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



 
                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN
               SERVICES, EDUCATION, AND RELATED AGENCIES
                        APPROPRIATIONS FOR 1998

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

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES

                 JOHN EDWARD PORTER, Illinois, Chairman

C. W. BILL YOUNG, Florida        DAVID R. OBEY, Wisconsin
HENRY BONILLA, Texas             LOUIS STOKES, Ohio
ERNEST J. ISTOOK, Jr., Oklahoma  STENY H. HOYER, Maryland
DAN MILLER, Florida              NANCY PELOSI, California
JAY DICKEY, Arkansas             NITA M. LOWEY, New York
ROGER F. WICKER, Mississippi     ROSA L. DeLAURO, Connecticut
ANNE M. NORTHUP, Kentucky        

 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.

S. Anthony McCann, Robert L. Knisely, Susan E. Quantius, Michael K. Myers,
                  and Francine Mack, Subcommittee Staff
                                ________

                                 PART 1

                           DEPARTMENT OF LABOR

                                                                   Page
Secretary of Labor................................................    1
Employment and Training Administration and Veterans' Employment 
and Training.......................................................  107
Occupational Safety and Health Administration, Mine Safety and 
Health Administration, Employment Standards Administration.........  223
Bureau of Labor Statistics.........................................  445
Pension and Welfare Benefits Administration, Pension Benefit 
Guaranty Corporation...............................................  493
Office of Inspector General........................................  551
Consolidated Management............................................  603
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

41-672 O                    WASHINGTON : 1997

------------------------------------------------------------------------

             For sale by the U.S. Government Printing Office            
        Superintendent of Documents, Congressional Sales Office,        
                          Washington, DC 20402                          







                       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 LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 1998

                              ----------                              

                                           Wednesday, May 14, 1997.

                           SECRETARY OF LABOR

                                WITNESS

HON. ALEXIS HERMAN, SECRETARY OF LABOR

                            Opening Remarks

    Mr. Porter. The subcommittee will come to order.
    Madam Secretary, before I welcome you, I want to thank the 
members of my subcommittee for indulging my back pain that 
forced me to miss a number of hearings. I appreciate all the 
members who attended those hearings, and those on our side who 
chaired them in my absence. I appreciate it very much.
    I am having the chance to be filled in on what had occurred 
in each of them, and to stay abreast of the deliberations of 
the subcommittee. But let me express my great appreciation for 
members covering for me in my absence, and thank each one of 
them for the job that they're doing on behalf of the 
subcommittee.
    Now, Madam Secretary, I want to welcome you in your first 
appearance before the subcommittee as the Secretary of Labor, 
and to congratulate you on your confirmation by the Senate. I 
understand that you're the Nation's 23rd Secretary of Labor, 
and you've been on the job now how many days?
    Ms. Herman. Eight days, now, Mr. Chairman.
    Mr. Porter. Well, the committee looks forward to working 
with you and your colleagues in the Department on the fiscal 
year 1998 budget. Now that we seem to have, I'm not sure we 
ever really have, but now that we seem to have some kind of a 
budget deal between the White House and the Congressional 
leadership I think our tasks should be easier. Obviously, there 
are a great deal of details to be worked out as we go through 
each of the appropriation bills. But I'm confident that we can 
work together and work with the Administration and provide some 
answers for the American people.
    We are very happy with your appointment. It is unfortunate 
that there was such a long delay, but that's behind you, and we 
are delighted that you are our new Secretary, and look forward 
to working very closely with you.
    I would now yield to Mr. Stokes.
    Mr. Stokes. Thank you very much, Mr. Chairman.
    It's nice to see you back and we hope that you're feeling 
much better. It's a pleasure to have you back chairing our 
Subcommittee.
    Madam Secretary, Mr. Dave Obey, who is the ranking member 
of this Subcommittee, and also the ranking member of the full 
Appropriations Committee, had intended to be here this morning 
to personally welcome you. He has to be on the floor because of 
the supplemental appropriations bill. However, he is going to 
try to get here, and in the meantime he has asked me if I would 
convey to you and join with the Chairman in welcoming you 
before our subcommittee.
    I was just thinking a moment ago that I guess Mr. Obey and 
I am not sure who else was present 20 years ago when you 
appeared before the Subcommittee as the Director of the Women's 
Bureau, of the Labor Department--the youngest person to ever 
hold that office. I might say you look as young today as you 
did then.
    Ms. Herman. I thank you for that, Congressman Stokes. I'm 
quick to point out I did age the fastest in that job. 
[Laughter.]
    Mr. Stokes. Well, let's hope it will be a little easier on 
you this time. You have had a very distinguished record of 
service in the area of employment and training, and so you come 
to the Subcommittee with outstanding credentials. And, we 
really look forward to working with you. Today, we look forward 
to your testimony before us.
    Thank you.
    Mr. Porter. Thank you, Mr. Stokes.
    Now, Madam Secretary, if you would proceed with your 
statement.

                           Opening Statement

    Ms. Herman. Thank you very much, Chairman Porter. And let 
me thank you again for your warm words of welcome to me from 
this committee.
    Mr. Chairman and distinguished members of the subcommittee, 
I am pleased to be here today to discuss the important work of 
the Labor Department and our 1998 budget request. I would ask 
that my full statement be included in the record.
    This is my first hearing before Congress as the newly-
confirmed Secretary of Labor, and I look forward to meeting 
with you in the future. Even more important, I look forward to 
working with you to improve the lives of America's working 
families.
    I want to work closely with each of you, and in partnership 
with the business community, the labor community, civic, 
charitable and professional organizations, to make sure that 
all Americans have the education, the training and the skills 
they need to succeed in the new economy.
    I want all Americans to enjoy a rising standard of living, 
with the opportunity to build an even better life for their 
children, and I want to make sure that Americans who are 
willing to work hard will enjoy the rights and respect, the 
safety and security, that they deserve.
    Together, we have made progress in helping America's 
working families build a better future for themselves. The 
economy is growing steadily. More than 12 million new jobs have 
been created since January of 1993. And unemployment is at its 
lowest rate in 23 years.
    Yet, we still face the challenge of helping working 
Americans to participate and prosper in the new economy. The 
new economy harnesses high technology and requires highly 
skilled workers to make the highest quality products and offer 
the highest quality services for markets at home and abroad.
    But, millions of Americans continue to toil daily in the 
old economy with bare hands and traditional machines, and 
millions more still seek full time jobs. It is our 
responsibility to make sure that all workers, regardless of how 
they earn their living today, have the opportunity to find and 
hold secure jobs in a safe and healthy environment with good 
wages, reliable pensions and health benefits.
    The goals I have set for the Labor Department to answer 
these challenges and build on the success of the past four 
years are as follows. My first goal is to equip every American 
with the skills to find and hold good jobs, with rising incomes 
throughout their lives. Secondly, to help people move from 
welfare to work. Thirdly, to assure that working Americans 
enjoy secure pensions when they retire. Fourthly, to guarantee 
every American a fair, safe and healthy work place. And lastly, 
to help people balance the issues of work and family today.
    Our 1998 budget request includes the resources we will need 
to pursue these goals, as well as to improve the accuracy of 
the economic indicators that guide our department and other 
Federal departments. Each of my assistant secretaries appeared 
before you on April 9th and 10th and provided details on their 
budget requests. Therefore, my remarks will focus on the major 
budget enhancements and the new initiatives.
    My first goal is to equip every American worker with the 
tools they will need throughout their careers and to enhance 
their productivity and raise their standard of living. 
Education can no longer end with a high school degree or a 
college diploma. Now education must mean lifelong learning and 
constant development of new skills.
    Our request reflects one of the President's top priorities, 
investing in education and training to ensure that every 
American has the schooling and the skills to succeed in the 
increasingly competitive global economy. And we target the high 
unemployment, low skill and lack of work experience among youth 
and adults in some of our poorest communities.
    Many young people need help to find and shoulder work and 
family responsibilities. We need to enhance the learning skills 
development and work experience as they prepare for the jobs of 
the 21st century. That is why we are continuing to assist 
States to develop and implement School-to-Work systems within 
the mainstream education system.
    States and localities are establishing One-Stop Career 
Centers, making the current array of programs meet the needs of 
workers looking for jobs and businesses looking for workers. 
The 1998 budget proposes competitive national grants to urban 
and rural areas with major youth unemployment problems. The 
Youth Opportunity Area grants are awarded for local plans based 
on proven models that show the best chance of helping young 
people find jobs.
    Two years ago, President Clinton proposed consolidating 
Federal job training programs into a work force development 
system. I am especially pleased that the House Committee on 
Education and Work Force reported out a bipartisan bill on 
April 30th, and that the President has sent a letter in support 
of this bill. It reflects our common goal of building an 
integrated work force development system.
    My second goal of promoting welfare to work is a goal that 
if we are going to successfully launch this initiative, we must 
closely work together. I am particularly pleased that the 
recently negotiated balanced budget agreement includes funds 
for Welfare to Work. The new Welfare-to-Work Jobs Challenge, is 
designed to help States and cities move the hardest to employ 
welfare recipients into the lasting jobs by the year 2000 is a 
challenge that will not be an easy one to meet. Having started 
my own career helping people move from welfare to work, I can 
assure you that with good cooperation, it is a job that we can 
do.
    We have asked for additional funds, as you know, for the 
Unemployment Insurance Program, to allow it to address the 
famous Year 2000 problem that will face computer systems for 
the State Unemployment Insurance agencies, and to focus on 
much-needed integrity activities in both tax collections and 
benefit payments.
    My third goal is to assure that workers are economically 
secure when they retire. Over 150 million participants and 
beneficiaries depend on the Pension and Welfare Benefit 
Administration (PWBA) to protect their pension, health and 
other welfare benefits. PWBA has the responsibility for 
implementing health insurance portability and other reforms 
under the new health benefit laws covering private employers.
    They will also provide more individualized technical 
assistance and education to pension plan participants and 
beneficiaries, and they will enhance enforcement efforts to 
crack down on the abuse of employee contributions to 401(k) 
plans.
    My fourth goal is to guarantee every worker a safe and 
equal opportunity work place. We must do all that we can to 
eliminate barriers denying employees equal opportunity, and 
guarantee safe and healthy work places, as well as other worker 
protections. The partnership initiative offers employers a 
choice between partnership and traditional enforcement. It 
targets those work places and work processes with the most 
acute safety and health problems, and provides additional 
outreach for the small business community.
    The New OSHA is premised not only on cooperation, but on 
maintaining a strong and credible enforcement presence. Without 
a strong enforcement program, far fewer employers would seek 
partnership or compliance assistance.
    The Employment Standards Administration Fair Enforcement 
Strategy includes equal opportunity initiatives to improve the 
enforcement coverage of the 200,000 Federal contractors. The 
strategy will eliminate unnecessary paperwork requirements and 
streamline internal procedures. And it will expedite the review 
process by targeting the most serious violations.
    To support the integrity and accuracy of prevailing wages 
and fringe benefits determinations under the Davis-Bacon and 
related Acts, we are requesting additional resources to 
continue and to expand on the improvement efforts initiated in 
fiscal year 1997.
    My fifth goal is to help workers balance work and family. I 
have worked over the years with dozens of major corporations 
and unions that have adopted family friendly policies. This is 
simply good business and good family values. The Department has 
taken steps to promote this important value through programs 
like the Working Women Count Honor Roll. We would expect to 
continue to work with the more than 1,600 partnerships that 
have been established in this initiative as well as others to 
work on this most important goal.
    Improving economic indicators, and the Government's 
Performance and Results Act are the two areas that I would like 
to comment on last. I want to thank Congress for the assistance 
that you have given and I want to work with Congress and I want 
other Federal agencies to complete our work with the accuracy 
of the economic indicators upon which we all depend.
    The consumer price index is the principal source of 
information about inflation. It is used extensively for 
economic analysis and policy formulation in both the public and 
private sectors, and has a significant impact on Federal 
spending and tax revenue. It is important that the committee 
provide the President's requested funding levels for the Bureau 
of Labor Statistics.
    Finally, I am committed to continue the performance-based 
results-oriented approach to goal setting and strategic 
planning. I look forward to consultations with Congress, as 
well as with our other stakeholders over the next several 
months as the Department completes its work on its initial 
strategic plan required by the Government Performance and 
Results Act, which is due to Congress in September of this 
year.
    I have had the opportunity to meet with most of you. I 
would like in the future to be able to meet with all of you to 
discuss the important work of the Department. I look forward to 
working with the committee and I thank you for theopportunity 
to appear before you.
    I will now be happy to respond to any questions that you 
may have, Mr. Chairman, or members of this committee.
    [The prepared statement and biography of Alexis Herman 
follow:]

[Pages 6 - 20--The official Committee record contains additional material here.]


    Mr. Porter. Madam Secretary, thank you for that excellent 
statement. I have to say that in all the years I've been a 
member of this subcommittee, and it's a lot of years, I haven't 
heard a better opening statement. And I very much agree with 
all of the philosophy and goals that were expressed in the 
beginning of your statement so eloquently. I think you've set 
us on exactly the right path, and I commend you for such a fine 
statement.
    Ms. Herman. Thank you, Mr. Chairman.
    Mr. Porter. Now, that marks the end of your honeymoon. 
[Laughter.]
    Ms. Herman. Okay. Well, compared to where I've been, I'll 
take whatever I can get.
    Mr. Porter. Now to the tough questions. For members of the 
subcommittee, we will operate this morning under the five 
minute rule, because there are so many members present. When we 
reach Mr. Obey, I will give him additional time to make any 
opening statement that he wishes to make, now that he's here.
    I've been told now that he has to go right away.
    Let me then recognize Mr. Obey first for any statement he 
might make, and for questions.
    Mr. Obey. I thank you, Mr. Chairman.
    I don't have time for questions, I have to go to the Floor 
right away for the debate on the rule on the supplementals. I'm 
not going to be able to be here. I didn't want you to take my 
absence as any lack of interest.
    It's just that the scheduling in the House has focused my 
interest elsewhere, and I suspect that on occasion, a number of 
other members of the subcommittee are going to have to be going 
over there as well.
    I just wanted to wish you luck. You have a challenging job 
before you. I hope that you will not pull any punches when it 
comes to defending the interests of American workers. And I 
hope that you will feel free to take the gloves off in 
responding to threats to the welfare of American workers, 
wherever those threats come from, including on some occasions, 
unfortunately, the United States Congress.
    So with that, I simply want to wish you luck and 
congratulate you on your appointment, and we all look forward 
to working with you.
    Ms. Herman. Thank you very much, Congressman Obey.
    Mr. Obey. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Obey.

                    discretionary spending increase

    Now, Madam Secretary, the Administration's budget for your 
department proposes a discretionary spending increase for the 
next fiscal year of a little over 9 percent. Last year, your 
department received an increase of about 9 percent as well.
    As you look to the future, do you expect the department to 
continue to request these kinds of budgetary increases?
    Ms. Herman. As I look to the future, Chairman Porter, as we 
have laid out these initiatives in the President's 1998 budget, 
we expect that the majority of these initiatives are actually 
frozen in the out years. But that is not to say that we would 
certainly not want to come back before this committee as the 
need arises, as we look to the needs of the department.
    Mr. Porter. I say that not because I don't realize the high 
priority that you have in terms of providing particularly 
worker training and protection, as we increasingly face global 
competition, but I say that because we also have to figure a 
way to balance the budget over the next five years. And that 
becomes a very difficult responsibility generally for the 
subcommittee.

                            staffing levels

    Let me talk about staffing levels. I note that the 
department's staffing levels are beginning to creep back up, 
after declining significantly in the early and mid-1990s. You 
propose a total of 17,143 FTEs for 1998. That is an increase of 
1,134, or 7 percent over the 1996 level. We have been trying to 
downsize the Federal establishment in recent years, and as you 
know, we've had some success in that.
    Why are you proposing now to reverse this trend in the 
Department of Labor?
    Ms. Herman. First of all, Chairman Porter, let me point out 
that the overall goal that the President wished to achieve in 
reducing the FTEs, Federal Government wide, by approximately 
273,000, has already been achieved through the balanced budget 
proposals that the President has put out.
    I would also point out that the comparison of the numbers 
to the department's 1996 budget FTE numbers is not an accurate 
picture, given what happened with the Government shutdown and 
the rescission efforts that took place. It took some time to 
bring the FTE requirements in line.
    I would suggest, however, that with regard to the increases 
that we have asked for in this cycle, they are still below the 
levels where we were in the last 10 years, and that we would 
expect to continue to work with the Vice President's 
reinvention efforts to keep the staffing levels of the 
department in line with those efforts.
    Our requests are tied specifically to the new initiatives 
that we are requesting.

                      requested increases for osha

    Mr. Porter. Well, why does OSHA then go up by nearly 300 
FTEs, which is over 14 percent, between 1996 and 1998? How is 
this justified?
    Ms. Herman. Well, again, as we look at the OSHA increases 
as well as the other departmental increases, I would point out 
that the choices that were made in the President's budget 
support the overall budget strategy of the President. OSHA was 
a part of those approved increases. And specifically, as we 
look at the increases that we're asking for in OSHA, it is our 
attempt to continue with the reinvention efforts of OSHA, 
particularly the strengthening of the partnership and 
compliance assistance programs that OSHA has initiated.
    We have worked in particular on the partnership initiative. 
This is an initiative that is in fact more labor-intensive, as 
we attempt to be more hands-on with the small business 
community to help them to come into compliance with the new 
OSHA reinvention efforts.
    I would also point out that we're asking for additional 
staffing resources on the enforcement side to beef up what 
we're calling our enforcement response teams, to give us the 
capacity to have more of a rapid response in emergency 
situations, as we pursue a new enforcement strategy as well.

                        fy 1998 request for esa

    Mr. Porter. Let's look for a moment at the Employment 
Standards Administration, which includes the Wage and Hour 
Division and the Office of Federal Contract Compliance. Why do 
we need an increase of nearly 400 FTEs or 10 percent between 
1996 and 1998 in the ESA?
    Ms. Herman. Again, as we look at that area in particular,it 
is an area that has not had any significant staff increase to meet the 
new demands of what that department has undertaken. That department has 
looked at the reinvention efforts, particularly in ESA and the Office 
of Federal Contract Compliance, to make sure that we are targeting more 
effectively, that we are working more closely with the employer 
community on compliance activities, and at the same time that we are 
meeting the requirements of what we're doing to prevent illegal 
immigration.
    Mr. Porter. My time's up. Mr. Stokes, I yield to you.
    Mr. Stokes. Thank you, Mr. Chairman.

                   preparation for the world of work

    Madam Secretary, in less than three years, our Nation will 
move into the 21st century, the year 2000. We already know that 
this will be the most technological society ever known to 
mankind.
    I am concerned about whether or not our Nation has in place 
the necessary job training mechanism needed to prepare the 
young people today for that world in which they will be 
working. What are your major concerns in that area, or special 
plans relative to that?
    Ms. Herman. Well, obviously as we look at what we must do 
to help workers compete we must look at the new economy which 
as you have pointed out, is going to require more highly 
skilled, globally competitive workers. At the same time, we 
must be sensitive to the needs of the workers who are trapped 
in the old economy, and to be mindful of what we must do to 
invest in the training and the upgrading of those workers as 
well.
    I am particularly pleased that as we look at the requests 
before this committee, we are pointing to the need for 
additional resources for our out of school youth in particular. 
We want to be able to target those communities where we have 
high unemployment rates, especially with our young people who 
need to be brought into the mainstream of our economy, working 
more closely with our empowerment zone strategy, to decrease 
the rates of unemployment in particular in those communities.
    I think the investment that the Department has made in its 
One Stop Career Centers at the local level is also a good 
investment to make sure that we are literally taking the 
services of the Department to the street level to meet the real 
needs of the customers of the Department.
    We've also asked for a modest increase in the Job Corps 
program. I know that I need not tell this committee of the 
benefits over the years of what Job Corps has done for many 
young people in our society today. But if you were to ask me, 
are the resources adequate in terms of the tremendous gap that 
is still out there, I would just point out two statistical 
realities. If we were to pursue this committee's and the 
Congress's own thoughts on the 50-50 plan on the Job Corps 
center strategy alone, we would literally need to virtually 
double the Job Corps budget, just to construct 50 more Job 
Corps centers as the plan calls for. It would cost more than $1 
billion. And then to service the enrollment would be 
approximately another $700 million.
    If you look at the investment of what we're doing today in 
the adult job training program, there statistically we believe 
that we are reaching only 1 to 2 percent of those who really 
need to be serviced through our existing programs. If we had 
the budget request to simply address that need alone, you're 
talking about an increase of $4 billion to $5 billion.
    But I do believe that with the resources that we do have, 
that the Department is making wise and strategic choices on how 
best to prepare the work force for the next century.

                    job training reform legislation

    Mr. Stokes. Madam Secretary, I am sure you are aware that 
the House Education and Work Force Committee recently reported 
out a consolidated job training bill. Have you had a chance to 
examine that legislation?
    Ms. Herman. I have had a chance to take a look at that 
legislation. And fortunately, I also had the opportunity in my 
previous capacity to work with the business community on many 
of the aspects and issues that are now contained in our 
consolidated proposal to reform the job training system.
    I'm excited by the possibility of being able to pass reform 
legislation in this Congress. I think it does much of what we 
need to do to not only bring more efficiency to our system, but 
also to deliver better quality services to our customers.
    Mr. Stokes. I appreciate that. I think it is important for 
us to know what your position is relative to that particular 
legislation.
    Thank you Madam Secretary for your response. I yield back 
to the Chairman.
    Mr. Porter. Thank you, Mr. Stokes.
    Mr. Bonilla.
    Mr. Bonilla. Thank you, Chairman.

                     liaison to business community

    Welcome, Madam Secretary, congratulations, and again, I 
appreciate your coming by the office the other day to talk 
about issues important to Texas, and to small business. As we 
discussed that day, that's going to be the heart of my concern, 
as we work together on issues important to the jobs in this 
country, and creation of jobs by the private sector.
    One of the things we talked about was Job Corps, and we 
agree that that is a very effective job training program that 
our Government and is the most effective that the Federal 
Government has ever initiated. But in order to understand why 
this has happened, and to discuss the reasons for its success. 
I'd like to emphasize it is because of the private sector's 
involvement in this program. The most frequently missing 
element in other programs, in my view, why we should include 
the private sector in more initiatives that this Government 
undertakes.
    In private enterprise, performance equals success. I spent 
15 years in the private sector before running for Congress in 
1992. And I can assure you that the things that you learn in 
the private sector, as you know, having come from a business 
background, says that if you don't produce, you simply don't 
survive. It's not like Federal agencies oftentimes coming every 
year asking for an increase without having shown that they have 
justified their existence or shown you why they should in fact 
receive an increase in their funding.
    We often turn to the private sector for answers. For 
example, this Administration is challenging the business 
community to move a million people from welfare to work by the 
year 2000. What is so perplexing is this Administration 
continues to increase the cost of creating jobs for business by 
disregarding the fact that over 90 percent of the private 
sector work force is non-unionized.
    From proposing pro-union initiatives, such as the debarment 
standards, to perpetuating the fraud and abuse of Davis-Bacon, 
and we know that there's tremendous fraud and abuse under that 
Act, to OSHA and MSHA's attempt to control every aspect of the 
work place without proper science, this Administration has 
promoted an agenda scripted by the unions, an agenda designed 
to give unions more power and not create jobs.
    We certainly hope, Madam Secretary, that this practice 
stops with you. It was reassuring to have heard reports that 
the labor unions originally opposed your nomination, due to 
your business background. With all of the support this 
Administration has provided unions over the past four years, 
you would think that the unions singlehandedly could move one 
million people from welfare to work, they are theoretically so 
powerful and influential. But the fact is that they haven't 
created a single job.

                               ergonomics

    As you can see, I am concerned over the relationship, about 
this Administration's subservience to organized labor. And to 
illustrate this point, let's look at the ergonomics policy 
which you and I discussed the other day. Three significant 
events just happened to occur on the same day, April 28th, 
which is Workers Memorial Day. At a news conference, AFL-CIO 
President John Sweeney announced ergonomics regulations will be 
a major priority for organized labor. He also said that the 
AFL-CIO will run ads in districts of members of Congress who 
have voted against the ergonomics regulation, or vote against 
any future efforts to create an ergonomics regulation.
    Second, on the very same day, OSHA launches its ergonomics 
Web site, which also indicates issuance of an ergonomic 
standard as a major priority for the agency. Third and finally 
on the same day, the OSHA Review Commission issued a long-
awaited decision in the Pepperidge Farm case, stating that OSHA 
now has the legal authority to issue ergonomic citations under 
the general duty clause. What is most distressing, since OSHA 
issued that $1.4 million ergonomic citation at the Downingtown, 
Pennsylvania plant that Pepperidge has now closed down that 
facility, eliminating 1,500 jobs. It strikes me as more than 
just a coincidence that these three critical events occurred 
almost simultaneously.
    In addition, I asked you to provide me with a list of 
organizations which have received grants for ergonomics 
programs, and I appreciate the promptness of your reply. What 
it does however show is that at least five of the seven grants 
were given to unions, and none was given to the business 
community which also applied for these grants. And this ties in 
to what I started out talking about, and that is the 
involvement of the private sector in this process and how it 
becomes more efficient for all concerned.
    I'd like to, as I began asking my question about 
ergonomics, there was a great illustration in the newspaper the 
other day, in the Washington Post, that illustrates what could 
happen if we go overboard without proper science and medical 
research in developing an ergonomics standard. We have an OSHA 
person here measuring the distance from the floor to the top of 
the lady's head, another OSHA man standing behind her measuring 
the distance between her head, and I guess, the distance 
between the front of her head to the back of her head, and 
another person over here measuring the distance between her 
nose and the computer screen.
    If we don't include proper science and medical research in 
developing a standard like that, Madam Secretary, I'm afraid 
we're going to wind up with this kind of foolishness that's 
going to wind up costing a lot of people a lot of money, and 
more importantly, it's going to cost people jobs. Because in 
some cases, they're not going to be able to comply with a 
standard that's proposed like that without proper research 
background.
    With this in mind, it's important that OSHA and the 
department listen to the concerns expressed by the business 
community, about issuing an ergonomic standard that's not based 
on sound science. Madam Secretary, would you be willing to 
appoint someone from your staff to serve as liaison to the 
business community to ensure that these concerns are adequately 
addressed?
    Ms. Herman. Congressman Bonilla, what I plan to do in the 
staffing up of my office is to have someone who is going to be 
available to relate to the business community on a number of 
issues. And I would certainly include in those discussions 
between the business community and that staff person's office 
the issues that you have just raised.

                     training grants in ergonomics

    Mr. Bonilla. Although it didn't happen under your watch, 
the grants that I asked you to provide me, showing where the 
ergonomics grants have gone, does it trouble you that none has 
gone to the business community, even though they applied, and 
they all primarily have gone to unions?
    Ms. Herman. Well, I was happy to be able to provide you 
with the information that you did ask for. I am not aware of 
the decisions that went into the awarding of those grants. I 
intend to take a look at the awardees that we are working with 
in that area, and to make sure that we've got balanced 
participation in our programs.
    Mr. Bonilla. My time is up, but just in closing, I would 
say that I hope that that would trouble you, because it's so 
lopsided, it's not even anywhere close. And I'll have more 
questions on another round.
    Thank you, Madam Secretary.
    Ms. Herman. Thank you.
    Mr. Porter. Thank you, Mr. Bonilla.
    I want to say to the members of the committee, we will, if 
the Secretary's schedule will allow it, have a second round for 
those who wish to stay. I realize how short a time five minutes 
is and how difficult it is to make much progress. So we will 
attempt to have a second round as well.
    Mr. Hoyer.
    Mr. Hoyer. Thank you very much.
    Madam Secretary, first of all I want to join the Chairman 
in his generous remarks at the outset. As someone who has had 
the opportunity to work with you over many years in a lot of 
different capacities, I am a big fan of yours. I believe that 
you will do an outstanding job, both in terms of your knowledge 
of the particulars, which you have demonstrated in your opening 
statement, but also in your knowledge of how to work within the 
system and work the system to make it work for the people that 
you represent, not just the Administration, but the workers.
    Secondly, let me make an observation. I want to tell my 
friends on the committee that a lot of us are very concerned 
about whether the 90 percent of working Americans who have seen 
their net standard of living decrease in the last 25 years 
relative to those of us who are at the top of the totem pole, 
including all of us at this table. We are not average working 
Americans. And no average working American thinks anybody at 
this table is an average working American, believe me.
    But average working Americans, I will tell my friend from 
Texas, have not done so well over the last 25 years. And I see 
a lot of concern about labor. Frankly, I think if labor were 
stronger, rather than weaker, average working Americans would 
be doing better, both organized and unorganized. I feel 
constrained to make that statement.
    Mr. Bonilla. Will you yield to me for just five seconds?
    Mr. Hoyer. I will yield to you for the three or four 
minutes that you went over on your time. Yes, sir. I would be 
glad to yield to my friend from Texas.
    Mr. Bonilla. My five second question is, does the gentleman 
believe that the Federal Government can guarantee success for 
those who have not so far experienced it?
    Mr. Hoyer. I think the Federal Government has had an 
historic role in making sure that opportunities were available, 
that training was available, and that, yes, average Americans 
could avail themselves of the incredible opportunities this 
country provides through its help and partnership with the 
private sector. I don't know whether that answers your question 
specifically.
    But, in any event, I wanted to respond and say that 
frankly, from this member's perspective, but for organized 
labor, the standard of working men and women in this country, 
the 90 percent who are not organized, who are not contributing, 
who are not participating, would be far lower than they are 
today. I think that point needs to be made very frequently.
    Now, let me go on to the balance of my time.

                        one stop career centers

    Madam Secretary, as you know, I have, for many years now, 
been concerned about the lack of coordination of our services 
at the Federal level. In particular, it seems to me there are 
three major agencies of Government, one of which you head, the 
Department of Labor, the Department of Education, and Health 
and Human Services to which this applies. In terms of reaching 
out and assisting people who need help, we have many programs 
in all three of these departments.
    On page 11 of your statement, you talk about the one stop 
career system. This is the same concept that I have been 
pushing and now have a bill in called the Family Services 
Improvement Act, H.R. 1480, which I think can get some 
bipartisan support. All of us want to see these programs' 
effectiveness maximized. The way you maximize effectiveness is 
through one stop shopping.
    Now, you deal particularly with career training, job, and 
school for work operation. But obviously that ties in to where 
the young mom takes her child to school and into having a 
healthy mom and healthy child.
    I would urge you, Madam Secretary, as you enthusiastically 
focus on and talk about your one stop career center system to 
expand that perspective and that vision to include the entire 
family spectrum, and, specifically, the family-child centers, 
as Secretary Riley refers to them. But I am pleased about your 
enthusiasm on this and would urge you to focus on that, and 
work with, particularly, Secretary Shalala and Secretary Riley 
in bringing the expertise of your agencies to bear on the 
coordination of services. Local access to your agencies will be 
easier, better coordinated, more efficient, more effective, and 
more accessible to our customers if you do so.
    Ms. Herman. Well, thank you for sharing your perspective. I 
have obviously been keenly aware of your interest in this area, 
Congressman Hoyer. And you have my commitment to do all that I 
can as Secretary to look for opportunities and ways that we can 
maximize our coordination and therefore our efficiency for the 
Federal Government.
    Mr. Hoyer. My time is gone, Mr. Chairman. I see you looking 
at me. I'm going to find out where Mr. Bonilla went and talk to 
him. [Laughter.]
    Ms. Herman. Yes, better for the two of you to have that 
debate. [Laughter.]
    Mr. Hoyer. Thank you very much.
    Mr. Porter. Thank you, Mr. Hoyer.
    Mr. Istook.

                        davis-bacon wage surveys

    Mr. Istook. Thank you, Mr. Chairman.
    Madam Secretary, nice to be with you. I'm sorry we have not 
yet been able to get together personally, but I look forward to 
that.
    Ms. Herman. Thank you, Congressman Istook.
    Mr. Istook. I would like to focus on a matter that has been 
most publicized out of Oklahoma, regarding fraud in the 
submission of information that determines the prevailing wage 
standards under Davis-Bacon.
    I am concerned. I recognize you don't want fraud, and I 
don't want fraud. Nobody does. But in trying to have a process 
that removes the possibilities of that, I'm concerned that the 
department appears to be looking at using the same process, and 
not getting the flaws out of the system.
    In particular, the ability of a third party to submit 
unsolicited WD-10 forms for wage and hour purposes allows 
someone that wants to try to skew the curve, an opportunity to 
do so. I'm not aware of any other, maybe you can make me aware 
if there are some, but I'm not aware of any other determination 
such as this where you factor in voluntary submissions, as 
opposed to using an economic model.
    For example, with cost of living, they use a model. They 
don't say anybody that wants to add things and thereby throw 
off the model can do so. The service contract standards, which 
are done through the Bureau of Labor Statistics, again, use a 
model that pre-selects those who are going to be surveyed, to 
assure the reliability of the data, and that it is actually a 
representative sampling.
    But when it comes to prevailing wage, and I understand it's 
regulatory, not statutory, the decision has been to allow the 
third party submissions. And the error rate, according to your 
Inspector General, of third party submissions, is twice as high 
as the error rate of those submitted by contractors, or by 
employers, as it more properly should be called.
    I'm very concerned, and what I'd like to ask is, why should 
Davis-Bacon be singled out to provide opportunity for 
unsolicited efforts to skew the curve and the calculations, 
when you don't permit it for other systems where you have to 
determine prevailing amounts?
    Ms. Herman. Well, Congressman Istook, let me say that I am 
generally familiar with the issue that you've just articulated. 
And it is my understanding that as a result of the IG's 
investigation of the situation that did occur in Oklahoma, as 
you know, we are cooperating with the Justice Department in 
particular on this matter. But it has also led to us taking a 
very hard look at the way we collect data to make sure that 
we're doing all that we can to force more accuracy in the 
system.
    To that end, I am aware of the fact that staff is now 
working more closely with the Bureau of Labor Statistics to 
look at what we can do to have more sound and accurate 
statistical models in the collection of wage rates for purposes 
of Davis-Bacon. I'm also told that we're going to pursue not 
only looking at BLS survey data, but that we're also going to 
look at different steps that we can take to determine more 
technically viable models, if you will, that can help us have 
more accurate data for Davis-Bacon purposes.
    Mr. Istook. Is it still under consideration with you to 
assure that you can in fact have an accurate statistical model 
by not having a program of additional voluntary submissions 
that can be used to skew the numbers?
    Ms. Herman. It's my understanding that all of these options 
are still being looked at and still being reviewed. And I 
intend to personally get involved in this issue to see exactly 
where we are. And I'll be happy to consult with you on our 
progress.
    Mr. Istook. I would appreciate that. Because as you may be 
aware, there is analysis going on that indicates that the 
problem has not been limited to Oklahoma. There's really no 
reason to believe that such a problem, which is endemic to the 
system, would pop up one place and it would be the only place. 
Those of course are ongoing. I know you're cooperating with the 
Justice Department in the indictment that's pending, and the 
investigation is ongoing in other indictments, if possible.
    But I appreciate that, and I would encourage, as I 
mentioned, that we don't just try to refine the process we've 
got, we recognize where the flaw is and go directly to that and 
fix it.
    Ms. Herman. Thank you, Congressman.
    Mr. Istook. Thank you. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Istook.
    Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.
    I too want to join my colleagues in welcoming our new 
Secretary of Labor. I'm absolutely delighted that you are in 
that capacity. I think it sends a wonderful message to the 
women of America. I think because of your knowledge of the 
possibilities of Government and your good relationship that you 
have with the business community as well as with working people 
in our country, that you will make a very valuable and needed 
contribution. I think you will comfortably and with great 
leadership continue the work of your predecessor, who was much 
admired by many of us here on this committee.
    Ms. Herman. Thank you very much, Congresswoman Pelosi.
    Ms. Pelosi. Congratulations and good luck to you.
    Ms. Herman. Thank you.

                               ergonomics

    Ms. Pelosi. I'm sorry, did Mr. Bonilla come back? Not yet. 
I'm sorry that he's not here, because as the maker of the 
motion for the amendment on the Floor in ergonomics, I'm very 
proud of the bipartisan support that the legislation received, 
and maybe it's good news, maybe it's bad news for him, but 
Labor at that time was very, very much occupied with their 
priority of increasing the minimum wage for working families in 
America, and really did not focus on the ergonomics amendment 
when it was offered.
    I think that it was not a reflection of Labor's 
participation, but the recognition of our colleagues of the 
serious challenge that ergonomics poses to the work place that 
the reasonable suggestions that we were making will benefit a 
business as well as, management as well as workers.

                      work opportunity tax credit

    But I want to focus my short time on the issue of the--I 
have to turn back to it--I have had questions in the past about 
tax credits for hiring workers, especially now that we have the 
work opportunity tax credit. I have associated myself in the 
past with some of the criticisms of giving a windfall to 
business for hiring people that they may need to do their work 
anyway, their most recent hires. And I hope that you could shed 
some light today on how the work opportunities tax credit 
differs from previous initiatives in this direction.
    Ms. Herman. I think the biggest difference for the work 
opportunity tax credit that has been in effect now for 
approximately eight months, is the fact that workers now have 
to be pre-certified that they're actually going into a real job 
in order to receive this tax benefit. Having worked in my 
previous life, when I was at the Department, on many of the 
other type of tax credits that we did give, I know that this 
committee is familiar with the targeted jobs tax credit. As we 
looked at its impact over the years we saw that an employer 
would take the tax credit and simply apply it to its existing 
work force, and this did not necessarily result in the creation 
of any new jobs for those at the lower end of the wage 
spectrum.
    We're hopeful that with the targeted application of the 
WOTC, and with the pre-certification requirement, that now we 
will actually be creating new jobs, and this is what the 
intended benefit should be to an employer as the incentive to 
reach for that worker. And at the same time, to get the tax 
benefit for creating a new job. That's the biggest difference.
    Ms. Pelosi. Because some of us view it as a subsidy for 
business without the addition of that welfare so-called 
reform--I'm not a supporter of that particular piece of 
legislation--requires. I mean, if we're not going to have jobs, 
if it's not, if we're not creating the jobs, then it's unfair 
to expect these poor people to work and not have a safety net 
there.
    So I'm pleased that there's a distinction being made 
between the targeted jobs tax credit, which did, which expired, 
as you know, but which was not particularly effective nor 
popular here.

                    preparation for the next century

    I was interested in the questions of my colleague Mr. 
Stokes about how we prepare for the next century from a 
technological standpoint, and Mr. Hoyer from the standpoint of 
the one stop shop. I wanted to use some of my time for you to 
elaborate on any of those particulars.
    Because I do think we are at a very crucial place, and this 
year 2000 is a milestone for us. We'll either go forward with a 
trickle-down mentality of what's fine up top hopefully will 
raise people up at the bottom. But the fact is that wages that 
people receive now are not on a par with what they did, even 
years ago. And we have to redress that problem.
    So if you'd like to elaborate on any plans that you have in 
that direction.
    Ms. Herman. Well, in addition to the comments that I 
already made to Congressman Stokes, I would hope that in the 
One Stop Centers we could continue to build on initiatives like 
the America's Job Bank. Through this initiative, we're getting 
millions and millions of job openings that are actually being 
posted now through the Internet, so that prospective workers 
come into the One Stop Centers and examine first-hand the kinds 
of jobs that are available, not just in their own communities, 
but indeed throughout the Nation.
    But in those centers, we have the built-in support services 
that can help you actually get job ready, right there on the 
spot. This might include the appropriate coaching that you 
might need, for just the general orientation to the world or 
work, or resume assistance, finding out more nuances about the 
particular job that could be posted, or all of the kinds of 
services and hands-on services. What I'm excited about is the 
fact that it's hands-on, it's real, and it has immediate impact 
in terms of touching the lives of real people who come in 
seeking jobs.
    Ms. Pelosi. Will they still be doing profiling?
    Ms. Herman. They will still be doing profiling on the more 
intensive assistance that is needed for others who are trying 
to come into the work place. We're making a distinction there 
by those who are ``more job ready'' providing up-front services 
as opposed to those who would possibly need greater intensive 
training and support to become job ready.
    Ms. Pelosi. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. Pelosi.
    Mr. Miller.

