[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                DEPARTMENTS  OF  VETERANS  AFFAIRS  AND
                 HOUSING  AND  URBAN  DEVELOPMENT,  AND
                  INDEPENDENT AGENCIES APPROPRIATIONS
                                FOR 1998

=========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES

                    JERRY LEWIS, California, Chairman

TOM DeLAY, Texas                     LOUIS STOKES, Ohio
JAMES T. WALSH, New York             ALAN B. MOLLOHAN, West Virginia
DAVID L. HOBSON, Ohio                MARCY KAPTUR, Ohio
JOE KNOLLENBERG, Michigan            CARRIE P. MEEK, Florida
RODNEY P. FRELINGHUYSEN, New Jersey  DAVID E. PRICE, North Carolina
MARK W. NEUMANN, Wisconsin           
ROGER F. WICKER, Mississippi         

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

  Frank M. Cushing, Paul E. Thomson, Timothy L. Peterson, and  Valerie 
                     L. Baldwin, Staff Assistants
                                ________

                                 PART 2
                                                                   Page
 Selective Service System.........................................    1
 Neighborhood Reinvestment Corporation............................   41
 Council on Environmental Quality.................................  205
 American Battle Monuments Commission.............................  391
 Cemeterial Expenses, Army........................................  415
 National Credit Union Administration.............................  177
 Community Development Financial Institutions.....................   93
 Consumer Information Center......................................  449
 Consumer Product Safety Commission...............................  503
 United States Office of Consumer Affairs.........................  625

                                ________

         Printed for the use of the Committee on Appropriations

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
40-256 O                    WASHINGTON : 1997

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             For sale by the U.S. Government Printing Office            
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director









DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 1998

                              ----------                              

                                            Tuesday, March 4, 1997.

                        SELECTIVE SERVICE SYSTEM

                               WITNESSES

GIL CORONADO, DIRECTOR
WILLIE L. BLANDING, JR., EXECUTIVE DIRECTOR
LEWIS C. BRODSKY, DIRECTOR FOR PUBLIC AND CONGRESSIONAL AFFAIRS

                            Opening Remarks

    Mr. Lewis. Today we will take testimony on the fiscal year 
1998 budget request with the Selective Service System as well 
as Neighborhood Reinvestment Corporation. Our schedule 
originally called for the NRC to be up first. However, because 
the Selective Service in some way managed to get themselves 
scheduled at the same time in the other body, there is a 
conflict and so we readjusted that schedule.
    But we are pleased to accommodate Mr. Coronado and 
appreciate your being here.
    As we begin with the Selective Service System, I would like 
to note that their 1998 budget request of $23,919,000 was an 
increase of some $989,000 over their 1997 funding level. This 
increase is spread throughout their budget, although more than 
half was in Service to America. We will discuss this plan in 
greater detail in just a few moments.
    Testifying before the subcommittee this year is the 
Selective Service's distinguished Director, Mr. Gil Coronado.
    Welcome to you and your colleagues. Please introduce those 
with you this morning, including your new associate, Mr. 
Blanding, and then proceed with your oral testimony. Your 
written statement will be in the record in its entirety, and, 
to accommodate Mr. Stokes' problem, certainly I yield to Mr. 
Stokes.
    Mr. Stokes. Thank you, Mr. Chairman.
    Let me just personally extend to Mr. Coronado and staff a 
personal welcome for your appearance here today. As the 
chairman has already indicated, I have got a very conflicted 
schedule this morning, so if I slip out on you here, I hope you 
don't take it personally. I am just trying to be at three 
places at the same time. But I did want to say to you that I 
will submit, Mr. Chairman, some questions for the record.
    Mr. Lewis. All right. Thank you, Mr. Stokes.
    Mr. Coronado. As one grandfather to another, I fully 
understand.
    Mr. Stokes. We do share that. Thank you.
    Mr. Lewis. The grandfather business is especially a delight 
for all of us.
    Mr. Coronado. It certainly is a blessing from God.
    Mr. Lewis. With that, let us hear your testimony, and, as I 
indicated. It will be in the record in its entirety, then we 
will move on.
    Mr. Coronado. Thank you, Mr. Chairman. And I do have seated 
with me at the table two key members of the Selective Service 
team. On my right is Mr. Willie L. Blanding, the new Executive 
Director who just joined our agency last July; and to my left 
is Lew Brodsky, Director of Public Congressional Affairs.

                       greetings from the lewises

    Mr. Chairman I convey warm greetings from those other Jerry 
Lewises of Rankin, Texas, whom you met last year. Young Jerry, 
Jr., the 35-millionth young man to register with Selective 
Service, is doing well back home. He continues to support the 
Selective Service System. Exhibits we recently constructed show 
Jerry, his high school friends, and his registration card. Yes, 
Jerry's image is now on display around America to remind young 
men to register. Mr. Chairman, we are grateful to this 
Subcommittee and the Congress for continuing to provide us with 
the funds necessary to serve as America's defense manpower 
insurance policy.

                         mobilization timetable

    As you know, in November 1994, the Defense Department 
revised its mobilization timetables to reflect post-Cold War 
scenarios and told us that first inductees would hereafter be 
required 193 days after mobilization for a national emergency.
    We had anticipated the new timetables and began downsizing 
a few years ago. We reduced several programs and streamlined 
the organization. On the other hand, the shift to new 
mobilization timetables for inductees increased our operational 
work load by adding new planning and training requirements. We 
must revise our procedures, regulations, and documentation to 
reflect a new, graduated, or ``time-phased response'' to 
deliver pre-examined draftees for induction 193 days after 
Mobilization Day.

                        automation modernization

    At the same time, we are moving forward with modernization 
of our automation capabilities, making hardware and software 
improvements to increase efficiency and enhance service.
    As you consider our fiscal year 1998 appropriation, I know 
that to function in an era of Government downsizing, the 
Selective Service System cannot merely dwell on its proud past 
nor depend exclusively on the threat of a future crisis; the 
Agency must demonstrate that America benefits from its work 
each and every day. So in the spirit of the National 
Performance Review, we are broadening this Agency's direction.

                     service to america initiative

    We have enthusiastically embarked on a new initiative which 
we call Service to America, while continuing to meet our 
statutory responsibilities.
    President Clinton recently acknowledged it as--and I 
quote--a noble and worthwhile effort sure to increase civic-
mindedness and opportunities in our country. End quote.
    The idea is simple. With your support, our registration 
process will serve dual functions in American society. In our 
routine communication with all new registrants in America, we 
encourage them to serve America today. In close cooperation 
with the Department of Defense and the Corporation for National 
Service, we are informing young men about service opportunities 
today in the U.S. Armed Forces and in the Nation's communities.
    With Service to America, this Agency proudly continues to 
fulfill its time-honored purpose in a new way. We historically 
focused the attention of America's young men on meeting 
society's wartime needs, and now we also remind them about 
civic opportunities in peacetime.
    We want to fully implement the Service to America 
initiative. Our FY 1998 budget submission requests $23.9 
million, a slight increase for the first time in 4 years. About 
half of the increase would fund the increased costs of 
printing, mailing, processing, and staffing associated with the 
Service to America initiative. The balance of the funding 
increase would offset pay raise costs. The Service to America 
initiative is a solid example of Federal agencies working 
together to achieve common goals and provide better, more 
efficient service to the public. It is also relevant to our 
Nation's new bipartisan emphasis on volunteerism.
    We have been in touch with General Colin Powell as he 
spearheads, with former President Bush, the ``President's 
Summit for America's Future.'' We suggested ways this Agency's 
capabilities can be adapted to support programs and initiatives 
sparked by the upcoming Philadelphia summit. The General 
responded recently. He was happy to receive our suggestions, 
and his staff is now considering our proposals. I strongly urge 
that you fully fund this innovative and modest adjustment to 
our acknowledgment program. With your support for this 4 
percent increase in the Agency's budget, we can move forward 
with an endeavor that has great benefits for America and 
coincides with our Nation's new, bipartisan emphasis on 
volunteerism.
    Mr. Chairman, I am proud of what Selective Service does for 
America. I hope you share in this pride, as I answer your 
questions about our FY 1998 budget request.
    Thank you.
    [The prepared statement of Mr. Coronado follows:]

[Pages 4 - 29--The official Committee record contains additional material here.]


                         subcommittee position

    Mr. Lewis. Thank you, Mr. Coronado.
    As I indicated, the statement will be included in its 
entirety and questions may be submitted by Mr. Stokes, and 
initially I will have some budget-related questions, but we may 
or may not get to them this morning in view of the schedule. So 
I will be submitting questions as well, for the record, as my 
other colleagues will as well.
    It seems to me that in light of the limitation on time that 
we are dealing with, it might be most worthwhile to explore in 
more detail your new initiative, Service to America.
    By way of background, Mr. Coronado, while such matters as 
budget limitations, forced readiness requirements, available 
training space, and the like cause me to have continued 
misgivings as to the need for a Selective Service System at 
this time, I am nevertheless quite capable of reading the 
political tea leaves. We have had that discussion on the Floor 
more than once, as you know.
    I expect your agency to be around well into the foreseeable 
future, and I should note by all accounts, Mr. Director, you 
and your crew had performed admirably in carrying out your 
mission while heeding this budget line. You are to be sincerely 
congratulated for the good work that you do.
    In this context, I notice with utmost sincerity and 
integrity that you proposed your Service to America initiative. 
There is no question that your system makes it relatively easy 
for you to put together lists of young men specifically 
interested in military service, the AmeriCorps's program, or 
any other in-service type activity you could squeeze on a 
return postcard that your program would suggest.
    The real question is whether, from a policy standpoint, it 
makes any sense to provide lists of names to a military 
establishment which is now and will continue for at least 2 
more fiscal years going through a manpower downsizing exercise.
    Similarly, from a policy standpoint, does it make any sense 
to recruit more paid volunteers on an AmeriCorps program which 
costs not only more than what many in Congress think we can 
afford in the first place but has yet to be adequately reviewed 
to determine if it is indeed successful in performing the 
mission for which it was established? There are a number of 
Members that have very serious questions in connection with 
AmeriCorps and some of its work.
    Mr. Coronado, would you like to comment on the first of 
those policy questions, and we will go on from there.

                     service to america initiative

    Mr. Coronado. Absolutely, Mr. Chairman, and thank you for 
the opportunity to do so.
    Service to America is basically an opportunity, using the 
established infrastructure, for Selective Service to serve the 
youth of America, pure and simple. I have, in my visits across 
the country, determined that there is one common problem with 
American youth, and that is that there is a disconnect between 
society and our youth. Here is an example of how we can touch 
them and reach them and communicate with them and offer them an 
opportunity to serve America today.
    The volunteer force needs support. Even though it is 
shrinking in size, the Army is failing to meet its quotas. The 
all-volunteer force is delighted we have such an initiative 
where we ask the young person of today, the males we 
communicate with, the question about serving America today. The 
all-volunteer force is working very hard at meeting its quotas. 
I was recently told that, in fiscal year 1996, as an example, 
they had high standards for the military. They have a screening 
process by which they talk to and test would-be recruits, even 
after all that, when they reach what is called the MEPS, the 
Military Entrance and Processing Stations, 22 percent of them 
never reach day one of training. That equates to about 150,000 
individuals in fiscal year 1996. Here is an opportunity to be 
able to tell the youth of America, you can serve your country 
even if you fail to serve in one area, perhaps you may be used 
in another.

                       agency's technical ability

    Mr. Lewis. Well, Mr. Coronado, acknowledging that you have 
the technical ability to provide lists of registered men to any 
agency of Government, it is frankly rather interesting to me 
that, according to your comments made to me last week, neither 
the military nor the AmeriCorps leadership have contacted you 
to let you know how much your service is worth to them.
    Federal agencies are more than capable of acting much as 
any individual citizen would. If you offer them something for 
free, they will take it. On the other hand, it is often a much 
different level of interest expressed when the service is 
offered but only at a price.
    Put rather bluntly, why should Congress be asked to provide 
funds for something which the Federal beneficiary itself 
apparently is not willing to pay for? If these Federal agencies 
are not willing to pay for this service now, when would we 
expect that they will?
    Further, given the way this town operates, you know when 
you create something for an opportunity in Washington, D.C., it 
never disappears. Is it fair to assume that once you start 
providing this, quote, recruitment service, it not only would 
be very difficult to quit but also would it be difficult to 
stop paying for?
    Mr. Coronado. Mr. Chairman, it would not be a recruiting 
service, it would simply be a service to the youth of America, 
to ask them to participate in the future of our country to 
serve America today. Whether their feeling is for the military, 
or service in some other capacity, we have no way of knowing.
    I can assure you that the Department of Defense is elated 
with this initiative. They helped us design this little card. 
We cleared that through them. They are the reason we went into 
an expanded proposal for the three-part registration card, with 
a business reply.
    It was all really at the direction of the Department of 
Defense. They felt, and feel today, that this would be a very 
effective way of gauging responses. The cards come back to us, 
then Defense communicates with the men. It is an adjunct to 
everything they do. They do have a very high budget. We feel 
this would really serve the youth of America by having someone 
else ask them if they want to participate in today's 
opportunities.

                          recruitment service

    Mr. Lewis. Let's go back to the fundamental part of my 
question, if you would.
    Mr. Brodsky. I was going to ask you, sir, this was never 
designed to be a replacement for ongoing recruiting initiatives 
at the Department of Defense. It was always meant and presented 
to be an adjunct to ongoing initiatives. We don't know what the 
eventual scope of a program like this might encompass, 
especially if things work out. There may be other agencies that 
can benefit from our ability to communicate with young people 
telling them to serve America today.
    Right now, you are only seeing two agencies listed on our 
form. Down the road, there could be other agencies that we 
include, especially on a broader, larger three-part card. This 
initiative has such popularity that we are a victim of our own 
success. In fact, what has happened here is that the 
Administration feels so strongly about this, they feel it 
merits a very slight increase in budget so we can do this for 
the benefit of other agencies throughout the Government, if 
that is the direction this takes.
    There was no additional cost in Phase I, which is what we 
are doing now. What we are talking about is an expansion of 
this program to allow it to be of even more service in fiscal 
year 1998. And, to answer your question specifically, the 
$500,000 requested for fiscal year 1998 includes the start-up 
costs of going to a broader program.
    We would expect that in the out-years--future years--there 
would be no additional costs. After start-up, continuing costs 
would be mainly postage, so we are looking at more or less 
$350,000 to $400,000, per year after FY 1998.

                       department of defense help

    Mr. Lewis. If I didn't have the serious reservations I have 
about this start-up in the first place, I would be tempted to 
go forward just to really see if you would come in next year 
with a reduced budget. I have never seen that in any agency 
that has come before me. But having said that, if the 
Department of Defense is so excited about this and helped 
design this card, they do have a very, very sizable budget. 
This is just a fraction, a drop in an ocean, relative to--I 
would think they would absolutely be willing to pay for this 
service if it is so desirable.
    And it strikes me that it creates a very unusual 
circumstance when we are asking, out of some 22 agencies 
commissioned before our committee, we are asking them all to 
tighten their belt. We have one admittedly relatively small 
budget item, your agency, but the increase requested here is 
very significant, especially when you are talking social 
programs that affect people's housing needs, et cetera, et 
cetera, and asking them to be serious about reducing that. So 
the precedent is of serious concern to me.
    Mr. Coronado. We do not feel that it is unrealistic to 
follow what was originally suggested in 1993 by the Congress. 
It is evident to the general public that we must get our youth 
involved in the future of our country, to offer them 
opportunities from another source, not just somebody in uniform 
knocking at the doors or visiting their high schools. Our 
program is an adjunct to everything that is going on.
    The Department of Defense is truly excited about this. But 
they have their own programs. They have no flexibility to add 
money or take money away from their current programs and be 
able to provide extra resources to us. We are hopeful that in 
the future we would be able to measure the success or the 
failure of this effort with DoD, who is our primary customer, 
and any other agency that may benefit from America's 
rejuvenated spirit of volunteerism.
    Mr. Lewis. Have you gotten some indication that if, indeed, 
it is successful, then they would be willing to pay their share 
of the cost?
    Mr. Brodsky. Yes, there is an indication in the future we 
might be able to go on a cost-sharing basis, if the pilot is 
successful. What we are looking for here is seed money, 
obviously, because we don't know for certain how successful 
this initiative is going to be. But, we feel it is a good idea 
and it will work.
    However, as was pointed out, the Department of Defense is 
fully committing its own monies to its recruiting efforts. The 
Department itself does not have control over the whole budget 
that we think of as the ``Defense recruiting budget.'' The 
individual services have the lion's share of the money.
    We are not working with the individual services on this. We 
are working with the Department of Defense's Accessions Policy 
office. That office does not have a large budget, and all of 
its funding is dedicated to their direct mail campaigns. There 
is no extra money in that portion of the DoD budget to pick up 
the costs of this initiative. What we are saying here is that 
this initiative is an adjunct program to what DoD is doing. It 
is not meant to replace anything that they are doing. They 
cannot free up money at this point.

                           proposed expenses

    Mr. Lewis. I think you may know that in another area of 
responsibility in the Appropriations Committee, I serve on the 
subcommittee that deals with defense funding. We had the 
Secretary before us the other day. I must admit, I didn't ask 
him this question.
    In the meantime, in the interest of time this morning, I 
would ask you to provide for the record a detailed and specific 
accounting of all proposed expenses for this program, which I 
noted earlier amounts to some $506,000 for fiscal year 1998. 
And it would be unfair for me not to say, for the record, that 
we are very concerned about the precedent here and the impact 
it has upon other agencies whose budgets we will be discussing 
in the weeks ahead.

                         mobilization timetable

    Mr. Director, as we have discussed in some detail over the 
past couple of years, the Selective Service operates under a 
Department of Defense mobilization timetable which suggests 
that conscripts brought into the military through your systems 
would not be needed earlier than 193 days after the start of a 
conflict. It is my understanding that your operations are thus 
geared to make names available to the military on the 194th day 
after a conflict begins. Please correct me if I am incorrect in 
this understanding.
    Mr. Coronado. With the ongoing registration program, the 
system will kick in initially as soon as the word is given that 
we need to mobilize. The first selectees, or draftees, would 
report on day 76 for a physical, mental, and moral examination, 
then be sent back home. In this two-phase process, men would 
know if they were selected for active duty or not and could 
make proper arrangements in their personal lives. Day 193----
    Mr. Lewis. I understand that----
    Mr. Coronado [continuing]. Is when the first men are 
actually inducted.
    Mr. Lewis. That was my point. The defense mobilization 
timetable suggests that those conscripts would be on the 194th 
day----
    Mr. Brodsky. They would report to the Military Entrance 
Processing Stations on day 194.
    Mr. Lewis. Correct.
    Although I recognize this is more or less a ``what if'' 
kind of question, I am interested as to your assessment of what 
would be necessary for your agency if this delivery date is 
ever changed. Specifically, what would be the appropriate role 
for the Selective Service System if the delivery date was 
changed to, let's say, 250 days, or let's say 400 days or even 
600 days?
    Mr. Coronado. The delivery date dictates the composition of 
the work force, and the timetable for implementation of our 
plans, and the further out it is, the better we can execute it 
with less resources.
    We are adequately resourced to meet the M+193 requirement 
of DoD. Our structure, as it is right now, is just suited to 
respond to the M+193 scenario. If we were to increase the 
time----
    Mr. Lewis. Say 250 days or 400 days.
    Mr. Coronado. Yes, sir, that would be to our benefit. Also, 
this Agency maintains the capability of going into emergency 
mode, provided we are given additional resources.
    Mr. Lewis. In terms of your requirement for delivery at 
which point the Department of Defense has determined that the 
Selective Service should move to, say, another delivery mode 
such as deep standby or even termination.
    Mr. Brodsky. They have not, sir. There has been no such 
determination. Their policy is, M+193. That is what is 
required, and what this Agency must meet. At this time, there 
has been no discussion we are aware of at DoD or elsewhere of a 
change to that requirement.

                      public service announcement

    Mr. Lewis. Mr. Director, what are the costs associated with 
the development and distribution of your English and Spanish 
public service announcement?
    Mr. Coronado. I will ask the Director for Public and 
Congressional Affairs to respond.
    Mr. Brodsky. We have historically done a radio campaign 
each year. Last year we did a radio campaign which included 
spots in Spanish aimed specifically at the influencers of young 
Spanish males--namely, their parents--and distributed them to 
Spanish language stations around the country. We can provide a 
detailed breakout of that for the record.
    Mr. Lewis. In connection with that, do you have any 
accurate way of determining how often those are broadcast?
    Mr. Brodsky. We have a more accurate way of determining TV 
broadcasts because our TV spots, like many PSA's that are 
distributed these days, are encoded with an inaudible and 
invisible code. That technology is not available in radio 
campaigns. For radio, we depend on business response cards 
coming back from the stations, indicating to us in writing if 
they elected to play the spots, and when they played the spots.
    Mr. Lewis. In connection with all of that, do you have any 
accurate way of measuring what the results are in terms of 
actually having young men registering as required by law as a 
result of those spots?
    Mr. Brodsky. There is never a definitive connection in any 
advertising that is done to actual registrations; in our case, 
to the play of radio spots. However, we often see increases in 
the registration rates over a period of time, after those spots 
have been released.

                      obtaining celebrity support

    Mr. Coronado. Mr. Chairman, can I add one more thing? 
Because of limited funding we have not really done all the 
things we wanted to do in public awareness. We have used our 
own resources and depended on personal friendships. I have 
stuck a mike in the face of Jimmy Smits from ``NYPD Blue''. I 
have stuck one in front of comedian Paul Rodriguez, actress 
Jennifer Lopez, a lot of other celebrities and asked them for a 
favor: Read this script, and do it for America. I have done 
that because that is the only way we can actually to get the 
job done.
    So we are using a lot of friendships to get good public 
service announcements, and it is good for America, and we need 
your help.
    Mr. Lewis. You remind me of a time when I was a youngster 
in my own business. It was a week and a half ago, but really 
not so long ago. I remember the physicians in my county were 
insulted at the thought there might be some reimbursement for 
the work they did at the county hospital. They believed in this 
volunteer service, and the people who needed that service at 
the county hospital received volunteer assistance, and, I might 
add, very fine care.
    I sometimes wonder whether they--such people receive any 
better care today. Clearly, the American taxpayer is not 
receiving better care as a result of it. I congratulate you for 
seeking out that volunteer effort. I wish we could spread the 
disease around.

                              outsourcing

    You have reported that one of the ways you have reduced 
costs and streamlined your agency is through the use of 
outsourcing some accounting, employee assistance, finance, 
health, and payroll support programs. Can you discuss in more 
detail what you are doing in this regard and give us an idea of 
the kinds of savings you have achieved by those efforts?
    Mr. Coronado. We can provide a detailed listing of all the 
cooperation we have with other agencies that handle the things 
that you just mentioned and specifically address each one of 
those.
    Mr. Lewis. Do you want to give me a little flavor at this 
moment?
    Mr. Brodsky. We might call upon our financial--manager at 
Selective Service--but I think we use the Department of the 
Interior?--Yes, we use the Department of the Interior to handle 
all of our payroll and finance services.
    Mr. Lewis. It is reaching out to, in this case, other 
agencies.
    Mr. Brodsky. In most cases, that is what we are doing. We 
are getting help, because of our small size and funding, we are 
incapable of handling some administrative chores ourselves.
    Mr. Lewis. So you are reaching out to other Federal 
agencies as opposed to private assistance?
    Mr. Brodsky. Yes. We contract as well certainly, for a lot 
of the services that are provided. Our TV and radio, for 
example. Distribution is done under contract. We are, of 
course, too small to do many things in-house.

                           Mail-back Postcard

    Mr. Lewis. One of the improvements you have made to the 
registration process is the use of this mail-back postcard. You 
have noted that the use of this system has resulted in the cost 
avoidance of approximately 70 cents per register. First, what 
is the approximate cost for registering projected to be for the 
Fiscal Years 1997 and 1998?
    Mr. Coronado. For registration?
    Mr. Lewis. Yes. What is the actual cost for registration?
    Mr. Coronado. 7.4 million is the figure that we have.
    Mr. Lewis. You are telling me you are saving 70 cents per 
registrant? What is the cost----
    Mr. Coronado. $1.06 at the post office.
    Mr. Lewis. And what----
    Mr. Brodsky. We save approximately 70 cents from that 
$1.06, if the registration comes into us by mail-back card 
rather than through the post office. I think what you are 
asking is, what is the average cost per registration, all 
things considered. We would have to do the math on that.
    Mr. Coronado. Everything we do is reimbursable. We ask the 
folks at the post office to take a card, look at the ID, 
process it, and send it to us. With post office involvement, it 
is $1.06. With the reply card sent directly from the 
registrants, that saves us 70 cents.
    Mr. Lewis. Part of what I am getting at is whether or not 
you considered the cost avoidance that is involved here a 
direct savings, or have the overall costs per registrant in 
fact increased over time? And if you would help us with that 
for the record.
    Mr. Brodsky. I am fairly certain what they have decreased 
over time. We have found innovative ways to maintain high 
compliance with the registration program and yet do it more 
efficiently at less cost, because the budget has been 
decreasing----
    Mr. Lewis. I know that you have got to go across the 
Capitol building, and while I do have other questions I was 
going to ask here, I think we will submit the balance of these 
for the record and let you make sure you make that schedule. 
Okay. So with that, we appreciate your being here and 
appreciate your testimony as well and look forward to working 
with you. Mr. Knight, let me indicate to you for the record 
that Mr. Stokes was with us earlier, and, as you know, we have 
all kinds of conflicts with our schedule, and he had two 
different previous commitments, and so he was here briefly and 
he will submit questions for the record. And we will move 
forward from there.
    [Additional subcommittee questions follow; see budget 
justification at end of volume.]

[Pages 38 - 40--The official Committee record contains additional material here.]


                                            Tuesday, March 4, 1997.

                 NEIGHBORHOOD REINVESTMENT CORPORATION

                               WITNESSES

GEORGE KNIGHT, EXECUTIVE DIRECTOR
HUBERT E. GUEST, DEPUTY EXECUTIVE DIRECTOR/TREASURER
ROY T. DAVIS, CPA, DIRECTOR, FINANCE, ADMINISTRATION, TRAINING, HUMAN 
    RESOURCES AND RESEARCH
MARGARET H. KELLY, DIRECTOR, FIELD OPERATIONS
JULIA HUNTER GALDO, DIRECTOR, COMMUNICATIONS AND INFORMATION SERVICES
JEFFREY T. BRYSON, GENERAL COUNSEL/SECRETARY
CARLOS B. PORRATA, DIRECTOR, INFORMATION TECHNOLOGY, PROGRAM REVIEW AND 
    INTERNAL CONSULTING
MARY LEE WIDENER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NEIGHBORHOOD 
    HOUSING SERVICES OF AMERICA, INC.

                            Opening Remarks

    Mr. Lewis. The announcement over the weekend that we are 
not going to have any votes today kind of radically impacted 
the Members' schedules across the country. If you bear with me 
we will now turn to the Neighborhood Reinvestment Corporation, 
whose fiscal year 1998 budget request of $50,000,000 represents 
an increase of $100,000 above the 1997 appropriated level.
    Representing the NRC again this year is its very able 
executive director, Mr. George Knight.
    Mr. Knight, welcome back to the subcommittee for I expect 
this to be both an informative but also a relatively brief 
affair. Please introduce your colleagues who have joined you 
this morning, then proceed with your oral statement as you see 
fit. The entire statement will be included in the record.
    Mr. Knight. Thank you very much. It is indeed good to be 
here.
    To my far right is Margo Kelly, who is our director of 
field operations; and to my right is Roy Davis, who is our 
director of finance and training. He picked up that 
responsibility this year. To my left is Hugh Guest, who is 
Deputy Executive Director; and further over is Julia Galdo, who 
is our Director of Communications; and to her left is Jeff 
Bryson, our General Counsel. And he is not sitting at table, 
Carlos Porrada, who is the Director of Program Review and our 
Technology Chief. Mary Lee Widener will be here. She hadthe 
hearing scheduled at 11:00, and so she will be a few minutes late.

                    results of fy 1996 appropriation

    Well, I want to thank you for your appropriation in 1996 of 
$38 million. We were able to parlay that to $420 million. That 
helped 16,000 families; 4,400 of those families were new 
homeowners, and it gave them a stake not only in their home but 
in the neighborhood. As you know, we believe that is the best 
and soundest way to change a neighborhood from distress to one 
of pride.

                     examples of tax base increases

    We have been concerned to see what the impact would be of 
the kinds of investments we do beyond the homeowner and lender 
and insurer. By strengthening real estate markets, the 
revitalization of the tax base also changes, and the result, of 
course, is a positive one for the city, for the taxpayer.
    We looked in Savannah at an intensive intervention that had 
occurred there: 7 of the 23 properties on the block were 
totally dilapidated and vacant. By purchasing them, renovating 
them, and selling them to lower-income families, within a year 
the tax assessment on that block rose over 100 percent. More 
importantly, the surrounding area had significantly begun to 
improve.
    We think that the immediate buildup of these family assets 
helps the next generation. I have put a couple of children 
through college and understand the generational asset transfer 
mechanism of a home equity loan to pay for tuition. We think 
that these kinds of things will stabilize families and their 
educational obtainment, and that is probably the promise for 
the long run.

                         what has been learned

    What have we learned that could be replicated and passed 
on? I think first at the national level, the secondary market 
mechanism that has been invented and worked for 20 years works. 
Raising the 20 to 40 million dollars a year is certainly a 
challenge, one that Mary Lee enjoys and her Board has taken up 
and done a commendable job.
    Second, the lower-income families can and want to be 
homeowners. A little more than 4 years ago, I mentioned that a 
small group--at that time 20 programs--wanted to create 10,000 
new homeowners in 5 years. At the end of the 4-year mark, just 
past the turn of this year, more than 10,000 families already 
had been made homeowners. We had aimed at $650 million in 
investment, and it looks like it will be about $625 million, 
which is basically good news, because that means the homes came 
in a little less expensive than we had thought.
    Third, I think what we learn and continue to demonstrate 
is, beyond these extensions of credit and creating homeowners, 
the local organization has to be engaged in other kinds of 
social service activities, if you will--cleanups, fix-up 
campaigns, working with voluntary groups, Christmas in April, 
Habitat for Humanity, focuses on crime, graffiti, or youth. 
Those kinds of locally set agendas joined with the credit 
extension activities, really make a difference.
    Fourth, training is in demand. Three years ago, I told the 
subcommittee that we had 1,300 participants in our four 
training institutes. This last year, we had 2,600. Two weeks 
ago in Atlanta we had 750 at a week-long training institute. 
Training is tremendously effective and in tremendous demand.

                           measures of impact

    Finally, I included a few pages from our report that we 
sent to our board. They asked me if we had been efficient with 
the increased resources that you were kind enough to give us? 
We looked at three major tests. The first was a mission test: 
Are we able to reach the same kinds of families? You can 
sometimes be more efficient by changing your mission. And the 
answer to that was, yes, we are still serving families around 
60 to 62 percent of median income.
    Second, were we able to use the money more impactfully? And 
the answer again was yes. The appropriation has stretched 
further than just counting the units of investment. We have 
stretched it further on training and other things.
    And third, they asked about the secondary market. Were we 
able to manage more resources, more assets, or more loan for 
each dollar of our administrative grant? Since 1990 to 1995, 
the years for which we have data, we were able to double the 
loans handled for each dollar that we gave them.
    So with that, I look forward to your questions.
    [The statement of Mr. Knight follows:]

[Pages 44 - 52--The official Committee record contains additional material here.]


    Mr. Lewis. Thank you, Mr. Knight.
    As I indicated, your entire statement will be included in 
the record. But to begin with, Mr. Knight, I am going to be 
asking questions this morning that are designed just slightly 
to put you and maybe some of your staff somewhat on a hot seat.

                         defining critical mass

    As you might recall, one of the questions I asked for the 
record at last year's hearing had to do with what you believed 
the, quote, critical mass was for the NRC. That is, at what 
level of funding can you essentially optimize growth of your 
various organizations and avoid the dysfunction that so often 
comes from putting more money into an organization than that 
organization can responsibly control?
    Your response suggested that the NeighborWorks network 
could sustain growth of about 10 percent a year or 12 to 18 new 
organizations and that the Neighborhood Housing Services of 
America, NHSA, activities have and can continue to grow by 
about 65 percent per year.
    You further concluded that Neighborhood Reinvestment could 
grow to a maximum of about $100 million, or twice what you have 
requested this year, before the odds of dysfunction threaten 
the effectiveness of your organization.
    Mr. Knight, would I be correct in assuming that these 
figures are still reasonably accurate?
    Mr. Knight. I would say reasonably accurate. Yes.
    Mr. Lewis. That is--frankly, a short answer that I think is 
probably appropriate, and I think we both understand that. 
Presuming that, I would then like to bring to your attention 
the short line found in the second full paragraph of page 10 of 
your budget justification.
    By the way, we appreciate receiving your budget 
justification. Not all of our agencies even send them up. At 
any rate, it says in part--and I quote--the $50 million 
appropriations recommended for the corporation by the Office of 
Management and Budget will enable the network to continue--
continue its work.
    You will note that I have added emphasis in connection with 
that statement. And then it provides a brief synopsis of what 
you do.
    My question, Mr. Knight: Is this your budget or is this 
OMB's budget?

                    EXPLAINING BUDGET REQUEST FIGURE

    Mr. Knight. The budget is ours. The amount is OMB's.
    Mr. Lewis. Please explain the difference.
    Mr. Knight. We prepare and submit to OMB every year several 
budget levels at which we feel we can operate. One is a level 
that I would describe as a challenge level, a level that we 
think we can responsibly operate at, that is above what we 
currently receive.
    We submit a level that is at our current level, and then 
they usually ask us for some other levels. They then pass back 
to us a number that they want to include in the President's 
submission. And that sentence probably should have said the 
President's budget. And we then----
    Mr. Lewis. If I really thought the President knew about and 
understood your program, I would sincerely question whether 
that would have been the budget amount, so I would suggest that 
it is OMB's budget.
    Mr. Knight. We then construct a budget that we feel is 
responsible in the use of the funds.
    As you know from prior years, we put a great deal of 
emphasis on putting funds into the local revolving loan funds 
and the local operations. We think that is the first and best 
use of those funds, and then we put funds into our operations 
and technical assistance staff.
    Mr. Lewis. Because this subcommittee generally, and I think 
you know I personally, support the work of the NRC and the way 
you go about performing that work, let me be a bit more direct. 
What was the specific appropriations amount for fiscal year 
1998 you requested in your original budget to OMB?
    Mr. Knight.  I believe the maximum level we requested was 
$71 million, most of that increment would have been used for 
the local revolving loan funds.
    As you undoubtedly are aware, even in the Campaign for Home 
Ownership, even with the standard bank product, the 
availability of second mortgages was critical to getting many 
of those families into the homes. The revolving loan fund's 
ability to work with a family for that extra 3, 5, 10, 15 
thousand dollars makes the first mortgage possible. Without it, 
in many cases, you don't get the first mortgage, so the 
revolving loan funds are critical.

                    QUESTIONING OMB'S RECOMMENDATION

    Mr. Lewis. Presuming that is the $71 million that was 
submitted, could you give me a clear understanding of what OMB 
had to say or what they suggested were the reasons for not 
approaching the budget as submitted and instead coming back 
with a $50 million amount? In fact, it is a net loss if you 
take any reasonable expectation of an increase in cost of doing 
business.
    Mr. Knight. They haven't let me know that.
    Mr. Lewis. Training hasn't gotten cheaper, has it?
    Mr. Davis. No, it hasn't.
    Mr. Knight. We haven't had an extensive conversation. I 
think it related to the tightness of the budget overall.
    Mr. Lewis. I should note for the understanding of all the 
members on my committee and otherwise, I am pursuing this line 
of questioning not because I want to pick a fight with OMB or 
because somehow we are flush with money to allow these agencies 
like NRC or otherwise, but, rather, I am trying to make the 
point that we have in the Neighborhood Reinvestment Corporation 
a Federal agency with one of the best track records of any that 
I am aware of. The NRC represents in every respect what 
government can and should be doing for people: Providing first-
rate service at rock-bottom prices.

            ACKNOWLEDGING THE IMPORTANCE AND SUCCESS OF NRC

    Mr. Knight, I just returned from a weekend in New Orleans 
examining housing programs in New Orleans, and I can tell you 
that there is great emphasis upon that statement, especially 
since my experience over the weekend. Every dime we provide NRC 
gets many times over. Yet Mr. Knight has managed to do this 
without loading up his staff or bloating his administrative 
budget. NRC's total administrative cost runs to just 10 percent 
as opposed to 50 percent or higher in EPA's Superfund program, 
for example. And this year's budget request, if approved as is, 
in fact will result in a reduction of five full-time equivalent 
NRC employees.
    Yet while we are asked by the President to accept a level 
budget for a success story like NRC, he demands huge increases 
for unproved programs like the Corporation for National 
Community Service and Community--and the Community Development 
Financial Institution, CDFI, and for marginal performers like 
EPA's Superfund program. The Director in that instance 
continually tells us, you know, Superfund is broke, yet we have 
yet to see any significant plan for fixing it.
    This President's 1998 budget clearly represents too much of 
business as usual or pure politics rather than an honest 
attempt to make available to the citizens of this country 
programs such as NRC which have been proven to work and which 
we can, in the final analysis, afford.
    Perhaps my biggest frustration is that this lack of vision 
could very possibly result in the members of this subcommittee 
being divided by inevitable partisan battles, that battles like 
this can cost, even when they all know there is a meaningful 
middle ground that could be reached.
    For now I am going to step down from that soap box, and I 
am not sure, Mr. Knight, if you want to enter into the fray at 
this point or not. I would certainly entertain my colleagues by 
discussion with them individually. They expressed their views 
as well for the record, so that you will see it and the record 
will be complete.
    Mr. Knight. I certainly thank you for your vote of 
confidence that you have in us, and we will work very hard to 
earn it.

                   THE CHAIRMAN'S TRIP TO NEW ORLEANS

    Mr. Lewis. I think I really should say for the record that 
my trip to New Orleans, among other things, was a part of an 
ongoing concern. In urban American city after city, while 
sizable dollars flows, that we purport to want to deliver to 
the poorest of the poor in terms of housingassistance places 
that are decent, in which people can live. All too seldom it seems to 
get real results. And a little bit more of that kind of government, I 
would suggest, will eventually cause that revolution out there. Very 
disconcerting circumstances experienced by this weekend but evidenced 
elsewhere as well.
    Mr. Knight. You probably didn't have time to be in the 
neighborhood where the Neighborhood Housing Services is 
working. But Lauren Anderson and Richard Ainsworth, who is 
vice-president of Whitney National Bank, have done a marvelous 
job providing home ownership counseling. They have helped 
hundreds of families into new homes. They operate a revolving 
loan fund.
    As you know from your trip, the housing stock in New 
Orleans is one of the most challenging ones--below sea level 
and wood. The NHS continues to provide a marvelous service in 
New Orleans. They in the last year have worked hard with the 
major property casualty insurance companies as partners. It is 
very challenging.
    Mr. Lewis. During what was a very brief trip, we spent time 
talking with people who are residents of existing facilities, 
community kinds of meetings where you could feel, as well as 
have communicated to you, the frustration and anger that is 
there.
    We met with other community groups such as the banks. I 
spent a good deal of time with one of the representatives of 
Whitney, for example. I knew of your work with them only as a 
result of that, but, to say the least, this tour which was 
outlined by the local authority didn't include your work. We 
wouldn't want to eschew a success story there, I say in jest.

                    the network's focus on diversity

    Mr. Knight, as you have noted in the past, the strength of 
the NeighborWorks network system serving the revitalization 
needs of America's lower-income communities lies in its ability 
to serve all of those diverse communities.
    A good example of what you are doing in communities can be 
seen through the various revolving loan fund programs, where 74 
percent of the clients served in 1995 were very low or low 
income, 61 percent were of an ethnic or racial minority, 47 
percent were female, and 23 percent were older than 55.
    When the NeighborWorks organizations go into a community, 
are they always looking for this type of diversity?
    Mr. Knight.  I think they are always looking for the 
neighborhood under stress. The neighborhood is being 
disinvested, if you will, and, sadly, too often sadly, that is 
also a neighborhood that contains a high percentage of racial 
or ethnic minorities. So if you will, we arrived at it 
secondhand. We seek to work in the neighborhoods that are 
distressed, and when those neighborhoods turn out to be largely 
minority, then you see the kind of pattern that we have.
    We think that Americans of all backgrounds deserve the 
opportunity to live in a neighborhood in which they can raise 
their children as a place of choice. When we work in a 
neighborhood, we don't seek to change the racial or ethnic or 
income characteristics of the neighborhood but to reengage the 
private sector mechanisms in that neighborhood so people have 
access to credit on a day-to-day basis.
    Mr. Lewis. So to answer a variety of questions relative to 
whether your program works, if you don't have this kind of 
diversity, etcetera, etcetera, your answer is very likely no, 
but, rather, we look to a distressed neighborhood and what the 
population mix is; that is what it is.
    Mr. Knight. That is what it is.

                      engaging the private sector

    Mr. Lewis. One of the reasons NRC has been a success is, of 
course, because of its unique relationship with the private 
sector in this regard.
    During fiscal year 1995, contributions made directly to the 
NeighborWorks organizations from banks, businesses, 
foundations, insurance companies, thrifts, utilities, and other 
supporters totaled more than $72 million. This is up from just 
over $44 million in 1990.
    Mr. Knight, what is the equivalent number for fiscal year 
1996, and what do you anticipate for 1997, 1998?
    Mr. Knight. It will be above the 72, growing, and certainly 
we will know as time tells. Last year we signed the single 
largest investment with State Farm Insurance Company, a $25 
million investment in the secondary market, which brings their 
total investment close to $50 million--a very exciting moment.
    With USAA, a large regional, increasingly national, 
insurance company, we recently signed a very interesting $7 
million commitment to the secondary market coupled with a 
commitment to nine cities where they would invest in, if you 
will, staff on the local board level and operating dollars so 
that the local program had the ability to hire that extra loan 
counselor. This is a very exciting partnership with them.
    We shortly will sign an agreement with a large regional 
bank in New England, with Fleet, that will involve 20-plus 
local programs and a significant investment in both NHSA and at 
the local level. So, again, a very exciting partnership. I am 
confident we will be over the $72 million in 1996 and 1997.

                    the campaign for home ownership

    Mr. Lewis. Recognizing home ownership as a critical 
component of the neighborhood revitalization, you began in 1993 
a program called Campaign for Home Ownership. Now in the fourth 
of its 5-year plan, this program has assisted over 8,000 new 
homeowners to purchase over 9,500 units of housing with a total 
$547 million. The cost per unit is less than $68,000 compared 
with the national average of about $139,000 per unit.
    Is it safe to assume you will more than meet your 5-year 
goal of creating 10,000 new homeowners and stimulating $650 
million in reinvestment in communities?
    First, Mr. Knight, please give us an update as to where we 
are today with this program, then please speculate as to where 
we will be at the end of the 5-year campaign.
    Mr. Knight. I believe when the final numbers are in--and I 
hope that will be another couple of weeks; as of December 31--
we will exceed our goal. Now we are well over 10,000 new 
homeowners at the end of 4 years; we have achieved the goal. 
The homes are coming in a little less costly than we 
anticipated, so the investment goal will be met at the end of 
this year but not met at the end of last year (1996).
    The delinquency rates on these mortgages are well 
withinnormal bounds, a little bit higher than conventional, but then we 
are lending to a distinctly lower income population and about a percent 
or 2 below FHA rates, and, hopefully on the delinquency side, this will 
be a sustained home ownership.
    All my staff knows I hate to speculate on numbers, but I 
think we will easily be over 12,000 to 12,500 homeowners by the 
end of the year. And let me be the first to invite you to join 
us on September 22 to celebrate and wrap up this campaign. We 
will be holding a training institute in Alexandria. That is the 
closest we could get to Washington and afford it. And we would 
very much appreciate it if you were available on September 22 
to speak to the campaign leadership.
    Mr. Lewis. Let's look closely at my calendar and see what 
we can do about that.
    Well, congratulations on the record to date. And just one 
more time, there is no reason to repeat those lines of 
adulation that were expressed for the record earlier, but, in 
the meantime, success is very important here.

                   Comparison with Bangladesh Program

    I was in a session yesterday with a cross-section of people 
who call themselves housers, both public and private 
individuals, and I asked in the middle of that whether anyone 
had read ``The Price of a Dream'' by a fellow named Bernstein. 
And you are shaking your head.
    I assume you know about the Grameen Bank. Your story is a 
fascinating extension almost in this country of what they began 
in Bangladesh. And I must say that as I have an opportunity to 
visit these projects at various places in the country, and more 
and more I become convinced, when you see that bright shiny 
look in the eyes of a new homeowner given some chance of a new 
opportunity, it is a very, very exciting result that we 
potentially have for government's work.
    I think I will say it for the record, it is a very, very 
healthy development that your organization, one way or another, 
stayed out of HUD rather than on the side of HUD.
    Mr. Knight. Thank you.
    One of the things I don't talk about here because it is a 
fairly minor but important activity is the economic development 
loans made from the revolving loans.

                          Economic Development

    As you know, each board has the authority to decide to whom 
they are going to lend. As it turned out, about $3 million was 
lent last year for what might be called economic development 
loans. Among these was Pasadena, California, where the 
NeighborWorks organization is working with a group of low-
income families, very much a Grameen Bank peer-lending process. 
They have also begun what they are calling now the African 
market.
    Once a month in Pasadena, there is a marketplace for small 
entrepreneurs to display their wares. It has been enormously 
successful. In Anchorage, Alaska, the very large NHS in 
Anchorage, Alaska, when a local business was failing that has 
supplied a large number of jobs, Neighborhood Housing Services 
of Anchorage stepped up and said, ``We have enough confidence 
that you can manage this business to lend to you. It turned out 
to be the Harley-Davidson dealership, and they are now the 
second largest Harley dealership west of the Mississippi.
    So when you start with this----
    Mr. Lewis. The largest is probably in my district.
    Mr. Knight. So many revolving loan funds don't see economic 
development loans as a primary activity, but it is a critical 
piece to their neighborhood. When they do lend it can be very 
important. It is the principles of flexibility, local decision 
making, and the access to that flexible capital.

                       Developing a New Campaign

    Mr. Lewis. Your latest testimony here is kind of a 
reflection of where I was going to go next. I would like to 
have you give the subcommittee a little broader look at NRC's 
plans, if any, to begin a new or similar campaign in years 
ahead beyond the campaign we talked about a moment ago.
    Mr. Knight. Okay, I will. I certainly will.
    Mr. Lewis. Do you have any plans?
    Mr. Knight. Not in the economic development area. We are 
thinking of beyond the next campaign, and we--that we 
definitely will be doing.
    Mr. Lewis. If we reach the goal of 12,000 homes. Goals are 
important.
    Mr. Knight. Goals are very important; what you measure 
counts. On the economic and development side, we----
    Mr. Lewis. Excuse me. Let me go back just a moment. You 
said, what you measure counts?
    Mr. Knight. Yes.
    Mr. Lewis. I wonder if we can repeat that for the record 
again. What you measure counts. If we say that in every one of 
our hearings, we might be pleased.
    Mr. Knight. On the economic development side, as important 
as the microlending is, in this country except for one group we 
are aware of Axxion groups in Texas, most do not charge the 
Grameen bank's high interest charges. They tend to have a 
modest interest charge.
    As you know, Grameen charges very high interest, 15 to 30 
percent. That is not often done here, and, as a result, peer 
lending programs here are very expensive to do. They are very 
valuable but very expensive because the transaction cost has to 
be raised separately from lending and capital. That is one of 
the reasons many of our local affiliates have not done more 
than experiment with it. They do continue to use the revolving 
loan fund as needed.

