implementation of the CARES Act could also promote transparency and assist Congress in performing its oversight responsibilities. In addition, requiring output and outcome performance measures and requiring the SBA to report this information directly to both Congress and the public by posting that information on the SBA's website could enhance both congressional oversight and public confidence in the SBA's efforts to assist small businesses. <6.1. Appendix. Major Provisions of the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act, and the HEROES Act> The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) established a Paycheck Protection Program (PPP) to provide "covered loans" with a 100% SBA loan guarantee, a maximum term of 10 years, and an interest rate not to exceed 4% to assist small businesses and other organizations adversely affected by the Coronavirus Disease 2019 (COVID-19). The SBA announced that PPP loans will have a two-year term at a 1.0% interest rate; defines a covered loan as a loan made to an eligible recipient from February 15, 2020, through June 30, 2020; waives the up-front loan guarantee fee and annual servicing fee, the no credit elsewhere requirement, and the requirements for collateral and a personal guarantee for a covered loan; expands eligibility for a covered loan to include 7(a) eligible businesses and any business, 501(c)(3) nonprofit organization, 501(c)(19) veteran's organization, or tribal business not currently eligible that has not more than 500 employees or, if applicable, the SBA's size standard in number of employees for the industry in which they operate. Sole proprietors, independent contractors, and eligible self-employed individuals are also eligible to receive a covered loan; increases the maximum loan amount for a covered loan to the lesser of (1) 2.5 times the average total monthly payments by the applicant for payroll costs incurred during the one-year period before the date on which the loan is made plus the outstanding balance of any 7(a) loan (made on or after January 31, 2020) that is refinanced as part of a covered loan, or (2) $10 million; allows borrowers to refinance 7(a) loans (made on or after January 31, 2020) as part of a covered loan; specifies that covered loans are nonrecourse (meaning that the SBA cannot pursue collections actions against the recipient(s) in the case of nonpayment) except to the extent that the covered loan proceeds are used for nonauthorized purposes; allows covered loans to be used for payroll costs, costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, employee salaries, commissions, or similar compensations, mortgage payments, rent, utilities, and interest on any other debt obligations that were incurred before the covered period; expands lender delegated loan approval authority for making covered loans to all 7(a) lenders to expedite PPP loan processing; requires lenders, when evaluating borrower eligibility for a covered loan, to consider whether the borrower was in operation on February 15, 2020, had employees for whom the borrower paid salaries and payroll taxes, and paid independent contractors; requires borrowers to, among other acknowledgements, make a good faith certification that the covered loan is needed because of the uncertainty of current economic conditions and to support ongoing operations, and acknowledge that the funds will be used to retain workers, maintain payroll, or make mortgage payments, lease payments, and utility payments; requires lenders to provide "impacted borrowers" adversely affected by COVID-19 "complete payment deferment relief" on a covered PPP loan for not less than six months and not more than one year if the borrower was in operation on February 15, 2020, and has an application for a covered loan approved or pending approval on or after the date of enactment. The SBA announced that covered loan payments will be deferred for six months. However, interest will continue to accrue on these loans during the six-month deferment; presumes that each eligible recipient that applies for a PPP loan is an impacted borrower and authorizes the SBA Administrator to purchase covered loans sold on the secondary market so that affected borrowers may receive a deferral for not more than one year. The SBA has announced that the deferment relief on covered loans will be for six months; provides for the forgiveness of covered loan amounts equal to the amount the borrower spent during an 8-week period after the loan's origination date on payroll costs, interest payment on any mortgage incurred prior to February 15, 2020, payment of rent on any lease in force prior to February 15, 2020, and payment on any utility for which service began before February 15, 2020. The amount of loan forgiveness cannot exceed the covered loan's principal amount. The forgiveness is reduced proportionally by formulas related to the borrower's retention of full-time equivalent employees compared to the borrower's choice of either: (1) the period beginning on February 15, 2019, and ending on June 30, 2019, or (2) January 1, 2020, and February 29, 2020; and by the amount of any reduction in pay of any employee beyond 25% of their salary or wages during the most recent full quarter before the covered period. Borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period. Cancelled debt resulting from loan forgiveness would not be included in the borrower's taxable federal income; The SBA has announced that due to likely high subscription, at least 75% of the forgiven loan amount must have been used for payroll; requires the SBA to pay the principal, interest, and any associated fees that are owed on an existing 7(a), 504/CDC, or Microloan that is in a regular servicing status for a six-month period starting on the next payment due. Loans that are already on deferment will receive six months of payment by the SBA beginning with the first payment after the deferral period. Loans made up until six months after enactment will also receive a full six months of SBA loan payments; requires federal banking agencies or the National Credit Union Administration Board applying capital requirements under their respective risk-based capital requirements to provide a covered loan with a 0%-risk weight; increases the SBA's lending authorization under Section 7(a) of the Small Business Act from $30 billion to $349 billion during the covered period; increases the SBAExpress loan limit from $350,000 to $1 million (reverts to $350,000 on January 1, 2021); permanently eliminates the zero subsidy requirement to waive SBAExpress loan fees for veterans; appropriates $349 billion for loan guarantees and subsidies (remaining available through FY2021), $675 million for the SBA's salaries and expenses account, $25 million for the SBA's Office of Inspector General (OIG), $265 million for entrepreneurial development programs ($192 million for SBDCs, $48 million for WBCs, and $25 million for SBA resource partners to provide online information and training), $17 billion for subsidies for certain loan payments, and $10 million for the Department of Commerce's Minority