                               lm-2 forms

    Mr. Miller. Madam Secretary, thank you for coming, and I 
appreciate your initiative to come see us beforehand. You're 
getting into this very fast.
    One quick line of questioning I'd like to pursue is the LM-
2 form.
    Ms. Herman. Yes.
    Mr. Miller. I'd like to if possible include something in 
the appropriation bill this year to allow us to automate that 
form. The Family Medical Leave information is very successful, 
we have an 800 number and a web site and automation etc. And it 
would cost money in the long term to not make it readily 
accessible.
    I asked Mr. Anderson and he kind of gave half-hearted 
support. But if you could come up with a proposal we could put 
in the appropriations bill. We're not talking about much money, 
and certainly I think it would be saving in the long run. What 
we're talking about is making information available to the 
American people. So I don't think it's something that should be 
very controversial.
    But if you could get something within the next few weeks, 
we would appreciate that.
    Ms. Herman. I'll be happy to get back to you on that, 
Congressman Miller. I did go back to the offices and look into 
this situation. And I learned two things that I didn't realize, 
and that is, one, that the LM-2 form or the information is 
already available to the public. I hear your concern in terms 
of what we can do for automation and computerization of the 
data.
    I am also told that that effort is something that would be 
labor intensive and would involve substantial costs, but again, 
it is something that I will be happy to get back to you on.

                 targeting industries for investigation

    Mr. Miller. Thank you.
    Next, let me inquire about a problem that we've had some 
experiences, and you hear stories about it going on, and that 
is the collusion between the Department of Labor and organized 
labor. There are problems, in the past few years, as I 
mentioned to you, the one out in California where Mr. Sawyer 
was the regional director, and was colluding with the Service 
International Employees Union. Secretary Reich terminated him, 
and it was an embarrassment to the Department of Labor. There 
was a problem of the wage hour, which spent 500 hours 
investigating to find $300 worth of violations.
    There is no question, organized labor supported the 
Democrats 100 percent. The problem you have is using the 
authority of the Federal Government to use a quid pro quo to 
help organized labor. And just as the IRS should not be used, 
and just as the FBI should not be used, we should not use the 
regulatory power of the Federal Government to impose a certain 
political belief on anybody.
    When Mr. Anderson was here, we were talking about, in Wage 
and Hour, the issue of targeting certain industries. The two 
industries being targeted by wage and hour are the same two 
that the Federal employee unions are targeting too, and that 
is, janitorial and nursing. This is initiative called quality 
management, which has got a great term.
    But the question is, is it just coincidental that the 
Federal unions are targeting the same two that you're 
targeting? What assurances can you give us today that the 
Federal Government, and your agency in particular, will not in 
effect use your power to investigate or intimidate innocent 
businesses to be unionized? I'll end it right there. What 
assurances can you give me?
    Ms. Herman. Well, first of all, Congressman Miller, let me 
say at the front end that no one will make my decisions for me 
as Secretary of Labor. I intend to consult with the labor 
community, with the business community, with a whole array of 
partners that are obviously interested in the work of the 
department.
    It is my understanding that the Inspector General of the 
Department of Labor did go back and investigate this whole 
issue of a alleged collusion with the unions as a result of the 
unfortunate incident that did occur in California. I am told 
that their investigation found no indication of collusions with 
unions in the department's efforts.
    Having said that, I am not personally surprised that in 
certain industries, where you have low wage workers, where you 
have perhaps more incidences of violations of labor laws, that 
those are also the same industries that the department is 
involved in and that labor unions in particular may have 
targeted for organization purposes.
    I can give you every assurance, as Secretary of Labor, that 
I will do all in my power to ensure that there is never 
collusion with anyone as we develop the programs and 
initiatives of the department.
    Mr. Miller. A concern was, for example, that you're 
targeting all of janitorial. It's kind of like saying, we're 
going to target all one class of people in the United States. 
That's wrong, and you would certainly agree with that. And so 
you get concerned that we're using this as a philosophy of 
business, that we're going to target industries. Then it makes 
it easier, in theory, for collusion and abuse. That's the 
concern, whether it's a written contract, which it's not, I'm 
sure.
    So we're going to be watching, and we need to make sure 
that we have assurances that this is not going to happen.
    Ms. Herman. You have my assurance.
    Mr. Miller. Thank you.
    Mr. Porter. Thank you, Mr. Miller.
    Mrs. Lowey.
    Mrs. Lowey. Thank you, and welcome back to you, Mr. 
Chairman. It's nice to see you.
    And I am delighted to welcome you, Madam Secretary. I know 
that you will bring a great deal of distinction to the job. And 
I share your commitment and know it is the commitment of many 
of us on this committee that the agenda of the Department of 
Labor is an agenda that is supported by mainstream Americans, 
both union and non-union. And that your mission to ensure that 
our work places are safe, that the pensions of hard-working 
Americans are secure, that training is available in order to 
work in partnership with the business community to ensure that 
we have a productive work force.
    This mission, I'm sure, is a mission that most Americans 
can be very proud of, and we can be very confident that you 
will fulfill that mission with distinction. So we welcome you.
    Ms. Herman. Thank you.

                            welfare to work

    Mrs. Lowey. Madam Secretary, the Labor Department is 
positioned to play a crucial role in helping welfare recipients 
move into the work force. And in order to fulfill that role, 
you have requested $756 million for a new welfare to work jobs 
effort. Can you highlight for us what the Department plans to 
do with these funds? How do you plan toget the private sector 
involved?
    I see in your written testimony that you started off your 
career helping people move from welfare to work. What do you 
think are the most, well, the key ingredients, to a successful 
welfare to work program?
    Ms. Herman. Well, there are several key ingredients, I 
believe, that we need to ensure the successful transition from 
welfare to work. The most important ingredient that I would 
highlight, though, is commitment. I think that we have to have 
a commitment, literally, from all sectors, in our society 
today, if we are to meet this most important challenge.
    Not only the business community in terms of the jobs that 
will have to be created, but other sectors and the non-profit 
community as well. Church organizations, I think, can be 
particularly helpful, non-profit institutions. I think that we 
need to look to every sector in our society today, to become 
engaged, if you will, in this national challenge.
    So the commitment for all sectors is very important.
    Secondly, I think the recognition that this is not 
something that will happen overnight. This is an investment 
that has to be made for the long term, if we are going to be 
serious about moving people from welfare to work. You're right, 
having begun my early career working in this area in 
particular, I can tell you that it takes hard work, it means 
real commitment, and it means staying with it for the long 
haul.
    And if we do this, I believe that in the end, we will be 
successful. We have a responsibility in the department and 
indeed, the President has already begun this effort, to also 
share best practices. We need to talk about what has worked, 
and why it has worked, and to use the department to be able to 
get that word out, to communicate those success stories.
    We had the opportunity in January of this year to have 
several of our national business leaders come to the White 
House to talk about their own hands-on experience in this area. 
I am hopeful that we will be able to expand those types of 
engagements and to get everyone talking about what has worked, 
why and what we can do to replicate it.
    Mrs. Lowey. I look forward to working with you. In fact, in 
Westchester County, we have one of the most successful 
programs, called Job Star, which has placed 88 percent of its 
students in this particular program in jobs that pay over 
$25,000.
    What I think is important about this, is if by chance one 
of these women loses a job, they can always go back to the 
college. And I would like to see this kind of program 
replicated throughout the community college network. I think 
it's a great area to provide the education and the training, 
and this school provides the child care as well, and the 
support services. I think it could be an excellent example for 
the Nation.

                                pensions

    Regarding pensions, Madam Secretary, in your written 
testimony, you listed one of your five goals, to assure that 
working Americans enjoy secure pensions when they retire. Can 
you elaborate for us what your specific priorities are with 
regard to pensions? And can you also speak to the department's 
efforts with regard to women's retirement security?
    And I do remember a few years ago when my colleague and I 
were sitting on this committee, and I remember the facts 
regarding workers pensions. This Administration has done very 
important work in turning that organization around. So I would 
be appreciative if you would comment.
    Ms. Herman. My specific goals with regard to the pension 
area are threefold. Obviously, the first is to continue with 
the strong enforcement actions that we're already taking 
through PWBA. We need to continue to do what we can to make 
sure that we enforce our pension laws and that pensions are 
safe and secure for American workers.
    Secondly, I'm very interested in what we can do to expand 
pension coverage to those workers who are presently not covered 
and in what we can do in particular in this area to work with 
small businesses to help them to cover the large numbers of 
workers who are concentrated primarily in small businesses that 
do not have pension coverage.
    I am anxious to entertain proposals in this area, and again 
to share what is working, so that we can do what we can to 
expand pension coverage.
    Thirdly, we've already taken some steps, as you know, 
through legislative action in Congress to address the whole 
issuee of pension portability. I think that is very important 
as well, so that as workers are changing their jobs, that they 
will be able to take their pensions with them. What we can do 
to build on these initiatives, to ensure portability, is also 
very important.
    In addition, as you talk about the whole issue of women and 
pensions, you may recall that I began my own career at the 
Women's Bureau looking at this very issue in the context of 
displaced homemakers at the time. I am gratified to see the 
tremendous strides that the Department has made in the last 20 
years to put more attention on the question of women and 
pensions in particular. Since the large numbers of workers in 
the work place today who are not covered by pensions are, in 
fact, women who are concentrated in the lower paying 
occupations.
    We need to do more to expand our education and outreach 
campaign in this area in particular, so that women are informed 
of their rights, and to do what we can to encourage, as I said, 
greater coverage of workers.
    Mrs. Lowey. I would estimate that my time is over. But my 
colleague, Rosa DeLauro left, and if we have another round, 
then----
    Mr. Porter. Thank you, Mrs. Lowey. I was about to say that 
we have three members on the Republican side, and Ms. DeLauro, 
if she returns, that haven't had a chance for questions. That 
would mean that we would have between 20 and 25 minutes, after 
we finish the first round, for a second round. And the Chair 
would plan to do that and divide the time equally among those 
who wish to remain.
    Mr. Dickey.
    Mr. Dickey. Thank you, Mr. Chairman. Hi, Madam Secretary.
    Ms. Herman. Good afternoon. Or is it still morning? I don't 
know. [Laughter.]
    Mr. Dickey. It's still morning.

                        replacement for joe dear

    I appreciate your coming by, and I enjoyed our visit. We 
had a lot of progress in the business community that I could 
see with the people I was in contact with, Madam Secretary, as 
relates to OSHA, in that Mr. Dear, Mr. Joe Dear, made visits 
and overtures and actually instituted some plans that would 
bring compliance into a voluntary type of environment. It was 
working, it was going just fine, and suddenly he left.
    Now, I've heard several different things, and I've asked 
you, but I want to get it on the record. Did he leave because 
he was trying to work with us? Or did he leave for some other 
reason?
    Ms. Herman. Joe Dear left for other reasons. He is back 
with his family and in a new job. I can assure you that I would 
have been delighted to have had Joe Dear stay on as Assistant 
Secretary for OSHA, had he chosen to do that.
    Mr. Dickey. What is going to be done in place of, or in 
replacing him?
    Ms. Herman. I am committed that the individual who replaces 
Joe Dear at OSHA is someone who will continue with the 
reinvention efforts that Joe Dear began with OSHA. I think he 
made an enormous contribution to strengthening our overall OSHA 
programs. The efforts, the investments that were made in 
compliance assistance, while we were strengthening our 
traditional enforcement programs, really did make a difference.
    His emphasis, will be my continued emphasis, to make sure 
that we are talking about results and not red tape, that we're 
looking at our regulations to be published in plain and common 
sense English, so that people who have to use these regulations 
can understant them, and in our compliance assistance program, 
to work more closely with the business community, the small 
business community in particular. These are issues that I will 
continue to pursue as Secretary.
    Mr. Dickey. Are there any quantitative data that would show 
that what Joe Dear was trying to do did work, or is it still 
subjective?

                           maine 200 program

    Ms. Herman. It is both subjective, I believe in many 
instances, we are in the process of gathering objective data. 
For instance, I can think of one program in particular in 
Maine, which we call the Maine 200 program----
    Mr. Dickey. What was the name of that town?
    Ms. Herman. The name of that town?
    Mr. Dickey. Jay, Maine. Yes, let's get that straight. 
[Laughter.]
    Ms. Herman. Okay, I'll remember that from here on out. In 
Jay, Maine, the Maine 200 program actually brought together the 
businesses in that community, more than 200 businesses, that 
are looking at how they can come up with the appropriate 
compliance procedures to meet the requirements of OSHA. It's my 
understanding if we had used a traditional enforcement 
mechanism approach in this particular process, that certainly 
we would not have achieved the excellent results that the Maine 
200 program has now demonstrated.
    Mr. Dickey. She's calling it the Jay program. [Laughter.]
    Tell me this. Are you going to consult with small business 
about his replacement?
    Ms. Herman. I intend to consult with all of the key 
stakeholders for OSHA, which would certainly include the 
business community, on the replacement.
    Mr. Dickey. This is my last question. Have you explained 
your business background?
    Ms. Herman. Have I explained my own business background?
    Mr. Dickey. In this panel?
    Ms. Herman. No, I have not, in this panel.
    Mr. Dickey. Could you do that, please, just what you've had 
as far as your business experience?
    Ms. Herman. In my personal business experience, I operated 
a small business, and my focus as a businesswoman, was three-
fold. The first was to invest in a lot of strategic planning 
and organizational restructuring that certainly took place in 
the 1980s. I was very much involved in working with major 
corporations on how they could work with their own small 
business community to bring them into their vendor pool to help 
them to become more efficient as service providers to major 
corporations.
    I also spent a great deal of time looking at the question 
of retention and career development of workers in major 
corporations, investing in particular in career development 
systems, looking at what it takes for an employee to be 
successful on the job, and delineating a work culture that is a 
result of that.
    Mr. Dickey. That's all the questions. Thank you.
    Mr. Porter. Thank you, Mr. Dickey.
    Mrs. Northup.

                           helper regulations

    Mrs. Northup. Thank you, Mr. Chairman.
    And thank you, Madam Secretary. I appreciate your visit, 
also, and apparently you visited most of the members of this 
subcommittee. And I think we all appreciate it. We appreciate 
being able to share with you our particular concerns.
    One of the areas that I would like to ask you about is the 
question of helpers on jobs, or semi-skilled workers. I 
understand that your own regulations allow the use of semi-
skilled helpers on Federal construction projects. But the 
Department has consistently refused to implement your own 
regulations.
    Can you tell me if you're going to move ahead with that?
    Ms. Herman. I am not aware of the fact that we have 
refused, Congresswoman Northup, to move ahead with our own 
regulations in this area. What I will commit to do is to take a 
look at this issue and to get back to you.
    Mrs. Northup. It is an area that I consistently hear 
complaints about in the construction industry. And I think 
there are two points here that are very important. One is, that 
first of all, it helps lower the cost, and it also helps bring 
people from welfare to work or school to work. Semi-skilled 
labor, they aren't ready to be fully certified on the job, but 
it gives them an on the job opportunity to gain those skills.
    You've talked a great deal here today about helping people 
get access to jobs. And what this effectively does is cut out 
anybody that isn't fully skilled from jobs that they have a 
right and a regulation in your department to have access to 
those jobs.
    So you know, it's very important, the President keeps 
talking about moving, apparently you're getting some notes on 
this, and we all are talking about how can we help people that 
haven't been in the work force previously have access to the 
higher paid jobs. And it seems to me like currently what we 
have done is block a considerable number of these people out of 
these jobs.
    Ms. Herman. I've just been informed that the regulations 
have been suspended while we re-examine this issue. So I'm 
delighted to hear that we've obviously heard your concerns in 
this area, and I understand we are in a period of re-
examination.
    Mrs. Northup. Actually, Madam Secretary, the regulations 
say that you have to use the semi-skilled. The suspension keeps 
them from having access.
    Ms. Herman. I see. So the regulations that have already 
been promulgated----
    Mrs. Northup. Right.
    Ms. Herman. Well, as I said, let me take a look at this and 
get back to you. I am generally aware over the years that the 
issue of helpers in the work place has been a subject of some 
controversy on both sides in terms of the best way that they 
can be used. I began my own career, as I shared with you, 
working in the skilled apprenticeship movement. And I know that 
the whole issue of how skilled apprenticeship strategies work 
in conjunction with helpers as well in the work place is 
something that we've talked about for a number of years. But I 
will be happy to get back to you on this subject.

                             apprenticeship

    Mrs. Northup. Along this same line of work force training, 
in recent years, most occupational training programs have moved 
away from time based training to competency based training. And 
I wondered what the Department of Labor would be willing to do 
to ensure that the Bureau of Apprenticeship and Training makes 
these changes for craft changing in the construction industry 
as well.
    The point again being, are we really trying to access 
opportunities in these jobs, these very high paying jobs? Many 
jobs have come actually from Government contracts to people 
that maybe have been truly locked out in the past.
    Ms. Herman. I would hope that we are doing all that we can 
to reinvent our training initiatives to make sure that we are 
more competitive and that we are getting the best results. 
Whether that is what we're doing in the skilled apprenticeship 
training area or other training programs, I am certainly 
committed, as Secretary, to looking at our programs to achieve 
those desired results.
    And I do also recognize that particularly in the 
apprenticeship area, which has had a long contribution to 
making a real investment in upgrading what we can do to 
increase the opportunities for skilled workers, that we can 
also do more to innovate in that particular area.

                  davis-bacon and minority employment

    Mrs. Northup. And I'd also like to ask you if you would 
please look at whether the Department of Labor has ever 
examined the number of women and minorities that are used when 
Davis-Bacon rules apply. I would like to ask you to study that. 
It's very interesting to me that last year, when I was in the 
general assembly debating prevailing wage, the rafters were 
filled with people watching that, supporting Davis-Bacon 
expansion, talking about these give opportunities to women and 
in particular, minorities.
    There was not one woman in the audience, and there was only 
one minority person in the audience. Everybody else who was 
supporting it, everybody, were the traditional work force. And 
my question to you is, would you, before those claims are made 
again, examine just how many women and minorities have access 
to jobs because of Davis-Bacon rules applying?
    Ms. Herman. We'll take a look at that.
    Mrs. Northup. Thank you very much.
    Mr. Porter. Thank you, Mrs. Northup.
    The Chair will assume that members that are here currently 
intend to stay for a second round, unless you advise me 
otherwise.
    Mr. Dickey, No.
    Mr. Dickey. You're right. [Laughter.]
    Mr. Porter. That will mean that we will each have five 
minutes, and that will take us right about to noon.
    Mr. Dickey. I go first.
    Mr. Porter. No, you don't go. [Laughter.]
    You're welcome to stay, Mr. Dickey, if you'd like, and we 
can divide the time. Do you intend to stay?
    Mr. Dickey. I will stay.
    Mr. Porter. You will stay. Well, that will take us a little 
past noon.
    We'll continue under the five minute rule.

                   job training program proliferation

    Madam Secretary, there's been much discussion in the past 
couple of years about the proliferation of job training and 
related programs throughout the Government. The General 
Accounting Office has indicated that there are as many as 160 
job training or related programs, many of them not in your 
department.
    Now, the Administration's 1998 budget appears to be going 
in the direction of creating more new programs, because it 
proposes to start a brand new $250 million program called 
Opportunity Areas for Out of School Youth. How can we justify 
starting a new program in this area, when we know that we 
already have too many on the books, and when the authorizing 
committees are working on a complete rewrite of the job 
training authorizations to eliminate many of them and bring 
this down to a much more manageable size?
    Ms. Herman. Thank you for that question, Chairman Porter.
    The legislation that is being proposed for the job reform 
training legislation actually has language in the bill that 
specifically authorizes that we should look to initiatives such 
as the Out-of-School Youth initiative to be able to concentrate 
on those unique communities where we have particularly high 
rates of unemployment, such as the unique issues that the Out-
of-School Youth demonstration projects are designed to address.
    So while we think it is important to have the State and 
local flexibility and consolidation strategies being authorized 
in the reform legislation, while we believe that the 
consolidation strategies are important in the Department of 
Labor, we're actually consolidating 24 of the 37 programs that 
are impacted in this review.
    But that is not to say that we don't still need to have 
special measures targeted at special populations, such as this 
particular population, to be able to have pilot demonstrations 
to reduce the unemployment rates. And the legislation 
specifically gives us the opportunity to do that.
    Mr. Porter. Do I understand correctly, we already have 37 
programs that in some way impact the same population that this 
program would?
    Ms. Herman. No, I'm saying that this is a unique program. 
We've had pilot experiences that we've been operating at the 
Department. And what we want to do in this particular 
initiative is to be able to set up additional demonstration 
programs throughout the country, linking it to our empowerment 
zone and enterprise communities, so that we can bring those 
resources to bear to deal with this tremendous problem of the 
out-of-school youth. After all, if you look at just minority 
teenage rates in particular, we're at more than 30 percent 
there.
    Mr. Porter. Not to denigrate at all the extent of the 
problem, are there no programs that are currently focused on 
this population?
    Ms. Herman. We have, in the Department right now, 
obviously, programs that we are already running for out-of-
school youth as a part of our overall youth initiative. We do 
not have the intensity of the focus that we are planning 
through these demonstration grants which actually linking it 
into empowerment zone and enterprise community strategies.
    This effort is designed to provide an array of support 
systems, as well as follow-through services, in these 
communities where we would intend to work with these young 
people. We are actually setting up very intense targeted 
populations here.
    Our existing programs would not do the intense work of 
support that these demonstration programs are designed to do.
    Mr. Porter. Would the legislation eliminate any of the 
existing programs?
    Ms. Herman. The legislation consolidates a number of our 
existing programs, yes, into three basic block grant approaches 
that would go to the States. One for adult training, another 
broad general block grant for youth training, and the other for 
family literacy.

                   job training program effectiveness

    Mr. Porter. Let me focus now on effectiveness. Some on the 
subcommittee have been very skeptical concerning the 
effectiveness of many of the job training programs. Your own 
Inspector General continues to express serious concerns about them. He 
testified in March before the Government Reform Committee on Labor 
Department issues.
    In his prepared statement, he said the following: ``IG 
audits of employment and training programs continue to identify 
recurring problems, especially with respect to program 
performance and grant management. Our most significant finding 
continues to be that these programs generally result in short-
term low wage jobs. This finding becomes even more critical in 
view of the enhanced role DOL's employment and training 
programs will have with the implementation of welfare reform.''
    The IG's statement doesn't exactly inspire confidence in 
your programs. What are we to make of this?
    Ms. Herman. Well, I am obviously very concerned with the IG 
reports as well. And I've had the opportunity to meet with the 
respective staffs on this particular issue in the Department. I 
am one who believes that our programs have worked and do work. 
When you look at the statistical evidence, you find that those 
individuals who have been through these training programs on 
average are earning 6 to 12 percent more in terms of just wage 
increases.
    We also recognize from looking at the data that just in the 
adult job training program alone, that within the first two to 
three years of those participants who have been through those 
programs, that the programs are actually being paid for by 
their return on investment that we have made in those workers.
    So we have good, sound statistical evidence that tells us 
these programs are in fact working.
    With regard to some of the specific concerns that have been 
raised in the reports of the IG, I want to take a closer look 
at what the data implications have been in those reports. One 
concern that I do have, and I cannot say that this bears out at 
this point statistically, because I am still in the process of 
reviewing this, but I am aware from having worked in these 
programs for many years that we can oftentimes compare apples 
to oranges.
    So that sometimes, if we are looking at a particular group 
of workers who have had the benefits of those programs, that we 
may not necessarily be making the same type of comparisons of 
individuals who are perhaps not as skilled as the group that 
may have been in an earlier control group.
    So I don't know that we are necessarily comparing apples to 
apples in our own internal reviews here. But I would commit to 
get back to you on my own findings in this area.
    Mr. Porter. I think that's very important, before we mark 
up. Because there are many questions in our minds and 
specifically, about the 20 percent increase that you've 
proposed in the adult job training program, which is a very 
substantial increase. You partially, I think, answered my 
concerns there. But I think it's very important that you 
communicate with us what you see in response to what the IG has 
indicated.
    Ms. Herman. I would be happy to do that.
    Mr. Porter. Thank you.
    Mr. Stokes.
    Mr. Stokes. Thank you, Mr. Chairman.

                      programs for minority youth

    Madam Secretary, on page seven of your formal statement to 
the subcommittee, you make a very powerful statement. You say 
to us, and I quote you, that expense to society of impoverished 
youth, particularly those who do not graduate from high school, 
or get an equivalency degree, is staggering. From one estimate, 
the total lifetime cost to the broader society, of a cohort of 
16 through 24 year old inner city high school dropouts, is 
around $41 billion. This figure includes the cost of lost 
earnings, lost tax revenues, expenditures by the criminal 
justice system, and welfare and additional health care 
expenses.
    When we look at that statement and compare the fact that we 
are talking about a 4.9 percent nationwide unemployment rate in 
general--while that's good--we know that that really has no 
application to these inner city youth. This is particularly 
true in the minority community, where African-American youth 
are unemployed at three times the rate of their white 
counterparts.
    And when we combine this situation with what I talked about 
with you earlier this morning regarding the year 2000 and 
beyond, the matter is even more devastating. We already know 
that one-third of the new entrants into the work place in the 
year 2000 will be minorities.
    One of my concerns is, what are we doing in order to try 
and address this particular problem? And frankly, it is a 
problem that I have discussed with each Labor Secretary over 
the years that I have been on this subcommittee--what are we 
going to do to really impact these minority youth?
    Ms. Herman. As I was listening to you cite the statistics, 
I could not help but recall my own early beginnings in this 
area, and conversations I know that we've had over the years on 
this most acute issue.
    And unfortunately, you know, the answer doesn't change, I 
believe, in terms of what we have to do. What we do need is 
more of a renewed commitment to make the necessary investments 
on a more intense and a more coordinated level than ever 
before. And I say than ever before, because as we move into the 
next century, if we are to truly be competitive in terms of the 
global marketplace, we cannot afford to leave these young 
people behind. We have to be able to get them job ready, skill 
ready, to meet the next century.
    It is going to take the kind of investment that the 
President has proposed in the Out-of-School Youth initiative 
where we can go in and link other Federal resources as we're 
planning to do with our empowerment zone and our enterprise 
community strategies, to have a much more concentrated and 
focused approach with these young people. We will be getting 
the private sector and other stakeholders involved, who really 
care about getting these young people back into the mainstream.
    We have some excellent demonstration programs that have 
worked in California, in particular. And I believe in your own 
home State of Ohio we have been piloting new strategies that 
are, quite frankly, more intense and more hands-on with these 
young people, creating role models, creating new incentives. 
And that's the kind of work that we have to pursue and 
continue.

                          contract compliance

    Mr. Stokes. Madam Secretary, the Department of Labor's 
fiscal year 1998 budget request includes a 17 percent increase 
for the Office of Federal Contract Compliance programs. Can you 
just briefly tell us the mission of this particular office, and 
with respect to the proposed increase, how it will be used, and 
why it is critical to have it at this particular time?
    Ms. Herman. Well, approximately 22 percent of the labor 
force, about 26 million workers today are actually covered by 
Federal contractors. So one, we have increasing demandthere. 
But moreover, the office has taken great strides, I believe, to 
increase its efficiency of operation through looking at more effective 
targeted enforcement and by getting our overall systems, quite frankly, 
to come into the 21st century in terms of what we have to do to meet 
the overall statutory requirements of enforcing the laws for protecting 
employees of Federal contractors.
    Mr. Stokes. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Stokes.
    Mr. Bonilla.
    Mr. Bonilla. Thank you, Chairman.

                  timetable for ergonomics rulemaking

    Madam Secretary, to continue on my topic of ergonomics, 
before leaving the Department of Labor, former Secretary Reich 
stated that issuing an ergonomics regulation would be a major 
priority for the Clinton White House. Is it your understanding 
that issuing ergonomics rules is still a major priority for the 
Administration? And if so, when can we expect to see a notice 
of proposed rulemaking?
    Ms. Herman. First of all, what I do know is that our clear 
priority is to look at this issue much more closely, because we 
recognize that repetitive stress injury is a very serious issue 
today in the work place. We do not have a schedule for a 
proposed rulemaking. It is my intention to continue to look at 
the available data, to examine the issue, to do what we can to 
make sure that we are addressing this most serious issue in the 
work place today.
    I mentioned to you in our visit that I am aware now that we 
have actually had a regional conference in Chicago where we 
brought together employers, union representatives, workers who 
are impacted by this issue, to hear what they are doing in 
practical, common sense terms. I want to examine all of the 
broad options that are available to us, as we look at this 
important issue in the work place today. But we do not have a 
proposed schedule at this point for a final rule.

                   responses to questions for record

    Mr. Bonilla. Madam Secretary, it's been 34 days since OSHA 
testified before this subcommittee. I see Mr. Watchman is here 
with us today again. I submitted a number of questions 
regarding ergonomics, work place violence standards, and the 
proposition 65 issue, which OSHA has failed to review for the 
past five years.
    To this date, the committee has not received answers to 
these important questions that I asked, and that is simply 
unacceptable. Again, this of course happened before you started 
your tenure.
    What would you do, Madam Secretary, to ensure that we get 
these answers by next Monday?
    Ms. Herman. Well, I will certainly do everything in my 
power to make sure that the committee is getting a timely 
response.
    I'm afraid that I cannot commit per se to Monday, because I 
am quite frankly not aware of all of the backlog of requests on 
OSHA in terms of inquiries from Congress. When I did go back to 
get general information following up on our visit, I was told 
that we actually had more than 200 questions that had been 
submitted from various members of Congress to our OSHA staff.
    So I know that they're working very hard to meet the 
demands from all the various inquiries at this point. And I 
will commit to do as much as we can as quickly as we can to get 
back to you.
    Mr. Bonilla. Let me say again that I appreciate your 
getting me the information I asked you for just a couple of 
days ago so promptly. And I just am optimistic about the time 
table that we're looking at in getting these questions 
answered.

                        job appointments at dol

    I'm concerned with reports, Madam Secretary, that the labor 
unions only accepted your nomination when the Administration 
granted John Sweeney, President of the AFL-CIO, more say in 
staffing lower level jobs at the Labor Department. You're the 
boss now. What assurances do we have that such activity would 
not occur, and that you in fact would be able to have your own 
people serving under your direction?
    Ms. Herman. As I indicated earlier, as Secretary of Labor, 
I intend to make my own decisions. Certainly, when it comes to 
the staffing of the department in the critical jobs, I intend 
to consult with the appropriate stakeholders who have an 
interest in the various jobs at the Department of Labor.
    But with regard to the decisions that will be made on 
staffing, those will be my decisions.
    Mr. Bonilla. When do you believe the Administration will 
name the new OSHA Administrator, Madam Secretary?
    Ms. Herman. I am hopeful that now, having come to this 
unique point in time for me, as Secretary, the appropriations 
hearing that I have spent my first week on the job preparing 
for, that I can quickly turn my attention to the personnel 
decisions and the staffing needs of the department, and get 
back to this committee in short order on some of my initial 
recommendations with particular regard to OSHA, that I know 
members on this committee do care about.
    Mr. Bonilla. Have you been consulted by the Administration 
about this very important appointment?
    Ms. Herman. I have been consulted, or at least, I have 
received inquiries and recommendations from a number of 
individuals who care about the OSHA job.
    Mr. Bonilla. Has the Administration consulted with 
organized labor regarding this appointment?
    Ms. Herman. I don't know if the Administration per se has 
consulted with organized labor. My intention is to consult with 
labor, consult with business, small business representatives in 
particular, and members of this committee, who have an interest 
in the assistant secretary for OSHA. That would be my 
intention.

                             drunk driving

    Mr. Bonilla. One last thing I wanted to point out is, in 
your, testimony you talk about two highway paving workers who 
were struck by a vehicle and killed in Florida. That's on page 
21 of your testimony. It's my understanding that these two, are 
employees of Ashland Oil and who were killed by a drunk driver. 
And we all deplore drunk driving in this country.
    In considering these circumstances, is there an implication 
that there was possibly a Labor Department or Government 
program that could have been initiated that could have stopped 
this from happening?
    Ms. Herman. No, I think the implication here is to simply 
call attention to where we would be involved or potentially be 
involved. And we would want to have the ability to respond.
    Mr. Bonilla. So were these in fact the Ashland Oil workers 
that were referenced?
    Ms. Herman. Yes.
    Mr. Bonilla. These situations are verytragic and emotional, 
but we want to make sure that the facts and substance are behind what 
we're really talking about here today.
    Ms. Herman. Exactly.
    Mr. Bonilla. Thank you, Madam Secretary.
    Thank you, Chairman.
    Mr. Porter. Thank you, Mr. Bonilla.
    Ms. Pelosi.

            family and medical leave act/comp time proposal

    Ms. Pelosi. Thank you, Mr. Chairman.
    Madam Secretary, I wanted to ask you some questions about 
the expansion of family and medical leave versus the concept of 
the comp time proposal in the legislation that has passed the 
House of Representatives. I think a great part of President 
Clinton's legacy will be the Family and Medical Leave Act, the 
first piece of legislation that he signed, which aids families 
in balancing the competing demands of work and family. And I 
appreciate the proposals for expansion of family and medical 
leave.
    I am concerned about certain provisions of the comp time 
bill, and I was hoping that you could address, give us your 
evaluation of the comp time bill and secondly, its impact on, 
if it were to become law, its impact on the enforcement 
agencies' need for additional resources in the implementation 
of the comp time bill.
    Ms. Herman. First of all, let me state for the record that 
the President has expressed his own desire to be able to sign 
comp time legislation this year. And I am hopeful that the 
discussions and the deliberations that are taking place in the 
Congress will result in a bill that the President can in fact 
sign.
    The President has also been very clear, however, on those 
issues that he considers to be critical to any comp time 
legislation. It includes the issue of employee choice and 
employees must be able to choose comp time or overtime pay, 
that we must make sure that we do all we can to protect the 40 
hour work week, and lastly, that we take safeguards to make 
sure that we prevent any employer abuses in the system.
    With regard to the impact and what we need to consider in 
terms of resources should we find ourselves with a comp time 
bill that would be in the purview of the Department, I believe 
it is very important on the front end to be clear about the 
resources that would be needed to implement such legislation. 
And I would hope to have the opportunity to come back and 
discuss those implications with members of this committee.
    Ms. Pelosi. The three areas in terms of employee choice----
    Ms. Herman. Employee choice, protect----
    Ms. Pelosi [continuing]. 40 hour work week----
    Ms. Herman. And protecting abuses, yes.
    Ms. Pelosi. So you wouldn't have an idea right now what the 
additional resources, well, we don't have a bill.
    Ms. Herman. Right.
    Ms. Pelosi. So it would be hard to go forward on that.
    Could you talk about any expansion of the Family and 
Medical Leave Act that would be preferable to the bill that 
passed the House of Representatives?
    Ms. Herman. Yes. The President has proposed that expanding 
the Family and Medical Leave Act be included as a part of the 
comp time legislation that we are considering. And basically, a 
24 hour expansion of the Family and Medical Leave Act would be 
added for additional purposes, that employees could use that 
time for, including parent teacher consultation.

                    niosh involvement in rulemaking

    Ms. Pelosi. Mr. Chairman, I don't have any further 
questions. But I did too want to say to the Secretary that I 
share the compliments that were extended to Mr. Dear earlier. 
He was an excellent, he performed excellently in his position. 
And in his departure, Mr. Dickey, I don't know if you saw in 
the paper the statement that he made that being in the 
limelight here was like being a mackerel on the beach. From a 
distance, it's all very shiny, and then you get close up and 
there are other consequences. [Laughter.]
    I think that was very astute of him in evaluating life in 
the center of attention here. But he certainly, I think, made a 
very valuable contribution to OSHA. And I consider that to be a 
very important function of part of your responsibility. And 
certainly, the decisions that are made there should be based on 
facts, as some of our colleagues have said.
    And any of the initiatives that are taken should be based 
on science, and that's why in another set of hearings, I hope 
that we would have the commensurate support for NIOSH that 
matches the words of our colleagues about any decisions about 
ergonomics or any other such situation, would be met, as I say, 
with the amount of funds that are needed at NIOSH to do the 
scientific research on which all of these decisions, I believe, 
should be based.
    Ms. Herman. Thank you for those comments, Congresswoman 
Pelosi. And I'm looking forward to getting the results of the 
NIOSH study, because I think it will make an enormous 
contribution to the debate that we're having on this important 
issue.
    I should also tell you that I sent Joe Dear a note, and I 
told him that I knew a little bit about what it meant to be a 
mackerel on a beach. [Laughter.]
    Ms. Pelosi. Mario Cuomo described it as being like the 
Thanksgiving turkey. They bring it in, everybody oohs and ahs, 
and then they proceed to carve you up. [Laughter.]
    Ms. Pelosi. Mr. Chairman, thank you. I yield back the 
balance of my time.
    Mr. Porter. Thank you, Ms. Pelosi.
    The Chair would also second your remarks about Joe Dear. We 
hope you can find another Joe Dear to head that agency. He did 
an excellent job.
    The time is about 8 minutes of 12:00. We have four 
remaining members to ask questions. That will take us a little 
beyond the time. Madam Secretary, do you have time?
    Ms. Herman. I have time.
    Mr. Porter. All right. Mr. Miller.

                   pro-union procurement regulations

    Mr. Miller. I commend you for your appearance here today. 
You did an excellent job for only being on the job for a matter 
of days. I appreciate that, and I look forward to working with 
you. I hope we'll have a good relationship over this next four 
years.
    Let me ask some questions along the lines of the pro-union 
procurement regulations that were proposed by the Clinton 
Administration. On February 18th, Vice President Gore announced 
a series of new proposals at the AFL-CIO convention that can 
only be described as union friendly.
    One proposal would in effect debar Federal contractors who 
have violated labor, safety or other work places. That appears 
to be too subjective.
    The other proposal was to deny reimbursement to companies 
for their legal expenses for defending against NLRB complaints. 
That's in effect saying you're guilty automatically. That's 
kind of un-American, in my opinion. If a company is wrongfully 
targeted by the Federal Government, and cannot recoup its legal 
expenses, that could potentially put the company out of 
business. Plaintiffs have all the resources of the Federal 
Government at their disposal while the defendants are left to 
their own resources.
    What do you know about these announced changes in 
procurement regulations?
    Ms. Herman. What I know, Congressman Miller, is that the 
proposal that the Vice President has initiated is something 
that comes under the purview of the Office of Management and 
Budget, and the Federal Procurement Offices there. We are 
looking at a proposed regulation that would be subjected, first 
of all, to all of the Federal acquisition standards. And the 
intent of the proposed regulation, as I understand it, is to 
make sure that taxpayers monies basically are not being used to 
support lawsuits where, as you have indicated, companies have 
been cited or involved in labor disputes regarding their own 
labor practices that the Federal resources could not be used to 
support that kind of an effort.
    It's also my understanding that to the extent that we take 
into account the anti-discrimination laws that are on the books 
when we award contracts that we're looking to include fair 
labor practices as one of the issues that would also be taken 
into consideration. And to basically say that in the same way 
that Federal funds cannot be used to support employment 
discrimination cases that Federal funds could not be used as a 
part of labor disputes between employers and their labor 
unions.
    It is my understanding again that this is a regulation that 
will enjoy wide comment in terms of all of the stakeholders 
that certainly have an interest in this issue, that it will go 
through the traditional process that the Federal Government has 
set up, and that obviously, no regs would be issued before that 
important step is taken.
    Mr. Miller. So it's not going to be happening any time in 
the near future?
    Ms. Herman. No, it is literally in the promulgation stages.
    Mr. Miller. Just the idea, if a company is accused of some 
violation, they should be allowed to defend themselves, even if 
they are wrong. That's just a basic principle.
    Ms. Herman. I think the issue there is not so much saying 
they shouldn't defend themselves, but should the resources of 
the Federal Government, if you're using the contract dollars of 
the Federal Government to do that, I think that is what the 
issue is here.
    Mr. Miller. Then the Federal Government is using their 
resources to pay the $180 million a year we pay to the NLRB. So 
we're using Federal resources on one side, but, when you're 
accused by the Federal Government, you should also have the 
right to defend yourself, with federal resources.
    In any of the discussions you've had with Administration or 
union officials about the announced changes, has any company or 
person been named as an example of the types of violations that 
have been targeted? Can you give me illustrations?
    Ms. Herman. I'm not aware of any of the specifics regarding 
the data in terms of which the decision was based.
    Mr. Miller. When you were director of public liaison with 
the White House, did you ever discuss changes in procurement 
policy favored by organized labor? Was that a subject of 
discussion?
    Ms. Herman. I did not discuss those policy changes with 
organized labor. No, I did not.
    Mr. Miller. Okay. Thank you, Mr. Chairman. I think we have 
a vote going on.
    Mr. Porter. Mrs. Lowey.

                     professional judgement budget

    Mrs. Lowey. Thank you, Mr. Chairman.
    I'm going to ask you a question for Congresswoman DeLauro 
regarding the professional judgment budget. As we know, a 
professional judgment is a budget put together assuming there 
are no funding constraints, no competing priorities, no need to 
balance the budget. It's not a pie in the sky, how much money 
can we throw at every problem estimate. It is a judgment about 
the worthy activities which should be pursued, where funding, 
where a responsible budget, what it would look like if we were 
able to take advantage of all the opportunities for wise 
investments.
    Ms. DeLauro asks this question because when the National 
Institutes of Health came to testify, our Chairman asked Dr. 
Varmus, the Institute Director, what the funding level for the 
so-called professional judgment budget was. Ms. DeLauro said 
she believes that the budget you have submitted represents a 
sound investment to prepare and protect our Nation's workers. 
However, I'm sure that you had to make some difficult choices 
in putting this budget together.
    I wonder if you would give us a sense of what a 
professional judgment budget for the Department of Labor would 
look like.
    Ms. Herman. I'm afraid we don't have enough time for me to 
answer that question.
    Let me just give you some illustrations of what could 
happen from a budgetary perspective if we had the resources to 
perhaps make the adequate investment in some of the critical 
issues of the department. You can take an area like PWBA, for 
instance, where we've literally had a forty-three percent 
increase since the establishment of workers who are covered by 
pension plans, the asset portfolio is more than $3.5 trillion 
today.
    If the accompanying budget increases match the growth in 
the work load, you would literally have a five-fold increase in 
the request for PWBA. And I believe that would be something in 
the neighborhood of $400 million.
    We're only reaching 1 percent of the low income adult 
training needs today in our JTPA Title II-A program. If we were 
to actually target by professional experts, that category that 
is in most need of those services, you're talking about, rather 
than the roughly 140,000 that we're reaching through our own 
system, you're talking about an increase of somewhere between 
1.5 and 2 million individuals. The related budgetary need would 
be of somewhere in the neighborhood of $4 billion to $5 billion 
in addition to the overall increase that we're asking for in 
our Title II-A employment and training request.
    The Chairman I think is stopping me.
    Mr. Porter. Actually, I wasn't.
    Ms. Herman. Okay.
    Mr. Porter. Thank you, Ms. Lowey.
    Madam Secretary, because I take a little longer to get 
tothe Floor because of my back, I'm going to go ahead and turn the 
Chair over to Ms. Northup. But let me thank you for the excellent 
testimony you've given today, for a superb statement. And we look 
forward to working very closely with you.
    Ms. Herman. Thank you very much, Chairman Porter.