                       Reduction in Grant Request

    Mr. Lewis. For 1998, your budget plan calls for the 
distribution of grants of all types totalling $27,952,000. This 
funding level is, in fact, a reduction of over $3 million from 
the 1997 level of $31,159,000. Even though your total budget 
request is virtually identical to last year, this proposed 
reduction is the first you have proposed since at least fiscal 
year 1993.
    Mr. Knight. I am hoisted on my unwillingness to speculate 
forward. You will notice that our total sources of revenue are 
also down by about $3 million. The detail I think it is on page 
82. We work very aggressively to raise grant funds from other 
sources and become, in effect, a pass-through organization.
    I have not speculated on those for the 1998 budget, and so 
what you see is, what I am quite confident we have in hand 
already.
    As we raise additional funds, they will flow through to the 
grant budget. So you will see a corresponding drop in both 
revenue and expenses of about $3 million. It is one I am very 
sensitive about, obviously defensive about, because I feel very 
strongly that that is a critical component of our work.
    Mr. Lewis. Following up on that explanation then of that 
reduced level relative to what the market provides inleveraged 
dollars, what would the optimal level of funding be for your grant 
activity?
    Mr. Knight. I would go back to your earlier line of 
questions and say that of what we submitted to OMB, we could 
probably handle on the grant side another $15 million-plus in 
terms of revolving loan funds.
    Mr. Lewis. I am tempted to dwell on this a bit, but your 
1998 budget request similarly will allow the development of two 
NeighborWorks organizations and affiliation with 10 existing 
nonprofit entities. This plan is identical to what you spoke 
about doing in fiscal year 1997.
    Again, is the optimal amount of growth--or could you 
successfully do more with more communities with a different 
level of funding? What is the optimal level?
    Mr. Knight. We could probably do a little bit more. This is 
where the 1-year plan gets relatively difficult. Most of those 
12 programs for 1998 have already begun with initial visits. So 
even with an enormous--which isn't going to happen and I 
wouldn't urge to happen--funding, we couldn't increase the 12 
very much this year, because it takes time to get an 
organization built and it takes time to get an existing 
organization--to meet the standards that we set.
    So, yes, we could increase it. If the committee is 
interested in increasing it, I would propose a small increase 
in 1998 and a larger increase in 1999.
    Mr. Lewis. Thank you.

                     preserving affordable housing

    In reviewing the program activities, I could not help but 
be impressed by what you accomplished in the area of preserving 
affordable housing. For an investment of approximately $13 
million in Federal appropriations, you have been able to 
generate nearly $450 million in investment to rehabilitate, 
repair, and build new homes, nearly 18,000 total housing units 
in 1997.
    Can you take a moment to explain how this program works, 
including the use of revolving loans and other direct 
investments--how many units and at what average cost you expect 
such preservation efforts will cost in 1998? And, finally, how 
you believe the program--your program specifically differs from 
the preservation program operated by the Department of Housing 
and Urban Development.
    Mr. Knight. I will respond to that last one. The $13 
million are the funds that specifically are going into those 
capital revolving loan funds. They are, of course, supplemented 
by the training assistance and the funds that are building 
capacity so it is closer to, say--25 or 30 million to 420 
million.
    The preservation program that is managed by the Department, 
which I am not an expert on by any means, relates to, I 
believe, large multifamily properties that were financed 
through a combination of grant, tax and insurance incentives 
over the last 15 to 20 years and are really quite different 
kinds of properties than the properties that our folks are 
focused on.
    The NeighborWorks organization focuses on owning 
multifamily in a market-based manner. They do assume there is a 
steady flow of public funds coming in. Because their sources of 
financing are largely private sources, and private lenders look 
principally to see what your reasonable cash flow is over time; 
I really couldn't answer you too much on the Department's 
preservation program because I am not really an expert on it.
    Mr. Lewis. That is a fair response, and we may discuss this 
further with you for some elaboration or evaluation on the 
record.

                             mutual housing

    Mr. Knight. The mutual housing, of which there are about 
4,000 units, is a mixed-income approach, and we feel that is a 
very sound approach. About 40 percent of the occupants are 
below 50 percent of the median, and about 40 percent are 
between 50 and 80, and the rest are above 80. In almost every 
case they also have a social service activity, whether it is a 
day-care center or, in the case of Denver, helping people move 
into home ownership, conducting home-ownership classes. In the 
case of Sacramento, they are working extensively with children 
in after-school kinds of activities.
    In almost every case, the mutual housing association has 
been able to stabilize families. One piece of it that hasn't 
worked as expected is that, frankly, the turnover rate is much 
lower than we anticipated. People want to stay there.
    In Stamford, Connecticut, a very high-cost area, the units 
have very, very little turnover. Drug dealers have been driven 
out of the neighborhood because the families want to stay 
there. They also run an after-school program. So we think mixed 
income, long-term financing promotes long-term social 
stability, and financial stability.
    Mr. Lewis. Strengthening neighborhoods, strengthening 
communities.
    Mr. Knight. Yes, and it allows the organization to own the 
property for a long period of time. I mentioned Anchorage. They 
own almost a thousand units and added their first SRO--single 
room occupancy property--to the mix, principally because they 
have strong cash flow from some of their other family units.

                       program reviews and audit

    Mr. Lewis. Mr. Knight, for 1998, NRC plans to spend just 
over $2 million to conduct 92 program reviews and review 165 
audits. These numbers are comparable to what was accomplished 
in fiscal years 1996 and 1997. What criteria are used to 
determine which activities will be either reviewed or audited, 
and who specifically takes part in these reviews?
    Mr. Knight. The criteria are twofold. We have an internal 
committee that is chaired by Roy, on which Carlos and Margo and 
I sit, along with a representative from the secondary market. 
Quarterly risk analyses rank the programs. We have a Board of 
financial regulators. We risk rank each program for its 
performance and any kind of activity that may be endangering 
its financial and programmatic health. That is one criterion 
for targeting our reviews.
    Second is what I would say is longevity. We would like to 
get around at least every 2 years to a program. Even though a 
program may be operating on a very sound basis, we schedule 
them for a review.
    Nevertheless, our biggest challenge has been, as the 
complexity of programs has grown now, to do a more tailored or 
focused review without having to review everything. We are 
working very hard this year to see what--if we can we go in and 
just look at certain critical aspects of the program and 
satisfy ourselves that, yes, they [the oganizations] are on a 
sound basis. The nonprofit community has no monitoring or 
regulatory agency similar to the banking world.
    Mr. Lewis. Who typically does the audits?
    Mr. Knight. The audits, by our grant agreement, must be an 
external auditor.
    Mr. Lewis. It is on a contract basis.
    Mr. Knight. It is on a contract basis. We receive the 
audits.
    Frankly, our quarterly reviews, the risk ranking, is 
probably more sensitive to the issues than the audits, because 
audits come in months and months afterwards. If we catch the 
trouble in the audit, we are not doing our job; we have missed 
something.
    Ms. Kelly. The audit already confirms what we already knew.

                          training institutes

    Mr. Lewis. During fiscal year 1998, you had plans to 
conduct four major training institutes provided to the 
subcommittee. Each institute was attended by more than 600 
individuals. Who typically attends these events?
    Mr. Knight. About 38 percent come from the nonprofit 
community development industry, and the other 15 percent from 
local government and the private sector. The courses range from 
how to manage multifamily property to creating a neighborhood 
plan to how to originate a mortgage, how to service mortgages. 
It is a wide range.
    This is what is coming in Chicago, and these are the 
courses this institute will have a special emphasis on: 
property casualty insurance, which is an important issue in 
neighborhoods. Many of these are taught in conjunction with 
other industry leaders. The Institute for Real Estate 
Management runs the property management classes; Habitat for 
Humanity has taught. We work with a number of organizations 
that have expertise in these areas. Obviously, members of the 
insurance industry will teach about property casualty 
insurance.
    Mr. Lewis. Have you done an analysis to determine what 
percentage of the attendees are new and what percentage may be 
repeats?
    Mr. Knight. We have not done that specific analysis, and I 
would be delighted to do one.
    Mr. Lewis. It might be interesting to know.
    Mr. Knight. We know that the organizations repeat, that 
they send their new staff people. And we know that in the 
property management area we get repeats, because the Institute 
for Real Estate Management has a sequence of certifications, 
and since we offer the two levels of that sequence, we are 
seeing in our second level now many people who came through our 
first level.

    Question. Have you done an analysis to determine what 
percentage of these attendees are new and what percentage are 
returning?
    Answer. From October 1, 1994, to March 1, 1997, we 
conducted 10 training institutes, attended by 6,002 
participants from network and non-network organizations. During 
this period, repeat participation was 24.9 percent.
    Additionally, a breakdown of the non-
NeighborWorks' participants showed that 19 percent 
were from the private sector, 26 percent from the public sector 
and 55 percent from the nonprofit community development sector.

    Mr. Lewis. Give us a feel for what it costs to attend the 
institute and what is offset by appropriate fees.
    Mr. Knight. I will provide that. It is $135 a day to 
attend, and that offsets our marginal costs. We have not put in 
more appropriated money. In the last several years, we have, by 
expanding the participants and seeking scholarship funds, 
offset costs.
    I would have to say that hats are off to Roy and the 
training staff and to many, many individual trainers, 
individuals who come from their institutions to train for free.
    One gentleman, Warren Smith, who is an officer with Fleet 
is one of the nation's leading commercial neighborhood 
lenders--he has come time and time again to teach. And we do 
not reimburse him for his costs. Jim Carr, who is the Director 
of Research for Fannie Mae, has come time and time again to 
teach at the institute, and, again, we don't offset the cost. 
The private sector has been enormously supportive of this 
effort.

                       training institute courses

    Mr. Lewis. Would you provide for the record similar 
information regarding some 300 other training courses that you 
have offered?
    Mr. Knight. Yes.
    [The information follows:]

[Pages 64 - 90--The official Committee record contains additional material here.]


                        nhsa's secondary market

    Mr. Lewis. For fiscal year 1996, NHSA secondary market 
activity included $17.7 million in loan purchases and $12.9 
million in loans committed. These actual figures were lower 
than what was accomplished in 1995 and are nearly half of what 
is expected to occur in 1997 and 1998.
    First, what factors came into play which resulted in this 
reduced 1996 program?
    Mr. Knight. In 1995, we experienced runaway and 
unsustainable submissions, Mary Lee, I see has just joined us.
    The nightmare we were faced with, accepting the 
overwhelming demand as it came and not turning people away 
because we didn't want to discourage it. It was a new 
experience for us to slow demand down and eventually stop it in 
1995 because it was unsustainable, given the reserve level that 
the NHSA board had set.
    So 1995 was a record year, $52 million, but we ran our 
reserve levels down to what we consider dangerously low; 1996 
was a rebuilding year. We have rebuilt the reserve levels.
    I believe it is now safe to say you are at 8 percent?
    Ms. Widener. Yes.
    Mr. Knight. Which makes their board comfortable and me 
comfortable, and so it was a case of restrained demand. We had 
to control it to get back up.
    We, as you know, cover administrative costs. We don't have 
another way because we don't charge the local programs. We want 
the program to lend on a sound basis. We don't want them making 
loans at some magic interest rate or some magic set of terms 
that puts the family in trouble. Our only way to meet demand 
was to raise reserve funds. Part of our grant and part of Mary 
Lee's fundraising is to raise the reserves.
    Mr. Lewis. Would you make projections for us for 1997 and 
1998? I would be interested in your commentary.
    Mr. Knight. Yes.
    Mr. Lewis. Would you like to comment on that?
    Ms. Widener. Yes. I think another factor is, it will turn 
on the degree to which we can sell loans to Fannie Mae or 
Freddie Mac, which is another strategy to reduce the balance 
sheet, keep activity up and therefore relieve pressure on the 
reserves. And we have entered into a contract with Freddie Mac 
for the first round of sales and have completed a pilot sale 
with them, so we think that approach is going to help. But we 
need to be sure of what we can do is based on reserves and 
being able to control the balance sheet before we can know how 
far we can go.
    Mr. Knight. I had previously mentioned the closing of the 
$25 million agreement with State Farm and USAA.
    Ms. Widener. I actually got here before 11:00, so I 
actually heard all of your testimony.
    Mr. Lewis. You were intent.
    I watched her come in.
    If you would provide answers to these questions for the 
record, we want to know a bit about personnel, the number of 
employees, etcetera, etcetera.
    But with that, I think we have spent more time on your 
agency than I planned to largely because this is one of the 
more delightful experiences that we have during the year.
    And, Mary Lee, before you leave, if I can mention something 
to you privately.
    Thank you, Mr. Knight. Thank you all for terrific work.
    [See budget justification at end of volume.]
                                         Wednesday, March 12, 1997.

           COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND

                               WITNESSES

KIRSTEN S. MOY, DIRECTOR
HON. ROBERT E. RUBIN, SECRETARY OF THE TREASURY

                          Introductory Remarks

    Mr. Lewis. The meeting will come to order.
    This morning it's a pleasure to welcome Secretary Robert 
Rubin and Ms. Kirsten Moy. Ms. Moy is Director of the Community 
Development Financial Institutions Fund, CDFI.
    Secretary Rubin, as you indicated earlier, this is not the 
normal venue for the Secretary of the Treasury, but, on the 
other hand, this committee covers almost the gamut in terms of 
needs and interests, and the future potential of CDFI is very 
important to us. Because of that, it is really very significant 
that you would come and join Ms. Moy in our discussions this 
morning.
    The budget for CDFI for fiscal 1998 is $125 million in 
their request, an increase of $75 million from fiscal year 
1997--that which came out of the conference process at any 
rate. We're interested in hearing from you how such a large 
increase in resources would be put to productive use. Frankly, 
we will dwell a good deal upon how you have used the $50 
million and what you see as the long-range potential here.
    I might mention to both of you that within this 
subcommittee are such Federal responsibilities as all the 
veterans' programs. In an appropriations sense, veterans' 
medical care is an almost untouchable area, so it is the big 
competitor on the block. Then, from there, we have the multiple 
mix of public housing programs, NASA, EPA, the National Science 
Foundation, and almost all want more money, and yet, all of us 
are committed to the impact that an imbalanced budget might 
have upon our country long term. So that's the struggle that we 
have.
    I look at CDFI as an agency with a good deal of potential. 
I'm interested in kind of positive views. I don't know what the 
prospect will be as we go forward, but nonetheless, it is an 
agency that falls within that whole group of Federal activities 
that I like to point to.
    While we move towards a balanced budget, that means we're 
going to have to reduce the rate of growth in government 
overall. That doesn't necessarily mean a machete. It also 
involves a serious responsibility to try to measure those 
commissions and agencies that have potential. Where good work 
has been done, and where we can demonstrate that excellent work 
has been done, maybe those deserve some special attention and 
assistance, while others, goodness, we might even close down an 
agency sometimes. But all that's a problem of Washington and 
the mix of our responsibility.
    You should know further that, of all of the 13 
subcommittees, separate from Defense, this has the largest pool 
of discretionary dollars. Both Defense and our subcommittee on 
Labor HSS are under great pressure to reduce those spending 
patterns, because that's where the discretionary money is, 
before you discuss a question such as entitlements, which is 
also not in this committee's responsibility--and I'm not sure 
the Secretary wants to discuss that today.
    This is a subcommittee where the action is if, indeed, 
we're going to stay on that pathway that leads towards making 
sense out of the implications of ongoing imbalanced budgets and 
our national economy.
    So you are very welcome. We will be looking forward to your 
testimony.
    Let me call on my friend and colleague, Louis Stokes, for 
any comments he might have.
    Mr. Stokes. Thank you very much, Mr. Chairman.
    Let me join with the Chairman in welcoming Secretary Rubin 
and Ms. Moy before our subcommittee this morning.
    As one who has sat on this Appropriations Committee for 
many, many years, I am accustomed to having the Secretary of 
the Treasury appear before the full Appropriations Committee. 
But this is historic this morning, to have the Secretary of the 
Treasury before our VA, HUD Subcommittee. It is, indeed, a 
pleasure. I think it points to the significance and the 
importance of the matter which you will be testifying to here 
this morning.
    As one who is actively involved in urban problems, I see 
CDFI as being another one of the tools that we can utilize to 
try and solve some of the major urban problems, while we 
utilize other tools such as empowerment zones and neighborhood 
reinvestment, things of that sort. So I will anxiously await 
your testimony.
    Let me also say, Secretary Rubin, as we have watched your 
tenure in office at Treasury, it has been a real pleasure to 
see the manner in which you have conducted the business of our 
government and the manner in which you have acquired the kind 
of respect you have in this office. I am sincere when I say to 
you it's a real honor to have you here this morning.
    Secretary Rubin. Thank you very much, Mr Stokes. And thank 
you, Mr. Chairman.
    Mr. Lewis. As we begin this meeting, before we have some 
questions, I would like both of you to know that you're welcome 
to present your statement, and your entire statement will be 
included in the record. So you can use the time available as 
you see fit. I know the Secretary may not be able to stay 
through the entire process. So we will call upon Secretary 
Rubin first and, at your leave, Ms. Moy, and then we'll go from 
there.
    Mr. Secretary, welcome. We're pleased to have you with us.

                   Opening Remarks of Secretary Rubin

    Secretary Rubin. Thank you.
    Let me start by saying I appreciate being here. I am going 
to make a few comments and, if I may, I do have to leave. We 
have an 9:30 appointment here on the Hill.
    The reason I wanted to be here is that this is a program I 
have cared enormously about from the very beginning. And, much 
more importantly, it's a program that the President has cared 
enormously about.
    When he campaigned in 1992, he had a vision of a nationwide 
network of community development banks around the country. From 
the day he walked in the Oval Office, and I was in the White 
House at the time, he was talking about things that he most 
wanted to get done of the things he had talked about. The CDFI 
Fund was very much on the top of that list of priorities.
    The reason was that he had the view, which I very much 
identified with for a long time, that if our country is going 
to realize its full potential for all of us. We're going to 
have to find ways to effectively bring the residents of the 
inner cities into the economic mainstream. It was his view that 
we have to do that through work, not through transfer payments, 
and that we have to involve the private sector as much as 
possible.
    The CDFI Fund, that's really what it's all about. It is 
designed to help create opportunities for people in the inner 
cities and other depressed areas to find work, and it is 
designed to leverage Federal dollars with private sector 
dollars and to bring the private sector to focus on the issues 
of the inner city.
    I think we made enormous progress, Mr. Chairman. We were 
fortunate in getting an enormously effective person to head our 
CDFI Fund. As I mentioned inside to you earlier, we knew who we 
wanted. Then the question was, how do we get her? We finally 
got the President to call and the President persuaded Kirsten 
to join us. She has done a remarkably good job.
    I don't think there's any question that we have a 
tremendous opportunity in this country, economically, and I 
think we're extraordinarily well positioned. I agree with what 
you said, that to get there, we have got to continue on the 
road of fiscal responsibility and get in balance, but within 
that, we have got to make the right choices.
    When we meet with the finance ministers of other countries, 
it's very interesting, because they talk about the same 
problems that we do. One is fiscal responsibility and the other 
thing is what Mr. Stokes briefly mentioned, which is they all 
have problems and all have groups of people in their countries 
who are economically disenfranchised. That has created enormous 
social problems and economic problems. They all focus on the 
question of how they move those people into the economic 
mainstream.
    For us, we think basically of three categories or programs. 
One I call investment in human capital, Head Start and various 
other education programs, which I think is probably the single 
most important. Second is public safety.

                  capital access and economic activity

    Third is the whole question of capital access and creating 
economic activity in the inner cities and other depressed 
areas.
    While there are many aspects of that program that I think 
are very important, in many ways I think the one that is the 
most promising over the long term, once it's brought to scale, 
is CDFI. Kirsten will tell you about the specifics of some of 
the programs that are underway.
    But the reception it has received, I think there has been 
ten times as many applicants in the first round as we had money 
to give out. It gives you a sense of the receptivity for this 
program in the private sector and the community generally.
    Secondly, the President and, even more, the First Lady, had 
a vision of microenterprise and the potential that had for 
dealing with people in depressed areas. As you may know, in 
many developing countries these microenterprise lending 
programs of very small amounts--$500, $1,000, whatever it may 
be, to buy a piece of machinery, to buy something that will 
enable somebody to become economically self-sufficient--have 
been remarkably effective, sort of a ``people's capitalism'', 
if you will.
    The First Lady particularly has energized our effort in 
that respect. Our notion is to provide sources of capital for 
these very small loans, with a combination of technical 
assistance, so that the people know how to use the capital and 
be able to function effectively in the economy.
    While little pieces of this are being done around the 
administration, the President directed that this be centered in 
the CDFI Fund. In our CDFI Fund now, we are making loans that 
will promote microenterprise activity, and then also out of 
Treasury, through Kirsten, coordinating the microenterprise 
activity around the administration.
    I think it has the potential--one can never tell what's 
going to happen, but I really think the combination of CDFI 
generally--that is to say, community development, a financial 
institution of one sort or another--plus microenterprise 
lending, has the potential of having a really significant 
impact in an area where an awful lot of programs have been 
tried in the inner cities and so many have been found wanting, 
although some are successful and I give them credit for that.
    I think we have something here that is very promising. As 
you say, Mr. Chairman, we're going to have to allocate scarce 
resources very carefully, and it was our view that this is a 
program that is very much worth the allocation of those 
resources. It is also something that we can judge as we go 
along. We're asking for $125 million this year, and our hope 
over a five-year period is to scale up over that time to a 
billion dollars. You can tell as we go along, you and this 
committee, you can watch and see what's happening to see if 
this thing is working the way we think it has the opportunity 
to work.
    So, with that, let me just say I am very pleased to be 
here. As Mr. Stokes said, I suspect you haven't had a Treasury 
Secretary here before, and I appreciate the opportunity to come 
in. The reason I wanted to be here is because we believe very 
deeply in this program.
    Mr. Lewis. I will ask similar questions of Ms. Moy, but let 
me extend a few questions to you, Mr. Secretary, if I may.
    I'm not sure whether either of you had the opportunity to 
read ``The Price of a Dream'', which is a book that was written 
and focused around the Grameen Bank, the Bangladesh experience. 
In fact, I gave a copy of that book to each of my children, but 
also to Secretary Kemp. Indeed, it tells a very interesting 
story.
    I was reminded, though, in thinking about the fact that 
President Reagan was once heard to say, ``You know, these Latin 
countries, they're all different.'' Washington kind of laughed 
at that, you know, as though it was obvious, as though we, in 
this isolated United States, really do understand that there 
are differences between people. And Bangladesh, of course, was 
much, much different than our country.
    But the impact of that experiment, of essentially 
stimulating enterprise, was rather phenomenal. The results have 
been rather phenomenal in that country, not as clear as in 
other countries. But there are people across the country, and 
now the First Lady indeed paying attention to the potential of 
that sort of stimulus for enterprise in communities where 
credit not normally available.
    The experience in Bangladesh, largely because of 
enterprising women, the percentages are way, way up there 
towards the 90 percentile, maybe above that, with women. The 
return rates are very much commercial rates, a reflection in 
terms of the percentage of actual loans repaid, but also the 
rates of interest are market rates, which is not something our 
government normally wants to do in these social programs. 
``Market rates? Goodness sakes. We'll have to do something 
about that.''
    I would commend, first, the book to you, but we want to be 
in the real world here. It is an experiment that has worked 
elsewhere. It is one of the reasons I'm willing to look at--
Last year you asked for $125 million as well, but in the 
conference the amount was $50 million. So it's a question of 
competition and also being willing to look again. That's kind 
of where I'm coming from on this.
    I would commend not only that book to you, but also a 
measurement of what we have seen in this country already, in 
terms of some of these mutual efforts.

                        microenterprise activity

    Secretary Rubin. Kirsten, I'm sure, will comment on the 
microenterprise activity, but let me give you a view, for 
whatever it's worth, Mr. Chairman.
    As you say, every country is different and every culture is 
different, and you can never tell whether something that works 
in one place will work in another.
    When I was in New York, before I came to the White House, I 
had something in excess of ten years experience with respect to 
the inner city issues. Something that caught me rather early 
on, it seemed to me it was everybody's problem, not just the 
problem of the people who live there. So I have a little bit of 
background in it, although I don't profess expertise.
    I think it's a very promising idea, if we can combine it 
with technical and practical education assistance. That's very 
much what we're trying to do. Very often you're dealing with 
people--One thing that struck me when I was back in New York, 
when I was part of a community organization in central Harlem, 
was how many people who really wanted to work and wanted to be 
a part of the economy.
    Here we can give them the opportunity. Now the question is, 
can we also give them the training and the technical assistance 
they need to be successful. I think that it's something that is 
enormously worth trying, because if it works, it could be 
tremendously powerful.
    Mr. Lewis. One of the keys of that initial experiment, as I 
understand it, was that eventually much of the authority and 
responsibility was passed on to small committees at the village 
level, and indeed, those committees were very tough on people. 
If people didn't make their loans, not only did they not get 
loans in the future, but they essentially lost the opportunity. 
That became a message.
    But we don't have a pattern in history of being that tough 
in the government.
    Secretary Rubin. Kirsten can tell you--she knows the 
specifics. I can only recollect what Kirsten told me. But there 
are organizations around the country now that are sort of the 
analog, in a way----
    Ms. Moy. The legacy of toughness is very much in our 
lending institutions.
    Mr. Lewis. We'll be interested in getting that.
    Secretary Rubin. Her point is correct--and Kirsten can 
address herself to this--that you're starting to see the 
analog. I have met with some of these organizations that 
Kirsten developed around the country.
    Mr. Lewis. I commend you for--the Secretary is, to say the 
least, busy, but I commend you for getting him interested 
enough to raise it to this level. It's helpful to all of us.
    Mr. Stokes, do you have some questions? I'm not sure how 
long Secretary Rubin can stay, but I thought maybe----
    Secretary Rubin. I have to leave in about two or three 
minutes.
    Mr. Lewis. Let's go through that now, then.

                            self-sufficiency

    Mr. Stokes. Some of the things I am sure Ms. Moy can 
answer, but I know the commitment that the President has for 
this particular initiative. I have heard him speak of it often. 
As I said in my remarks, I see it tying into some of the other 
things that the administration is trying to do in our cities--
the empowerment zones and neighborhood reinvestment and that 
type of thing.
    I guess in that sense what we're talking about is an 
institution that has a social mission, in the sense that you're 
trying to help us bring back our cities, particularly our inner 
cities, and you're trying to help some of the disadvantaged be 
able to get into the mainstream of life. I think we have to get 
away from this concept of handouts and welfare. We have to 
enable people to become self-sufficient. This appears to be one 
of the means of doing that.
    In terms of the $50 million that was granted last year, 
have you seen that type of mission coming out of it, Mr. 
Secretary?
    Secretary Rubin. Well, Kirsten can comment on it with much 
greater specificity, but again, I have had an opportunity, 
through Kirsten, to meet some of the people and be at some of 
these meetings with the people who have been getting this 
money.
    It's very impressive. What you see is a group of highly 
energized people around the country who come to these meetings. 
They seem to care enormously about what they're doing, and they 
very much share our vision, which is the one you just 
mentioned, which is not transfer payments but work. That's 
really what this is about.
    I have been very impressed by the people I've met. I just 
don't remember what the group was that we had that roundtable 
of--I have forgotten. I think they were micro-enterprise 
organizations from around the country.
    It was the one where I was supposed to speak, and I said 
I'm not going to speak and I'll just talk with these people, 
wherever it was. It was a very impressive----
    Ms. Moy. Oh, yes. It was our advisory board.
    Secretary Rubin. Yes, the advisory board.
    It was very impressive. These people were remarkably 
knowledgeable and cared about what they were doing. They were 
committed to the idea of work and not transfer payments. It 
gave me a very hopeful feeling that this thing is rooted in the 
communities and really has a good potential for working.
    Mr. Stokes. Thank you.
    Mr. Chairman, I know the Secretary has other engagements, 
so I won't pose any further questions to him. I will reserve 
them for Ms. Moy.
    Mr. Lewis. Mr. Secretary, in appropriations time there are 
all kinds of conflicts with committees. Because of the mix of 
our agencies, our members have lots of interest here but they 
are forced to be elsewhere.
    Roger Wicker is a new member of our committee but is a 
member who has a great interest in the subject before us, and I 
appreciate him being here. I would yield to you.
    Mr. Wicker. Thank you very much. I do appreciate you coming 
before our subcommittee. I look forward to questioning Ms. Moy 
more about the specifics.
    Let me just say and, I guess, echo what Mr. Stokes said. 
This is the type of program that really interests me. It is for 
that reason, maybe for the same reason, that I support the 
Appalachian Regional Commission, the Economic Development 
Administration, all of those programs that some people 
criticize. But I would much rather spend a small amount of 
money creating jobs in the private sector than to continue with 
writing a check from the government to an individual. I would 
much rather that check come from the private sector. So I am 
very, very interested in hearing the specifics later on.
    As the Chairman said, I'm a new member of this 
subcommittee. This is a program that I know very little about. 
But to the extent that I can work with the administration to 
move people off of the transfer payment into a private sector 
job, I am all for that.
    You mentioned that you didn't much want to talk about 
entitlements this morning. I'll just say that, boy, we need to 
talk about entitlements.
    Secretary Rubin. I don't disagree with that. I spend so 
much of my time talking about it, it's such a relief not to----
    [Laughter.]

                          entitlement programs

    Mr. Wicker. If we can somehow find a way to keep those huge 
growing entitlement programs from squeezing out the small 
amount of discretionary dollars that we do have, that we will 
have like another $75 million to create jobs that last.
    Secretary Rubin. You're right. The answer to the 
discretionary side of the budget, one of the answers is to 
certainly get the entitlements under control. I absolutely 
agree with that.
    If I could make a suggestion, you might find it 
interesting, sometime when these people come around, to meet 
with some of the people who are the recipients of these grants. 
Really, if you're interested in the program, it really gives 
you a much better sense of the potential, at least, that exists 
here.
    Mr. Wicker. Wonderful.
    I notice that Mr. Stokes' ears perk up when he hears 
``urban'', and when I see the word ``rural'', it catches my 
imagination.
    Secretary Rubin. We're in favor of both. So I think that 
pretty well captures it.
    Mr. Stokes. If the gentleman would yield, I think it is 
very important for us to consider both rural and urban needs 
and concerns simultaneously, not to the exclusion of one over 
the other.

                  national credit union administration

    Mr. Lewis. Mr. Secretary, I know you have to leave us. But 
in just the short time you have with us, the National Credit 
Union Administration--and you know there is some controversy 
going on now about their community of interest, where they can 
seek their membership and so on. That is now before the courts.
    Some members are suggesting that we ought to consider 
legislation to push that and maybe define what their community 
constituency can be, their field of membership.
    Secretary Rubin. Credit unions. We have a study on that, I 
believe.
    Mr. Lewis. I would be interested in input regarding what 
your Department would say relative to legislative activity at 
this point. While they're in the courts, the tendency is to say 
``Oh, no'', especially those with a legal background, there is 
a tendency to say ``Oh, no.''
    Secretary Rubin. We would be happy to get back to you on 
that, Mr. Chairman. I actually have not kept up with this 
probably as well as I should have. But I know we have 
recommended a study underway.
    I understand the question you're raising.
    Mr. Lewis. Yes. The question really involves, you know, if 
you're going to compete in the marketplace, do you want to 
compete equally, should you maintain your protections, all 
those questions.
    Secretary Rubin. Yes. I guess you're saying, while it's 
pending in the courts, should there be legislation.
    Mr. Lewis. That's right.
    Secretary Rubin. Let us get back to you on that.
    Mr. Lewis. Okay. I appreciate your being here.
    Secretary Rubin. Mr. Chairman, Mr. Stokes and Mr. Wicker, 
thank you very much.
    [The statement of Secretary Rubin follows:]

[Pages 102 - 105--The official Committee record contains additional material here.]


    Mr. Lewis. It is our pleasure to welcome one more time Ms. 
Kirsten Moy, who is the Director of CDFI. As we have already 
indicated, there is a good deal of interest in our subcommittee 
regarding the potential of this agency, but you're here not at 
a time when almost every budget operates with a style that says 
``what did you get last year and how much more can you get next 
year.'' Rather, it is perhaps competing to be one of those 
agencies that will get some special attention, in contrast to 
those who will be reducing the rate of growth, of necessity, if 
we're going to meet those targets that all of us have committed 
to.
    With that, Ms. Moy, your entire statement will be included 
in the record, as I have indicated, and if you would proceed 
from there, we will have questions. And Mr. Stokes is tough.

                    Opening Remarks of Director Moy

    Ms. Moy. I am very gratified by the level of questions that 
have arisen already. I think what I will do, since you have the 
statement and can read it, I would like to depart from the 
formal statement and try to address some of the questions you 
may have.
    Mr. Lewis. Ofttimes that's very helpful.
    Ms. Moy. I assume you will ask me other questions as you 
think of them.
    First of all, let me remind the subcommittee that we run 
two programs, and I will be talking about both of them. One is 
the Community Development Financial Institutions Program, where 
the bulk of our money goes, and that provides loans, grants and 
equity investments and some measure of technical assistance to 
these CDFIs, Community Development Financial Institutions, all 
around the country.
    In the first round of funding--and again, this is in your 
materials--let me remind the subcommittee that we made $37.2 
million in awards to Community Development Financial 
Institutions, to 32 organizations around the country, and about 
$20 million of that amount was in grants. But about $16 million 
was in the forms of loans and equity investments upon which we 
expect to realize some financial return.
    We achieved tremendous diversity in that first round. Our 
CDFIs are based in 20 States and the District of Columbia, but 
they're actually serving communities in 46 States and the 
District, so we got excellent geographic coverage.
    About half serve predominantly urban areas, 25 percent 
serve predominantly rural areas, and the other 25 percent 
actually serve a combination of both. So I believe that means 
we might be slightly overrepresented in the rural category 
because I think the rural population is approximately 25 
percent. So I think we did well in that category.
    We believe in working with other programs. At least 24 of 
our CDFIs also serve Empowerment Zones and enterprise 
communities, so there the activities are really reinforcing 
each other.
    In terms of type, you will see we funded everything from 
community development banks to community development credit 
unions, loan funds, some microlending organizations, one Native 
American housing organization, and three community development 
venture capital groups. So institution type alone doesn't 
determine whether you are a CDFI. It's that you have a primary 
mission of community development among other things.
    The second program we run, which works in concert with the 
CDFI program, is the Bank Enterprise Award Program. That is the 
program to which, by statute, we must allocate one-third of our 
program monies. Last year, we awarded $13.1 million to 38 banks 
and thrifts for doing more, increasing the level of their 
lending and investing in distressed communities, and for 
supporting CDFIs. So the programs are viewed as working hand in 
glove.
    We have some good diversity in that program as well. We had 
banks ranging in total asset size from $21 million, which is 
quite small, to over $320 billion. In the case of the CDFI and 
BEA Programs--both--I'm going to be talking about leverage in a 
moment, we achieved tremendous leverage on those monies.
    One thing we are repeatedly asked is how are our programs 
different from those of other Federal agencies. You know, is 
this duplicative? Are we doing things that other organizations 
would do? I would argue, as the Secretary does, that what we're 
really about is not a giveaway program. It's about a program to 
incentivize the private sector to do more. All our award 
winners are private institutions. The idea is to use a small 
amount of public money to leverage much larger amounts of 
private money.
    We are here to help make the financial services industry 
work better, in those distressed communities and low-income 
populations, that perhaps traditional financial institutions 
have not always been so good in serving. We do this partly by 
helping with the creation of new institutions specifically 
targeted to serving those communities, and by making 
traditional financial institutions work harder and better.
    I would say that the hallmarks of our programs are 
tremendous leverage, forging linkages with banks and thrifts 
and other entities in the financial services industry, and 
creating viable, self-sustaining institutions. Our institutions 
all have to make it on their own at some point. We're not here 
to be providing the money forever.
    We're about expanding access to the economic mainstream and 
trying to restore healthy market activity in these communities 
so that the Federal Government doesn't need to be there 
forever.
    We're also about catalyzing new activity and jump starting 
it, as opposed to subsidizing it on a permanent level, and 
we're a lot about promoting performance. That's sort of clear 
from the way we did the selection and the way we will continue 
to make awards.
    I would like to just give a few examples which will 
possibly help make it real. In terms of leveraging of private 
resources, you may recall that every dollar we give out has to 
be matched one-to-one by non-Federal money. That's just for 
starters, so we don't even give anybody money unless they bring 
another dollar to the table from a non-Federal source.
    We did a calculation of the various amounts of fund-raising 
that those 32 organizations are doing in the next two to three 
years as a result of getting money from us.
    Mr. Wicker. Ms. Moy, is that one-to-one in both programs?
    Ms. Moy. No, the CDFI program. Actually, we got a lot more 
than that in the bank program, in terms of the way the program 
works. The two programs work differently.

                         leveraging other money

    In the next two to three years, we think that the $37.2 
million that we are awarding will provide three to four times 
that amount in terms of leveraging other money. That's in the 
short term.
    In the long term, which one might define to be ten years or 
so, we think that these groups will be able to do lending and 
investing of 10 to 20 times the amount of money that we are 
awarding them.
    Now, these are real numbers, and that's because financial 
institutions are all about leverage. I mean, people get a 
certain amount of capital and they are able with that capital 
base to do a lot more lending and investing. That's the idea.
    In a regulated financial institution, for instance, if a 
bank has capital of, say, eight to ten percent--we're talking 
about leverage there of ten to one or twelve to one. So this is 
not unusual in this type of institution. We are actually 
getting more than that in some cases because of the particular 
way these institutions are working.
    One very real example is self-help of North Carolina. It's 
a national leader in community development finance. It's 
probably one of the oldest CDFIs around. We recently disbursed 
a $3 million grant to self-help. Over the next five years, they 
and we conservatively estimate that our grant and matching 
funds will enable them to provide more than $100 million to 
finance affordable housing and small business loans over and 
above what they could have done without our assistance. In 
fact, they have already closed a $22 million transaction based 
on the award that we made to them.
    We have a really good story to tell in terms of forging 
linkages with the financial services industry. The $13.1 
million that we put out in bank enterprise awards generated 
nearly $66 million in equity investments and other financial 
support, to Community Development Financial Institutions. In 
addition, the program leveraged about $60 million in direct 
lending and financial services in some of the Nation's most 
distressed neighborhoods. So that's the leverage we think of: 
$126 million of activity relative to our $13.1 million in 
awards.
    As one example, Republic National Bank in New York got a 
sizeable award, just over $500,000. But that catalyzed nearly 
ten times that amount, $5.2 million, in financial support 
they're providing to 20 CDFIs in the greater New York 
metropolitan area. In that case, it was actually a 10 to 1 
ratio.
    Among the organization supported in New York is a CDFI, the 
Non-Profit Facilities Fund, which we are actually making an 
award to. That institution serves low-income people by 
financing among other things health care facilities, child care 
facilities, community service facilities and so forth. To date, 
this CDFI has made about $11 million in loans and has attracted 
investors from the banking, insurance, foundation, and local 
government sectors. Of course, they made a lot of those loans 
before they had our money, but they have plans to do a whole 
lot more with it.

                      self-sustaining institutions

    The third thing that I mentioned that we're very focused on 
creating viable, self-sustaining institutions. This is 
critically important. These institutions have to be able to 
operate in the private marketplace while serving these very 
needy communities.
    The Delaware Valley Community Reinvestment Fund, which 
serves some of the most distressed communities of Philadelphia 
and Chester, PA and Camden, NJ, has a very strong track record 
in terms of financing affordable housing and assisting small 
businesses. Over time, they have attracted 700 investors from 
the private and not-for-profit public sectors. Now, some of 
these are very small investors; some are individual investors 
and some are religious organizations. But still, it's 700 
investors. And their asset base has grown 25 percent within the 
past year, partly as a result of our award. We're providing a 
$2 million grant, which represents a 10 percent increase in 
their asset base. With that, they should be able to expand 
their lending and investment activities many times over in 
those communities.

                              rural areas

    We talked about rural areas earlier. Expanding access to 
the economic mainstream is especially challenging in rural 
areas. Appalbanc is a multi-faceted community development 
financial institution that serves 85 really distressed 
communities in West Virginia, Kentucky, Tennessee and Virginia. 
They are focused right now on a strategy to promote housing 
development and home ownership in very distressed rural areas. 
This, of course, will expand access to the economic mainstream 
by providing low income people, that otherwise could not afford 
a home, with a means of owning their own homes. To date 
(they're a longstanding CDFI). They have actually developed or 
rehabed more than 20,000 homes, so we know they can do this. 
The $1.33 million we are providing in assistance will greatly 
expand their ability to continue this activity in a very needy 
region.
    Congressman, I know you're familiar with ShoreBridge 
Capital in Cleveland, and----
    Mr. Stokes. They were in to see me yesterday, yes.

                          shorebridge strategy

    Ms. Moy. Charlie Rial happened to be in Washington.
    But what they're a lot about is restoring healthy market 
activity by forging linkages between labor force development 
initiatives and actual business development and expansion. 
Sometimes, unfortunately, even when there's new economic 
activity in a community, the jobs don't necessarily go to the 
people who need them most. That takes a lot of extra work, 
commitment and planning. That is the ShoreBridge strategy. You 
probably know far more about them than I do. But we're 
providing them with an investment of $1.5 million, which will 
be used, along with capital from many other private investors, 
to retain and expand manufacturing companies that employ low-
income residents of the Cleveland Supplemental Empowerment 
Zone.

                   santa cruz community credit union

    Finally, let me mention in terms of jump starting new 
activity, we are providing a $1 million grant to the Santa Cruz 
Community Credit Union, which provides access to credit for 
small and start-up businesses and basic financial services to 
low-income residents in Santa Cruz, CA. Our $1 million grant is 
actually going to be used to expand the credit union's 
operations to enable them to open a new branch in Watsonville, 
CA, which was devastated by an earthquake some years ago.
    They don't yet have our money. They probably will in the 
next couple of weeks. But they have already raised $2.5 million 
of additional deposits for the credit union based on the 
proposed $1 million award.
    Mr. Wicker. What kind of businesses do they lend to?
    Ms. Moy. They're an interesting credit union. They provide 
financial services, as all credit unions do, but they are 
primarily small business lenders. They have a sensational track 
record in lending to small business, which is not something 
that actually many credit unions do. In fact, several of their 
companies have actually gone public (to Chairman Lewis) I know 
you're familiar with them. It's an incredible story. They're at 
an asset size of $20 million, one of the largest community 
development credit unions around.
    These are examples of the sort of initiatives that the Fund 
can support.

                         performance agreements

    Let me conclude by mentioning something that I think we all 
care about dearly, which is performance. When people come to 
apply for your money, they always tell you a lot of stories 
about all the wonderful things they're going to do. And I'm in 
that same position with you here right now.
    I think what is very important is that, over time, we 
demonstrate there actually is performance. The Fund's statute 
requires that we execute an assistance agreement, a formal 
agreement with each award recipient, that details performance 
goals and provides sanctions to the Fund if the organizations 
do not perform.
    We are in the process right now of actually negotiating 
performance agreements with all 32 organizations. Not quite, 
but almost half of these organizations have now largely 
developed their performance goals, have raised their matching 
money, and are in position to close, so that we will actually 
have monies disbursed to them in the next four to five weeks.
    The other half are still working on it. It is taking some 
time because, frankly, this is a new experience for many of 
them. Aside from the fact that this is the first time many of 
them are receiving Federal money, very few funders have ever 
asked them about what they plan to do with the money and for 
goals at the level of detail that we are. This is taking a lot 
of time. We think it's absolutely critical that we do it.
    It is important to the Fund that, over the long term, these 
organizations actually show the community development impact 
that they propose, and that we would like to see, based on the 
use of scarce Federal dollars. We are also at the present time 
putting in place systems and procedures to make sure that we 
can effectively monitor and evaluate all these awards going 
forward.
    I would be happy to answer any questions that you have.
    [The information follows:]

[Pages 112 - 120--The official Committee record contains additional material here.]


    Mr. Lewis. Thank you very much, Ms. Moy.
    Before we start the questioning, it was refreshing to have 
one speak with both enthusiasm and knowledge from off the top. 
In the meantime, some of us--I'm an exception--some of us learn 
to read in high school and so you're recognizing that is a 
helpful item.
    It is, as you suggest, one thing to leverage dollars, and 
it's another thing to actually measure the results, to insist 
upon goals and measure the results. Some have suggested that 
you get very little for that which you cannot measure. That 
emphasis is very important, at least to me.
    Ms. Moy. It is critical.

                            one-to-one ratio

    Mr. Lewis. The one-to-one ratio that you mentioned of 
dollars, beyond five dollars, those are dollars that come from 
other government programs, like State and local government, 
and/or the private sector?
    Ms. Moy. They come, I think, most largely from the private 
sector, but local government is also a contributor in some 
cases.
    Actually, certain States have started CDFI programs--though 
not many. Delaware Valley, I believe, received a sizeable grant 
from the State of New Jersey, Governor Whitman's office, as 
matching money. Actually, through the Bank Enterprise Program, 
it seems that one of the larger and most frequent sources of 
match are the banks. There are wonderful partnerships between 
the CDFIs and the banks.

                        public housing programs

    Mr. Lewis. One of the responsibilities of this subcommittee 
involves public housing programs. Frankly, I have learned much 
more about those programs since taking on this responsibility 
than I learned before. An area that is of great concern to me 
is what appears to be a growing body of information that would 
suggest that there's a factual foundation for suggesting that 
in many an urban center in America we have been delivering 
money for many, many a year, and because we have failed to very 
seriously measure results, an awful lot of that money doesn't 
lead to results.
    A recent trip to New Orleans is perhaps an extreme 
illustration of that.
    I won't dwell upon the negative, for we've been sending 
$50-$70 million a year to that local authority for some time 
now, and when you look at the condition in which most of those 
we purport to want to serve are asked to live, you just have to 
shake your head. It certainly shakes my faith in government's 
ability to follow through on the results side.
    There were exceptions to that experience. On both sides of 
the main drag, the main street, the one that all the tourists 
visit--I think it's St. Charles Street in New Orleans, if I'm 
remembering right--within two blocks there are projects that 
involve largely the work of neighborhood reinvestment, which is 
not a housing program but, rather, it provides housing 
assistance in a fashion that seems to work. It involves a 
combination of Federal money investment, banks making 
investments locally, a partnership of public/private and 
otherwise, where there actually are products being developed 
that provide subsidized housing that is in direct contrast to 
places like Desire Homes. Habitat for Humanity is a story 
that's worth looking at.
    It's strange, isn't it, that we've been spending $50-$70 
million there, and yet this relatively new idea outside of 
housing seems to be having an impact.
    Above and beyond that, there's a CAP program that is 
attempting to put together an effective coalition between 
Xavier College, New Orleans, as well as Tulane. Within that, 
there was a session, a presentation, in which they were 
discussing a program that is designed to go out into the 
communities that surround the projects, find people of 
enterprise, and see if they are willing to make the kind of 
commitments to goals, et cetera, et cetera, the kind of thing 
that you were discussing.
    We haven't measured that yet, but at least there is a great 
spark of interest in creating jobs within the community that 
involves the projects. The solution to these community problems 
involves education, jobs, and living conditions, housing that 
is livable. There are at least some elements there that are 
encouraging to me.
    But the vast reflection is very, very discouraging. The 
Nation's capital reflects much of the same.
    Let me ask a few specific questions. We have a number of 
questions we would ask you to respond to for the record as 
well, and then I will turn to Mr. Stokes.

