SSA began as an independent agency with a mission of providing retirement benefits to the elderly. A three-member, independent Social Security Board was established in 1935 to administer the Social Security program. The Chairman of the Board reported directly to the President until July 1939, when the Board was placed under the newly established Federal Security Agency (FSA). At that time, the Social Security program was expanded to include Survivors Insurance, which paid monthly benefits to survivors of insured workers. In 1946, the Social Security Board was abolished, and its functions were transferred to the newly established SSA, which was still within FSA. The FSA administrator established the position of Commissioner to head SSA. The FSA was abolished in 1953, and its functions were transferred to the Department of Health, Education and Welfare (HEW). In addition, the position of SSA Commissioner was designated a presidential appointee position requiring Senate confirmation. The Social Security program was expanded in 1956 to include the DI program, providing benefits to covered workers who became unable to work because of disability. In 1965, amendments to the Social Security Act increased SSA’s scope and complexity by establishing the health insurance program known as Medicare. The purpose of Medicare was to help the qualified elderly and disabled pay their medical expenses. SSA administered the Medicare program for about 12 years before Medicare was transferred to a new division within HEW, the Health Care Financing Administration. Further amendments to the Social Security Act created the SSI program, effective in 1974. This program was designed to replace welfare programs for the aged, blind, and disabled administered by the states. The SSI program added substantially to SSA’s responsibilities because the agency began dealing directly with SSI clients by determining recipients’ eligibility based on income and assets. SSA remained a part of HHS (formerly HEW) from 1953 until its independence in 1995. Since 1984, congressional committees responsible for overseeing SSA’s activities had considered initiatives to make SSA an independent agency. Although the reasons for considering independence for SSA have varied over the years, such legislation was introduced in several sessions of the Congress. Statements by committee chairmen have shown a desire to make SSA more accountable to the public for its actions and more responsive to the Congress’ attempts to address SSA’s management and policy concerns. As noted earlier, legislation was enacted that made SSA independent as of March 31, 1995. At this time of heightened attention to the costs and effectiveness of all federal programs, the Congress and the administration have acted to promote a more efficient federal government that stresses managing for results and accountability. These efforts include the Chief Financial Officers Act of 1990 (CFO Act), the Government Performance and Results Act of 1993 (GPRA), and the Government Management Reform Act of 1994 (GMRA). In addition, the administration has undertaken, under the Vice President’s direction, the National Performance Review (NPR), aimed at making government work better and cost less. We strongly support these efforts as important and necessary steps to improving federal management. SSA has surpassed many other federal agencies in these areas. For example, as a pilot agency under GPRA, SSA has worked to strengthen its strategic management process and to identify and develop performance measures that help its managers, the Congress, and the public assess its performance. In addition, for several years now, it has measured satisfaction levels among some of its customers and used focus groups to understand its customers’ and employees’ views, reflecting the customer service focus promoted by NPR. SSA is also a leader among federal agencies in producing complete, accurate, and timely financial statements as required by the CFO Act and GMRA. For example, for fiscal year 1995, SSA issued audited financial statements 3 months before its legal mandate. Moreover, SSA was among the first federal agencies to produce an accountability report, which is designed to consolidate current reporting requirements under various laws and provide a comprehensive picture of an agency’s program performance and its financial condition. To be most effective, SSA’s ongoing efforts in strategic management, performance measurement, and accountability reporting will need to be continually improved and integrated into the agency’s daily operations and management. SSA has a foundation in place on which it can build to manage the significant policy and program challenges it faces in the future. As the baby boom generation ages, growing numbers of people will receive Social Security retirement and survivors benefits in the years to come, as shown in figure 1. By the year 2015—as baby boomers begin entering their mid-60s—the numbers of individuals receiving benefits will reach an estimated 50.4 million: more than one-third greater than the 37.4 million people receiving Social Security retirement and survivors benefits in 1995. Once on the rolls, retirees can be expected to receive benefits for longer time periods than past recipients. A 65-year-old male who began receiving Social Security benefits in 1940—the first year SSA began paying monthly benefits—was expected to