                         responses to questions

    Mrs. Northup [assuming chair]. Madam Secretary, I'll close 
briefly just by asking you a couple of questions. We talked 
about black lung. I have a number of questions written to you. 
One thing that's been very difficult for our office is that 
OSHA has not responded to our questions that we asked weeks ago 
in the hearing.
    Could you expedite the responses to those questions so that 
we could follow up more effectively?
    Ms. Herman. I will do all that I can to see that we get you 
an expedited response. As I indicated to Congressman Bonilla, I 
believe it was, we have right now more than 200 questions that 
are due back from various members. But I will take a special 
look at the questions you've asked on black lung.
    Mrs. Northup. Thank you. And also, when you referred, 
somebody asked earlier about the ESA, the increase in, I think 
it was maybe Chairman Porter, the increase in jobs that were 
requested for ESA and a 10 percent increase?
    That of course would be the area under which these black 
lung regulations, it would be their implementation that would 
actually be involved. So it certainly seems to me like maybe 
one of the increases is directly related to that regulation.
    Ms. Herman. I will take a look to see what is the related 
increase of staff to the regulation.
    Mrs. Northup. All right. I think I have a number of 
questions related to that, and I would ask you to look at each 
one of those as you go through the review of that.
    Ms. Herman. I will do that.
    Mrs. Northup. Okay, thank you very much. And I am finished, 
and I understand that we are adjourned for the day--for the 
week. Thank you very much.
    Ms. Herman. Thank you very much, Congresswoman Northup.
    [The following questions were submitted to be answered for 
the record:]

[Pages 52 - 105--The official Committee record contains additional material here.]


                                          Wednesday, April 9, 1997.

  EMPLOYMENT AND TRAINING ADMINISTRATION AND VETERANS' EMPLOYMENT AND 
                                TRAINING

                               WITNESSES

RAYMOND J. UHALDE, ACTING ASSISTANT SECRETARY FOR EMPLOYMENT AND 
    TRAINING
MARY ANN WYRSCH, CHIEF OF OPERATIONS FOR EMPLOYMENT AND TRAINING
PRESTON M. TAYLOR, JR., ASSISTANT SECRETARY FOR VETERANS' EMPLOYMENT 
    AND TRAINING
JAMES E. McMULLEN, DEPUTY ASSISTANT SECRETARY FOR BUDGET
MARY SILVA, DIRECTOR, JOB CORPS
    Mr. Bonilla [assuming chair]. The subcommittee will come to 
order.
    I welcome the witnesses who are appearing before our 
subcommittee today. We will be hearing from the Department of 
Labor, Employment and Training Administration and Veterans' 
Employment and Training. First, we have Mr. Raymond Uhalde, the 
acting Assistant Secretary for Employment and Training, and he 
will be followed by Preston Taylor, Assistant Secretary for 
Veterans' Employment and Training.
    Mr. Uhalde, we would love to hear from you at this time.

                         ETA Opening Statement

    Mr. Uhalde. Thank you, Mr. Chairman and subcommittee 
members, for the opportunity to appear today to discuss the 
Administration's fiscal year 1998 budget request for workforce 
preparation and employment services. I will summarize my 
written testimony.
    With me today is Mary Ann Wyrsch, the Chief Operating 
Officer for the Agency, and Mary Silva, the National Director 
of Job Corps.
    The request before the committee totals $10.2 billion, of 
which $9.5 billion is for discretionary programs and $741 
million is for mandatory programs. An additional $781 million 
is included in the President's budget request based on 
legislation to be proposed, including $756 million for a new 
Welfare-to-Work Jobs Challenge.

                         program effectiveness

    Mr. Chairman, your January 15th letter requested that we 
address the effectiveness of our programs and inform you about 
the progress we have been making in implementing the Government 
Performance and Results Act.
    The Employment and Training Administration places a high 
priority on measuring and improving the efficiency and 
effectiveness of its programs. We do this by collecting 
detailed data on program participants through our management 
information system, by monitoring program results through a 
performance measurement and management system, and by 
evaluating our programs through rigorous studies of their costs 
and net impacts. We routinely provide feedback to our State and 
local partners on their performance through ``report cards.''
    For some time ETA has been making investments in management 
information which provide American taxpayers, the Congress, and 
the workforce development community with information on client 
characteristics and the services they receive, and, more 
importantly, the results that are achieved in terms of 
employment, earnings, and educational attainments.
    JTPA's job training system was one of the first Federal 
block grant programs designed to be results-driven and guided 
by a highly structured performance management system. Local 
programs must meet federally defined, State adjusted minimum 
levels of performance. These standards help States identify 
high-performing programs that qualify for incentive awards and 
low-performing programs in need of technical assistance or even 
reorganization.
    The Labor Department takes our evaluation seriously, and 
attempts to use the most rigorous evaluation techniques 
possible with the funds available. Of course, we are learning 
as we go and we recognize that great care needs to be taken in 
interpreting results of evaluations. It is often difficult to 
do, since the evaluations don't really measure whether training 
or education works, but rather identify the incremental 
contribution of a particular program or activity beyond what 
individuals would otherwise get in their communities.
    Currently, we are conducting, with this Committee's 
encouragement and support, a major national evaluation of the 
Job Corps. We're also in the design phase of a national study 
of the JTPA program for dislocated workers.
    In general, our evaluations and data from program 
operations show that our employability development programs can 
be effective in improving the employment and earnings of 
participants. For example, our random assignment study of over 
20,000 applicants to JTPA programs for the economically 
disadvantaged found that the increased earning of adult 
participants surpassed the costs of the program within two and 
one-half years.
    We are using this wealth of information and experience in 
performance measurement and management to meet the requirements 
of the GPRA. In drafting our five year strategic plan and our 
first annual performance plan which must be in place later this 
year, we have solicited and received input from our partners in 
the workforce development systems, as well as from all 
employment and training stakeholders. We have also had an 
opportunity to brief and consult with this Committee's staff on 
our plans. Until the end of August, when we have to finalize 
these plans, we will continue this open and consultative 
process.
    Mr. Chairman, two years ago President Clinton proposed to 
dramatically overhaul the complex structure of Federal job 
training programs by consolidating multiple programs into a 
single, integrated workforce development system, by providing 
skill grants or vouchers to adults who need training, and by 
improving accountability by focusing on results. Unfortunately, 
the 104th Congress did not complete action on this legislation.
    This year the House and Senate authorizing committees have 
held hearings on job training reform and are working on 
legislative proposals to build a broad consensus regarding key 
portions of last year's proposal. We have been greatly 
encouraged by the spirit of bipartisanship and expressions of 
good will at House and Senate hearings with both committees.
    But even without new legislation, the Department has 
pressed ahead with reforms to the job training system, 
including implementing the authority you provided us in the 
fiscal year 1997 appropriations act to waive Federal legal and 
regulatory requirements under JTPA and the Wagner-Peyser Act 
that impede State and local reforms. We recently signed an 
agreement with the State of Oregon that allows them much 
greater flexibility in return for higher performance under 
JTPA, and we will be accepting proposals from all States to 
request such waivers.

                          1998 budget request

    The Department's fiscal year 1998 budget is linked to two 
of the President's top priorities--education and successful 
implementation of welfare reform.
    In addition to funding for programs that help young people 
make a successful transition to the world of work and family 
responsibility, the President has proposed competitive national 
grants to high-poverty urban and rural areas with major youth 
unemployment problems, including designated and prospective 
Empowerment Zones and Enterprise Communities. The Youth 
Opportunity Area grants are time-limited Federal seed money. 
Grants would be awarded based on local designs and those that 
have the best chance of substantially increasing the employment 
among youth. We are working with the authorizing committees to 
determine how best to incorporate this innovative approach in 
job training reform legislation.
    Key features of apprenticeship are reflected in our 
successful workplace learning programs, including employer-
union partnerships, links between classroom and worksite 
learning, and paid work experience. We are requesting eleven 
new staff for the Bureau of Apprenticeship and Training to meet 
the growing demands for apprenticeship services, including the 
provision of technical assistance to States and to expanding 
industries such as telecommunications.

                         unemployment insurance

    We are requesting $2.6 billion for State Unemployment 
Insurance programs, $289 million above fiscal year 1997, $200 
million of which will help States address the year 2000 
computer problem and $89 million for enhanced integrity 
services.
    The year 2000 problem is particularly acute for State 
Unemployment Insurance agencies because they depend heavily on 
automated systems to track claimants, collect wage and tax 
information, determine eligibility, and calculate pay benefits. 
Many of these systems are not yet year 2000 compatible. Without 
conversion, they will either calculate benefits incorrectly or 
possibly crash. Failure to address this problem would have an 
extremely detrimental effect on the UI system and UI 
recipients.
    The integrity functions of Unemployment Insurance arevital 
because they are designed to ensure benefit payment accuracy, detection 
and collection of overpayments, and detection and collection of under-
reported taxes. These activities help keep program costs and employer 
taxes down. Because fiscal year 1998 would be a start-up year in terms 
of additional investments in the integrity area, the return would be 
approximately $118 million. However, analysis shows that an investment 
of $91 million in fiscal year 1999 would result in a much larger return 
of about $158 million.
    As mentioned earlier, the President's budget includes a 
Welfare-to-Work Jobs Challenge, based on legislation to be 
submitted, which is designed to help States and cities move one 
million of the hardest to employ welfare recipients into 
lasting jobs by the year 2000 through job placement and job 
creation. It provides $3 billion over 3 years in mandatory 
financing through the Department of Labor for job placement and 
job creation, with $756 million requested for fiscal year 1998.
    It is widely recognized now that a job creation measure is 
needed to complement the Transitional Assistance to Needy 
Families block grant if we are to indeed make welfare reform 
work. The Jobs Challenge is intended to meet that need. We are 
encouraged that welfare-to-work legislative proposals are being 
developed in the House and Senate that follow the principles 
enunciated by the President in his Jobs Challenge.
    The Administration also proposes an increase of $169 
million above the fiscal year 1998 level so that additional 
welfare recipients can be served through the Job Training 
Partnership Act program for low income adults, providing funds 
in addition to those in the TANF block grant. Already JTPA 
helps many welfare recipients get the training they need to 
become economically self-sufficient. JTPA has documented 
success in placing women on welfare in private sector jobs, 
particularly through on-the-job training.
    Mr. Chairman, in conclusion, I would emphasize the 
importance of what we are undertaking. In recent years, 
education and wages have become increasingly interconnected and 
the economy has divided along skill lines. This presents us 
with a challenge--how do we ensure that every American will 
have the opportunity to obtain the skills needed to compete and 
succeed in the new economy? We cannot afford to leave anyone 
behind. At the same time, we must ensure an appropriate return 
on the American taxpayers' investment.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to answer any questions that you or other subcommittee 
members may have.
    [The prepared statement and biography of Raymond J. Uhalde 
follow:]

[Pages 111 - 124--The official Committee record contains additional material here.]


               veterans' employment and training service

    Mr. Bonilla. Mr. Uhalde, I am sure the committee will have 
quite a few questions for you in just a second. But first, I 
would like to go ahead and ask Mr. Taylor for his testimony. 
Before that, I would like to recognize that this is Mr. 
Taylor's last appearance before this subcommittee.
    What are you going to be doing next, Mr. Taylor? Next month 
is when you leave, is that correct?
    Mr. Taylor. Yes, sir. I'm heading back to the private 
sector, and home for family reasons. My daughter is 16 and will 
be heading into her last year of high school. I want to be 
around when it's time to start looking for colleges.
    Mr. Bonilla. Where's home, Mr. Taylor?
    Mr. Taylor. New Jersey. I've been commuting back and forth 
for the last three and a half years.
    Mr. Bonilla. Well, we wish you the best of luck.
    Mr. Taylor. Thank you very much.
    Mr. Bonilla. We would be pleased to hear your testimony at 
this time.

                        asvet opening statement

    Mr. Taylor. Thank you. Good afternoon. I appreciate the 
opportunity to submit for the record the fiscal year 1998 
Department of Labor budget request for the Veterans' Employment 
and Training Service.
    First, I want to acknowledge the efforts of this Committee 
and others in Congress who provided the resources that made it 
possible for VETS and our State partners to continue to meet 
the needs of our customers in fiscal year 1997.
    When I first came to the Veterans' Employment and Training 
Service three and a half years ago, I knew that to be 
successful we had to listen to our customers. Based on survey 
results and focus groups, we developed training to improve both 
our skills and our sensitivity to today's veteran population. 
We are always looking for continuous improvement both in the 
delivery of our services and the measurement of program 
results.
    Since this is the last time I will appear before you as an 
assistant secretary, I would like to leave with you my vision 
for VETS in 1998 and into the 21st century. It is that we 
continue to evolve into a world-class organization, providing 
employment training and enforcement services to our Nation's 
veterans. I expect our staff to keep pace with the demands and 
rewards of putting our customers, veterans and their 
prospective employers, first. This will give each veteran a 
chance for real employment security in a changing economy.
    To help us achieve these goals, we are in the process of 
developing our strategic plan mandated by the Government 
Performance and Results Act. Our plan is currently in 
departmental clearance. We intend to improve the way we measure 
and evaluate our programs. The Agency's 1998 budget request is 
designed to promote the maximum employment and training 
opportunities for veterans, particularly those who still suffer 
higher than average unemployment rates--the disabled, minority, 
female, young, and recently separated veterans.
    To better serve veterans, we are streamlining, shifting 
resources and making better use of electronic tools. The 
quality of jobs available through the State Employment Service 
system is also improving. Federal contractors, and that means 
many of the Nation's leading companies, can now place job 
openings electronically on America's Job Bank. Many of these 
are better paying and career-building jobs. I intend to make 
sure that DVOPs and LVERs have the knowledge and tools 
necessary to access those jobs and place veterans in them.

                           homeless veterans

    The only significant increase in our fiscal year 1998 
budget submission is a $2.5 million request for the Homeless 
Veterans Reintegration project, an important program that was 
reauthorized by Congress last year. These funds will allow us 
to competitively award 20 grants to help homeless veterans move 
into unsubsidized employment. VETS is the only Government 
agency directly working to put homeless veterans into jobs. 
That is not the VA's responsibility; that is the Department of 
Labor's responsibility. That is not HUD's responsibility; that 
is the Department of Labor's responsibility.
    The bulk of our budget, just over $157 million, is for 
grants to our State partners to fund DVOP and LVER positions. 
We are working with the State Employment Security agencies to 
make sure that their time and attention can be targeted to 
those veterans who are not job-ready, or when they leave 
military service and need more targeted and intensive 
assistance. This emphasis will not adversely affect our 
services to any of our veteran customers. In fact, it will 
allow DVOPs to concentrate their efforts on case managing those 
disabled veterans who require specifically tailored services to 
make them job ready, while LVERs will be able to play a greater 
role in monitoring the provision of priority of services and 
Federal contractor job listings.
    Our request for JTPA IV-C is the same as last year, $7.3 
million. These too, will be competitive grants awarded to State 
entities through the Governor's office. A small amount of the 
funds will be used at my discretion for research and 
demonstration projects.
    The $22.8 million request for administration of the agency 
will support 254 employees. Our administrative funds will also 
support the Transition Assistance Program for about 160,000 
separating servicemembers and their spouses.
    Finally, $2 million is requested to continue funding the 
National Veterans Training Institute, which provides quality 
training services to Federal and State personnel charged with 
helping veterans.
    This is a tight and responsible budget. I appreciate the 
opportunity to present its highlights to you. I look forward to 
working closely with the committee on behalf of our Nation's 
Veterans. I'll be glad to respond to any questions that you 
might have.
    [The prepared statement and biography of Mr. Preston M. 
Taylor follow:]

[Pages 127 - 134--The official Committee record contains additional material here.]


    Mr. Bonilla. Thank you, Mr. Taylor, very much for your 
testimony.

                            job corps works

    I would like to start out by talking about Job Corps, which 
you touched on briefly in your testimony. I have also reviewed 
the written testimony regarding Job Corps that you submitted. 
But before I ask my questions, I would like to recognize Ms. 
Silva for being featured in a recent article in the Dallas 
Morning News commending for her for her work in recruiting 
women to the program. Congratulations on that and keep up the 
good work. Did you like the article?
    Ms. Silva. It really was nice.
    Mr. Bonilla. Yes. It's unusual to get something nice said 
about you in the newspaper.
    Ms. Silva. It's wonderful. And I'm not from Texas, so it 
was really nice. I showed it to my mother and she loved it.
    Mr. Bonilla. That tells you a lot. If your mother liked it, 
it must have been really good.
    I want to start out talking about Job Corps. As you know, 
realistically, I have had a lot of differences with now 
departed Secretary Reich over issues involving various 
functions of the Labor Department, but the Job Corps is 
something we always agreed on completely because it is a 
program that works and it is a program that I believe has had a 
lot of strength because of its connection to the private 
sector, with companies like Vinnell and Adams and Associates 
being involved. I do attribute a lot of this good to the 
private sector because in the private sector performance equals 
success. If you don't produce, you don't survive. That 
motivation often doesn't exist when there is not a connection 
to the private sector in a program designed to help the 
disadvantaged and the poor.
    I've been to the Laredo, TX facility several times and I've 
seen the young people that are going through it, have gone 
through it, and I see firsthand how it helps them get a leg up. 
They are often coming from families that have never had an 
opportunity to have a skill or in many instances don't even 
know how to fill out a job application. So I just can't say 
enough good things about the program.

                    gateway job corps center closing

    One of the things I wanted to ask about is I read on page 8 
of your testimony that the Gateway Job Corps Center in New 
York, administered by the Government through the National Park 
Service, is closing because of long-standing performance 
problems. I would like for you to clear up a little confusion, 
because on page 26 of your budget justification you state that 
``At present, the Department has no plans to close any Job 
Corps Centers. This reflects our confidence that efforts now 
underway will bring the chronically poor performing centers up 
to par.''
    It seems to contradict your written testimony which states 
that the Department is closing Gateway. You also state in the 
justification that some of your specific actions to improve 
poor performing centers are to ``contract out a previously 
funded operated center.'' Are you referring to Gateway here? 
Also, how many of the 118 remaining Job Corps Centers have 
contracts with Government agencies? If there are any, how are 
these centers rated?
    Mr. Uhalde. Mr. Chairman, specifically with Gateway, let me 
just answer briefly and then turn to Mary for further response. 
Gateway is operated by the National Park Service. We worked 
very closely with the Park Service to try and improve 
performance. But after a significant amount of time, it has not 
been successful. We didn't have the option of being able to 
contract those services out because that wasn't allowed under 
the authorities of the National Park Service. So we had no 
other choice but to close the center because we couldn't 
contract it out and provide services through the private sector 
and stay on the National Park Service land.
    We are constantly looking for new operators and soliciting 
new operators when we do have poor performance. We do change 
contractors through the competitive bid processes, often 
particularly when we do have poor performing centers. Over the 
last 72 bids, there have been 6 new private sector operators 
that came in operating 12 new centers out of 72 bids.
    Mary, do you want to talk more about Gateway?

                 iroquois job corps center contracting

    Ms. Silva. I want to clarify something. Last year, we 
changed a federally-operated center, the Iroquois Center in 
upstate New York, which was formerly operated by the Fish and 
Wildlife Service, one of the bureaus under the Department of 
Interior. Iroquois also had suffered from chronic poor 
performance. We partnered with Fish and Wildlife in determining 
that it would be better if a private sector company operated 
the Iroquois Job Corps Center. So we contracted out the 
Iroquois Center, which is what part of that testimony referred 
to when we said we contracted out a formerly federally-operated 
center, which we were given the authority to do last year.
    In terms of Gateway, we did not have that authority with 
the Park Service. The Gateway Center has been a chronic poor 
performer. In fact, it was closed for two years, from 1988 to 
1990, for performance reasons. We have tried a variety of 
different approaches to try to ensure that we could improve the 
performance. At the time that the statement was made that we 
had no intention of closing a center, it was because we hoped 
that we would be able to contract that out also. That was not 
possible, which is why we are closing it effective June 30.
    We have currently 29 Job Corps Centers that are operated by 
Federal agencies; 18 of them are operated by the Forest Service 
within the Department of Agriculture, and 11 now are operated 
by three bureaus within the Department of the Interior.
    Mr. Bonilla. And how are they rated? In other words, how 
does their efficiency compare to those that are affiliated with 
private companies?
    Ms. Silva. There's quite a significant range. Some of the 
federally-operated centers are outstanding performers, a number 
of the Forest Service centers are very excellent performers, 
and some of the federally-operated centers are challenged and 
don't perform as well. I do not attribute it at all to the 
Federal operation or the private operation.
    Mr. Bonilla. Ms. Silva, maybe you would like to answer this 
question, are any other centers in jeopardy of closing because 
of poor performance besides the one we've just discussed here?
    Ms. Silva. Not at this point. What we're trying to do is 
use a variety of different interventions before one would speak 
of closing a center, because that is a significant impact. 
We've put what we call ``high performance challenge teams'' on 
six centers. These are technical experts that spend up to six 
months in the center trying to provide on site technical 
assistance. We have seen very good results in a number of the 
centers where we have had high performance challenge teams.
    We have also changed contractors because with theprivately-
run centers we have that option where you can competitively procure and 
change center operators. As Ray Uhalde mentioned, we have turned over a 
number of contractors because it is absolutely essential that they 
understand that performance is the bottom line.
    Mr. Bonilla. So you have seen some significant changes then 
in the ones that were not rated highly last time?
    Ms. Silva. Right. Some continue to be challenged and in 
others we have seen significant changes.
    Mr. Bonilla. What about the money saved by closing Gateway, 
what is that money going to be used for?
    Ms. Silva. What we anticipate doing is expanding the 
capacity at the neighboring South Bronx Job Corps Center to 
enable young people from the New York area to be able to stay 
there. We're also looking at other centers within New York 
State to be able to keep that capacity. But all of the funds 
have not been designated because we just made this decision 
recently.
    Mr. Bonilla. I'd be interested in following up on that at 
some point.
    Ms. Silva. Okay.
    Mr. Bonilla. If you would let us know, I would appreciate 
that very much.
    Ms. Silva. Okay. Fine.

                           nlrb and job corps

    Mr. Bonilla. A few weeks ago the National Labor Relations 
Board was before this committee and I asked a question related 
to the Job Corps. I questioned their decision to expand their 
jurisdiction and involve themselves in the Management Training 
Corporation and the Teamsters' case involving Job Corps 
Centers. My question is, this is addressed to Mr. Uhalde, were 
you consulted about this case?
    Mr. Uhalde. No. I have not consulted with NLRB on those 
issues.
    Mr. Bonilla. Does it seem odd to you that the NLRB would 
become involved in this case, especially since the terms of the 
contract administered by ETA control the employees' wages and 
fringe benefits and not the company?
    Mr. Uhalde. I'm just generally aware that there are some 
issues with regard to a couple of centers that I believe are 
operated by MTC regarding issues of attempting either to 
organize workers or bargain a contract with MTC for center 
employees that have already voted to be organized. But I am not 
familiar with the details of the issue.
    Mr. Bonilla. I just wanted to let you know about that, and 
we're going to keep an eye on that particular issue.
    Mr. Uhalde. Okay.
    Mr. Bonilla. I thank you very much.
    Mr. Stokes.
    Mr. Stokes. Thank you very much, Mr. Chairman.

                 programs addressing high unemployment

    Good afternoon. I would like to start by making reference 
to last year's hearings. At that time, the agency indicated for 
the highest poverty communities in America the unemployment 
rates can be in excess of 70 percent. It appears that these 
individuals have no economic future. Tell us specifically how 
does the fiscal year 1998 budget request address this type of 
ongoing tragic national problem?
    Mr. Uhalde. Congressman, the President's budget addresses 
it very directly by proposing an initiative that we're 
referring to as the Opportunity Areas for Out-of-School Youth, 
requesting $250 million that would be targeted to high poverty 
areas both urban and rural where poverty is in excess of 30 
percent, especially Empowerment Zones and Enterprise 
Communities, either existing ones or prospective future ones.
    The intent is for these high poverty neighborhoods to be 
able to use these concentration of funds to build a 
comprehensive set of services directed toward private sector 
employment for these young people. Out-of-school kids in these 
areas have an employment rate of less than 50 percent. By 
definition they're not in school, so they are neither earning 
anything nor learning anything.
    What we need to do is to provide opportunities and 
alternatives for them. This is an intention to provide, if you 
will, a block grant targeted at these high poverty areas to try 
and provide alternatives for young people.
    Mr. Stokes. Mr. Uhalde, over the years we've learned that 
education and skills matter more than anything. However, 
critics of employment training say that short-term training is 
not effective, earnings of job training graduates are low, and 
the jobs people get are not training related. Can you address 
these concerns and elaborate more on your answer for the 
record?
    Mr. Uhalde. Certainly. As I tried to characterize in my 
written statement, we have spent a lot of time with our 
employment training programs in trying not only to collect the 
data, but measure their success and their performance. We use 
it for day-to-day and annual management to make decisions for 
programs. We also do it to measure the effectiveness of the 
programs and to demonstrate their benefits in terms of cost-
benefit analysis.
    We do very rigorous evaluations. I think the weight of the 
evidence is that clearly for our adult programs, even reviews 
that have been done by the General Accounting Office, it shows 
that for adult men and for adult females our programs pay off. 
The earnings the people get in these programs are above and 
beyond more than the roughly $2,000 that is invested on average 
in their training. Longer term training does pay off more. Job 
Corps can certainly attest to that.
    But we think the evidence for both our adult programs and 
programs that are better linked to private sector, like the 
Center for Employment Training, is that it pays. It transforms 
people's lives and makes them have greater opportunities and 
success in earnings and employment.
    Mr. Stokes. Mr. Uhalde, are you able to quantify for us the 
cost of high school drop-outs to our Nation's economy in terms 
of lost productivity, lost taxes, incarceration etc? Is there 
any way to quantify that type of a loss?
    Mr. Uhalde. I think there are a variety of studies that are 
available that show that. I am aware of sort of a common 
measure that a typical high school drop-out over a life time 
will earn roughly $230,000 less than a high school graduate 
over their lifetime. As a result of that, they will contribute 
$70,000 less than a high school graduate in terms of Federal, 
State, and local taxes.
    Teen mothers are more likely to have low birth weight 
babies than adult mothers. Low birth weight babies over a life 
time will incur an additional $400,000 worth of medical 
expenses.
    So, just in those two areas, there is substantial cost. The 
typical costs often cited for a year of incarceration can be 
$45,000 to $60,000. So the opportunity costs to working and 
learning are substantial.
    Mr. Stokes. Thank you.

                       assistant secretary taylor

    General Taylor, I want to concur with our Chairman's 
compliments regarding the outstanding service you've rendered 
over the past 3\1/2\ years as Assistant Secretary for Veterans' 
Employment and Training. Of course, we're going to miss you.
    Mr. Taylor. Thank you.
    Mr. Stokes. Also, we certainly understand your reasons for 
leaving.
    Let me ask you, having served 3\1/2\ years as the Assistant 
Secretary, what accomplishments are you most proud of during 
your time?

                         asvet accomplishments

    Mr. Taylor. When I arrived in late 1993 unemployment for 
veterans was above the national average, 7.2 percent. Today, I 
am very happy to tell you that veterans' unemployment is now 
3.8 percent, below the national average. We think we played a 
role in that.
    However, we are still seeing, even with the downsizing of 
the military completed and veterans' unemployment down, 2 
million veterans coming into our employment offices each year 
looking for help.
    We are also very proud of what we've been doing in 
preparing young military men and women, who are about to leave 
the military in 180 days or less, in our transition classes, 
where we teach them how to write a resume, how to interview, 
how to dress for an interview, what the VA benefits are, and 
where the jobs are. We trained 600,000 of these young people.
    We are also an enforcement agency. We resolved 5,200 job 
related discrimination cases in these last three and one-half 
years. I'm very proud of those accomplishments.
    Mr. Stokes. I appreciate those things that you're most 
proud of, but have you had any disappointments, alternatively 
speaking?
    Mr. Taylor. Yes. The homeless veterans program when I 
arrived was a very small $5 million program. But we received 
great benefits from it. We were able to help 8,000 homeless 
veterans with that money and we were able to put more than 
4,000 of them into jobs. As I said during my opening statement, 
there is only one Government agency that is responsible for 
helping veterans find work and that is in the United States 
Department of Labor.

                        inter-agency cooperation

    I have worked very closely with VA especially in helping 
disabled and special disabled veterans find work. We have 
worked with HUD also. We have developed a continuum of care 
program with them. The VA would take care of their health 
needs, HUD would take care of their lodging requirements, and 
we would take care of their employment needs.
    The VA did a survey two years ago among homeless veterans. 
They held a symposium here in Washington on the homeless 
veterans issue. One-third of all homeless people in the United 
States are veterans and the VA wanted to talk to them. They 
asked the homeless veterans what was their most pressing need. 
They were really shocked to find that the homeless veterans say 
they needed a job. They thought that they would ask for medical 
help or lodging. They did not. Overwhelmingly, they were 
looking for employment. And we're the only agency that provides 
that.
    So my big disappointment was when this committee rescinded 
that program two years ago. Fortunately, the Congress 
reauthorized it again and the President thought it was 
important enough to ask for money in this fiscal year 1998 
budget. I am pleased that has happened.
    Of course, the Government shut-down and the continuing 
resolutions were also a problem for us, not just my agency but 
for everyone in the Federal Government.
    Mr. Stokes. I appreciate that very much. Tell us what, in 
your opinion, needs to be done. As you look over this three and 
a half year period, give us some idea of what you think needs 
to be done.

                            veterans' needs

    Mr. Taylor. Well, I think one of the things that needs to 
be done has been recognized by the President's budget--he's 
decided to ask for $2.5 million to help homeless veterans. 
These veterans, many of them have been caught in right-sizing, 
re-engineering in the private sector. Mothers and wives usually 
write to the President or the President's wife asking for help, 
saying we're on the verge of being homeless, my husband has 
been out of work for six months, a year, a year and a half, 
maybe two years, and we've run through our savings, we can't 
make the mortgage payment and we're afraid we're going to be 
homeless.
    They are not all people with psychiatric problems or 
drinking or drug problems. Many of them just have fallen on 
hard times. So I think it is a good thing that the President 
has recognized that.
    Although unemployment overall is down, we still see high 
unemployment among our minority veterans. Unemployment in that 
area is hovering around 10 percent. Unemployment of female 
veterans is hovering around 9 percent. We are seeing more 
female veterans all the time. We need to do more to help 
disabled veterans who want to work. So we have started to 
develop strategies now to develop processes that are going to 
be aimed at helping these particular groups of veterans. 
Unemployment for young veterans between the ages of 20 and 24 
is around 12 percent. So we need to figure out how to get that 
number down.
    Mr. Stokes. Thank you very much. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Stokes.
    Mr. Miller.

                        government travel policy

    Mr. Miller. Good afternoon. I was wondering about the 
policy of the Federal Government on the issue of travel. You 
are a presidential appointee, a political appointment position. 
I remember talking to Secretary Reich one time about his family 
staying in Boston and the commute was really at his expense. Is 
that what the Federal policy is?
    Mr. Taylor. Yes. I have an apartment in Crystal City and 
that's at my expense.
    Mr. Miller. So you have the personal expense. You were a 
career employee?
    Mr. Taylor. Yes, sir.
    Mr. Miller. Is that true that: if a career member of the 
Labor Department or any Federal agency, do they have the same 
requirement? I'm also curious what impact that has on getting 
people to accept the job.
    Mr. Taylor. I don't know the answer to that. Let me ask Mr. 
McMullen to help with that.
    Mr. McMullen. Part of it depends on the situation in which 
the travel is taking place. If someone is put out on assignment 
to go out to another location to do some work away from their 
home base, the Government would of course reimburse them for 
those travel expenses. If their home base is in one city and 
they decide to live in another city, it is up to them to pay 
for the commuting back and forth.
    Mr. Miller. Would there be expenses for you to move your 
family to Washington by accepting the job?
    Mr. Taylor. I'm sorry?
    Mr. Miller. Would there have been money available for you 
to move your family to Washington if you had desired that?
    Mr. Taylor. No. I would have to move at my own expense.
    Mr. Miller. Okay. That does create a problem, obviously. I 
guess that is one reason why you are leaving Government 
service.

                             asvet programs

    How many Federal programs are under your jurisdiction? And 
are they all job training programs?
    Mr. Taylor. We have three missions. One is employment and 
training. Last year the Department was able to find through a 
grant program to the States approximately 535,000 job openings 
for vets. I know Mrs. Lowey and I discussed that last year 
here. The training aspect is done in concert with the DOD, 
Department of Defense. We go into their bases as their guests 
and train their military people who are about to leave. Last 
year, I believe we trained about 145,000 of them.
    We have an enforcement responsibility and investigators 
that work for us. If a person is called up by the President 
from the National Guard or the Reserves to participate in some 
type of military operation, such as Desert Shield/Desert Storm 
or even a small operation like Haiti where the President called 
up 6,000. These citizen-soldiers have job rights. They leave 
their jobs at the call, but some of them have trouble getting 
those jobs back when they are demobilized. That is against the 
law. President Clintonsigned a reemployment law in 1994, known 
as the Uniform Services Employment Re-employment Rights Act. We enforce 
that act.
    Mr. Miller. How many separate job training programs are 
there?
    Mr. Taylor. Just the one.