                        cdfi fund staffing plan

    Last July, your office provided the committee with a 
staffing plan for CDFI. Out of 33 positions in the office, two 
positions are designated for portfolio/program monitors within 
the Office of Policy and Programs.
    Will these two individuals be responsible for ensuring all 
aspects of the programs, that all of them are executed 
according to plan?
    Ms. Moy. I'm glad you asked that question, because we're in 
the process of revising our staffing plan.
    I made, I hope not an overly facetious, remark last year 
that it was my first job in the Federal Government and 
everything seemed to take more time and people than it did in 
the private sector. We need far more than two people to do 
this. In fact, we brought in Ernst & Young, a reputable 
accounting firm, early on to help us, to advise us on 
appropriate ways to set up our systems and procedures, 
especially for the monitoring function. We are going to be 
hiring substantially more than two people, and at higher 
levels.
    I don't need to bore you with it, and we can certainly 
provide you with a revised staffing plan. But we will have a 
high-level grants manager. There will be a comptroller and an 
accountant that will be working on all these issues.
    But yes, those people will be there to ensure that our 
loans and grants are in compliance, that if there are loans and 
investments, people are repaying the loans. But we're 
evaluating and monitoring not only the financial impact, but 
the programmatic impact, the program side. Did they, indeed, 
meet their performance requirement, their performance goals? I 
think that's very important. We're getting quarterly reports on 
a number of financial and other issues and a full annual report 
from these folks about what they have actually accomplished.

                  default rates and performance goals

    Mr. Lewis. Can you give us an indication of what you see--
you have been doing this measuring and CDFI has been making 
these grants and there are preliminary indications. What's 
happening out there in terms of default rates and other thing, 
performance goals?
    Ms. Moy. First of all, we're still in the process of 
disbursing money now, and so----
    Mr. Lewis. I understand. When did you make your first 
disbursement?
    Ms. Moy. When did self-help close, do you recall? Okay, the 
24th of February.
    Mr. Lewis. The first disbursement?
    Ms. Moy. Well, in Bank Enterprise, three-quarters of the 
money is out. On the CDFI program, the first one was on the 
24th. We have----
    Mr. Lewis. What I'm really asking is in the early stages of 
this. Maybe these are questions for next year and the year 
after.
    Ms. Moy. What we can tell you is that, in selecting the 
award winners, we took a detailed look at the defaults and 
delinquencies. Many people actually said we were too tough. But 
I would venture to say that the performance record of those 
that received funding on the first round are excellent and they 
would compare favorably with any mainstream financial 
institutions out there.
    Santa Cruz, for instance, has I think a loss rate less than 
one percent on small business loans, maybe less than half a 
percent. It's phenomenal, given the people that they're lending 
to.
    The industry, in the area of housing, it is less than half 
a percent. I mean, there were organizations that have actually 
gotten Federal money, who came in with substantially higher 
default rates, they were unbelievable, well over 10 or 20 
percent. We just didn't feel, given what they were doing, that 
that was acceptable. We expect such good performance going 
forward.
    There is no way that our money can continue to work in 
these organizations if there is such a level of losses that the 
money dissipates.
    Mr. Lewis. That's correct.
    There is a presumption, of course, in the standard 
financial institution circuit, that unless there is significant 
equity, there is bound to be a pattern of default and an 
irresponsible use that is much higher than the traditional.
    What you're suggesting in many ways is that maybe that 
original premise needs to be reexamined and it may be full of 
holes for----

                           repayment capacity

    Ms. Moy. I think it's true in certain cases. I think it's 
modified in others. Bankers used to talk about the importance 
of character and capacity in repayment. I think what some of 
our CDFIs do is pick the right people to lend to, because they 
know the communities imtimately.
    You also never structure a loan for someone that they can't 
repay. You know, some of these loans may bear lower interest 
rates, but they represent realistic repayment schedules.
    Mr. Lewis. You indicated you need more than two. Will other 
organizations, such as the Department of Treasury, their IG, be 
called upon to help monitor the program execution?
    Ms. Moy. Actually, the IG has been assisting us. I sought 
from the beginning to make sure we were--This is a new program 
within Treasury. Treasury doesn't run many programs and it is 
important to be in sync with the IG. They have actually been 
providing us with technical assistance since we started, with 
recommendations regarding our award selection and award 
monitoring process, and they have done two reports for us. So 
we're working very closely with them. It has actually been a 
very rewarding experience.
    Mr. Lewis. I understand the Treasury Inspector General, in 
May of 1996, issued a report outlining CDFI award monitoring 
procedures. Included was a suggestion for quarterly status 
reports which are to be thoroughly reviewed for accuracy and 
completeness.
    Do you plan to have these people who will be working within 
your office to----
    Ms. Moy. Absolutely, absolutely. They will be looking at 
the financials and the programmatic performance, absolutely.

                          training initiative

    Mr. Lewis. Ms. Moy, in your statement there is mention of 
your intention to launch an important training initiative to 
provide the full range of training and technical assistance to 
CDFI institutions, those to whom you provide grants.
    What areas of training deficiency have been identified and 
were they identified through detailed surveys, or are they 
based upon, I suppose, anecdotal information?
    Ms. Moy. Well, actually, one of our best sources of 
information was the 268 applications. We have a tremendous 
reservoir of information. The training and technical assistance 
needs were very clear upon review of those 268 applications.
    We have all kinds of CDFIs, from start-up organizations to 
groups that are growing rapidly, sort of in midstream, to 
seasoned, 20 year old organizations. They have very different 
technical assistance needs. Some of the young ones just need 
help about how do I start up, how do I put together a good 
board, how do I start raising money, how do I organize, how do 
I underwrite loans?
    We have organizations that are rapidly expanding that need 
to get much more sophisticated about the type of lending they 
do. They may have some simple bookkeeping or simple computer 
systems in terms of monitoring their loans. They now need full-
fledged portfolio monitoring systems. That's a totally 
different type of technical assistance.
    Mr. Lewis. I have to go make a phone call. Mr. Stokes, I 
will yield the time to you, and then Mr. Wicker.

                         performance agreements

    Mr. Stokes. Thank you, Mr. Chairman.
    Ms. Moy, let me start with a question about your 
performance agreements that you require to be signed. Tell us 
what sort of things you require to be put into that performance 
agreement.
    Ms. Moy. Let me divide that into two pieces. There is what 
we call the boilerplate. It's a standard agreement and has a 
lot of the usual Federal compliance and other requirements in 
it, the whole body of Federal law that applies to grants, which 
we have had to adapt for the variety of institutions that we're 
funding. Some of them are regulated and some are unregulated. 
So we had to do seven versions of these boilerplates.
    But the most interesting part, I think, are the performance 
goals themselves. So, depending upon what type of institution 
they are, they look very different. For instance, for a 
community development credit union--and Faith community was one 
of our winners--it may have to do with expanding membership so 
they can serve more individuals. It may have to do with 
providing additional services. Many credit unions, for example, 
haven't been able to offer checking to their individuals, and 
people have had to go to local pawn shops or other places to 
cash checks.
    In an institution that is primarily, for instance, a 
housing lender, the goals have to do with how many housing 
loans you want to make, are they going to expand from single 
family to multifamily, one way or another, how many units are 
they going to be creating over time, which income level of 
population are they going to be serving?
    For a small business lender, again, it's different. It's 
perhaps how many businesses are you going to help start out; 
what is the volume of small business loans you're going to be 
putting out there. How long are some of those businesses going 
to be in operation and what type of job potential do they have 
over time. So it varies from entity to entity.

                             matching fund

    Mr. Stokes. Let's talk about the matching fund situation a 
little bit. What do you require in terms of the amount of 
commitments or cash in hand with reference to an application 
for a grant?
    Ms. Moy. Well, when they come in, they don't actually have 
to have matching money in hand, but they have to have fairly 
good prospects for getting money. You know, there is some ``pie 
in the sky'' about raising money, but we would like to see, 
either the money in hand or a credible plan for fundraising 
from some realistic sources.
    For instance, in the first round, most of the people that 
came in, while not having money in hand, had submitted 
applications to leading foundations, for instance, had already 
gotten indications that they were likely to be funded.
    Mr. Stokes. What's the general source of their funding, the 
matching funds?
    Ms. Moy. It's actually very interesting. In the first 
round, there was some major funding from a variety of 
foundations, like the Ford Foundation, for instance, the 
MacArthur Foundation and so forth. Much of the money is from 
banks, because the Bank Enterprise Award Program is clearly 
incentivizing that activity.
    There is matching from religious organizations. Many of the 
Catholic religious orders, some of the Protestant 
organizations, are putting money into this. There is some 
matching from individuals.
    Actually, the sector we haven't really been able to tap 
much is the corporate sector. There have been a few instances 
of corporate donations from community to community, but we have 
not really been able to fully access that community. Actually, 
among the proposals in the President's budget is actually a 
proposal for tax credits to incentivize equity investments in 
CDFIs, something that would apply largely to corporations.
    Mr. Stokes. In your first round of grants, I'm assuming 
that you received a larger number of applications than you did 
in terms of the grants.
    Ms. Moy. Yes.
    Mr. Stokes. What percentage of your applications were you 
able to fund?
    Ms. Moy. We funded--We had 268 applications asking for over 
$300 million. We initially, if you remember, had only $31 
million available. We were able to put in a little more money 
later on and were funding $37.2 million.
    We were funding about one in ten, a little over one in ten, 
when we started. We were way oversubscribed. Then we, in 
addition, had to cut people back about 40 percent on the 
funding, because there just wasn't enough money.
    Mr. Stokes. As I understand it, you are now in the process 
of actually disbursing the funds?
    Ms. Moy. Yes, on both programs. That's correct.
    For BEA, as I mentioned, about three-quarters of the money 
is out, based on what the banks have already accomplished, and 
for CDFI, in the last few weeks we have closed three 
transactions. We have another 29 to go.
    Mr. Stokes. Obviously, between July and March of this year, 
you've had a considerable lag time, right?
    Ms. Moy. Yes, that's correct.

                            disbursing funds

    Mr. Stokes. Tell us why it has taken so long to get the 
funding out.
    Ms. Moy. Part of it speaks to the need to set up systems 
and procedures to monitor the money. Awarding is one thing, but 
once you put money out, it is a totally different story. Some 
of that has been spent in building the legal, financial and 
administrative infrastructure that we need.
    The problem with crafting these assistance agreements has 
also taken some period of time. I think only two or three of 
our organizations have ever received Federal money. I have to 
tell you, a number of them were in shock, when they first got 
our legal documents. There is a palpable difference between 
those who have previously seen Federal money, in terms of being 
familiar with the sort of issues raised, and those who have 
not. I think it will take some time to do some education.
    In articulating the performance goals, that is not 
something that an organization does overnight. It is frequently 
done in consultation with the board, who may have to pass on 
it. So that has taken some time.
    But I think we're in a position now where we have got a lot 
of the infrastructure in place, in terms of the infrastructure 
internally to monitor these, and we have basically all the 
boilerplate, if you will, all the model legal documents we need 
for all these varieties of institutions. I think we're in 
position now to close these things as organizations are ready 
to--about half of the organizations are ready to, and we think 
over the next four or five weeks, we should close a sizeable 
number of them.

                                Staffing

    Mr. Stokes. Let me pursue a question posed to you by the 
Chairman relative to staff. I'm not quite sure I understood 
your answer.
    Ultimately, how much staffing do you plan to have?
    Ms. Moy. At the $125 million level, we were talking about a 
staff of approximately 35. When I came last year, I think I had 
seven or eight people on staff, and a large number of 
contractors. We now have 13 people on staff, and almost an 
equal number of contractors. They do things that come up from 
time to time, for instance, where our programs are cyclical, 
when we go out for a round and start taking applications, we 
need to bring extra contractors on board. We don't need them 
all year; we need them part of the time. So we have, for 
instance, two or three people that are helping us with the Bank 
Enterprise Awards Program, closing out the first round.
    We have someone who helps us with the microenterprise 
initiative. Also, since Ernst & Young are helping us with our 
systems and procedures, they are helping us with a revised 
staffing plan to handle the administrative monitoring side. 
Right now we have two or three slots that we have filled with 
contract employees, just to see whether what they're proposing 
works out or not before we make a commitment to hire these 
people on a permanent basis.
    Mr. Stokes. Do I have time for one further question, Mr. 
Chairman?
    Mr. Lewis. Certainly.

                          administrative costs

    Mr. Stokes. With an agency of this sort, there is always 
the concern about the money getting to the recipients, the 
people for whom the program was designated.
    How much of your budget do you anticipate, or what 
percentage will be devoted to administrative costs?
    Ms. Moy. Well, we have an administrative cap of $5.5 
million. In the last year, we spent, out of $50 million, about 
$2.7 or $2.8 million for administration.
    Mr. Stokes. You're under the cap.
    Ms. Moy. Yes, we're under the cap.
    We are proposing in the President's budget that if we get 
the $125 million, there will be slightly over $5 million for 
administrative, and the rest of it is $40 million for the Bank 
Enterprise Awards Program, which is what is required by 
statute, and $80 million, the bulk of it, for the CDFI program.
    Mr. Stokes. Thank you very much, Ms. Moy.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Wicker.

                              eligibility

    Mr. Wicker. Thank you, Mr. Chairman.
    Ms. Moy, let me just ask about eligibility. In the summary 
justification, the language mentions distressed urban and rural 
communities. How do you determine who is even eligible to apply 
in the first place?
    Ms. Moy. The CDFIs can serve either these distressed 
communities, or a targeted population, like a low income 
population. I just wanted to mention that we do have CDFIs 
serving low income populations, not necessarily a particular 
distressed community.
    If you go through our regs or statute, you will see that 
there are several criteria on which a CDFI can establish its 
basis for working in a distressed community. They parallel some 
of the CDBG criteria, but there is not just one criteria. For 
instance, poverty at a 20 percent level, or higher. For rural 
areas, a certain level of out-migration that has occurred over 
a period of time. Unemployment at least one and one-half times 
the national average. But there are several indicators, because 
we know the communities are all different. If you have only one 
criteria, it may be that you truly have a distressed area that 
doesn't happen to meet that particular criteria.
    Mr. Wicker. You've got two types of funding, one for the 
CDFIs, and then this Bank Enterprise. Those are traditional----
    Ms. Moy. Those are traditional banks, correct.
    Mr. Wicker. Do you have a pot of money for one type of 
funding and another for the other, or do you just----
    Ms. Moy. There are two pots. By statute, we are required to 
put one-third of our program moneys in Bank Enterprise.

                                housing

    Mr. Wicker. And then I noticed that a lot of the specific 
examples that you gave--and I'm glad you gave specific 
examples--I notice a lot of them dealt with housing.
    How much of the $50 million from last year went to 
affordable housing? Can you quantify that?
    Ms. Moy. I can't tell you exactly, but let me try the 
question one other way, and I can also provide you with backup.
    Of the $37 million that went to the CDFIs, the 32 
organizations, I would say the activity among those 
organizations was probably split fairly evenly between housing 
and small business lending and other forms of economic 
development.
    We funded four community development banks. They all do 
both housing and economic development, small business. The 
community credit unions usually do a mixture of both. Among the 
loan funds, the unregulated institutions, they are fairly 
evenly split between the two.
    I don't know that I will be able to tell you in dollar 
amounts. I can try. But I can tell you that, as an amount of 
activity, it is a fairly even break between the two.
    Mr. Wicker. Then within the housing area, how much is 
single family and how much is multifamily?
    Ms. Moy. It is much more multifamily.
    Now, rural areas are a little different. I would say much 
of our single family activity is probably in rural communities. 
I think it's whatever is appropriate for that community. In the 
case of self-help, the $22 million transaction that just closed 
was all for the purchase of nonconforming, single family 
mortgages for low income individuals.
    If you want more, we can certainly go back and I'll see 
what I can pull out from the examples.

                          multifamily housing

    Ms. Wicker. In multifamily, who is going to own that?
    Ms. Moy. The multifamily ownership, some of them are 
private developers, private for-profit developers. Many of them 
represent----
    Mr. Wicker. They would then rent the----
    Ms. Moy. The predominant part are affordable, so they're 
low income, or in many cases, mixed income. There is mixed 
income housing in urban areas.
    But the bulk of the projects are affordable housing 
projects. But there is some attempt, in many distressed urban 
communities----
    Mr. Wicker. Some of which is rental?
    Ms. Moy. The multifamily is all rental, it's all rental, 
correct.
    There are attempts in urban areas to not create ghettos, 
and therefore, mixed income housing is promoted in many of 
these cases.

                            small businesses

    Mr. Wicker. Then I would be curious if you could just give 
me some examples of the types of small businesses.
    Ms. Moy. Oh, they're all over the place. They range from 
home-based businesses in some cases, to--we probably don't have 
as much manufacturing, but some small retail and service 
businesses, for example, delivery businesses. I can think of 
one organization that has financed a desktop publishing 
business, another one that financed a computer-related 
business. It's virtually every type of small business.
    I just visited some folks in Chicago. There is a woman 
making jewelry out of her house. In California, the Santa Cruz 
Community Credit Union has funded many agriculturally-related 
businesses. The Cascadia Revolving Fund in the Northwest 
finances wood products-related businesses among other types of 
businesses.
    The businesses reflect the local economy. All I can tell 
you is they are basically very small businesses, by and large, 
and sometimes they grow.
    Mr. Wicker. Very small.
    Ms. Moy. Yes. And when they grow, they often graduate to 
get regular bank financing, which is part of what it's all 
about.
    Mr. Wicker. But you said in a couple of instances these 
types of businesses have gone public? Did I hear you say that?
    Ms. Moy. Santa Cruz is a phenomenon. They are so good at 
doing this. The Chairman is well acquainted with one of these 
institutions. I would not say that's a common thing that 
happens. It's very rare anywhere. But in the case of Santa 
Cruz, I think they have financed at least one business that has 
gone public over time. And that was an organization that 
couldn't get financing from anywhere else originally. But I 
would not say that's a common thing.
    I believe Kentucky Highlands, which has been doing venture 
capital, has also had some companies go public.

                      disbursing loans and grants

    Mr. Wicker. It seems that last year your awards were mostly 
grants rather than loans; is that correct?
    Ms. Moy. $20 million out of the $37 million was for grants.
    Mr. Wicker. How do you make that decision?
    Ms. Moy. Aside from what's appropriate for an institution, 
when people come to us with their matching money, what we give 
them and what they bring us has to be comparable in form and 
value. So if they raise grant money, we are able to give them 
grant money. If they raise loan money, all we can give them is 
actual loan money. That's in our statute.
    So I guess Congress, in its wisdom, wanted to be sure that 
this was something that other investors felt was worthwhile 
investing in, in the same way, before they put Federal dollars 
out.
    Mr. Wicker. I would appreciate it if you could--Is this 
your second year? You were created in 1994, so that's two years 
of history?
    Ms. Moy. No, we didn't go operational until October of '95, 
the rescissions bill.
    Mr. Wicker. If your staff could provide me with a list of 
the awardees, I would very much appreciate it.
    Ms. Moy. There actually is something in the--Let me make 
sure you have this.
    Mr. Lewis. I think we have some of that material, but we'll 
make sure it's in the record.
    Ms. Moy. Okay, awardees and the profiles.
    Mr. Wicker. Right. That would be most helpful.
    [The information follows:]

[Pages 131 - 153--The official Committee record contains additional material here.]


    Mr. Wicker. I thank you, Mr. Chairman.
    Mr. Lewis. Thank you very much, Mr. Wicker.
    Ms. Moy, we have a number of questions for the record. We 
have covered a number of them, but the microenterprise 
questions that I had, I want to get more specific for the 
record relative to the way those local panels may be operating 
and the kind of review authority they have and so forth.
    I would once again commend that book to you that I 
mentioned earlier.
    Ms. Moy. Is this the David Bornstein book?
    Mr. Lewis. That's right.
    Ms. Moy. You know, he called us.

                           application review

    Mr. Lewis. It's very, very interesting, in terms of the 
work that you're about, and your mentioning the Santa Cruz 
experience is something I am very much aware of. But how you 
select the participants, establish the goals, measure the 
results, is awfully, awfully important.
    But one more time, as Mr. Wicker is suggesting, we have an 
illustration of an avenue of funding flows that may very well 
produce results that are measurable in housing, when over here 
in another category we have 150 accounts that are housing 
accounts to which we appropriate money, and an awful lot of 
them have not ever been reviewed, the results are not required, 
and we just send money. If you're worried about poor people, it 
just seems to me there's a disconnect there that's 
unacceptable.
    The first round of applicants included 268 applicants for 
the CDFI program, and 50 applicants for the bank enterprise 
award program. Awards were made to 32 CDFIs and 38 to the BEAs.
    Were all of the applicants qualified, or did you review 
results in a number of applications being rejected for 
technical or substantive reasons?
    Ms. Moy. Of the 268?
    Mr. Lewis. Yes.
    Ms. Moy. Let me see. Some of those, almost 30 of those 268 
applicants, were determined early on to have failed certain 
completeness tests on their applications. They didn't submit a 
full application, something like that.
    We reviewed the remaining close to 240 applications, going 
into great detail. It was a very competitive process because we 
were about 10 to 1, so the bar was set very high. But I would 
say there were organizations that were not nearly competitive, 
that had serious deficiencies in their applications. Part of it 
may have been the result of the organizations applying for the 
first time for this program, which requires a full business 
plan, which is very unusual for the Federal Government. And 
some of these simply weren't ready. Perhaps this is not a 
program for them at this time.
    We had other applicants, though, who I think we could have 
funded had we more money, and some that were very close. We 
debriefed virtually every applicant. Anyone that wanted a 
debriefing got a debriefing from us. Between that and certain 
amounts of technical assistance, many of them will be there. So 
I would say the applications were all the way along the 
spectrum.
    Mr. Lewis. Ms. Moy, in very difficult times, as we are 
trying to measure our own results, I am forced to talk about my 
staff around here being very, very tough people with scalpels, 
but with bleeding hearts. That's difficult for all of us.
    Nonetheless, if we're going to even consider expanding 
funding for existing programs, we have to look at results. This 
is the first hearing in the process that takes you through the 
other body, and come back to conference, et cetera. As much 
acceleration that you can establish as it relates to a 
demonstration of real results, that is clear-eyed, that isn't a 
``wish list''--you know, the illustration that you and I have 
discussed that relates to Santa Cruz, CA was pre-CDFI, really--
--
    Ms. Moy. Yes, that's right.
    Mr. Lewis [continuing]. But that credit union was showing 
some imagination and there are results out there that we need 
to be able to measure that justify.
    Frankly, I am not nearly so inclined in a direction of 
grants as I am inclined in the direction of loans that involve 
the marketplace, that involve commitment. If you read ``The 
Price of a Dream'', one of the things about those women who 
received those loans is they placed the loan repayment above 
feeding their family almost. Grants don't really reflect 
often--I'm not sure; I'm open to that. But, nonetheless----
    Ms. Moy. Perhaps we could discuss it.
    Mr. Lewis. That's correct.
    But, nonetheless, there are sparks here that are of 
interest to us, and certainly your own leadership and 
experience is helpful. One of the things that is very helpful 
is that you're small.
    Ms. Moy. I agree.
    Mr. Lewis. I'm not sure if Mr. Stokes has additional 
questions, but we're going to have to move on.
    Ms. Moy. I thank you for the committee's time.
    Mr. Lewis. I appreciate your time very much. From there, 
both Lou and I have conflicting meetings that are waiting down 
the hall for us.
    Mr. Stokes will have some additional questions for the 
record, and others will as well.
    As you can tell, we are interested in a dialogue here that 
will take us through the conference process. So it's one step 
at a time.
    Ms. Moy. I am very grateful for the time.
    Mr. Lewis. We appreciate your being here, Ms. Moy. It was 
nice to be with you.
    For now the meeting is adjourned until 11:00 o'clock.

[Pages 156 - 175--The official Committee record contains additional material here.]


                                         Wednesday, March 12, 1997.

                  NATIONAL CREDIT UNION ADMINISTRATION

                               WITNESSES

NORMAN E. D'AMOURS, CHAIRMAN
HERBERT S. YOLLES, PRESIDENT, CLF
ROBERT M. FENNER, GENERAL COUNSEL

                          Introductory Remarks

    Mr. Lewis. The meeting will come to order.
    This morning it is my pleasure to welcome our friend and 
former colleague, Norman D'Amours, Chairman of the National 
Credit Administration.
    I am going to take an aside, Mr. D'Amours, to let my 
colleagues know that in the audience today is a long-term 
friend of mine from beautiful downtown San Bernardino County, 
Redlands, California, and surrounds, who is a part of the 
Arrowhead Credit Union, Mr. Maurice Calderon. Maurice is 
accompanied by Chris Kerecman, who is with the California 
Credit Union League. Welcome, gentlemen. It is a pleasure to 
have someone from home here. It is just maybe once or twice in 
a whole generation we actually have constituents in the 
audience here.
    Mr. D'Amours, the budget request for the National Credit 
Union Administration consists of only a limitation on new loans 
to $6 million and a limit on administrative expenses of 
$203,000. The amount of new loan authority requested is the 
same as provided in fiscal year 1997. The limit on 
administrative expenses is a reduction of $347,000 from the 
1997 level of $560,000.
    As you know, per usual, Mr. D'Amours, we will be including 
your entire statement in the record, so you can summarize it if 
you wish, proceed as you wish. But preceding that, I will call 
upon my colleague, Mr. Stokes.
    Mr. Stokes. Mr. Chairman, I don't have any opening 
statement as such. I would take this opportunity to welcome 
once again back before our subcommittee our former colleague, a 
distinguished member of this body, Mr. Norm D'Amours. It is 
always a pleasure, Norm, to have you appear here, and I look 
forward to your testimony this morning.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. D'Amours, I must mention for you and your associates, 
early on in the appropriations process, there were major 
conflicts and meetings, and while there are a number of 
colleagues who wanted to be here not only just to say hello but 
to provide questions, they are in other meetings, and so they 
may be submitting questions for the record, and I would 
appreciate your responding.
    Mr. D'Amours. Of course.

                            Opening Remarks

    Mr. Lewis. In the meantime, as you proceed with your own 
comments, if you would like to introduce your colleagues for 
the record, that would be appreciated.
    Mr. D'Amours. I will, Mr. Chairman. Thank you very much.
    Thanks for this opportunity to present our request for 
funding limits on the NCUA Central Liquidity Facility, the CLF. 
Appearing with me today are Herb Yolles, who is the president 
of the Central Liquidity Facility, seated to my right, and 
Robert Fenner, the Agency General Counsel.
    I am going to skip and give a very brief statement. You 
have mentioned in your opening many of the points I was going 
to make. I will not reiterate--or I will not iterate, more 
properly.
    In our estimation, Mr. Chairman, the $600 million loan 
limit is adequate to address unexpected liquidity needs for 
credit unions. The request is less than 3.55 percent of the 
limit set by statute, which is 12 times paid-in and on-call 
capital, or approximately $17 billion. The borrowing authority 
is not used to build up loan volumes at credit unions because 
the statute requires that proceeds from the CLF cannot be used 
to expand credit union loan portfolios. Rather, the funds are 
advanced almost exclusively to support liquidity needs of 
natural person credit unions.
    Over the past years, there has been a wide variance in the 
fluctuation of outstanding CLF loan balances. The relatively 
low utilization of our total authority can be viewed as a 
positive sign of credit unions' present financial condition. By 
the end of 1996, all loans were repaid, and no direct loans 
were outstanding. However, because of a liquidity shortage 
involving one of the corporate credit unions, the CLF did 
become an active liquidity lender from December 1994 through 
about February 1995. In that time, the CLF made 601 loans 
totaling $389 million; the majority, 509 of those, were 
overnight loans.
    So, as intended, as Congress intended, the CLF acted 
successfully to provide liquidity and maintain financial 
stability during a temporary liquidity shortage. Mr. Chairman, 
we respectfully--my notes here say ``respectively.'' But we 
respectfully request that you support our authorization request 
in order to continue the NCUA's and the CLF's ability to 
respond rapidly to such adverse liquidity situations.
    In closing, I would like to thank you, Mr. Chairman, and 
this subcommittee for having included $1 million into the 
community development revolving loan program last year. And I 
want to assure you that we made very good use of it.
    [The information follows:]

[Pages 179 - 188--The official Committee record contains additional material here.]


                          Field of Membership

    Mr. Lewis. Mr. D'Amours, I have a number of questions that 
we have prepared. Not all of those I will go through, but I 
will provide them for you to respond for the record for those 
that we do not get to.
    Mr. D'Amours. Yes.
    Mr. Lewis. I wanted to just shift gears away from my 
original intent here. There is a good deal of discussion around 
the House relative to the court case that has been moving to 
the Supreme Court that involves credit unions and what makes up 
their membership base. The Court is on the verge of at least 
consideration and some decision.
    It has been suggested around the House that there may very 
well be legislation introduced soon. In journals available to 
us, we have an indication that at least within the committee 
there is great hesitancy about introducing legislation. 
Nonetheless, there is a great deal of interest about that. It 
is the whole separate question.
    I am sure you must be somewhat familiar with it. Can you 
bring us up to do on what you do know, what your rumor mill is 
telling you about those prospects, and give us some reaction?
    Mr. D'Amours. Well, your guess is as good as mine, Mr. 
Chairman. In fact, your guess is better than mine, being an 
active member of the body, and Mr. Stokes and other members of 
the committee. But it would appear that legislation is going to 
be introduced, and I would hope that it was introduced and I 
would hope that the Congress would begin to act to hold 
hearings, at least to hold hearings on that legislation.
    The Court is likely to hear arguments on this case in 
October and to reach a judgment sometime next year, probably in 
the earlier part of the year. The fact that the Court took this 
case under certiorari indicates at least some questions in some 
people's minds about the validity of the judgment of the 
Circuit Court of Appeals of D.C. as to the NCUA's actions 
interpreting common bond.
    The problem would be if the Court were to rule against us, 
were to rule against NCUA, and, therefore, against the ability 
of credit unions to continue reaching out and providing 
services to people who are underserved. It would be late in the 
day. The harm, depending on the injunctive results that may 
follow such a decision, could be devastating. And I would like 
to think that at the very least the Congress would have had a 
bill introduced, had hearings on that bill, and, therefore, be 
in a position, if it did not seek to act earlier, to act very 
expeditiously from that point on. Depending upon the injunctive 
fallout of a Supreme Court decision that would go against 
credit unions, we do not expect that to be the case, but it is 
always a possibility, there could be terrific harm caused to 
the credit union industry, and the legislative fix would need 
to be quick.

                            court injunction

    Mr. Lewis. Mr. D'Amours, you and I have personally talked a 
bit about the field of membership and the significance of this 
question as it relates to the current service provided by 
credit unions and the future of those services being available.
    Mr. D'Amours. Yes.

                        low-income credit unions

    Mr. Lewis. In particular, I am interested in your reaction 
as to what might be the effect of a negative decision upon low-
income credit unions.
    Mr. D'Amours. Well, until the Washington, D.C., District 
Court injunction was stayed, there was a cutoff of the ability 
of credit unions to serve many low-income residents. For 
instance, there is a credit union in Texas, in Polytechnic 
Heights, which is a suburb of Fort Worth. A credit union had 
opened a branch in that area. This is an area that Martin Frost 
is very concerned about. It is a very low-income area. There 
was not a bank within 5 miles of that credit union branch. 
These people had no access to fairly priced credit union 
services. They were subject to loan sharks, pawnshops, rent-to-
own stores and all the number of people who move in to take 
advantage of these communities when fairly priced financial 
services are not available.
    This credit union opened up a branch, spent $2.5 million 
doing that, and was beginning to sign these people up in 
droves. Not only were people joining the credit union, but 
there was a rejuvenation of the community. You could see places 
being rebuilt, refurbished, fixed up. It was bringing new life 
into that low-income area.
    Well, the injunction following the Circuit Court of Appeals 
ruling, stopped that process in its tracks. The credit union 
could no longer sign up any new members from that branch. At 
that date, they had only signed up 200 members. You cannot 
operate a branch of any financial institution with 200 members, 
or customers, should it be a bank.
    That is just one illustration of the harm that was being 
done to inner-city people and low-income people, and you could 
multiply that by a factor of several, a large-number factor 
nationwide.
    This is only one illustration. I could give many different 
applications of it.

                    field of membership legislation

    Mr. Lewis. Yes, sure.
    Mr. D'Amours, it has come to the committee's attention that 
while there is discussion out there trying to figure out who 
the phantom author might be. The relative value of having an 
author who comes from the committee original authority and 
policymaking jurisdiction, it is my understanding that at least 
there is a very strong likelihood that Steve LaTourette of 
Ohio, a member of the committee, could very well be planning to 
introduce such a bill. I just mention that for the edification 
of those who might be interested.
    Mr. D'Amours. I am sure his phone will be ringing quite a 
bit before this day is out.
    Mr. Lewis. By way of information, as I suggest.
    The use of the Central Liquidity Fund is a subject I would 
like to discuss a little. The CLF loan limitation request for 
fiscal year 1998 is $600 million.
    Mr. D'Amours. Yes, sir.
    Mr. Lewis. An amount which has been constant for the last 
17 years.
    Mr. D'Amours. Yes, sir.

                       maximum clf loan authority

    Mr. Lewis. What is the maximum amount of loan authority you 
have ever used in one year? And has there been concern that the 
loan limitation amount is inadequate?
    Mr. D'Amours. Answering your questions in inverse order, 
Mr. Chairman, there has been no concern that the authority is 
inadequate. I do not know exactly what the highest number is. I 
would guess $300-some-odd million, but I do not know.
    Do we have that information with us?
    That would have been--then my guess was pretty good. The 
$389.8 million was the largest amount we have ever used.

              community development revolving loan program

    Mr. Lewis. Your statement indicates there is--in it there 
is mention of the community development revolving loan program 
which had a $2 million authorization for fiscal year 1998.
    Mr. D'Amours. Yes, sir.
    Mr. Lewis. A series of questions, briefly. What is the 
purpose of the loan program, and how did the $2 million for 
this loan program help low-income community development credit 
unions?
    Mr. D'Amours. Well, it is a revolving loan program made 
only to credit unions which are considered low-income credit 
unions. Most of these are serving people who are below the 
average median family income line, within 80 percent of it. It 
goes directly to credit unions, and they are able to use it to 
make loans or otherwise provide services, financial services to 
these people who do not have access to fairly priced financial 
services.
    Originally, we were granted $6 million when the program was 
created. You added $1 million to that last year under the 1984 
legislation, I believe it was. 1994, excuse me. I have to get 
my decades straight. Under the 1994 Riegle bill, another $10 
million was authorized. Only $1 million of that was 
appropriated, and that was thanks to the good graces of this 
subcommittee last year. There are $2 million that could be 
appropriated this year.
    Last year we were unable to fund $3.6 million in requests 
for such lending.

                          program performance

    Mr. Lewis. Would you provide us for the record information 
relative to the experience that we have had out there with this 
stimulus of lending program, loss ratios, what kind of success 
you would attribute to the program and the like?
    Mr. D'Amours. Yes, sir. I will be delighted to. May I just 
say that, quite frankly, Mr. Chairman and Mr. Stokes and 
members of the committee, I do not know, and we will send you 
documentation for this, I do not know that there is a better, 
more efficient, clean, more cost-effective way to get these 
kinds of funds directly to the people who mostly need them, and 
on a lending basis where these loans are repaid. And the 
profit, if you will, being made on these loans is recycled back 
to these very same people with very little cost.
    Mr. Lewis. As a result of the $1 million, and speaking to 
the fund in general, I am interested in knowing how many loans 
we have been able to make with this new authority and how many 
community development credit unions exist today, items like 
that, the growth patterns over the last 3 or 4 years.
    Mr. D'Amours. We will get that to you. Yes, sir.
    Mr. Lewis. All right. For the record would be fine.
    Mr. D'Amours. I will get that for the record.
    [The information follows:]

[Pages 193 - 196--The official Committee record contains additional material here.]


    Mr. Lewis. Mr. Stokes.

                         personal bankruptcies

    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. D'Amours, let me refer first to your formal statement 
on page 2 where you say, ``By instilling habits of thrift and 
teaching the value and workings of financial discipline, credit 
unions are still fulfilling the mandate Congress gave them over 
60 years ago.''
    How do you answer the statement that when we look at the 
increase in personal bankruptcies, probably now up to about 1 
million last year, when we look at the significant rise in 
consumer debt, much of it on high-interest credit cards, many 
of them issued by our Nation's credit unions, it sort of raises 
the question of whether our credit unions are doing all they 
can to instill habits of thrift and savings.
    Tell us how big an issue you think this is and if the 
Credit Union Administration is doing anything about it.
    Mr. D'Amours. Well, I do not have the specific numbers, 
Congressman Stokes, but I know that in terms of bankruptcy, 
failures, the numbers of credit unions compare very favorably 
with those of other financial institutions, meaning that we do 
not have that experience nearly to the extent that other 
financial institutions do.
    Credit unions, because they are member-owned and member-
operated financial institutions, there tends to be a closer 
relationship between the member owner and the institution than 
there would be between a customer and other institutions. There 
tends to be better communication. There tends to be better peer 
pressure in terms of repayment of obligations and the like.
    What we do at NCUA is to encourage credit unions to reach 
out to inner-city communities as the act mandates, to take the 
actions that the act mandates to not only deal with people as 
customers, but as members, as brothers and sisters, and owners 
of the institution, and to teach them and help them to learn 
the responsibilities of borrowing, of borrowers, and the 
benefits of establishing a nest egg.
    We cannot do that directly as a Federal agency, but because 
the statute defines credit unions in that way, we have never 
shied away from our responsibility of asking credit unions, 
when we go examine them and see them, to focus on this 
responsibility, and we think they have responded quite well.

                           common bond issue

    Mr. Stokes. Let me ask you this: The chairman explored with 
you the problems related to the common bond issue. It is my 
understanding that the administration actually favors some type 
of legislative approach in this area. Is that your 
understanding?
    Mr. D'Amours. That is not my understanding. I do not know. 
I have not spoken with the administration on this.
    I know that the administration is defending us in the 
lawsuit, so I would have to presume from the fact that they 
defended us in the lawsuit, that they petitioned for certiorari 
in the Supreme Court, that they have argued that our 
interpretation of common bond is correct, that they certainly 
would not be hostile to a legislative solution since they are 
pursuing a judicial solution to the question. But I have not 
specifically discussed with the administration whether or not 
they are actively pursuing legislation.
    We at NCUA believe legislation is appropriate, and I would 
have to believe and I would surmise, given their position in 
courts, that they do, too, as just another way of solving what 
we think is the misapplication of law by the Circuit Court of 
Appeals.

                            bank opposition

    Mr. Stokes. Can you tell us why the banking industry is so 
opposed?
    Mr. D'Amours. Well, I think that, first of all, I don't 
believe the entire banking industry is opposed. I think there 
are a group of community banks out there who are very upset by 
the fact that the banking industry is shrinking, that 
institutions are merging.
    I was reading in the American Banker just yesterday that 
community bankers are taking out advertisements critical of and 
hostile to regional banks. So apparently they do not like what 
they see happening in the marketplace, and they have identified 
credit unions as a likely, maybe an easy target. I would say 
they are making a major mistake if they believe that. And so 
they are venting their ire and their frustrations at credit 
unions, perhaps. But I know many bankers who are doing good 
work, fulfilling the financial mission that they serve in the 
American economic system, that they have served well for a 
number of years.
    I think this issue may be being driven by a segment of the 
banking community. I do not know that any banker would say he 
doesn't support it because of the national cohesiveness of any 
group, but I know personally that many bankers do not care.
    What it is being driven by, I think, is a misunderstanding 
of banks, of what credit unions are, what their function is, 
what their limits are. Banks ought to be able to compete well 
with credit unions. They have powers of investment that credit 
unions do not have. They have any number of advantages that 
credit unions do not have. They are free from very many 
limitations that we have put on credit unions. Rather than 
compete, they seem to think that the best tactic is to destroy 
the credit union movement by attacking it. I think that is a 
mistake.

               cooperation among community organizations

    Mr. Stokes. Just one last question, Mr. Chairman.
    This morning we had testimony from Secretary Rubin and Ms. 
Moy relative to community development financial institutions. 
And, of course, we also have testimony in this subcommittee 
from the Neighborhood Reinvestment Corporation, which is 
similarly involved in urban communities and rural communities 
in terms of helping bring back revitalization of our urban and 
rural communities.
    Do you see ways in which the Credit Union Administration 
can build on what these other two agencies are doing?
    Mr. D'Amours. Well, I do not know that I would say build on 
because we certainly can work in a complementary way. Credit 
unions have been doing this for 60 years. Credit unions have 
been doing this before some of these other people began doing 
what they are doing. What they are doing is very vital, but 
credit unions have a very special function. We get into rural 
areas. You know, one thinks of Self-Help Credit Union, North 
Carolina. I personally visited any number of credit unions in 
South Texas, the Brownsville-McAllen area of Texas, very rural 
areas where people are building houses with credit union funds. 
Farmers, migrant farmers, are using credit unions to build 
houses out in the countryside. They have no other access to 
loans, fair access to loans, other than credit unions.
    Credit unions have been doing this for a long time. I think 
one of the mistakes credit unions have made over the years, if 
I may say, is that they have been tending to their knitting 
very well, but they have not been bragging very much about what 
they do. I think bankers and the general public do not 
understand enough about what credit unions do and what they 
have been doing for years and how they could be maybe doing it 
better. But certainly everything that these other groups are 
doing, credit unions are and have been doing from the early 
1900s, from 1909 in this country.
    So, sure, we complement one another. The credit union 
industry and these other efforts you have mentioned work--can 
work in concert, maybe could better work in concert. But credit 
unions do all of this, anyway. These are just different 
applications of what credit unions are already doing.
    Mr. Stokes. Thank you.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Chairman.
    Mrs. Meek.

                  community development credit unions

    Mrs. Meek. I am a little late coming in from another 
meeting. I am very interested in the credit union movement. I 
have been a member of one for many, many years.
    I really missed the microlending presentation that was made 
when I was on another subcommittee. Anytime--and this is a 
little off the record, but anytime I see a lot of--my major 
district is low-income, very low-income, very high poverty. 
Anytime I see banks start coming into my neighborhood, I know 
there is some significant reason for doing so.
    I need to meet with a member of your staff. I need to find 
out where the credit unions are in my district, District 17 in 
Dade County, Florida. And that could be done if I could meet 
with someone from your shop to sit down with me.
    Mr. Lewis. I think there is a possibility, Mrs. Meek, that 
that could occur.
    Mrs. Meek. All right. Thank you.
    Mr. D'Amours. As a matter of fact, I would be delighted to 
meet with you at any time and bring whatever staff is necessary 
to help you.

                       how credit unions can help

    Mrs. Meek. I am interested in something I see in your 
testimony here regarding how low-income communities and areas 
can benefit from other credit unions; that is, if they do not 
have the know-how of the money to begin their own shop, the way 
I am reading this they do have a chance to perhaps connect or 
hook up with another larger credit union. Am I correct?
    Mr. D'Amours. That is exactly right. I mentioned that 
earlier, I think before you got here, Congresswoman Meek. There 
are two ways that low-income communities can be served. They 
can start their own credit unions--and they do. We started 12 
such credit unions last year nationally, 12 start-up low-income 
credit unions where people got together and, from scratch, 
built their own financial institution, which is a beautiful 
thing to behold. That does not always work. That is not always 
possible.
    The other way is that an existing credit union will, under 
regulations we passed in 1994, open up a branch in such an 
area. We allow them to do that. By the way, the court order 
prohibits that. The court order would prohibit that. It is 
being stayed for the moment, but before it was stayed, they 
could not do that.
    So those are the two ways in which it occurs.

                   capital in low-income communities

    Mrs. Meek. I do not think the financial community realizes 
the amount of money that is in some of these low-income areas. 
They loan money to churches, but very seldom do they have the 
knowledge or the know-how to see people in those communities 
that own homes and can afford a low-cost home. I think the 
credit union movement could look closer at that as an 
opportunity to develop more in low-income communities.
    Mr. D'Amours. Yes, ma'am.
    Mrs. Meek. Because once they get a home, they pay for the 
home, and the failure rate or the foreclosure rate is perhaps 
similar or no more higher than would happen in the regular 
marketplace. So I guess what I am saying, the credit unions 
should perhaps take some leadership to model after what the 
banks are doing. They are coming in, and when they come in, 
there is always a reason. So I do hope that you and your credit 
union leadership will look at the propensity that these 
communities have, particularly for home building.
    Mr. D'Amours. We are doing that, and we have been doing 
that. After taking this job, I have done this job for 3 years, 
Congresswoman, and when I went out into isolated rural areas 
and inner cities, I learned for the first time how much money 
there is in these areas. You drive through these streets, you 
drive through these cities, and you see boarded-up windows, and 
you see litter in the street, and you see signs of poverty 
everywhere. But you see loan sharks, you do not see loan sharks 
most of the time, but some of these check-cashing operations--
--

                         predatory institutions

    Mrs. Meek. There is a check-cashing place on every block.
    Mr. D'Amours. Some are legitimate, but some are really loan 
shark-type operations. You see pawnshops, you see rent-to-own 
stores. You see all kinds of these things, and they are 
everywhere.
    I had it explained to me when I visited these communities 
that you may see signs of poverty, but the truth is there are 
many low-income workers in that community that are bringing 
home a paycheck. There are retired military veterans in those 
communities. There are Social Security benefits going into 
those communities. There are all kinds of hundreds of millions 
of dollars pouring into those communities. Unfortunately, the 
kinds of people who provide them financial services, you do not 
see many banks, if any, but the kinds of people that are 
providing them financial services are taking that money and 
dissipating it.
    Credit unions are targeting those communities and have 
been. A credit union goes into that community. The money stays 
in the community because the members, credit unions do not have 
customers, they have members, control it. It stays there.
    Credit unions are exactly doing that, and we at NCUA have 
been encouraging them to expand those efforts. That regulation, 
IRPS 94-1, that I mentioned earlier was along those lines, and 
we are making other efforts at the agency to see to it that 
credit unions expand those efforts. I could not agree with you 
more, with your statement more.

                            working capital

    Mrs. Meek. Thank you. The major problem is working capital. 
You know, the businesses cannot survive because they cannot get 
the working capital they need from traditional financial 
resources, and I would just like to know how to put the puzzle 
together, Mr. Chairman. It is a puzzle that needs to be worked, 
and I would like to know how from members of your staff how we 
can take advantage of the credit union movement to do 
something.
    Mr. D'Amours. Well, this committee has been very 
supportive. Last year, even though we did not request it, it 
allocated, appropriated $1 million for the Riegle bill funds 
which we made good use of, and there are $2 million subject to 
appropriation this year. But, again, we are not making a 
request for those funds.
    Mr. Lewis. Thank you very much, Mrs. Meek.
    Mr. D'Amours, we have several new members on our 
subcommittee who are aggressively displaying interest in policy 
issues like this, especially those that are designed to 
stimulate the economy and opportunity in the private sector. 
Mrs. Meek's questions very much flow along those lines. It is a 
long time between now and the time we get to conference, and I 
understand that you have to deal with OMB and the 
administration in a special way. But in the meantime, we also 
understand and have a feeling for your needs.
    Mr. D'Amours. Thank you, sir.
    Mr. Lewis. Your remarks will be included entirely in the 
record, and any additional remarks would be acceptable. Beyond 
that, members who are not present, and those present, may have 
additional questions as well. So we appreciate your being here, 
and we look forward to continuing to work with you.
    Mr. D'Amours. Thank you, Mr. Chairman. I appreciate your 
courtesy, and Mr. Stokes. Congresswoman, nice to meet you.
    Mr. Lewis. The meeting is adjourned.
    [See budget justification at end of volume.]