live, on average, about an additional 12 years. By 2015, a 65-year-old male will have a life expectancy of 16 years—a 35-percent increase. During that same time period, the life expectancy for women aged 65 will increase by almost 50 percent—from an average of over 13 years to an average of nearly 20 years. Meanwhile, the ratio of contributing workers to beneficiaries will decline. By 2015, an estimated 2.6 workers will be paying taxes into the Social Security system per beneficiary; in 1950, 16.5 workers were paying Social Security taxes per beneficiary. This retirement explosion threatens the long-term solvency of the Social Security system. Beginning in 2012—16 years from now—program expenditures are projected to exceed tax income. By 2029, without corrective legislation, the trust funds are expected to be depleted, leaving insufficient funds to pay the expected level of retirement, survivors, and Disability Insurance (DI) benefits. Concerns about the long-term solvency of the Social Security system are fueling a public debate about the fundamental structure of this system. The Advisory Council on Social Security, for example, has put forth three different approaches to addressing the Social Security system’s long-term deficit. All three approaches call for some portion of Social Security payroll taxes to be invested in the stock market. Two of these approaches, however, call for allowing individuals to invest some portion of their payroll taxes in individual retirement accounts. This would be a significant departure from the original program design, in which all trust fund monies are invested and managed centrally. Given the magnitude of the financial problems facing the Social Security system and the nature of the proposals for changing the system, we can expect the debate over the financing and structure of the Social Security system to continue and intensify in the coming years. In our report on SSA’s transition to independence, we noted that the agency’s independence would heighten the need for it to work with the Congress in developing options for ensuring that revenues are adequate to make future Social Security benefit payments. More than a year after gaining independence, however, SSA is not yet ready to fully support policymakers in the current public debate on financing issues. SSA has been involved in financing issues through its Office of the Actuary, which has provided data and analyses to the Advisory Council and policymakers developing financing options. The Office of the Actuary plays a unique role within the agency because it serves both the Congress and the administration. SSA will also be providing assistance to the Social Security Advisory Board, which was established by the independence legislation to advise the Commissioner and make recommendations to the Congress and the President on SSA program policy. These supportive roles represent SSA’s major activities related to long-term financing issues. SSA has acknowledged that it has not undertaken the policy and research activities it needs to examine critical issues affecting its programs, including long-term financing, and to provide additional support to policymakers. The agency recognizes the need to be more active in these areas and in May 1996 took steps to reorganize and strengthen its policy analysis, research, and evaluation offices. It believes this reorganization will better position it to take a leadership role in critical policy and research issues related to its programs. At the time of our review, however, the reorganization had just begun, and the office responsible for coordinating all policy planning activities was only partially staffed. Although SSA did not have a specific time frame for when the reorganized policy office would be fully staffed and operational, it did expect to be better prepared to join the public debate over the next year. SSA is in a unique position to inform policymakers and the public about the critical nature of long-term financing issues. Focus groups conducted by SSA have demonstrated that the public’s knowledge of Social Security programs is generally low and the public’s confidence in the Social Security system is undermined by its future financing problems. To address these issues, SSA is conducting a public education campaign that discusses what the current system offers in disability, retirement, and survivors benefits. It also emphasizes that the Social Security system can pay benefits for many more years and that the Congress has time to act before the trust funds are depleted. SSA, however, is not discussing options for maintaining or changing the current system. Feedback SSA has received from its focus groups indicates that addressing the public’s lack of knowledge without also discussing possible options for ensuring the system’s future solvency does not instill confidence and weakens the agency’s credibility with the public. We are concerned that SSA has not seized the opportunity as an independent agency to speak out on the importance of addressing the long-term financing issues sooner rather than later. As we have noted in our previous work, the sooner action is taken to resolve the future funding shortfall, the smaller the changes to the system need to be and the more time individuals will have to adjust their financial and retirement plans. In recent years, disability caseloads have faced unprecedented growth.