                         job training programs

    Mr. Miller. Okay. I have heard there are 160 Federal job 
training programs. So you have one. There are 159 more.
    Mr. Uhalde. Well, the Employment Training Administration 
has 30 according to the count of the General Accounting Office. 
Those are programs or funding streams. The Job Training 
Partnership Act is one act and has 15 to 20 funding streams 
within it and those are all counted as programs in this count 
you hear of 160 Federal programs. We have about 30 in total.
    Mr. Miller. Is the 160 an accurate number, I guess it is 
Agriculture Department programs and so on, not just in your 
area.
    Mr. Uhalde. Obviously. They are at HUD, Education----
    Mr. Miller. Is 160 a realistic number?
    Mr. Uhalde. It depends on how you count it. There are 160 
funding streams. When you get to the local level it is an issue 
of these funding streams having different rules or requirements 
attached to them so it makes it difficult to integrate the 
money and serve the participant who, after all, doesn't care 
what the funding stream is, they need supportive services or 
training.
    There are multiple funding streams. The President's 
proposal is to consolidate between DOL and Education 70 of 
those.
    Mr. Miller. It didn't get through Congress last year, as 
you know. Are you optimistic it will get through this year?
    Mr. Uhalde. We are optimistic. We testified before both the 
House and the Senate committees. In the House, Chairman McKeon 
is working very closely with the Administration and with other 
groups. He is expecting to have a markup in the next couple of 
weeks, as I understand it. We're very hopeful. There's a lot of 
common ground.
    Mr. Miller. Right.
    Mr. Uhalde. We think there's a deal to be done.
    Mr. Miller. In your budget submission, my understanding is 
that you have an increase in administrative costs. Would you 
expect it will save administrative costs if you had some 
consolidation? You are requesting an increase in administrative 
costs for this year.
    Mr. Uhalde. Yes, we have a net increase for training and 
staff to take us to 1342 staff which is about 30 less than last 
year's total. I think we net 17 staff over the 1997 level.
    The consolidation savings would accrue in the field, and 
those savings are going to be plowed into the program. 
Administrators will use the savings for services for people. 
There will be less duplication of administrative costs and they 
will be able to do more training.

                    state administration of welfare

    Mr. Miller. Okay. During my district work period down in 
Florida, I looked at the welfare issue and the job training 
issue. There was confusion in Florida, and a lot of it may just 
be a timing issue within the State, but one of the problems in 
my area is who is going to run all this, whether it is the 
local job training, or the Manasota Industry Council, or the 
State. It was a confusing issue. Are you seeing problems with 
the implementation of welfare reform as far as the role of job 
training and fitting in. They have so much more control at the 
State level, but job training, what kind of problems are you 
seeing in this transition?
    Mr. Uhalde. Well, I guess I would characterize it more as 
all the States right now are trying to sort out how to do this. 
The welfare programs, by and large, are administered at the 
State level, except in I believe 11 States where they are 
county administered. And our job training is primarily local, 
while our employment service activities are State. States are 
trying to sort out how much they want to do through a State-
operated system and how much they want to integrate with the 
broader job training system.
    We are offering in every State the opportunity to State 
welfare systems to integrate their services with the workforce 
development system, the job training system and the employment 
service. We believe welfare recipients would be better served 
in a mainstream program. After all, under the work first 
philosophy, not only do we want to get them work, but we want 
them to know how to get work, and how to use the mainstream job 
placement systems, the job training systems to get additional 
jobs. No one is going to keep their job permanently. So we are 
advocating and working with States to try and integrate these 
systems. Many States are and I think many more are moving that 
way.
    Mr. Miller. What States are the leaders in integrating this 
area?
    Mr. Uhalde. The States of Wisconsin and Michigan are very 
far ahead in terms of completely integrating their welfare, job 
training, and employment service into the one-stop systems that 
we're talking about now. The State of Iowa is very much in that 
forefront, as is Maryland.
    Mr. Miller. It's working well?
    Mr. Uhalde. It seems to work very well because there are 
many of these common resources that can be shared. Employers 
don't want to be contacted by 15 different types of agencies on 
placing people in jobs. If you can have a common job 
development system for dislocated or welfare or young people, 
it is more efficient.

                      trade adjustment assistance

    Mr. Miller. Let me ask one more question. I see in here 
this trade adjustment assistance, NAFTA TA programs, this 
mandatory $349 million.
    Mr. Uhalde. Yes, sir.
    Mr. Miller. Explain that to me.
    Mr. Uhalde. Trade adjustment assistance is a program that 
was originally initiated during the original round of what's 
called the Kennedy Trade Agreements. It provides training and 
income support for workers who lose their job specifically as a 
result of our country's trade policies.
    Mr. Miller. It is an entitlement that amounts to $349 
million.
    Mr. Uhalde. That's correct.
    Mr. Miller. I read an article last year that all the monies 
are not being used, there are not as many requests.
    Mr. Uhalde. No. The money is being used. The combination of 
the trade adjustment and the NAFTA-specific assistance is being 
used for workers.
    Mr. Miller. Is it necessary to have a separate program for 
that? I mean, job training is job training. Isn't that the way 
it should be in theory?
    Mr. Uhalde. Well, the issue has been that for regular job 
training of dislocated workers, we have approximately seven to 
ten more workers to serve than we have money to serve. Congress 
and the Administration have made a commitment to workers who 
lose their work because of trade policies. The rest of the 
country is benefitting by free trade, and these workers are 
paying the price by losing their jobs.
    Mr. Miller. Does the program work well?
    Mr. Uhalde. It works very well for moving workers back to 
work. We're trying to integrate the administration of it with 
our regular job training program so that it is more efficient 
and less duplicative at the ground level. And that seems to be 
working very effectively. We jointly enroll them in our regular 
job training so that while they're waiting for certification 
they can be getting services. To them, the process is 
invisible, they are just getting job training services.
    Mr. Miller. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Miller.
    Mrs. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman.

                        one-stop career centers

    Welcome. I thank you for appearing before us. Last year, 
one of the major efforts of Secretary Reich in terms of 
reforming the job training system was the one-stop. As I look 
back upon the year, being involved in many of these programs, 
there has somehow been a disconnect between training the 
workers and actually placing them in jobs, of having successful 
training programs with any relationship to the real jobs out 
there. And that's been the criticism, living through CETA, 
JTPA, et cetera, going way back to the 1970s. It is now I 
believe in 40 States, up and running in about----
    Ms. Wyrsch. It is 43 this year.
    Mrs. Lowey. So, 43. And there has been a request for 
another $150 million I believe. I have always felt that one-
stop is another way to say, okay, we're going to do something 
about this; we're going to get people trained and we're going 
to get them trained for real jobs that exist out there. Can you 
tell us whether one-stop has somehow made the whole system more 
appealing to the employers? And can you give us some 
information about the successful programs, what we've learned, 
what we still have to learn? What's happening with the one-stop 
program?
    Mr. Uhalde. Yes. We think that the one-stop system is the 
way in practical terms to address in part what Mr. Miller was 
asking, and that is, there are multiple streams of funding for 
individuals to continue their life-long learning. And while 
legislation is going to consolidate some of that, there will 
always be separate funding streams. For example, Pell Grants 
are not going to be consolidated into student loans. We haven't 
even talked about funding streams from HUD and other areas.
    To encourage this life-long learning, individuals need a 
place to go to get the kind of career information that isn't 
currently accessible in one location in communities. One-stops 
are the way to be able to provide that. In places where it has 
been implemented, it is becoming very popular. It is a 
combination of technology and personal service. The whole 
emphasis has been on customer service. The customer 
satisfaction ratings for one-stop are very high. The ability to 
bring together a variety of training and employment service 
placement resources, as you were addressing, into one location 
or one system is a very powerful mechanism, and having it 
overseen by workforce boards that are business-led gives it the 
kind of connection to local labor markets, and employers, that 
we need to make sure that people aren't training for jobs that 
don't exist.
    Technology is very important. A lot of the services are 
provided in the one-stops; for example, the one-stops in 
Connecticut, in Illinois, and in Maryland rely very heavily on 
people coming in and being able to access America's Job Bank, 
Talent Bank information on computers electronically. Many 
people can get that information, and find out where jobs are, 
where training is available, and leave having the information 
they need without needing any more personal attention and 
service. That enables programs to provide more intensive 
services for those people who are unable to negotiate the labor 
markets by themselves. So there is a whole potpourri of 
services for individuals to get them jobs.

                        evaluation of one-stops

    Mrs. Lowey. Do you have documentation that actually will 
lay out the percentage of people who are moved into employment 
from those one-stops? In other words, $150 million in this 
budget, or any budget, is a lot of money. Now that some of 
these programs are up and running, someone like myself has felt 
this is an important investment and it is worth transforming 
all of our employment services to one-stop. In fact, it is 
almost so easy to understand that you wonder why we had to wait 
this long to create one-stops.
    So, what kind of validation do you have for one-stops that 
can convince our colleagues this is really an important 
investment and we have to do it now? They may say, look, we're 
not accomplishing anything, let's just throw it all out, which 
some people are saying as well.
    Mr. Uhalde. Well, we have a process evaluation that is 
being done now. I don't know the time schedule for it to be 
delivered, but we'll check and provide you with the next report 
from that process evaluation.
    It is important to understand that the $150 million is 
development money. It is, if you will, the money that is trying 
to glue together the employment service money of $800 million, 
the job training money of $3 billion, and the welfare jobs 
money of $1 billion. We are trying to knit together by having a 
single application form when people come in so that they don't 
have to apply to five different programs; to cross-train all 
the staff so they know about all the programs, so an individual 
can come in and the staff person can find a whole array of 
services. We are also developing products like America's Talent 
Bank where over the next year and a half, we expect about 2 
million resumes to be listed automatically on America's Talent 
Bank.
    So the $150 million is developmental, trying to leverage 
and cause all of that money to come together. I would say the 
original six States that got one-stop implementation grants are 
the States that we should look to for performance information.

                    one-stop performance measurement

    The last thing I would say on that is our performance 
measurement system hasn't kept up. When you put half a dozen 
programs together, what you put together is a half dozen 
performance measures. So this year we are developing, with 
different departments and amongst these programs, a single 
performance measure system for the one-stops, and the States 
are working with us.
    Mrs. Lowey. Of those six States, have there been any 
preliminary reports? I know that there has to be a very complex 
evaluation mechanism, but I am just saying 500 people in, 20 
percent hired, how long have they kept the jobs. If we're going 
to be salesmen for this program, which I believe in, I think 
while you're developing the mechanism, maybe we can get some 
preliminary evaluations. Is there any feedback? In other words, 
pick one in any of the States; how many people have used the 
system, how many have been placed in jobs, what is the average 
salary of those jobs, how long have they stayed in the job, and 
if they lose the job, can they go back in the system and can 
they be helped again at the one-stop?
    Mr. Uhalde. Yes. That's the process analysis and we'll get 
you the latest copy of it. I think those types of results are 
available. They are available by the individual programs. Part 
of the work is telling a story with sort of discrete reporting 
systems, and that is what that report is trying to do. We'll 
get that information to you.
    [The information follows:]

                            Process Analysis

    The process analysis for the Wisconsin Job Center was 
forwarded to the Subcommittee.

    Mrs. Lowey. That would be very helpful, because there are 
those who feel that none of these programs work, that it's a 
great big bureaucracy, let the employers do it through tax 
credits or other ways. For those of us who have seen some of 
the one-stops who believe that it can work, I think it is very 
important that we get this kind of documentation as soon as 
possible.
    Mr. Uhalde. I agree. I think also some of the technological 
access to the labor market is proof itself of the popularity 
and success of this, too. America's Job Bank a year ago had 3 
million inquiries in a month. It now has 12 million inquiries 
for the month of January. Employers are loading their jobs 
directly onto America's Job Bank. There are about 600,000 jobs 
a day that are listed on the computer screen where people in 
Washington can look for jobs across the country in California. 
And you can sort the jobs to find out what the wages are, or 
sort the jobs by occupation or region.
    The attraction to businesses and job seekers of that type 
of technology has been phenomenal. We never expected that much 
interest in that. Frankly, the copying that's going on with 
that system is very flattering.

               opportunity areas for out-of-school youth

    Mrs. Lowey. In another area, for the second year in a row 
you are requesting $250 million to train and find jobs for 
urban youths. This request was not funded last year. Could you 
explain to this committee why this program is necessary. Are we 
already providing job training services to the same population?
    Mr. Uhalde. You're right, it wasn't funded last year, 
although the Senate report did provide us report language 
encouraging us to use our demonstration money to continue work 
in this area. We are demonstrating this in three locations.
    It is important because, while there is job training money 
that is spread out for young people by formula throughout the 
country, the problem for out-of-school kids in high poverty 
areas is particularly acute. They are concentrated in these 
areas of 30 percent or more poverty which accords with where 
Empowerment Zones and Enterprise Communities are. In these 
areas, young people have to swim upstream against the culture 
that surrounds them that doesn't value work, doesn't value 
learning, doesn't value legitimate activity. The only way to 
really get at that culture is to try and saturate a 
neighborhood with not only training but also employment and 
recreational and learning activities so that you can get more 
young people engaged in that and hopefully turn around entire 
neighborhoods. That's the purpose of it.
    When this has been done in communities, Boys and Girls 
Clubs, neighborhood churches, and schools are all involved in 
these activities. They are locally driven. But it is about 
caring about all of the young people in the neighborhood, not 
as with our regular training programs where we just don't have 
enough money to serve but one out of ten.
    Mrs. Lowey. I think my time is up. Thank you very much. 
Thank you for your indulgence, Mr. Chairman.
    Mr. Bonilla. Mrs. Lowey, thank you.
    Mrs. Northup.

                        apprenticeship standards

    Mrs. Northup. Thank you. I would just like to ask you a 
couple of questions. The first is, it seems like occupational 
training programs moved away from how many hours you spend to 
competency training programs years ago. It seems to me that one 
of the complaints I have heard is that the Bureau of 
Apprenticeship and Training hasn't made that same transition. 
This is probably mainly in the building and construction 
trades.
    Mr. Uhalde. I believe the standards in the buildings and 
construction trades are standards that are worked out jointly 
by both the employers and unions. Our role at the Federal 
Government level in States is to certify those standards. 
Employers and unions are agreeing on those standards.
    Mrs. Northup. In the last week, I visited a number of high 
schools in my district that are involved in school-to-work 
transition. One fabulous program is in the automotive industry, 
a very expanded system that is working so well. Their 
apprenticeship program was very different quite honestly from 
the one in the building trade which has gotten very low marks 
and a lot of discouraging remarks from across the community. 
But one of the things that was raised is the fact that 
competency standards were so different, that they had not been 
updated over the years. So you really hold both employers and 
unions responsible for that failure to update?
    Mr. Uhalde. Oh, absolutely. The apprenticeship is grounded 
in both labor and employers agreeing on the programs. These are 
voluntary programs. We don't put any training money into this. 
These are monies at the local level, employers' monies, 
sometimes bargained money. So they really have the stake in 
this system.
    I do agree that in the national skills standards effort 
that's going on, in which organized labor and many employers 
are obviously participating, that they are reviewing all 
standards to make sure that they are updated. And to the extent 
that competencies need to be raised and heightened in those, 
I'm confident that they will be. But it really has to be a 
joint effort because it is grounded in employers and labor 
agreeing on the standards.
    Mrs. Northup. What the initiation was for me to go to this 
high school is because we had received so many complaints from 
the contracting industry about the quality of the training 
programs. That's why I'm so surprised to hear you say that 
there really is no disagreement between anybody about whether 
or not the competency standards should move more to skill level 
and away from hours.
    Mr. Uhalde. I don't mean to say that there isn't any 
disagreement. I think there is quite a considerable debate. But 
to get to agreement on new standards, both sides have to come 
to agreement on it.
    Mrs. Northup. If you were aware of the fact that there was 
considerable disenchantment with the current standards from the 
people we want to employ these kids coming out of these 
schools, or even adults that go back, would you then initiate 
some efforts to upgrade and change these standards?
    Mr. Uhalde. I will be glad to review standards in any of 
the areas where we think there is concern. We have a constant 
dialogue with the apprenticeship community in all of these 
areas with both business and labor. To the extent that there 
are issues, we have a Federal Advisory Committee on it with 
both employers as well.
    Mrs. Northup. Could you give me the list of who is on that 
Advisory Committee?
    Mr. Uhalde. Sure. We would be glad to.

                               job corps

    Mrs. Northup. Let me ask you another question about the Job 
Corps which I understand from a number of people is so 
successful--and I realize that is based on sort of the 
particular institution--but would you say the support for that 
program tends to be strong in general?
    Mr. Uhalde. Oh, yes. I think support for Job Corps is very 
powerful because it is grounded in performance. It is built 
over a year of mixing work and learning, and is really school-
to-work principals in a residential setting for young people. 
It is not for everyone because, obviously, many young people 
don't want to leave home nor do they need to leave home to 
learn and to succeed. But for those young people where a 
residential atmosphere is important for learning, it mixes work 
and learning, employer involvement, private sector management, 
and a performance-driven system that is hard to beat and that 
has been proven over time.
    Mrs. Northup. I look at the new programs that are being 
proposed and I wonder why we don't put more money into the Job 
Corps. I remember that the funding for that is fairly flat in 
the President's budget.
    Mr. Uhalde. We are requesting an increase for Job Corps.
    Mrs. Northup. What is that percent?
    Mr. Uhalde. It is a modest increase.
    Mrs. Northup. Does it increase the numbers of participants?
    Mr. Uhalde. Job Corps is relatively costly per individual 
because of the residential component. It is an 8 percent 
increase.
    Mrs. Northup. I'm sorry, I didn't get your answer. Does it 
increase the number of slots for students? Are there more 
students served?
    Mr. Uhalde. No. No, it is flat.
    Mrs. Northup. So, in that sense, it is not being expanded?
    Mr. Uhalde. No. It is just finishing up and fully funding 
the eight new centers that are on. It is not any new slots.
    Mrs. Northup. The question is, since, as you said, it can't 
be beat, why aren't we spending more money and expanding the 
Job Corps availability, that most everyone agrees seems to be 
so successful and such a good concept, rather than starting all 
these new programs or funding some new programs?
    Mr. Uhalde. Well, we have been expanding Job Corps up until 
this year with eight new centers that we have funded. It is 
expensive to fund Job Corps on a per student basis. We know, if 
we can get substantially good results from non-residential 
efforts, we want to do that as well because all young people 
can't go to Job Corps Centers. So the out-of-school youth 
initiative is an attempt to get at young people in high poverty 
neighborhoods.

                       successful pilot programs

    Mrs. Northup. Do we have any pilot programs of similar 
programs where they have worked and been as successful as Job 
Corps?
    Mr. Uhalde. There are some programs for young people that 
have been very successful that have run for a very long time 
that we've evaluated, like the Center for Employment Training 
in San Jose and 40 locations in the West. We have been 
replicating it into the East in a dozen locations.
    Mrs. Northup. What's the name of it?
    Mr. Uhalde. Center for Employment Training. It started 25-
30 years ago with migrant seasonal farm workers in San Jose. It 
has the same principals as Job Corps except it is non-
residential; that is, employers are fully engaged in the 
program. All the instructors come from industry, and young 
people, again, as the school-to-work philosophy, do academic 
and occupational learning simultaneously.
    Mrs. Northup. And which new program is like that?
    Mr. Uhalde. Well, the whole school-to-work philosophy is 
built on that.
    Mrs. Northup. I'm talking about which one of the 
President's programs, the new programs, are they based on any 
proven model programs? You pointed out the Center for 
Employment Training. Is that the model program that the 
President now is replicating in one of his new initiatives?
    Mr. Uhalde. That is a Department of Labor initiative that 
we have been replicating for the last several years. The out-
of-school youth initiative which is a Presidential initiative, 
the $250 million request before this committee, that----
    Mrs. Northup. That's similar to this Center for Employment 
Training?
    Mr. Uhalde. That would use Center for Employment Training 
approaches. But also we have, as I mentioned, demonstrated that 
in seven communities around the country and have gotten some 
preliminary results that show that both youth drop-out rates 
from high school and teen pregnancy rates have been reduced in 
six of the seven communities where we have run that program.
    Mrs. Northup. And that program is going to be the same one 
that we're going to model the out-of-school youth program on? I 
thought that program you were talking about for seven 
communities were kids that had not dropped out of school.
    Mr. Uhalde. No. That was for young people who had dropped 
out of school, the out-of-school youth initiative.
    Mrs. Northup. And the seven pilot programs----
    Mr. Uhalde. Are for out-of-school kids as well. And it has 
been reasonably successful in this pilot effort.
    Mrs. Northup. I would be interested in the information on 
that, too.
    Mr. Uhalde. We could provide you with the evaluations.
    [The information follows:]

                    Out-of-School Youth Evaluations

    Evaluation materials on efforts to serve out-or-school 
youth were forwarded to the Subcommittee.

    Mrs. Northup. Thank you. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Ms. Northup.
    Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.

               Opportunity Areas for Out-of-School Youth

    Thank you for being here today. Let me just proceed on the 
out-of-school youth effort. In your testimony, you say that 
less than half of all out-of-school youth are employed. What 
level of employment among young people might be achieved in 
your view if the out-of-school youth effort were enacted?
    Mr. Uhalde. Well, our target and the expectation more 
generally for youth in that age group is an employment rate of 
80 percent. That's our objective.
    Ms. DeLauro. Of those who are unemployed?
    Mr. Uhalde. Yes. That's our objective.
    Ms. DeLauro. In the out-of-school youth effort, what 
program is in existence in the seven States that you talked 
about a few minutes ago?
    Mr. Uhalde. We have run an initiative with demonstration 
money over the last several years called Youth Opportunities or 
Youth Fair Chance in seven cities.
    Ms. DeLauro. Sure. Okay.
    Mr. Uhalde. That is the initiative that we've had some 
preliminary success with. Now we want to take that initiative 
and do it in a number of communities focused on out-of-school 
youngsters.

                   DOL Involvement in Welfare Reform

    Ms. DeLauro. Okay. Let me just ask about last year's 
welfare reform bill and how the Department of Labor's 
employment and training programs are going to meet the 
challenges of welfare reform.
    Mr. Uhalde. The Labor Department has actually several 
programs that are currently accessed by welfare recipients. 
About 600,000 applicants to the employment service already are 
welfare recipients. And with the work first philosophy that 
many States are undergoing, we expect that to be increased. In 
the Job Training Partnership Act program for disadvantaged 
adults, Title II-A, about 42 percent of those participants that 
leave the program are welfare recipients. After three months 
about 56 percent of them are placed at work and they're making 
over $7 an hour.
    Ms. DeLauro. What kinds of jobs are they doing?
    Mr. Uhalde. They do work that in the administration 
category, in retail, in wholesale trade, and clerical work and 
office. We can provide you with a distribution of the 
occupations in those areas.
    Ms. DeLauro. They are full-time jobs?
    Mr. Uhalde. As I recall, over 80 percent are either in 
full-time work or have benefits.
    Ms. DeLauro. They are either in full-time work that have 
benefits or----
    Mr. Uhalde. One or the other, either full-time work or in 
benefits. And most of them, the vast majority are in full-time 
work.
    Ms. DeLauro. And that full-time work carries benefits with 
it?
    Mr. Uhalde. We know which have benefits. I believe the 
figure is approximately two-thirds have benefits.
    Job Corps is another program that is significant. I believe 
it is about 40 percent of Job Corps students are from welfare.
    So we have several programs that already are being accessed 
by welfare recipients. The President is requesting another $169 
million for JTPA Title II-A, the low income adult program, 
because we expect much more use of the program by welfare 
recipients. We expect with the abolishment of the jobs program 
in the Personal Responsibility Act that many more States are 
going to integrate their services for welfare recipients with 
the workforce development system.
    Ms. DeLauro. In terms of the welfare legislation and the 
goal of welfare-to-work, what do you really need to make that 
really work? The goal of welfare reform, in my view, is getting 
people from welfare to work. You're charged with the 
responsibility of trying to develop ways in which we do that. 
What do you need to get people from welfare to work? And if we 
were to try to truly live up to this view, what ought we be 
doing about that to make this happen, and I'll editorialize, 
rather than just using the rhetoric of signing a piece of 
legislation or voting for a piece of legislation that says 
let's get people from welfare to work? What do you need to 
accomplish that?
    Mr. Uhalde. I think that's a good question. I think that 
with welfare reform, because it is law and touches so many 
people, it is important that everybody try and figure out what 
they can do to help make it work. It is not going to do any 
good for us to sit back and see if it fails.
    Ms. DeLauro. Right. We've got to move forward.
    Mr. Uhalde. For our job training system, I think the first 
thing is when the bill was passed, I don't think there was much 
debate on this. CBO scored it as being short $12 billion in 
terms of having enough resources to achieve the work objectives 
that were embedded in the legislation. So we know that it 
starts off short. If you ask me what do I need to make it work: 
we need more money. We need more money targeted to welfare-to-
work for this population. And the President has requested, as 
you know, $3 billion over three years plus the increase in the 
JTPA monies as a partial response to that.
    Ms. DeLauro. As a partial response because $3 billion 
doesn't make $12 billion.
    Mr. Uhalde. No. The President has also requested the work 
opportunity tax credit changes as another method for moving 
welfare recipients to work.
    The second thing I would say is that we in the job training 
community need to work very closely with the States to make 
sure that we don't set up parallel systems that don't work with 
each other. I believe that welfare recipients will be better 
served in a system that has knowledge of the labor market, is 
grounded in the private sector, and has a public-private 
partnership embedded in it, that is locally-driven. And that is 
the workforce development system that we have.
    I think, for those States that set up duplicate systems, I 
think the rationale is you give more special attention to 
welfare recipients in the main. I think what you lose is the 
primary connections to the employer community and labor market. 
This isn't going to work unless people get hired in private 
sector jobs.

                    State Response to Welfare Reform

    Ms. DeLauro. In terms of the States and what you have seen 
so far, and it's early, though States like Connecticut have 
been underway for a while, what in your view, because I would 
expect that you have a view on this, what level of funding do 
States need to apply to this effort to make this work in 
conjunction with what we're doing at the Federal level? And 
what are you seeing among States at the moment in terms of 
dovetailing with the Federal system with what I view as an 
obligation of trying to get people from welfare to workif we're 
going to make this a reality?
    Mr. Uhalde. I don't have a systematic survey of State 
actions. I know that several States, such as Michigan, are 
putting significant State resources, as well as money out of 
their TANF block grant, into welfare-to-work. They are 
organizing it under the workforce boards along with the job 
training program, and are giving particular emphasis to those 
efforts. Similarly, Wisconsin, similarly, Iowa. I think those 
efforts are very important.
    States obviously are facing a trade-off. The good news was 
they got an undifferentiated block grant to provide benefits, 
child care, and welfare-to-work services. Nobody segregated 
that for them and now they have to decide if they put more 
money in it, then it will short fund something else. And if 
more money is put into work, that means less money for benefits 
or other supportive services. And so they are trying to balance 
that. We think that our services can compliment that. But we 
have to recognize also we serve the whole range of the 
workforce. So we don't want to short-change dislocated workers, 
low-income people, or the working poor.
    Ms. DeLauro. That's my next question. What risk are we 
running in terms of displacing the working poor with welfare 
recipients? What's our risk in this area and what do you see?
    Mr. Uhalde. My initial reference was the competition for 
training dollars between the working poor and welfare 
recipients. From our job training money, that's the same pot. I 
think the priority certainly for States and even locally 
administered welfare programs is the great incentive is to put 
your first dollar into moving welfare recipients to work. And 
so I think there will be some competition there between the 
working poor, who you would like, as they lose a job, to come 
into a training system or to a placement system to get work, 
and welfare. I think there will be a tendency to put the first 
dollar to welfare.
    But your question is in terms of the labor market I 
believe, what is the potential for displacement? I think this 
is a very real challenge to the labor market. If we're going to 
collectively introduce 2 million additional people at a point 
in time into the low wage labor market, there are people who 
are there already working and I think that is going to be a 
challenge. I think the tax credits are an opportunity, and 
working at the local level with workforce boards and with 
employers trying to open up employment opportunities for low 
income people. But it is clear that there is going to be 
increased competition for some of the same jobs.

                  State Incentives for welfare reform

    Ms. DeLauro. The final question on this, Mr. Chairman. I'm 
not sure in terms of the legislation, so just tell me, is there 
any kind of, if you will, a resource-based incentive system to 
States for getting people off of welfare and presumably to 
work?
    Mr. Uhalde. Are you referring to the welfare reform 
legislation?
    Ms. DeLauro. Yes.
    Mr. Uhalde. I think there is a bonus payment of some type, 
but I am not familiar with it. The President's $3 billion 
proposal would be an incentive payment to States and to cities 
for longer term welfare recipients that are moved into jobs 
that last more than nine months or longer, sort of good quality 
jobs.
    Ms. DeLauro. Just quickly, and I don't know if there is an 
answer to this, but one of my concerns is that if States do in 
fact have some benefit from getting welfare recipients to work 
in terms of a bonus, et cetera, that you're going to look at 
being able to hang onto more resources, and that the likelihood 
of looking at helping that population, which I believe we ought 
to be doing, could be potentially at the risk of the working 
poor. And then obviously we've got to monitor what kinds of 
jobs the people are going into and if they have them more than 
nine months and so forth. But my concern is that we are not 
displacing the working poor and we are maintaining those folks 
in jobs and they are able to maintain themselves and their 
families while at the same time being able in a meaningful way 
of taking people from welfare to work through skills training 
and education.
    It would seem to me that if we are $12 billion behind in 
1996-97, that with inflation, and we're talking about $3 
billion over three years and some other money, that each year 
we get further and further behind in terms of what we're trying 
to do. So that in the long run what we're not doing is meeting 
the essential goal of what welfare reform is all about. In 
fact, what we truly do need is to get people from welfare to 
work and we need to be more thoughtful in the process. And I 
say that for us here in terms of the kinds of resources that we 
need to apply to a system if we truly want to make it work. 
Some States are doing it. Michigan, in point of fact, is 
putting a lot of money, as I understand it, into developing a 
job market.
    I think this is fraught with pitfalls here that we need to 
be looking at all of the time so we don't find ourselves like 
we did with deinstitutionalization and putting folks out there 
on their own. Now we have a serious homeless problem in this 
country because we thought about all the wonderful services 
that were going to be provided to those people and those 
wonderful services nobody ever put nickel one or dime one into.
    I didn't mean to make a speech, but I think we've got some 
really serious issues to sort out in this effort.
    Thank you very much for your indulgence, Mr. Chairman.
    Mr. Bonilla. Thank you, Ms. DeLauro.
    Mr. Uhalde, I have a couple of questions related to migrant 
and seasonal farm workers. As you probably know, I've been a 
huge advocate of assistance for them over the years. I have a 
large population in my congressional district. I was looking at 
a cartoon that we clipped recently--I'll show it to you and 
then I'll hand it to you. It shows two farm workers in the 
field and it says ``Sure, the work is back-breaking, the hours 
are long, and the pay is lousy, but it beats the heck out of 
being trapped in a cubicle all day.'' [Laughter.]
    The most amusing part of this to me is to think they could 
have actually said this completely in English like that, 
because I come from that culture. Many of my relatives and 
forefathers have worked as migrant farm workers.

                     Migrant Program in Puerto Rico

    One of the things I wanted to raise was the results of an 
I.G. audit that was revealed recently about the migrant and 
seasonal farm worker programs in Puerto Rico last year. It is 
troubling to me because when dollars are scarce and farm 
workers in the United States are clamoring for assistance 
andtraining and services, we need to ensure funds are spent where they 
are most needed. In Puerto Rico last year, as the Assistant I.G. Joe 
Fish put it, the money basically went down the drain. This disturbing 
audit discovered that the Department wasted $10 million on migrant farm 
worker training in Puerto Rico. Mr. Fish goes on to say that ``Puerto 
Rico is not all that different from the rest of the country in its job 
training programs. People are trained for jobs that don't exist,'' he 
said, ``and are woefully under-educated for the emerging jobs in the 
international economy that do.''
    My question is, what efforts have been underway to prevent 
abuses in the program as outlined by the I.G.?
    Mr. Uhalde. Thank you. First, I guess I would just have to 
say that we take great exception to the characterization that 
the Puerto Rico program is not that different from job training 
in the rest of the country. I think we've talked here about a 
lot of successful programs. As you probably know very----
    Mr. Bonilla. Why do you think the I.G. said that, Mr. 
Uhalde?
    Mr. Uhalde. I think Puerto Rico is just a particularly 
egregious example of poor management of the program. But also 
the problems in Puerto Rico are particularly difficult. That 
program is not typical even of migrant and seasonal farm worker 
programs in general. It was a poorly run program. I had the 
unfortunate opportunity of having to appear for one minute on 
``Fleecing of America'' as a result of it.
    Mr. Bonilla. The NBC show, right?
    Mr. Uhalde. Yes. It was not my highlight. It was a poorly 
run program. They were doing on the job training for 
agricultural work, essentially subsidizing farmers for the same 
jobs that these workers were trying to move out of. The workers 
weren't getting the skills that they deserved in the program. 
As soon as we were alerted to the draft audit we sent a team 
down there. They were there for three weeks. They prepared a 
corrective action plan with the Secretary of Labor. They have 
implemented a corrective action plan, but we weren't satisfied 
and we have decided that the grant is not going to be 
administered by the Commonwealth of Puerto Rico unless we have 
a competition, so we put the grant up for bid. We have actually 
done that in five States where the migrant seasonal farm worker 
program on a performance basis wasn't doing the job, and they 
are now being competed.
    Mr. Bonilla. I appreciate that you have taken action on 
that because we would hate to see a black mark like this spoil 
the program for other farm workers that are receiving benefits.
    Mr. Uhalde. Absolutely.
    Mr. Bonilla. In another area related to the farm worker 
population, it is my understanding that the U.S. Census Bureau 
has acknowledged that farm workers were under-counted by as 
much as 66 percent last time. Since this population is almost 
three times what the Department thought it was, level funding 
for this program would provide only $29 per farm worker. My 
question is, what steps are being taken by the Department to 
address this funding disparity with the 402 program?
    Mr. Uhalde. Well, the President's request is at the same 
level as last year and the year before. So we haven't requested 
an increase in funding for the program. We are requesting an 
increase in the program for economically disadvantaged adults, 
under which farm workers can be served as well. But we 
recognize that it is really the dedicated 402 program that can 
do the outreach to those farm workers best. But with budget 
constraints, we have not been able to increase the budget for 
that program.

                                workflex

    Mr. Bonilla. I have a couple of questions now on workflex. 
The fiscal year 1997 bill gave the Department the ability to 
grant six workflex waivers. These waivers are crucial for those 
States that are moving forward to improve the efficiency and 
quality of workforce programs. They are especially important 
for those States that were counting on the passage of Federal 
legislation. Could you please update the committee on the 
current status of the workflex waivers?
    Mr. Uhalde. Yes, sir. We put out in January for comment to 
the system our guidance on both the general waivers and the 
workflex waiver approach for States. We also wanted to signal 
to States the conditions and criteria under which we were going 
to compete workflex opportunities for States. Since we're 
limited to the six States, of which at least three have to be 
in States with less than 3.5 million population, we won't be 
able to select all the States who are interested.
    We have just recently put out the guidance in final, and 
States are now in the process of preparing their proposals for 
workflex. Our regional administrators in every regional office 
have been instructed to work closely with the States to help 
them in the preparation of proposals to send in. I believe 
sometime in May is when the workflex proposals are due, and we 
will then make selections for States.
    Mr. Bonilla. Was there any particular reason that the 
application deadline was extended to the end of May?
    Mr. Uhalde. Several States, an association of State JTPA 
liaisons, and the National Governors' Association wanted more 
time for States to prepare proposals. We knew there were 
several States that were interested very quickly, so we 
compromised on the date of May. I think originally we were 
talking about April for submission. So we extended it a little. 
But it was really at the request of States collectively.
    Mr. Bonilla. If you could, Mr. Uhalde, elaborate on the 
process and criteria that will be used to determine the 
grantees. In particular, could you describe how ED-FLEX States 
will be treated?
    Mr. Uhalde. ED-FLEX States are I believe supposed to be 
given priority consideration with regard to selection. The 
whole purpose of workflex is to trade off flexibility for 
improved performance and accountability. We want to look at 
States' proposals and see where we think we're going to get 
better performance and accountability. So I think those are the 
principal criteria that we would be using, and whether they 
have a comprehensive rationale for it.

                     year 2000 computer conversion

    Mr. Bonilla. Finally, I have some questions here that 
Chairman John Porter asked me to ask you. He would be here 
except he's got a back injury that has kept him from appearing 
with the subcommittee here today. You are proposing to help the 
States address the so-called year 2000 problem that will affect 
their computers in the Unemployment Insurance program. If you 
could, briefly describe this problem for us and tell us why it 
takes so much money tocorrect it.
    Mr. Uhalde. Okay. Why don't I have Ms. Wyrsch answer that 
question for you.
    Ms. Wyrsch. Mr. Bonilla, our State Unemployment Insurance 
agencies are heavily dependent on automated systems because 
they run some very complex processes, and they run them weekly 
and monthly for large numbers of transactions--benefit 
payments, tax collections, fraud, matching programs, a whole 
range of programs that have been built up over the last ten or 
fifteen years. These data systems are not to a large extent 
compliant with what we call the date change issue. Most of them 
only have two fields for dates, assuming that the first digits 
of a year would always be 19.
    So, when you have the millennium change and you're now into 
the 2000s, many of these programs will either spew out 
incorrect data or crash altogether. The expense comes in terms 
of the need to basically go in and rewrite millions of lines of 
computer code and to do the checking and then the testing for 
these very complex programs which pay millions of people a year 
and run millions of transactions. That's essentially where the 
expense comes in.
    The surveys we have done with our State partners, the 
Interstate Conference of Employment Security Agencies, have 
shown the estimated cost to be approximately double the amount 
requested. The request before you only represents our 
contribution, if you will, to the costs that the States are 
expected to incur to correct this problem to make their systems 
run.
    Mr. Bonilla. The request is for $200 million for this in 
fiscal year 1998. Could you tell us exactly how you got to that 
amount? Is there some basis for it, or did you just roughly 
estimate? What did you do exactly?
    Ms. Wyrsch. We developed the figure by working with the 
Interstate Conference of Employment Security Agencies, which 
surveyed States in terms of the needs they had in tax benefits 
and appeals systems, and basically looking at a number of 
factors such as lines of code, hardware changes, et cetera. We 
then augmented that with a survey of our own, and working with 
our Information Technology Support Center which has done some 
research for us about what it costs to modify lines of code, 
the time it will take, et cetera, we came up with an estimate 
of about $477 million for this effort. As I said, we agreed to 
request approximately half of that as our contribution towards 
the cost of making these changes.

                      funding for year 2000 costs

    Mr. Bonilla. And then just come back next year for the 
remainder?
    Ms. Wyrsch. No. We will not come back next year. If we do 
not make this investment now, we will have almost passed a 
window. I cannot emphasize enough the need to get these 
resources to States now, to get the work done in terms of 
changing lines of code. If we wait, we will have almost gone 
past a point of no return.
    Many of these systems have to be up and ready to go for 
full-range testing in the first part of calendar 1999 so that 
when the switches come in the year 2000 we know that they will 
work. There is extensive code changing to be done, system 
acquisition to be done, and then testing. So we need the money 
in this fiscal year to give to the States.
    Mr. Bonilla. So the question would be moot then about 
asking you if you would come back next year for more money 
because the window would be passed, is that correct?
    Ms. Wyrsch. I think the window would be passed. That's why 
we emphasize the importance of getting these resources and 
getting them now so they can get to the States.
    Mr. Bonilla. Do you expect the States to come up with the 
rest of the money from their own funds that they would need for 
this transition?
    Ms. Wyrsch. Yes, we do. The States are funded through the 
Unemployment Insurance administrative funds to run their 
programs. The assumption is that they have adequate funds in 
their base to address this problem and that they should be able 
to absorb approximately half of this cost.
    Mr. Bonilla. Tell us what would happen if Congress does not 
provide the money that you need for fiscal year 1998.
    Ms. Wyrsch. As I said, we're concerned about the ability of 
the States to foot this entire cost because it is an 
extraordinary cost for changing all these lines of code. We 
feel that our Unemployment Insurance systems would be in danger 
of either, as I said, crashing, just not working at all, or 
spewing out incorrect data in terms of benefits, tax 
collections, and they would be unable to function well in terms 
of payments. So our assumption is that we really have a very 
strong need for these monies.