[Pages 202 - 203--The official Committee record contains additional material here.]




                                          Wednesday, March 5, 1997.

  COUNCIL ON ENVIRONMENTAL QUALITY, EXECUTIVE OFFICE OF THE PRESIDENT

                                WITNESS

KATHLEEN A. McGINTY, CHAIR, COUNCIL ON ENVIRONMENTAL QUALITY
    Mr. Lewis. We will call the meeting to order.
    Let me indicate to those who are here that, because of 
changes in our schedule, with no votes on Monday and Tuesday, a 
lot of Members are coming back from their districts today, and 
a lot of people also have conflicting hearings. Mr. Stokes and 
I were together earlier this morning and he indicated to me 
that he has two other meetings, and especially there's an 
Ethics Committee hearing that he has to participate in. So if 
you will bear with us, we will be developing the formal record 
here and, beyond my questions, I will have questions for the 
record. But other Members will as well.
    Welcome, Ms. McGinty. We very much appreciate your being 
with us.
    Ms. McGinty. Thank you.

                  Welcoming Remarks by Chairman Lewis

    Mr. Lewis. We will be taking testimony on fiscal year 1998 
budget request for two offices this morning that are within the 
Executive Branch of the President, and are both, of course, 
under this subcommittee's jurisdiction: The Council on 
Environmental Quality, which includes the Office of 
Environmental Quality, and the Office of Science and Technology 
Policy.
    We will begin this morning with the CEQ. I am delighted to 
welcome CEQ's very able chairman, Kathleen A. McGinty.
    At this time, Ms. McGinty, I would like to invite you to 
introduce any of your colleagues who are with you that you 
wish. And, with that, we will proceed with your oral testimony. 
Your entire statement will be included in the record.

                          Introductory Remarks

    Ms. McGinty. Thank you, Mr. Chairman.
    I do have with me today Shelley Fidler, my Chief of Staff; 
Michelle Denton, my Associate Director for Congressional 
Relations; Wesley Warren, my Deputy Chief of Staff; and my 
General Counsel, Dinah Bear.
    Mr. Lewis. Thank you very much.
    Ms. McGinty. That's a big portion of the team.
    Mr. Lewis. Proceed as you wish. We will both include your 
entire statement in the record, and revise and extend to some 
extent. Go right ahead.

                           Opening Statement

    Ms. McGinty. Thank you very much.
    Thank you, Mr. Chairman. It's a pleasure to appear before 
you today to present the President's request for CEQ for fiscal 
year 1998. I also want to thank your staff, who has been very 
helpful to us, both in preparation for this hearing and 
throughout the course of the year in the work that we do.
    I wanted to focus this morning briefly on three things: 
first, the level of the request that we have presented; second, 
our work over the past year; and third, I would like to turn to 
what is really our top priority, which is our initiative to 
comprehensively reinvent the National Environmental Policy Act.
    First the level of our request. As you know, Mr. Chairman, 
CEQ currently operates at a staff level of 19 FTEs and a budget 
of $2.4 million. Our request today is for 23 FTEs and a 
corresponding budget of $3,020,000.
    In percentage terms, as we have discussed, this is a 
significant increase for CEQ. However, I would like to 
emphasize to the committee that, even at 23 FTE, CEQ is still 
significantly below the average in the Bush administration, 
which was 31 FTE, and very significantly below CEQ's peak level 
of 70 FTE in the Nixon administration.
    The resources that we are requesting, Mr. Chairman, are 
critically necessary if CEQ is to take on what I will describe 
in a moment as our very first priority, which is the 
comprehensive reinvention of NEPA. Many, including the Western 
Governors Association, industry, nongovernmental organizations, 
certainly Members of Congress, have both praised NEPA's intent, 
the purpose of NEPA to be a comprehensive integrating statute 
that brings environmental, economic and social considerations 
together in a coherent whole, and also its call to afford 
citizens an opportunity to participate in agency decision 
making.
    Having recognized those important purposes, these groups, 
though, have all recognized that the implementation of NEPAcan 
and should be improved. I agree with that and I would like to take on 
as a top priority the reinvention of NEPA to that end.
    But I do need resources that can be taken out of the daily 
firefights to get that job done. People who are senior 
professional and dedicated to the specific mission.
    As noted, I will return to the substance of this endeavor 
in a moment.

                          ceq's oversight role

    Before that, I want to share briefly some of CEQ's work 
over the past year. As the committee is aware, CEQ has 
responsibility both for immediate oversight of the 
environmental assessment process that every agency of the 
Federal Government is called on to comply with, as well as 
responsibilities in serving as the President's senior advisor 
on environmental policy. In that capacity, we coordinate policy 
among the agencies and settle disputes that may arise among and 
in the context of those issues.

                       environmental assessments

    First, to turn to environmental assessments, the first part 
of our portfolio. We have worked very hard over the last year 
to use NEPA as we believe it was intended to be used, and that 
is, not just as a document-production exercise, but really to 
improve agency decision making. For example, we use NEPA to 
design a process through which we will complete even the most 
complex habitat conservation plans. These are the plans that 
allow us both to protect critical habitat and to offer 
landowners certainty that they have met their Endangered 
Species Act obligations. Through NEPA, we will get even the 
most complex of those done in ten months.
    I just returned from Washington State, where I signed an 
agreement with the Governor there that will both meet all 
Federal obligations and give the State a 70-100 year guarantee 
that they have met all their Endangered Species Act 
obligations. NEPA allows us to do that.
    In addition, CEQ responded to the request of Governor Tony 
Knowles and the Alaska delegation to launch a process to 
identify lands for possible oil production and environmental 
protection in the National Petroleum Reserve in Alaska.
    Because NEPA acts as an integrating statute, we will be 
able to see that process through to completion in 18 months or 
less. This also builds on our effort, which we were able to 
conclude in six months, to allow for the export of oil from 
Alaska's North Slope.
    Through NEPA again, we worked this year to cut processing 
times for timber salvage sales from three years to less than 
one year. We resolved a longstanding dispute between the FAA 
and the Air Force, that finally allows the Air Force to 
undertake military training activities in Alaska.
    We provided for the transfer of the Homestead Air Force 
Base in Florida, but in a way that will protect our restoration 
activities we have underway in the Everglades.
    NEPA is the statute that allows us to do that, because it 
calls on us to get all of the parties together to understand 
all the obligations and to move forward in one coherent and 
efficient way. So we are using NEPA to that end.

                          ceq's role on policy

    On the policy front, as opposed to the environmental 
assessment front, we have been working hard to coordinate the 
agencies and to resolve disputes among them. CEQ developed, for 
example, targeted reforms to the Resource Conservation and 
Recovery Act that were passed into law in the last Congress. 
These reforms eliminate duplication between RCRA and the Clean 
Water Act and Safe Drinking Water Act, and we believe it will 
result in tens of millions of dollars in avoided costs to 
industry.
    CEQ hammered out an agreement that will provide for the 
financial health of the Bonneville Power Administration, while 
also providing resources for salmon recovery efforts.
    We reached out to the National Association of State 
Attorneys General and to the International Association of 
Police Chiefs and crafted an environmental crimes bill that now 
has been introduced in the House and Senate that will, among 
other things, provide additional resources for State and local 
law enforcement officials to combat environmental crime.
    Finally, CEQ worked to implement and craft significant 
reforms in the wetlands programs and now, with OMB, are working 
to ensure that flood victims are offered a series of 
alternatives in responding to the floods, including 
nonstructural options, for preparing themselves and hopefully 
avoiding flood damage in the future.

                  nepa implementation and improvement

    Mr. Chairman, CEQ has worked hard to use NEPA to ensure 
coordination, coherence and efficiency in environmental policy 
matters.
    To turn now to what really is our top priority for this 
year, we hope to build on the kind of progress we've been able 
to make in these individual instances over the last year. We 
want to build on the insights we also gained as a result of the 
comprehensive review we undertook of NEPA, our NEPA 
effectiveness study, which we shared with the committee at the 
end of last year.
    We are already underway. I have launched a series of three 
working groups, frankly trying to address what has seemed to be 
the most troubling aspects of NEPA implementation, and that is 
in the grazing area, oil and gas area, and timber area. We are 
working very closely with the Western Governors Association on 
this. Governor Knowles, Governor Geringer, Governor Kitzhaber 
and many others are involved. We hope to reach out to the 
academic institutions. The University of Wyoming and the 
University of Montana in particular have resources that we 
think could veryeffectively help us to use NEPA again as it was 
intended, as a tool to improve and enhance agency decision making.
    That, Mr. Chairman, is our top priority. We have those 
three working groups launched. But as you know, NEPA reaches 
every Federal agency and every major Federal action and 
decision. So I would like to be able, with the additional 
resources we are requesting, to step back from the firefights, 
take a comprehensive look at how NEPA has been implemented, and 
work towards its improvement.
    Thank you very much.
    Mr. Lewis. Thank you very much, Ms. McGinty. I appreciate 
your testimony, and I certainly have always appreciated both 
the confidence and style with which you present your testimony.

                        utah's desert wilderness

    I must confess that if we were conducting this hearing like 
last fall, as I indicated in our personal conversation in my 
office, it would have been very difficult to control no small 
amount of emotion or anger that I felt with regard to the 
President's actions that involved Utah's desert wilderness. As 
a legislator representing a large portion of the desert, who 
has also experienced the pain of having my desert carved up by 
environmental extremists, with almost no communication to the 
people who either represent the people in the area or the 
people themselves, watching what took place just last fall for 
me was kind of like Yogi Berra's old line, ``deja vu all over 
again.''
    Although my anger is not, and probably will not, totally 
evade, I nevertheless understand how pointless it is probably 
to revisit the past, and especially that specific decision. 
Instead, I want to take a moment, if you will, to visit the 
future.
    On page 1 of your justification you comment--and I quote--
``CEQ is mandated to develop policies which bring into 
productive harmony social, economic, and environmental 
priorities, with the goal of improving the quality of Federal 
decision making.''
    If I'm not mistaken, that statement is taken directly from 
the language set forth in the National Environmental Policy 
Act, and you alluded to that very language.
    In a similar vein, you comment on page 9 of the executive 
summary of your recently published report, titled ``The 
National Environmental Policy Act, a Study of its Effectiveness 
after 25 Years'', that the study participants felt that NEPA's 
most enduring legacy is a framework for collaboration between 
Federal agencies and those who will bear the environmental, 
social and economic impacts of agency decisions.
    It seems to me that if statements like these are truly what 
your organization is all about, then the Utah decision sets 
NEPA directly on its ear, to do what was done in Utah, let 
alone the way it was done. By that I refer to the reality that 
the U.S. Senators, the Representative from Utah, were not 
consulted regarding this. To say the citizens of Utah were 
consulted and/or even began to approve of this suggestion, if 
it didn't hurt so much we would laugh about it. Indeed, it just 
flies in the face of what I sense really is your style of doing 
business.
    Now, I wouldn't suggest that CEQ, having the 
responsibility, although you review these things, had nothing 
to do with it, but in my heart of hearts, I find it impossible 
to imagine that you would be--that it really does seem to me 
that that takes us to the heart of our relationship.
    You know of my past interest in environmental questions. 
Early in my own governmental career I received lots and lots of 
heat because of ``extremism'' relative to air quality matters 
that led to the development of the air quality management 
district, that nonetheless, all of our efforts to strengthen 
those who would change the environment are threatened, I 
believe, are undermined if we allow extreme voices to dominate, 
and especially extreme styles.
    So how can I help but ask, ``who's next?''
    Ms. McGinty. Mr. Chairman, if the point of that part of 
your question is whether or not there are other national 
monuments that are currently under consideration, the answer to 
that is no.
    To step back to the larger point that you made in the 
question, yes, additional consultation would have been very 
much welcomed and recommended and would have improved the 
process that was undertaken in establishing the national 
monument in Utah. I do think, however, it's important to keep 
in mind what the national monument designation does do and what 
it doesn't do, and where NEPA certainly will have a role in 
this whole process.
    The monument designation itself is a recognition that there 
are artifacts of historical archeological or scientific import, 
so the President, in designating the national monument, has 
recognized that, in fact, those things exist in this 
geographical area.

                     nepa and public participation

    The question is, what then are the management formulas and 
prescriptions that follow from such a designation. None of that 
has been decided. When it comes to deciding how this land 
should be managed, we will, in fact, use NEPA to its fullest 
extent. We envision a three-year, intensive process through 
which the public will participate and have a very strong role 
in deciding exactly how those lands will be managed. So there 
is much room, and we will use NEPA to that effect.
    Mr. Lewis. Well, Miss McGinty, I can't help but say I am 
reminded of another discussion that's going on. I happened to 
get home early enough last night to where I actually watched C-
Span. One of my colleagues was holding a hearing that had to do 
with the Immigration Service, with questions about what may or 
may not have happened across the country, encouraging people 
who are here, who are not citizens, to be naturalized in order 
to vote, et cetera. You know, I considered the franchise to be 
more important than the questions that we're involved in here.
    But a fundamental point was being made. It was that you're 
asking us to change the law to facilitate thisprocess, and 
underlying that, the very administration that's asking for it, at least 
if we can interpret what the Vice President said, may very well have 
violated the law that exists presently as it relates to the 
administration, in terms of CEQ, in which you presented your highest 
priority to change.
    I must say that I am reminded of that discussion last 
night, for at least in terms of the spirit of your testimony, 
the statements in the existing Act, et cetera, we fundamentally 
violated one of the basic foundation stones; that is, bringing 
people together.
    In my own territory in the desert, we had two monuments--
Joshua Tree National Monument and the Desert Valley National 
Monument. That territory operated pretty well for many, many a 
decade. Indeed, I don't see any change at all in terms of the 
quality of preservation or otherwise of the territory by park 
designation. But at least, if you're going to have one or the 
other, the people involved before the fact, before designation, 
ought to be consulted, participate and et cetera. You're 
suggesting they will have a chance to participate, but after 
the designation is made.
    Indeed, if there is a basic job for CEQ, it ought to be to 
advise the administration that that's a pretty dumb way of 
dealing with people.
    If you would like to respond further, go ahead.

   nepa: integration of environmental, economic and social objectives

    Ms. McGinty. I just want to underscore and reiterate our 
commitment to the principles outlined in NEPA. The various 
examples of the work that CEQ has undertaken in the past year 
that I shared with you earlier I think demonstrates very 
clearly that we have taken very seriously the notion that NEPA 
is not a statute that is solely about protecting the 
environment, really. It is a statute that much more 
comprehensively talks about that integration of environmental, 
economic and social objectives.
    When we talk about things like, for example, this dredging 
issue that CEQ has taken on in the New York and New Jersey 
Harbor, there was a clash of wills that persisted over the last 
decade that very much threatened both the economic viability of 
the port and the environmental integrity of the bay and the 
ocean. We worked very hard to craft an agreement that I feel 
strongly will both ensure the economic viability of that harbor 
but will do no harm to the water quality in those waters off of 
New York and New Jersey.
    Everything that we delve into is an effort to live up to 
what I think is exactly the right mission, and that's the 
mission that is outlined in the National Environmental Policy 
Act. So I guess I do want to underscore that the initiatives we 
have taken on have been very faithful to that spirit and our 
desire now to reinvent NEPA is really a desire to capture what 
I think Congress had written 26 years ago and make sure that it 
is, in fact, implemented.
    Mr. Lewis. I believe you when you say you really do want to 
implement that spirit. I am very concerned about the 
implementation of that other spirit, which is to bring people 
together and consult them, not presume that just because we 
happen to be on this side of the Potomac that we can walk 
across it without getting wet.
    I must say that it does raise fundamental questions about 
the way the administration is dealing in environmental areas. 
Environmental programs are fundamental people programs. Way 
beyond the endangered species are people problems and 
challenges, and to not include them in the process is very, 
very disconcerting. Maybe it's just convenient to take a place 
like a little rural state in the West and roll right over them, 
and we can consult people in a larger state where there happens 
to be water problems. The politics of that are interesting in 
and of themselves. But it really is perhaps the best 
illustration of the extremes of Uncle Sam having all the 
answers and being willing to exercise it at will in almost 
whatever fashion those people who are not elected would choose.
    Ms. McGinty. Mr. Chairman, I certainly understand and hear 
and respect your concern with regard to the Utah decision. But 
I really did want to underscore that in everything else we have 
done--indeed, now in the implementation of the Utah decision--
but in everything else we have done, to go back to this 
dredging example, that was not just a prescription that came 
out of Washington. The labor unions were engaged in that 
decision, industry was engaged in that decision, and many 
Members of Congress, the New York and New Jersey delegations, 
were involved in that. We worked very closely with Governor 
Whitman and Governor Pataki in reaching that decision. 
Environmental groups were involved in it.
    The habitat conservation plans that I mentioned, that was 
not prescribed from Washington. That involved local 
environmental groups, the State of Washington, the timber 
industry in Washington State.
    I often think that the meetings that I chair in the White 
House are often the hottest ticket in town, because no matter 
what the subject, there are at least 30 people in the room. It 
is because I really do insist that all the voices are heard 
from. It means that we have laborious processes to reach 
conclusions. That means that I chair long meetings, and it's 
not just because of the gift of the Irish. It is because we 
really do take seriously that notion that all the voices need 
to be heard from.
    I appreciate your indulgence to underscore that point, that 
I do believe strongly in that and work hard to make sure that 
that's involved in all the decisions we come to and thepolicies 
that CEQ promulgates and puts together.
    Mr. Lewis. May I remind you that my mother's name was 
O'Farrell. [Laughter.]
    This discussion does bring up a point. Senator Bennett last 
week introduced a bill to codify in law what the President 
promised management in the area would look like. Currently, 
many of those people who I would suggest may be on the fringes 
of the environmental community are strongly opposing the 
Senator's suggestion.
    Is this an item that CEQ could endorse as a reflection of 
our good faith in this effort?
    Ms. McGinty. We are aware of the legislation that has been 
introduced. We certainly will be looking closely and carefully 
at it. It absolutely is the President's intention, as he 
articulated in declaring the national monument, that valid 
existing property rights in the monument area would be 
respected, that current grazing activities, hunting and 
fishing, the multiple uses that were existing in the monument 
area, would continue, that he did not want to see those things 
change.
    So, with that in mind, we certainly will look at the 
legislation and see if there isn't some agreement we could 
reach.
    Mr. Lewis. Might we look forward to next year's session in 
examining that discussion, and maybe I will have one question 
to bring to light what CEQ actually advised and what the 
process was like?
    Ms. McGinty. Certainly.
    Mr. Lewis. I will have further questions about your 
thoughts as it relates to rethinking CEQ.

                       budgetary increase request

     But moving along in terms of the pattern I have here 
regarding your budget request, as indicated, CEQ's budget 
request for $3,020,000 for fiscal year 1998 represents an 
increase of some $584,000, or about 20 percent over the 1997 
level of $2,436,000. Similarly, the 1997 funding level 
represented an increase of nearly $300,000 over the 1996 level.
    While the dollar level we're talking about is certainly low 
compared to most other agencies we deal with, we are 
nevertheless faced with the perception that while other 
agencies are asked to cut back on funding, you desire to go the 
other way. Rather than shifting priorities, backing away from 
items like the Utah wilderness and working on reform, you 
prefer to expand budgets, it would appear. Again, even though 
the amounts are small, you have asked for an increase in every 
object class category, personnel levels, salaries and benefits, 
travel, rent, supplies, equipment. Every one would get an 
increase.
    On a percentage basis, your request increase is second only 
to the Corporation for National and Community Service, which I 
am told is among the President's favorite programs, and is on 
par with the Department of Housing and Urban Development, which 
has asked for a $5.6 billion increase just to renew existing, 
not new, Section 8 assisted housing contracts. That increase, 
which is pretty sizeable, is a required increase because of 
past mistakes over the years of Congress as well as 
administrations as it relates to housing policy. There's no 
choice there but to put people out in the street.
    So you are out there among the leaders, without any 
question, percentage-wise and dollar-wise. Of course, while I 
will give you the opportunity to defend and make the best case 
possible for your 1998 request, you must agree that it's 
difficult to take seriously the administration's statements 
desiring a balanced budget, when a part of the President's own 
office asks for such an increase.
    Would you like to comment?
    Ms. McGinty. Certainly, Mr. Chairman.
    First, the requested increase for CEQ, as you know, on a 
percentage basis is significant, but to underscore again, in 
terms of the staffing levels over the history of CEQ, we still 
are significantly below where the institution has been 
throughout most of its history. Again----
    Mr. Lewis. You made that point earlier, and I would like to 
interject that the thought occurred to me that you're 
absolutely correct, that during the Bush administration and 
previous administrations there were more personnel. They were 
personnel given by the Congress which increased every budget, 
every year, with almost no review. You know what Washington is 
like. You give somebody something for nothing, even if they 
didn't ask for it, and they're going to take it and they're 
going to spend it. So I'm not sure that that argument really 
helps us a lot.
    Ms. McGinty. Well, the President's request is in the 
context of his balanced budget. In addition to being part of a 
balanced budget plan, it also is part of his commitment which 
he has undertaken and fulfilled, to reduce the White House 
staff by 25 percent. So any increase that CEQ has been able to 
realize in the President's request has been offset in other 
parts of the Executive Office of the President. So overall, the 
President's request for the Executive Office of the President 
will still reflect and maintain his commitment to a 25 percent 
staff cut.
    In referring to the Department of Housing and Urban 
Development, you noted that mistakes--dare I say that mistakes 
have been made in the past with regard to some of HUD's 
programs. To lay it right out there, mistakes were made with 
regard to CEQ in the beginning of the President's first term. 
We are still climbing back up from what we realized had been an 
incorrect decision to so dramaticallyreduce CEQ's resources in 
the beginning of the administration.
    So as may have been the case with regard to HUD, where cuts 
were made too severely, we certainly made that mistake in the 
beginning of the administration. Now, as part of the 
President's balanced budget and 25 percent staff cut in the 
White House, he has realized that this should be more of a 
priority in the overall scheme of the Executive Office of the 
President.
    Mr. Lewis. I must say that I hope I didn't mislead you. It 
wasn't my point that HUD's programs have been cut too severely 
in the past but, rather, they grew like Topsy without any 
thought of the way the formula actually operated. In this case 
we created circumstances in housing programs with 40-year 
mortgages and 20-year contracts, and suddenly in shrinking 
budget times contracts were being renewed and poor people could 
be put out on the street because Congress just plain doesn't 
choose to look very far down the line. I would suggest that's a 
problem of Washington in general. It is honestly one of the few 
arguments I would make that suggests maybe, from time to time, 
shifts in the majority is good around here. Forty years may be 
too long.
    As indicated in the budget justification and your 
statements, $482,000 of the proposed increase would be used to 
hire four new professionals.
    Ms. McGinty. Yes.
    Mr. Lewis. Simple division tells me that each of the four 
would receive an average of just over $120,000 in salary and 
benefits--and I will give you a chance to respond. These are 
people who obviously would have significant experience, doing 
whatever it is you have in mind for them.

                           staffing increase

    Can you explain in some detail what your plans are for 
these additional people and indicate the type of experience 
you're looking for to fill these positions?
    Ms. McGinty. Yes, sir. Again, the activity toward which 
these staff would be applied would be this effort 
comprehensively to improve the implementation of the National 
Environmental Policy Act.
    In terms of the kind of staff and the qualifications that I 
would be looking for, I will look for these staff where I have 
looked for the staff I currently have. Most, if not all, of my 
staff come from Capitol Hill. Many have had experience----
    Mr. Lewis. None from Utah, right?
    Ms. McGinty. No, not from Utah, I don't believe, no. 
[Laughter.]
    Mr. Lewis. Idaho maybe?
    Ms. McGinty. Not Idaho, either.
    Many also come from the agencies where they've had years of 
experience in the agency. Some of CEQ's current staff have been 
part of CEQ since the Reagan administration, and I have kept 
them as part of the team, with all of their years of 
experience. So I will be looking in those same directions as we 
build this new part of the team if, indeed, we have the 
opportunity to do that.
    In terms of the figures that you have just mentioned, I 
will need to respond on the record in more detail. But the 
numbers would reflect--First of all, I guess I should say that, 
in terms of CEQ's overall budget request, $2.3 million of the 
$3 million request represents simply salary and attendant 
expenses. With regard to these new staff, the increase would 
reflect both salary and the need for additional space and the 
rent we would need to pay there, equipment, and the money that 
would be needed to buy that equipment and to support it.
    I would not envision that any single member of that group 
of four additional staff would earn $120,000 a year. In fact, I 
wouldn't envision that they would earn $100,000. My senior 
policy staff, with the exception of two people in the office--
we do not have support staff at all. So all of my staff are 
senior policy staff. But the highest salary is on the order of 
$98,000, I believe, in terms of my policy staff.
    Mr. Lewis. Do you expect to advertise the four jobs through 
the Office of Personnel Management or elsewhere, or have you, 
in fact, determined in advance who you think you probably want 
to hire?
    Ms. McGinty. I have not determined in advance who we would 
hire. We will follow the normal set of procedures, I assume, 
through the Office of Personnel Management.
    Mr. Lewis. Is CEQ subject to the Executive Order of last 
fall requiring that employees who have been RIF-ed be given 
priority for hiring?
    Ms. McGinty. I need to determine that.
    Ms. Fidler. No, we're not required to do that.
    Mr. Lewis. Okay. So it is within the purview of the 
administration and separate from those limitations on the 
tapping of the RIF pools.
    I must say that, in connection with a relatively small 
staff and high policy level people, I understand your response 
and would appreciate a response for the record. The point we're 
attempting to make here is that I am of the view that it may be 
that CEQ is coming from a frame of reference that is so slanted 
in one direction. Any environmental effort is a good effort. 
The tradition that almost assumes that economic considerations, 
in spite of what the language in the charge might suggest, is 
let's go forward with regulation, period. A little mix of 
flavor in a new staff that maybe isn't of traditional form 
might be helpful. I think any agency benefits from a different 
kindof blood, not just new blood.
    Ms. McGinty. Mr. Chairman, I would certainly be open to any 
suggestions you might have, in terms of places we might look 
for additional staff or, indeed, individuals we might talk to.
    Without taking too much of the committee's time now, I 
would appreciate the opportunity to expand on some of the 
examples I have cited today, because CEQ really has undertaken 
many initiatives. I would say everything that we do is in the 
spirit of not just looking at environmental protection but 
achieving that integration that we have spoken about, these 
RCRA ``rifleshots'' that we call them that are now signed into 
law. It was CEQ's leadership that put that bill together, with 
tens of millions of dollars saved to the business community.
    CEQ also led the effort that again was signed into law to 
establish clarification on lender liability under the Superfund 
program. There again, a very significant savings to the 
business sector. These habitat conservation plans, when we're 
stepping up to the plate and giving private sector timber 
companies or, in the last case, the State of Washington, a 100-
year guarantee that they have met all their Endangered Species 
Act obligations, this is not something that the 
environmentalists, in particular, take too kindly to. But I 
think it's the right thing to do, economically, socially, and 
environmentally. But it is the next generation of what we need 
to think about on the environment.
    Mr. Lewis. I will be looking forward to your revising the 
record.

                         nepa as a policy tool

    Your stated reason for specifically needing more personnel 
is, of course, related to your launching of a major effort to 
reinvent the way in which NEPA is being used currently as a 
policy tool. Your goals for this effort are to improve decision 
making by the Federal Government and promote greater efficiency 
in the performance of NEPA reviews.
    I suppose many people, especially some living today in 
Utah, suspect that NEPA has been broken since the day it was 
enacted. They tell me that, anyway. They have that concern or 
thought. I can certainly attest that many times NEPA has been 
abused when we've tried to make sensible land use decisions in 
my own district. Nevertheless, for better or for worse, NEPA 
has become what many consider to be the very foundation of a 
myriad of environmental statutes. To change it, or even 
reinvent it, whatever that means, will at least certainly raise 
eyebrows, if not ire. Even for a few westerners, I suspect that 
they would say ``the devil you know is better than the devil 
you don't know.''
    Can you tell us in some specific ways how you believe NEPA 
is broken?

                  shortcomings in nepa implementation

    Ms. McGinty. Well, I think there are instances in which 
NEPA works better than in other instances. Some of the 
shortcomings in NEPA implementation currently involve too much 
of an emphasis on document production. Documents are generated 
for the sake, as far as I can tell, in many instances, for the 
sake of generating documents. They are also generated at the 
end of a process, so they don't even effectively inform the 
decision making itself.
    Tied to that, constituencies, citizens, state and local 
governments, are brought in far too late in the process, many 
times, frankly, after a decision for all practical purposes has 
been made. The agency is simply going about the job of checking 
the boxes of what it thinks it needs to do.
    What we need to do is make sure that process gets 
inverted----

                            reinventing nepa

    Mr. Lewis. That's a very interesting point.
    Ms. McGinty [continuing]. So that the studies, the analysis 
that is done, is done in a way that genuinely informs the 
decision making process, so that citizens are genuinely given a 
chance to influence the final decisions that are made.
    Mr. Lewis. Maybe you could elaborate a little bit more on 
the points you have made, but giving us some better idea of how 
you plan to go about reinventing NEPA. Tell us what are some of 
the specific things you believe will be accomplished by doing 
that.
    Ms. McGinty. I would be happy to, Mr. Chairman.
    Mr. Lewis. Do you want to do it now?
    Ms. McGinty. Oh, I would be happy to.
    We envision a three-step process. We are currently engaged 
in the first step, which is to look at a sector-specific basis, 
starting with the oil and gas sector, grazing, and the timber 
industry, timber production.
    In these areas, the agencies are already at work and coming 
forward with specific recommendations as to how the process can 
be improved. To take one example, in the grazing area right 
now, often you have contiguous pieces of Federal property. One 
piece is owned and operated by the Forest Service; the other 
piece is owned and operated by the Bureau of Land Management.
    The Forest Service may have categorical exclusions from 
NEPA for certain low-impact or no-impact activities. The Bureau 
of Land Management, on exactly the same piece of land 
continuous with the Forest Service's piece of land, will have 
contradictory categorical exclusions. So one of the 
recommendations that has come from the group already is to look 
at those exclusions and see if we can't find more, but at the 
very minimum to harmonize them, so that individuals who are 
operating both on the Forest Service land and the contiguous 
BLM land have one consistent message from the Federal agencies.
    That's the first part of this effort. I think it will be 
ongoing for the next several months, until we can put together 
a draft set of recommendations. That draft we want to then 
share very broadly. In fact, right now we're talking to the 
University of Wyoming, who may host for us a session in May, 
where we will just put the document out there, having the 
varied interest groups at the table, including the Governor's 
offices, and have at it in terms of seeing whether those 
recommendations we come up with can be elaborated upon or 
improved.
    The second phase will be to reach out from the learning 
we've had in those three sectors and look at additional sectors 
across the government. One that has been suggested to us is the 
mining sector, where improvements could be made in the NEPA 
process.
    Then, finally, after we have done our sectoral approaches, 
the third phase would involve going back out of specific 
sectors and just looking comprehensively across the board at 
some general governing principles that we could put in place to 
better effectuate NEPA's purposes. So it's a three-stage 
process that we envision.
    Mr. Lewis. As I understand it, much of the reinvention of 
NEPA will take place by way of administrative rather than 
legislative reforms, and you have mentioned in several ways, 
your focus upon oil and gas, timber and grazing. At least for 
the West and the Southwest, I can't imagine three hotter 
buttons.
    I'm just wondering, how do you really anticipate developing 
a meaningful dialogue, let alone hopefully increasing trusting 
relationships, when you start the process with the hottest of 
issues.
    Ms. McGinty. Well, we wanted to be responsive to those 
things that seemed to be most troubling and concerning to 
people. We did talk about this internally, whether we would 
start with the general principles and then in an extended 
period of time get to some of the specifics and try to solve 
some problems as applied, or if we would do the process 
inductively--start with the specifics and then build the 
general principles from what we know works on the ground.
    Mr. Lewis. Congressman Hansen and Senator Bennett would be 
concerned about which people you're talking about.
    Ms. McGinty. Well, this process has been informed most by 
the Western Governors Association and the Western States 
Foundation, which as you might know is a coalition of 
extractive industries for the most part. We just wanted to roll 
up our sleeves and work with those groups, because I do believe 
that, while there certainly will be issues on which we differ 
with some of those parties, there is more than a kernel of 
truth to their complaint that the process is unwieldy, that 
they do not get effective or crisp or clear decision making. I 
know there are improvements that can be made.
    I am very encouraged by the willingness of the governors to 
help on this project. They are genuinely interested in 
participating and seeing if we can't figure some things out 
here.
    We also have the very good fortune again of universities 
pitching in. The University of Montana has something called the 
Center for the Rocky Mountain West, which is dedicated to 
trying to find these more collaborative approaches to decision 
making. And the University of Wyoming has a special board that 
it has created, with people from all around the country, to 
focus on natural resource issues. Both of them have made 
themselves available to help us in this project.
    Mr. Lewis. In your discussions as you went forward with 
this and examining these areas of possible use in the process 
of reinvention, did you consider maybe taking just one of the 
areas, maybe one of the lesser controversial ones? It's hard to 
see which one it might be. But while working on lesser 
controversial ones, experimenting to see how you really build 
this positive relationship and the level of credibility, I 
think is necessary, at the same time using the rest of your 
troops for things like the reinvention, internally doing the 
nuts and bolts as a part of all that?
    For example, the grazing item, while very important to the 
grazers, doesn't involve quite as many people. Did you think 
about that?
    Ms. McGinty. Well, we have built up to the specific focus 
we have in these sectors now. For example, in the timber 
sector, we are trying to build on the rapport we have already 
built over the last four years with specific members of the 
timber industry, through things like our ecosystem approaches 
and our habitat conservation plans which we do through NEPA. So 
there is a base of support that has been built and an honest 
dialogue that has been built in that sector.
    Similarly, in grazing, as I believe I shared with the 
committee last year, we undertook 18 months ago or so a pilot 
project to improve grazing practices and the NEPA 
implementation there. We are now at the stage where we have 
some learning from the pilot project that I think has helped to 
build the bridges for us to take this on as a whole sector.
    Mr. Lewis. It still boggles my mind that we're going to 
take up all three of these items at once. No matter what 
constituencies one has built, there still is a pretty 
significant level of people who are wondering if we can trust 
each other.
    For example, all is not sweetness and light in timber 
country. It might be helpful if one used--let's say you 
usedgrazing to demonstrate to somebody that we actually can bring 
interests together, and maybe make some question marks that are now 
exclamation points after them.
    I would like to welcome Mrs. Meek. We appreciate your being 
with us. I understand your schedule----
    Mrs. Meek. I would like to protest because this Committee 
meets at the same time as the other subcommittee on Treasury 
and Postal.
    Mr. Lewis. Mr. Stokes has the same problem this morning, 
and my National Security meeting is around the corner.
    Mrs. Meek. I just want you to know I am committed, but I 
have to shuttle to get back and forth.
    Mr. Lewis. I'm not sure if you've worked with Kathleen 
McGinty before, but she is a very delightful person and she can 
sell an Eskimo an icebox, so be careful. [Laughter.]
    Mrs. Meek. Her reputation precedes her, Mr. Chairman.

                          mining law proposal

    Mr. Lewis. While we are on the subject of reinventing oil, 
gas, timber and grazing, what role have you specifically and 
your office generally played in the Secretary of Interior's 
recently announced policy to change mining law administratively 
because of the failure to do so legislatively?
    Ms. McGinty. I haven't been involved, Mr. Chairman, in the 
details of the approaches that the Secretary has put forward. I 
was aware that he was going to work on administrative reforms. 
I was involved, however, in the proposal on mining that is 
incorporated in the President's budget. That proposal would 
establish a five percent net smelter return royalty on hard 
rock mining, as well as set up a specially dedicated 
reclamation fund into which those monies would be put. Those 
monies would then be used in the communities that have had acid 
mine drainage damages and things like that, so the money would 
be used to clean up those sites.
    There we have had positive response from the National 
Mining Association, as well as an environmental group or two. I 
was involved in that part of the proposal.
    Mr. Lewis. Could you give me a feel for what Secretary 
Babbitt wants to do with mining law as it fits into your short-
term or long-term reinvention goals? It's pretty clear from 
what you just said that there would appear to be some 
differences between your direction and what Babbitt may be 
suggesting.
    Ms. McGinty. To be clear, Mr. Chairman, I don't know that 
there are differences. I'm just not versed right now in terms 
of the details, administratively, of what he will put forward. 
Indeed, I think he is in some respects in the early stages of 
putting those proposals forward.
    But the way that NEPA will work with whatever changes he 
puts in place is to bring about the integration of what the 
mining law under the Secretary's regulations may require, with 
things like what are the Clean Water Act requirements, what are 
the Clean Air Act requirements, what about RCRA. All of these 
laws impact the mining industry.
    The only place that we have to go to make sure those varied 
requirements are integrated in one coherent whole is NEPA. NEPA 
is the structure that tells agencies that they need to use a 
scoping process. They need to look at all the requirements that 
are out there, and they are supposed to present them to the 
public as one coherent whole as to what the requirements will 
be.
    Mr. Lewis. I think you have heard that line, Ms. McGinty, 
that is usually used somewhere around the beltway, that 
``legislators come and go, and we'll be here forever.'' That 
is, the bureaucracy suggests that. I know that such a statement 
wouldn't bother Mrs. Meek, but it bothers the devil out of me. 
[Laughter.]
    I guess my point is that, in a fundamental way, we have the 
Judiciary that has a very specific role; an administration, at 
least as the Founding Fathers looked at it, was supposed to be 
in the business of administering laws, going forward with 
programs that are put together and sent to them by way of 
elected policymakers. The legislature is in the policy 
business.
    And yet, it seems to me there has been an excessive pattern 
of administrations, particularly at the second and third level 
of permanency, that uses that statement that I introduced this 
commentary with, that ``legislators come and go and we'll be 
here forever.''
    With that backdrop, do you think it's the proper role for 
the Executive branch to make such extensive regulatory 
administrative changes as we're talking about here when it 
wasn't able to accomplish many of those same changes in a 
legislative context?
    Ms. McGinty. I think it is my responsibility certainly to 
execute the National Environmental Policy Act as it was written 
by the Congress----
    Mr. Lewis. As those third levels interpreted it being 
written by the Congress?
    Ms. McGinty. Well, I feel an obligation myself to read and 
interpret the obligations there. Most compellingly, I believe 
there are two obligations. One, again, is to achieve this 
integration of the various economic, social and environmental 
objectives, and two is to do that in a way that the public has 
a chance to participate in agency decision making.
    I believe that we've made progress in moving towards that 
very clearly stated directive in the National 
EnvironmentalPolicy Act, in the kinds of programs that I've discussed 
earlier today. But I do believe that we are still far away from 
actually implementing Congress' intent, in that we've been very good at 
document production, we've been very good at making sure we're not 
going to get sued, or if we do get sued, we've checked all of the boxes 
and so we're safe. But we have not been very good at living up to what 
is a very simple but I think a very important directive that is the 
heart of the National Environmental Policy Act itself.
    Mr. Lewis. A final question regarding the Secretary, and 
then I will be pleased to recognize my colleague, Mrs. Meek.
    What is the time frame that you believe is necessary to 
accomplish a reinvention of NEPA and how much would you expect 
this reinvention to cost?

                      nepa reinvention time frame

    Ms. McGinty. I believe, sir, in terms of the overall 
reinvention of NEPA that I outlined, which would involve at 
least these three phases, I think that would take on the order 
of several years to finish that entire job. But in terms of 
these individual pieces of this that we can put together, I 
would hope, again in May, to be able to take advantage of the 
opportunity that the University of Wyoming has presented, to 
present the initial recommendations on the oil and gas and 
timber and mining sectors, just to open those up to public 
comment. I think there is real progress and benchmarks we can 
make along the way.
    Mr. Lewis. Thank you.
    Welcome, Mr. Hobson, and my colleague, Mr. Stokes.
    Mr. Stokes, I was just about ready to call on Mrs. Meek, 
and I wondered maybe I shouldn't do that because my ranking 
member came in. I'm going to give you the option.
    Mrs. Meek. I will yield to the ranking member. [Laughter.]
    Mr. Stokes. Let me say this, Mr. Chairman. I would prefer 
that you recognize Mrs. Meek at this time. I have three 
subcommittees working today. I will yield to her and then you 
can come back to me.
    Mrs. Meek. Thank you so much.

                        homestead air force base

    Ms. McGinty, I understand that at the beginning of your 
testimony you mentioned Homestead Air Force Base, which as you 
know is sort of attached by my left arm. I get teased a lot 
about it here in the Congress.
    My question to you is, you are going to see that that 
situation is worked out?
    Ms. McGinty. Yes.
    Mrs. Meek. According to the rules and regulations and all 
of that?
    Ms. McGinty. Yes.
    Mrs. Meek. I need to know whether or not, being that that's 
a very important facility for south Florida, if there are any 
immediate plans to do so.
    Ms. McGinty. Yes. Thank you.
    As you may well be aware, there has been some controversy 
with regard to Homestead Air Force Base. There were some 
especially from the environmental community who were very much 
opposed to the transfer to Dade County of the Air Force Base on 
the premise that that would be incompatible with restoration of 
the Everglades.
    CEQ got involved I think in the fall of last year to see if 
we couldn't say there is a way for both of these objectives to 
be met; namely, the economic development opportunity for Dade 
County, as well as preservation and rehabilitation of the 
Everglades.
    The agreement that we have reached among the Federal 
agencies and also with the mayor there, and the county 
officials, is a process that would involve two stages. One, 
which is currently underway, and we anticipate will take 
roughly four months--potentially four months to a year--which 
will enable actually the transfer of the base to be 
effectuated.
    The analysis that is underway right now will simply look to 
whether there is additional environmental concerns that should 
be reviewed. But we are confident in this first process in four 
months to a year that the base will be transferred.
    The second part of the agreement depends on the county's 
plans for the Air Force base, which then will become a 
commercial air strip. If the county wishes to expand the 
current footprint of the air strip and potentially put a second 
or third runway in, at that point we would reengage the 
environmental analysis process and look at the issues then. But 
we didn't want that larger picture, which is quite speculative 
right now, to impede the economic opportunity for Dade County. 
So that's the agreement we put in place. It will allow for the 
transfer of that Air Force base, and we think it will allow for 
that to happen without any genuine concern with regards to 
Everglades restoration.
    Mrs. Meek. I'm glad to hear that, in that the community 
college in the air base conversion, they were awarded a part of 
that space that you've talked about. But they're being held up 
by all of these--I don't call them peripheral, but the 
political impasses that have been reached because of the air 
strip and all of that. That is holding up the college's 
project. The money that the Congress awarded them is in 
jeopardy as well.
    So do you have any idea as to when----
    Ms. McGinty. I could look into that specific issue, but 
overall, I think we now have the blueprint for having this move 
forward. We have figured out a way that this does not need to 
be an impasse we can't surmount. We will be able to transfer 
the Air Force base.
    As I said, it may take on the order of four months or more 
to do that, but we are on the way towards that objective.
    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you very much.
    Now, if you would yield the balance of your time to my 
ranking member, Mr. Stokes.
    Mr. Stokes. Thank you, Mrs. Meek, and thank you, Mr. 
Chairman. Ms. McGinty, it's nice to see you again.
    I understand that you've had an extensive discussion this 
morning regarding your efforts relative to undertaking this 
major effort to reinvent the way Federal agencies implement the 
National Environmental Policy Act.

               epa's rule on ozone and particulate matter

    Let me ask you this. One proposed set of environmental 
regulations now generating a great deal of comment and activity 
this year is the Environmental Protection Agency's rules on 
ozone and particulate matter. Can you comment on CEQ's 
involvement to date in these regulations?
    Ms. McGinty. Yes, sir.
    This is a pending rulemaking, so in terms of the details of 
the substance of the proposals, there is still comment coming 
in that will be reviewed on those proposals.
    But CEQ's role has been and will continue to be, as this 
rule moves towards its final versions--which I believe is in 
June or July of this year--we will work with the Office of 
Management and Budget to make sure that there is a 
comprehensive review of the proposed standards.
    That will involve making sure that the comments that come 
in from the public on the record to the Environmental 
Protection Agency are made available to the other agencies that 
have an interest in this issue. Second of all, in the next two 
weeks, we will engage a series of meetings where we will invite 
in state and local governments, the environmental community, 
and representatives of industry, to hear directly from them 
what their perspective is on that.
    So the short answer to your question is that CEQ will be 
very much involved in terms of the White House review of these 
rules, and in undertaking that, we will make sure especially 
that we have a public outreach process to hear comments on the 
rules.
    Mr. Stokes. In this regard, there appears to be a great 
deal of discussion and difference of opinion within the 
scientific community itself as to whether the data support the 
proposed rules. Of course, Congress is now getting in the 
picture and having some congressional hearings on the matter to 
add more confusion to the picture.
    Do you have any comments in that regard?
    Ms. McGinty. Well, sir, again, the rules are pending, so we 
will see the comments that come in. I guess I would also note 
that my colleague, Dr. Gibbons, will be here soon and certainly 
can speak to the science.
    I would just say that it's my understanding that some of 
the confusion pertains I think more to the ozone standards than 
the particulate matter. There the confusion so to speak is, I 
think, relevant not to whether or not there is a health problem 
and whether or not a change in the current standards is 
necessary. The EPA's advisory group I think has spoken to that.
    But because ozone is an area where there is not a clear 
bright line, where we know that on this side of the line it's 
unhealthy and on that side of the line you've achieved perfect 
health protection, it's more of a sliding scale. Therefore, in 
the end, science won't be able to tell us exactly, directly, 
definitively, where the right point is. There will need to be a 
policy judgment as to what that right point might be.