Business Development Agency; allows the period of use of FY2018 and FY2019 grant awards made under the State Trade Expansion Program (STEP) through FY2021; reimburses (up to the grant amount received) STEP award recipients for financial losses relating to a foreign trade mission or a trade show exhibition that was cancelled solely due to a public health emergency declared due to COVID-19; waives SBDC and WBC matching requirements; requires federal agencies to continue to pay small business contractors and revise delivery schedules, holding small contractors harmless for being unable to perform a contract due to COVID-19 caused interruptions until September 2021; requires federal agencies to promptly pay small business prime contractors and requires prime contractors to promptly pay small business subcontractors within 15 days, notwithstanding any other provision of law or regulation, for the duration of the President invoking the Defense Production Act in response to COVID-19; and provides SBA Emergency Injury Disaster Loan (EIDL) enhancements during the covered period of January 31, 2020, through December 31, 2020, including expanding eligibility beyond currently eligible small businesses, private nonprofit organizations, and small agricultural cooperatives, to include startups, cooperatives, and eligible ESOPs (employee stock ownership plans) with not more than 500 employees, sole proprietors, and independent contractors; authorizing the SBA Administrator, in response to economic injuries caused by COVID-19, to waive the no credit available elsewhere requirement, approve an applicant based solely on their credit score, not require applicants to submit a tax return or tax return transcript for approval, waive any rules related to the personal guarantee on advances and loans of not more than $200,000, waive the requirement that the applicant needs to be in business for the one-year period before the disaster declaration, except that no waiver may be made for a business that was not in operation on January 31, 2020; authorizing the SBA Administrator, through December 31, 2020, to provide up to $10,000 as an advance payment in the amount requested within three days after receiving an EIDL application from an eligible entity. Applicants are not required to repay the advance payment, even if subsequently denied an EIDL loan. The funds may be used for any eligible EIDL expense, including, among other expenses, providing paid sick leave to employees unable to work due to COVID-19, maintaining payroll to retain employees, and meeting increased costs to obtain materials due to supply chain disruptions. The SBA limited EIDL-advance payments to $1,000 per employee, up to a maximum of $10,000; and appropriating an additional $10 billion for EIDL assistance. The Paych eck Protection Program and Health Care Enhancement Act ( P.L. 116-139 ) increases the SBA's lending authorization under Section 7(a) of the Small Business Act from $349 billion during the covered period to $659 billion; requires that no less than $30 billion of this authorization amount be set aside for loans issued by insured depository institutions and credit unions with consolidated assets of $10 billion to $50 billion; requires that no less than $30 billion of this authorization amount be set aside for loans issued by community financial institutions (including community development financial institutions (CDFIs), minority depository institutions, SBA-certified development companies, and SBA microloan intermediaries), and insured depository institutions and credit unions with consolidated assets less than $10 billion; increases the PPP appropriation amount from $349 billion to $670.335 billion; appropriates an additional $50 billion for EIDL loans; appropriates an additional $10 billion for Emergency EIDL grants; appropriates an additional $2.1 billion for the SBA's salaries and expenses account (to remain available until September 30, 2021); and provides agricultural enterprises eligibility for Emergency EIDL grants and EIDL loans during the covered period (January 31, 2020 through December 31, 2020). The Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act; H.R. 6800 ) H.R. 6800 , would, among other provisions: expand the PPP loan covered period from June 30, 2020, to December 31, 2020; extend PPP eligibility to all 501(c) nonprofit organizations of all sizes; establish a minimum PPP loan maturity of five years; require, as of the date of enactment, that 25% of existing PPP funds be issued to small businesses with 10 or fewer employees; 25% of existing funds be issued to nonprofit organizations, with at least half of this amount going to nonprofit organizations with not more than 500 employees; and the lesser of 25% of existing PPP funds or $10 billion be issued to community financial institutions, such as Community Development Financial Institutions (CDFIs), SBA microloan intermediaries, and SBA-certified development companies; establish technical assistance grants for small community financial institutions with assets of less than $10 billion; bifurcate the SBA's lending authority for the 7(a) and PPP programs; increase the SBA's 7(a) loan authorization amount from $30 billion to $75 billion for FY2020; provide SCORE and veterans business outreach centers eligibility for $10 million each from the CARES Act's $265 million entrepreneurial development resource partners grant program; amend the PPP loan forgiveness by extending the 8-week period to the earlier of 24 weeks or December 31, 2020, mandate loan forgiveness data collection and reporting, and eliminate the 75%/25% rule on the use of loan proceeds; allow certain previously incarcerated individuals to be approved for PPP and SBA disaster loans; temporarily increase, for FY2020, the 7(a) loan program guaranty from up to 75% for loans with an outstanding loan balance exceeding $150,000 and 85% for loans with an outstanding loan balance of $150,000 or less to 90% of the outstanding loan balance; temporarily increase, through December 31, 2020, the SBAExpress loan guaranty from not more than 50% of the outstanding loan balance to not more than 90% of the outstanding loan balance on loans up to $350,000 and not more than 75% of the outstanding loan balance on loans greater than $350,000; temporarily reduce, for FY2020, 7(a) and 504/CDC fees to the maximum extent possible given available appropriations; temporarily increase, for FY2020, the maximum 7(a) loan amount from $5 million to $10 million and the maximum 504/CDC loan amount from $5.5 million to $10 million; and permanently increase the 504/CDC maximum loan amount for small manufacturers from $5.5 million to $10 million; authorize, for each of fiscal years 2021-2025, $80 million for Microloan technical assistance grants and $110 million for Microloan; and authorize to be appropriated during FY2020, to remain available until expended, $50 million for Microloan technical assistance grants and $7 million for Microloans; appropriate $500 million for fee reductions and guaranty and maximum loan amount increases; and appropriate $10 billion for Emergency EIDL grants.