                          ui integrity request

    Mr. Bonilla. I may be going back to Mr. Uhalde for this 
question from Chairman Porter. You have a new wrinkle in your 
UI budget this year that involves authorizing legislation to 
raise the discretionary spending cap to accommodate an $89 
million increase for State UI integrity activities. This would 
be similar to what we already have for continuing disability 
reviews in the SSI program in Social Security. Could you tell 
us why you are proposing this?
    Mr. Uhalde. Yes, Mr. Chairman. The Unemployment Insurance 
administrative costs have not been fully funded over the last 
several years to accommodate the workload. So States over time 
have had to make adjustments. One of the adjustments they have 
made gradually is under-funding integrity activities, such as 
collection of overpayments, collection of tax liabilities, and 
benefit reviews of claimants. So these integrity functions 
which ultimately save tax dollars and save benefits have been 
shorted over time.
    What we are proposing here is essentially an ability to 
invest $89 million targeted on those integrity activities. As a 
result, the Unemployment Insurance Trust Fund will save $118 
million. So the Federal budget deficit will go down as a result 
of it. The reduction is on the mandatory side, the spending 
would be on the discretionary side, so we're asking for 
authorizing legislation that would raise the cap because 
ultimately this is a benefit to the budget if we spend these 
monies. It is really an investment. And frankly we don't want 
it to crowd out other spending of this subcommittee.
    Mr. Bonilla. Gentlemen and ladies, we appreciate your 
appearing before us today. We thank you for your testimony and 
for answering all our questions, and we had quite a few of 
them. It will be very helpful to us.
    Before we adjourn, I am going to ask Christine to give you 
my cartoon to take back.
    Mr. Uhalde. Thank you, Mr. Bonilla.
    Mr. Bonilla. The subcommittee stands adjourned until 10:00 
a.m. tomorrow.
    [The following questions were submitted to be answered for 
the record:]

[Pages 160 - 221--The official Committee record contains additional material here.]


                                          Thursday, April 10, 1997.

 OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION, MINE SAFETY AND HEALTH 
          ADMINISTRATION, EMPLOYMENT STANDARDS ADMINISTRATION

                               WITNESSES

GREGORY R. WATCHMAN, ACTING ASSISTANT SECRETARY FOR OCCUPATIONAL SAFETY 
    AND HEALTH ADMINISTRATION
J. DAVITT McATEER, ASSISTANT SECRETARY FOR MINE SAFETY AND HEALTH 
    ADMINISTRATION
BERNARD E. ANDERSON, ASSISTANT SECRETARY FOR EMPLOYMENT STANDARDS 
    ADMINISTRATION
JAMES E. McMULLEN, DEPUTY ASSISTANT SECRETARY FOR BUDGET

    Mr. Miller. Good morning.
    We have three people with us today, Mr. Watchman and Mr. 
Anderson and Mr. McAteer. Each of you will have opening 
statements, I believe, and we'll proceed. Welcome.
    Mr. Watchman, I believe you're going first, is that right?

                        Opening Statement--OSHA

    Mr. Watchman. Yes, thank you.
    Good morning, Mr. Chairman and members of the subcommittee. 
I'm very pleased to be here this morning to present OSHA's 1998 
budget, and to give you a status report on our progress in 
implementing new OSHA programs.
    On page one of my written statement, there is a description 
of some of the things that happened to workers during my first 
week on the job as Acting Administrator. In the interest of 
time, I won't describe each one of these incidents. But I think 
it is important to remind ourselves of why we're here today to 
talk about OSHA.
    Every working day in this country, workers are being 
asphyxiated, electrocuted, killed in falls, struck by vehicles, 
crushed in machines, and disabled by exposure to toxic 
substances. Most of these incidents are preventable.
    We've made much progress in reducing workplace injuries, 
illnesses and fatalities. But our work is far from done.
    As Acting Administrator, I have two responsibilities. 
First, to carry out our statutory mission of protecting workers 
through the development and implementation of standards and 
through enforcement of those standards. And secondly, to 
implement the new OSHA programs and initiatives that President 
Clinton announced two years ago, and that Joe Dear started at 
the agency. The White House remains very firmly committed to 
these initiatives.
    The new OSHA, I believe, is changing the agency for the 
better. We are leveraging our limited resources to make the 
best use of them, to protect the most workers with the dollars 
we have. We are achieving a better balance of intervention 
tools, focusing more on compliance assistance and outreach and 
education and cooperative programs than we have in the past.
    We are using cooperative approaches where possible. We are 
also using enforcement where it's necessary and appropriate.
    In doing so, we are engaging in smarter, fairer 
enforcement, seeking to spend our resources protecting workers 
at the most hazardous workplaces and trying to treat employers 
differently, depending on the level of protection they're 
providing their workers.
    But effecting real and lasting change takes time. And it's 
a very resource-intensive endeavor, we're finding out. I'm here 
today to ask the committee to help us make this effort go 
forward with a fiscal year 1998 increase of approximately $23 
million, which would put our budget at a total of approximately 
$348 million.
    In the area of partnership and compliance assistance, there 
are a variety of projects I'd like to report back to you on. 
The first and foremost is the cooperative compliance programs 
that started with the Maine 200 program. We currently have 15 
CCP programs going on around the country, 9 that are in Federal 
OSHA states and 6 that have been developed by state agencies.
    To give you an example of the success we've seen so far in 
these programs, in Wisconsin, the average reduction of injury 
and illness rates is 29 percent. And that's a terrific figure 
for employers reducing their injury and illness rates by 
participating with OSHA in this program. That represents 
hundreds of workers that have been able to return home to their 
wives and husbands and children and parents every day because 
of this program.
    Local emphasis programs are also showing great promise 
around the country. In Fort Worth, for example, over half the 
participating employers have reduced their injury and illness 
rates, and over a third have reduced those rates by more than 
25 percent. In Savannah, Georgia, we worked with pulp and paper 
mills to identify 2,500 hazards in under a year, where we'd 
only been able to identify 159 hazards over the previous four 
years.
    In Kansas, we worked with the oil and gas industry to 
reduce fatalities. There, they'd had 65 fatalities in the 
preceding 15 years. But in the last year and a half, there has 
not been a single fatality in that industry.
    We're also expanding the Voluntary Protection Program. 
These are among our most successful with participants that have 
excellent track records in safety and health, and injury and 
illness rates that are better than 50 percent lower than their 
industry averages. We've expanded this program 50 percent since 
January of 1996, and we currently have 336 members.
    We're also expanding our assistance to small business. We 
are providing consultation visits to approximately 25,000 small 
and medium size companies every year. We're developing 
compliance guides, most recently for methylene chloride, and 
for residential home building in a project we put together with 
the National Association of Home Builders. We've also reissued 
our small business handbook to make it easier and more 
accessible for small employers to use to identify hazards in 
their workplaces and address them.
    We're using technology to try to provide small business 
assistance as well. We've put a variety of programs on the 
Internet. We've seen over a million users participate in those 
programs so far.
    One of the best tools that we've put on there is something 
called Expert Advisors. These are interactive, simple question 
and answer formats that allow small employers and workers to 
identify hazards like asbestos and cadmium, and figure out how 
to best protect workers from those hazards.
    Our CD-ROM containing OSHA regulations is the best selling 
CD-ROM in the Government today, selling over 64,000 copies a 
year.
    We're also looking to leverage our resources to provide 
small business assistance. We are working with a variety of 
private organizations to offer 12 pilot programs in training 
around the country, in which the other organizations are 
actually participating in the training rather than using OSHA 
resources.
    In addition, the Voluntary Protection Program has started 
an effort called cluster mentoring, in which a large employer 
will mentor smaller companies so that they can qualify for 
admission to the VPP.
    Training is another important part of the program. Training 
is a very cost-effective means of protecting workers. The 
average cost is about $100 per worker. And we have seen 
significant declines in injury and illness rates where workers 
have been trained.
    In awarding grants under our training program, we are 
looking for emphasis on small business preferences in making 
those grants.
    For these partnership and compliance assistance activities, 
we are requesting for fiscal year 1998 an increase of $8.4 
million to continue and expand these efforts.
    In enforcement, we're trying to make sure that we have a 
strong and credible enforcement presence in the workplaces 
around the country. It's important as an effective deterrent 
and it's also important to guarantee the success of new OSHA 
programs. We're finding that many employers will choose not to 
participate in the voluntary programs in the absence of a 
credible enforcement presence.
    We also want to make sure that serious violators do face 
serious consequences. At the same time, we're trying to make 
our enforcement programs smarter and fairer in a number of 
ways. We're improving our targeting efforts by identifying, for 
the first time, work site specific data that will allow us to 
identify the most hazardous workplaces around the country.
    Second, we are shifting our focus away from individual 
technical violations, more toward a systematic approach of 
finding and fixing hazards on an ongoing basis. We're doing 
this through incentives like penalty reductions and limited 
scope inspections.
    Third, we are recognizing the unique challenges that small 
businesses face. We are currently piloting a new penalty 
reduction scheme in which businesses will get up to an 80 
percent reduction for size. We have also waived other than 
serious penalties for small employers with under 250 employees.
    Fourth, we are responding faster to hazards in the 
workplace by trying to allocate our resources in the most 
efficient way and provide the fastest possible response to the 
most serious hazards. We're seeking $7.1 million for an 
increase in enforcement programs to advance these efforts, with 
emphasis on the fourth element.
    Currently, we have about 2,100 Federal and state inspectors 
around the country to protect over 90 million workers. And 
oftentimes, we find we can't get to a workplace fast enough 
where there are serious hazards. In Englewood, Colorado, for 
example, we were recently notified of a trench that was not 
adequately protected. But we were not able to get there until 
eight days later.
    In that time, workers continued to be exposed to danger in 
that trench. Thankfully, they were not injured or killed. But 
that's really too long a period of time to address that kind of 
hazard. So we're seeking additional funds to establish 
enforcement response teams which will provide faster and better 
protection to workers.
    In standards, we are continuing to expand our use of 
regulatory partnerships. These are designed to instill common 
sense in our regulatory policy making and our protective 
standards. We're engaging in negotiated rulemakings where 
feasible. Currently we have projects involving steel erection, 
fire protection in shipyards, and we're currently putting 
together a negotiated committee for metalworking fluids.
    In addition, where formal negotiated rulemaking isn't 
appropriate, we are seeking consensus based rules. An example 
would be the butadiene standard we issued last fall, which 
represented an agreement between rubber industry employers and 
workers.
    Also, employers and workers in the construction and 
maritime industries have been working together to come up with 
a proposal for safety and health programs.
    We're exploring non-regulatory approaches as well where 
feasible. We recently reached an agreement with the asphalt 
paving manufacturers for voluntary engineering controls to be 
placed on all paver manufacturers starting this summer. We had 
a similar agreement with styrene users to protect workers from 
over-exposure to styrene.
    Also in terms of our regulatory activity, we are currently 
rewriting our regulations in plain language. Wehave expanded 
that effort to encompass six standards. And we're hopeful of expanding 
it further in the near future.
    Lastly, I'd like to talk about our efforts to shift the 
agency's focus towards results. We are currently developing a 
strategic plan in compliance with GPRA, which contains our 
plans for the next five years and will allow us to change the 
agency's culture to focus much more on results and improving 
worker safety and health.
    This plan will enable us to answer three critical 
questions: where do we want to be in five years; how are we 
going to get there; and how are we going to measure our 
progress towards those goals. We have met recently with your 
staff and started a productive dialogue about this strategic 
plan. We intend to work closely with stakeholders and with OMB 
and with all of you in the next few months as we get this 
project finalized.
    We need your help, though, in continuing to change the 
agency and implement new OSHA initiatives. For those reasons, 
we are requesting the increase that I have set out here today.
    Thank you, and I would ask that my full statement be placed 
in the record.
    [The prepared statement and biography of Gregory Watchman 
follow:]

[Pages 228 - 235--The official Committee record contains additional material here.]


          employment standards administration FY 1998 request

    Mr. Miller. Mr. Anderson.
    Mr. Anderson. Thank you, Mr. Chairman.
    Mr. Chairman and members of the subcommittee, I welcome 
this opportunity to come before you today representing the 
Employment Standards Administration of the Department of Labor.
    May I say that I regret the illness of Mr. Porter. I was 
rather looking forward to his chairing this hearing today, and 
I hope that you would convey to him our best wishes for a very 
speedy recovery from his back problem.
    I would like to discuss our fiscal year 1998 budget request 
for $340.4 million and 4,055 FTE. This request, which builds 
upon the initiatives already underway in ESA represents a net 
increase of $23.9 million and 113 FTE over the comparable 
fiscal year 1997 level.
    The increased funding will allow us to effectively carry 
out the important missions mandated by the statutes and 
executive order that we enforce and administer. I believe that 
ESA has put forward a reasonable request with program increases 
that provide for critical needs. Program increases totaling 
$16.4 million and 198 FTE are proposed, which I think we will 
describe more fully in a moment.
    Program decreases of 85 FTE and $2.6 million are taken to 
comply with Executive Order 12837, and the Federal Work Force 
Restructuring Act of 1994. The remainder of the $23.9 million 
increase results from mandatory increases such as pay raises.
    Overall, ESA received enough funding for 1997 to maintain 
operations, which has allowed the continuation of periodic roll 
management projects in the Office of Workers Compensation 
Programs. ESA also received full funding for Wage and Hour's 
Immigration and Davis-Bacon reform initiatives. The fiscal year 
1997 support provided a solid base on which to build our fiscal 
1998 request.
    In fiscal year 1997, Wage and Hour was provided with 
resources to expand labor standards enforcement in selected low 
wage industries such as garment and agriculture in targeted 
areas in seven states where immigrant workers tend to 
concentrate. These resources are an important part of the 
Administration's comprehensive strategy to deter illegal 
immigration.
    This initiative acknowledges the fact that employment is 
the single most important and pervasive incentive for illegal 
migration. Curbing illegal migration and enforcing worker 
protection laws have a direct connection.
    It is in this context that the fiscal year 1998 request for 
$1.3 million and 28 investigate FTEs is framed. The requested 
resources for 1998 will enable Wage and Hour to broaden this 
initiative through compliance assistance and enforcement in low 
wage industries in strategically selected small cities and 
surrounding rural areas. Unlike many workers in larger urban 
areas, workers in these areas may have few employment options 
and perceive the need to accept substandard wages to remain 
employed.
    Wage and Hour also received resources in 1997 for the 
express purpose of developing and implementing Davis-Bacon wage 
survey determination system improvements to ensure that the 
locally-prevailing wages and fringe benefits required by the 
Davis-Bacon Act are accurate.
    Wage and Hour establishes the prevailing wage rates through 
data provided voluntarily by employers and third parties. Over 
the past several months, the Department has examined several 
Davis-Bacon wage survey improvement options and is now focusing 
on the two most promising options. One is the reengineering of 
the current Davis-Bacon wage survey process to promote greater 
participation and improve the accuracy and timeliness of the 
wage determinations.
    The second would use the Bureau of Labor Statistics' 
redesigned occupational employment survey as the basis for 
Davis-Bacon wage determinations. We intend to invest the 
resources provided in 1997 and the additional amount requested 
for 1998 to develop and evaluate these options. To this end, we 
have developed a two-year spending plan for both the additional 
1997 resources and those requested for 1998 because much of the 
developmental work that is required in both the reengineering 
and the BLS option, will extend at least over the next two 
years.
    In accordance with this plan for the Davis-Bacon 
reengineering process, we have already obligated funds to begin 
the redesign of the survey collection form, the analysis of 
scanning and character recognition and expert system 
requirements, the development of electronic data submission 
capabilities, and on-site survey data verification.
    All of these improvements will be partially or fully funded 
this fiscal year. These improvements respond to the General 
Accounting Office's May 1996 report, which identified Wage and 
Hour's limited computer capabilities as an underlying reason 
for the process's vulnerability to the use of inaccurate survey 
data submissions.
    Startup work on exploring the feasibility of the BLS option 
will be initiated this fiscal year. However, the bulk of the 
BLS efforts cannot be undertaken until fiscal year 1998 and 
fiscal year 1999, because initial data from the redesigned 
occupational employment survey, which will be studied as a 
possible basis for Davis-Bacon wage determinations will not be 
available any earlier.
    We also have requested that BLS test the feasibility of 
gathering data on benefits and total employment costs for 
workers in various occupations in construction industries 
through their national compensation survey.
    Our reengineering efforts are based on the current survey 
methodology but seek to use technology and revised procedures 
to promote greater survey participation, to improve the 
accuracy of survey data submissions, to make the data 
collection and analysis process more efficient and less costly, 
and to enhance our ability to verify data submissions to assure 
greater accuracy of Davis-Bacon wage determinations.
    The fiscal 1998 request includes an additional $2 million 
to further these efforts and improve upon Wage and Hour's 
information system infrastructure. These additional resources, 
added to base level funding, are needed to continue Wage and 
Hour's efforts to develop and implement improved methodologies 
and systems for Davis-Bacon prevailing wage determinations and 
to obtain and adequately verify the accuracy of data received 
during the wage surveys.
    To this end, the result will be an improvement in the 
timeliness, accuracy and reliability of the resulting 
prevailing wage determinations.

              federal contract compliance fy 1998 request

    The Office of Federal Contract Compliance Programs has 
proposed the fair Enforcement Strategy Initiative for 1998 
which will enable OFCCP to more efficiently use resources while 
reducing the burden on employers. Workplace discrimination 
remains a pervasive issue in the 1990s, as many recent news 
reports have confirmed. Since the major responsibility of OFCCP 
is to prevent discrimination and promote equal employment 
opportunity, the FTE and funds needed for OFCCP are of great 
importance to women, minorities, individuals with disabilities 
and special disabled veterans and Vietnam era veterans.
    The fair enforcement strategy will eliminate the now-
necessary paperwork requirements associated with the 
affirmative action plan. Regulatory reform, which we are now 
pursuing, will reduce the paperwork burden on Federal 
contractors by revising the requirements for the affirmative 
action plan. OFCCP proposes needed changes to make compliance 
less intrusive and simpler for Federal contractors, while 
maintaining the integrity of the program.
    The strategy will also target enforcement resources on the 
most serious violations. The tiered review process is proposed 
to improve OFCCP's interaction with Federal contractors by 
tailoring the scope of the review to focus on more substantive 
issues, rather than the current one-size-fits all approach. 
This flexibility will allow the agency to concentrate its 
resources in areas where there are compliance problems while at 
the same time reducing the burden on contractors who are in 
compliance with the Executive Order and the other laws OFCCP 
enforces.
    Technical assistance guidance for Federal contractors and 
others is also a component of the fair enforcement strategy. 
Seminars will be provided for Federal contractors, especially 
for first-time contractors not familiar with the various 
requirements of the equal employment opportunity and 
affirmative action obligations.
    OFCCP has requested an increase of $8.6 million and 101 FTE 
for the fair enforcement strategy, which includes $3.8 million 
for information technology.
    Mr. Miller. Could you begin to wrap it up, please?
    Mr. Anderson. All right. Let me very quickly comment on the 
FECA program. The request there is for $1.9 billion. Let me say 
on the FECA program that our request for the increase is based 
on our need to support the periodic roll management initiative. 
That is an effort to get workers back to work, to provide 
employment counseling and medical assistance to the long-term 
claimants. That has been very helpful in saving the Federal 
Government money. And we project that with the increases that 
are requested through the year 2002, the Federal Government 
could realize $500 million to $600 million in savings within 
the FECA program.

               labor-management standards fy 1998 request

    Let me pass over the comments I had on the Office of Labor-
Management Standards and say that we believe the request that 
has been put forward to the committee is a reasonable request, 
which if agreed to, would provide us with the resources we need 
to increase the efficiency, to improve customer service and to 
continue to carry out our responsibilities as efficiently and 
effectively as we can.
    Thank you very much.
    [The prepared statement and biography of Bernard Anderson 
follow:]

[Pages 240 - 246--The official Committee record contains additional material here.]


    Mr. Miller. Thank you.
    Mr. McAteer, if you could kind of paraphrase. We have your 
written statement. We'll allow opportunity for discussion.

                        opening statement--msha

    Mr. McAteer. Thank you, Chairman Miller.
    I take it the best approach that I might have is to be 
rather brief.
    I am here today and I thank you for the opportunity to 
appear for appropriations requests for the Mine Safety and 
Health Administration and the Office of the Solicitor. MSHA 
requests $205.8 million and 2,186 FTE to conduct mine safety 
and health activities. Those increases will be in the areas of 
safety and health. Last year was the best year in terms of the 
number of fatal accidents and non-fatal accidents in this 
country's history, a record that we are proud of, and have 
achieved with the cooperation of industry and labor.
    We think that our initiatives in the health area, 
particularly in the area of silicosis and in black lung will 
enable us to work to reduce and eliminate these diseases from 
the workplaces in the mines of this country. The Solicitor's 
office requests $70.7 million and 682 FTE in the fiscal year 
1998 to provide legal services to the Secretary of Labor and 
the Department agencies to implement and enforce the statutes 
administered by the Department.
    You have my written submission, I believe it's in 
therecord, and I thank you very much.
    [The prepared statement and biography of J. Davitt McAteer 
follow:]

[Pages 248 - 254--The official Committee record contains additional material here.]


    Mr. Miller. Thank you. I appreciate the statement.
    What we're going to do is use the five minute rule to start 
with, so everybody has a chance to have a round of questions 
and then we'll be able to go back to a second round.
    I noticed with interest the report from Mr. Anderson saying 
that program increases are going to have 198 more FTEs and 
increased spending of $16 million. But you have decreases of 85 
FTEs but only a reduction of $2.5 million. I guess on yours, 
you have 40 FTEs more, but you've cut 52 FTEs, but not very 
much money. It just doesn't seem like the numbers add up.

                     WORKPLACE VIOLENCE GUIDELINES

    But let me ask a couple of questions. Let me first ask one 
about OSHA. I remember last year one of the problems over the 
past has been the issue of consulting with the industry when 
you develop new standards. I remember one on the fall 
protection in construction and that was withdrawn. You got 
input, and I assume that's moving along.
    I know one that's being proposed right now is the area of 
violence prevention, which affects restaurants and places, and 
such. Do you seek input from the industry as you develop these 
standards of violence? Because once they get issued, even 
though they're voluntary, the question is, they're a legal 
standard. But do you seek that input, help and cooperation with 
that?
    Mr. Watchman. Yes, sir. One of the principal things we're 
trying to do in our regulatory program under the new OSHA is to 
interact with stakeholders much more frequently and much 
earlier in the regulatory process. Now, guidelines, I should 
make clear, are voluntary. These are not regulations. They're 
not enforceable and we don't seek to enforce them.
    But in the area of workplace violence, we have worked with 
stakeholders in a variety of settings, meetings and 
correspondence, to get their input into the guidelines. And in 
fact, the guidelines reflect practices that employers have used 
successfully around the country.
    Mr. Miller. But don't guidelines become legal standards? 
I'm not a lawyer. But once you establish a guideline, the 
lawyers can use that however they want, right?
    Mr. Watchman. No. Our guidelines specifically say they 
cannot be enforced.

                               LM-2 Forms

    Mr. Miller. Can't be taken to court? You may not be 
involved in the issue when it goes to court, but couldn't it 
then became a--well, I'm not a lawyer. But it raises the issue.
    Let me switch to issues about the Employment Standards 
Administration. Let me ask first about the LM-2 forms, that's 
under you, Mr. Anderson. The forms that labor unions file. Is 
that being automated, so it's more readily available? 
Accessible information? This past year, as you know, organized 
labor has spent $35 million on political activity. And people 
have been wanting to see how that money, how unions are 
spending that money.
    How accessible are those LM-2 forms, and do you have plans 
to automate it and make it more accessible via the internet or 
what have you?
    Mr. Anderson. Those forms are available to the public upon 
request. And our district offices of the OLMS, the Office of 
Labor Management Standards, can make those forms available for 
review. I'm not sure whether a FOIA request would be necessary 
for that or not. But they are available for public review.
    There is no discussion at this time to automate them and 
make them available more widely through the internet that I am 
aware of. The program, the data are used essentially to analyze 
the union elections, experiences, also the financial forms are 
used to examine the way union funds are used by the officers. 
There is no discussion at this time to make them more broadly 
available to the public.
    Mr. Miller. But you would agree that they should be easily 
accessible for the press, members of the unions of, whoever 
would like to have access to them. The question is whether 
they're, you know, very accessible. I've heard that it's very 
cumbersome, slow process to get access to that information. So 
there's technology available with scanning, it's like an FEC 
report for us. Those are available on the internet, I 
understand, fairly quickly.
    Mr. Anderson. Well, that is something that I think we 
certainly would want to look at. And why don't we examine the 
feasibility of doing that, given the technology available that 
would be necessary.

                              CHILD LABOR

    Mr. Miller. Right. Maybe some of the smaller agencies under 
you or such could get lost.
    Let me ask, do you do child labor? Who does child labor?
    There was an editorial in this morning's Wall Street 
Journal about child labor on the Amish. I'm not familiar with 
that case, but it raises the issue of the Amish, the work of 
their children. An Amish person has a sawmill and is being 
threatened with a $20,000 fine. Isn't there a problem with 
religion? They don't believe in using cars and such.
    Mr. Anderson. Well, as you know, our child labor laws and 
regulations are intended to protect young people in the world 
of work. And one of the so-called hazardous occupations is 
employment of young people under the age of 18 in sawmills. I 
think it's H.O. 4.
    The purpose of that, quite frankly, is to protect the 
safety of young people who might want an employment experience, 
be hired in a variety of places in our economy. I think it is a 
matter of some interest that over 200,000 young people each 
year are injured on the job. Sixty-four thousand of them are 
injured seriously enough to require emergency hospital room 
treatment.
    So the regulations that are in place under the child labor 
law are intended to protect young people. And those regulations 
are applied throughout the economy, without regard to the 
religious affiliation of the employer or any other 
characteristic.
    Now, as it turns out, the Amish are a very special case. 
I'm from Pennsylvania. And I'm quite familiar with the Amish in 
Lancaster County. I believe they have a practice of ending 
public school, at the age of 14, after which young people then 
begin to learn various occupations through on-the-job training.
    We respect the religious commitments of the Amish and their 
religious orientation. But at the same time, the Amish 
certainly should respect American law.
    Now, let me say with specific reference to that case, we 
have been in communication with representatives of the Amish 
community. And the assessment that was placed there is now 
under review through the appeals process by the courts in 
Pennsylvania. We also have spoken to representatives of the 
Amish community about the hours of work for young people, the 
regulations limit thenumber of hours young people can work. And 
we have been talking to the Amish about perhaps some special 
understanding that we can have with them, given the fact that kids end 
their schooling at 14, and so therefore would be in on-the-job 
training.
    Mr. Miller. My time is up. But reading the editorial, it 
was kind of an embarrassment that the Federal Government is 
clamping down on a way of life. I'm not familiar with it, since 
it's up in Pennsylvania, but it's something where they have a 
proud history of family strength, their children are involved 
in the work in a different manner than maybe they see the 
outside world. And we don't have the proudest record, compared 
to their record.
    So it's embarrassing that the Federal Government is 
clamping down on this way of life. So I'm glad you're trying to 
work with them and resolve that. If we have a chance, I have 
some more questions.
    Mr. Hoyer.
    Mr. Hoyer. Thank you very much. I want to welcome our 
witnesses.

                        RESIDENTIAL CONSTRUCTION

    Mr. Watchman, many of us want to focus on the $2 million 
that was appropriated last year for the purposes of identifying 
and treating discretely the regulations that deal with 
residential construction as opposed to larger construction. We 
are six months into the fiscal year. Can you tell me the status 
of the application of those funds?
    Mr. Watchman. Yes, sir. We're not as far along with that 
project as we had hoped by this point. Before he left OSHA, Joe 
Dear asked our advisory committee on construction, which is 
made up of both business and labor representatives, to look at 
the issue and come up with a proposal for how to use that 
funding to evaluate the practical application of construction 
regulations for residential home building.
    Since then, the former Secretary, John Dunlop, has gotten 
involved and has begun to mediate with the parties to come up 
with a proposal. I was told recently that he has in fact 
reached some agreement with the parties and that we'll be 
looking at that proposal in the near future and bringing the 
parties together to try to work this out.
    But I certainly submit to you that ultimately we will 
comply with your request that we carry out this function.
    Mr. Hoyer. Mr. Watchman, let me say candidly, I am 
interested in sooner, rather than later.
    Mr. Watchman. Yes, sir.
    Mr. Hoyer. I am not interested in ultimately. And I am not 
interested in arbitration. I want somebody at the Department of 
Labor in your shop to make a decision and to move on with it 
and to get it done.
    As you know, I am a big supporter of OSHA. There are some 
on this panel who are less supportive of OSHA's operation. I 
think it's absolutely critical. I support its funding.
    But what I do not support is a lack of common sense. And in 
some respects, delay lacks common sense. Waiting, debating, 
trying to resolve, and trying to come up with consensus is not 
getting us anywhere. And I am, as you can tell, frustrated by 
the failure to get on with this project, which I think is a 
reasonable, common sense project. You referred to Mr. Dear. I 
was a big fan of Mr. Dear's.
    I want to talk to you further about this. I would like a 
report back within 15 days, either to the committee or to 
myself personally, as to where this project stands and when it 
is going to be completed.
    Mr. Watchman. I'll be happy to provide that for you.
    Mr. Hoyer. I would appreciate that very much.
    And I want to say that I understand that there is some 
controversy here. But the controversy will not disappear. And, 
if you wait until you resolve the controversy, you will not do 
anything. You will frustrate me and frustrate the objectives of 
the committee in giving the $2 million for that purpose.

                   DAVIS-BACON IMPROVEMENT INITIATIVE

    Mr. Anderson, let me ask you about another issue. I have 
been a consistent, 25 year supporter of Davis-Bacon. Davis and 
Bacon, by the way, were two Republican members of Congress who 
decided that we wanted to make sure that people got paid fairly 
for the work that they performed, I tell my Republican 
colleagues.
    The fact of the matter is, what they did not want was cheap 
labor coming in from the south, being paid for by taxpayer 
dollars, State or Federal taxpayer dollars, and undermining the 
local work force. That is what Davis and Bacon wanted to 
accomplish. I am for that.
    What I am not for, however, and I tell all my friends in 
labor I am not for, is having an inaccurate assessment of what 
the prevailing wage is in a district. I am tired of my business 
community telling me, ``It ain't a prevailing wage, it's the 
labor wage''. Your Department is not to choose the labor wage, 
it is to choose the prevailing wage.
    Mr. Wicker. Preach on.
    Mr. Hoyer. I'm going to do it. [Laughter.]
    And I know that you will join me in very strongly 
supporting the application of Davis-Bacon. I want to ensure 
that it has accurate representation so that your two Republican 
predecessors will ensure that we do not underpay working men 
and women accomplishing Federal objectives through Federal 
construction projects.
    But it needs to be, Mr. Anderson, an accurate wage. You 
have $3.75 million. Can you tell me the status of the $3.75 
million? You indicate that you want more in 1998. And in your 
statement, you indicate that you are going to use both 1997 and 
1998 resources, to accomplish this objective. Again, can you 
give me time lines as to when we are going to do this, how it 
is progressing, where we are?
    Mr. Anderson. Let me say thank you for your support of the 
Davis-Bacon Act.
    Before I answer your question, let me say that only 27 
percent of all of the prevailing wage determinations are the 
union wage, that is, the collectively bargained wage. And that 
27 percent represents only those wages which in the survey are 
shown to be over 50 percent of the wages paid to workers in a 
specific occupation are collectively bargained.
    So the overwhelming majority of prevailing 
wagedeterminations are not the union wage.
    Now, with respect to the $3.75 million that was 
appropriated for this fiscal year, let me say that for the past 
18 months, we examined a series of alternatives to the 
prevailing wage survey process, with a view toward identifying 
methodologies and sources of data that would produce more 
accurate, timely, reliable prevailing wage determinations.
    We boiled it down to two options that we want to pursue. 
One is a reengineering of the current system. The other is the 
consideration of wage survey data produced by the Bureau of 
Labor Statistics to see if those sources of data might be 
appropriate for Davis-Bacon purposes.
    There are two BLS surveys of interest to us: the 
occupational employment survey, and the Comp 2000 survey, which 
is a survey intended to obtain information on fringe benefits. 
Both of those BLS surveys are new. The occupational employment 
survey is just being implemented by BLS this year. And results 
of the survey won't be available until the latter part of this 
year.
    So the use of the resources we received for 1997 is 
concentrated mainly on the reengineering option. That option 
involves a series of measures which are intended to introduce 
more technology into the survey process, to improve the 
verification procedures, to increase the timeliness with which 
information is presented to the Department of Labor, to improve 
the analysis of the data, and to take a number of other 
measures that would achieve the goals of improving the quality 
and the accuracy of that information.
    We are going to spend the $3.75 million. In fact, we have 
already entered into a contract with the BLS to do planning for 
the test of the use of the occupational employment survey and 
the Comp 2000 survey for possible Davis-Bacon purposes. Much of 
that work can't be done by BLS until next year, because of the 
planning to make the modifications in the survey that are 
required will be done in 1997. The implementation of that will 
be in 1998. That is why we requested the additional $2 million.
    So we expect to use all of the funds that were provided in 
1997, the $3.75 million. And in fact, we submitted a spending 
plan to the committee to show you how we expect to allocate 
those funds for the improvement of the Davis-Bacon prevailing 
wage system.
    Mr. Miller. We're on a five minute rule.
    Mr. Hoyer. Thank you, Mr. Anderson.
    Mr. Miller. Mr. Bonilla.
    Mr. Bonilla. Thank you, Mr. Chairman.
    Gentlemen, welcome this morning. We're glad to have you 
here today.
    One of the things I want to start out is by expressing 
frustration about this hearing in general, because we don't 
have enough time to ask questions. I know the Chairman is 
trying to be as fair as possible. But there are so many 
concerns and questions that my constituents have. And I'll get 
to them as quickly as possible. Chairman, just stop me when my 
time is up, because I can probably go on for a long time.
    In the interest of time, I'd just like to mention my 
concern regarding Davis-Bacon and the way it's administered. 
And I will submit questions for the record. The indictment last 
week of the union agent, Andre Whitson, demonstrates a 
significant and widespread abuse of Davis-Bacon. And let me 
say, as I said to Secretary Reich last year, it doesn't matter 
to me that Davis and Bacon were Republicans. We make mistakes 
sometimes, too, that need to be corrected.
    And this has turned into one of the biggest boondoggle 
programs and abused programs that this Government has ever 
administered. It costs people a lot of money, and it costs jobs 
in communities across this country.

                 review of california's proposition 65

    I also share Chairman Livingston's frustration with OSHA's 
inaction on reviewing California's proposition 65. I'd like a 
copy of your response to the Chairman's letter, and I may 
submit questions for the record on this matter as well. Because 
it does affect other States, big time, versus just California.
    Simply put, I cannot understand why it's taken OSHA more 
than five years to complete its review. Mr. Watchman, five 
years, to complete a review. Do you realize, in the private 
sector you'd be fired if you couldn't get a job done in a 
reasonable amount of time? It's just mind-boggling that this 
can't be done in a shorter period. OSHA has missed the deadline 
and I realize that this hasn't happened under your watch. But 
I'm just expressing frustration about the agency in general, 
has missed the deadline requested by this committee in last 
year's bill on this proposition 65.
    [The information follows:]

[Pages 261 - 262--The official Committee record contains additional material here.]


    In addition, I'm concerned with the proposed workplace 
violence standards that you are developing for the restaurant 
industry and separately for convenience stores. Again, I'll 
submit questions for the record.

                     workplace violence guidelines

    Even OSHA's own Patricia Biles is quoted with regard to 
workplace violence standards as saying that these guidelines 
are ``not the most effective or the most scientifically 
proven.''
    Much of the controversy surrounding OSHA's regulations is a 
simple fact that a good faith, solid effort to base guidelines 
on sound and accurate science is lacking. It's especially true 
for the ergonomics rule that you and I have discussed before, 
and we've discussed this with your predecessor, Mr. Dear, and 
the Secretary.