                        proposed asset exchanges

    Mr. Stokes. If Mrs. Meek still has some time, let me try to 
get in another question or two.
    One of the administration's methods of dealing with certain 
difficult environmental issues in an era of extremely tight 
budgets has been to propose asset exchanges. Probably the two 
more noteworthy examples of this approach are the proposed land 
and asset swaps for the New World Mine near Yellowstone 
National Park and for the headwaters old growth timber in 
Northern California.
    Concerns for this approach prompted the Chairman of the 
House Appropriations Committee to write to the President 
expressing his reservations.
    What has CEQ's role been in these proposed asset exchanges?
    Ms. McGinty. We have been very much involved in these asset 
exchanges because they involve a plethora of agencies. Each one 
of them involves a broad array of agencies who have a piece of 
those issues.
    To put these initiatives in context, pursuant to the 
Federal Land Management Policy Act and several other statutes, 
the agencies do engage on the order of 200 land exchanges every 
year. The purpose of them is to protect and preserve 
particularly valuable resources or to achieve better coherence 
and coordination in management responsibilities. So it is 
pursuant to those laws that these exchanges have been 
undertaken.
    Now, the magnitude of these two exchanges is larger than 
most of the exchanges that have happened in the past. So what 
we are undertaking to do is to find the assets that could be 
offered in exchange.
    We have visited with Mr. Livingston, as well as Mr. Regula, 
who had signed and sent the letter to the President that you 
referred to. We have briefed their staffs and certainly we will 
stay in very close coordination and contactwith the Congress as 
these things move forward.
    Mr. Stokes. Is it your opinion that the administration has 
the legal authority to engage in these swaps?
    Ms. McGinty. Yes, sir. Again, this is pursuant to the 
Federal Land Management Policy Act, I think called the Weeks 
Act. There are a series of land management statutes that 
proscribe and authorize the exchange of assets. Again, on the 
order of 200 of these exchanges are done every year by the 
various land management agencies.
    Mr. Stokes. Thank you, Mr. Chairman. You have been very 
generous with Mrs. Meek's time and I thank you.
    Mr. Lewis. Thank you, Mr. Stokes. I appreciate both of you 
participating.
    Mr. Hobson, the same with you.
    Mr. Hobson. Thank you. I had another hearing, too, and I'm 
supposed to be over there.
    I'm going to ask a series of questions, and you can answer 
whichever ones you want.
    Ms. McGinty. OK. [Laughter.]
    Mr. Hobson. I'm sure she'll get to all of them.
    On air quality, I want to make a statement on EPA's 
proposed air quality standards for ozone and particulate 
matter. This is very important to Ohio. We had a delegation 
meeting and we had more Members attend that delegation meeting 
than we've ever had since the six years I have been here. We 
had more state legislators in on that issue than I have ever 
seen before.
    I might tell you that Senator Glenn actually took the lead 
on that issue for our state. So this is a bipartisan problem as 
our state looks at it. I don't think anybody is locked into 
anything. We're told the cost is two billion dollars a year on 
our state, on something that the science is not really there. 
So we're searching for an answer. I will tell you that it's an 
issue of concern.
    I'm also really concerned about the Everglades. I think 
anybody who has ever been to Florida is really interested in 
the preservation of the Everglades. I'm concerned about the 
proposal that was defeated in Florida that would have helped in 
the Everglades, and I don't know what you're going to do about 
that.
    The third issue is on this new generation of vehicles. I'm 
going to be a little parochial for just a moment. Wright-
Patterson Air Force Base is working with the private sector in 
the transfer of technology for new types of materials, and I 
would hope you would look at that technology.
    I would also tell you that I know we're only doing this 
with Ford, Chrysler and GM, but I heard last night from a 
company in my district that is going to produce a natural gas 
vehicle that will be the most efficient natural gas vehicle on 
the market in California. It will be produced in Ohio and 
shipped to California. I might tell you that it's not a company 
on that list.
    I think we're missing an opportunity if we limit our 
technology to not include some of these companies. They're 
going to have a natural gas vehicle on the market that's going 
to have a 200 mile range and I think it's going to sell like 
hot cakes in that area. So somebody ought to look at that.
    The last issue is something I ask everybody when they come 
before us, so people need to get prepared if they're not. It's 
about your rent. I notice a jump in your GSA rent. You say it's 
nonnegotiable. That troubles me. GSA should not dictate to you 
and you should have the ability to negotiate. If they don't, 
you need to come and see me.
    GSA met with me last year when I started asking about 
rents. The Consumer Product Safety Commission took on this 
issue with GSA and the Commission was able to move their labs 
and make some changes. I think you need to look at your rent. I 
want you to take on GSA, and if they're not being responsive, 
then you need to come to our committee and we need to follow 
up.

                            agency rent cost

    If you look at these agencies across the board, the 
percentage of money they're spending on rent is not right. It's 
an arcane system and we need to take a look at that, Mr. 
Chairman.
    If you want to respond to the rent question, the rest of it 
you can answer later if you wish.
    Ms. McGinty. I'll start with that one and say that we 
accept and we'll call to follow up and have an appointment with 
you.
    Mr. Lewis. You can reduce that rent across the street from 
the White House, right?
    Ms. McGinty. Right.
    Mr. Lewis. That would be interesting.
    Ms. McGinty. It would be wonderful. We would love to have a 
reduced rent, so we would love to follow up with you on that.

                         air quality standards

    On the other matters that you raised, on the airstandards, 
one of the roles that again CEQ will play is to provide a forum for 
various stakeholders, including especially state and local governments, 
to come in and make presentations to us on the specific concerns they 
have with regard to the rules.
    As you might know, the rules are still pending. The comment 
period is still open. The final rules have not been 
promulgated. Starting, I believe, on March 10th, we will begin 
to hold that series of meetings, together with OMB and the 
White House, and we look forward to hearing from the state 
governments on those specific issues.
    Mr. Hobson. Have they been notified yet to get ready?
    Ms. McGinty. They may well have yesterday. The requests for 
folks to come in may have gone out yesterday. But, in any 
event, they will be issued very soon.

                           florida everglades

    On your second point with regard to the Everglades, I am 
very optimistic in terms of the progress we have made with the 
bipartisan support of the Congress in beginning to turn the 
tides on Everglades restoration, and I think in a way that 
achieves the environmental objective but underscores the 
economic importance of the Everglades in terms of water quality 
and drinking water supplies in south Florida.
    In terms of the specific issue of the funds that are needed 
to continue the restoration job, the President has again built 
on what the Congress did last year in providing $200 million 
for some of the restoration work, to increase the budgets of 
the agencies that are involved here so that we can get the job 
done. We do need to work in a bipartisan way, I think, to try 
to secure the resources that really are necessary.
    While we have made a lot of progress, the overall tab for 
Everglades restoration is on the order of $3-4 billion. So the 
$200 million down payment that the Congress provided last year 
is very much a help but only a beginning.
    Mr. Hobson. If I may, Mr. Chairman, one of the real 
problems is there are two or three companies down there that 
are getting off, in my opinion, scot free that have been major 
polluters in that situation. They went out and spent a lot of 
money on a campaign to tell people that it was all wrong. I 
watched that campaign and it was very troublesome. I know we 
have problems everywhere, but that is a natural resource in 
this country that should be protected and people shouldn't get 
away with what happened there.
    I'm going to leave it to Congresswoman Meek. But there is 
bipartisan support I think for the Everglades.
    Ms. McGinty. I would just note on that particular point 
that the President has reproposed in his budget that the sugar 
industry be asked to contribute a penny per pound of sugar 
produced towards the restoration of the Everglades. So we are 
hoping we can secure that piece of the budget as well.
    Mr. Lewis. Can you do that by regulatory adjustment or do 
you have to have legislation?
    Ms. McGinty. We need legislation, yes.
    Mr. Lewis. I just thought I would ask the question. 
[Laughter.]
    As you can kind of sense from this committee, at least from 
the questions here on both sides of the aisle, we really do--
especially on environmental considerations--do hope to have as 
nonpartisan an environment as possible, for the environment is 
for all of us to be concerned about. The credibility question 
very much applies and underlines all the thrust of our 
direction today.
    You know, whether Secretary Babbitt likes it or not, the 
mining law of 1872 is pretty clear on what it means and what it 
does. I mean, even a nonlawyer like me can read it and kind of 
make a reasonable, narrow adjustment.
    To change the administration of the law through executive 
action, using conflicting statutes as cover, is a clear 
violation of congressional and statutory intent. That comment 
takes us right to kind of the heart of there really needs to be 
a partnership here rather than presumption. I make that point 
even though I intended to be through with CEQ.
    Ms. McGinty. I would be happy to follow up on that point. I 
do know that the basis for the Secretary's action was a report 
developed by the Bush administration, in terms of regulations 
that had not been promulgated or had not been updated that are 
called for in the statute. They have to do, I guess, with the 
environmental management provisions envisioned in the statute.
    Mr. Lewis. I note with interest that you often refer to a 
former administration that happens to be Republican. I 
understand that. But the reality is that that goes back to the 
point: ``Legislators come and go and we'll be here forever.''
    I hope to end on a positive note. You mentioned Northern 
California and some of the problems that were up there. 
Frankly, it's a long ways from my district, but it's where the 
flooding was horrendous.
    My friend, John Garamendi, wants FEMA to give the USGS some 
$2 million for levee mapping. The problem is there are 4-6,000 
miles of levees and we don't know how high they are, what their 
condition is, a lot of things. People at the California 
conservation agencies suggest that FEMA mapping might well be a 
waste of money and that there are technologies that perhaps can 
better do the job.
    Because these problems were not so long ago in the 
black,and I've been familiar with them for a while, I might bring to 
the attention of your people programs like GEOSAR and I-Star, which is 
a mapping process using airplanes like 737's with technology that can 
do it very rapidly and very effectively. I would suggest maybe, if two 
million is the right amount, that we go in another direction and get 
the job done quickly, especially as the weather ahead of us gets to be 
better. That's something I would urge you to look at.
    Ms. McGinty. Thank you very much. We are very closely in 
contact with Doug Wheeler, the secretary of the resource agency 
in California, to undertake this effort.
    Mr. Lewis. I'm not sure that Doug of GEOSAR, for example, 
as a potential. It is an item that--through another venue I 
have been in contact with it. That stuff is now no longer in 
the black and portends really some fabulous things for 
environmental and agricultural considerations and so on.
    As you know, the Corps of Engineers can issue Section 404 
permits. If it's all right with the Members, it's approaching 
the time when we move to our next series, but I want to go 
through just this item and maybe ask you to respond for the 
record, except for those questions that Members have pressing 
on their current agenda.
    The Corps of Engineers can issue Section 404 permits based 
on wetland objectives identified in a special management plan, 
called SMP. Local governments and land owners in many parts of 
southern California and other states are interested in 
conducting such comprehensive plans similar to the habitat 
conservation plans that have been approved and are currently 
being developed.
    Upon completion of the SMP, a comprehensive, long-term 
permit could be issued for the area, replacing the needs for 
applicants to seek a permit for each individual proposed 
action. This concept has the dual benefit of protecting 
wetlands and allowing for development under a thorough yet 
economical and streamlined permitting process.
    Does CEQ support this concept, and if so, what and can will 
you do to help facilitate its implementation?
    Ms. McGinty. I am not aware of that particular program, but 
certainly the concept of it is very consonant with what we've 
done with the habitat conservation plans and some other areas. 
So I would be very happy to look into it and see if we have a 
program there or if we could build one.
    Mr. Lewis. I'm constrained, because my colleagues are so 
kind to be with me, to ask you to look at the balance of my 
questions for the record and see if either of my colleagues 
have questions they want to pursue here.
    Mrs. Meek.
    Mrs. Meek. I don't know, Mr. Chairman, whether my question 
is relevant, but allow me to ask it and perhaps I can get the 
proper reference.

                           brown fields sites

    What is the situation regarding the brown fields situation? 
Does that come within your purview?
    Ms. McGinty. I do work on that very closely. I believe it's 
a perfect example of where we have an environmental, economic, 
and social objective brought together in a very good program, 
yes.
    The situation is that there are several proposals that are 
pending. First of all, administratively, we have established a 
hundred brown field sites around the country where we have been 
able to provide seed money to local communities to restore 
blighted urban areas and bring them back into productive use.
    The President's budget calls for, I believe, a doubling of 
that number, so that we could get on the order of 200 sites, 
and I think moving towards a goal of 300 sites eventually.
    Bills have also been introduced in the Congress that would 
go a step further and specify technical assistance that could 
be provided in developing brownfields proposals. And finally, 
the President's budget also includes a new tax incentive that 
is a $2 billion tax incentive that encourages private industry 
to invest in brownfields areas.
    And the Council on Economic Advisors estimates that that $2 
billion if we can get the Congress' support for it, will 
leverage on the order of $10 billion of private sector 
investment in these abandoned areas.
    And I would be happy to get you additional information on 
the program itself.
    Mrs. Meek. It will certainly help us in the welfare or the 
work programs that we are all trying to do.
    Ms. McGinty. Exactly.
    Mrs. Meek. And I would like to talk with you about it 
further.
    Ms. McGinty. Exactly. It is a very good source of job 
opportunities and it is where the environment can help create 
jobs.
    Mrs. Meek. That is right.
    Thank you.
    Ms. McGinty. Thank you.
    Mr. Lewis. Thank you, Mrs. Meek.
    Following up just a little bit on the flooding question I 
was talking about earlier. As you know, normally we think about 
floods in a State like California or elsewhere in the country 
and now all over the country. We think of FEMA in terms of the 
immediate response.
    Ms. McGinty. Right.
    Mr. Lewis. But many of the problems relative to those kinds 
of challenges are not FEMA responsibilities. In fact, a number 
or a key problem with government response has to do with 
environmental organizations using NEPA and other statutes and/
or regulations that seem to slow down or hold up river channel 
restoration, and dike repair replacement.

                              flood plains

    Southern California is the country's largest area flood 
plain unprotected with maybe a billion and a half dollar 
project altogether because of a past history of dumb policy 
making. Again, there are tens of thousands of homes in the 
flood plain in Orange County south of an area way up north. 
There are billions of dollars of property involved and yet, 
much of the work moving forward is, in many ways, being 
hindered by almost excessive use of NEPA and other laws by 
environmental groups who want to see no channeling whatsoever.
    Are you familiar with what is going on, especially in the 
west in that regard?
    Ms. McGinty. This issue was raised to me as a concern by 
Congressman Fazio and also Senator Feinstein. And I visited 
with both of them and immediately within 24 hours, we issued a 
statement that made it very clear that none of these laws would 
impede operation and maintenance repair of these levies and 
flood, the various hardware that is in place to prevent 
flooding.
    The concern I think was as much one of confusion about what 
are we or are we not allowed to do and, so, we tried to put out 
a statement that would clarify that as much as possible.
    What we are hoping to do in the flood work that we have 
undertaken is to provide communities and some of the 
individuals you have talked about with options. Previously 
folks were not offered any options in terms of how they could 
respond to a flood. The only option was to rebuild the levy and 
be in jeopardy of being flooded again the next year or the next 
several years.
    The options that we will provide will enable people to move 
levy structures back to increase the flood plain and the 
absorptive capacity of the river, to relocate if they would 
like to get out of the flood plain. These are options that 
previously were not available but the Congress passed new 
authorizing legislation last year that gives us the ability to 
do that and we are trying to make sure that, in fact, those 
things are executed.
    Mr. Lewis. I appreciate that response and as I indicated, 
all the members have questions they would ask for the record.
    We very much appreciate your being with us today and for 
now, we will thank you and this part of our session is 
adjourned.
    Ms. McGinty. Thank you, Mr. Chairman, I appreciate it.
    [Questions for the record follow; see budget justification 
at end of volume.]

[Pages 231 - 390--The official Committee record contains additional material here.]



                                           Wednesday, April 9, 1997

                  AMERICAN BATTLE MONUMENTS COMMISSION

                               WITNESSES

GEN. FRED. F. WOERNER, USA [RETIRED], CHAIRMAN, AMERICAN BATTLE 
    MONUMENTS COMMISSION
MAJ. GEN. JOHN P. HERRLING, USA [RETIRED] SECRETARY
KENNETH S. POND, EXECUTIVE DIRECTOR
COL. ANTHONY N. COREA, USAF, DIRECTOR OF OPERATIONS AND FINANCE
COL. DALE F. MEANS, USA, DIRECTOR OF ENGINEERING AND MAINTENANCE
COL. KEVIN C. KELLY, USA, WW II MEMORIAL PROJECT OFFICER

                          Introductory Remarks

    Mr. Lewis. The meeting will come to order.
    Our hearing this morning relates to the budget for the 
American Battle Monuments Commission, and it is my pleasure to 
welcome General Fred Woerner. I don't have any formal comments, 
per se, but I would call upon Mrs. Meek, who was kind enough to 
be here with us this morning, if she has any comments she would 
like to make.
    Mrs. Meek. No, Mr. Chairman.
    Mr. Lewis. Presuming that our schedule is to move forward 
today and to try to get our work done in a reasonable time, we 
have three groups before us. I would appreciate it very much, 
General Woerner, if you would introduce your guests and present 
your testimony, and then we'll have questions.
    General Woerner. Thank you very much, Mr. Chairman.
    To my right is the Secretary, Major General John Herrling, 
USA-retired, and to my left is Mr. Ken Pond, Executive 
Director.
    I will be very brief. I have submitted a full statement for 
the record.
    Mr. Lewis. And it will be included in the record. Thank you 
very much, General.
    General Woerner. Thank you, sir.
    On behalf of the American Battle Monuments Commission, I am 
pleased to appear before you today. I do thank you, Mr. 
Chairman, and members of this committee, for the fine support 
that you have provided us in years past.
    The very special nature of the American Battle Monuments 
Commission places it in a unique an dhighly responsible 
position with the American people. The manner in which we care 
for our Honored War Dead is, and should remain, a reflection of 
the high regard in which we, as a Nation, memorialize their 
service and their sacrifices.
    As you are well aware, the American Battle Monuments 
Commission was established by Congress in 1923. It is a small, 
one-of-a-kind organization, responsible for commemorating the 
services of the Armed Forces where they have served since 1917. 
We do this through the construction of memorials and memorial 
burial grounds on foreign soil. The American Battle Monuments 
Commission administers, operates and maintains 24 permanent 
memorial cemeteries and 28 monuments, memorials and markers in 
15 countries around the world.
    We have eight World War I and 14 World War II cemeteries 
located in Europe, the Mediterranean, North Africa, and the 
Philippines. In addition, we are responsible for cemeteries in 
Mexico City and Panama. Interred in these cemeteries are a 
total of 125,000 War Dead. We also care for 5,000 more 
Americans buried in Panama, and we honor, in addition, 94,000 
of those who are missing in action or were lost or buried at 
sea.
    The care of these cemeteries and memorials requires a 
significant annual program of maintenance and repair of 
facilities, equipment and grounds. It is important to note that 
this maintenance requirement is extraordinarily labor-
intensive. Therefore, in our budget, 72 percent is committed to 
salaries, leaving us only the 28 percent balance to provide for 
our operations, including engineering maintenance, our 
utilities, our horticultural supplies, equipment, and 
administrative costs.
    Furthermore, in our uniqueness, we do not have the option 
of closing or consolidating cemeteries or memorials. We must 
achieve any improvements through greater efficiency, and we are 
attempting to do that precisely through automation in both the 
operational and financial management areas.
    Complementing these missions, we have been mandated by 
Congress to construct two new memorials in Washington, D.C. In 
1995, President Clinton and President Kim Young Sam of the 
Republic of Korea dedicated the Korean War Veterans Memorial, 
and in February of this year, we opened the Korean War Veterans 
Memorial's information kiosk. This kiosk houses an automated 
honor roll, which allows friends and relatives to query a data 
base containing the names and information about those who died 
during the Korean War. With the opening of the kiosk, that 
memorial is now complete.
    In May of 1993, Congress authorized the American Battle 
Monuments Commission to build a national World War II Memorial. 
The Rainbow Pool site on the mall was dedicated on November 11 
of 1995 by President Clinton. Since that time, a national 
design competition for the memorial was held, with over 400 
preliminary designs submitted. Six finalists were selected for 
the final stage of competition, and this past January, the 
President announced the winner of the design competition. As 
directed by Congress, the project will be funded through 
private donations.
    Our greatest challenge, Mr. Chairman, for fiscal year 1998, 
will be dealing with aging facilities and equipment. Our 
cemeteries and memorials range in age from approximately 50 to 
80 years, and our Mexico City cemetery is over 140 years of 
age. The permanent structures and plantings, which make our 
facilities clearly among the most beautiful memorials in the 
world, are aging and require prioritized funding to maintain 
them at current standards.

                       fy 1998 budgetary requests

    Therefore, we are requesting $242,000 more in fiscal year 
1998 for maintenance and minor construction. In addition, much 
of our equipment is old and rapidly reaching the end of its 
useful life. In order to resolve this problem, we are 
requesting an additional $201,000 to fund our equipment repair 
and replacement program.
    We also have small increases of $207,000 for supplies, 
$300,000 to integrate our financial system in compliance with 
OMB, GAO, and the recent congressional directions. And finally, 
$214,000 for the rental of office space that, up until this 
year, was provided at no cost.
    In summary, since 1923, the American Battle Monuments 
Commission's cemeteries and memorials have been held to the 
highest standard in order to reflect America's continuing 
commitment to its Honored War Dead, their families, and the 
U.S. national image. The Commission intends to continue to 
fulfill this noble trust.
    Our appropriation request for fiscal year 1998 is 
$23,897,000.
    Mr. Chairman, this concludes my remarks. I am at your 
pleasure, sir.
    [The statement of General Woerner follows:]

[Pages 394 - 397--The official Committee record contains additional material here.]


    Mr. Lewis. Thank you very much, General Woerner.

                      foreign currency fluctuation

    As you know, last year the committee expressed its concern 
about the Nation's cemeteries and war memorials relative to 
their general condition, and wanting to make sure we were 
attempting to at least be responsive to some of the problems 
there, we added $2 million above and beyond the President's 
request, that funding essentially going to that account dealing 
with foreign currency fluctuations. The budget justifications 
indicate that the entire $2 million will be utilized. I had 
some questions in connection with that, and those questions 
obviously apply to similar considerations in the 1998 proposal.
    What is the currency fluctuation loss, for example, for the 
most recent month?
    General Woerner. Yes, sir. Tony, you have the specific 
numbers.
    Colonel Corea. The most recent month, March 1997, the loss 
was $113,000.
    Mr. Lewis. I understand the monthly estimates in the 
justifications for January through September averages in the 
$170,000 range.
    Colonel Corea. Yes, sir.
    Mr. Lewis. Is it your estimate now that the entire $2 
million will actually be used?
    Colonel Corea. Our original estimate, was that the $2 
million would be used. That was based on where we were last 
year.
    As you know, the dollar has been exceptionally strong this 
year in the overseas foreign currency markets. For instance, 
today the French franc is at 5.77 francs to the dollar, which 
is higher than what we had estimated. Our guesstimate--and I 
just say it's a guesstimate because we don't know what will 
happen with the foreign currency markets--is that we will use 
about $1.4 million this year, as opposed to the $2 million that 
we estimated last year. But that's strictly, as I said, a 
guesstimate, based on where we're sitting today.
    Mr. Lewis. The problem with our budgetary process is that 
we don't have to guesstimate about the reality that we've got a 
huge deficit out there and there is not much fluctuation, 
except it seems to keep going up. There was some adjustment 
downward in the annual amount recently, but the 1998 request 
does include projections that assume fluctuation problems, and 
it is a guesstimate as well, I assume.
    Colonel Corea. Yes, sir. 1998 is our best estimate. 
However, 1998 does include a repricing of the foreign currency 
budget rate, which we have not done since the account was 
established in 1988--
    Mr. Lewis. Repricing of the budget rate, what is that?
    Colonel Corea. Repricing is to bring the budget rate closer 
to the actual market rate. For instance, the rate that we've 
been using since 1988 has been six francs, actually 6.01 
francs, to the dollar. However the actual rate hasn't been 
there in years. OMB has come back to us and we've looked at the 
rates, and we're repricing using the DOD rates because they 
have the experience and the staff to be able to estimate the 
rates more precisely than we could. So we're going to be using 
a 5.28 rate for francs in the future. And this will be closer 
to where the actual dollar is versus the foreign currency 
budget rate.
    General Woerner. Of course, it is well known that we should 
neither lose nor profit from the currency exchange. Certainly 
we have never profited. However, we have lost, and in fiscal 
year 1996 we had to take $.7 million out of our operating 
funds--actually take it right back from the field--thus 
increasing our backlog of maintenance.
    So at the end of this year, if the foreign currency market 
stays exactly the same, we might have $.6 million left in the 
account, that will remain purely for future currency exchange 
issues. We would add an additional $2.1 and hopefully start to 
re-establish a balance in the account, rather than be in the 
negative and have to take foreign currency costs out of our 
operating funds, as we have done.
    Mr. Lewis. I'm interested in that, and I hear what you're 
saying. But essentially what you're saying is we're going to 
build that reserve account because of the impact of 
fluctuations, that it may very well cause us to delay upkeep 
and repairs that are really the reason for our existence in the 
first place. Those kinds of decisions are delicate decisions. 
Indeed, if the Congress gets the view that maybe you're more 
concerned about fluctuation than you are taking care of 
memorials, we could have a problem.
    General Woerner. Yes, which we are clearly not. 
Nevertheless, having been through the experience of taking $.7 
million out of very limited operating accounts, which are only 
28 percent of our budget. We would like to have at least a 
point or two margin in there, rather than gamble on the zero, 
given the capriciousness of the currency exchange market.
    Mr. Lewis. Well, we handled similar problems with other 
much larger accounts by way of supplementals, but some 
supplementals are relatively easy in debate and others are more 
difficult.

                               pay raises

    The budget requests $12,250,000 for salaries in 1998, a 2.9 
percent increase above 1997. Given that the majority of ABMC's 
employees are foreign nationals, where cost-of-living increases 
are determined by their foreign country and, thus, not subject 
to your control, is that 2.9 percent realistic?
    Mr. Lewis. Tony?
    Colonel Corea. Well, we expect that it's not. We were 
limited to the 2.8 percent because it was the standard rate.\1\ 
We expect that we could have pay raises higher than 2.8----
---------------------------------------------------------------------------
    \1\ Permitted for personnel cost increases.
---------------------------------------------------------------------------
    Mr. Lewis. The standard rate?
    Colonel Corea. It is the rate that OMB allowed us to apply 
in this year's budget request.
    Mr. Lewis. I understand. Okay.
    Colonel Corea. So it should be adequate for U.S. employees, 
GS employees and U.S. miliary, but it may very well not be 
adequate for our foreign national employees, who may receive 
pay raises higher than the 2.9 or 2.8 percent. So we could have 
to take funding from other accounts in order to pay our foreign 
nationals' pay raises.
    Mr. Lewis. Okay. Any further comment?
    General Herrling. No, I don't think so, Mr. Chairman.

                                  fte

    Mr. Lewis. The justifications indicate that the 1998 
request will support 363 FTEs, a decrease of one FTE below the 
1997 level. Last year, you estimated 367 FTE in 1997.
    What causes the number of FTEs in 1997 to decrease by 
three? You estimated it was 367, so it was a reduction of 
three, with the current estimate of 364. The Congress provided 
your full 1997 budget request--in fact, we added that $2 
million that I mentioned.
    What FTE level does ABMC need to maintain its cemeteries 
and memorials at the current high standard? I presume you're 
going to tell me it's the amount you're requesting.
    General Herrling. Mr. Chairman, the 363 is about the right 
level to maintain the cemeteries at the current standard.
    As I go around and talk to superintendents, there is 
concern that their workforce is being cut back to a point where 
they can no longer maintain these cemeteries at the standard 
that we expect. They are very concerned about future cuts in 
the workforce.
    I have gone into headquarters and taken as much out of the 
headquarters and the European region as I can. But I think we 
have reached a point now where it would be very detrimental to 
take further cuts below 363.

                           foreign currencies

    Mr. Lewis. I'm assuming that you're using the French franc 
as the measuring tool compared to the dollar, because so much 
of the work is in France?
    Colonel Corea. Yes, we actually use each of the currencies. 
We used the French franc here strictly as an example.
    General Herrling. We use seven different currencies in 
Europe: French francs, Belgium francs, Netherland gilders, 
British pounds, Luxemborg francs, Italian lira and Tunisian 
dinar.

                          maintenance backlog

    Mr. Lewis. Let's talk about that backlog in maintenance and 
repair projects. The justification indicates that the backlog 
will total $8.4 million at the end of 1998. Last year, you 
estimated a backlog of $5,844,000 at the beginning of 1997, and 
that same level at the beginning of 1998.
    What happened?
    General Woerner. Well, sir, the American Battle Monuments 
Commission, both at the Commissioner level and at the 
secretariat level, is under new management, and we threw out 
the old list. We lost confidence in it. We also got aboard a 
new engineer, replacing an individual who had been with the 
Commission for 22 years.
    So, with a clean sheet of paper, we went out and did a 
thorough scrub of our entire holdings and came up with a new 
prioritized list in which we now have total confidence. We feel 
that the approximate $10 million engineering project list is an 
accurate statement of all the projects we need to complete. 
After completing the fiscal years 1997 and 1998 projects, those 
remaining on the list constitute our backlog.
    Mr. Lewis. I would say at the very least that's a 
significant adjustment, percentage-wise and, indeed, in your 
budget, dollar-wise.
    General Woerner. Yes, it is. Very significant.
    Mr. Lewis. You have replaced somebody who had been there 22 
years, so suddenly the scrub shows that the condition is 
considerably less than you might wish it to be and thereby we 
have a backlog that's considerably higher than we originally 
estimated, just by replacing a person who had been there 22 
years, if that's the case.
    General Woerner. Also, this scrub was made and--this new 
list was built on clearly articulated and established 
standards, against which we can measure the condition of our 
buildings and grounds.
    Mr. Lewis. Is that a new thing? You didn't have clear 
standards before?
    General Woerner. Certainly not to the degree that we have 
now. We were not satisfied that the list had been built against 
hard criteria.

                        management headquarters

    Mr. Lewis. General, this line of questioning has taken me 
right to the heart of some of our fundamental budget concerns. 
You said that a very high percentage of your budget involves 
personnel who are required to actually do the maintenance. What 
percentage of your personnel base is in management here in 
Washington?
    Colonel Corea. I think it's three percent.
    General Herrling. Three percent of our total personnel, of 
those 363.
    Mr. Lewis. Which means about 90 or 100 people, right?
    General Herrling. No, sir.
    Mr. Lewis. Oh, that's a third.
    General Herrling. We have 14 people.
    Mr. Lewis. You have 14. Has the total volume of 364, 367, 
been reasonably close to the number of employees you've had for 
an extended period of time?
    General Woerner. Reasonably close, and coming down. We have 
drawn down, and with this one coming out in fiscal year 1998, 
we will have drawn down the directed eight spaces. So it's been 
in the----

                      maintenance backlog analysis

    Mr. Lewis. What I want to push for, for the record here at 
least, I would like to get an idea of the process you went 
through in terms of this scrubbing, establishing new standards 
and maintenance, et cetera, and then looking again, why that 
led to a sizeable readjustment, when was the last time we did a 
scrub like that and set standards, et cetera.
    General Herrling. Let me try that, Mr. Chairman.
    When I came in a little over a year ago--I've been on the 
job 18 months--and in preparation for this hearing a year ago, 
I sat down with my then engineer and went over the list of 
priorities and what the backlog of maintenance was in dollar 
figures. I wasn't happy with the answers. The detail wasn't 
there and the justification wasn't there.
    So when he retired, after spending 22 years in this 
organization, and with a total of 50 years of military service, 
I brought in a new engineer. He's sitting behind me, Colonel 
Dale Means. The charter I gave Dale was, go out and visit every 
cemetery we own, and as many monuments as you can, and make an 
assessment on what our real hard projects are, as far as 
construction and repair.
    I also hired a new engineer in the Paris office. The fellow 
who we had over there was not an American. The superintendents 
complained that he wasn't responsive to their needs in the 
cemeteries, so I hired an American engineer and put him in the 
Paris office.
    Between these two engineers, they visited our cemeteries, 
they have consolidated the master engineering projects last, 
and I am confident that we now have a list that I can bring to 
anybody and justify. In fact, I think----
    Mr. Lewis. Let me tread on dangerous ground by making a 
comment for the record. I hope it's not a reflection of what 
you just described as the process you went through.
    There is a major project in my district of no significance 
to the entire county. It happens to relate to a military 
circumstance. But that project is going forward with some 
policy discussions by elected officials who don't necessarily 
know a lot about long-range planning or how you create jobs, et 
cetera, et cetera. But the project is being run by a retired 
person from the military. Every time we have a problem in my 
region, we seem to hire a former military person, and the 
project seems to not work very well.
    You suggest we've got a guy here who--I don't want to be 
overly critical, but 50 years with the military and, after 22 
years in this operation, we have some concerns about maybe the 
standards. That would suggest to me serious questions about a 
process whereby we review not only what our responsibility is 
but how it's getting done. I would really like to have some 
more elaboration and discussion, at least with my staff, as we 
develop this record.
    General Herrling. I think I have tried to do exactly that 
since I came on board as Secretary; to really take a new look 
at how we're doing business, the personnel situation, our 
project listing and how we finance projects to see if we can't 
apply some real hard management principles to the processes.
    I am looking to the future. We're trying to come up with a 
long-range plan, a plan for the next five or ten years for 
those cemeteries, and a lot of this has just been started in 
the last year, Mr. Chairman.

 abmc management and leadershipI21General Woerner. May I add to that, 
                             Mr. Chairman?

    Mr. Lewis. Sure.
    General Woerner. The organization has always been very 
committed, but some of the people had an unusually long tenure 
and hadn't grown with new managerial techniques and skills. So 
while the heart was there, some of the talent was in short 
measure.
    There have been significant changes in the managerial side 
of the organization, not only with the Secretary but also with 
the Paris office, a new region director there, a new deputy 
region director, new engineer, and in our Washington office, a 
new executive director as well as a complete change over in our 
directors for finance, engineering and personnel/
administration. In addition we changed the director in our 
Mediterranean office and the superintendent at our Manila 
cemetery. So what I'm saying, sir, we now have the leadership 
aboard that are products of modern management techniques, 
rather than the dedicated men who learned their skills 30 or 40 
years ago.
    Mr. Lewis. I must say, General Woerner, and General 
Herrling as well, I appreciate your candor in connection with 
this discussion. But I have been on this committee for a number 
of years and this is the first time I have heard a discussion 
like this. It would appear to me that maybe there has been a 
need for this discussion some time ago. Even though your budget 
is a small budget, $20 million is a lot of money, and it is 
designed for a very important purpose. But if, one way or 
another, because of a lack of oversight on our part, there has 
been a lack of management skill to deliver the product at the 
other end, it deserves some questioning.
    Mrs. Meek.
    Mrs. Meek. Mr. Chairman, I have here questions that were 
submitted to me by your ranking member, and I would like to ask 
maybe two of them and comment on one.
    Mr. Lewis. You go right ahead and take all the time you 
want.

                         world war ii memorial

    Mrs. Meek. I will submit the rest for the record.
    First of all, I want to commend the staff of the Commission 
for being here. This being my first time, I didn't even know 
you existed until I became a member of this Committee. I am 
happy to know you and know that you're doing good work.
    I have been reading some of the material regarding the 
battle, regarding the World War II monument, and it has stirred 
a lot of controversy in terms of not so much the structure of 
it, the way it looks, and the rationale of it--it obviously has 
been very well received. But, on the other hand, the location 
of it has caused a big public outcry. I have been reading where 
even a member of the Senate has commented on it.
    I'm a community-based person and I would like to know what 
kind of process did you use to come about doing this. Was the 
public really involved in your decision making? Just what 
happened? Tell me a little bit about what happened in this 
process.
    General Woerner. I'll lead off, Mrs. Meek, and then turn it 
over to John.
    First, the short answer is it was a very public process, 
that we believe addressed it within the context of the best 
interest of the American people. Specifically, the procedure 
requires that we come up with a recommendation and process it 
through three Washington commissions: the Commission on Fine 
Arts, the Washington Planning Commission, and, in effect, the 
National Park Service.
    All of those three commissions, speaking for the American 
people, concurred that the selected site that has been 
dedicated by the President, is the most appropriate site in 
Washington, D.C. for this memorial.
    Furthermore, the opposition, in our analysis of the 
opposition, suggests that it is not widespread. Quite to the 
contrary, it is focused, specifically in Senator Kerrey's 
office, and in one particular editor of an architectural 
magazine. So it's from those two primary sources--and there's 
been others picking it up. But our sense is that we have an 
approved site, having worked it through the three wickets in 
Washington, that the American people say they want for this 
seminal monument in American history.
    John.
    General Herrling. It goes back to the Commemorative Works 
Act, Mrs. Meek, of 1986, which the Congress passed. It gave 
three bodies the responsibility to take a look at Washington 
and what was built here, particularly on the Mall. General 
Woerner just mentioned those three bodies.
    But they are entrusted to act in the public interest for 
anything that's built here in the City of Washington or on the 
Mall. So we had to seek their approval for the site that was 
finally selected. They gave us nine sites to look at. We looked 
at all nine and they were all evaluated based on their 
location, their prominence, their historical significance of 
World War II and other things. Those three commissions all 
agreed and approved the Rainbow Pool site as the right site.
    Now, we have received some controversy in the paper, but I 
would say we have also received considerable favorable reviews 
through personal correspondence to our office and through other 
means. I think what is printed in the Washington Post and other 
media tends to get the headlines, but it may not reflect the 
common view.
    Mrs. Meek. I asked that question, not so much as to how 
negative or positive your response has been, but in terms of 
the process, to be sure you did get public involvement. I've 
been in government a long time, so I know what ``public 
involvement'' means. So I just wanted to ask you that question 
to be sure you're also looking at reviewing that process 
whenever you do this, so that the process will sort of be 
ironclad. Because the American public probably goes much 
broader than those three commissions you spoke about. I mean, 
that Mall belongs to the people of this country. I don't have 
that strong a feeling about where it's located. It looks all 
right to me.
    But the General spoke about the American public, and that's 
a very vague term. I wish it was so that we meant the real 
public that enjoys that Mall and could have some involvement.
    Of course, the people----
    Mr. Lewis. Would you yield, Mrs. Meek?
    Mrs. Meek. Yes.
    Mr. Lewis. I think the point you're making is an important 
one. You and I both probably don't remember the controversy 
that swirled around--this was long before I had this kind of 
responsibility--swirled around the Vietnam Memorial, which was 
very, very controversial. Now it is the memorial that 
everybody, everybody wants to visit. Indeed, I hope we learned 
from that process, and I'm sure that we did.
    General Herrling. I think we did.
    General Woerner. Very definitely.
    Mrs. Meek. Because, man to man veterans were concerned at 
the time about that. So that's what I'm talking about, General, 
the process.

                             rental funding

    The second question I have is a budget question. It's 
something that the ranking member, Mr. Stokes, wanted asked. It 
has to do with budget decisions--I'm looking on page 13 of your 
Monument Commission. It's line item 23, rent, communications 
and utilities.
    First of all, you need $214,000 to pay for office space 
more than you had for last year, and you mention that it was 
free. His question is, what is this based on? Why did you get 
it at no cost at the beginning and why is it no longer 
available to you at no cost? He's looking for ``freebies'', 
General.
    General Herrling. We were, too. We were living on 
``freebies'' for many, many years. But we were under the wing 
of the U.S. Army Corps of Engineers. We are a tenant in the 
Corps of Engineers building at 20 Massachusetts Avenue. For 
years we were allowed to maintain our offices there at no cost. 
Then a review by the DOD and the Department of the Army lease 
noted this and they said no. It's time that you anted up and 
paid your fair share of the lease for that building. So that's 
why we are asking for the money this year for the first time.
    Mrs. Meek. So you're sort of looking at some other spaces?
    General Herrling. Yes, we are.
    Mrs. Meek. And that's why you're estimating $214,000?
    General Herrling. It is.

                      individual cemetery funding

    Mrs. Meek. The second question. You have a comparison of 
individual budgets for cemeteries on page 16. You have quite a 
few increases and decreases throughout this entire thing. The 
question is, can you tell us why the budget for Cambridge, 
which is the fifth item down, increases by 22 percent, and the 
budget for Epinal--and I may be mispronouncing that--increased 
by 28 percent, and why the budget for Argonne increased by 45 
percent? Can you sort of elaborate on those?
    Colonel Corea. I can say something on that.
    The reasons for the basic increases by cemetery are based 
on the projects that we're planning for 1998 in those 
particular cemeteries. The standard costs for a cemetery, from 
the labor to utilities and supplies and equipment, are fairly 
flat on a year-to-year basis.
    What you're seeing there shows the funding for projects, 
which end up being a part of the cost of a cemetery for that 
year. So that's why the numbers jump, and you'll see other 
numbers that go down proportionately because they don't have 
the same level of projects next year.
    Mrs. Meek. Explain to me what you mean by ``projects''?
    Colonel Corea. Engineering maintenance projects and 
construction projects----
    General Woerner. That's this new list, the revised list, 
which gives us the priority in which we want to address our 
backlog of maintenance and repairs. We can't do it all at once, 
so certain cemeteries, those most in critical need, are 
reflective in the pluses, and those that can be delayed further 
are reflected in the minuses.
    Mrs. Meek. Mr. Chairman, do I have time for one more?
    Mr. Lewis. Go right ahead.

              world war ii memorial fund raising and cost

    Mrs. Meek. You mentioned that all this will be private 
monies which you will have to raise. Is it going to be raised 
before site preparation and construction can begin? If it is, 
is there some kind of schedule that you're relying upon, and 
have you allowed for cost overruns which inevitably happen? If 
so, will you come back to this committee and ask for more 
money?
    I'm not the Chairman, so I can ask all these questions 
[Laughter.]
    Will you come back and ask for some more money if things 
don't work out the way you planned?
    General Woerner. Our best estimate is the $100 million mark 
that we now have. Congress told us that this is to be done by 
private contributions. So the Congress has not addressed cost 
overruns that we could come back on. We have to manage this 
memorial construction within the funds that we are able to 
raise.
    Mr. Lewis. Mrs. Meek, one more time, if you would yield on 
that, I understand that Senator Dole has agreed to take on this 
project, leading the effort. We know he will give his best 
effort. But it still is a lot of money.
    General Woerner. Yes, it is.

                 world war ii memorial--dedication date

    Mr. Lewis. Presuming they're successful, how long will it 
take you to build this memorial?
    General Woerner. Our mark on the wall, sir--and it's an 
ambitious one--is to dedicate the memorial in the year 2000. 
Very ambitious.
    Mr. Lewis. Thank you, Mrs. Meek.
    Mrs. Meek. Thank you.
    May I say something?
    Mr. Lewis. Sure.

                     world war ii memorial funding

    Mrs. Meek. Having been around in World War II, I would be 
very happy if the Chairman were benevolent enough to say today 
that he would see to it, if there's a cost overrun--and I'm 
saying this without tongue in cheek--that we would be willing 
in our minds to commit something to this.
    Mr. Lewis. I certainly hope that we wouldn't discuss that 
for the record at this point in time. [Laughter.]
    I would be happy to chat with you about it at some other 
time.
    Mrs. Meek. I had to do something to shake the Chairman up. 
[Laughter.]
    General Woerner. Mrs. Meek, thank you very, very much. 
[Laughter.]
    We have just made you an honorary member of the Commission.
    Mr. Lewis. Mr. Wicker.

                         world war ii memorial

    Mr. Wicker. Thank you, Mr. Chairman.
    Let me just say that Mr. Lewis and Mrs. Meek have been very 
thorough in the questions that they have asked, and I don't 
have many more. But let me comment about the World War II 
Memorial.
    I'm looking at the proposed design, and it really looks 
wonderful.
    General Woerner. Thank you, sir.
    Mr. Wicker. I notice in your testimony that you're actually 
hoping to have a dedication by Veterans' Day in the year 2000.
    My father is a World War II veteran. He just turned 73 on 
Monday, and he will be 76 on the proposed date of this 
dedication. I sure hope to have him there. Also, I appreciate 
the fact that Senator Dole has taken on this fundraising 
responsibility.
    You know, these men and women that fought for us in World 
War II are among a group of people who we owe a great debt to. 
By the same token, this country has been very, very good to 
them, including my father. I just don't think you're going to 
have too much trouble raising this $100 million from private 
sources. I think, once the word gets out, that generation of 
Americans will respond as they always have to a challenge. I 
think it will be a wonderful thing.

             world war ii memorial--design approval process

    Let me just ask a question about whether this design is a 
done deal. We've got the design jury that passed on this, and 
Miss Meek talked about the process. It has gone before the 
Commission, and the World War II Advisory Board made 
suggestions. But I note in an article from the Los Angeles 
Times that there are still a couple of hurdles. Am I correct 
there--
    General Herrling. Correct.
    Mr. Wicker. It's the Commission on Fine Arts and the 
National Capital Planning Commission. Where are we on that, 
General?
    General Woerner. In terms of the approval process, this 
design was recommended to the American Battle Monuments 
Commission by an evaluation board and a separate design jury, 
each operating in the blind of the other, unanimously. Their 
recommendation was unanimously recommended to us by the World 
War II Memorial Advisory Board, a presidential advisory board, 
and my Commission approved it unanimously.
    We now must run the wickets just as we did on the site; 
through the Commission of Fine Arts, the National Capital 
Planning Commission, the National Park Service--acting on 
behalf of the Secretary of the Itnerior. Each of those must----
    Mr. Wicker. Three wickets?
    General Woerner. Three wickets.
    Mr. Wicker. So where are we on that, General?
    General Woerner. Just about to start. Have the formal 
hearings been scheduled yet?
    General Herrling. They have. Our first hearing before the 
Commission of Fine Arts, Mr. Wicker, is on 19 June, and then 
the National Capital Planning Commission meeting is the 26th of 
June.
    Now, to go back to the question--is this design a ``done 
deal''. What we have now is a design concept. The design will 
change somewhat. But the basic design will stay the same. 
Already there's been some minor modifications to the design. 
But all these designs have to go before the three commissions, 
who will look at them in great detail, and then will probably 
tell us to go back and change this aspect of it or that aspect 
of it.
    This approval process by those commissions will take 
probably another 10 to 12 months, because it's an iterative 
process. You go in with the preliminary design and they say it 
looks fine. You're going to have to change this and that. Then 
you go back with a more advanced design and they'll review that 
and comment on it. AT some point, you'll go back in for a final 
design review, when you've got it all put together, and then 
they'll make a final judgment on the design. So the entire 
process takes nine, ten, sometimes twelve months.
    General Woerner. But each time one of those review 
commissions makes changes, you have to get their 
recommendations through the other two.
    General Herrling. There's an interesting aspect to the 
process. You mentioned your father, who is 73. We received a 
letter from a World War II veteran and he said, ``General, it 
only took us three-and-a-half years to win this war. Why is it 
going to take you seven-and-a-half years to build a memorial?''
    Mr. Wicker. How long did it take to build the Pentagon?
    General Herrling. Eighteen months.
    General Woerner. Eighteen months.

                      world war ii memorial--site

    Mr. Wicker. The location, in your view, has been finally 
decided?
    General Woerner. Yes.
    Mr. Wicker. That issue is past.
    General Woerner. The President has dedicated the site and 
there's a marker on it, yes, sir.

                world war ii memorial--design approvals

    Mr. Wicker. What are the preliminary reactions you're 
getting from the Commission of Fine Arts, the Park Service, and 
the National Capital Planning Commission about the design?
    General Herrling. Very positive. We gave all three a 
preliminary look at the design before we had the official 
unveiling in the White House. We wanted to do that to preclude 
embarrassment later on, if one of those commissions did not 
agree with it.
    But the National Park Service said it's a very good design. 
The Commission of Fine Arts and J. Carter Brown thought it was 
a design with great promise, as did the National Capital 
Planning Commission. Harvey Gantt also felt that it was a very 
good design.
    Now, that doesn't mean it's going to be smooth sailing. 
There will be a lot of comments from the members of those 
commissions, and a lot of modifications, as we go through this 
process.
    Mr. Wicker. It would seem to me that, once it all gets 
finally set, then the money will start pouring in more quickly. 
I would imagine it's hard to raise money for something that 
you're not quite sure what it's going to look like.

              world war ii memorial--fund raising sources

    Mr. Lewis. If the gentleman would yield, in connection with 
that, how long one can really wait to have precise detail 
before you begin selling the design is problematical. Before we 
can break ground and meet that target date that we want your 
father at, we have to raise the money. That gives us a little 
over a year, is that right?
    General Woerner. Yes, sir. We are raising the money right 
now. We have initiated that and the first direct mail requests 
are in the mail. Senator Dole is aboard. We hope to fill out 
the volunteer organization and to pair up Senator Dole with a 
co-chairman from corporate America. In fact, John is meeting 
with the Senator this afternoon.
    Mr. Lewis. Let me suggest, if you would continue to yield--
    Mr. Wicker. I yield back.
    Mr. Lewis. I would suggest to you that it's very important 
that the veterans' service organizations be plugged into this.
    General Woerner. Sure.
    Mr. Lewis. I'm sure they're beginning to. But there are 
ways that this committee can help with that sale, if you will, 
or the Veterans Committee--I'm sure that Bob Stump and the 
ranking member would be willing to participate.
    General Woerner. Wonderful.
    Mr. Lewis. Maybe starting right here in D.C. But clearly in 
places like Texas and California and otherwise, and in 
Florida--
    Mrs. Meek. Yes.
    General Woerner. We consider all the veterans' 
organizations absolutely crucial to the efforts. I appreciate 
the offer.
    Mr. Lewis. The sooner they're motivated to be out there, 
the better. I presume they may be doing that.
    General Woerner. Yes, sir. They are.
    Mr. Lewis. It's possible that members of both bodies might 
be willing to participate in helping promote their interests.
    General Woerner. Thank you, sir.
    Colonel Kelley. Let me mention, sir, that tomorrow I'm 
going to meet with the American Legion leadership--
    Mr. Lewis. You have to identify yourself.
    Colonel Kelley. I am Colonel Kelley. I'm the project 
officer for the World War II Memorial.
    We have a meeting tomorrow in Indianapolis with the 
leadership of the American Legion, who is backing us. They have 
agreed, at least tentatively, and we're working out the details 
of how they will help, and we're doing the same thing with the 
VFW. We will get to the other organizations as we go along, 
yes, sir.
    Mr. Lewis. Thank you.
    Mrs. Meek.
    Mrs. Meek. This question is for Colonel Kelley.
    In my community we have very large Memorial Day 
celebrations and that kind of thing. You haven't come to that 
stage yet where you're asking for public contributions, have 
you? If so, a rendering of this entire thing would help, if it 
were big enough, on Memorial Day. Like North Miami has a very 
large one, in which I participate, and a rendering of this 
later on, if you can get started, would help in that particular 
area for fund-raising.
    I know you're thinking about that. But always remember that 
you have congressional offices that are very much interested, 
particularly when you have someone who was around in World War 
II. We're trying to help as best we can. So you can utilize us, 
and I'm sure all the other Congresspeople would be interested 
in this as well. You would be surprised at how anxious we are 
to help in these kinds of things.

               world war ii memorial--program management

    My second question is, who is running this project? Is that 
you, Colonel Kelley?
    Colonel Kelley. General Woerner is running this. 
[Laughter.]
    Mrs. Meek. Okay. General, not being in the service, let me 
ask this question. Do you think you can manage a project this 
big?
    General Woerner. Without a doubt.
    Mrs. Meek. With your resources?
    General Woerner. Without a doubt.
    Mrs. Meek. Without a doubt.
    General Woerner. That's right. We have, in addition to the 
gentlemen sitting at this table, augmented our staff that is to 
address the issue of fundraising. We are confident that we have 
the professionals, the paid staff aboard. What we haven't 
completely put together yet is the voluntary network. That's 
the subject of this afternoon's conversation.
    Mrs. Meek. Thank you.
    General Herrling. Mrs. Meek, I would add that we are in 
preparation of a book that we will send to each Congressman and 
Congresswoman and Senator on the World War II Memorial project. 
I am hoping to have those books signed by Representative Marcy 
Kaptur, who introduced the legislation, and Senator Stevens. 
But it will provide you with a little more detail on the World 
War II Memorial.
    Mrs. Meek. Thank you.