The U.S. Small Business Administration (SBA) administers several types of programs to support small businesses, including direct disaster loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; loan guaranty and venture capital programs to enhance small business access to capital; small business management and technical assistance training programs to assist business formation and expansion; and contracting programs to increase small business opportunities in federal contracting. Congressional interest in these programs has always been high, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs, but it has become especially acute in the wake of the Coronavirus Disease 2019 (COVID-19) pandemic's widespread adverse economic impact on the national economy, including productivity losses, supply chain disruptions, major labor dislocation, and significant financial pressure on both businesses and households. This report provides a brief description of the SBA's programs, examines congressional action to assist small businesses during and immediately following the Great Recession (2007-2009), and discusses legislation to assist small businesses adversely affected by the COVID-19 pandemic, including P.L. 116-123 , the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, which provided the SBA an additional $20 million for SBA disaster assistance administrative expenses and deemed the coronavirus to be a disaster under the SBA's Economic Injury Disaster Loan (EIDL) program. This change made economic injury from the coronavirus an eligible EIDL expense. P.L. 116-136 , the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which, among other provisions, created the Paycheck Protection Program (PPP) to provide "covered loans" with a 100% SBA loan guarantee, a maximum term of 10 years, and an interest rate not to exceed 4% to assist small businesses, small 501(c)(3) nonprofit organizations, and small 501(c)(19) veterans organizations that have been adversely affected by COVID-19. The act also provides for loan deferment and forgiveness under specified conditions. A c overed loan is defined as a loan made to an eligible recipient from February 15, 2020, through June 30, 2020. The SBA announced that PPP loans will have a two-year term at an interest rate of 1.0%. P.L. 116-139 , the Paycheck Protection Program and Health Care Enhancement Act (Enhancement Act), among other provisions, appropriates an additional $321.335 billion for the PPP. H.R. 6800 , the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), among other provisions, would expand PPP eligibility and provide small businesses additional flexibility by extending the PPP loan forgiveness covered period from eight weeks to the earlier of 24 weeks or December 31, 2020 . Some of the CARES Act's provisions (e.g., fee waivers, increased loan limits, and increased guarantee percentages) were used in legislation passed during the 111 th Congress to address the severe economic slowdown during and immediately following the Great Recession (2007-2009). The main difference between that legislation and the CARES Act is that the CARES Act includes loan deferrals, loan forgiveness, and greatly expanded eligibility, including, for the first time, specified types of nonprofit organizations. The SBA started accepting PPP loan applications on April 3, 2020. Because the SBA neared its $349 billion authorization limit for section 7(a) lending, which includes the PPP, the SBA stopped accepting new PPP loan applications on April 15. The SBA started accepting PPP loan applications once again on April 27, following the Enhancement Act's enactment on April 24, 2020. The act increased the SBA's section 7(a) loan authorization limit from $349 billion to $659 billion, and appropriated an additional $321.335 billion to support that level of lending. One lesson learned from the actions taken during the 111 th Congress to assist small businesses during and immediately following the Great Recession is the potential benefits that can be derived from providing additional funding for the SBA's Office of Inspector General (OIG) and the Government Accountability Office (GAO). GAO and the SBA's OIG can provide Congress information that could prove useful as Congress engages in congressional oversight of the SBA's administration of legislation to address COVID-19's adverse economic impact on small businesses, provide an early warning if unforeseen administrative problems should arise, and, through investigations and audits, serve as a deterrent to fraud. Requiring the SBA to report regularly on its implementation of the CARES Act could promote transparency and assist Congress in performing its oversight responsibilities. In addition, requiring both output and outcome performance measures and requiring the SBA to report this information to Congress and the public by posting that information on the SBA's website could enhance congressional oversight and public confidence in the SBA's efforts to assist small businesses.