                               ergonomics

    For the record, I'm extremely disappointed with the non-
responses of OSHA last year to my 150 questions about the 1995 
proposed rule. Over half my questions were not answered at all, 
which leads me to believe that OSHA has either intentionally 
avoided responding to legitimate Congressional questions it has 
no answers for, or it's a dramatic concession that the state of 
the ergonomic science is uncertain, volatile and inappropriate 
for regulation at this time.
    It is difficult for me to believe that OSHA could not 
answer my questions, after spending $3.5 million on ergonomics. 
And then your agency can't find time to answer these simple 
questions. I find myself a year later with very little 
additional information about OSHA's ergonomics rule. And now 
OSHA comes before this subcommittee today with afiscal year 
1998 budget asking for more resources for its ergonomics rule.
    Mr. Watchman, I wonder how many of those workers you 
discussed in your testimony could have been saved if OSHA 
targeted that $3.5 million toward proven methods, such as 
education, and I hope that OSHA will be more responsive to the 
committee this year. I'm optimistic about that, Mr. Watchman, 
and I hope that you do make that optimism come true.
    The first question I have for you today, sir, is giving you 
the benefit of the doubt, I will assume that OSHA was not able 
to answer my questions due to a lack of data. In that case, 
wouldn't it be helpful to OSHA if the National Academy of 
Sciences conducted a study on all available scientific and 
medical literature related to this issue?
    Mr. Watchman. First on the issue of the questions that we 
had last year. We did make an effort to answer those questions. 
As you know, we answered most of them individually and then 
there were a series of questions that we answered with group 
answers.
    Most of those questions revolved around a working draft 
that we had in the Department two years ago that was discussed 
with stakeholders. That document is no longer a working draft. 
It never was a proposal of OSHA or the Department or the 
Administration. And in fact, the team was disassembled last 
year, and there really wasn't anyone around that was still 
working on the issue.
    We tried to answer the questions as best we could, and we 
offered to meet with you. I would reiterate that offer today. I 
would be happy to meet with you and your staff to try to 
identify your specific needs and issues that you're concerned 
about in this area.
    I do need to take issue with the notion that we don't have 
science here, though. First, this is clearly the worst 
workplace health problem in the country today. There are a 
variety of data sources, and they come with different numbers. 
But by any measure, we know that hundreds of thousands of 
workers are being affected by repetitive stress injuries every 
year. These workers are suffering serious pain, debilitating 
injury and lost work time. And these injuries interfere with 
even basic life activities, like picking up a child or shopping 
for groceries.

                  texas instruments ergonomics program

    We know that this is a big problem that we need to address. 
But the good news is, many of these incidents are preventable. 
We're learning from employers about what they're doing around 
the country. In your own State of Texas, Texas Instruments 
implemented an ergonomics program and was able to reduce their 
workers comp costs from about $250,000 a year to just $11,000 
over a three year period.
    We're looking at these kinds of results as representing the 
effective solutions that employers are using around the 
country. We want to try to learn from those and try to develop 
a standard that's based on the solutions that we know to be 
effective.
    So we are aware that there are hundreds of studies that 
link exposure to workplace factors to musculoskeletal 
disorders. We believe that there is enough of a threshold of 
science here to move forward to protect workers. And the proper 
place to debate these issues fully is in the context of a 
rulemaking, which would be triggered by our working with 
stakeholders to come up with a proposal.
    Mr. Bonilla. Mr. Watchman, this regulation could be the 
most costly, profound, biggest thing to show up on the horizon 
for small business and large business in this century. My only 
concern is that we do this thing right. All of us understand 
the repetitive stress injury problem in this country. You 
acknowledged Texas Instruments, other companies, every employer 
is interested in preserving the health and safety of their 
workers.
    There are some fools in this country that imply that it's 
somehow advantageous or somehow a goal of an employer to lose 
someone on the job if they have a repetitive stress injury. 
They lose money and productivity when things like that occur. 
That's why companies like Texas Instruments and a grocery store 
chain called HEB, that employs 25,000 employees in Texas, and 
USAA, the big insurance company, are working on these things.
    My concern is, and I'm hopefully going to have another 
round of questions, that we need to make sure that we go slow 
on this issue. This rule should not be implemented because of 
someone feeling that they've got to impose more power or clout 
or have a regulation imposed that is not in the best interests 
of workers. That's where I'm coming from and I think you know 
that.
    Mr. Miller. Ms. Pelosi.

                         ergonomics conference

    Ms. Pelosi. Thank you, Mr. Chairman.
    I, too, want to thank our witnesses for their testimony 
today and for the work they do for worker safety and 
protection. And for management as well, because I know that 
most employers in the country have an interest in the safety 
and welfare of their employees.
    I understand that you've had, following up on some 
questions on ergonomics, I understand that you had the 
conference in Chicago, you testified to it in your statement. 
Could you give us some examples of what you learned there? 
Because I understand stakeholders were there at your 
conference.
    Mr. Watchman. That's right. It was a very successful 
conference. We worked in partnership with employers and worker 
representatives and safety and health professional groups. Over 
1,000 people attended the conference, and we had many employers 
there presenting case studies about their experiences with 
ergonomics programs.
    The bottom line from that conference was that there are 
many, many ways of not only reducing repetitive stress injuries 
on the job, but also saving money. Texas Instruments is one of 
the examples I mentioned, but there are many, many others where 
employers have saved hundreds of thousands of dollars or 
millions of dollars in costs by implementing ergonomics 
programs.
    What we're learning is that there are effective ways, many 
of them very simple, such as changing a knife on a poultry 
processing line or adjusting a table up or down to better suit 
the worker that's assigned to that station. Or using a 
different type of chair in an office. There are many different 
types of approaches to this problem that can be quite cost-
effective.

                       current ergonomics efforts

    Ms. Pelosi. Thank you.
    I listened attentively to my colleague Mr. Bonilla's 
suggestion that we're aware of about having National Academy of 
Sciences make a study. With all due respect to the maker of 
that amendment, I oppose that. Because I think the length of 
time that such a study would take, I think it would be a 
minimum of two years, during which time Congress would not be 
able to address this issue, I mean, OSHA would not be able to 
address this issue, would constitute a gag rule on OSHA 
doingits job to protect workers, even with voluntary suggestions.
    Could you tell us ways in which OSHA has been able to be of 
assistance to businesses because we have lifted the rule 
prohibiting you from developing voluntary guidelines and 
collecting data on repetitive stress injuries?
    Mr. Watchman. Sure. We started an outreach campaign last 
December with Secretary Reich's announcement. The conference in 
January in Chicago kicked off that effort. We're now working on 
putting together a manual that comprises those best practices 
we learned of in Chicago, so that people who didn't attend that 
conference can read about these solutions.
    We are also looking at putting together a technical 
assistance manual, which would be helpful to employers. And 
we're also starting a web page on the internet where we can put 
information about musculoskeletal disorders and how to prevent 
them in the workplace.

                        niosh role in ergonomics

    Ms. Pelosi. Isn't it so that NIOSH is the agency created by 
Congress to address the issues of a study to provide much 
information that OSHA needs to determine how to proceed with 
any such guidelines?
    Mr. Watchman. That's right. The National Institute of 
Occupational Safety and Health is charged with performing 
research on safety and health issues. On many issues, they've 
been very valuable, providing scientific research and data to 
us.
    In this case, they are actually doing what the amendment 
requires, comprehensive analysis of all of the scientific 
literature that's out there. Again, it's several thousand 
studies as I understand it. We're expecting NIOSH to release 
that survey shortly, and I think that will be helpful to us.

               scientific basis for ergonomics guidelines

    Ms. Pelosi. I also want to call to our committee's 
attention a letter I received last year when we were discussing 
this issue last June from Dr. Katz, the Director for the 
National Institute for Arthritis and Musculoskeletal Disorders 
on the subject of ergonomics.
    In his letter, he says, although we are supportive of 
efforts to reduce musculoskeletal injuries and disability in 
the workplace, I believe your question about OSHA's work, I had 
asked him a question about the issuance of an OSHA rule or 
voluntary guidelines. He said, I believe your question about 
OSHA's work on voluntary guidelines should be allowed to 
continue. It is a regulatory issue and is therefore best 
addressed by those with expertise in that area.
    For that reason, says Dr. Katz, I would defer to OSHA on 
this question. The conversations and testimony we have received 
from scientists has been that you really don't have to have a 
complete understanding of all of the science of why it is 
hurting, damaging the musculoskeletal system in order to know 
that you need to make some adjustments, some of them very, very 
simple. And I know, I hear from both sides on this issue that 
it's in the interest of employers to be able to have some 
guidance in this area.
    In case you care to comment on that.
    Mr. Watchman. I know that Dr. Katz' comments in the past 
have raised questions about the adequacy of the science. My 
understanding is that more recently he has confirmed to the 
subcommittee that there is good evidence of a causal link 
between exposure to workplace factors, like repetitive motion, 
heavy lifting and awkward posture, and musculoskeletal 
disorders. In particular, I think he has cited industries like 
meat packing, automobiles, and data entry as among the 
industries affected by this problem.
    Mr. Miller. We're trying to hold to the five minute rule, 
and five minutes goes by very fast. Hopefully we'll have time 
for another round.
    Mr. Wicker.

                   methylene chloride as a carcinogen

    Mr. Wicker. Thank you, Mr. Chairman.
    Mr. Watchman, as you know, I have sponsored a resolution of 
disapproval with regard to OSHA's regulation concerning 
methylene chloride. I will state to my colleagues, there is a 
brief account of this measure in today's National Journal 
Congress Daily. There's only one correction that I would add to 
that, that it is not just a GOP measure, but that the 
resolution of disapproval does have bipartisan support.
    But I would like to ask you if I could in this very short 
time that I have about your understanding of methylene 
chloride, which as you know is used in the furniture industry, 
which has created thousands and thousands of jobs in my State. 
I understand from OSHA that you believe methylene chloride is a 
health hazard, and that specifically it is a carcinogen, it 
causes cancer, is that correct?
    Mr. Watchman. That's correct.
    Mr. Wicker. What types of cancer do you believe that 
methylene chloride causes?
    Mr. Watchman. I think liver cancer may be one of the types. 
But I think there are a variety of types of cancer. I would be 
happy to provide a more complete answer for the record.
    Mr. Wicker. I would appreciate your providing me a complete 
answer for the record.
    [The information follows:]

[Page 268--The official Committee record contains additional material here.]


           health problems associated with methylene chloride

    Mr. Wicker. Now, are there other diseases that your 
scientists have determined are caused by methylene chloride or 
are we just talking about cancer?
    Mr. Watchman. In addition, exposure to methylene chloride 
can cause acute neurological problems and damage the nervous 
system.
    Mr. Wicker. Anything else?
    Mr. Watchman. I believe it can lead to an increased risk of 
heart attacks as well.
    Mr. Wicker. Okay. Now, I will appreciate your supplementing 
the record if you will on that.
    [The information follows:]

                 Diseases Caused by Methylene Chloride

    Methylene chloride can cause central nervous system 
depression, characterized by headaches, dizziness, 
irritability, and disorientation. Higher exposures can lead to 
loss of consciousness and death. This type of effect is the 
primary cause of the acute occupational fatalities reported to 
OSHA due to methylene chloride over-exposure.
    Methylene chloride is metabolized to carbon monoxide in the 
body and will have the same health effects as carbon monoxide 
breathed in from cigarette smoke or engine exhaust. These 
effects include worsened symptoms of heart disease (decreased 
time to angina, increased chest pains) and increased chance of 
heart attack. A study of workers in South Carolina showed 
increased mortality from both ischemic heart diseases of the 
circulatory system.
    Methylene chloride also causes irritation to eyes and skin. 
Skin contact can lead to occupational dermatitis and skin burns 
after prolonged contact.

                 scientific tests on methylene chloride

    Mr. Wicker. What tests are these conclusions based on?
    Mr. Watchman. They're based on studies that were conducted 
by people outside of OSHA, professionals who regularly do this 
sort of thing. These studies found links between exposure to 
methylene chloride and cancer.
    Mr. Wicker. Can you tell me what kinds of tests these were?
    Mr. Watchman. I can't give you the specific details on how 
they conducted the tests, but I'd be happy to supplement my 
answer for the record, if you'd like.
    Mr. Wicker. I really do need for you to do that.
    [The information follows:]

[Page 270--The official Committee record contains additional material here.]


    Mr. Wicker. Do you know if they were tests on laboratory 
animals, or were they epidemiological studies based on humans 
that were exposed to this substance? Do you know that?
    Mr. Watchman. I am not familiar with every study that has 
been done. But I believe most of the data is based on animal 
studies.

                    journal of occupational medicine

    Mr. Wicker. Are you familiar, Mr. Watchman, with the 
Journal of Occupational Medicine?
    Mr. Watchman. It's not a journal I subscribe to, sir, but I 
am familiar with it.
    Mr. Wicker. You are familiar with it?
    Mr. Watchman. Yes.
    Mr. Wicker. Do you have any question about its objectivity 
or the scholarly-ness, if you will, of the science in this 
publication?
    Mr. Watchman. I really couldn't pass judgment on that.
    Mr. Wicker. Okay. Well, will your agency be able to provide 
an answer for that question for the record?
    Mr. Watchman. Certainly.
    [The information follows:]

                    Journal of Occupational Medicine

    The Journal of Occupational Medicine (JOM) is a well-
respected and scholarly scientific journal. The journal 
maintains high standards of scientific objectivity. However, 
scientists who publish articles in the journal often publish 
articles and letters on the same scientific topic with 
differing scientific interpretations. This is part of the 
development of the scientific body of evidence on a topic. 
Therefore, the fact that any one article was published in this 
journal or any of the other well-respected and scholarly 
scientific journals does not make its results incontrovertible. 
In fact, the comparison of human and animal cancer potency 
estimates of methylene chloride that Hearne et al. published in 
JOM was followed several months later by a contrasting view 
published in the same journal. Other prestigious journals, 
including Risk Analysis, also published dissenting views on the 
Hearne et al. interpretation.

                 risk assessments on methylene chloride

    Mr. Wicker. I just want to point out to you, Mr. Watchman, 
two publications of the Journal of Occupational Medicine, one 
dated in March of 1987, the other three years later in March of 
1990. And a scholarly study in this publication of methylene 
chloride determines in both instances that based on 
epidemiological experience, that is, the experience of human 
beings, working with this substance, that the mortality 
projections from these laboratory rat and laboratory mice 
experiences are not consistent with what we found in working 
with humans.
    And in working with humans, there is no evidence that 
methylene chloride is harmful. And I just wonder if your agency 
considered the conclusions based on the March 1987 or the March 
1990 publication?
    Mr. Watchman. We did consider all the relevant studies that 
had been done. I think this is a noteworthy standard in that we 
actually did two risk assessments on this issue, the first one 
in early 1990 or so, and the second one more recently. We used 
a model called pharmacokinetics, which is designed to more 
accurately distinguish the differences between animals and 
humans, and take account of those differences more 
appropriately.
    Both of those risk assessments, though, did conclude that 
exposure to methylene chloride can cause cancer, and in a 
significant way that warrants OSHA's intervention.
    Mr. Wicker. I would simply point out to you two things. 
Number one, the agency, OSHA, claims to have based its 
pharmacokinetics on a Navy model. But are you aware that the 
Navy itself in a letter that has been made public, criticizes 
the use by OSHA of this particular pharmacokinetic study? Are 
you aware of that?
    Mr. Watchman. I am not aware of a Navy letter, but I'd be 
happy to take a look at it and get back to you.
    Mr. Wicker. I am going to ask you for the record to look at 
that and let me know what you think about the Navy's own 
criticism of a study done by OSHA.

[Page 273--The official Committee record contains additional material here.]


    Mr. Miller. We've been trying to hold the time----

                   fatalities from methylene chloride

    Mr. Wicker. Let me ask one question, and I'll ask it for 
the record. Can you supply any scientific information about 
human beings in the workplace actually being harmed by 
methylene chloride?
    Mr. Watchman. Yes, I can. We have evidence of a variety of 
instances in which workers have died as a result of over-
exposure to methylene chloride.
    Mr. Wicker. I've received a letter from you, Mr. Watchman, 
a very specific letter, on this issue. And you didn't mention 
it in the letter. So I really would appreciate your providing 
me with scientific data about human beings being harmed and 
some information to counter this scholarly study which says 
that compared with the general population there is no increase 
in overall mortality or deaths due to methylene chloride.

                      methylene chloride standard

    Mrs. Lowey. Thank you, Mr. Chairman, and I thank you, Mr. 
Watchman. Just following up on my good friend's statement, 
isn't it true, Mr. Watchman, just quickly, because we're 
leaving, that the FDA has banned this chemical from certain 
products? Isn't it also true that the auto industry has not 
used this chemical as a stripper? Could you comment on that?
    Mr. Watchman. I believe that's correct.
    Mrs. Lowey. So that I think if there's any other 
information my colleague requests, I think it's important that 
you state for the record, and perhaps because we're short of 
time, what we really wanted to know is, what are the benefits 
of this rule to workers in the industry? And could you repeat 
again for us, how long did OSHA take to study and to develop 
the methylene chloride standard?
    Mr. Watchman. We actually started this process in 1986, 
with the publication of an advanced notice of proposed 
rulemaking. We issued a proposed rule in 1991, held hearings in 
1992, reopened the record for additional data in 1994 and 1995, 
and then finally published the rule in January of 1997.
    The benefits of the rule are very significant. Weestimate 
that the rule will save approximately 34 lives a year from either 
cancer or acute over-exposure to methylene chloride.

                    davis-bacon and prevailing wages

    Mrs. Lowey. I thank you. I think if there's any other 
validation, I'm sure my colleague and I would both welcome it.
    I just also wanted to enter in the record for 
clarification, I believe Mr. Anderson said that only 27 percent 
of prevailing wages across the country are union wages.
    Mr. Anderson. That's correct.
    Mrs. Lowey. And again, I think we have to remember what 
Davis-Bacon is all about. We didn't want the massive purchasing 
from Government contracts in construction to push down the 
prevailing wages in a particular area. I would just like to 
enter in the record a quote from the Director of the 
Congressional Budget Office, Robert Reichauer, when he 
testified in 1993, ``that high wage rates do not necessarily 
increase costs if these differences in wage rates were offset 
by hiring more skilled and productive workers, no additional 
construction costs could result.''
    There was another study done which compared the average 
cost per mile for highway and bridge construction in high wage 
States to low wage States and found that the construction costs 
per mile were actually lower in the high wage States.
    So I think our colleagues agree that what we want to do is 
provide a decent wage for the workers. And I think it's very 
important that we keep all this information in mind. Because 
you don't want to drive costs up inappropriately for 
businesses. But then again, you want to be sure that the 
workers have a decent way of life, so they can support their 
families.

                       level of osha enforcement

    I'm aware of the concern, however, that OSHA has spent so 
much time on its reinvention initiative that its enforcement 
activities have diminished. Could you discuss that, Mr. 
Watchman? Do you think you can do a better job of enforcing 
important health and safety standards without compromising the 
successes of the so-called new OSHA?
    Mr. Watchman. It's an issue that's been raised a variety of 
times for us. What we're looking to do is expand our use of the 
other intervention tools and have a healthy mix of them without 
damaging our enforcement program. As I said earlier in my 
testimony, we need a strong and credible enforcement program, 
not just as an effective deterrent to protect workers, but also 
to guarantee the success of the voluntary programs. Many 
employers will choose not to participate in those without 
having a strong enforcement presence there, too.
    Last year, as you know, given the shutdowns and budget 
uncertainties we faced, we did see a significant decline in 
enforcement activity. We are seeing a rebound this year. So I'm 
confident we'll get back up to a good level of enforcement 
activity this year.

                       SMALL BUSINESS INITIATIVE

    Mrs. Lowey. Lastly, in your statement, you described the 
steps OSHA is taking to assist small businesses in protecting 
the health and safety of their workers. I was very impressed by 
your activities in that area. I happen to believe that most 
businesses really want to provide a safe working condition for 
their workers, and some of the small businesses really lack the 
information and the resources to do so. As a result of your 
small business efforts, can you say that more small business 
establishments have health and safety programs that didn't have 
them before, and can you comment on that?
    Mr. Watchman. Sure, yes. I think many more businesses, 
probably thousands, have safety and health programs that didn't 
have them before. We are emphasizing safety and health programs 
through our consultation programs that provide free visits, 
through Internet materials, through penalty reductions that 
provide incentives, through our cooperative programs like CCP 
and VPP, and other programs of the agency. So in many ways, we 
are advancing the cause of safety and health programs to make 
sure that employers are finding and fixing hazards on an 
ongoing basis.
    Mrs. Lowey. I thank you very much. And I think my time----
    Mr. Miller. Mr. Bonilla will be back shortly, and we will 
proceed with questioning. And we may have time for one short 
round after that.
    So we'll have a very short recess until a member returns to 
begin.
    [Recess.]
    Mr. Bonilla [assuming chair]. Mr. Miller is on his way back 
from the floor, and I think Mrs. Northup, as soon as she walks 
through the door, will probably resume questioning, Mr. 
Watchman.
    But I'd like to go ahead and ask you a couple more 
questions if I could, while we're waiting.
    Mr. Watchman. If you'd like to direct any questions to Mr. 
McAteer, I'm sure he'd be happy to pitch in here. He's kind of 
lonely down here. [Laughter.]
    Mr. Bonilla. You're doing a good job, Mr. Watchman.
    Mr. McAteer. I've had my opportunity in the past. 
[Laughter.]

                          ergonomics proposal

    Mr. Bonilla. Getting back, Mr. Watchman, to the ergonomics 
issue, I just want to emphasize again that we're all concerned 
about the repetitive stress injuries. We want to make sure that 
any rule that's implemented eventually is educational, 
cooperative and helpful and not simply punitive to some people 
who are trying to improve the situation in the workplace.
    One of the things I want to bring up, and this is something 
that in the interest of time, I'm just going to ask 
rhetorically. If you'd like to respond for the record, I would 
like you to do that.
    I took great exception to the comments you made in Inside 
OSHA, when asked ``Why do you think Congress relented and 
lifted the restrictions of developing a rule?'', you responded, 
``It prejudged OSHA's rulemaking before it had really begun.'' 
Your quote was, ``Most members of Congress are fair-minded.''
    Does that mean I am not fair-minded? Because I've tried to 
emphasize that in this entire process. Because I believe that 
any regulation must be based on accurate and sound science. 
Nothing could be more fair than that.
    Even Dr. Katz, whose name has been brought up here this 
morning, of NIAMS, stated, ``That we are not at the stage where 
we could promulgate certain suggestions in terms of what we 
should do to treat patients with repetitive motion disorders.'' 
You testified again a few weeks ago that more research is 
needed. Your statement feeds the public with misinformation 
about legitimate concerns that several members have on this 
issue.
    Do you really believe that concerned members reacting to a 
600 page document which raised concerns by employers because 
they were ignored during the stakeholder process, and that 
eliminated the grandfather clause which would have exempted 
work sites that had an existing ergonomics program was 
prejudging? If you'd like to briefly respond and then for the 
record----
    Mr. Watchman. Well, let me just say, I'm sorry for any 
impression that I was suggesting that someone was not fair-
minded. I know that you come to this issue with good 
intentions, both on behalf of the workers in your district and 
the businesses. And again, I would reiterate that I am happy to 
work with you closely on this issue and keep you apprised of 
where we are.
    I think it's worth pointing out, though, that we're not 
ready to issue a standard tomorrow or this year. We are looking 
at narrowing the scope of a proposal to target the hazards, or 
the places where the hazards are the worst, or where the 
solutions are known. As I said, we've learned a lot from the 
Chicago conference, from employers, about what solutions are 
out there that are effective.
    But we hope to move forward to work with stakeholders to 
reach a proposal that's based on consensus as much as possible. 
And again, it will be tailored to address the problem, where 
the problems are the worst and where the solutions are known. 
And a proposal would trigger the kind of very substantive, 
thorough, analytical debate that I think this issue warrants. 
In the context of a rulemaking, we would have extensive public 
hearings, opportunities for written comment, opportunities for 
witnesses and parties to cross examine one another. And in that 
setting, we'd be able to fully address the scientific, legal, 
policy and economic issues.
    Mr. Bonilla. Since Mrs. Northup has returned, I'm going to 
yield to her. But I have a couple more questions remaining on 
this issue.

                    PROPOSED BLACK LUNG REGULATIONS

    Mrs. Northup. Thank you.
    I have a number of questions. I'd like to start, Mr. 
Anderson, by talking to you about your new proposed regulations 
regarding black lung. First of all, I'd like to go on the 
record, and I think maybe I'm the only person on this 
subcommittee that has a considerable amount of coal mining that 
goes on in my district.
    Kentucky was one of the last States, and we were in 
emergency special session in December of this past year, 
redefining black lung. The session was called by the Governor, 
a governor that comes from one of the highest coal mining 
counties, a Democratic Governor elected with strong union 
support. But the workers compensation program, was going 
bankrupt in Kentucky because of the definitions of black lung, 
and because of the litigation procedures.
    The Federal Government strengthened its programs back in 
the 1970s. This was a tremendous step backwards. It not only 
brings many more people to the gate to apply for black lung 
benefits, it also makes the success of their cases much more 
likely. It adds to the litigation costs considerably. It allows 
thousands to reopen their cases, to re-litigate back as far as 
20 years ago. I think I understand 80,000 previously 
adjudicated claims would be allowed to be reopened.
    In the December session of the Kentucky General Assembly, 
we had the latest medical data. All the evidence is that the 
definitions that you have now are the correct definitions. 
We've gone to those in Kentucky. Every other State that has 
coal mining hasn't. If we want the black lung program, because 
of the declining coal mining industry, to literally just become 
a system that just provides welfare for anybody that ever was 
in the coal mining industry, let's just assess the entire 
country and put that system in place.
    But the coal mines in Kentucky and most of the eastern 
United States would close if these provisions were enacted. 
There's always been a member of Congress that's proposed some 
changes. They've failed every time. There's not support for 
these kinds of changes. Why would your agency even consider 
putting these types of changes in through a regulatory process?
    Mr. Anderson. Mrs. Northup, the purpose for the regulatory 
changes that are proposed for the black lung program is to 
streamline the adjudication process so that a smaller 
proportion of all of the cases wind up in the court of appeals, 
which as you know, is a very costly and timely part of the 
process.
    Mrs. Northup. Mr. Anderson, if you just make everybody 
lose, every case lose, the coal company loses, that is not a 
fair way to approach this.
    Mr. Anderson. Well, let me say that only 7.5 percent of all 
the claims are found meritorious in which case those who are 
making such claims are awarded black lung benefits.
    Mrs. Northup. But your changes would entirely change that. 
And it would allow for that adjudicated cost, it's allowing 
80,000 cases that have been taken care of over the last 20 
years to be reopened.
    Mr. Anderson. It's not clear what proportion of those cases 
would be found meritorious when reviewed again. But let me say, 
the estimate that our people have made, based on looking at all 
of the evidence, is that if the regulations are implemented, 
the proportion of successful claimants will be increased to 
something like 8 or 9 percent compared to 7.5 percent.
    Now, the costs of implementing the new regulations again, a 
very careful and comprehensive assessment of the process 
suggests that perhaps the cost would increase by about 4 cents 
per ton of coal mined. That 4 cents per ton of coal mined would 
amount in the aggregate to less than $30 million a year, in an 
industry whose total revenues are in excess of $20 billion a 
year.
    So we think that a very careful and conscientious 
examination of all of the evidence involved in the regulatory 
changes that have been proposed shows that there would be a 
rather small cost effect on the industry from implementing 
these new procedures.

           POTENTIAL COST OF PROPOSED BLACK LUNG REGULATIONS

    Mrs. Northup. Mr. Anderson, its hard to believe that you 
could come to that conclusion. First of all, you're spreading 
that burden across all coal companies, including the western 
coal companies that have a considerable amount of the market 
but that would be very likely unimpacted, because they're 
above-ground mining.
    So you are sharing a cost that would be very focused on the 
eastern United States. And you are applying those costs not to 
companies that are going to bear it, but to companies you 
perfectly well know are unlikely to have to share those costs. 
That's the first problem.
    Second thing is that you don't have to speculate what the 
difference in cost would be. You can go into Kentucky, that had 
previous definitions similar to the ones you're thinking of 
adopting, you can go to the Federal program that earlier in the 
1970s had similar definitions. And you can see what the 
increased usage, the increased costs, the increased awards are. 
And it's very easy to see that it practically bankrupted a 
number of states, practically bankrupted the Federal system, 
and that's why it was changed in 1996.
    But we don't need speculation about what the damages would 
be. Because we can look in the States that had previous similar 
definitions and see just how catastrophic it would be. And it 
wasn't just a case of the costs, the financial costs, that 
surely would sink. In Kentucky, the only reason the coal 
companies didn't sink is that the costs had to be shared up 
until the last few years by all business in Kentucky. And we 
had one business after another that crossed the borders to 
escape the workers compensation costs due to black lung.
    Now, the last thing I would mention, is what you intend to 
do is put this back on the coal companies, which in a sense 
would just completely put them out of business. So I ask you to 
go back, to tell me what the differences are between what 
you're proposing and what existed in Kentucky, so that it would 
give you any grounds for coming to a different conclusion that 
we had previously in Kentucky.
    Mr. Anderson. If you would permit us, Mrs. Northup, to go 
back and take a look at that and to respond to you for the 
record, on the Federal black lung program, which I think is 
different in many respects from State workers compensation 
programs that provide benefits to persons with black lung 
disease, and incidentally, the Federal program declares 
eligible only those who are totally disabled as a result of 
having the black lung disease.
    Mrs. Northup. But your definition is so broad that it's 
very similar to Kentucky, where it's easy to get so classified.
    Mr. Anderson. Yes.
    Mrs. Northup. And I want to point out something about, the 
people that have died over these 20 years. Your regulations 
would allow their widows to come back and reopen those claims. 
They're not even available physically to judge what the 
physical problems are.
    But like I said, this is a non-partisan sort of issue. This 
is a case of where we had a Democratic Governor from the coal 
mining area supported by labor who brought this to the Kentucky 
legislature and said it had to be changed.
    Mr. Anderson. We will respond to you with the full record.
    [The information follows:]

[Pages 280 - 281--The official Committee record contains additional material here.]


    Mr. Miller [resuming chair]. I think we'll have enough time 
for a short round.
    Ms. DeLauro.

                   reduced workers compensation costs

    Ms. DeLauro. Thank you very much. And I want to thank all 
of you today, particularly for the work that you do in helping 
to ensure the safety of the working men and women in this 
country. I truly do believe that at heart, most employers are 
concerned about the health and safety of their workers.
    On the other hand, we see a case, and I don't know whether 
we could classify these folks as fools or not, but the folks 
who barred the doors of the chicken factory in North Carolina, 
where we saw a number of people who lost their lives. We do 
have those instances. What you could do above all is to ensure 
the health and safety of working Americans.
    Let me go back for a second on the issue of savings on 
workers compensation. Lots of businesses that I speak with, 
they're always concerned about the costs of workers comp. That 
is an issue that always comes up. And in terms of the 
repetitive stress injuries, they wind up being twice as 
expensive as the average workers compensation claim.
    You talked about Texas Instruments. And if you could, just 
give me the numbers again. It went from, and I didn't remember 
the first number, I remember the second number to $11,000. What 
was the first one?
    Mr. Watchman. The first number was $250,000, and this was 
over a three year span.
    Ms. DeLauro. Over a three year span to $11,000. I think it 
would be, it would seem that businesses could save money in 
this area in terms of workers comp. Do you have examples other 
than Texas Instruments, and I would just ask you this for the 
record, that you could provide, is where businesses have saved 
money and could you include a more complete list for the 
record? Because it would seem to me that over that period of 
time, if you've got substantial savings in workers 
compensation, that the businesses, could more than cover the 
cost of employing these regulations.
    Can you provide that for us?
    Mr. Watchman. Yes, I'd be happy to provide a longer list 
for the record.
    Ms. DeLauro. That would be helpful.
    [The information follows:]

[Pages 283 - 284--The official Committee record contains additional material here.]


               scientific research on methylene chloride

    Ms. DeLauro. Let me just make a quick point, if I can, on 
the methylene chloride issue. I don't know the date of the 
study that was discussed. I understand it maybe was in the 
range of about eight to ten years old. This is a committee that 
deals very heavily with the National Institutes of Health and 
there, in that venue, we do take the body of research that is 
done, that's animal based, if you will, and we use that as 
transferrable to humans.
    If we do that, then we need to demonstrate some 
consistency, it would seem to me, on animal-based research, as 
it translates to humans. And if we deal with it with the NIH, 
then it would seem to met that in terms of this methylene 
chloride, that we can use that as well.
    In addition to which, we are always seeing changes in data. 
And if the study is eight or ten years old, we want to deal 
with changes and new information that is available that helps 
us again in the long term to look at what are our illness-
causing ingredients by way of methylene chloride.
    I just want to make one last point on this. It wasn't too 
long ago when we heard from the tobacco industry that tobacco 
was not addictive, and in fact there have been a number of 
studies more recently that in fact indicate that tobacco is 
addictive. We need to really be dealing with some of these 
products as they come along, and as the informationthat we 
receive and what science has developed becomes available we need to 
take and use this information for the health and safety of the people 
that we represent and that you're charged with trying to do something 
about.

         resource implications of compensatory time legislation

    The House recently passed a bill which would allow 
employers to offer comp time to hourly workers. We already know 
that there are a large number of overtime violations. And what 
I want to ask is, if a version of comp time is enacted, what 
are the resource implications for the Wage and Hour Division, 
and will we have to, as an appropriations committee, consider 
this in fiscal year 1998?
    Mr. Anderson. Well, thank you very much, Ms. DeLauro, for 
that question. The resource and, workload implications for the 
Wage and Hour Division would be substantial, as might be 
expected, with any change in the law which is as fundamental as 
comp time would be for the Fair Labor Standards Act. The most 
fundamental principle of the Fair Labor Standards Act, of 
course, is the 40-hour week, after which a premium on hours 
worked would have to be paid.
    And so if we change that in any way, there will be a huge 
number of questions from both employers and workers on exactly 
what that means, how it is carried out, questions having to do 
with permissible range of conduct for employers in perhaps 
requiring workers to take comp time as compared with overtime 
pay.
    We could imagine that there would be literally thousands of 
calls to come into the district offices, the regional offices 
of the Wage and Hour Division all over the country, as workers 
and employers would attempt to understand exactly what this 
means, and also as workers would attempt to be protected 
against the possible abuse by employers in taking advantage of 
the law.
    That is why the President has stated, in his view on comp 
time, that it is very important to preserve employee choice, 
and to have in any comp time bill adequate protection for 
employees. There are some workers who probably would prefer 
overtime pay to comp time. So the resource implications for the 
Wage and Hour Division would be considerable.
    We did not ask for any additional resources for fiscal year 
1998, because the budget process prohibits us from anticipating 
the actions of Congress in passing legislation. But obviously, 
if a comp time bill passes and if it's signed by the President, 
I think it's reasonable to expect that we would come back in 
the next budget cycle with a request for additional funds to 
handle the increased workload.
    Ms. DeLauro. Let me say this to you. I'm a supporter of 
flexible time. I think that is what working men and women in 
this country are looking for.
    On the other hand, I think we can, we can do this through 
expansion of the FMLA, etc. But can you provide for us for the 
record, just something that talks about what kind of resource 
implications it will have for Wage and Hour, and what that 
means for you and what you have to do, and what implications 
that has for this committee?
    Mr. Anderson. We will provide that.
    [The information follows:]

                Cost Estimates of Comp Time Legislation

    We are currently reviewing the various compensation time 
proposals in order to estimate the resources requirements 
should a compensation bill be passed. Our estimates will be 
forwarded as soon as they are completed.

                        perception of collusion

    Mr. Miller. We're going to go around for another short 
round.
    Let me to back to the question that I ended up, I was 
talking about the Amish and the image and credibility that the 
Federal Government, abuse of power in a way and big Federal 
Government beating up on the Amish and that's to me an 
embarrassment. You're more familiar with the Amish section of 
the country than I am.
    But however, whatever the details are, it doesn't look 
good.
    The other area, continuing along that area of abuse of 
power and the credibility, which has been affected by the 
Department of Labor, is the collusion between Federal agencies 
and organized labor. About two years ago, a Mr. Sawyer, who was 
terminated, properly, of course, was the regional director out 
in California and was working basically in support of organized 
labor activities, abusing Wage and Hour Administration type 
guidelines.
    Are you familiar with the case? It was the Service 
International Employees Union, and he was the regional director 
out in California.
    Mr. Anderson. I am familiar with that.
    Mr. Miller. And this gentleman was properly terminated. The 
question I have is, what steps have been taken to avoid this 
abuse of power that took place there that it does not happen 
again? Wage and Hour is the one that was being abused, right?
    Mr. Anderson. It is. The Wage and Hour Division is a part 
of the Employment Standards Administration. I would say that 
the incident involving Mr. Sawyer in California was a most 
unusual, unique event. And it was dealt with very swiftly and 
very firmly by Secretary Reich. Mr. Sawyer was terminated.
    Now, in the wake of that incident, at the request of this 
Committee the Inspector General conducted a comprehensive, 
broad-based review of the system that is used by the Wage and 
Hour Division to identify companies for investigations and the 
process that is used in managing those investigations. And we 
are very pleased that the Inspector General concluded that the 
Wage and Hour Division staff conducts its business at the 
highest level of professionalism. And there was no evidence 
whatever of any collusion or undue influence brought to bear by 
organized labor, or anyone else for that matter, in the pursuit 
of the Wage and Hour Division staff responsibilities in 
enforcing the Fair Labor Standards Act.
    So we were very pleased that in fact we have a clean bill 
of health from the Inspector General based on that review.
    Mr. Miller. We probably have a copy of that report. If not, 
can we get a copy of it?
    Because there was obviously a real abuse of Federal 
powerthere, and the DOL did properly respond to that.

               QUALITY MANAGEMENT POLICY IN WAGE AND HOUR

    With respect to Wage and Hour, explain to me a little bit 
what quality management, mainly it's been just responding to 
complaints. Now the idea is to be more proactive, I guess, with 
the quality management policy under Wage and Hour, and how you 
avoid the potential abuse of power with that and collusion with 
organized labor. There is a real perception out there that 
there is collusion. And I know you're going to say it's not. 
But how does quality management not, from what I understand of 
it, it's not going to be abused?
    Mr. Anderson. Well, I regret that perception, because it is 
totally wrong. Quality management means that in the pursuit of 
the enforcement function, an effort is made not only to 
identify those who are violating the law, those who are not in 
compliance with the law, but also to increase the knowledge of 
those who are affected by law as to what their obligations and 
responsibilities are.
    So there is a heavy emphasis on customer service, 
compliance assistance, technical assistance to those who are 
affected by the laws which the Wage and Hour Division 
administers. And a broad range of activities are undertaken 
regularly through consultation with businesses that are 
affected by the Fair Labor Standards Act and the other laws. In 
the development of regulations, that are in pursuit of the 
implementation of the laws, there is regular consultation 
through the notice and comment process. There are frequent 
communications with people who are affected by these laws to be 
sure that they achieve their intended purpose.
    And in the consultation process, of course there is 
consultation with representatives of organized labor, as well 
as representatives of business. I think there is an even-handed 
approach that is taken, and not one in which there is undue 
influence contributed by or exercised by any side or the other.

                   targeting the health care industry

    Mr. Miller. Well, let me just conclude with one final 
question. For example, organized labor has targeted the health 
care industry. Are you targeting the health care industry? Do 
they want to increase their organizational efforts and organize 
in the health care industry? The question and concern is, are 
you targeting them at the same time to use a multi-pronged 
effect to help organized labor. Would you say that's not true, 
or make a statement for the record?
    Mr. Anderson. In pursuit of our new enforcement strategy 
which was developed in 1994, there is an emphasis on targeting 
those industries that have the worst offenders, that have the 
most vulnerable workers, industries where there is reason to 
believe that there is the highest degree of non-compliance with 
the law. These are essentially low-wage industries.
    As you might know, we have had a very aggressive and very 
successful effort underway in the garment industry. The garment 
industry strategy focused on education, enforcement, and 
recognition. Given the success of that strategy, we now have 
begun to apply those same techniques in other industries, among 
which will be the nursing care industry. Not the health care 
industry in broad relief, but the nursing care industry.
    And that is an attempt to focus in on an industry where 
there are large numbers of vulnerable workers who we have 
reason to believe are not benefiting from the protection 
afforded by the law for their work life.
    Mr. Miller. My time is up. But it sounds almost like a 
collusion. Organized labor says, we're going to target the 
nursing care industry, Wage and Hour, we're going to target the 
health care industry. To me, it's coincidence or what have you, 
that concerns me. If we have time, I would like to pursue that 
and have better justification for that. That bothers me a lot.
    Mr. Bonilla.