                           Accounting Systems

    Mr. Lewis. A couple more questions briefly. This can really 
be answered for the record, but I want you to know that I'm 
interested and the fact that your budget request of $300,000 to 
fund a new comprehensive accounting system has come to our 
attention.
    There are other agencies of government that have requested 
funding for redoing their computer accounting systems that 
haven't done so well. I hope that your review and development 
of a system will be better than the IRS has proven to be. You 
might want to respond to those questions that are specific, not 
that part of it, but those questions for the record.

                        State Department Funding

    Mr. Lewis. The administration recently sent up a budget 
amendment that proposes to transfer $210,000 to ABMC in 1998 
from State Department funds for the cost of overseas operations 
at embassies. In subsequent years, such cots would be included 
in ABMC's budget.
    Do you know how this cost for ABMC's overseas operations 
was determined, and if so, explain.
    Colonel Corea. Yes, sir. It was determined by the levels of 
support that the State Department provides us in Rome, Paris, 
Mexico City, Bangkok, and a number of places.
    The new State Department system is called ICASS which 
stands for ``International Cooperative Administrative Support 
Services. It's where state is supporting our administrative 
functions, payroll functions and those kinds of requirements.
    The idea with all of this is that a lot of costs in the 
past have been borne by the State Department.
    Mr. Lewis. Kind of like the rental costs.
    Colonel Corea. Yes. But this is throughout the government. 
As you know, we're just one small agency on a list of many 
agencies that are overseas, where the State Department provides 
support.
    So that $210,000 will come to us and then we will end up 
paying it back to the State Department for their services.
    Mr. Lewis. The question, really, though, is have you 
evaluated how they determined that $210,000?
    Colonel Corea. Yes, sir. There has been long meetings with 
our staff in both our regional offices, as well as in Manila. 
They have gone through all the pieces of it, and there has been 
a lot of discussion as to what is provided us, what is not 
provided us, how it's factored, and how they're counting the 
support provided to ABMC. We're satisfied that the $210,000, 
after all of that, is going to be appropriate.
    Mr. Lewis. Okay. I think you may know that funding for the 
State Department generally, from time to time, becomes 
controversial around here. If it is suggested on the floor 
that, one way or another, they're increasing their budget by 
the back dooring of all kinds of other activities, including 
your own, it could become controversial.
    You're satisfied, though, that this is----
    Colonel Corea. We're satisfied with the $210,000. The idea 
is that that money is going to come from their--
    Mr. Lewis. I understand.
    At any rate, we very much appreciate your presence today, 
and we do appreciate the work that you're about. Indeed, the 
Committee does want to be of assistance in the project we have 
discussed in some detail today. Thank you.
    General Woerner. Thank you very much, Mr. Chairman.
    [The information follows; see budget justification at end 
of volume.]

[Pages 412 - 414--The official Committee record contains additional material here.]


                                         Wednesday, April 10, 1997.

                       CEMETERIAL EXPENSES, ARMY

                                WITNESS

 H. MARTIN LANCASTER, ASSISTANT SECRETARY OF THE ARMY, CIVIL WORKS
STEVEN DOLA, DEPUTY ASSISTANT SECRETARY, OFFICE OF MANAGEMENT AND 
    BUDGET, OFFICE OF THE ASSISTANT SECRETARY OF THE ARMY
JOHN C. METZLER, JR., SUPERINTENDENT, ARLINGTON NATIONAL CEMETERY
RORY SMITH, BUDGET OFFICER, ARLINGTON NATIONAL CEMETERY

                              Introduction

    Mr. Lewis. It is my pleasure to welcome to discuss with us 
the Army cemetery expenses, Mr. Martin Lancaster, our colleague 
and friend. Welcome
    Mr. Lancaster. Thank you, Mr. Chairman and Congresswoman 
Meek.
    Mrs. Meek. Good to see you.
    Mr. Lewis. Your entire statement, as you are familiar, will 
be included in the record, and you can proceed as you like. 
While we will have a limited number of questions, we may have 
others for the record as well.
    Mr. Lancaster. I will summarize my remarks and would 
request that the full statement be included, and I do 
appreciate the opportunity to testify this morning in support 
of the 1998 fiscal year budget for Arlington National Cemetery 
and the Soldiers and Airmen's Home National Cemetery.
    The superintendent, Mr. Metzler, and Mr. Rory Smith, who is 
budget officer, are with me from Arlington, as well as my 
deputy, Steve Dola. They will be available to respond to 
questions that I may not be able to answer myself.

                        Fiscal Year 1998 Request

    The request for fiscal year 1998 is $11,815,000. This 
amount will finance operations at both of the cemeteries and 
supports the work force, will assure maintenance of the 
buildings and grounds, and will permit the superintendent to 
acquire necessary supplies and equipment.

                         Construction Projects

    Major new construction projects proposed for 1998 include 
replacement of the historic Custis Walk which is approximately 
2,500-feet long and is about 75 percent affected by heaving and 
cracking, which requires visitors to exercise additional care 
and represents a true safety hazard on the grounds of the 
cemetery.
    Also, access roads at the Columbarium complex will be 
constructed which will allow full use of the new courts 
currently under construction.

                      Government-Wide Streamlining

    Additionally, $200,000 is being applied to further expand 
contracts that enhance the appearance of the cemetery while 
implementing Government-wide streamlining plans and staff 
reductions.
    Our total personnel strength is declining from 128 
authorized in fiscal year 1996 to 121 in 1997 to 117 for 1998. 
However, at the same time, we plan to perform the same work 
contractually that was previously performed by civil service 
personnel, and we have directed those contractors to take on 
additional tasks that need to be accomplished.
    Ground maintenance, tree and shrub maintenance, custodial 
services, guide services and informational receptions, and 
headstone setting, realignment, and cleaning are all major 
functions now performed by contract personnel.

                             Three Programs

    The $11,815,000 requested are divided into three programs, 
operations and maintenance, administration, and construction. 
The O&M program, totalling $8,779,000, will provide for the 
cost of daily operations necessary to support an average of 20 
inurnments or interments per day and for maintenance of 
approximately 628 acres. This program supports 111 of the 117 
full-time permanent positions.
    The administration program, $599,000, provides for 
essential maintenance and administrative functions to include 
staff supervision of Arlington and Soldiers and Airmen's Home 
National Cemeteries.
    The construction program, $2,437,000, provides $1,175,000 
to replace the Custis Walk, $810,000 to construct the access 
roads to the Columbarium, both of which I mentioned earlier, 
and $350,000 to continue the grave-liner program and other 
minor items.
    In fiscal year 1996, there were 3,325 interments, 1,733 
inurnments. 3,500 interments and 1,900 inurnments are estimated 
for both fiscal years 1997 and 1998.

                              Columbarium

    The 11,286 niche capacity of the Columbarium Phase III 
currently under construction will bring the total niches in the 
Columbarium complex to 31,286. Phase I, completed in 1984, and 
Phase II, completed in 1991, each provided 10,000 niches.
    The North Court will be completed in October of this year, 
and the South Court will be completed in June of next year. At 
this time, there remain only about 2,000 niches in Phase II. So 
we are right on schedule to complete the new construction as 
they exist and capacity is completed.
    We appreciate your support for the Columbarium effort 
because the inurnment of remains is increasingly popular at the 
National Cemetery and has taken up much of the slack that would 
be otherwise existent as we run out of space for interments.
    Arlington National Cemetery is the Nation's principal 
shrine to honor the men and women who served in the armed 
forces. In addition to the thousands of funerals with military 
honors held there each year, hundreds of other ceremonies are 
conducted to honor those who rest in the cemetery and those who 
served, and we appreciate the strong support that this 
Committee has given through the years in maintaining the 
Arlington Cemetery as the premiere place in the country where 
we honor those who served and, more importantly, those who paid 
the supreme sacrifice.
    That completes my testimony, Mr. Chairman, but we will be 
happy to respond to questions.
    [The statement of Mr. Lancaster follows:]

[Pages 418 - 440--The official Committee record contains additional material here.]


                               Contracts

    Mr. Lewis. Thank you, Mr. Lancaster. You state very clearly 
and very well the importance of the Arlington National Cemetery 
and the way it is, if you will, used by the Congress as well as 
the public-at-large.
    Your statement indicates an increase of $200,000 being 
requested for contracts to enhance the appearance at Arlington. 
Does that increase totally offset the proposed reduction for 
FTE 1998?
    Mr. Lancaster. If you don't mind, I will yield to Mr. 
Metzler to answer that kind of specific question.
    Mr. Metzler. Yes, Mr. Chairman, it does, and it also 
provides us an opportunity to do some more work in the Cemetery 
and enhance the appearance of the Cemetery.
    We are undertaking some new contracts in fiscal year 1997, 
headstone cleaning, and we are also undertaking an increase in 
that number in 1998. So that is going to be a benefit to us.
    Mr. Lewis. Extending that a little bit, Mr. Metzler, that 
would suggest that you still believe that contracting out for 
these services is less expensive than having the work done by 
civil servants?
    Mr. Metzler. In the repetitive work area, yes, it is, and 
it is working to our advantage at this point, and we are happy 
with the results we get.

                             Response Time

    Mr. Lewis. As I understand it, in some instances, it takes 
more than one week, sometimes more than a month from the 
notification of the desire for burial at Arlington until the 
actual interment. Is that right?
    Mr. Metzler. It depends on what the family is requesting 
and the availability of the services at the cemetery. It is a 
difficult question to answer in each case, but I could give you 
a couple of examples.
    The military who provides us honors at the Cemetery are not 
always available each day. As an example, this morning, we had 
the Prime Minister of Canada visiting the cemetery in an 
official capacity. When that happens, then the Air Force and 
the Navy ceremonial troops are tied up for that period of time. 
Often times, we have other elements that are not available. The 
chaplains, the Chapel Service itself has been committed for 
from someone else.
    So, if someone is asking for a specific date, a specific 
time, and a specific military support, it may not be available 
for a week, and sometimes it may take 2 weeks to get that 
available.
    Mr. Lewis. The Committee is interested in knowing how often 
this kind of difficulty occurs where you may have as much as a 
month delay, and that which you describe kind of touches on the 
edges of the difficulties you have with such scheduling. So we 
would like to have you elaborate on some of that for the 
record.
    Mr. Metzler. I would be more than happy to provide you with 
some more information.

                           Scheduling Delays

    Arlington National Cemetery currently averages 20 funeral 
services daily, Monday through Friday. Each service involves 
staff members of Arlington National Cemetery and the Chaplain's 
Office. Some services may involve military personnel from one 
or all branches of service, some may require the scheduling of 
the Fort Myer Chapel, and some may require the use of a 
caisson. Scheduling a funeral service requires consideration of 
the date and time the family requests a service, the level of 
honors authorized the deceased, the availability of military 
personnel, the religious denomination of the deceased and 
availability of a chaplain of the same denomination or the Fort 
Myer Chapel. To prevent one funeral service from interfering 
with another while coordinating all the above potential 
participants creates delays in scheduling, especially if the 
family insists on specific honors or two of day that the 
service is to be conducted, or there is a conflict in the 
availability of military support staff. The military support 
staff all have other ceremonial obligations outside of 
Arlington National Cemetery, there are only two caissons 
available and the Fort Myer Chapel is limited to six services a 
day. A one week delay in scheduling funerals, therefore, is not 
an uncommon occurrence. A one month delay, on the other hand, 
does not occur.

                            columbarium cost

    Mr. Lewis. Last year, Mr. Lancaster, it was estimated that 
the cost of the Columbarium project would be $7.7 million. You 
recently awarded the construction contract, the second part of 
the project. Is $7.7 million still the estimated cost of the 
project?
    Mr. Lancaster. Actually, the total estimated cost of the 
project is currently $7.4 million, as I recall. So it actually 
is under the estimate, which we were pleased to have happen.
    Mr. Lewis. Does that dollar amount include the $810,000 
requested?
    Mr. Lancaster. No, sir, it does not.
    Mr. Lewis. It does not.
    Mr. Lancaster. The construction of the two Columbarium 
courts and the associated roads make up the $7.4 million 
estimate; however, the $810,000 for roads is part of the fiscal 
year 1998 request.
    Mr. Lewis. What would happen with that roughly $400,000 of 
savings?
    Mr. Metzler. We have several areas that we are looking at 
with potential use of that savings. One is to reimburse a 
settlement claim that we had with the contractor, $98,000, and 
the others----
    Mr. Lewis. Excuse me. I hope that contractor is not the 
same one that was just awarded this more recent contract.
    Mr. Lancaster. This was the maintenance contract.
    Mr. Metzler. This was the grounds maintenance contract, and 
he is long gone.
    Another part of it would be to pay for repair of a broken 
storm sewer line in Section 33, and another possible use would 
be to fund the completion of the new master plan.

                              master plan

    Mr. Lewis. I understand the new master plan is currently 
under review. When will that master plan be available? Two 
years ago, we had an estimate of January 1996.
    Mr. Lancaster. We are prepared--in fact, you should have 
received by now a letter from me, Mr. Chairman, offering to 
come over and brief you on the master plan, and we are 
available to do that at your convenience either collectively as 
a Subcommittee or one by one to the members who are interested.
    We hope that by mid-summer, having completed the briefings 
and completed the incorporation into the master plan of the 
comments that we are hearing during the comment period, to have 
completed that master plan.
    Mr. Lewis. It is my understanding you have that letter, 
Martin. So we will be communicating.
    Mr. Lancaster. That is right.

                           project management

    Mr. Lewis. In the area of cost overruns, it is suggested 
that the Corps of Engineers--where we are talking about cost 
overruns on some construction project, it is suggested that the 
Corps of Engineers district manager. It was suggested that the 
Corps might manage some of those projects.
    The recently completed McClellan Gate Restoration Project 
was managed by the Seattle District.
    Mr. Lancaster. Yes, sir, that is correct.
    Mr. Lewis. What is your view about having the Corps manage 
these projects?
    Mr. Lancaster. We have traditionally managed the contracts 
for Arlington. So I don't think that is a change.
    What is a change is going to the Corps district that has 
the expertise for doing the project instead of simply depending 
on the Baltimore District in which Arlington Cemetery finds 
itself physically located.
    The historic preservation expertise is in the Portland 
District--I mean, the Seattle District, which did the McClellan 
Gate Restoration.
    The Custis Walk, we are actually using the Norfolk District 
instead of Baltimore.
    So it really is our trying to manage the expertise of the 
Corps to get the best service available to Arlington that they 
can possibly have. I don't believe, but I will let Mr. Metzler 
speak to this--I don't believe the fact that the district was 
in Seattle created any management problems in the completion of 
that work, nor has the design work for the Custis Walk being in 
Norfolk created any problems, but I will let Mr. Metzler speak 
to that.
    Mr. Lewis. Was it right below, for example, the $660,000?
    Mr. Metzler. The project was, and as a matter of fact, I 
think one of the advantages we had is it offered some 
competition within the Corps of Engineers, as we offered these 
projects out to the different districts, and we have been 
satisfied with the results that we have had at this point.
    Mr. Lancaster. The McClellan Gate came in, I think, under 
significantly and, in fact, allowed us to do some things with 
that restoration that would not have been otherwise possible.

                              grave liners

    Mr. Lewis. We may have some additional questions in 
connection with that, the Norfolk area that you mentioned, the 
Curtis Walk question.
    The justification indicates that the cost of grave liners 
in 1998 will increase by $40,000 to $350,000.
    Mr. Lancaster. I believe, but again, I will let Mr. Metzler 
amplify on this--I believe that that is not an increase in the 
cost of grave liners, but rather, an increase in the use of 
grave liners by families.
    In the past, families were buying vaults at their own 
expense, but the trend in recent years has been that these 
concrete grave liners are every bit as effective, and they are 
provided free of charge. So families are increasingly using 
that which is made available as opposed to purchasing upgrades, 
as it were. As a result, that has increased our cost because 
this is a service that has always been offered free of charge 
to the veteran.
    Mr. Lewis. You have provided me a new understanding of 
grave liners.
    Mr. Lancaster. Yes.
    Mr. Lewis. Mrs. Meek?
    Mrs. Meek. Mr. Chairman, I have some questions to submit to 
the record for Mr. Stokes, but first of all, I would like to 
welcome Martin Lancaster. I am happy to see you and your staff 
here today.
    Mr. Lancaster. Thank you.

                             visitor study

    Mrs. Meek. According to your report here, you mentioned 
that during the fiscal year 1996, you accommodated 
approximately 4 million visitors, but you also asked for 
$35,000 for a study which you want to develop a procedure, 
which you would normally continue to use after that.
    My question is, what procedure are you using now? You were 
able to predict or to show that you had 4,000,000 or more 
visitors there. What procedure are you using now? If you do get 
the $35,000, what kind of changes do you envision as a result 
of this way of estimating this? Do you think it will have any 
impact on your operations there?
    Mr. Metzler. The procedure that we are using right now is 
we are counting the number of visitors who enter the cemetery 
either by the Metro system, through the Tour Mobile system, the 
number of funerals that we do per year, and then we are using a 
multiplier and then the same thing for the people who pay or 
park in our pay parking lot.
    The number of 4 million visitors is an estimate. What this 
study hopes to do is to validate the number and give us a more 
factual accounting of the number of visitors that we have at 
the cemetery. Since we provide this number not only to this 
Committee, but to other Committees and other people who ask 
that question, we want to have a more accurate count.
    Mrs. Meek. So what will $35,000 do?
    Mr. Metzler. It will have an independent study performed at 
Arlington Cemetery to validate how many visitors are touring 
the grounds each year.
    Mrs. Meek. All right. Thank you.
    Mr. Metzler. Yes, ma'am.
    Mr. Lewis. Mr. Price?
    Mrs. Meek. I have others, but there are more people here. 
Let's give them a chance.

                           non-funeral events

    Mr. Price. Thank you, Mr. Chairman. I also want to add my 
welcome to our good friend, Martin Lancaster, and his 
colleagues here today.
    I think the budget justifications really cover most of the 
ground. I am struck by the number of events, though, that you 
are hosting and the kind of requirements that that presents in 
terms of personnel operations. You estimate 2,700 non-funeral 
events in these national cemeteries. Now, is that Arlington 
plus----
    Mr. Lancaster. It is primarily Arlington. I think very 
seldom are there ceremonies at the Soldiers' and Airmen's Home 
Cemetery.
    Mr. Price. What is the nature of these 2,700 events? What 
kind of range of ceremonies are we talking about?
    Mr. Lancaster. Well, everything from events such as today 
when the Prime Minister of Canada visited, and generally, we 
will lay a wreath at the Tomb of the Unknown, to military units 
that may have a memorial site on the cemetery that will come 
back on the anniversary of some event. It is a wide range of 
events that are unrelated to funeral services, but generally 
commemorate some military-related event in history or a 
ceremonial visit by a distinguished visitor.
    Mr. Price. You are hosting an average of six or seven such 
events a day.
    Mr. Metzler. This time of year, we are doing more like 15 
or 20 a day. The children or the school groups that are in the 
halls here at the Capitol also work their way over to the 
cemetery, and part of their tour of the grounds of the cemetery 
is to lay a wreath at the Tomb of the Unknown Soldier in most 
cases.
    A lot of those 2,700 events are the school groups in town. 
We probably do another 100 to 300 events that are more intense 
with military units and heads-of-state visits and things of 
this nature.

                         international visitors

    Mr. Price. Do you have any way of estimating your level of 
international, numbers of international visitors, and what kind 
of special efforts to you make to accommodate international 
visitors? For example, how many languages are your brochures 
printed in? Are foreign languages accommodated in your tours, 
that sort of thing?
    Mr. Metzler. They are not. We do not have the means right 
now to provide any multi-language services to our international 
visitors. To answer the first part of your question, I really 
don't have a handle on how many foreign visitors and the 
different languages they represent come to the cemetery.
    Within the book store that is co-located at our Visitors 
Center, we do offer some materials in multiple languages that 
are the more popular, Japanese, Spanish, languages that will 
sell, but beyond that, the signage, the people that are doing 
the tours in the cemetery, it is strictly done in English.
    Mr. Price. Thank you very much.
    Mr. Lewis. Thank you, Mr. Price.
    It is my privilege to recognize my colleague, Mr. Hobson. 
He came just to say hello, Martin.
    Mr. Hobson. Yes, I did. Nice to see you, Martin.
    Mr. Lancaster. Nice to see you.

                                 rents

    Mr. Hobson. Glad to have you back.
    I have two questions which I will submit for the record. 
One of them I ask everybody, and that is about rents.
    Mr. Lancaster. Rents?
    Mr. Hobson. You have some rents, and they have gone down, 
and then they are going back up. So, at some point, could you 
respond?
    Mr. Lewis. Please respond for the record, not now.
    Mr. Hobson. Not now, not now. So I won't hold you up, but 
welcome and good luck.
    Mr. Lancaster. Thank you. Thank you.

                                closing

    Mr. Lewis. Mr. Lancaster, let me mention that Mr. Stokes 
did want to be here. He has a conflict with another Committee 
that relates to the Ethics Committee work. I would like with 
the Committee's permission to include that explanation at the 
beginning of each of our other two hearings, which I meant to 
do earlier as well, but in the meantime, we appreciate your 
appearance, look forward to working with you, and our meeting 
is adjourned.

[Page 447--The official Committee record contains additional material here.]


                                            Wednesday, May 7, 1997.

                      CONSUMER INFORMATION CENTER

                               WITNESSES

TERESA NASIF, DIRECTOR, CONSUMER INFORMATION CENTER
BETH NEWBURGER, ASSOCIATE ADMINISTRATOR FOR PUBLIC AFFAIRS, U.S. 
    GENERAL SERVICES ADMINISTRATION

                 Welcome to Consumer Information Center

    Mr. Lewis. Our next witness I am pleased to welcome is 
Teresa Nasif, Director of the Consumer Information Center.
    Ms. Nasif, welcome back to the Committee.
    Ms. Nasif. Thank you.
    Mr. Lewis. If you'd like to summarize your statement, we 
will include your entire prepared statement in the record, and 
in the meantime the agency's 1997 appropriations involve 21 
FTEs, a total of $2.26 million. The request for 1998 is an 
identical number of FTEs, and $2.119 million of budget 
authority requested.
    So if you'll proceed as you like, we'll go on with 
questions from there.
    Ms. Nasif. Thank you very much, Mr. Chairman, and Members 
of the Subcommittee. Thank you for the opportunity to present 
the fiscal year 1998 budget for the Consumer Information 
Center.
    With me today is Beth Newburger, Associate Administrator 
for Public Affairs, U.S. General Services Administration.
    Mr. Lewis. Welcome, Ms. Newburger.
    Ms. Newburger. Thank you very much, Mr. Chairman.

                           Opening Statement

    Ms. Nasif. Established more than a quarter of a century 
ago, the Consumer Information Center successfully continues to 
carry out its vital mission mandate of helping Federal 
departments and agencies inform the public about health and 
safety issues, developments in Federal programs, and the impact 
and effects of Federal research and regulatory actions.
    Today many elements of the CIC program remain the same: an 
essential mission mandate, a commitment to serve the American 
public, and the firm support of the Administration and this 
Committee.
    However, the CIC program is going through a time of change 
that reflects a new environment in government and in customer 
behavior. Overall, Federal agencies have reduced the scope of 
their publishing activities due to budget constraints, and the 
American public is placing fewer orders for merchandise, 
including information, by mail.
    CIC is meeting these challenges in two ways: first, we have 
redoubled efforts to identify private sector partners who share 
Federal information goals, and who can provide resources to 
stretch limited Federal dollars. And, second, CIC has set up 
telephone ordering systems for both the Consumer Information 
Catalog and its list of publications.
    In partnership with GSA's Federal Information Center 
program, we have implemented a toll-free number, 1-888-PUEBLO, 
for citizens to call to receive a free copy of the catalog.
    Also I'm pleased to report that beginning with the Spring 
1997 edition, all copies of our catalog will include a 
telephone number for placing publication orders at the Pueblo 
facility.
    Citizens pay for these calls, thereby sharing in the 
expense of the program. Making access easier and quicker will 
encourage more Americans to take advantage of the wealth of 
information available from the Federal Government.
    CIC remains in the forefront of Federal electronic 
dissemination, as more and more schools, libraries, and 
families are accessing information through the Internet. The 
public will access the CIC Website more than 3 million times in 
fiscal year 1997, a threefold increase since its inception in 
fiscal year 1995.
    While Americans can now access CIC either electronically or 
by ordering by phone, our address, Pueblo, Colorado, 81009, 
remains one of the best known addresses in the country, where 
Americans order millions of publications published by more than 
40 Federal departments and agencies.
    The Government Printing Office facility in Pueblo provides 
order fulfillment services for tens of thousands of orders 
received weekly as a result of the promotions done by the CIC. 
During fiscal year 1996, consumers ordered 7 million 
publications from Pueblo. In the years ahead, we will continue 
to make helpful information available to all citizens, whether 
they are seeking it by computer or by mail.
    We're very committed to maintaining a vigorous publication 
distribution program in recognition of the fact that most 
Americans still continue to receive their information through 
traditional print channels.
    Our ongoing efforts to identify and obtain valuable Federal 
information, our media and marketing programs, our centralized 
distribution system, and our widely acclaimed electronic 
information activities all combine to make CIC an essential 
source for citizens needing vital consumer information from 
their Federal Government.
    Mr. Chairman, we trust the committee will agree that CIC is 
a valuable Federal program, and that it will look favorably 
upon our request. I'd be pleased to answer any questions you 
have at this time.
    [The statement of Ms. Nasif follows:]

[Pages 451 - 454--The official Committee record contains additional material here.]


                       questions from mr. stokes

    Mr. Lewis. Thank you very much. Mr. Stokes, do you have any 
introductory comments or questions?
    Mr. Stokes. Yes, thank you, Mr. Chairman. I have a couple 
of questions here.

                            internet access

    Ms. Nasif, during last year's hearing we discussed the 
expanding use of the Internet and the Center's activities, as 
well as the fact that a majority of the population, and my 
guess is it's a considerable majority of the people, contacting 
the Consumer Information Center do not have access to the 
Internet.
    You alluded that it is a problem, but also CIC is 
maintaining the print distribution network, even as electronic 
dissemination becomes more prevalent.
    With another year's experience on the Internet, tell us how 
your operations have changed? For instance, how many hits do 
you get on your Website? How has the number of print 
publications changed?
    Ms. Nasif. This year we have seen progress in both the 
print publication area and in our electronic dissemination 
activities. On the Internet side, we are expanding. When we 
started the site in 1995, we had 1 million accesses that first 
year.
    Then in 1996, that increased to more than 2 million 
accesses. In 1997 we probably will exceed 3 million.
    We think that the Internet is getting more popular for a 
variety of reasons. We have a very good site. It has valuable 
information not easily available anywhere, it's user friendly, 
it's easy to navigate, and it's possible to search by topic.
    But the other thing that is happening is that the number of 
American homes with computers is increasing. In one study, the 
number of American homes having access to the internet in 1996 
increased from 4 million to 11 million.
    It's the administration's goal to see that every school in 
our country has Internet access, and I know it's expanding in 
libraries across the country, as well.
    Now, with the advent of the ability of consumers to buy a 
Web Box, you don't even need a computer to access the Internet. 
It's possible through a purchase of one of these devices to 
also be part of the information highway.

                      distribution of publications

    But we see the Internet as something that will continue to 
be an enhancement, and complementary to our print program which 
is still the main part of the Consumer Information Center.
    As I mentioned, during last year we distributed 7 million 
publications, and we're continually trying to get the message 
out that the information is available from Pueblo by print or 
by computer, and we have instituted some innovations like the 
telephone ordering systems, because we're finding that for 
whatever reason, Americans are more attuned to picking up the 
phone and ordering something by phone than they are to sending 
away for the information by mail.
    Mr. Stokes. You're committed to continue the print 
dissemination process?
    Ms. Nasif. Absolutely. We absolutely are committed to it, 
and we do everything we can to keep ahead of the curve in terms 
of motivating the public, informing them that the information 
is available, and encouraging Federal agencies not to give up 
on their print program.
    It's a tough decision for Federal agencies. Because of the 
budget constraints that they're facing, they're tempted to go 
all electronic and not to bother printing the product.
    And the point we make to them is that you must have the 
printed product, because that's what enables you to promote it 
to the media, and for those people who don't have access--which 
is still a large percentage, a major percentage of Americans in 
this country--it's important to have a print product available.

                          a two-tiered system

    Mr. Stokes. Let me ask you this: Although some print 
publications of the CIC are distributed without charge, there's 
a fee associated with many of the publications.
    Alternatively, most people with access to the Internet can 
download printed copies at little or no cost to themselves. 
Aren't we at risk of creating a two-tiered system here, where 
in general those most able to pay for the information wind up 
not paying, and those possibly most in need and less able to 
pay wind up paying more? Does this disturb you?
    Ms. Nasif. It's a difficult question. We initially looked 
at the Internet site as possibly a method of generating revenue 
for the program, and what we realized is that, number one, 
there is no Federal site that charges for its use at this time.
    And it would probably serve to countermand our mission 
mandate of getting information to the public by our trying to 
put a charge for consumers using this site and coming on to the 
site. So it's a difficult question.
    But right now, it's true, that you can download any of the 
information from our Website at no charge. But I would like to 
point out that as far as the publications that we offer in 
print form, about 50 percent are free, and a good number of the 
sales publications are only 50 cents, so that more than 80 
percent of the titles are either free or 50 cents.
    So the publications are available at very moderate cost. 
Also, because of our marketing and our media activities, a lot 
of the information is put out through the media. So someone 
doesn't really have to order a book from Pueblo, or even get on 
our Website. We have a very aggressive program to get 
information out through newspapers and magazines. And we do 
press releases, and keep in touch with the media to make sure 
that they highlight and disseminate that information to the 
public.

                         cost for publications

    Mr. Stokes. What is the highest cost of your publications?
    Ms. Nasif. With the exception of a couple of subscriptions, 
the highest cost one listed in the spring catalog is $3.25. And 
that is one from the Department of Veterans Affairs on benefit 
programs.
     GPO sets the prices for the sales publications. But more 
than 80 percent are free or 50 cents.
    Mr. Stokes. Thank you, Mr. Chairman.

                        questions for the record

    Mr. Lewis. Thank you, Mr. Stokes. Just a couple of 
questions, and then we have a number of questions for the 
record as well, Ms. Nasif.
    [Questions and answers follow:]

[Pages 458 - 461--The official Committee record contains additional material here.]


            gift authority for consumer's resource handbook

    Mr. Lewis. The fiscal year 1997 regular appropriations bill 
transferred responsibility for publication of the Consumer's 
Resource Handbook from the Office of Consumer Affairs to the 
Consumer Information Center.
    In addition to the responsibility, the Congress provided 
$200,000 and gift fund authority to enable you to accomplish 
that task.
    First, what resources have you been able to generate 
through the gift fund to help offset the cost of publishing the 
Handbook?
    Ms. Nasif. The gift authority was given to us primarily to 
support the development and the printing and the distribution 
of the Consumer's Resource Handbook. However, through the 
Committee's generosity, by the fact that you provided $200,000, 
that is the money that we are using to pay the distribution 
costs of the edition that was actually put together by the U.S. 
Office of Consumer Affairs at the end of fiscal year 1996.
    They had completely revised and printed and reissued the 
Consumer's Resource Handbook at the end of 1996. So we are now 
using the $200,000 to pay the distribution costs out of the 
Pueblo facility.
    The gift fund authority would have been used had we 
retained responsibility for the Handbook. But, of course, the 
President's budget transfers back the responsibility for the 
Consumer's Resource Handbook to OCA beginning in fiscal year 
1998.
    So in fact we have not used the gift authority this year.

                  resources for updating the handbook

    Mr. Lewis. Does the Consumer Information Center have the 
personnel and resources necessary to update and publish the 
Handbook? You just indicated you were not going to be doing 
that as a result of the President's direction.
    Ms. Nasif. In fiscal year 1998?
    Mr. Lewis. Yes.
    Ms. Nasif. It is the President's plan that it would revert 
back to the Office of Consumer Affairs, and we support that 
transfer back to OCA.

                transferring responsibility for handbook

    Mr. Lewis. Is there some reason why you support that 
transfer back?
    Ms. Nasif. They've done a very good job through the years. 
It's been by the of U.S. Office of Consumer Affairs since 1979, 
and it has consistently been one of the most popular Federal 
documents available to the public. And I think they've done an 
excellent job of compiling it, and they have the expertise to 
continue putting it together.
    So therefore we support it going back to the rightful 
owners, you might say.
    Mr. Lewis. So, you are really suggesting that if you had 
the responsibility going forward, you might not have been able 
to do it as well?
    Ms. Nasif. We would have done a good job also, of course. 
But I think that in part we would have done a good job because 
of the excellent track record that OCA had set down for us.
    Mr. Lewis. Could you explain to the Committee from your 
perspective what the logic of the Congress you work with was to 
transfer that authority in the first place?
    Ms. Nasif. I believe that there was the plan that the U.S. 
Office of Consumer Affairs would be terminated for fiscal year 
1997. The belief was that here was one very valuable 
publication that should continue, and so therefore it was 
transferred to the Consumer Information Center.
    Mr. Lewis. The Government has great difficulty even 
considering closing one small agency, and consolidating 
operations, don't we?
    Ms. Nasif. Yes, I think it's hard to close down an 
operation that has a good track record.
    Mr. Lewis. Even if you're giving it to another agency that 
has a good track record?
    Ms. Nasif. I think we would do a fine job as well, but it's 
based on the decade or more of OCA perfecting the formula for 
the fund raising, and the systems for gathering the 
information. I think they do a great job, but I'm sure we would 
do a great job, too.
    So I think you're fortunate to have two capable consumer 
agencies appearing before this committee.

                        questions from mrs. meek

    Mr. Lewis. Thank you very much. Mrs. Meek.
    Mrs. Meek. Thank you very much, Mr. Chairman. We are happy 
to have you here this morning.
    Ms. Nasif. Thank you, Mrs. Meek.
    Mrs. Meek. I have utilized your Pueblo publications a lot 
in my area. And I find there's a paucity of information that's 
simple for people to understand.
    And I distribute it at my town hall meetings, and, of 
course, I have Diahann Carroll's picture--that's me. 
[Laughter.]
    I do this, and it sort of individualizes this booklet. And 
you would be surprised: I get more feedback, positive, from 
this than when I talk about the policies and the new laws and 
the new regulations that are made in Washington.
    The consumers are very, very interested in what's coming 
before them and what's good and what's bad. And this book has 
been very helpful in that regard.
    Ms. Nasif. I'm so glad. Thank you for the kind words.
    Mrs. Meek. I would recommend this to any member because 
there so many things. At this point in the new Federalism, and 
that's the only word I can give it, there is very little help 
you can give your constituents when it comes to roads, 
buildings, post offices, or those kinds of things.
    But now you can give them information. You can provide them 
information; you can provide them help. I find that to be very, 
very useful, particularly for people who are information poor. 
And I would commend this to the other members as well.
    Ms. Nasif. Thank you very much, and thank you for the 
endorsement.
    We are fortunate that we've had six of our committee 
members actually take advantage of our imprinting service.

              cost of consumer information center service

    Mrs. Meek. It does cost money.
    Ms. Nasif. Yes.
    Mrs. Meek. To me, to get it.
    Ms. Nasif. It's $200, that's true. Because it covers the 
plate change at the time we go for the printing. But we think 
it's a wonderful consumer value, of course.

                           change in zip code

    Mrs. Meek. Now, your zip code has changed? It was 81009 and 
is now 81002?
    Ms. Nasif. 81009 is still the zip code. It's very astute of 
you to notice that. Very few people notice that.
    Mrs. Meek. I'm a woman. [Laughter.]
    Mr. Lewis. And a grandmother, too. An astute grandmother.
    Ms. Nasif. 81009 is actually the number that we promote 
through the media. The reason we put 81002 on the catalog 
itself is that way we can track the performance of the various 
editions of the catalog, We can track catalogue order blanks 
and how they perform.
    We do a lot of counting in the Pueblo facility. Every 
promotion that we do has a different coded address, so that we 
know exactly how many people respond as a result of an IRS mail 
back card versus a print out, versus a radio spot. And we keep 
counts on all of it in order to figure out what we're doing 
well and what we're not doing well, and how to improve what 
we're doing.
    It's the same place, even though it has a different zip 
code. One is the Pueblo Post Office, and the other is actually 
our facility.
    Mrs. Meek. So we can keep that.
    Ms. Nasif. Yes.

                         publishing the catalog

    Mrs. Meek. My next question has to do with your publishing 
dates. When do you propose publishing this booklet again, and 
how much will it cost?
    Ms. Nasif. We publish it every three months. And that 
enables us to drop publications that we've run out of stock on, 
and we can put in new publications coming out from the Federal 
agencies. And the publishing budget is in the neighborhood of 
about $370,000.
    We print 12 million copies total each year of the catalog, 
and then we distribute it in a variety of ways. About half the 
catalogs go out through a bulk mailing list to educators, 
librarians, community leaders who have requested to be on the 
list, who then distribute copies of the catalog to their 
constituents.
    We also distribute through members of Congress through the 
program that you participate in.
    Mrs. Meek. Thank you.
    Mr. Lewis. Thank you, Mrs. Meek. We appreciate it. Mr. 
Hobson.

                              drop in rent

    Mr. Hobson. I have a couple of questions. First of all I 
would like to comment that your rent does go down a little bit. 
How did you accomplish that, do you know?
    Ms. Nasif. The $99,000 rent?
    Mr. Hobson. Yes. It dropped from $102,000. So it's going in 
the right direction, anyway.
    Ms. Nasif. We are assessed rent by GSA just as GSA assesses 
rent for all Federal agencies. They take into consideration 
what the prevailing rates are.
    Mr. Hobson. I wish they did. You need to look at that, 
because they really don't very well. But that's another point. 
You need to watch them on their rent.
    But you are going down, which is better than most of them.
    Ms. Nasif. Yes.
    Mr. Lewis. But with a GSA assessment, at any rate.
    Ms. Nasif. Actually we are right in the GSA building, and 
it's good space, and we think it's worth $102,000. We were 
delighted when our programmed amounts went down to $99,000.
    Mr. Hobson. Just remember, we're watching that.
    Ms. Nasif. Okay.

                             other services

    Mr. Hobson. The other thing is, three other quick 
questions. I don't understand the ``other services.'' Are you 
getting reimbursed for all that money from other agencies? Or 
how does that work?
    Ms. Nasif. Yes. The ``other services''--are you referring 
to other income on page six?
    Mr. Hobson. No, I'm looking at page eight, where you have 
an item that says ``other services.'' And what I'm concerned 
about is that is a way of increasing the agency's expenses by 
passing--one of the ways that people work statements is to get 
other people to reimburse them for it, and gradually then 
suddenly they won't do it any more and then you'll come in and 
say well, we've got to have this.
    So suddenly we're hit with the cost.
    Ms. Nasif. Agencies participating in our program, who wish 
to offer their publications without charge to the public 
actually are billed for the postage and the handling and the 
distribution services that are incurred by the Government 
Printing Office facility in Pueblo, Colorado.
    So if you are an agency--you're the Social Security 
Administration for example--and you would like the CIC to offer 
your booklets without charge, as the booklets get mailed out, 
GPO charges us, CIC. We will in turn assess you, as the 
sponsoring agency, for those postage costs. That's what that 
represents.
    Mr. Hobson. That's what I'm worried about. What I'm worried 
about is this could eventually become a way of gaming the 
system, because they will then come back and say to you some 
day, because this has jumped from $2.7 million to $3.8 million 
and it's going up.
    Ms. Nasif. Yes.
    Mr. Hobson. They'll come back and say, oh, we don't have it 
in our budget any more. Now, you've got to come back in here 
and ask us to do it. And I just want to forewarn you. Be 
careful that somebody doesn't game you on that.

                             average salary

    The other thing is the average salary in your agency will 
be--it is $56,000 and will be $58,000? Is that what you're 
proposing?
    Ms. Nasif. Yes. That's correct. And that reflects increases 
in pay including the locality pay adjustment. So there is some 
increase due to that.
    Mr. Hobson. There's an increased locality adjustment for 
Pueblo, Colorado?
    Ms. Nasif. No. We are actually located here in Washington, 
D.C.
    Mr. Hobson. So it's for D.C.
    Ms. Nasif. Yes, we get it for D.C. The 50 or so people in 
Pueblo, Colorado are actually GPO employees.

                             average grade

    Mr. Hobson. Ours hasn't been changed for about 30 years, on 
the location thing. The other thing is, I think this is the 
littlest thing--it may be technically correct. But you have--if 
I read this correctly--you have 18 people that are nines or 
above, and three people that are below nine. Is that correct?
    Ms. Nasif. Yes. That's correct, and I can explain.
    Mr. Hobson. Well, that's what it says here. But down here 
it says that your average grade is 11.86. I think that's a 
little misleading, if 18 of them were above nine. It may be 
technically correct. Of course, the other three are very low, 
and that affects the overall average.
    But the real average in here--I mean, the real thing is 
it's weighted to nines and above. Because there are only three 
people below nine.
    Ms. Nasif. Yes. Mathematically that is the average, but I 
will be glad to go back and double check on that.
    Mr. Hobson. No, no. But it may be technically correct, 
because those three are way below, and they pull the average 
down, but the real bulk of people in this agency--and I'm not 
arguing with you about it. I'm just saying we should 
understand--that the number of people in this agency are 
really--they are 12's and above. Because there are nine people 
at 12, there are five people at 13s.
    No, I'm sorry. There are nine at 12. There are five at 13. 
There are three at 14. And there's one at 15.
    So that's out of the 21 people.
    Mr. Lewis. Ms. Nasif, we do expect that Mr. Hobson will 
have another series of very detailed questions for the record. 
[Laughter.]
    Mr. Hobson. I just want you to know that somebody does look 
at these things.
    Ms. Nasif. I appreciate it, because it takes a lot of work 
to put this together.
    Mr. Hobson. I used to read financial statements a long time 
ago, and government statements drive me nuts.
    Ms. Nasif. Well, I appreciate the attention.
    Mr. Lewis. Mr. Frelinghuysen.

                  no questions from mr. frelinghuysen

    Mr. Frelinghuysen. Mr. Chairman, Mr. Hobson's attention to 
detail is so profound that I'm going to resist asking any 
questions.
    Mr. Lewis. He's just overwhelmed you. [Laughter.]
    He has covered the territory in such detail. Thank you.
    Mr. Hobson. Let me tell you, the previous agency did change 
their rent, because of----
    Mr. Lewis. GSA. Even though they thought the space was 
worth every dime they paid for it.
    Mr. Stokes.

                      cic income application chart

    Mr. Stokes. Thank you, Mr. Chairman. I'll be very brief. I 
noted that you have not included a CIC income application chart 
in this year's justifications. Why is that?
    Ms. Nasif. There was no particular reason, Mr. Stokes. We'd 
be happy to provide it for the record.
    We were trying to streamline our package, but the chart 
would be pretty similar, to last year's. We actually created 
it, and then we were going through the justification to see any 
way to make this easier to look through. And we just 
arbitrarily decided to take it out.
    Mr. Stokes. Would you provide it?
    Ms. Nasif. Certainly. We felt that perhaps page six did the 
job. But I'm with you. I think a picture is worth a thousand 
words, so we will be happy to provide it.
    Mr. Stokes. Thank you.

[Page 468--The official Committee record contains additional material here.]


    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.

                     EXPENSES VERSUS REIMBURSEMENTS

    Last question, very briefly, a large portion of your 
publications are reimbursed. So that leads to a question 
regarding expenses versus actual reimbursement. In 1996, the 
difference between reimbursement and expenses was about 
$250,000. But in 1997 and 1998, your budget indicates a 
difference of over $850,000, an increase of differential on the 
negative side.
     Can you explain what appears to be a trend of expenses 
outpacing reimbursements?
    Ms. Nasif. The amounts to be collected are increasing?
    Mr. Lewis. I'm saying that the actual reimbursements show a 
pattern whereby your expenses are outpacing those 
reimbursements, a pattern from $250,000 in 1996, and then 1997 
and 1998 being something over $850,000.
    Ms. Nasif. I can explain that. The publication distribution 
figure, $3.008 million, actually is collected from two sources 
of funding. It's collected from reimbursements from agencies 
which will be $2.151 million. But also from private sector 
organizations under other income, which in 1998 will be 
$857,000.
    We collect money not just from Federal agencies, but from 
our private sector partners. And so we will be collecting 
money, for example, in the actual 1996 column, it was $1.9 
million from Federal agencies, but then an additional $215,000 
from private sector partners.
    So we do collect enough to pay the GPO bills, and that 
money is really like pass-through money that comes through the 
CIC fund. GPO bills us and then we turn around and send the 
bills off to the Federal agencies or the private sector 
partners who have agreed to cover distribution.
    Mr. Lewis. Okay.
    Ms. Nasif. So we are not spending more than we collect. We 
stay within our budget.
    Mr. Lewis. Well, thank you for that clarification. And if 
we have further questions, we will ask them for the record, and 
other members are welcome to extend questions as well for the 
record.
    In the meantime, Ms. Nasif, thank you very much for being 
with us.
    Ms. Nasif. Thank you, Mr. Lewis.
    Mr. Lewis. It's a pleasure to meet you.