                        methylene chloride rule

    Mr. Bonilla. I'd like to follow up on my colleague Ms. 
DeLauro's question about the savings in workers comp. As she 
discussed, some corporations are already realizing savings and 
I think it's very important. I'm glad she asked for the record 
for that information. Because these savings and the improvement 
in worker safety that they're realizing already has happened 
without a government regulation being promulgated.
    And I think that's significant to note how much improvement 
is already being made due to the initiatives of employee around 
the country. So I'm glad that she asked for the information.
    I'd also like to point out, while I ran to vote, there was 
a question asked about the promulgation of the methylene 
chloride rule and how long it took from beginning to end to 
implement it. I believe the answer was 11 years, is that 
correct?
    Mr. Watchman. I think that's right.

                    proposed nas study of ergonomics

    Mr. Bonilla. In light of that, I'm a little puzzled as to 
why a NAS study that would only take 20 months would be such a 
horrible thing if we're looking at a comparison between one 
rule and the other; especially when you consider that 
ergonomics is so vast and expansive versus what a specific 
chemical could do to a person.
    Is that unreasonable, to think that 20 months is not a long 
time?
    Mr. Watchman. I think there's a great danger in saying that 
we should not work on this issue while any study is taking 
place. We do welcome new studies and new evaluation of existing 
studies. As I said, NIOSH is already conducting a very 
comprehensive survey, and we expect to see the results of that 
quite shortly.
    But we already know that there is a significant problem out 
there that's affecting hundreds of thousands of workers every 
year, and that there are many, many studies that link exposure 
to workplace factors like repetitive motion to musculoskeletal 
disorders.
    I think it would also probably have a chilling effect on 
our ability to move the debate forward, were we limited in what 
we could do pending the outcome of a study by NAS. Certainly it 
would be much more difficult for us to bring all of the 
affected parties to the table to try to develop consensus about 
how to move forward on this issue if a rider were imposed.
    Ultimately, there is clearly a body of scientific knowledge 
that we have that is a much stronger body of knowledge than 
we've had for many other standards we've issued that have 
adequately protected workers. The proper place to resolve the 
many issues that exist, scientific as well as legal, and policy 
and economic issues, is in the context of a rulemaking, where 
all of the different parties can be heard.

             estimated number of musculoskeletal disorders

    Mr. Bonilla. You just referred to hundreds of thousands of 
workers that are being affected by this. Do you agree with BLS' 
numbers of approximately 300,000 workers suffering repetitive 
stress injuries? Is that a figure that you agree with?
    Mr. Watchman. I know they have reported about 300,000 
repetitive stress injuries. I personally couldn't testify that 
it's an accurate figure. I believe it is. Their methodology is 
pretty solid, they've used it for many years. I would say 
that's a rough estimate, but it's probably close.
    My guess is, if anything, it's under-reported. But there 
are a number of problems with the BLS data. And there are 
other----
    Mr. Bonilla. Based on your expertise as the Acting Director 
of OSHA, your best judgment is that 300,000? This is very 
important, because these figures are thrown around loosely, and 
I'm trying to nail it down.
    Mr. Watchman. There are other measures of different types 
of musculoskeletal disorders. Roughly 2.7 million claims are 
awarded under workers compensation every year for 
musculoskeletal disorders. We also know there are hundreds of 
thousands of back injuries that result from work experiences 
that represent musculoskeletal disorders as well.
    Most people seem to think that we're talking about roughly 
a million workers that are affected by this problem every year. 
I use the number hundreds of thousands, because I think that no 
matter what measure you use, we are talking about hundreds of 
thousands of workers.
    Mr. Bonilla. You told Inside OSHA in its March 24th edition 
that RSIs affect millions of workers. So what are we talking 
about, millions, or are we talking about a couple hundred 
thousand? Again, because these numbers, when you throw them out 
there and you talk about millions being affected, that has an 
impact on people. It starts to reach to their emotions, and I 
know that's the goal sometimes, to reach someone's emotions, to 
overrule their brains.
    But, we've got to use our head in promulgating the rules. I 
think we're making a point here that there is not accurate 
statistical data that we're basing any of this whole issue on.
    Mr. Watchman. I think the data is fairly reliable. But the 
different sets of data are measuring different things. And 
that's what produces different numbers. But ultimately, if you 
look at all of those measures, I think the common thread is 
that this is clearly the number one workplace health problem in 
the country today, and one that we have a statutory mandate to 
address.
    Mr. Bonilla. Just to make a final point on how we're all 
over the place on these numbers, BLS says 300,000, on the AFL-
CIO's web page, it says 700,000, again in the Inside OSHA 
edition of March 25th, you say millions. So Mr. Watchman, which 
one is right? I think you're dancing all over the place here. 
There's a lot of latitude and it's somewhat abstract in how 
these things are put together. But that is a pretty big 
discrepancy.
    Mr. Watchman. Well, let me try to clarify. The BLS number 
of 300,000 represents repetitive motion injuries. They also 
report over 300,000 back injuries. I think if you add those 
groups together of different types of musculoskeletal 
disorders, you come up with the AFL number of 700,000. If you 
add the different numbers of workers that are being injured 
because of exposure to repetitive motion and awkward posture, 
and other workplace factors, it is millions of workers that 
have been affected by these problems, and have been awarded 
workers compensation claims.
    It is also millions of workers that will be affected in the 
future unless we move quickly to develop protections for them.
    Mr. Bonilla. So it's like, pick a number, any number, 
depending on what kind of point you're trying to make. I think 
that's pretty obvious, with the latitude that we're referring 
to here.
    I don't want to dwell on that any more. I just wanted to 
make a point on that.
    Thank you very much, Mr. Watchman.
    Mr. Miller. We'll go to Mr. Wicker next.

                effects of methylene chloride on workers

    Mr. Wicker. Thank you, Mr. Chairman.
    Mr. Watchman, let me get back to methylene chloride. During 
my last series of questions, I asked you to cite for the record 
specific examples of human beings getting cancer or heart 
disease or being harmed by methylene chloride and you said you 
would do that.
    Let me just be specific, that I'm not talking about when 
they received an overdose or when something went wrong with the 
chemical, but rather, some scientific information about when 
methylene chloride is used as it is intended to be used in the 
workplace, and persons were harmed. I wanted to specifically 
ask you to submit that kind of information for the record.
    Mr. Watchman. I'd be happy to provide information about the 
different ways that workers are harmed by exposure to methylene 
chloride.

[Page 292--The official Committee record contains additional material here.]


             economic impact analysis on methylene chloride

    Mr. Wicker. Very good.
    Let me ask about your compliance with several 
Congressionally mandated laws with regard to methylene 
chloride. Congress has developed laws that are designed to 
ensure that small, family-owned businesses have a voice before 
regulations are promulgated. The Regulatory Flexibility Act 
requires OSHA to perform an economic impact analysis of small 
businesses before a proposed regulation.
    In addition, OSHA must submit with the final regulation 
alternatives to the proposed regulation. And finally, the 
Regulatory Flexibility Act requires OSHA to consult with the 
Small Business Administration before using an alternative 
definition for small businesses.
    So let me take these one by one. Did OSHA perform an 
economic impact analysis on small businesses with regard to the 
proposed rule?
    Mr. Watchman. Yes, we did.
    Mr. Wicker. And I would appreciate your providing for the 
record how this was conducted, and how that complies with the 
regulations.
    [The information follows:]

[Page 294--The official Committee record contains additional material here.]


                alternatives to methylene chloride rule

    Mr. Wicker. With regard to alternatives to the proposed 
rule, is it your understanding that OSHA must submit with the 
final regulation alternatives to the proposed rule?
    Mr. Watchman. I believe the statute requires us to consider 
alternatives that would provide the same level of protection as 
the standard we're considering, but with less burden on 
business. We did consider alternatives as we do for other 
rules. Typically, we may consider whether different types of 
engineering controls are appropriate, or personal protective 
equipment, or other measures that will adequately protect 
workers.
    We did consider different alternatives in this instance as 
well, and took a number of steps in the final rule to address 
particular issues with regard to small business. Just to give 
you a couple of examples, we lengthened the compliance 
deadlines under the rule, for businesses of under 20 to three 
years to meet the engineering control requirements. We also 
reduced requirements for training, records, the use of 
respirators and medical exams, and we dropped the requirements 
for a written plan and for laboratory tests, in an effort to 
make sure that the rule was the least burdensome for a business 
as possible, while still providing the same level of protection 
to workers.
    Mr. Wicker. Your answer was two-pronged. Let me go back to 
the alternative to the rule. You said you consideredother 
alternatives. Is it your understanding that alternatives must be 
submitted in the regulation, or you could just say that you've 
considered other alternatives?
    Mr. Watchman. I believe the statute requires us to consider 
alternatives, and if we choose not to adopt them, we need to 
explain in our discussion of the rule what we considered and 
what we concluded about those alternatives.
    Mr. Wicker. Did you submit, along with the rules, other 
alternatives? Did you specifically do that?
    Mr. Watchman. I'm not sure what you mean by submit. Maybe 
if you could clarify your question.
    Mr. Wicker. I guess I would ask what your understanding of 
the rule is. You would just consider other possibilities. My 
understanding is that there must a formal submission of other 
alternatives to the rule and so I would simply ask, did you 
formally submit along with the regulations other alternatives?
    Mr. Watchman. I believe the statute requires us to consider 
other alternatives that small business owners and 
representatives have submitted to OSHA. When we issue the final 
rule, that reflects our consideration of the proposed rule, as 
well as any alternatives that have been submitted to OSHA.
    And typically, we will review those alternatives, determine 
if they are economically and technologically feasible, 
determine if they provide an adequate level of protection to 
workers. And if they do, then we will include them in the 
standard.
    In this case, as I mentioned, we adopted some very specific 
things that had been suggested to us, that simplified the 
standard for the purposes of small business. So in that sense, 
yes, some of the alternatives that were suggested were 
incorporated into the rule.
    Mr. Wicker. Thank you.
    Mr. Miller. Ms. DeLauro.

                 effect of rider on ergonomics activity

    Ms. DeLauro. Just to go back on some of the statistics and 
the numbers and the data gathering, wouldn't the Bonilla 
amendment that was deleted on the House floor last year have 
prohibited even the collection of data on repetitive stress in 
the industry? And as I understand it, the amendment had been in 
effect for about a year, and did that have any impact on data 
collection?
    Mr. Watchman. The amendment that was offered last year, I 
believe did preclude us from gathering data on the incidence of 
musculoskeletal disorders. But the rider that had been in 
effect for some time did not have that restriction in it.
    Ms. DeLauro. So you've been able to proceed. Was there any 
effect in that amendment being in place for a year on your 
ability to collect data?
    Mr. Watchman. Well, it had a very significant impact on our 
ability to move forward to try to protect workers on this 
issue. It precluded us from issuing guidelines or a proposed 
standard or a final rule.
    Ms. DeLauro. Just a comment, whether it's RSI or methylene 
chloride, in terms of numbers, as someone who is a cancer 
survivor, when you're talking about 200,000, 300,000, 700,000, 
it would seem to me that what we need to try to do is prevent 
people from unnecessarily dying as a result of some sort of a 
product or a specific injury. It seems to me that the numbers, 
if 200,000 is an estimate, that's a big number of people in 
terms of looking at how we do try to protect people who are on 
the job.

                      garment industry sweat shops

    Let me ask you a question that has to do with sweat shops. 
I have a mother who worked in the sweat shops in the garment 
industry. And I used to go there after school when I was a kid 
to meet her there. I didn't discover until later in life that 
she had method to her madness, as I used to meet her there 
after school, and it wasn't a nice place. Lots of noise and 
lots of dirt. And I watched those women bending their backs 
over their sewing machines. And I didn't want to be there as a 
kid.
    She said to me, take the opportunity for education so that 
you don't have to do this. My mother worked in those sweat 
shops.
    I want to applaud the crackdown on sweat shops. And I 
wanted to ask you, there was an article in the New York Times 
today that talked about apparel industry group moves and sweat 
shops. This may be within the national companies, or what 
they're doing, but I don't know if it's both national and 
international. What is your role in enforcing this effort and 
where do we stand now in terms of the crackdown on abuses in 
the sweat shop industry?
    Mr. Anderson. Well, as you know, we've had a major 
initiative underway in the Department of Labor to reduce the 
abuse of workers in sweat shops, in fact, to see that they are 
eliminated altogether. That's our so-called No Sweat 
initiative. We've had a good deal of success with that. Over 
the period of this Administration we've attained $10.4 million 
in back pay for 34,000 workers in the garment sweatshops.
    We have also been successful in getting 75 manufacturers to 
sign compliance monitoring agreements in which they will use 
their own resources in initiatives to monitor the labor 
standards compliance of their cutting and sewing shops, which 
is where the problem really is concentrated.
    And in July of last year, the Department of Labor sponsored 
a fashion forum at Marymount University in Arlington, and for 
the first time, brought together all segments of the industry; 
the manufacturers, the retailers, the organized labor in the 
industry and consumer advocates. Coming out of that experience 
was the initiative of the White House in organizing the apparel 
industry partnership, which you read about in the newspaper 
today.
    We are very pleased that the partnership is near an 
agreement on a long-term solution to this problem. The 
Department of Labor has been offering assistance to the 
partnership over the period of time that they have been 
meeting. And we expect to continue being of some assistance to 
the degree that we can in the effort that they currently have 
underway.
    I might also add that as a result of the initiative that we 
undertook in the garment industry, the No Sweat campaign 
received a major award Innovations in Government, which is a 
combined effort of the Ford Foundation and the JFK School of 
Government at Harvard University. The Department of Labor, in 
fact, as a result of receiving that award, received $100,000 as 
a prize to help further the effort to bring information 
available to the public in this area.
    What's important is that the public understand what is 
happening in the places where their garments are produced. We 
don't believe that the American people want to buy garments 
that are made under sweatshop conditions. Every study that's 
ever been conducted of this shows that this is so. In fact, 
studies show that the American people areprepared to pay more 
if they can be assured that garments are made under adequate labor 
conditions.
    So we will continue to pursue this initiative. We requested 
funding and the Congress very kindly provided additional 
funding for fiscal year 1997, to allow us to move forward in 
this area and do even more than we did in the past
    Ms. DeLauro. Thank you. Thank you very much, Mr. Chairman.
    Mr. Miller. Ms. Northup.

                          u.s. postal service

    Mrs. Northup. First of all, do you all, does OSHA cover the 
United States Postal Service?
    Mr. Watchman. Yes, we do. As a Federal agency, they need to 
have a safety and health program.
    Mrs. Northup. Do they comply with all of OSHA's 
regulations, the same ones the private sector does?
    Mr. Watchman. They do apply, yes.

             prevailing wage rates and school construction

    Mrs. Northup. Okay. I'd like to go to the school 
construction issue. First of all, I noticed that two people 
implied or said that there actually was no increased cost from 
prevailing wage rates, Davis-Bacon rates. But actually, I have 
a GAO study that says that really isn't true.
    And in fact, in Kentucky, we just applied prevailing wage 
rates last year for the first time on school construction. So 
far, it has cost us an increase of $35 million this year in 
constructing schools in Kentucky. One county that had intended 
to build four schools, I understand, has had to cut back to 
three schools.
    So the prevailing wage rates laws that have now applied to 
schools have cut back in the amount of construction that we can 
do.
    And of course, if it were true that prevailing wage rates 
do not raise the cost of construction, that you've regained 
that through efficiency and everything, then the open bidding 
process would award these contracts to whomever competed, isn't 
that true?
    Mr. Anderson. Well, I think we need to look at the report 
that you referred to, Mrs. Northup, and say the following 
thing. The cost of production is a result of a number of 
factors that go into the production process, one of which is 
the cost of labor.
    Mrs. Northup. Right.
    Mr. Anderson. But the cost of labor is really based upon 
the productivity of that labor. Higher wages----
    Mrs. Northup. So in that case, a company, a contractor 
that's bidding on a project would say, I may have to pay higher 
wages, but I'll need fewer people, so I can beat out the 
competition, that's going to have to have more people but pay 
them less?
    Mr. Anderson. When you look at the prevailing wage process, 
the intention is to set the prevailing wage at the level at 
which most workers in that community, in that occupation, are 
paid.
    Mrs. Northup. Well, I know that's what the goal is. But the 
point is, does it cost us money or not? That's what we're 
talking about.
    Mr. Anderson. Well, it costs money. But if you ask, is 
production cost higher under prevailing wage conditions than it 
would be in the absence of prevailing wage conditions, the 
answer to the question depends upon the skill level, which 
means the productivity of the labor employed. Higher skilled 
labor has to be paid more.
    Now, there was a study conducted by Professor Peter 
Phillips from the University of Utah.
    Mrs. Northup. Well, excuse me, before we go on, I am very 
familiar with that study which was commissioned by the AFL-CIO, 
they paid $600 for it, and they got the answers they want. 
That's the only study that came to that conclusion. So I think 
there's real question whether that study has any validity.
    Mr. Anderson. There are the data on the impact of 
prevailing wages--let me say that I am a professional labor 
economist who, for good or for ill, has looked at wage 
determinations and questions of cost based upon labor over many 
years. And I can tell you that as Professor Reichauer, the 
former head of CBO, indicated in his statement that was 
reported here by Ms. DeLauro, there is no evidence to suggest 
that higher wages necessarily produce a higher cost of 
production.

                          peer review process

    Mrs. Northup. Mr. Anderson, we do not need that law. 
Because we'll just let everybody in the free market bid, and 
those people that have higher wage costs will be able to 
compete because they will have less labor needed and the 
Government can prove once and for all, there's no increased 
cost in prevailing wage, because those people that pay the 
higher rates will win.
    Let me ask you one other thing. We have talked about 
science being the standard. I'm reminded of that, because in 
Kentucky, when I was in the state legislature, I found out that 
scientists can prove anything. In fact, we had a case at the 
University of Kentucky, we had a tobacco and health research 
center that could prove that tobacco did not cause any 
diseases. And that it wasn't addictive, something I railed 
against all the time, that we spent tax dollars trying to prove 
anything so ridiculous.
    If there had been a peer review process of that science, of 
course, it would not have withstood the scrutiny. So I ask you, 
if you use a peer review process for the science that you 
quote, like that study out in the University of Utah, to make 
sure that we're not looking at scam scientific studies, and so 
that they bear up under the general scrutiny that most science 
has to in order to be published and quoted.
    Mr. Anderson. Well, the study that was conducted by 
Professor Phillips at the University of Utah was not used in 
any way to determine prevailing wages under the responsibility 
of the Department.
    Mrs. Northup. You just quoted it.
    Mr. Anderson. Well, I started to quote it on the question 
that you raised, Mrs. Northup, concerning whether higher wages 
necessarily mean higher costs of production. And there is a 
series of studies available----
    Mrs. Northup. I'm asking----
    Mr. Anderson [continuing]. Which fail to come to the 
conclusion that higher wages necessarily mean higher cost of 
production.
    Mrs. Northup. I'm asking you, if you, as you quote whether 
it's methylene chloride, whether it's ergonomics, whether it's 
mine safety, whether or not the studies you quote go through a 
peer review process before you accept them as viable and 
verifiable? Do you have a peer review process to look at the 
scientific studies upon which you base your decisions?
    Mr. Anderson. I'd like to separate out your question as it 
relates to the Davis-Bacon Act, and prevailing wages versus 
OSHA. Because----
    Mrs. Northup. But----
    Mr. Anderson [continuing]. If we can look only at the 
question of theDavis-Bacon Act, and the requirement under 
Davis-Bacon for the Wage and Hour Division to determine what the 
prevailing wage is in the local community, so that workers on federally 
assisted construction projects are paid wages comparable to what is 
being paid to most workers performing that work in that community, we 
don't rely on studies by academicians, no matter how learned or how 
much peer review. We rely on methods of collecting the data and 
analyzing it and publishing the rates.

                    peer reviews in osha rulemaking

    Mrs. Northup. Okay, let me ask the gentleman representing 
OSHA. Could you tell me whether you use peer review?
    Mr. Watchman. We actually have, I think, one of the best, 
most exhaustive, most thorough rulemaking processes in the 
Federal Government. In this process, we have extensive public 
hearings on every standard we're developing, that involve 
written comments and opportunities for cross examination of one 
party by another in the context of the hearings.
    Mrs. Northup. But you do not require a peer review process 
with scientific studies that are looked at?
    Mr. Watchman. In many cases, we do. Not in every case. In 
many cases, the data is universally accepted, there's really no 
debate there. In other cases, it's appropriate to have 
scientific peers reviewing the data to give us their thoughts. 
Typically, that takes place in the context of the rulemaking 
proceeding. We also sometimes do separate peer reviews of 
particular issues where that seems most appropriate.
    Mrs. Northup. I would think that would be regular, 
standard. And I know that I've cut you all off, but I'm 
watching him look at the clock.

                targeting industries for investigations

    Mr. Miller. We have another short round.
    Let me, by the way, you mentioned Davis-Bacon and Dr. 
Reischauer. If I'm not mistaken, CBO scored, if you eliminated 
Davis-Bacon, we'd save the Federal Government a billion dollars 
a year. So to take a quote out of context, actually when he was 
head of CBO, it was scored at a savings of about a billion 
dollars a year. That obviously tells us we're paying more than 
the going rate.
    Let me go back to the issue I was talking about right 
before my time ran out, and that was the issue of quality 
management and collusion between organized labor, which has me 
concerned that we're using, again, abuse of power to support 
organized labor. And I recognize the Democrats won the election 
and Mr. Clinton has a real obligation to organized labor.
    But I get concerned that you are targeting, because quality 
management in effect, proactive, and targeting industries and 
specific businesses without necessarily complaints? That's the 
way it operates, is my understanding.
    Mr. Anderson. Quality management has to do with the way the 
work is done, not with the targeting of any specific industry.
    Mr. Miller. But you've changed policy. It used to be that 
if someone complained, XYZ Widget Company, you'd go out and 
check that out. Now, you're going out in advance, like you just 
mentioned, you're going to target the nursing care industry, is 
that right?
    Mr. Anderson. We are concentrating our limited resources on 
those industries where there is the largest number of low wage 
workers and where violations are most likely, in an effort to 
try to see that there is maximum compliance with the law.
    Mr. Miller. You mentioned the garment industry. How do we 
know, using all the different agencies under the Employment 
Standards Administration, that you're not using your office to, 
in effect, pressure companies, whether it's hospitals or 
nursing homes or what have you to become organized? It sounds 
just like this Mr. Sawyer problem out in California.
    I have concerns. Do you have a list of industries that you 
are targeting besides garment and health care?
    Mr. Anderson. There is a set of industries where the major 
emphasis of our enforcement efforts will be directed, and they 
tend to be the low wage industries.
    Mr. Miller. Can you give me a copy of that list?
    Mr. Anderson. We can provide a copy of that list. They are, 
the garment industry, agriculture, janitorial services, 
protective services----
    Mr. Miller. And do you target individual companies within 
that, or just the whole industry?
    Mr. Anderson. Individual companies are not targeted. It is 
the industry, and let me say, there are two ways that 
investigations can be undertaken. One is an investigation in 
response to a complaint. The second is an investigation that is 
initiated by the Wage and Hour staff in the field, based on the 
expectation that there is a high level of non-compliance and 
violation of the law in that industry. For example, 
restaurants. There are investigations of restaurants from time 
to time in various communities around the country which are 
initiated because we have reason to believe that in that 
industry in a particular location, there might be a high level 
of violation of payment of the minimum wage and overtime.
    But specifically companies are not targeted because they're 
companies, and there's no relationship, that I can see, between 
the enforcement effort and any efforts on the part of organized 
labor to increase their membership.
    Mr. Miller. That doesn't--I can understand responding to a 
complaint or a problem. That's what you're supposed to do. But 
now you're saying, all right, we're going to go after the 
restaurant industry, because maybe organized labor says, we're 
going to organize them. They've come out and said, organized 
labor's going after the nursing care industry. Now you're 
saying you're going after them, too. That to me sounds, 
coincidental maybe to you.
    But it creates that suspicion of problem, just like going 
after the poor old Amish in Pennsylvania. That's abuse of 
power, and that's a problem that we have, I think, with the 
Federal Government.
    Mr. Anderson. I think that if I might simply respond to 
that, when an enforcement organization has very limited 
resources, and the goal is to achieve the highest level of 
compliance possible, which incidentally is the goal of all the 
enforcement agencies now under the GPRA, where we have to 
specify what our mission is within the agencies, our goals and 
objectives, we have to quantify, meaning count, the attainment 
of those goals. We have to have something to measure if we're 
going to count how successful we are in achieving our goals.
    What that means is that the funds that are available can 
better be used in a more efficient and effective way if we 
concentrate those funds on those areas where there is reason to 
believe the problem is most severe. It wouldn't make any sense 
to simply use a scatter shot, random approach to an enforcement 
effort if our goal is to achieve maximumcompliance in the 
application of the law to protect low wage workers.
    That is why we concentrate these limited resources, and we 
would love to have far more resources, of course, on those 
industries where the problem is most severe.
    Mr. Miller. There is a perception problem out there. How 
much does it cost to run Davis-Bacon? Is there a total cost for 
Davis-Bacon? Let me have that number some time.
    Mr. Anderson. It's $9.4 million. We can provide more 
details on that.
    [The information follows:]

              Administrative Costs of Davis-Bacon--FY 1996

    Following are the estimated costs for Davis-Bacon 
activities in FY 1996:

                                                                Millions
Total estimated FY 1996 costs.....................................  $9.4
    Wage survey/determination costs...............................   5.2
    Enforcement costs.............................................   4.2

    Mr. Miller. One final round of questions, then we'll 
conclude our session.
    Mr. Wicker.

                laboratory studies on methylene chloride

    Mr. Wicker. Thank you, Mr. Chairman. And just to ask a few 
more questions to my friend, Mr. Watchman, about methylene 
chloride. I have to respond to a couple of comments that my 
colleague Ms. DeLauro made before she left, for the benefit of 
those who are still in the room. She was mentioning, in the 
context of all these questions, hundreds of thousands of lives 
and certainly we're interested in saving hundreds of thousands 
of lives.
    But I wanted to point out that the debate with regard to 
methylene chloride, Mr. Chairman, is that Mr. Watchman and his 
agency have concluded that their regulation will save some 34 
lives per year. I disagree that the regulation will save 34 
lives a year, or any lives. But I think that it will end up 
costing thousands and thousands of jobs across America, and 
particularly in small business.
    So that's the figure we're debating over with regard to 
methylene chloride.
    Let me just ask you about laboratory mice and laboratory 
rats. It is my understanding that the toxicologic tests on 
laboratory mice did result in giving the mice enough methylene 
chloride to cause cancer in the mice. But with regard to 
laboratory rats, they never got cancer, no matter how much 
methylene chloride you gave them.
    Is that accurate or not?
    Mr. Watchman. I don't pretend to be an expert in the field 
of pharmacokinetics or animal testing, sir.
    Mr. Wicker. Well, you know, neither am I, and that's a real 
problem that we all have. [Laughter.]
    Mr. Wicker. I'm a layman, and I'm trying to defend the 
thousands of jobs that may be lost.
    Mr. Watchman. I'm not sure that's an accurate 
characterization of the findings. But I would be happy to look 
into it and get back to you for the record, specifically what 
studies we relied on and what the findings of those studies 
were.
    [The information follows:]

[Page 304--The official Committee record contains additional material here.]


    Mr. Wicker. Also, there was a question concerning which 
tests were more current, the laboratory rats and mice that you 
seemed to base your decision on, or the studies on human beings 
that I would commend to you, which have concluded that 
methylene chloride is not a problem.
    I just would like for you to confirm that actually the 
laboratory tests are older than those 1987 and 1990 conclusions 
concerning human beings. Are you able to comment on that at 
this time?
    Mr. Watchman. I'm just not aware of the particular dates of 
the studies, but I'd be happy to supply that for the record.
    [The information follows:]

[Page 306--The official Committee record contains additional material here.]


             reopening of rulemaking on methylene chloride

    Mr. Watchman. I do know that we reopened the record in the 
methylene chloride rulemaking on a number of occasions, 
including 1994 and 1995, specifically to accept information 
that interested parties like the industry groups who are 
affected by the standard wanted to provide to us. We did accept 
that information and considered it in the course of the 
rulemaking.
    Mr. Wicker. I'm not sure how instructive that point is, but 
it was raised by another member of the panel. And I just want 
to get an answer to it.
    Did your agency consider the conclusion of the American 
Conference of Governmental Industrial Hygienics in promulgating 
your rule, where this group of hygienists look at the 
carcinogenic study of laboratory animals, and concluded that 
those studies were not considered relevant for workers, and 
that methylene chloride is unlikely to cause cancer in humans, 
except when it's misused or exposed in unlikely levels of 
exposure? Did you consider that conclusion?
    Mr. Watchman. We did. Actually, the ACGIH recommended 50 
parts per million, which is much lower than the previous 
standard that OSHA had for the substance of 500 parts per 
million. ACGIH's conclusions were considered.
    Ultimately, though, the function they serve is a little bit 
different from OSHA. In order to protect workers, weneed to 
find there is a significant risk. And then if we find that, try to 
reduce that risk by a substantial degree to the extent feasible. So we 
were trying to protect workers to the extent feasible. And we found 
that the level of 25 parts per million was an effective way to do that.
    Mr. Wicker. Which is half the level recommended by the 
Governmental Hygienists.
    Then finally, I'd like to ask with regard to the definition 
of small business, it is my understanding that when an agency 
promulgates an alternative definition of small business, they 
must apply to the SBA for approval of that alternative 
definition. Now, in your letter to me, Mr. Watchman, dated 
April 3, 1997, you said, on the second page, OSHA defines small 
businesses at the time of the proposed rule as those with fewer 
than 20 employees.
    As you know, the standard governmental definition is 500 or 
fewer employees. And I want to ask you, did you or your agency 
specifically apply to the SBA for permission to use a different 
number?
    Mr. Watchman. Actually, the standard definition is a 
variety of numbers. First, let me just clarify that. SBA has 
different small business definitions for different standard 
industrial codes.
    Second, to answer the question, we had a number of 
consultations with SBA about the definition of small business 
for purposes of the rule. Initially, prior to our proposal, we 
did submit it to SBA for their consideration. They chose not to 
comment on our use of the 20 number.
    But later, before we issued the final rule, we had a number 
of additional consultations with SBA. And we ended up actually 
doing the analysis I think you have suggested, which is to look 
at the impact on small businesses as defined by the codes that 
the SBA uses. We did conduct that analysis in conjunction with 
the final rule.
    Mr. Wicker. But if the law is that OSHA must receive a 
specific waiver from SBA, then you did not receive specific 
dispensation from SBA to change the definition, did you?
    Mr. Watchman. Well, my understanding is that the law 
requires us to consult with SBA. But we don't need an express 
authorization from SBA in order to use different small business 
definitions.
    But in any case, we did in fact, as I said, comply with the 
law by considering their definitions in the course of our 
economic analysis.
    Mr. Wicker. Well, maybe we have a different interpretation 
of the law, and we'll find out what that is. But you consulted, 
you considered, but it is a fact that you didn't receive a 
specific permission from SBA to change that definition? That is 
a correct statement, is it not?
    Mr. Watchman. Actually, we may have in the course of those 
discussions received their approval for using 20 as a size 
cutoff for purposes of the rule. But the requirement applies to 
our economic analysis of the impact of the standard. And I want 
to be clear here that while we did an economic analysis based 
on 20 as a small business definition, we also did an economic 
analysis based on the other definitions SBA uses.
    Mr. Wicker. Thank you.
    Mr. Miller. Gentlemen, thank you.
    I'm sorry, Mr. McAteer, that you did not get to participate 
in this discussion. But thank you all very much, gentlemen, we 
appreciate your being here today.
    Meeting is adjourned.
    [The following questions were submitted to be answered for 
the record:]

[Pages 309 - 444--The official Committee record contains additional material here.]


                                          Thursday, April 10, 1997.

                       BUREAU OF LABOR STATISTICS

                               WITNESSES

KATHARINE G. ABRAHAM, COMMISSIONER
WILLIAM G. BARRON, DEPUTY COMMISSIONER
KENNETH V. DALTON, ASSOCIATE COMMISSIONER FOR OFFICE OF PRICES AND 
    LIVING CONDITIONS
DANIEL J. LACEY, ASSOCIATE COMMISSIONER FOR ADMINISTRATION
JAMES E. McMULLEN, DEPUTY ASSISTANT SECRETARY FOR BUDGET

    Mrs. Northup [assuming chair]. The subcommittee will come 
to order.
    I want to welcome you here today. Our witness this 
afternoon is Ms. Katharine Abraham, the Commissioner of the 
Bureau of Labor Statistics, Department of Labor. Ms. Abraham, 
we will start by giving you a chance to either submit your 
testimony or make your opening remarks.

                           Opening Statement

    Dr. Abraham. I do have a formal statement. Perhaps I could 
submit that statement for the record and just make a few 
opening comments.
    Mrs. Northup. That would be fine.
    Dr. Abraham. Thank you. As you know, the Bureau of Labor 
Statistics is the principal factfinding agency in the Federal 
Government in the broad field of labor economics. That means 
that we produce data on a whole range of things--employment and 
unemployment, prices and consumer expenditures, wages and 
employee benefits, productivity, projections of the labor force 
and employment by industry and occupation, and occupational 
injuries and illnesses.
    The data that we produce are in many cases extremely 
sensitive and very widely used. This obviously means that 
ensuring the high quality of the information we produce is of 
the highest priority. This is nowhere more evident than in the 
case of the Consumer Price Index, which is one of the things 
for which we are responsible.
    I have attached to my formal statement a list of the many 
improvements that the Bureau has made to the Consumer Price 
Index over the years. I might, if I could, particularly draw 
your attention to the steps we've taken to improve the CPI over 
just the last couple of years. I also would like to take this 
opportunity to report that the critical activities associated 
with our periodic Revision of the Consumer Price Index, which 
is something we do about every ten years and for which we first 
requested and received funding from the Congress in 1995, 
remain on course. In particular, the CPI for the month of 
January 1998 will include new updated expenditure weights.
    The budget request that we have before you would provide 
the funds necessary to continue our core activities. In 
addition, our request seeks additional funding to support two 
important program improvement initiatives: first, a set of 
projects to improve and supplement the Consumer Price Index, 
and, second, funds to support implementation of the new North 
American Industrial Classification System, which is a 
replacement for our currently existing but now somewhat 
outdated Standard Industrial Classification System.
    Since the BLS first sought funds to launch the CPI 
Revision, our periodic updating that I mentioned a moment ago, 
interest in the CPI as a measure of inflation has escalated 
dramatically along with a variety of concerns related to the 
impact of the CPI on Federal expenditures and receipts.
    Responding to this interest and concern, we are proposing a 
series of steps to strengthen the Consumer Price Index. The 
funding in our new initiative, which is in addition to the 
funds that we're asking for to continue the CPI Revision, would 
allow us to ensure that future CPI Revisions can be conducted 
more rapidly. It also would provide funding to support 
enhancements to our methods for dealing with changes in the 
quality of the items that we're pricing, and for ensuring that 
we get new items into the Index quickly. Finally, the requested 
funds would allow us to produce supplemental measures that 
differ from the CPI in taking into account changes in consumer 
purchasing patterns that may take place when relative prices 
change, in a way that doesn't happen, and can't happen given 
its monthly production schedule, in the CPI itself.
    In another area, we are asking for funds to continue our 
part of a Government-wide initiative to implement an important 
revision of the industrial classification system of the Federal 
Government. I would be happy to talk more about that if you 
would like later on.
    Our budget also includes funds to cover our mandatory costs 
increases, including Federal pay raises and increased costs of 
data collection by the Census Bureau and the States who do work 
for us under contract.
    In summary then, support for our 1998 budget request would 
enable us to continue production of essential data series, to 
continue the CPI Revision and launch several critical further 
efforts to improve the CPI, and to continue implementation of 
the new industrial classification structure.
    That concludes my remarks. We would be happy to answer any 
questions you might want to ask us.
    [The prepared statement and biography and Katharine Abraham 
follow:]

[Pages 447 - 452--The official Committee record contains additional material here.]


                      Commissioner's Tenure at BLS

    Mrs. Northup. Thank you. I have a number of questions. 
First of all, I don't know how long you've been at BLS; this is 
my first year here.
    Dr. Abraham. I've been at BLS about three and one-half 
years.

                Consumer Price Index and Cost of Living

    Mrs. Northup. Okay. The CPI is not supposed to be the same 
thing as an inflation number, is it, of cost of living?
    Dr. Abraham. Conceptually, the CPI provides an upper bound 
on the change in the cost of living. The CPI tracks the cost of 
purchasing a fixed market basket of goods and services. If you 
were really trying to track the cost of living, you would want 
to take into account the fact that when Gala apples get more 
expensive and Delicious apples get cheaper, people may shift 
their consumption patterns. So that they don't need as much 
more money to keep their standard of living the same as they 
would if they just kept buying what they had been buying to 
begin with. Because it doesn't take that into account, the CPI 
is an upper bound measure.
    Mrs. Northup. Does it take into account, for example, if 
one person might buy a car every ten years and run it 200,000 
miles, and somebody else might buy a new one every year, but 
the average family maybe buys a car every five years. So does 
it weigh the cost of that car based on buying it every five 
years?
    Dr. Abraham. Different categories of expenditure get 
weighted in the Index in proportion to their shares of total 
expenditures by households on average. So it is very much an 
average measure. It doesn't necessarily reflect what is 
happening to the costs of the things purchased by any 
individual household. It's based on an average concept.

                       cpi supplemental measures

    Mrs. Northup. Okay. You talked about ``new and improved,'' 
and it almost seemed like what you were saying is that there 
might be a CPI and then some auxiliary ones that would say if 
you do this, I don't know, say live in Florida or live in a 
warm climate--is that what you meant?
    Dr. Abraham. No. What I meant when I referred to 
supplemental measures was this matter of how you take, or don't 
take, into account consumer substitutions when relative prices 
change. The CPI doesn't take such substitutions into account. 
We're proposing to produce a supplemental measure or measures 
that would take that into account. Those measures would have to 
come out with a lag because we don't get the information we 
need to produce them except with a lag, whereas the CPI comes 
out every month on a very short turnaround basis.

                         Experimental Measures

    Mrs. Northup. Would it be possible to ever have, for 
example, some auxiliary CPIs? It strikes me that age patterns 
might be very different. For example, the average family with 
young children, I'm thinking of 20 years earlier in my life 
when I drove a car every minute of every day----
    Dr. Abraham. Yes. I'm familiar with that syndrome.
    Mrs. Northup. Did you have six kids, too?
    Dr. Abraham. No. Only two.
    Mrs. Northup. Well, it wore out the family budget besides 
the family car. But you would, for example, buy a dishwasher or 
a washing machine much more often in those years, whereas I'm 
hoping that maybe my husband and I have bought our last washing 
machine now because you use it so much less. Would it be 
possible to do that?
    Dr. Abraham. We have taken some steps in that direction. At 
the request of the Congress, we have for some years now 
produced an experimental Consumer Price Index for the Elderly, 
a group that has been of particular interest. To construct that 
measure, we look at the pattern of expenditures across broad 
categories of items for the elderly population as opposed to 
the whole urban population and reweight the data that we 
collect for the official CPI in accord with that pattern of 
expenditures. That's an experimental measure that may give you 
a sense of how things would look for the elderly as compared to 
the general population.
    It would be a fairly expensive proposition actually to 
construct such a measure properly. To do that, we would have to 
expand the number of elderly people we talk to to find out 
where they shop. And then when we went into those stores, we 
would need to try to figure out a way to identify the items 
elderly individuals were buying as opposed to things in the 
same store that were being bought by other people. That latter 
step I think would be difficult. So it would be both an 
expensive and a difficult proposition to do what you're 
suggesting properly.