[Pages 470 - 502--The official Committee record contains additional material here.]


                                            Wednesday, May 7, 1997.

                U.S. CONSUMER PRODUCT SAFETY COMMISSION

                               WITNESSES

HON. ANN BROWN, CHAIRMAN
HON. MARY SHEILA GALL, COMMISSIONER

    Mr. Lewis. Ms. Brown, you'll have to be patient with our 
members, since we have all kinds of overlapping meetings. You 
understand this process. But in the meantime, we want to 
welcome you, and we're very interested in hearing your 
discussion of the Consumer Product Safety Commission's 1998 
suggestions, and the administration's request.
    If you'd like to summarize your statement, you know the 
entire statement will be included in the record. We'd like to 
get to questions, and facilitate the process as easily as 
possible.
    Ms. Brown. Good. Well, I'll summarize briefly. I think 
Commissioner Gall who is with me has already submitted her 
statement for the record, and I'd like to submit Commissioner 
Moore's statement for the record.
    [The statements of Ms. Gall and Mr. Moore follow:]

[Pages 504 - 507--The official Committee record contains additional material here.]


    Ms. Brown. Commissioner Gall is with me today, and I will 
be brief. I am pleased to have this opportunity to testify in 
support of our fiscal year 1998 appropriations request.
    Mr. Lewis. Fine.

                           summary statement

    Ms. Brown. At the outset, I want to express our 
appreciation for our fiscal year 1997 appropriation of $42.5 
million, the full amount requested in the President's budget.
    I want to assure you that these funds are being used 
effectively to protect the American people against unreasonable 
risk of injury or death from dangerous or defective consumer 
products.
    I'll give you just one example, which is recall roundup. 
When we do our recalls, which is very often very serious, for 
products that cause injuries and death, we get the word out. 
But oftentimes we can't get all of those products out of 
people's homes.
    So we did a recall roundup, which was a spring cleaning, 
for people to go into their attics and basements to recheck to 
see if they had any of these products.
    It was extremely successful. We worked with the States, and 
every State in the United States, all 50 States, worked with 
us. Many States did more than one program; in fact, the great 
State of California did five different programs with us.
    And I just want to tell you what the whole effort cost. It 
cost $1,700 in printing costs, and $8,500 for video news 
release. But everything was seen by millions across the Nation.
    So that's the effective way I think we work.
    In fiscal year 1998 we are requesting an appropriation 
increase to $45 million, an increase of $2.5 million to 
continue and to expand our vital work.
    And I feel that we have worked with you, and I appreciate 
it, very closely and very, very well. That you have been 
extremely cooperative with us. I don't think that every agency 
has the same fine relationship that we have had with you, and 
that also the same bipartisan relationship.
    I think this is what the American people want to see the 
bipartisan spirit in the Government. And so I thank you, Mr. 
Chairman and members of the Committee.
    In preparing our budget, we carefully reviewed the needs 
and contributions of our three operating divisions, Hazard 
Identification and Reduction, Compliance, and Information and 
Education.
    As a result, we are proposing important investments above 
current service levels in most of these areas to enhance our 
ability to prevent and reduce the deaths and injuries related 
to consumer products.
    The modest program increases requested for fiscal year 1998 
are more than justified by our record of accomplishment. CPSC 
has made vital contributions to the 20 percent decline in 
annual deaths and injuries related to consumer products that 
have occurred between 1980 and 1993.
    Past agency work in electrocutions, children's poisonings, 
children's cribs, power mowers and fire safety helped save the 
Nation almost $7 billion annually in health care, property 
damage and other societal costs--more than 100 times CPSC's 
annual budget, or about $155 million in savings, for each 
million of the agency's 1998 request.
    The agency expects its 1993 standard to make cigarette 
lighters child resistant to save over $400 million in societal 
costs, and to prevent up to 100 deaths annually.
    Similarly the agency expects its work in carbon monoxide 
poisoning to reduce societal costs by $1 billion annually.
    CPSC removal of dangerous fireworks from the marketplace 
prevents about 14,000 injuries each year.
    As you know, in a concurrent submission to this 
subcommittee and the OMB in September, 1996, the Commission 
requested a budget of $49.7 million for fiscal year 1998. The 
OMB reduced our budget request to $45 million. Although this 
reduction of $4.7 million seems small, it will have a negative 
impact on our efforts to protect the health and safety of 
American's children and families.
    An additional investment of $1 million would allow us to 
respond faster and better to product hazards, saving more 
lives, and preventing more injuries, and would help us to 
implement the FOIA law.
    CPSC is a data driven agency. It carries out its mission 
with a sense of urgency, since quick action by the agency saves 
lives. To provide even greater benefits to the American 
consumer, we would like to establish an integrated information 
system at the agency, that would give the staff access to a 
much larger universe of product safety data, and would improve 
the speed with which staff could gain access to that data.
    Mr. Chairman, the CPSC is of great value to the American 
people. By every rational, cost/benefit measure, we save the 
taxpayer many times our budget in deaths, injury and property 
damage prevented.
    Accordingly, we urge you to appropriate not only the full 
amount we requested. We also hope you can find an additional $1 
million within the subcommittee's budget allocation, and within 
the framework of the balanced budget agreement announced last 
week for necessary enhancement of our information technology.
    Thank you.
    [The statement of Ms. Brown follows:]

[Pages 510 - 523--The official Committee record contains additional material here.]


    Mr. Lewis. Thank you, Ms. Brown, Ms. Gall. Mr. Stokes, I 
believe I heard Mrs. Brown suggest that they had asked for 
$49.9 million as the budget went to OMB, and OMB suggested they 
could do well with $45 million. But Ms. Brown is suggesting 
that even $1 million more would be very, very important.
    This is the first time--I'm not surprised that there's some 
disagreement, but it's the first time, I think, I've heard 
somebody actually suggest their original request was the right 
request.
    At any rate, I yield to you for comments or questions, if 
you like. I think Ms. Brown feels secure in her responsibility.

                              cpsc budget

    Mr. Stokes. I must say it's unusual.
    Thank you, Mr. Chairman. Let me pick up right where the 
Chairman commented, Ms. Brown. First let me welcome you back 
before our subcommittee, and say it's always a pleasure to have 
you here.
    We remain very, very proud of the work you do in this 
capacity. I noted that the budget that the Consumer Product 
Safety Commission submitted to the Office of Management and 
Budget requested $49.775 million for your operations for 1998.
    The President's budget was rather generous with the 
Commission, including a request to Congress for $45 million, an 
increase of nearly six percent above the enacted amount for 
1997.
    First of all, why do you think the CPSC fared relatively 
better than so many other agencies and Department's this year?
    Mr. Lewis. This is the hard part. [Laughter.]
    The easier ones are coming.
    Ms. Brown. I am delighted to answer you. [Laughter.]
    Quite honestly, Congressman Stokes, I do believe that this 
is a vote of confidence in the work that we are doing, not just 
the work that we are doing to prevent deaths and injuries and 
huge costs, but I think in the way that we are doing our work.
    And that is when I came into the agency, well before the 
104th Congress, I said that we had to bring all of the parties 
in, in order to make full progress. And I think that we have 
worked with industry very well.
    Also I think that you must realize that over the past 
decade, in the 1980s, while our mission has grown 
substantially, we have, in fact, been cut. If you compare it 
with EPA's budgets from 1981 to 1996, EPA increased 25 percent; 
FDA's budget from 1981 to 1996 increased 56 percent; while 
CPSC's budget, over those years, over all declined by 45 
percent.
    So one, it's a vote of confidence, and, two, it is helping 
us to make up some of the loss over those years.
    Mr. Stokes. Okay. Now, although the budget includes this 
relatively health, increase, even the Administration's number 
is nearly $5 million less than the amount you say you need.
    Ms. Brown. Yes.

                       effect of budget reduction

    Mr. Stokes. What are the principal activities you would 
like to undertake and will not be able to at the 
Administration's request level?
    Ms. Brown. I would like to have Pamela Gilbert, our 
Executive Director, speak to that.
    Ms. Gilbert. Thank you very much. We have, as the Chairman 
noted, asked for an additional $1 million, and that would be 
for information technology increases that are very, very badly 
needed to upgrade our current network system, to obtain a new 
Internet server that is going to help us comply with new FOIA 
requirements, and to update very old equipment and technology 
that doesn't even let us keep up with the current technologies 
that are available now, such as Windows 95, that are fairly 
common for many others but are right now beyond our 
capabilities at the Agency.
    In addition, we had a number of programmatic requests and 
initiatives that we had asked for in our original budget 
submission, that have been significantly reduced in our new 
submission, as a result of the President's request.
    This includes twice as big an investment in fire 
initiatives than we have now planned in our 1998 budget. It 
includes an entire update of children's anthropometric data, 
which is very important and critical to our work in keeping 
children safe.
    It also includes additional funding to contract out product 
testing of the more sophisticated and complex hazards that we 
face.
    So what we indeed have had to do in our budget request 
right now is scale back significantly the product safety 
initiatives and the information technology initiatives that we 
originally put in the budget request to the President.
    Ms. Gall. And if I could just add to that, it also 
addresses some of the concerns we have about the year 2000 
technology changes. And anthropometric data that Pamela has 
mentioned are beneficial to a lot of agencies, because we're 
the ones who obtain that data for NIH, for the Department of 
Transportation and their concerns about air bags, seat belts 
and children.
    All those kinds of things are very important and wrapped up 
in the anthropometric data that we are trying to improve. It 
means updating it. It's quite a few years old.

                      special investigations unit

    Mr. Stokes. Okay. Ms. Brown, your statement and the 
justifications indicate that a major initiative in 1998 will be 
the proposed expansion of the Special Investigations Unit 
within the Office of Compliance, for which you are seeking a 
$580,000 increase.
    You say this unit will be involved in investigations of 
technically complex issues and new applications of existing 
technologies.
    What level of funding, and how many staff years are you 
devoting to this effort in 1997?
    Ms. Brown. Well, in 1997, let me ask my staff if they have 
the funding for 1997. While they get that for me--or else I can 
get it to you--what we are asking for in 1998 is $580,000.
    And really the SIU is not meant to be a ``gotcha'' effort. 
What is clearly meant is to handle the very complicated 
technical kinds of problems that we have to deal with now, to 
find new sources of data, and also to deal with important 
technical problems.
    We really don't want to waste our resources worrying about 
the very minor problems. But we want to come up with the most 
different ones.
    And so the work of this group already has resulted in a 
number of significant investigations, including an 
investigation of a technically complex horizontal furnace that 
may pose a serious risk of fire or carbon monoxide poisoning, 
and anelectric heater whose design may contribute to potential 
fire hazard.
    And we have been working, and developed information sharing 
relationships with insurance companies a number of independent 
engineering consultants, and fire investigators. And we have an 
excellent relationship now with the International Association 
of Arson Investigators. So this has potential to be very 
valuable to the Agency.
    In the year 1997 the SIU had small funding of $50,000 and 
no additional staff. We now have four full time staff who have 
their major work at the SIU, but we have not added staff for 
that purpose.
    Mr. Stokes. Okay. I have a number of other questions, Mr. 
Chairman, but I'll yield at this time. And thank you very much.

                    composition of commission staff

    Mr. Lewis. Mr. Stokes, since you have asked a number of the 
questions I was going to ask initially, let me shift a moment 
and ask some questions that you and I have asked together in 
the past.
    Ms. Brown, one of the efforts that Mr. Stokes and I have 
been about since we've worked together on this Committee over 
some years now is to recognize that within each of our agencies 
and commissions there is an established personnel base carrying 
on very important functions.
    In your budget request, if the $45 million were granted and 
no more, there would be 480 FTEs, as Mr. Stokes outlined. We 
would hope that within that mix, as all of our agencies mature, 
that they would look a good deal like America, that is, reflect 
the mix of the country, its strengths, the mix of its race and 
otherwise.
    And I would like to have you, if you would, outline for the 
Committee efforts you have made in connection with that.
    Ms. Brown. I'd be delighted to. Since I've been 
Chairperson, 58 percent of the hires have been women, and women 
presently comprise 48 percent of the CPSC's work force. That's 
approximately the same percentage found government-wide 
according to the most recent statistics available from the 
EEOC.
    Since coming to the Consumer Product Safety Commission I 
have increased the number of women in the Agency's overall work 
force by four percent.
    Since I've been Chairperson, 38 percent of the hires have 
been minorities. Minorities comprise 32 percent of CPSC's work 
force. That is four percent higher than the government-wide 
figure of 28 percent.
    And since coming the Consumer Product Safety Commission, I 
have increased the number of minorities in the Agency's overall 
work force by two percent.
    Now, in the upper grade levels, which I think is also 
important besides the overall figures, I want to share with you 
some figures regarding women and minorities.
    Fifty-six percent of the promotions have gone to women, in 
the upper levels. That would be grade 13 and above. And for 
minorities, 44 percent of the promotions have gone to 
minorities.
    Mr. Lewis. In Southern California we are experiencing a 
rather phenomenal adjustment in our population, and there are 
similar impacts in States like Florida and Texas, a very 
rapidly growing Hispanic population. Can you tell me what may 
have happened to your personnel base as it relates to Hispanics 
and Hispanic speaking personnel?
    Ms. Brown. I don't have the exact figures. We will provide 
that for you.
    Ms. Brown. In personnel, we are doing some very active work 
in outreach to the Hispanic community. We've had a meeting 
where we had important people in the Hispanic community come in 
and give us some advice about how to improve our outreach.
    We have had many of our publications translated into 
Spanish. We have two Spanish-speaking operators on our hotline 
now. We are doing a pilot program that we're starting work on 
in California to see how we can get our messages out to the 
Hispanic population.
    In Texas, our outreach person down there, the person who 
works in the field, is a Spanish-speaking person of Hispanic 
descent, and he has been very active in working on this with 
us.
    Mr. Lewis. I'd appreciate your following up on that.
    Ms. Brown. We'll certainly get that.
    Mr. Lewis. Mr. Frelinghuysen.

                          baby safety showers

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Good morning, Chairman Brown. I'd like to thank you first 
for agreeing to come to my District to host a baby safety 
shower. I learned from being on this committee earlier from Mr. 
Hobson how successful your visit to his District was.
    Would you be good enough to comment on your success in this 
area, what you've been able to highlight, what sort of demand 
there is out there, and what sort of private businesses have 
been helpful to you?
    Ms. Brown. I look forward, first of all, to going to New 
Jersey, where two of my children are residents.
    Mr. Frelinghuysen. It's a good reason to come.
    Ms. Brown. And my great-grandchildren, in addition to 
working with you, as I said, in a bipartisan manner.
    The baby safety showers is a grass roots effort. The CPSC, 
in conjunction with Gerber Products, who have funded this for 
us, a private/public partnership, to get the word out in an 
innovative, fun way to parents and expectant parents across the 
country about how to keep their baby safe in the home.
    And we have promoted local ownership in the baby safety 
showers by community organizations doing this, such as 
hospitals, health departments, churches, social service 
organizations, day care centers, too numerous to mention.
    The program cost the Consumer Product Safety Commission 
next to nothing, postage to send out documents, and minimal 
staff time. But Gerber has been very generous with us.
    And we don't know how many showers have been held around 
the country, because this is a grass roots program with no 
intrusive government oversight or reporting requirements.
    However, we do get reports back from people throughout the 
country that they have been holding these showers very, very 
successfully. There's a huge demand for our baby safety 
documents, a ``how to'' kit.
    And the other thing that we have is the material has gone 
out in Spanish, as well. And, for instance, local organizations 
are incorporating baby safety showers into their ongoing health 
programs. The State of Maine has recently incorporated it into 
its entire program.
    This is one of the ways that government should work, 
helping people to have the knowledge to help themselves.
    Mr. Lewis. Could you yield on that point for a moment?
    Mr. Frelinghuysen. Certainly.
    Mr. Lewis. It just occurred to me that my colleague Mr. 
Stokes is recently a relatively new grandfather, and his 
daughter is a somewhat noted broadcaster. I wonder if a shower 
might not be appropriate. Jane might be interested. [Laughter.]
    Jane being the grandmother.
    Ms. Brown. I think you've pulled ahead of me in 
grandchildren.
    Mr. Stokes. You're much younger.
    Mr. Lewis. We're taking up Mr. Frelinghuysen's time.
    Mrs. Meek. This is not a question.
    Mr. Lewis. Okay.
    Mrs. Meek. I just wanted to ask you for some equal time. My 
son just had a 9.6 pound baby boy.
    Mr. Lewis. Congratulations.
    Mr. Stokes. Congratulations.
    Ms. Brown. We will send you a packet of all our baby safety 
material. [Laughter.]
    Mr. Lewis. Mr. Frelinghuysen.
    Mr. Frelinghuysen. Mr. Chairman, those are two tough acts 
to follow. [Laughter.]

                          anthropometric data

    Mr. Frelinghuysen. But thank you for your leadership, for 
your willingness to come into my District. I have a general 
question relative to data collection.
    There's a lot of adjectives in here I'm not exactly 
familiar with, but maybe you could sort of pull it all 
together.
    You have discrete data collection, and you have integrated 
data collection, and then there is some term here that I have 
never heard of--anthropometric, which I can probably figure out 
what that is.
    Ms. Brown. Nobody can figure out what that is. That's a 
trick word in the agency.
    Mr. Frelinghuysen. How do all these things come together, 
and what's it all mean?
    Ms. Brown. Well, I can tell you what anthropometric 
measurement is. I just learned that. It took me three years.
    But, in fact, these are measurements of a child's size. And 
these are used by many other agencies as well. We are the 
agency that has this kind of data.
    It's very important, for instance, if you're going to help 
a company decide what the space should be in something, or if 
we have to do a regulation about crib slats spacing, what are 
the sizes that babies can get through or not get through? It's 
a very serious science.
    And we are looking for some additional funding, because we 
think this measurement needs to be updated, this data, because 
the American children are becoming larger.
    So therefore we only have the money to do a pilot project, 
and it's very, very important. Now, somebody is going to help 
me with discrete data. I'm going to call on the professionals. 
This is Ron Medford.
    Mr. Frelinghuysen. Thank you for response. But a 9.6 pound 
baby. That sounds like rather a discrete figure. [Laughter.]
    Ms. Brown. Ron is Director of Hazard Identification.
    Mr. Medford. The discrete database that is referenced in 
the budget document really deals with those finite bodies of 
data collection systems that we have--the National Electronic 
Injury Surveillance System, which is our hospital emergency 
room data system that fits into that category.
    The death certificate collection program that we do with 
the States is a discrete program. The medical examiners/
coroners alert program is a discrete program.
    Mr. Frelinghuysen. Discrete in the sense that it's limited?
    Mr. Medford. Discrete in the sense that it is a program 
that we collect every year, and it's definitive in terms of the 
universe of products that we're trying to collect information 
on.
    The integrated part was actually referred to in the 
information technology area, where we're trying to put into the 
computer system a way in which someone can sit at the terminal 
and pull all of that information together from one place, and 
integrate those databases.
    So you have all those discrete databases with that data in 
it today that aren't integrated. You go from one computer file 
to the next. The effort that we're talking about is actually 
integrating those, and that's where the word integration comes 
from.
    Mr. Frelinghuysen. It's fascinating.
    Ms. Brown. So our entire staff can have access to a single 
database quickly.
    Mr. Frelinghuysen. That's fascinating. Thank you very much 
for shedding some light on that. Thank you, Mr. Chairman.

                             telecommuting

    Mr. Lewis. Thank you, Mr. Frelinghuysen. Mr. Price?
    Mr. Price. Thank you, Mr. Chairman. I'd like, to add my 
thanks to our guests this morning, and probe a bit on a couple 
of items in your testimony. You talk about the efforts you've 
made to save funds through using telecommuting, page six of 
your testimony, I'm referring to.
    The field telecommuting effort, under which staff use 
computers to work out of their homes. That's an interesting 
trend in the work place in general.
    It sounds like you've gone quite far with it. I'd like to 
know how this works. With over half of the field staff 
telecommuting--that sounds like a pretty extensive trend. I 
wonder, how does this work? How does it save money? How does it 
change the face of your field operations?
    Ms. Brown. Well, I think telecommuting is an excellent 
example of how we work smart at CPSC. It means that in the 
right conditions, employees may work from their homes using 
computers and other information technology.
    So technology has certainly made an advance in this. We did 
a pilot test late in 1995 that showed that working from homes 
could be productive. And with the success of the pilot, we 
offered the option to all our field offices to do this on a 
voluntary basis.
    The person had the right to accept it. Those who are new 
hires are hired with the idea that they will work from their 
homes, but people who were there could choose to or not.
    Now, the results have been very, very good. We have reduced 
field space rent by 50 percent, saving about $500,000 annually. 
And that's a big chunk of change for the Consumer Product 
Safety Commission with our small budget.
    We've released GSA space in 18 cities, and significantly 
reduced office space in 13 cities. Over 50 percent of our field 
staff telecommute. Now, that's 69 employees out of 128. So you 
know when we're talking about--this is not a huge amount of 
people. We only have 128 field staff.
    We expect additional savings in the future, as non-
participating employees leave, and we have found, most 
important, that telecommuting, with less commuting time and 
better automation tools, has improved both employee morale and 
productivity.
    Mr. Price. Now, these telecommuters, are they typically 
working out of their homes entirely? Or for part of their work?
    Ms. Brown. They are typically working out of their homes 
entirely.
    Ms. Gall. They are also working in the field, doing 
investigations, and that's another reason that technology 
integration is so important, because that way our field people, 
if they're on site doing an investigation, can tap inwith a 
laptop computer to some of the technology information we have in 
Washington, in the area here, pull up additional data about that 
particular issue, and send in their investigation report and so on with 
the technology.
    That's why it's such an important investment for us. And 
they also go into their various regional offices for meetings, 
and have an ongoing relationship with the heads of those 
offices.
    Mr. Price. They would have an ongoing relationship with the 
regional offices.
    Ms. Gall. Of course.
    Mr. Price. Does this pose any problems in terms of 
supervision and communication?
    Ms. Gilbert. It has actually improved communication, 
because what we often had in the past were many layers of 
supervision that the field investigator, the line staff person, 
had to go through before the information filtered to 
headquarters where we need it, and need it as quickly as we can 
get it.
    And what our field staff is now learning to do more and 
more, because of the telecommuting effort, is to deal directly 
with the compliance officer in headquarters who is conducting 
the overall review of the product.
    And so we're getting quicker input, and quicker information 
back and forth from the field, and better information, because, 
as you know, like in the game of telephone, if too many people 
are filtering the message, you don't get as clear a message as 
you do if it goes directly from the person requesting it to the 
person actually doing the work.
    So communication has much improved because of the 
telecommuting effort.
    Mr. Price. So you're saying you get the best of both worlds 
from this kind of development?
    Ms. Brown. Yes.
    Mr. Price. You anticipate saving $500,000 annually?
    Ms. Brown. We are saving it annually.
    Ms. Gilbert. In 1997 we'll save $500,000. We hope to 
increase that as the years go on.

                          voluntary compliance

    Mr. Price. Let me quickly ask you about one further aspect 
of your testimony. You stress your voluntary compliance 
efforts. You refer with some pride to negotiating 106 voluntary 
corrective actions in fiscal year 1997.
    You also talk about the stress on cooperative, non-
adversarial solutions as a hallmark of your Administration, 
your leadership at the Agency, pointing out that you've 
developed 17 voluntary standards, and issuing only 10 mandatory 
regulations since you became chairperson.
    I wonder if you could fill in the record on that as well, 
and particularly the trend toward voluntary corrective actions? 
Can you give us some sense of how that 106 figure for fiscal 
year 1997 compares with previous years, and what kind of change 
in approach or policy, if any, is implied by that?
    Ms. Brown. We have increased working with industries 
voluntarily. There are two different ways that we work. One is 
our compliance people, who do recalls. And almost all of our 
recalls of any dangerous product are arrived at voluntarily, 
negotiated with the company that has the recall.
    The other area are voluntary standards, that's standards of 
a whole product category. And we have emphasized working with 
industry voluntarily, with industries. But there have to be 
certain caveats, of course.
    The caveats are that we do monitoring of these voluntary 
standards to make sure that the industry is, in fact, adhering 
to a voluntary standard. It is much faster to work voluntarily. 
To do a mandatory standard, which we will not hesitate to do if 
the situation presents itself, however, that takes a very long 
time, and we very often end up in court.
    Speed is of the essence for what we're doing, in order for 
more people not be injured. So a voluntary standard is 
preferable if it is complied with, and if it is speedily 
arrived at.
    If that doesn't work that way, then we must turn, of 
course, to mandatory standards, as we did with our child 
resistant caps. Caps are child resistant, and have been for a 
long time, and the poisonings for young children have gone from 
284 a year to 34 a year.
    But 34 a year is still too many children dying from 
poisonings from medications.
    With the child safety caps, we now have found that we have 
the technology to make child resistant caps and also adult-
friendly. We were able to negotiate with the industry, but to 
reach a regulation for that, we had to go the mandatory route. 
By the end of this year you will find that all of that 
medication that used to be only child resistant now will be 
easy for adults to open as well.
    Mr. Price. Well, and the possibility that mandatory 
standards are an option, of course, strengthens your hand in 
negotiating these voluntary agreements.
    Ms. Brown. That is correct.
    Mr. Price. If there is something you could furnish for the 
record that would give us some idea of any trendlines in this, 
that would be helpful.
    Ms. Brown. We'll come up with that for you, certainly.
    [The information follows:]

          trend in the number of voluntary corrective actions

    The trend in Section 15 voluntary corrective actions has 
been increasing during Chairman Brown's tenure at CPSC. The 
chart below covering fiscal years 1994-1997 (to date) reflects 
that increase.

Fiscal year:                           Voluntary corrective action plans
    1994..........................................................   159
    1995..........................................................   280
    1996..........................................................   302
    1997 (to date)...............................................\1\ 164

\1\ Thru May 15.

    Ms. Brown. In fiscal year 1994, there were 36 voluntary 
standards. Fiscal year 1995, 40 voluntary standards. Fiscal 
year 1996, 51 voluntary standards. Eleven more than 1995, and 
15 more than 1994. We have found this a very successful way to 
work with industry, but as we say there must be compliance with 
the voluntary standard.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Price. Mr. Walsh.

                       savings from telecommuting

    Mr. Walsh. Thank you, Mr. Chairman.
    Thank you, Chairman Brown, for your testimony today.
    Mr. Price asked some questions about this telecommunicating 
which is something I am very interested in. Before I came here, 
I spent 15 years in the telecommunications industry. This is 
sort of what we talked about back then.
    I am just curious, though. On these savings, you said most 
of those savings came from rental savings, so you were able to 
consolidate offices and reduce rent.
    Ms. Brown. Or in some places eliminate an office 
altogether.
    Mr. Walsh. Okay. Now, when you talk about savings, 
obviously there are some costs that increase to things like 
personal computers, and modems, and telephones, and telephone 
lines. Lease lines, perhaps. Faxes. Printers. And maintenance 
agreements.
    Are all of those costs included, when you consider what 
savings you have had? Have you considered also the increased 
costs?
    Ms. Brown. All right. Let's get the Executive Director, 
Pamela Gilbert.
    Mr. Lewis. One more time, Ms. Gilbert.
    Ms. Gilbert. The $500,000 is not a net cost. It is the cost 
that we are saving from our rent. However, the other costs that 
are involved in telecommuting, that you just mentioned, Mr. 
Walsh, much of that we would have had to spend anyway. We have 
to update our computers. We have to buy new computers for the 
field.
    So we bought the portable type rather than the type of 
computer that sits on your desk. But we would have had to 
replace computers anyway, so there are just really marginal 
costs that have been involved. For example, we had to have fax 
capabilities anyway for these offices.
    One of the things to remember with our field offices--many 
of them are one or two person offices. So the fact that those 
people went to their homes, did not mean we had to buy a lot 
more equipment for each person, because they had most of it in 
their offices.
    But what we do not have to do anymore is pay rent for that 
office because they are now working from home.
    Mr. Walsh. Would each of these individuals then have a PC 
or a laptop, a modem, a fax, printer?
    Ms. Gilbert. Yes. They have all of that, all of the 
equipment that you just mentioned, at their home. But again, 
they would each have had most of that at their office anyway.
    Mr. Walsh. Each one of them?
    Ms. Gilbert. For the most part that is right. So that we 
did not have very many additional costs included in the 
telecommuting effort.
    Mr. Walsh. How about with more people contacting from 
different locations your mainframe or whatever it is that you 
have at your office? Did you have to spend additional funds to 
upgrade that, so that more people could access it? More courts?
    Ms. Gilbert. Oh, you mean as far as telecommunications at 
our headquarters?
    Mr. Walsh. Yes. At the central location.
    Ms. Brown. Doug may know that.
    Ms. Gilbert. Our Information Services Director will respond 
to that. Doug Noble.
    Mr. Walsh. I just want to make sure--you know, the savings 
sound great, but are they real savings?
    Ms. Brown. Right. Now you must understand, of course, the 
$500,000 savings are annual, while our equipment costs of 
course are one time.
    Mr. Walsh. Sure. Absolutely.
    Mr. Lewis. One time, they replace it.
    Ms. Brown. That is right.
    Mr. Walsh. That does not mean it is charging this rental 
for the private lines or the American On Line, or whatever it 
is that you use?
    Mr. Noble. That is correct, Congressman Walsh, and what we 
have done, regardless of telecommuting, has gradually expanded 
our telecommunitions program. We had a wide area network in 
place, and as more and more staff, got on to this network, who 
needed access, we found the load increasing on our network.
    What we are looking for is a way to sustain our 
communications and increase the capability for staff to work 
off our headquarter's computer network.
    Mr. Walsh. So you have a lease-line network for these folks 
that are not dialing over the network? They are not dialing 
that?
    Mr. Noble. We do it through Federal Telecommunication 
Service lines.
    Mr. Walsh. Okay.
    Mr. Noble. It is basically phone lines that we have, and 
they come into our headquarters computer in Bethesda.
    Mr. Walsh. Could you estimate the cost of establishing that 
for your field folks?
    Mr. Noble. The wide area network itself? It was 
approximately $100,000 to establish equipment and lines, and of 
course there had to be some training involved for these 
employees to learn how to actually use the network.
    [The information from Mr. Noble follows:]

[Pages 535 - 537--The official Committee record contains additional material here.]


    Mr. Walsh. Sure. Now, does each one of these employees have 
a maintenance contract for all the equipment that they have 
also?
    Mr. Noble. Up till this year, we actually had equipment 
that would have been under warranty. As the equipment has aged, 
the warranties have expired, and so in 1998 we are going to 
have to develop blanket purchase arrangements for on-site 
maintenance, if our employees at our headquarters cannot help 
the employee troubleshoot it through a telephone call.
    Mr. Walsh. If we could, perhaps next year, maybe--or maybe 
in ensuing months you could give us sort of an estimate of the 
cost of migrating your field staff from office oriented to home 
oriented.
    Ms. Brown. Right. We will get that to you.
    [The information from Ms. Brown follows:]

[Pages 539 - 540--The official Committee record contains additional material here.]


                     productivity of telecommuters

    Mr. Walsh. Because I think the application is marvelous. 
The other question I had was productivity. You said 
productivity was increased. How do you measure that?
    Ms. Brown. How do we measure increased productivity?
    Mr. Noble. Well, if I may just volunteer, the easy answer 
is we have saved thousands of hours in administrative time in 
terms of just improved communications. We can send messages, 
instantly, whereas before, it would have taken days, weeks, and 
hours, and that would have had a direct impact on our ability 
to react quickly to any situation we needed to address.
    So I think that is your major answer--is thousands of hours 
of administrative time have been devoted to programmatic work.
    Ms. Brown. Our talk with supervisors has also shown us that 
they feel that the work they are getting from their staff 
members is more productive. We have also found that people who 
have done this like it. When you have people who are working 
happily, they are usually working smarter and better.
    Mr. Walsh. And I think you mentioned earlier about 
flattening out your organization.
    Ms. Brown. That is the other point I wanted to make.
    Mr. Walsh. That is, eliminating layers that really did not 
get----
    Ms. Brown. Layers of bureaucracy is something that we 
really wanted to cut through with that commission, and this is 
a very important step forward in doing that. We have been able 
to do it, you know, quite easily at headquarters, when you 
start to do that. But when you start to do it in the field, it 
is quite important.
    Mr. Walsh. I think your experience--and I am not sure what 
other departments of Government are doing this--could be very 
valuable to the rest of the Government, if we could quantify 
what the start-up costs are in the monthly or annual costs of 
doing it this way, and then compare that to the actual savings 
and productivity.
    Ms. Brown. I think we must have that, because we won an 
award of reinventing Government, a Government award on this 
telecommuting program from the Vice President for reinventing 
Government. It is one of our three hammers. [Laughter.]
    But I do think that we must have this, and we will get this 
to you, promptly.
    Mr. Walsh. Great.
    Mr. Lewis. Would you yield.
    Mr. Walsh. I would be happy to yield.
    Mr. Lewis. Mr. Walsh, you are asking a line of questions 
that is very important, but it has been suggested that that 
which you do not measure, you never know the results of. So I 
would be very interested in our next session, a year from now, 
having a full discussion of the way you measure increased 
productivity, and what it really means, in more detail, et 
cetera, so that we can get a handle on that, as that might be 
reflected in requests in other agencies.
    There was, Ms. Brown, an item on television this morning, I 
am not sure which of the channels was involved, where they were 
talking specifically about this whole area of telecommuting, 
people doing work at home, et cetera, and reporting seemed to 
be, from whatever operation that was from the private sector, 
considerably different than that which I am hearing here.
    I mean, you might have somebody try to figure out which 
program that was, and it is an interesting story and it relates 
to this whole subject area that has a growing interest----
    Ms. Brown. Yes. We will find that. We can find that with a 
television monitor that we have.
    Mr. Lewis. Okay.

                                airbags

    Mr. Walsh. Mr. Chairman, if I could just ask several 
questions on airbags.
    Mr. Lewis. I might mention that it is obvious that other 
committees are through with their hearings, so we have got a 
broader attendance. We tend to take up all the time that is 
available, regardless, so I might mention that----
    Ms. Brown. Well, I am delighted and I thought it was 
excellent attendance because of the fine job that we did.
    Mr. Walsh. Life is easier when there is only one hearing a 
day. [Laughter.]
    Ms. Brown. Yes.
    Mr. Walsh. On airbags for cars, I do not have in either of 
my cars, airbags, but obviously it has been a huge controversy.
    But what has been your department's role in this, and where 
do you see this thing going?
    Ms. Brown. Well, quite honestly, you know that airbags are 
in the jurisdiction of the National Highway Traffic Safety 
Administration. We have nothing to do with airbags.
    Mr. Walsh. I did not know that.
    Ms. Brown. But I can just give you a----
    Mr. Lewis. But as a mother.
    Ms. Brown. Well, not only as a mother, but as a short 
woman, I can tell you that other women have called me, who know 
I am in the safety business, and I have been able to tell them 
where they can get pedal extenders.
    What we have learned for our agency, to try and look at the 
airbag experience--and I have made this very clear to our 
entire agency--any time that you do a safety innovation, you 
must look to see what will be the results of that innovation.
    Your testing has to include more than just a 5 foot nine 
male in the testing. We are a scientific and technical agency. 
You must use the best science and technical abilities available 
to understand further repercussions of safety.
    We do do data collection for the National Highway Traffic 
Safety Administration through our data collection system of 
emergency rules. But the airbag situation does give us a lesson 
in health and safety regulation.
    Mr. Walsh. Thank you.
    Mr. Lewis. Thank you, Mr. Walsh.
    To my favorite grandmother, I want you to know that I only 
have six grandchildren. So I am behind you now.
    One more time, Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman, and to Administrator 
Brown, we are very pleased to have you here today, and knowing 
of the accomplishments of you and your agency in the past, I 
want to commend you.
    My commendation, first of all, is based on the fact that 
you have been able to work out a reciprocal kind of 
relationship with business, where you do not come on as some 
big arbitrator in the sky, and just say we are going to change 
this, and they have to conform to everything.
    I think that is going to add to the continuous success of 
your agency, and what you are doing.
    I also would say in the area I represent, there are a lot 
of middle income to low income people, and they profit, and can 
profit a lot from your informational technology, and I would 
agree that this is an area you really need to enhance, and only 
through the help of this Committee can you do that.
    But I do hope that this Committee will be favorable to 
that, because the outreach efforts, and the way you have of 
reaching out to all the public is extremely important, in that 
so many of them know very little about the consumer product 
agency. But when they hear it or see it on television or see it 
in their newspapers, or have some of the local commentators 
talk about it over the air, it is extremely important.
    And I think a lot of this success has been due to the fact 
that you have women in the agency who have had to confront 
these kinds of things; not to say that men do not have this as 
one of their priorities. But I think that that approach has 
helped also.
    So I do hope that the information technology--I cannot 
imagine your being able to do a good job without all aspects of 
the computer industry, particularly in this area. We would not 
dare say to NASA, to any other agency, ``We want to limit your 
capacity to reach your constituency.'' So I do hope that this 
will come over real strong with this Committee.
    And I notice that you are doing quite a bit in fire 
prevention.
    Ms. Brown. Yes.

                            fire prevention

    Mrs. Meek. That is really, really a very big problem in the 
area, and the people I represent. Many of them--there are a lot 
of fatalities because of fire, because of the societal 
conditions that exist in those areas.
    And I do hope that perhaps the Agency can set as one of its 
goals a focus on how to reach those communities, and delivery 
systems that will help make it more possible for you.
    Ms. Brown. Fire prevention, of course, has been one of our 
major efforts, the fire prevention, and we are doing many 
things. Now, additional funds that would be used to try and see 
what we can do about the high cost of fires, both with human 
lives and also with what it does to a community--something 
burns out, and the whole economic vitality of an area will be 
damaged.
    Increased funding would provide a mix of research and 
action items for us to further continue our fire efforts. We 
need a broader and more inclusive attack on the Nation's fire 
problems, especially in the lower income communities which bear 
the brunt, and to the elderly and children.
    Mrs. Meek. Right. My last mention here is the fact that you 
are dealing with usually an industry that is well-established. 
I want you and your staff to think also about some of the 
linkages into that focus group you have here, in industry, that 
there are a lot of flea markets and a lot of discount places 
which people, middle income people, and lower----
    Ms. Brown. Dollar Stores?
    Mrs. Meek [continuing]. And middle income people like 
myself frequent. And many times they have not gone through the 
process that you have indicated. So your investigative powers, 
in that regard, would come into good help, a good consumer 
product help in those areas.
    Ms. Brown. Our recall roundup, which I mentioned before, 
was emphasized in communities and focused on making sure that 
older products, that do not meet our safety standard were 
either repaired or destroyed.
    Mrs. Meek. That is right.
    Ms. Brown [continuing]. We also emphasize emergency room 
health care. Many people do not go to pediatricians. That is a 
luxury, these days.
    Mrs. Meek. That is right.
    Ms. Brown. They get their primary health care very often in 
emergency rooms. So we are extremely cognizant of the 
populations that we need to serve.
    Mrs. Meek. Thank you.
    Ms. Brown. Thank you very much.
    Mr. Lewis. Thank you, Ms. Meek.
    Mr. Wicker.
    Mr. Wicker. Thank you, Mr. Chairman, and before I begin, I 
would note that we are joined by my colleague, Mr. Hobson.
    Mr. Lewis. His questions have been asked already.
    Mr. Wicker. Who is also a new grandfather. [Laughter.]
    Ms. Brown. We have had all kind of reports today, Dave. How 
many pounds did yours weigh?
    Mr. Hobson. Eight pounds, 5 ounces. I was there, but not in 
the room. That is number four. Trying to catch up. [Laughter.]
    Mr. Wicker. Congratulations.
    Mr. Lewis. Mr. Wicker.

                   upholstered furniture flammability

    Mr. Wicker. Madam Chairman, I appreciate you being here, 
and I also want to say, at the outset, that I recently 
requested that your senior staff meet with mine concerning your 
commission and your mission and activities, and that briefing 
was very helpful to them and to me.
    Ms. Brown. Thank you, sir.
    Mr. Wicker. I want to talk, briefly, today, about 
flammability and the upholstered furniture industry.
    As you may know, in my district in Mississippi, 
manufacturing is one of the largest sectors of the economy, and 
of that sector, upholstered furniture is overwhelming the 
largest portion, employing tens of thousands of people.
    Ms. Brown. Yes, sir.
    Mr. Wicker. This is a very price-sensitive industry, with 
hundreds of very, very small businesses participating in the 
manufacture of upholstered furniture. Any unnecessary 
regulatory cost which might be placed on the industry could 
have a negative effect on job creation as well as on the 
ability of consumers to afford the product.
    It is my understanding that the commission has a number of 
furniture-related projects, which I will ask you about in just 
a moment. But also that the industry itself has been very 
proactive in assisting your agency in its work.
    I have received a briefing about your agency's ongoing 
projects regarding upholstered furniture flammability.
    Approximately 75 or even 80 percent of such fires are 
caused by smoldering cigarettes, as you know. The industry has 
made great strides in this area through its voluntary program 
known as the Upholstered Furniture Action Council.
    Ms. Brown. UFAC.
    Mr. Wicker. Or UFAC. The UFAC program on a cost-effective 
basis has established construction criteria which must be met 
by the upholstered furniture manufacturers in order to qualify 
for participation. Reflecting the success of UFAC, over 90 
percent of the dollar volume of U.S. furniture is pledged to be 
in compliance.
    This has been a success story, according to your own 
agency's data. Since the beginning of the UFAC program in 1978, 
there has been approximately a 76 percent reduction in fires 
associated with a cigarette ignition of furniture, and this 
rate continues to fall each year.
    My question concerns my understanding that your agency is 
now considering whether to supplant this voluntary industry 
standard with a mandatory Federal regulation.
    I further understand that your agency is studying whether 
to move beyond cigarette ignition to require resistance to 
small open flame sources such as lighters, matches and candles.
    This is a much more complex and a much more potentially 
expensive undertaking to make upholstered furniture resistant 
to such open flame ignition sources.
    I note on page one of your testimony, that the mission of 
your agency is to protect the public against unreasonable risk.
    Ms. Brown. Correct.
    Mr. Wicker. And it is not totally clear to me that a 
reasonable consumer expects his or her couch to be totally 
impervious to open flame. I am also not sure what materials or 
constructions would yield this level of resistance to open 
flame, and at what cost to the consumer.
    I certainly share the comments of Mrs. Meek concerning the 
need for fire prevention. In my other subcommittee on labor, 
health and education, we are funding a pilot program of smoke 
detectors for this program.
    So, clearly, the agencies are working together, and none of 
wants to jeopardize the progress the industry has made on the 
larger question of cigarette ignition. Nor would we want to 
render furniture unaffordable to lower or middle income people.
    So my question to you is since it has been a little over a 
month since your staff met with my staff, could you update us 
on the Commission's furniture project?
    Ms. Brown. Yes; I certainly will. First of all, I was down 
in High Point and had a very, very successful and well-received 
visit to the furniture market. I think it is very important 
that the lines of communication are kept open in this, and for 
their work in another field--it happened to be bunk beds--they 
won an award working with us on a voluntary standard. So we 
would not turn to this just haphazardly, unless we saw cause. 
And I am going to have Ron Medford talk to you about this. This 
is a work in progress. We have not completed it, and we have 
not reached any conclusions--that is what we are doing work 
for. And Ron will talk to you further about where we are in 
this, and why we began this.
    Mr. Medford. Just quickly, by way of background, the 
Commission was petitioned by the National Association of State 
Fire Marshals to actually promulgate three mandatory rules or 
standard.
    One rule, a mandatory rule for smoldering ignition from 
cigarettes. The second one for a small open flame rule, the one 
you have been mentioning. The third rule is for a large open 
flame test.
    The Commission has taken several actions. First, on the 
large open flame issue, it denied that portion of the petition, 
which is more appropriate for commercial furnishings and not 
for residential furnishings.
    It deferred action on the cigarette part of the petition 
until it evaluated the degree of conformance by the industry 
with the voluntary program. And that work is going on right 
now. The staff has almost completed that work, and intends to 
give it to the Commission, some time in June.
    And thirdly, the Commission granted the piece of the 
petition that dealt with small open flame ignition, because the 
Commission found that it may present--these are preliminary 
findings on the part of the Commission--an unreasonable risk of 
injury, and that there are no national standards, either 
voluntary or mandatory, that address that issue, except in the 
State of California.
    What the staff has been doing is looking at the technical 
feasibility of developing a small open flame standard, and 
looking at the cost-benefit considerations, the one issue that 
you mentioned. All of those things are really intended to come 
to the Commission for a decision.
    The decision the Commission will make next with respect to 
those two issues is whether to grant the petition on smoldering 
ignition, which would depend entirely on the degree to which 
the voluntary program is working and being conformed with by 
the manufacturers.
    And secondly, the open flame issue is whether or not to go 
to the next stage of rulemaking, which is a proposed standard.
    It will be the first time that the Commission is presented 
with a preliminary regulatory analysis which looks at the cost 
and the benefits to society of such a rule.
    The upholstered furniture area actually represents one of 
the largest area of fire deaths in the country. There are 
something like 680 fire deaths every year, amounting to $244 
million in property losses. The latest fire statistics for 
upholstered furniture are attached. So it is one of the biggest 
fire problems that we have in the Nation, and that is why we 
are spending so much time and effort looking at it, along with 
a number of other serious fire problems in the country.
    [The information follows:]

[Page 548--The official Committee record contains additional material here.]


    So that is where we are. The next stage for consideration 
is whether the Commission wants to propose a regulation for 
small open flame, and at the Commission we are required to use 
a three stage rulemaking process.
    Mr. Wicker. Does Commissioner Gall want to comment?
    Ms. Gall. I just wanted to comment that I think some of the 
figures that Ron is quoting about the number of deaths, and the 
fire incidents associated with upholstered furniture are very 
old and before the UFAC certification program came into being.
    So that has to be remembered as well. That is a factor. I 
voted against moving the small open flame portion of that 
particular petition because I did not feel we had sufficient 
data to move forward. So I am the dissenting vote.
    Mr. Wicker. I appreciate what everyone has had to say about 
that, and particularly keeping lines of communication open, and 
I would simply reiterate that up to 80 percent of the 
upholstered furniture fires are related to smoldering 
cigarettes, and much progress has been made and continues to be 
made to the tune of over a 75 percent reduction.
    I would also simply mention to you, Madam Chairman, that 
the second largest furniture market in the Nation is in my 
hometown of Tupelo, Mississippi, and I would certainly welcome 
having you come down and meet with the very, very small 
furniture manufacturers who supply that second largest event, 
and I think you would astounded to see the progress we have 
made in Northeast Mississippi.

                          fire safe cigarette

    Ms. Brown. I would love to do that, and I will look forward 
to an invitation, and of course small business is equally as 
important to me. My family background is in small business.
    I do want to mention one other thing to you. The 
upholstered furniture industry has unfairly borne a largeburden 
of cigarette smoldering emission fires, because the cigarette industry 
has not shouldered its share.
    We had, in 1994, a bill entered by Congressman Moakley. We 
had done some work that showed that the cigarette industry 
could work, and in fact did work with us. It was possible to 
make a more fire-resistant cigarette. That bill did die, and 
there does not appear to be anything, although we have talked 
to Congressman Moakley about that again.
    That the cigarette industry should in fact assume its full 
share of the burden of reducing fire deaths.
    Mr. Wicker. Thank you.
    Mr. Lewis. Mr. Wicker, thank you very much for your 
questions, and your special interest in this subject area is 
helpful to the Committee as we review the work of the 
Commission. I might mention that I am very interested in your 
exercise of measurements by way of a cost-benefit ratio. I 
would appreciate your helping us get a better understanding for 
the record relative to how you go about making those 
measurements. The question of upholstered furniture, for 
example, that may have been put in the marketplace before 
certain standards were met is important.
    When one talks about fires and you relate X number of fires 
to X billions of dollars of less, whether the original cause 
was a forest fire or in the home, those questions are relevant 
questions and, indeed, it is important that we be measuring in 
a way that is helpful to all of us.
    [The information follows:]

[Page 551--The official Committee record contains additional material here.]


    Ms. Brown. We have what we call good-natured disagreement 
here, and you will get our data, and the data that we have from 
the fire services, which show how carefully we measure cost-
benefit. Of course it is part of our regulations.
    Mr. Lewis. I must say that we find, on this side of the 
table, that good-natured disagreement between us often 
stimulates better results and answers as well.
    Ms. Brown. There you go. That is why we are a three member 
Commission.
    Mr. Lewis. Mr. Hobson, I might mention to you, formally, 
for the record, that questions regarding savings and rent, and 
et cetera, have been asked, extensively, but we would love to 
have you round out that portion of the work. [Laughter.]
    Mr. Hobson. Well, I do want to welcome the Chairman and the 
Commissioner today, and all the staff that is here.
    Ms. Brown. Thank you.

                        small business ombudsman

    Mr. Hobson. We have worked very closely with this Agency. I 
think it is an example of where we can do things together, and 
you can do them without heavy rules and regulations by getting 
people together, and work. And as a new grandfather, you know, 
I do not have as many as other people. They are all important, 
and we have learned a lot from what the Consumer Product Safety 
Commission has done, and Roger, we will all be happy to come 
down to Mississippi if you can arrange a trip for us down 
there.
    Mr. Wicker. Wonderful.
    Mr. Hobson. Rodney and I said we had not been invited. I am 
sure Ms. Meek will want to go, too, with us. Maybe we can get 
Lou to go also. But I do have a couple questions I would like 
to ask, if I could, very quickly.
    And I understand that CPSC has established a highly 
successful small business omnibus program, and I do not know if 
any question has been asked about that, but would you tell us 
about what you have accomplished with that.
    Ms. Brown. Yes. It so happens that Clarence Bishop, our 
small business ombudsman is here, and I would like him to give 
you the information on this, since we will get it directly from 
the source.
    Mr. Lewis. Come on up, Clarence.
    Why don't we have you formally identify yourself for the 
record.
    Mr. Bishop. Good morning. I am Clarence Bishop, Deputy 
Executive Director of the Consumer Product Safety Commission.
    CPSC has always been sensitive to the needs of small 
businesses, and particularly now with a Chairperson who has a 
family background in small business, that sensitivity has been 
increased.
    So in June of last year, we established a small business 
ombudsman program to provide better services and to allow small 
businesses to interact easier with the Commission.
    And since June of last year, we have handled responses from 
almost 1,000 small businesses representing 44 States and 
actually three or four other locations, Puerto Rico, England, 
and some other places like that.
    And it is our goal that from the point that a small 
business contacts the ombudsman office, and within 48 to 72 
hours we have an answer or the information or the clarification 
regarding our rules and regulations that they are seeking.
    And we have been about 80 percent successful in this 48 to 
72 hour turnaround time.
    Mr. Lewis. Did you want to make a comment about that? 
Anybody else?
    Ms. Brown. No; no.
    Mr. Lewis. I am just happy to see that program working, Mr. 
Bishop.
    Ms. Brown. Not only to our expectations but Clarence Bishop 
has been excellent in this, and it is working really very, very 
well. We are awfully pleased. We had a small business 
conference where we announced this, and there were many small 
business people who are scared of Government and Government 
regulation. I know that from my father's experience.
    Mr. Lewis. We all were, when we were in business. 
[Laughter.]
    Ms. Brown. Well, on particularly small business. And this 
has really started to bridge the gap.
    Mr. Lewis. I think that is very important because small 
business does not have the resources a lot of times, and people 
come in and you get whacked with these things and you want to 
do the right thing but sometimes you just cannot.
    Ms. Brown. No; no.
    Mr. Lewis. Good. Thank you, Mr. Hobson.
    Mr. Hobson. I have a couple other questions.
    Mr. Lewis. Do you really?
    Mr. Hobson. Yes. [Laughter.]
    Mr. Lewis. We have two other agencies. Are you going to 
stay for a while?

                   drawstrings on childrens' clothing

    Mr. Hobson. Yes. For one of them anyway.
    I want to talk just briefly about drawstrings, because we 
worked on that, and it was a wonderfully successful program, 
but I am really concerned about an article I read the other 
day, and I am not sure whether it is correct or not. But the 
school buses in the districts are not fixing those mirrors as I 
understand it. It is like a five dollar repair to fix these 
mirrors, that the drawstrings would not get caught in it.
    Now we have successfully gotten the clothing manufacturers 
to come forth and do their part, without any rules or 
regulations.
    What do we need to do to get these school districts to make 
this repair so some young person does not get caught again?
    Ms. Brown. The place that we have been able to be 
effective, as you are saying, the Consumer Product Safety 
Commission, is we now have a voluntary standard and the 
industry leapt forward to do that. Where there should be no 
more than 2 inches at the waist, where they removed the strings 
at the neck, voluntarily, and there should be only 2 inches 
allowed at the waist and it must be tacked.
    Fortunately, that is on all new clothing and we have 
monitored the industry, monitored the stores to see that that 
is correct.
    The other part about it could happen on school buses, since 
that is not something we can attend to except to encourage our 
sister agencies and local jurisdictions to do that, that is 
another part of it.
    Mr. Lewis. We all need to figure out how to send out a 
message, then, because it is like $5 a bus. We are not talking 
big money and a child's life is certainly worth it.
    Ms. Brown. I think the National Highway Traffic Safety 
Administration has been trying to work on this, and I think 
that what I will do is to, when I get back today, call Dr. 
Martinez and see where we are on this.
    Mr. Lewis. And I will have my staff make an appointment for 
you and Mr. Porter so we can discuss it whenever HHS comes in.
    Mr. Hobson. Okay. I would like to do that because it is 
something that should be done.
    Quickly, on two other things. I want to continue to 
encourage you on the baby safety showers because people talked 
about we have done it, we are going to try to do it with 
another Member close to us, and I think it is a good thing for 
Members to----
    Mr. Lewis. Near Cleveland?
    Mr. Hobson. No, this is going to be over near Columbus. 
Cleveland is a little far for me to drive. [Laughter.]

                        laboratory consolidation

    Mr. Hobson. And we always consider it way up north.
    If you want to do one, I will be happy to come, if you guys 
are going to be there.
    The other thing is, and I understand maybe you have talked 
about this already, but I use you as an example before all the 
other agencies when they come in on rent, because you did fight 
on it.
    The GSA guy did show up and said, ``Hey, what are you 
doing?'' but he was very positive about what is happening on 
that, and I want to congratulate you. I think you have probably 
talked about this, about receiving the Hammer Award. I think 
that is pretty neat and----
    Ms. Brown. We also are consolidating our two----
    Mr. Lewis. You won on that. That was a big fight you had 
with GSA. That needs to be in the record, that she won, and 
fought on that. [Laughter.]
    Ms. Brown. And we are consolidating our laboratories and it 
has worked out to be a very successful enterprise and we will 
be----
    Mr. Hobson. Where are you consolidating?
    Ms. Brown. Pardon me?
    Mr. Hobson. Not in Ohio. Not in my district.
    Ms. Brown. No; no.
    Mr. Hobson. But the important thing is that agencies need 
to know that you can have these discussions with GSA and that 
you can work things out and get it done, and that is an 
important message to be sent to everybody, I think.
    Because there is a tendency for agencies to say, ``Well, 
GSA said this,'' and I do not think we have to--you have to 
live with that. So thank you, keep up the good work, and thank 
you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Hobson.
    With the attendance we have had today, I must mention that 
somebody, one side or the other, has asked all the questions I 
had formally prepared, which I thought might happen.
    Ms. Brown. I have not answered one of your questions, if I 
may, about our Hispanic staff. Eight percent of CPSC's 
minorities are Hispanic. Two percent of CPSC's overall staff 
are Hispanic, and Hispanic staff has increased approximately 40 
percent in the three years since I have been here.
    Mr. Lewis. I will be interested in following that progress, 
and frankly, we have done very well, across the board, in that 
whole area of interest.
    But nonetheless, I do find, particularly in California, 
that Hispanic access to executive levels in Government, as well 
as other locations, seems to lag significantly, and it does not 
hurt to raise that question from time to time.
    Ms. Brown. Absolutely.
    Mr. Stokes. Mr. Chairman.
    Mr. Hobson. Yes, Mr. Stokes.
    Mr. Stokes. On that area, can I just make a request that on 
this area, as in your previous questions, that Ms. Brown be 
permitted to expand on this in the record and provide tables 
for us also.
    Mr. Lewis. Absolutely.
    Ms. Brown. Oh, absolutely. That will all be provided, 
Congressman.
    Mr. Stokes. Thank you.
    [The information follows:]

[Pages 556 - 559--The official Committee record contains additional material here.]


                            housing project

    Mr. Lewis. Thank you, Mr. Stokes.
    I might mention, I was going to raise this when there were 
more Members present, but there is a good number here at this 
moment. It is separate from your subject but we are still in 
session and the thought is in my mind.
    On June the 5th, we are going to involve ourselves with as 
many Members as possible in a thing that is now being called 
``The House That Congress Built.''
    The Speaker and the Democratic leader have agreed to come 
together, and bring the leadership together, to go to a 
Southeast location in Washington, D.C. and complete the 
building of what actually will end up being two homes for 
people by way of Habitat For Humanity.
    It will be an effort whereby we hope to get a broad cross-
section of Members who are in the committees, authorizing as 
well as appropriating committees, that deal with public housing 
and housing in general, kind of the edge of the kickoff of home 
ownership week.
    We would hope that maybe that would even lead to the 
following year, Members going back to their individual 
districts and participating in similar efforts.
    But Mr. Stokes and I are very pleased to be a part of 
sponsoring this and want to bring it to your attention while 
you are here.
    And with that, thank you, one more time, for very fine 
testimony, Ms. Ann Brown, and I very much appreciate 
Commissioner Gall being with us, and for your contribution as 
well.
    With that, for now, we will see you next year.
    Ms. Brown. Thank you very much on behalf of all of us.

[Pages 561 - 624--The official Committee record contains additional material here.]


                                          Wednesday, May 7, 1997.  

                    U.S. OFFICE OF CONSUMER AFFAIRS

                               WITNESSES

LESLIE L. BYRNE, SPECIAL ASSISTANT TO THE PRESIDENT, DIRECTOR

                            Opening Remarks

    Mr. Lewis. It's a pleasure to welcome Ms. Leslie Byrne, 
director of the Office of Consumer Affairs.
    Ms. Byrne. Thank you, Mr. Chairman. It's good to see you 
again.
    Mr. Lewis. Nice seeing you.
    Ms. Byrne. Members of the committee, how are you today.
    Mr. Stokes. Ms. Byrne, how are you?
    Ms. Byrne. I'm doing well. I have Howard Seltzer and Sandy 
Aguilar from our staff with us today. And I have a formal 
statement that I'll submit for the record, and just make a few 
brief comments.
    Mr. Lewis. I would make some introductory remarks as well, 
and perhaps Mr. Stokes may want to, and then we can go from 
there, Leslie.
    It's a pleasure to welcome you to the committee, and for 
your first appearance before the subcommittee in this capacity. 
Ms. Byrne, you have the distinction of being the subcommittee's 
last witness of our review of the fiscal 1998 budget which 
began February 26th when we had hearings on NASA's budget.
    Thank you for being with us today, and while we welcome you 
to the committee, we wish you well. We certainly hope you're 
enjoying your work as much as we're enjoying hearing from you.
    Ms. Byrne. Thank you, Mr. Chairman, and as I say, I'll 
submit my formal remarks, but let me just say----
    Mr. Lewis. Let me see if Mr. Stokes would like to say 
anything. He might want to welcome you as well.
    Mr. Stokes. Thank you, Mr. Chairman. I would like to 
welcome Ms. Byrne, as a former member and colleague, and 
someone for whom we have great respect and admiration. It's a 
pleasure to have you appear here in this new position, and I 
join with the Chairman in wishing you well.
    Ms. Byrne. Thank you.
    Mr. Lewis. So then you can proceed as you like, Ms. Byrne.
    Ms. Byrne. Okay. Well, because of a letter we've received, 
the good news is that we've had a generous offer from a group 
who purport to be Nigerian officials, and we won't need an 
appropriation for 1998. [Laughter.]
    We may be able to turn money back to the Treasury. They say 
they find themselves with an embarrassing surplus of $28.6 
million, in U.S. dollars, and because of intentionally over-
invoicing a contract, they've graciously offered us 30 percent 
if we will bank the money for them here in the U.S. and supply 
them with several items of personal information, including our 
bank account number.
    Their letter closes with: ``let honesty and truth be our 
watchword''. So it must be legitimate.
    Mr. Lewis. I would suggest the Office of Consumer Affairs 
proceed with great caution. [Laughter.]
    Mr. Hobson. I've gotten those letters.
    Ms. Byrne. That's right. And Mr. Hobson, although this scam 
is laughable on its face, and transparent, it is a prime 
example of the type of fraud based on illegal use of personal 
information, which we have focused much of our efforts at 
USOCA.
    We focused on consumer education and policy development, 
and coordination of various agencies, so that people will be 
aware of these kinds of frauds. As a matter of fact, when we 
testified on the other side last month, Senator Bond indicated 
that one of his friends had been taken in by this very same 
fraud I just outlined.
    We are the only executive branch agency, by executive 
order, to coordinate and monitor Federal consumer programs 
throughout the government, to identify consumer needs, and 
educate and be advocates for consumers.
    We are non-regulatory. We have no mixed mission, or 
restrictions on our role to represent consumers. We are 
proactive in giving people the tools they need to protect 
themselves in the marketplace.
    Mr. Chairman, our budget request shows that we understood 
what your committee was saying last year about reducing 
government and making it more efficient.
    We are reorganizing. We are using technology to make us 
more productive, and to help the public with fewer tax dollars. 
We've instituted, since I've been there, a database that we can 
track complaints as they come in by letter and by phone, 
sharing that information with other government agencies, so 
that they have access to what we know also.
    We're developing Web links with the FTC and the CIC so that 
our handbook is going to be on every available Federal Consumer 
Website, so that when people click in to the Federal Trade 
Commission, or the Consumer Information Center, that they can 
pick up our publication.
    Our emphasis is on providing people with the education and 
information they need to help themselves. Because, quite 
honestly, it costs less, and is more efficient than fixing 
problems after the fact.
    Because of the shift of our economy to a service and 
information based economy, we are planning a White House 
Conference on Consumer Issues for 1998.
    Consumer rights are associated with products like cars and 
air conditioners, but those rights aren't easily transferred to 
international travel packages, or on line services.
    We need to ask questions in a borderless marketplace. Where 
do you go when something goes wrong?
    Our long term goal is a wide acceptance of core values that 
we've come to call a fair shake marketplace. These values are 
disclosure and information, choice of products and services, 
access to the marketplace, and redress when something goes 
wrong.
    We plan to continue to recognize entities that achieve 
these goals. That's why we have such a good relationship with 
the business community. They want to do right by their 
customers, and we want to tell the public when they do.
    Finally, Mr. Chairman, we will continue working with 
Congress on specific consumer issues, in town meetings and 
joint seminars, and on topics of privacy and fraud, credit and 
debt management and other issues that we know you feel are 
important.
    These are some of our goals, and with the support of this 
Committee we will also continue to have a consumer advocate in 
the Federal Government. That closes my remarks, Mr. Chairman.
    [The statement of Ms. Byrne follows:]

[Pages 628 - 645--The official Committee record contains additional material here.]


    Mr. Lewis. Thank you, Ms. Byrne. As you might have 
anticipated, the bells have just gone off. So we're going to 
move along and see what happens in the next few minutes.

                USOCA REQUEST FOR FY 1998 APPROPRIATIONS

    The Office of Consumer Affairs 1997 appropriation was for 
13 FTEs and $1.5 million. The 1998 request, reflecting a slight 
adjustment, 13 FTEs, the same, and $1.8 million of budget 
authority request. Mr. Stokes, any questions?
    Mr. Stokes. Thank you, Mr. Chairman. Ms. Byrne, I don't 
think there's any secret that over the last two or three years 
your agency has had a difficult time here in the Congress. 
Since becoming Director, tell us what you've done to address 
these concerns, and what additional actions you might take.
    Ms. Byrne. Well, the first thing we did was sharpen our 
focus. With everything being consumer issues, it's hard to deal 
with everything. So we focused in on fraud and privacy as our 
two priorities.
    The other thing is we have reorganized to have better lines 
of responsibility within the agency itself, so that everybody 
isn't trying to do everything. Those two things, in and of 
themselves, I think helped tremendously.
    Externally, the role that we had played as coordinator 
among the Federal agencies had been fairly moribund before I 
got there. It hadn't been an active role. We sat down with all 
the Federal agencies on April the 24th and talked about how we 
can cut out the proliferation of 1-800 numbers.
    There are so many 1-800 numbers now, people are getting 
confused which ones to call, and how we can help each other 
enhance our messages, and create message weeks, if you will, so 
that some time some agencies will talk about seat belts, to 
help NHTSA out with their message, and others would talk about 
how to control your debt and credit to help the Fed with their 
message.
    So those are things that I think are very positive aspects 
of our three part mission. And that is the advocacy and policy 
arm for the White House; being a coordinator among Federal 
agencies for consumers; and the education.
    And once you get your mission clarified, I think you do a 
much better job. I think quite honestly we had not done as good 
a job as we could have in communicating that mission.
    Mr. Stokes. Based on these activities, do you have reason 
to hope that the 1998 appropriation process for OCA may be less 
volatile?
    Ms. Byrne. One always has hope. [Laughter.] That's how I 
got into politics. It's a very hopeful profession.
    But I do believe that we serve a valuable function in that 
we are proactive. We don't wait for somebody to have their 
credit card misused. We try to educate people on howto protect 
their credit card numbers. That's a cheaper way to do business, quite 
honestly. That's a better way to do business.
    And now that I think we've clarified in our own agency's 
mind how to do what we need to do, I hope that this Committee 
understands that we're on a positive road.

                       USOCA'S ROLE IN GOVERNMENT

    Mr. Stokes. One other question, Mr. Chairman, and then I'll 
submit the balance of my questions for the record. Ms. Byrne, 
you indicate that OCA's primary focus is on fraud prevention 
and personal privacy issues.
    Many Federal agencies have considerable efforts under way 
in these areas. What makes your activities different and worth 
while?
    Ms. Byrne. Well, as I stated, Congressman Stokes, we have 
an umbrella approach. For example, on the issue of privacy, 
we're working on overseas privacy, in trying to find out how we 
can encourage our businesses to be able to have no trade 
barriers overseas, because they have more stringent privacy 
protections. What we can do to help them meet those privacy 
protections, and get through those trade barriers.
    We also have the advocacy role. The Federal Trade 
Commission, for example, which is the other agency that's 
working on privacy, gets X number of calls. Two hundred, five 
hundred.
    What we try to do is help that person who had their 
identity taken away from them in a false way, help them on the 
spot. Where do they go to get help? Who do they talk to? What 
do they have to to make it right with the credit bureaus who 
are telling them that somebody took a loan out for $100,000 in 
their name.
    It's very tough times for people, and we get a lot of calls 
from congressional offices where they've called us to help 
their constituents, because it is a very personal kind of 
approach.
    So it's not a high volume business. We're not looking for 
the thousandth case to send the matter to the Justice 
Department. We're trying to help people on the spot.
    Mr. Stokes. Thank you, Ms. Byrne. Thank you, Mr. Chairman.
    Mr. Lewis. Ms. Byrne, I believe that Mr. Hobson has a 
couple of questions.
    Mr. Hobson. Yes, Mr. Chairman.
    Mr. Lewis. I'm going to run up and vote, and come right 
back down, and then we can go on with our hearing.
    Mr. Hobson. First of all, on the rent, I see your rent is 
dropped from the 1996 level. Did you get different space?
    Ms. Byrne. We got different space. We were in the same 
building as the drug enforcement group, the drug czar, and he 
wanted to grow, and so they found us different space, and we 
were able to negotiate a better deal.

                   USOCA'S CONSUMER RESOURCE HANDBOOK

    Mr. Hobson. Glad to see you negotiating. I'm trying to get 
that message out to people. Now, I'm going to ask this 
question, and I hope staff will bring it to the Chairman's 
attention when he comes back.
    The CIC publishes the Consumer Information Catalogue and 
your office publishes the Consumer's Resource Handbook. Is that 
correct?
    Ms. Byrne. Yes. We publish the Handbook, and CIC, who just 
testified before us, does the catalogue.
    Mr. Hobson. How does these documents differ, and if both 
CIC and the Office of Consumer Affairs have similar goals and 
purposes, should we be looking at combining these, or what 
should we be doing?
    Ms. Byrne. Well, if you look at the catalogue, Congressman 
Hobson, you'll see that it's a compendium of all Federal 
publications. CIC is basically a distribution center for public 
information, whether it's how to worm your dog or whatever.
    Our book is very specifically tailored to how to protect 
yourself in the marketplace, where to go on the local, State 
and Federal level to get your questions answered. So, CIC is a 
distribution center for all publications. We have a specific 
number of publications that are tailored directly to consumer 
interests.
    They distribute our Handbook. But it's a difference between 
a policy arm and a distribution arm, if you will. This is our 
Handbook that is sent out. And while CIC distributes it for us, 
I think from Ms. Nasif's testimony today, it's apparent that 
there's a lot of work that goes into this beyond just 
distributing it.
    It has to have a policy component. What are you going to 
emphasize? What are you going to de-emphasize? What's the 
hottest problem people are facing? We're looking at, if, 
indeed, we get the ability to go back into business with this, 
we're looking at emphasizing child care as a consumer issue.
    How many families spend what proportion of their family 
income in child care? This is a big consumer issue. It's not 
something that's static. It's not something that's cast in 
stone.
    Mr. Hobson. Well, I think it's important for us to know, 
because if you don't know, it looks so similar.
    Ms. Byrne. Exactly.
    Mr. Hobson. That's what I was trying to bring out.
    Ms. Byrne. Exactly.
    Mr. Lewis. Thank you, Mr. Hobson.
    Mr. Hobson. And thanks for coming to visit with us.
    Ms. Byrne. Thank you.

                        national consumers week

    Mr. Lewis. One of the primary efforts, Ms. Byrne, of the 
Office of Consumers Affairs is the National Consumers Week, 
which is held each October. Can you explain the role that the 
Office of Consumer Affairs plays in National Consumer Week, and 
approximately how many events are held nationwide, and how 
critical is your office to insuring the success of this effort?
    Ms. Byrne. Well, there again, it's a catalyst to have 
local, State and Federal agencies focus on what they're doing 
for consumers, and how to do it better.
    It is also a time for businesses to kind of strut their 
stuff on what they've been doing to help their customers.
    We have had over 100 events last year, all around the 
country, and we've had contests where people submit what 
they've done for consumers. And we had three winners. The 
winner of our business category was General Motors, in 
conjunction with Ford and Chrysler.
    I think that it's a amazing that we got the big three to 
work so cooperatively together. So those are the kinds----
    Mr. Lewis. It is amazing.
    Ms. Byrne. It is amazing. And it goes--I think it speaks to 
our stature among the business community, quite honestly. That 
they know that we're not going to take advantage of their good 
will.
    But we are the catalyst. We bring them together. We have 
some focuses that we're looking at. Again, privacy in the 
Internet is something that we're going to be looking at this 
National Consumers Week, because it is a hot topic.
    How to protect your privacy in the online world. And other 
State and local and Federal agencies are going to be doing 
things to highlight their work. But I'm not sure who would take 
the lead, if we weren't there to do it. Because it is a large 
coordination effort among the various entities to make sure 
that we're all pulling in the same way.
    Mr. Lewis. Well, I frankly feel that there is a need for a 
proactive effort in this whole subject area. There's little 
doubt that information is fundamental to consumers having a 
better idea of how to protect themselves, both their privacy, 
but also their economic well being in some instances--many 
instances.
    And oftentimes it's that person with the least available 
capital or access who needs this information the most.
    Your testimony notes that due to budget constraints, the 
newsletter normally distributed by your office has been 
discontinued in 1997, and will only be a semi-annual newsletter 
in 1998.
    What was the frequency of the newsletter in the past, and 
what was the cost, and what do you expect the costs will be for 
the semi-annual?

                     usoca's consumer's newsletter

    Ms. Byrne. Well, it was quarterly in the past, and it was 
about $80,000 a year. We're looking at a $30,000 a year cost, 
and, quite honestly, the reason for the newsletter is, again, 
that effort to coordinate those kinds of consumer protection 
areas, where we have, without the coordination, we have a lot 
of duplication. There's no question.
    Mr. Lewis. Yes.
    Ms. Byrne. And the Federal agencies, instead of 
complementing each other's efforts, start to compete. It's the 
nature of the beast.
    Mr. Lewis. That's right.
    Ms. Byrne. And so what we try very valiantly to do, and the 
newsletter is a tool to do that, is get them all singing off 
the same hymnal, to make them understand that there are ways to 
work cooperatively, that they don't have to reinvent the wheel.
    We're working quite closely with NPR, on National 
Performance Review, in the same efforts. They see us as a 
vehicle for a lot of the things they'd like to do because of 
this consumer advisory council, in making sure that we are 
complementing and not competing with each other.
    Mr. Lewis. Your remind me of something I mentioned at a 
meeting earlier, that the first time I ever testified before a 
Committee was in ancient times, some time in the 60s I went to 
Sacramento to testify before a health and insurance committee, 
my field being the life and health insurance business.
    Testifying about those, what we described then, as suede 
shoe salesmen who were using large print on the front page of 
health contracts to convince elderly citizens that the 
contracts did much more than they ever were able to do.
    It's very, very important that Government knows it has a 
responsibility here, and to coordinate those efforts in a 
positive way.
    So I want to welcome you to the Committee. I'll have a 
number of questions for the record.
    Ms. Byrne. Certainly.
    [The information of Ms. Byrne follows:]

[Pages 651 - 654--The official Committee record contains additional material here.]


    Mr. Lewis. It's great to see you again.
    Ms. Byrne. Well, it's good to see you again, Mr. Chairman.
    Mr. Lewis. Mr. Stokes.

                       why usoca should be funded

    Mr. Stokes. Mr. Chairman, I just have one further question 
to pose to Ms. Byrne. I would like to ask you, as a former 
member of this institution, and a good member of this 
institution I would like to add, I think you understand better 
than most the fierce competition for dollars under Federal 
appropriations.
    Tell us what, in your opinion, or the best argument you can 
provide this Committee, why it should fund the Office of 
Consumer Affairs this year, especially at a rate that is 20 
percent above the current appropriation.
    Ms. Byrne. Well, Mr. Stokes, you understand that our 
requested appropriation for the last fiscal year was $1.8 
million. It's the same, and it's only by the perils of Pauline 
that we survived with the $1.5 million, and I understand that.
    We're barely hanging on with that amount, to be quite 
honest with you. We're not doing what we should be doing with 
$1.5 million. We, for example, before we came here, I did an 
interview in Fargo, North Dakota. When there's natural 
disasters, the con artists come out of the wood work.
    We should be much more proactive in getting information to 
people who are facing these natural disasters, so they don't 
lose twice. And yet we don't have the resources to do it.
    We're the only agency, quite honestly, because we're non-
regulatory, that can have that fast turn around. We can use the 
education and information to get people on the right path 
quickly.
    We're not run by lawyers. And so we're teachers. And so 
that's how we're proactive instead of reactive.
    We don't wait for somebody to be taken in a scam. What we 
want to do is get out there in the community and give people 
the information they need to protect themselves.
    And I think that makes us unique among most of the other 
agencies, is that we are proactive. We don't wait for a child 
to get hurt by a venetian blind cord, which is what, the 
Consumer Product Safety Commission has to wait for some 
demonstrable thing to happen, several of them, before they take 
action. The same with the Federal Trade Commission.
    But our job is to give people the understanding that they 
are in control of their destiny, so to speak, if they know what 
to look for. And that's what we do.
    Mr. Lewis. Ms. Byrne, you're comment in response to Mr. 
Stokes' question, your comment regarding disasters and scam 
artists coming out of the woodwork I think is an item that 
isvery worthy of our consideration.
    I don't know if you have had communication with FEMA 
regarding this problem, but we'd like to know more about that. 
It is an item that the Committee ought to look at with some 
care.
    Ms. Byrne. It really is. And we were trying to work--we had 
talked to FEMA, and they are up to their ears in rebuilding 
right now.
    Mr. Lewis. Of course.
    Ms. Byrne. But it's something, that I think, again, we have 
a role to play in coordination with the Federal Trade 
Commission and others, in getting folks down to these sites so 
that they aren't taken.
    There is an insurance scam going around in Fargo right now 
where people are purporting to sell retroactive flood 
insurance.
    Mr. Lewis. That's easy isn't it? I'll just collect your 
premium and see if you can collect your payment.
    Ms. Byrne. That's right. And so I was on the radio station 
with them this morning, saying there is no such thing. You 
can't have retroactive flood insurance. So if they come and 
approach you, just close the door.
    And hopefully that got to a few people who won't be taken 
in by it.
    Mr. Stokes. Mr. Chairman, I concur with you, that what Mrs. 
Byrne has just said to us about these kinds of scams taking 
place in disaster sites, is something for us to take a look at, 
particularly with the type of concern and interest that you 
have and that I have and that this Subcommittee has relative to 
FEMA and these disasters.
    People already devastated by that type of thing just do not 
need people in there.
    Mr. Lewis. There's no question that at times of panic, 
times of disaster and concern, people react and look for help 
and look for answers, and they can be taken advantage of. It's 
a very interesting subject that I haven't really thought about.
    Ms. Byrne. When your basement is under five feet in water, 
sometimes that stress makes you lose that common sense that you 
would ordinarily have. And so we have to just kind of remind 
folks that they've got to look for licensed and bonded 
contractors and things like that.
    Mr. Lewis. Well, one member of our Committee, a new member 
this year, who never loses her common sense, regardless, would 
at least like to say hello. Mrs. Meek?
    Mrs. Meek. Thank you, Mr. Chairman. Good to see you again. 
Very good to have a colleague back. I am certain in accord with 
the Chairman and Mr. Stokes about the fraud and the scam 
artists that follow these natural disasters.
    I've had a lot of experience with that after the hurricane 
in Miami. Some people still do not have their homes rebuilt. 
Bogus contractors are still running around. It doesn't seem 
like anyone can get a hold on this.
    The country has tried. And FEMA is trying. And I'm glad to 
hear they may ask for some kind of coordinated effort in doing 
this, because it is still a big scam, and people just cannot 
recoup their farms and the monies that they have lost.
    I am new to the Committee. Therefore I'm having not 
problems, but I have a concern. You are the third agency that 
has appeared before us with a consumer type focus. And I 
understand that you have no regulatory power, but I would like 
you to differentiate very quickly if you can the difference 
between you and the other acronyms, and I shouldn't say 
acronyms, but the others who have appeared before us.
    The second thing is, why is it we couldn't have--no one 
here is old enough except Lou to remember the lady who used to 
be the Federal consumer person--always on television.
    Ms. Byrne. Esther Peterson.
    Mr. Stokes. Esther Peterson?
    Mrs. Meek. It wasn't Esther Peterson. This lady was--Betty 
Furness.
    Mr. Lewis. Oh, yes.
    Mrs. Meek. Everybody in the country knew about Betty 
Furness.
    So is there any reason why this Congress could not build a 
mega-so-called consumer agency with perhaps a head to it with 
all of these different groups under that agency.
    I can see how an organization like that would work. But I 
need to know from you the differentiation, and also what you 
think of my idea.
    Ms. Byrne. Well, let me take your last question first, that 
when this agency was put together under President Richard 
Nixon, it was pretty much one big agency.
    And so little by little it was bifurcated and trifurcated 
and spun off. And the way that it was spun off is that the 
Consumer Product Safety Commission, the one that testified 
first here today, deals in things. They deal in tangible 
things, and the safety of those things.
    And the CIC, the Consumer Information Center, is a 
distribution center for all Federal publications. And as I told 
Congressman Hobson, while you were out, it can be anywhere from 
how to be a good consumer to how to worm your dog. It has all 
the information you could ever use.
    And we deal in services and information. Information in how 
to protect your privacy, services in credit card fraud, debt, 
how to protect your financial health, telemarketing fraud. All 
of those things, those services and the information that 
sometimes goes wrong for the consumer.
    So we've got Consumer Product Safety Commission who deals 
with real time tangible items. We've got CIC who distributes 
all the information. We've got us who deal with services, and 
information products.
    Mr. Lewis. You wouldn't think Mrs. Meek was a new member of 
the Committee for her to be asking that question, would you?
    Any further questions, Mrs. Meek?
    Mrs. Meek. No, sir. Thank you.
    Mr. Stokes. Mr. Chairman.
    Mr. Lewis. Yes?
    Mr. Stokes. Before you conclude, my understanding is that 
this is our last witness, and this terminates our hearings for 
this year.
    I just want to take this opportunity to say to you, as I 
sit here and reflect, you and I have served on this 
subcommittee together for a long period of time.
    Mr. Lewis. A long time.
    Mr. Stokes. A number of years. And we've both served when 
neither one of us was chair. [Laughter.]
    So we've been here a long time. But I want to commend you 
for the excellent hearings that you've conducted this year, the 
very fair manner in which you have presided over all of our 
hearings, and it's a pleasure to serve under your chairmanship. 
And I just want the record to reflect that.
    Mr. Lewis. Thank you very much, Mr. Stokes.
    Mr. Stokes. And I'm sure I speak for Mrs. Meek and all the 
members on our side.
    Mr. Lewis. There are many of us who are attempting to 
extend the spirit of Hershey. You may have heard about our 
conference at Hershey, Pennsylvania.
    Ms. Byrne. Absolutely.
    Mr. Lewis. Actually there is a great residue there on both 
sides of the aisle, of people who want to begin dealing with 
issues in terms of their problems and solutions rather than 
sometimes being driven by rhetoric alone.
    But, indeed, it is a pleasure to work with you, and I 
appreciate those comments. And we appreciate your being with 
us, and with that, this meeting is adjourned, and our hearings 
are adjourned for this year.

[Pages 659 - 935--The official Committee record contains additional material here.]







                           W I T N E S S E S

                              ----------                              
                                                                   Page
Blanding, W.L., Jr...............................................     1
Brodsky, L.C.....................................................     1
Brown, Ann.......................................................   503
Bryson, J.T......................................................    41
Byrne, L.L.......................................................   625
Corea, Col. A.N..................................................   391
Coronado, Gil....................................................     1
D'Amours, N.E....................................................   177
Davis, R.T.......................................................    41
Dola, Steven.....................................................   415
Fenner, R.M......................................................   177
Galdo, J.H.......................................................    41
Gall, M.S........................................................   503
Guest, H.E.......................................................    41
Herrling, Maj. Gen. J.P..........................................   391
Kelly, Col. K.C..................................................   391
Kelly, M.H.......................................................    41
Knight, George...................................................    41
Lancaster, H.M...................................................   415
McGinty, K.A.....................................................   205
Means, Col. D.F..................................................   391
Metzler, J.C., Jr................................................   415
Moy, K.S.........................................................    93
Nasif, Teresa....................................................   449
Newburger, Beth..................................................   449
Pond, K.S........................................................   391
Porrata, C.B.....................................................    41
Rubin, Hon. R.E..................................................    93
Smith, Rory......................................................   415
Widener, M.L.....................................................    41
Woerner, Gen. F.F................................................   391
Yolles, H.S......................................................   177







                               I N D E X

                              ----------                              

                        Selective Service System

                                                                   Page
Annual Report to Congress........................................     9
    A Message from the Director..................................     9
    Congressional Affairs........................................    12
    Financial Management.........................................    15
    Information Management.......................................    25
    Operations...................................................    19
    Planning, Analysis and Evaluation............................    28
    Public Affairs...............................................    16
    Resource Management..........................................    10
    The Regions..................................................    23
Biography--Executive Director....................................    29
Committee Position...............................................    30
Cost of English and Spanish Public Service Announcements.........    40
Cost Per Registration............................................    39
Mail-back Postcard...............................................    36
Mobilization Timetables..........................................    33
Moving the Data Management Center................................    39
Opening Remarks..................................................     1
    Automation Modernization.....................................     2
    Greetings from the Lewises...................................     2
    Mobilization Timetable.......................................     2
    Service to America Initiative................................     3
Other Outsourcing or Moves.......................................    39
Outsourcing......................................................    35
Public Service Announcement......................................    34
    Obtaining Celebrity Support..................................    35
Service to America Initiative....................................    30
    Agency's Technical Ability...................................    31
    Department of Defense Help...................................    32
    Proposed Expenses............................................    33
    Recruitment Service..........................................    32
Streamlining Agency..............................................    38
Written Statement................................................     4
    Agency Continues to be Examined..............................     5
    Automated Data Processing (ADP) Initiatives..................     7
    Fiscal History (Chart).......................................     4
    Health Care Personnel Delivery System (HCPDS)................     6
    Impact of New Induction Timetables...........................     5
    Planning and Performance Measures............................     5
    Registration Improvement.....................................     6
    Service to America Initiative................................     7

                 Neighborhood Reinvestment Corporation

Acknowledging the Importance and Success of NRC..................    54
Campaign for Home Ownership......................................    57
Chairman's Trip to New Orleans...................................    55
Community Development Block Grants and Home......................    80
Comparison with Bangladesh Program...............................    58
Defining Critical Mass...........................................    53
Developing a New Campaign........................................    59
Economic Development.............................................    58
Engaging the Private Sector......................................    56
Examples of Tax Base Increases...................................    42
Explaining Budget Request Figure.................................    53
Federal Low-Income Housing Purchases.............................    88
Grants and Leveraging............................................    66
Loan Default Rates...............................................    86
Measures of Impact...............................................    43
Mutual Housing Associations......................................    83
Mutual Housing...................................................    61
Neighborhood Housing Services of Cleveland, Inc..................    73
Neighborhood Housing Services of America.........................    70
Neighborworks Client's Characteristics...........................    75
Neighborworks' Campaign for Home Ownership.......................    65
Network's Focus on Diversity.....................................    56
NHSA's Secondary Market..........................................    91
Opening Remarks..................................................    41
Personnel........................................................    72
Program Reviews and Audit........................................    61
Preserving Affordable Housing....................................    60
Preserving Affordable Housing....................................    68
Questioning OMB's Recommendation.................................    54
Reduction in Grant Request.......................................    59
Request for Affiliation/Creation of Neighborworks Organization...    81
Results of FY 1996 Appropriation.................................    41
Statement of George Knight.......................................    44
Training Costs...................................................    64
Training Institutes Courses......................................    63
Training Institutes..............................................    62
What Has Been Learned............................................    42

              Community Development Financial Institution

Administrative Costs.............................................   127
Application Review...............................................   154
Capital Access and Economic Activity.............................    95
CDFI Fund Staffing Plan..........................................   122
Concluding Remarks...............................................   155
Default Rates and Performance Goals..............................   123
Disbursing Funds.................................................   126
Disbursing Loans and Grants......................................   130
Eligibility......................................................   128
Entitlement Programs.............................................   100
Housing..........................................................   128
Introductory Remarks.............................................    93
FY 1998 Budget Justification.....................................   156
Leveraging Other Money...........................................   108
Matching Funds...................................................   125
Microenterprise Activity.........................................    97
Multifamily Housing..............................................   129
National Credit Union Administration.............................   100
Number of Applications...........................................   126
One-to-One Ratio.................................................   121
Opening Remarks of Director Moy..................................   106
Opening Remarks of Secretary Rubin...............................    94
Performance Agreements...........................................   110
Performance Agreements...........................................   124
Profiles of Organizations Selected for Funding...................   131
Public Housing Programs..........................................   121
Questions for the Record.........................................   165
Repayment Capacity...............................................   123
Rural Areas......................................................   109
Santa Cruz Community Credit Union................................   109
Self-Sufficiency.................................................    98
Self-Sustaining Institutions.....................................   108
Shorebridge Strategy.............................................   109
Small Businesses.................................................   129
Staffing.........................................................   127
Training Initiative..............................................   124
Bank Opposition..................................................   198
Capital in Low-Income Communities................................   200
Common Bond Issue................................................   197
Community Development Credit Unions..............................   199
Community Development Revolving Loan Program.....................   191
Cooperation Among Community Organizations........................   198
Court Injunction.................................................   189
Field of Membership Legislation..................................   190
Field of Membership..............................................   189
How Credit Unions Can Help.......................................   199
Introductory Remarks.............................................   177
Low-Income Credit Unions.........................................   190
Maximum CLF Loan Authority.......................................   191
Opening Remarks..................................................   178
Personal Bankruptcy..............................................   197
Predatory Institutions...........................................   200
Program Performance..............................................   191
Working Capital..................................................   201

                    Council on Environmental Quality

Welcoming Remarks by Chairman Lewis..............................   205
Introductory Remarks.............................................   205
Opening Statement................................................   206
CEQ's Oversight Role.............................................   206
Environmental Assessments........................................   207
CEQ's Role on Policy.............................................   207
NEPA Implementation and Improvement..............................   208
Utah's Desert Wilderness.........................................   208
NEPA and Public Participation....................................   210
NEPA: Integration of Environmental, Economic and Social 
  Objectives.....................................................   210
Budgetary Increase Request.......................................   212
Staffing Increase................................................   214
NEPA as a Policy Tool............................................   216
Shortcomings in NEPA Implementation..............................   216
Reinventing NEPA.................................................   216
Mining Law Proposal..............................................   219
NEPA Reinvention Time Frame......................................   220
Homestead Air Force Base.........................................   221
EPA's Rule on Ozone and Particulate Matter.......................   222
Proposed Asset Exchanges.........................................   223
Agency Rent Cost.................................................   225
Air Quality Standards............................................   225
Florida Everglades...............................................   226
Brownfields Sites................................................   228
Flood Plains.....................................................   229
Questions for the Record.........................................   231
FY 1998 Budget Justification.....................................   355

                  American Battle Monuments Commission

ABMC Management and Leadership...................................   402
Accounting Systems...............................................   410
Fiscal Year 1998 Budgetary Requests..............................   393
Foreign Currencies...............................................   400
Foreign Currency Fluctuation.....................................   398
Full Time Equivalents............................................   400
Individual Cemetery Funding......................................   405
Introductory Remarks.............................................   391
Maintenance Backlog Analysis.....................................   401
Maintenance Backlog..............................................   400
Management Headquarters..........................................   401
Pay Raises.......................................................   399
Questions for the Record.........................................   412
Rental Funding...................................................   405
State Department Funding.........................................   410
World War II Memorial Dedication Date............................   406
World War II Memorial Design Approval Process....................   407
World War II Memorial Design Approvals...........................   408
World War II Memorial Fund Raising Sources.......................   409
World War II Memorial Funding....................................   406
World War II Memorial Fundraising and Cost.......................   406
World War II Memorial Program Management.........................   410
World War II Memorial Site.......................................   408
World War II Memorial............................................   403
World War II Memorial............................................   407
Written Statement of General Woerner.............................   394

                       Cemeterial Expenses, Army

Closing..........................................................   446
Columbarium Cost.................................................   442
Columbarium......................................................   416
Construction Projects............................................   415
Contracts........................................................   441
Estimating the Kinds of Visitors.................................   447
Fiscal Year 1997 Request.........................................   415
FY 1998 Budget Justification.....................................   424
Government-wide Streamlining.....................................   416
Grave Liners.....................................................   443
International Visitors...........................................   445
Introduction.....................................................   415
Master Plan......................................................   442
Non-Funeral Events...............................................   444
Opening Statement................................................   418
Project Management...............................................   443
Rent Fluctuations................................................   447
Rents............................................................   446
Response Time....................................................   441
Scheduling Delays................................................   441
Three Programs...................................................   416
Visitor Study....................................................   443

                      Consumer Information Center

A Two-Tiered system..............................................   456
Advertising Budget...............................................   459
Agency Reimbursements............................................   459
Average Grade....................................................   466
Average Salary...................................................   466
Change in Zip Code...............................................   464
CIC Income Application Chart.....................................   467
Cost of Publications.............................................   456
Cost of Consumer Information Center Service......................   464
Decline in Administrative Expenses...............................   460
Distribution of Publications.....................................   455
Drop in Rent.....................................................   465
Expenses versus Reimbursements...................................   469
FY 1998 Budget Justification.....................................   470
Gift Authority for Consumer's Resource Handbook..................   462
Grade Creep......................................................   461
Income Application Chart.........................................   460
Information with Government Checks...............................   458
Internet Access..................................................   455
Opening Statement................................................   449
Other Services...................................................   465
Publishing the Catalog...........................................   464
Resources for Updating the Handbook..............................   462
Telephone Ordering...............................................   458
Transferring Responsibility for Handbook.........................   462
Welcome to Consumer Information Center...........................   449

                   Consumer Product Safety Commission

Airbags..........................................................   542
Anthropometric Data..............................................   528
Baby Safety Showers..............................................   527
Bicycle Safety...................................................   569
Butylated Hydroxy Toulene........................................   562
Cellular Telephones..............................................   566
Composition of Commission Staff..................................   526
Cost Benefit Analysis............................................   551
Cost of Wide Area Network........................................   537
CPSC Budget......................................................   524
Drawstrings on Children's Clothing...............................   553
Effect of Budget Reduction.......................................   524
Estimated Fire Losses in Residential Structures..................   548
Fire Prevention..................................................   543
Fire Safe Cigarette..............................................   549
FY 1998 Budget Justification.....................................   570
Government Performance and Results Act...........................   568
Housing Project..................................................   560
Laboratory Consolidation.........................................   554
Laboratory Consolidation.........................................   561
Laboratory Services..............................................   563
Minority and Women at CPSC.......................................   556
Productivity of Telecommuters....................................   541
Savings from Telecommuting.......................................   532
Senior Executive Service.........................................   557
Small Business Ombudsman.........................................   552
Special Investigations Unit Involvement..........................   567
Special Investigations Unit......................................   525
Special Investigations Unit......................................   564
Statement of Hon. Ann Brown......................................   510
Statement of Hon. Mary Sheila Gall...............................   504
Statement of Hon. Thomas H. Moore................................   505
Subjects of Special Investigations Unit..........................   565
Summary Statement................................................   508
Telecommuting Cost/Benefit.......................................   539
Telecommuting....................................................   529
Trend in the Number of Voluntary Corrective Actions..............   532
Upholstered Furniture Flammability...............................   544
Upper Grade Level Representation.................................   556
Voluntary Compliance.............................................   531

                    U.S. Office of Consumer Affairs

National Consumer Hotline........................................   652
National Consumers Week..........................................   648
Office of Consumer Affairs on the Internet.......................   652
Office of Consumer Affairs Publications..........................   653
Opening Remarks..................................................   625
Outreach to Youth................................................   651
USOCA FY 1998 Budget Justification...............................   659
USOCA's Consumer Resource Handbook...............................   647
USOCA's Consumer's Newsletter....................................   649
USOCA's Role in Government.......................................   647
USOCS Request for FY 1998 Appropriations.........................   646
Why USOCA Should Be Funded.......................................   655