                    CPI as a cost of living measure

    Mrs. Northup. The question of fairness is so important to 
us. I think that everybody is almost afraid to move or do 
anything because what we don't want to do is to undermine the 
financial opportunities that we believe Social Security should 
provide to seniors, which are minimum. It is not as though 
you're going to travel the world on Social Security. On the 
other hand, because of the financial limitations, there isn't 
the money to inflate it.
    In a perfect scheme, would it be your goal that CPI would 
more closely approach cost of living changes? I mean, the 
closer you can get to that, is that your goal?
    Dr. Abraham. Yes. That's a good way to describe it. I would 
maybe say it slightly differently. If we knew how to produce a 
cost of living measure, that would be what we would produce. We 
know that what we produce is an approximation. That reflects 
operational and measurement difficulties associated with trying 
to do what I think our goal is.

                           Boskin Commission

    Mrs. Northup. I know that the Boskin Commission made a 
recommendation that we try to change it, reevaluate it. Did 
they make any other recommendations?
    Dr. Abraham. The Boskin Commission's report contained a set 
of recommendations. One was a recommendation that we establish 
as our goal producing a cost of living measure, which I think 
is basically right. There are some limitations on what I think 
it would be appropriate for us to do in trying to reach that 
goal. I think we need to be measuring things in a rigorous, 
objective way. You wouldn't want us making guesses about 
things.
    Mrs. Northup. No. No.
    Dr. Abraham. There were some recommendations in the report 
having to do with accounting for consumer substitution behavior 
either in the CPI itself or in supplemental measures. We're 
very much in agreement with the spirit of those 
recommendations.
    In the area of possible problems in the CPI related to 
changes in the quality of goods and services, new items that 
come on the market and so on, the Boskin report identified what 
the Commission saw as issues. There was relatively little in 
the report in the way of recommendations as to how to address 
those issues. There are some things we're doing, and some 
additional things that we will do if the budget proposal that 
we've put forward is funded.
    Mrs. Northup. Is there anything that they recommended that 
you believe we ought to implement that isn't covered inthe 
budget that you submitted?
    Dr. Abraham. Our budget proposal, which we started working 
on last summer, so it is not really driven by their 
recommendations, although I think it is very much in keeping 
with the spirit of those recommendations, included funding for 
everything that as of that point we believed we could do to 
improve the CPI. So in terms of our work, we've asked for 
funding for everything we think would be constructive at this 
point. If we think of more things, we'll come back.
    Mrs. Northup. And the President's budget included those?
    Dr. Abraham. Yes.
    Mrs. Northup. Okay. And finally, do you agree, based on 
your professional analysis, that the CPI overstates the 
increase in the true cost of living by a little over 1 
percentage point each year?
    Dr. Abraham. I agree that there is an issue with respect to 
substitution bias, which the Boskin Commission pegs at about .4 
of their 1.1 percent per year. The correct number there may be 
a little smaller than .4. I don't know exactly what the right 
number is, but I certainly agree that there is an issue and I 
agree about the direction of the bias in the CPI if you're 
using it as a cost of living proxy. I am much less sure, and 
really don't feel I can draw a bottom line judgement as to any 
bias in the CPI associated with quality, new goods, that whole 
set of issues.
    Mrs. Northup. Do you have any worry that it understates the 
cost of living? If you have certain feelings where you feel 
like maybe there is softness in terms of being able to say 
concretely, are there any areas where you think maybe we 
understate the CPI?
    Dr. Abraham. I think the evidence when it comes to 
assessing bias related to quality improvement or quality 
deterioration that we're not capturing is very, very sparse. 
Yes, I can think of examples of things where there might be a 
downward bias in the CPI. For example, others have talked about 
things like airline seats being closer together and airlines 
not serving meals on flights when they maybe used to. I read 
stories in the newspaper about, and have some personal 
experience with, the quality of service in retail 
establishments not being what it used to be. I don't pick these 
things up in the CPI.
    Having said that, I don't think the right way to resolve 
this is by anecdote. I think it is going to require a lot more 
careful study over a period of years. As we identify ways to 
measure things better, whether better measurement leads to an 
index that goes up faster or goes up less rapidly, we will 
implement those improvements.
    Mrs. Northup. Okay. Thank you.
    Mr. Miller?

                              davis-bacon

    Mr. Miller. Good afternoon. I was on the Budget Committee 
the last time we were together.
    Dr. Abraham. Yes. We had a lengthy discussion of the CPI.
    Mr. Miller. Doctor Boskin was there that day too.
    Let me start off with a question concerning Davis-Bacon, 
because we had a hearing earlier this morning with the 
Employment Standards Administration who really administers 
Davis-Bacon. Your agency has a high degree of integrity and 
respect. Unfortunately, the Davis-Bacon statistical data 
gathering does not have that. The Inspector General has been 
critical of it as has been others.
    What role is being discussed utilizing BLS and what else 
can they offer to help give credibility to Davis-Bacon? My 
understanding is there is some work on a contract with your 
office to do some work.
    Dr. Abraham. That is correct. Maybe the best thing for me 
to do would be to describe what that involves.
    Mr. Miller. Please.
    Dr. Abraham. The policy decisions in this area of course 
rest with the Employment Standards Administration. They are the 
ones who in the end are going to need to define what it is they 
want to measure. Once that has been defined, we're very happy 
to try to help with how to measure that.
    At this point, we have entered into a contract with 
Employment Standards Administration about doing a couple of 
things. We recently expanded what had been a program to measure 
employment by occupation, and added to that program the 
collection of information on wages. So this year for the first 
time, we will have very detailed data from a survey done in all 
50 States on occupational employment and wages. We have signed 
a contract with the Employment Standards Administration about 
studying the feasibility of getting employers to provide us 
with information on the union and non-union status of workers 
in the construction industry by occupation. We understand would 
be useful to feed into their process.
    If our first test of that looks promising, we're calling it 
a case study, which we're doing in conjunction with some 
follow-up work of our own to evaluate our expanded program, 
looks promising, we would do a bigger test to look at the 
operational issues that might be associated with collecting 
union and non-union status information on an ongoing basis. So 
that's one thing that we're doing. The timeframe on that would 
be that the case study I described would be conducted next year 
and, if that produced promising results, the bigger field test 
would be conducted probably the following year.

                  quality control of davis-bacon data

    Mr. Miller. This case study will be actually collecting the 
wage information?
    Dr. Abraham. No. The case study would be a part of our 
follow-up quality control efforts around the collection of 
data, to go back to construction employers and ask them about 
how feasible it would be for them, and what kind of records 
they would have to support, reporting to us on the union status 
of their workers in the construction industry by occupation, 
workers they employ. So that's one piece of what we're looking 
at.
    The other piece of what we'll be looking at under this 
contract is some collection of information on benefits in four 
sites, probably two in fiscal year 1998 and two in fiscal year 
1999, in conjunction with personal interviews that we will be 
doing in connection with our national compensation survey, 
which is our other big compensation data collection program.

                  current davis-bacon data collection

    Mr. Miller. The information that is needed for Davis-Bacon, 
are you collecting any of that information at least from those 
employers, companies now?
    Dr. Abraham. We are collecting information through our 
Occupational Employment Statistics program which, as I 
described, recently has been revamped to add collection of wage 
data, and through our National Compensation Survey. Davis-Bacon 
administration historically has used data on the modal wage. We 
don't collect on that. We collect information on median wages 
and we could produce statistics on mean wages.
    Mr. Miller. Is the modal wage the most frequently 
occurring----
    Dr. Abraham. My understanding is that Davis-Bacon 
administration has tended to focus on the modal wage. I should 
hasten to add, Iam not an expert on Davis-Bacon.
    Mr. Miller. I'm not either.
    Dr. Abraham. I have some expertise on measurement of 
things, but I'm not an expert on Davis-Bacon.
    Mr. Miller. I was assuming it was a median. I don't have an 
opinion about whether modal wage is an appropriate one to use 
or not, but I'm a little surprised that is the one that's used.
    Dr. Abraham. So, as I was saying, that using any data that 
we produce would be different from what has been done in the 
past. I can't speak to whether it would be appropriate.

                            wage information

    Mr. Miller. I'm looking at the efficiency of collecting 
information. I think they said in the last hearing that they 
spend $10 million collecting the data. There has been a lot of 
criticism of it, as the Inspector General. So why can't an 
agency such as yours, which is collecting similar data, just 
expand some of the data you're collecting? That's feasible I 
guess.
    Dr. Abraham. It certainly would be feasible for us to 
provide information on wages by occupation. Whether the data 
that we could provide that we naturally would be collecting in 
conjunction with our ongoing activities would meet their needs, 
I am not in a good position to say.

                           boskin commission

    Mr. Miller. Let me ask another question, if I may. At the 
hearing before the Budget Committee, Mr. Boskin was talking 
about a 1.1 percentage difference in CPI. He said that, based 
on changes taking place in the BLS, approximately .6 of that 
will be achieved within the next several years. Would you 
comment on that? How realistic is the .6 number, and how does 
he come up with that .6 number?
    Dr. Abraham. I'm not quite sure where that .6 number came 
from. But I can tell you the things that we're doing.

                        improvements to the CPI

    Mr. Miller. Okay. And then could you estimate how much 
impact would that have.
    Dr. Abraham. Actually, maybe I could back up a little and 
start with things we already have done. We made changes to the 
CPI back in January of 1995 to address partially the so-called 
formula bias problem, to change the way we handle prescription 
drugs, we made some changes in how we estimate costs for 
housing. We made additional changes in June/July of 1996 to 
finish addressing the formula bias problem.
    Mr. Miller. And what is the formula bias problem?
    Dr. Abraham. The formula bias problem was a problem related 
to the way that the price change for newly introduced items got 
weighted. It turned out that we were over-weighting items that 
were on sale and whose prices were likely to rise subsequently, 
and, correspondingly, under-weighting other items. We believe 
we have fixed that problem. We believe that addressing that 
probably reduced the rate of growth of the Index by about .25 
percent per year.
    We are planning to introduce updated market basket weights 
next January. We think that will slow the rate of growth of the 
Index we guess by .1 to .2 percent per year. But that's not a 
part of the Commission's 1.1 percent; that's sort of an almost 
separate thing.
    Out of the Commission's 1.1 percent, we are currently 
evaluating a change in the formula that we use to construct the 
subindexes that go into the CPI, specifically using a geometric 
mean formula rather than our current formula. If we adopted 
that new formula across the board, the rate of growth of the 
Index probably would slow by another .25 percent per year. It 
seems unlikely to me that we will decide to adopt the new 
formula across the board, so the effect would be 
correspondingly smaller.
    There was a piece of the Commission's 1.1 percent that 
related to upper level substitution bias. That's not something 
we have a way to address in the monthly index.
    So in terms of things we can quantify that we're likely to 
do that relate to the Commission's 1.1 percent, it is something 
up to but almost certainly less than .25 percent per year as it 
relates to the substitution bias.
    We're also doing some things to improve how we handle 
change in the quality of items. We made changes in January in 
our hospitals index. We're looking at doing more with hedonic 
adjustment techniques, that is, valuing item characteristics 
and factoring that out of the price change we measure. We're 
looking at taking steps to ensure that we get new items into 
the index more quickly. There is some evidence that when new 
items first come on the market they have a high price that 
subsequently drops. If we pick up new items sooner, we are 
likely to pick up that price drop. But I don't have any good 
way of saying how important all of these things are or 
quantifying what the impact on the Index is likely to be.
    Mr. Miller. But projected policy is now that we're going to 
say about a .25 percent will take place next year?
    Dr. Abraham. Something less than .25 percent.
    Mr. Miller. Next year?
    Dr. Abraham. We will be making an announcement by the end 
of this year. Our most likely date for implementation at this 
point would be January of 1999.
    Mr. Miller. If I have time, I would just ask one more 
question.
    Mrs. Northup. We've got three more witnesses, but go ahead.
    Mr. Miller. Oh, do we have more people?
    Mrs. Northup. Two more presenters. But go ahead.

                              sample size

    Mr. Miller. You have a huge sample size you work with.
    Dr. Abraham. In the CPI, 90,000 prices are collected a 
month.
    Mr. Miller. Basic statistics, obviously the larger sample 
size, the more accuracy you have. But sometimes you get a bias 
that creeps in because sample size gets too large. Do you feel 
comfortable with your sample size? Is it too large?
    Dr. Abraham. No. I don't think so. I'm interested in what 
you have in mind when you ask that.
    Mr. Miller. Doing the year 2000 Census, for example, we 
census everybody but the problem is some people get under-
counted. So you get biases in the questioning. When you have a 
larger sample size, the subjective bias creeps in because of 
the quality of the people collecting the data.
    Dr. Abraham. No. I don't think we have that sort of 
problem. We've got a process that is under control and a sample 
that is representative. I don't feel like it is too big.
    Mr. Miller. Thank you. Thank you, Madam Chair.
    Mrs. Northup. Thank you.
    Dr. Abraham. Since we're waiting, I might add that to do 
some of the things that people have asked us to do, we would 
need more information, not less. In particular, for doing the 
hedonic adjustments that I mentioned, to account explicitly for 
the changes in items characteristics, on their prices, and for 
items that is a big issue, we would need information on their 
characteristics and on their prices in order to be able to do 
those adjustments.
    Mr. Miller. Are we waiting for Mr. Obey? I'll be glad to 
ask another question or two.
    Mrs. Northup. Yes. Although we're going to have to go on if 
he's going to be tied up because we've got two more witnesses.

                 updating CPI's market basket of goods

    Mr. Miller. We increased your resources a year or so ago to 
help speed up the market basket, is that correct?
    Dr. Abraham. This came up at the Budget Committee Hearing 
and I wasn't quite sure what you were referring to.
    Mr. Miller. I thought we gave additional resources to allow 
you to speed up the market basket. Was the market basket always 
scheduled to be changed this----
    Dr. Abraham. It was always scheduled to be changed in 
January 1998. What you may be remembering is that last year we 
were in the second year, maybe third year of a six year program 
to revise the Consumer Price Index and there was a jump between 
fiscal year 1996 and fiscal year 1997 in the cost of 
accomplishing our Revision activities. But that was planned and 
anticipated.
    Mr. Miller. You have always gotten all the resources you 
need?
    Dr. Abraham. We have. We have been well-supported in our 
work on the CPI in particular.
    Mr. Miller. Thank you.
    Mrs. Northup. Mr. Obey.

                         solving budget deficit

    Mr. Obey. Thank you, Madam Chair.
    Where is your magic wand?
    Dr. Abraham. I wish I had one.
    Mr. Obey. I was told that all the hot shots in this town 
were relying on you to produce a magic wand which is going to 
let them solve all of the budget problems with no pain, no 
tough choices.
    Dr. Abraham. I'm sure that what people are relying on us to 
do is to produce the best possible estimates we can.
    Mr. Obey. I think you have produced the best possible 
estimates through the years. My concern is that there are a lot 
of people who would like you to produce the most convenient 
estimates. I hope you're not tempted.
    Dr. Abraham. No.
    Mr. Obey. Let me simply make a short observation and then 
ask a couple of questions about the Boskin recommendations. As 
you know, the BLS was set up to be an independent determiner of 
lots of numbers which we use for a lot of very important 
purposes and which result in a lot of dollars being shipped in 
different places in the economy and the budget. Through the 
years there have been a number of instances when 
administrations of both parties have tried to gain an edge in 
that process. Your agency has maintained a singular reputation 
for objectivity and fairness.
    I frankly am concerned when I see a bunch of self-styled 
experts and hot shots deciding on the basis of a quick study 
that they are going to arbitrarily say that you have been over-
estimating the CPI by 1.1 percent. In my view, BLS has a lot 
more expertise and ability to analyze economic data than the 
Boskin Commission. Being the judicious person that you are, you 
won't comment on that I know.

                           adjusting the cpi

    I would like to have a better understanding of what the 
issues are that need to be understood in this whole CPI area. 
My understanding is that the Boskin Commission believes that 
the CPI is over-stated by 1.1 percent, with a plausible range 
of .8 to 1.6. I understand that breaks down into three 
categories of adjustments: one being upper level substitution; 
second, lower level substitution; and third, new products, 
quality improvements, and outlets.
    You may have done this before I came in, and if you did, I 
apologize, and if you haven't, could you very briefly define 
what people are talking about when they're talking about upper 
level substitution, lower level substitution, and new products, 
quality improvement, and outlets?
    Dr. Abraham. Sure. Upper level substitution has to do with 
changes in their pattern of spending that consumers may make 
when the relative prices are--let me back up. The CPI is put 
together based on 90,000 prices we collect each month. We take 
those prices and produce measures of price change for 200-plus 
individual item categories. Then we aggregate those subindexes 
to form the overall CPI.
    Taking the three things you referred to in slightly 
different order than you listed them, lower level substitution 
bias has to do with how we put together those sub indexes. The 
way we do it now doesn't allow for any shift in consumption 
patterns when relative prices change. The Boskin Commission 
makes a recommendation concerning a different formula to use. 
If we adopted that, the Index would, based on our research, go 
up about .25 percent per year less rapidly. We don't think the 
recommended formula is likely to be appropriate in all cases, 
but we are in the process of evaluating its possible adoption 
in some of the parts of the Index. We had a press briefing this 
morning to talk about that. We will make a decision by the end 
of the year.

                     lower level substitution bias

    Mr. Obey. So it is fair to say that with respect to the 
lower level substitution bias question, your agency has an open 
mind on that issue. You're evaluating it and you're in the 
process of trying to reach an objective decision?
    Dr. Abraham. Right. We started working on this other way of 
putting the subindexes together back in 1993. So this is 
something we've been working on for some time. It is not just 
being open to a course of action the Commission recommended; it 
is something that we put in train.
    Mr. Obey. By about what time do you expect you may have 
reached a conclusion on that point?
    Dr. Abraham. Our current intention is to have reached a 
decision about the new formula by the end of this year.
    Mr. Obey. You say this year. Do you mean calendar year or 
fiscal year?
    Dr. Abraham. Calendar year 1997.
    Mr. Obey. Do you need any additional resources in order to 
accomplish that?
    Dr. Abraham. No.

                     upper level substitution bias

    Mr. Obey. Okay. Then you were going on to discuss upper 
level substitution.
    Dr. Abraham. Upper level substitution bias is bias that may 
exist in the CPI as a proxy for the cost of living because the 
CPI doesn't take into account substitution across item 
categories. We have produced estimates of the magnitude of that 
bias. The Boskin Commission's .15 percent per year is really 
our number, coming out of our research.
    We don't have any good way to address upper level 
substitution bias operationally in the CPI, which comes out, as 
you know, every month on a very short turnaround basis, because 
we don't at that point have the information on what has 
happened to consumer expenditures that we would need to 
construct the measure in a different way. We are looking at 
doing with regard to that is producing, on a more official 
basis than in the past alternative measures that take upper 
level substitution into account but that we are only able to 
produce with a lag. We would be able to produce those measures 
by the fall of the year following the year to which they apply.
    The budget proposal that we have before you at this time 
contains funds that are important to allowing us to do a better 
job of producing these alternative measures, making them more 
reliable than measures of that sort we've been able to produce 
in the past.
    Mr. Obey. So what you're saying is that to further refine 
your numbers in this area depends on expanding the consumer 
expenditure survey?
    Dr. Abraham. Exactly.
    Mr. Obey. For which you need additional resources.
    Dr. Abraham. Exactly.
    Mr. Obey. Over what period of time?
    Dr. Abraham. We would need those resources on a continuing 
basis. We would need some funds to develop the systems 
associated with the measure's production, but then we would 
need money on a continuing basis.

                         timing of improvements

    Mr. Obey. And if you moved just as fast as humanly 
possible, if you got every dollar you needed, when do you think 
you might reach a final conclusion about what adjustments would 
be needed on that score?
    Dr. Abraham. Fiscal year 1998 would be a start-up year. 
Data collection for the new expanded sample would start in 
1999. So we would collect data in 1999 and 2000, and then it 
would be January of 2002 that we're looking at for having 
everything in place on the new, improved basis.
    Mr. Obey. What I am trying to get at, we do this ludicrous 
five year down the road projections, Congress pretends it knows 
what is going to be happening five years from now, the White 
House pretends it knows what's going to be happening five years 
from now, we have this gargantuan debate about CBO or OMB 
estimates when neither one of them has the daffiest idea of 
what's going to be happening five years from now, and on that 
basis we make policy judgements run by the accountants. It is 
known as the budget process. But what you're telling us is that 
with your time table, assuming you make changes in the numbers, 
we would through the orderly process be able to effect those 
changes within the five year budget process that Congress is 
talking about, absent surprises, and you would have through the 
natural process information produced that would be required to 
make any changes that are being talked about?
    Dr. Abraham. We have some things in the works, as I've 
described.
    Mr. Obey. I have additional questions for the record. I 
would obviously urge you to do your work as fast as possible 
given the need to have an accurate number, but also I would 
hope that Congress would not move to the ploy of yet another 
commission to give us an artificial set of numbers that will 
not be as reliable as those produced through your ordinary 
processes. Thank you.
    Mrs. Northup. Thank you, Mr. Obey.
    Mr. Istook.
    Mr. Istook. I don't have any questions, Madam Chair.
    Mrs. Northup. Mrs. Lowey.
    Mrs. Lowey. Thank you, Madam Chair.
    I do apologize for coming late. I arrived at sort of the 
end of Mr. Obey's questions. I wish you God speed and good 
luck.
    Dr. Abraham. Thank you.

                            bls objectivity

    Mrs. Lowey. After rereading your bio, it is very clear to 
me that you have the expertise and the professionalism to do 
this in as objective way as possible. Somehow the more I learn 
about the CPI and the more I discuss it with people, I don't 
know if we should get into that, but I really wonder if there 
is any objective way to deal with it. Whether you shop at 
Gristedes, or PathMark, or Wal-Mart, or J.C. Penny's, or Nieman 
Marcus, or Saks, etc., good luck. I think, in fact, this is 
obviously why there is so much controversy because it is so 
difficult to put in place objective guidelines.
    I just want to say that I associate myself with the 
comments of my colleague, because I think this is the reason 
why a commission doesn't make sense to me as well, and why the 
professionalism of your office and your staff is what is 
needed. So if anyone can do this in an objective way, I think 
you can.

                      prior year budget reduction

    I know Mr. Obey talked about the cut in the overall BLS 
budget which has been 3 to 9 percent in four out of the last 
five years. You have discussed the impact of this on the 
ability to move forward on this CPI effort. However, in reading 
your testimony it is clear you do other things. I just wondered 
if you could share with us the impact that these cuts and the 
focus on the CPI effort will have on other activities.
    Dr. Abraham. The funding that we've requested for fiscal 
year 1998 is a level of funding that allows us to continue our 
work on all of our current data collection programs. I believe 
it gives us good support for making improvements not only in 
the CPI, but in our other data collection efforts. We have 
underway a major redesign of our monthly employer payroll 
survey that is the source not only of the monthly numbers on 
job growth nationally, but also of widely-used information on 
employment in States and localities. So I think that we are 
making an important improvement.
    I had the chance to talk a little bit about changes and 
improvements that we've made in our national compensation data 
collection efforts. We are in the process of integrating 
several separate efforts into a combined data collection 
program that I think will give us better data at less total 
cost than otherwise would be the case.
    Although the public attention to the work of our agency 
recently has been very much focused on the Consumer Price 
Index, we have other things going on and I feel that we're 
moving forward.

                              bls workload

    Mrs. Lowey. Could you share with us, other than the ones 
you just mentioned, other important studies that you are in the 
midst of to emphasize once again how important your agency is.
    Dr. Abraham. We do a lot of different things. Our monthly 
household survey, which is the source of the unemployment rate 
data, was revamped, top to bottom, effective with the data for 
January of 1994. So that was just modernized, if you will.
    The big thing in the employment and unemployment statistics 
area that we have going on is this effort to now revamp our 
employer payroll survey. In the compensation data collection 
area, we're in the process of integrating these separate 
surveys. We're working on trying to expand coverage of the 
service sector. That is sort of an across the board thing. I 
did mention something that is a cross-cutting which is 
implementation of the new industrial classification structure 
that the Government is in the process of adopting.

                            computer systems

    Mrs. Lowey. I can remember for the few years that I've been 
on this committee there has continually been a discussion from 
every department about their computersystems, about how they 
don't speak to each other and how they are out of date, and they either 
ask for an appropriation to institute a new computer system, or they 
want additional appropriations to expand the system they have. Just for 
my own edification, how new is your computer system and how does it 
interact with other agencies? Since you probably are the premier agency 
that deals with statistics, have you had a role in connecting with some 
of the others?
    Dr. Abraham. We don't have a big mainframe computer system. 
A decision that was made some years back, for which Mr. Barron 
gets substantial credit, though he's shaking his head no, was 
to contract out for our computer services rather than to have a 
big mainframe system. Over the years, that has given us 
substantial flexibility. We have been in the process over the 
past few years of downsizing our computer systems, putting them 
on minis and personal computers. I feel like we're in pretty 
good shape with our computer systems.
    We do have some particular issues with respect to sharing 
information with other parts of the Government. It is very 
important to us that the data we collect be kept confidential. 
So that is an important emphasis in everything we do, ensuring 
that our systems are structured in a way that keeps individual 
survey responses confidential and guards against pre-release of 
sensitive statistics that are scheduled to be put out at a 
particular pre-announced time.

                             data security

    Mrs. Lowey. That's interesting because that was my next 
question. First of all, we've been very aware of the lack of 
up-to-date equipment in many of the agencies and the fact that 
they all have different systems. I wondered how you possibly 
gathered this information since so much is based on the 
information from other agencies. And yet, if you would make it 
uniform with the Internet and the sharing of information that 
is so public today, I just wondered how you keep this 
confidential. So there is really two parts that I have concern 
about.
    Dr. Abraham. Keeping the data we collect confidential is a 
very, very high priority and we put a lot of energy into it.
    Mrs. Lowey. Have you found that an impediment to your work 
is the fact that so many of the other agencies have computer 
systems and programs that don't talk to each other, that are 
antiquated, that are not accurate?
    Dr. Abraham. I really would say that has not been an issue 
for us, unless there is something I'm just not thinking of.
    Mr. Barron. I think we do have an issue with our State 
colleagues where we need to help keep them up-to-date. That is 
reflected somewhat in our budget submission every year. They 
have many issues that they're working on beyond statistics, I 
would add, but we do try to work with our State colleagues, 
State agencies to keep their systems up to speed. That's an 
important issue every year.
    Mrs. Lowey. Thank you. Thank you, Mr. Chairman.
    Mr. Miller [assuming chair]. Thank you.
    Ms. DeLauro, do you have some questions?

                           changes to the cpi

    Ms. DeLauro. Yes, I do. Thank you very much, Mr. Chairman.
    Thank you all very much for being here. Sorry that I could 
not be here at the beginning. Hopefully, this is not being 
repetitive, but with regard to the CPI, are the proposals to 
adjust the CPI based on concrete assessment that the prices of 
specific goods are calculated inaccurately, or are these 
proposals based on the more general belief that the CPI 
overstates inflation? Can you help me with that?
    Dr. Abraham. Let me try. There hasn't been any real 
suggestion that we're not measuring prices correctly.
    Ms. DeLauro. In terms of the specific goods because there 
are so many, 9,000 or so----
    Dr. Abraham. We collect prices for 90,000 items per month.
    Ms. DeLauro. Right.
    Dr. Abraham. There hasn't been any suggestion that when we 
go out and try to identify the price of an item, that we're not 
doing that correctly. The things that have been discussed fall 
into two categories. One category is the category labelled 
substitution bias. If prices of things are going up, but some 
are going up more than others, in order to attain the same 
standard of living, you don't need as much money as you would 
need to keep buying what you were buying to begin with because 
you can substitute away from the things that have become 
relatively more expensive towards things that are relatively 
cheaper. We don't take that into account.
    Ms. DeLauro. You don't take that into account?
    Dr. Abraham. We do not take that into account in the way we 
currently construct the CPI. Out of the 1.1 percent per year 
bias that was the figure coming out of the Boskin Commission's 
report, that was pegged at .4 percent per year.
    The other thing that people talk about is how we account or 
don't account for changes in the quality of items and services, 
how we account or don't account for new items that may become 
available in the marketplace, how we deal with the fact that 
there are new kinds of stores for people to shop at. That whole 
set of things is obviously quite difficult. That is the other 
.7 percent per year.
    Take televisions, for example. No one is saying we don't 
write down the price of the television sets in the store 
correctly. What they saying is that the price of this year's 
model may be higher but this year's model is better and our 
procedures don't adequately take that into account.
    Ms. DeLauro. But does it take into account, just help me 
with this, does it say this is more money but you can buy a 
lesser sophisticated model which would cost you less money in 
terms of the price survey? Help me on this. Maybe it is 
subjective or----
    Dr. Abraham. No. No. It is saying that if we're pricing a 
model of television, that model gets discontinued and the new 
model has a feature to prevent the picture from rolling up and 
down (that's probably an innovation that was introduced some 
years ago and I'm revealing that I don't watch television 
much), the innovation is worth something to people in the sense 
that it is a better product. And so in figuring out what has 
happened to the price, people would say that what we should be 
doing, and in principle, I would agree with this, is figuring 
out the value of that innovation and subtracting that value off 
of whatever change in price we otherwise would be measuring. So 
it is issues related to that sort of thing.
    Medical care is maybe another good example. If there are 
improvements in the quality of treatment that we don't take 
into account in tracking what is happening to the cost of 
medical care, we may be saying thatmedical care prices are 
going up faster than they really are on a quality adjusted basis. Does 
that make sense?

                       MEASURING COST OF HOUSING

    Ms. DeLauro. It does. From my point of view, that's why 
this is such a difficult and a technical area which we should 
not be dealing in, my personal view, in utilizing it for 
balancing the budget.
    Let me ask you another question. In reading an article 
recently in the papers, there was one indication that we could 
be talking about under-estimating because of the cost of 
housing issues. Can you explain that to me and what this means 
in terms of housing. This article focused on under-estimation 
in terms of housing.
    Dr. Abraham. The article you saw probably was referring to 
a paper recently authored by Steven Roach, a Wall Street 
economist. I don't know him personally. I'm afraid I'm not 
quite sure precisely what his argument was. One thing that he 
was suggesting is that the method that we use to track housing 
costs is inappropriate. We use a method of tracking housing 
costs that involves trying to figure out what would be 
happening to the amount that people who own their own homes 
could get if they were to rent them out. So it is a rental 
equivalence concept--what's the value of the rent on this. He 
was suggesting that's not an appropriate way to measure housing 
costs. I disagree with him about that. We arrived at that 
method of measuring housing costs after long, long debate and I 
think it is clearly the right way to go.
    There may be some other issues with the way we measure 
housing costs. It is possible for different reasons that we may 
be slightly under-stating the rate of growth of housing costs 
but for reasons different than Mr. Roach was discussing.
    Ms. DeLauro. For instance, in a situation where people who 
are now in subsidized housing, mostly seniors where it is 
capped at 30 percent of their income, suppose that cap were to 
be removed and you could then charge anything to folks. Would 
something like that affect what you do and what the calculation 
might be?
    Dr. Abraham. I don't know enough about how the housing 
market works to know whether that necessarily would affect 
rents. But if a change of that sort affected prevailing rents, 
it would then show up in our index in the form of an increase.
    Ms. DeLauro. Okay. Thank you. I think we have to have a lot 
more discussion about this and in getting people to understand. 
It is very tough going to understand. I don't come to the table 
as a maven in this area, but your explanation making it 
understandable to lay people is really a big help. I appreciate 
it.
    Dr. Abraham. Thank you.
    Mr. Miller. Thank you, Doctor Abraham, for being here.
    One comment. Mr. Porter is unable to be here today due to a 
back problem. It is a rather painful experience or he would 
otherwise be present today.
    Thank you for being here. You are certainly the one agency 
within the Department of Labor that has the respect of both 
sides of the aisle for your high level of integrity. I 
congratulate you on the difficult time you're going through 
right now. Thank you for appearing today.
    The subcommittee will recess briefly.
    [The following questions were submitted to be answered for 
the Record:]

[Pages 468 - 492--The official Committee record contains additional material here.]


                                          Thursday, April 10, 1997.

 PENSION AND WELFARE BENEFITS ADMINISTRATION, PENSION BENEFIT GUARANTY 
                              CORPORATION

                               WITNESSES

OLENA BERG, ASSISTANT SECRETARY FOR PENSION AND WELFARE BENEFITS 
    ADMINISTRATION
JOHN SEAL, ACTING EXECUTIVE DIRECTOR, PENSION BENEFIT GUARANTY 
    CORPORATION
ANTHONY CALHOUN, CHIEF FINANCIAL OFFICER, PBGC
JAMES E. McMULLEN, DEPUTY ASSISTANT SECRETARY FOR BUDGET

    Mr. Miller [assuming chair]. The subcommittee will now 
proceed to the pension panel. I would just note that Chairman 
Porter has got a back problem and is unable to join us this 
afternoon.
    We have with us this afternoon Ms. Olena Berg, the 
Assistant Secretary for Pension and Welfare Benefits 
Administration, and Mr. John Seal, the Acting Executive 
Director of the Pension Benefit Guaranty Corporation. Ms. Berg, 
Mr. Seal, welcome. I think you have some opening statements. We 
have copies of your complete statements and if you would 
summarize, we would appreciate it.
    Ms. Berg, we would be glad to hear from you at this time.

                           Opening Statement

    Ms. Berg. Thank you, Mr. Chairman and members of the 
committee. In deference to your long day here, I will keep my 
remarks as brief as possible. I would like to submit my written 
statement for the record and just take a moment to highlight a 
few of the things that we've been doing in the agency since the 
last time we were here before you.
    As you know, PWBA is responsible for enforcing the Employee 
Retirement Income Security Act, or ERISA, which protects the 
pension, health and other benefits of over 150 million American 
workers and their families. We take that mission very 
seriously, and we have had a busy year since I last appeared 
before this Committee. I would like to report on a few of the 
results of our activities.

                           401(k) protection

    First of all, I hope you have heard about the national 
campaign that we initiated to protect the assets in the rapidly 
growing 401(k) type pension plans around the Nation. There are 
now approximately 160,000 of those types of plans. The assets 
in them are growing, soon to be somewhere around $750 billion. 
We became aware that in some situations employers were not 
contributing assets to the plan as rapidly as they could and in 
other cases were diverting the funds. So we initiated a crack 
down. We tried to get the light of publicity on these issues in 
order to have a deterrent effect so that people who might be 
tempted to misuse those assets would be deterred from doing so. 
We're pleased to report that since we initiated that campaign, 
we have now recovered over $22 million for American workers and 
returned that money into their 401(k) plans.
    In the process, we have also changed the regulation 
governing 401(k) plan contributions which had been in place for 
eight years. With changes in technology, we probably had 
allowed more time than was necessary for monies to be deposited 
into plans. We tightened the timeframe up substantially. That 
action, in and of itself, will ensure that workers earn 
somewhere around $70 million a year additionally on their 
401(k) assets as a result of increased earnings due to faster 
contributions.

                      fraudulent health care plans

    We also continue to enforce against fraudulent multiple 
employer welfare arrangements. These are health care plans that 
target small employers who are trying to do the right thing and 
offer affordable health care to their employees. These 
fraudulent operations collect premiums and when the payments 
start to become due, the operators are long gone and shut down, 
leaving people with unpaid health care bills. This area remains 
one of our most important enforcement priorities. Thus far, we 
have achieved approximately $57 million in savings and paid 
health care claims for people who have been caught in that kind 
of situation.
    Overall, just in terms of all the kinds of enforcement 
activities we undertake, last fiscal year we recovered 
something like $400 million and returned it to pension plans 
and other employee benefit plans on behalf of workers.

                         compliance asssistance

    We also tried to continue making it easier for employers to 
comply with the rules and regulations. For example, we 
initiated a delinquent filer compliance program for employers 
who may have inadvertently, or because they didn't understand 
the regulations, failed to submit required reports. There are 
some fairly hefty fines for that, but what we did was institute 
a program where we will reduce those fines to get people into 
compliance. As a result of that program, we have 46,000 
employers who weren't complying and reporting on their plans 
now back in compliance.

                      retirement savings education

    We have also continued our retirement savings education 
campaign that I announced to you last year. When we initiated 
it about two years ago, we had 65 private sector sponsors 
participating with us from the AFL-CIO, the American Bankers 
Association, the Securities Industry Association, and many 
other private groups all enlisting with us to try and get the 
message out to American families that they needed to be 
concerned about saving for retirement as the baby boomers, or 
what I call the population tsunami wave, start to turn 50 and 
get within worrying distance of retirement. We now have over 
200 partners in that campaign and continue to build on those 
efforts.
    Our latest announcement was made by the President just a 
couple weeks ago. On March 25, we initiated an 800 line where 
people can call to get the materials we are producing as part 
of the campaign and also those of our partners. I would like to 
be sure that you are aware of some of these materials because 
we think that one very good way for us to help get this kind of 
message out is through your offices. So, we're happy to provide 
these materials, and as many of them as people would like, to 
your offices here or your district offices.
    We have things like the ``Checklist on Women and 
Pensions,'' which summarizes what women need to know and do to 
make sure they're thinking about the pension issues that face 
them; our ``Top Ten Ways to Beat the Clock and Save for 
Retirement,'' which gets people in touch with information that 
can help them think about the issues they are going to need to 
be concerned about; ``What You Should Know About Your Pension 
Rights''; ``Protect Your Pension,'' a how-to book for people 
who want to walk through the forms that are submitted to the 
Government to try and figure out if there might be something 
that they need be concerned about in their own pension plan; 
and our latest and popular best-seller, ``Recent Changes to the 
Health Care Law,'' which was published in accord with the 
implementation of the new Kennedy-Kassebaum legislation. We're 
getting a lot of questions and we're trying to get the message 
out to both employers and employees on what that law will mean 
for them.

                            customer service

    At the same time that we've been trying to do all of this 
outreach with the community out there in the greater world, we 
have also tried to improve our management systems as well. We 
have reorganized internally to improve our customer service, to 
reduce supervisorial levels, get more people on the front 
lines, and establish cross-cutting team approaches to 
accomplishing our work. We think those are efforts that will 
pay off for us both in the short term, as they did in getting 
the new HIPAA regulations out, under a very tight April 1st 
deadline, but also for the long term as well. In fact, with 
respect to really trying to get people onto the front lines, we 
have increased the percentage of our people who are out in the 
field from 61percent in 1993 to 69 percent now. That will 
continue to be the focus of any augmentations you approve for us.

                             budget request

    In the budget request before you, we are asking for 
enhancements in four critical areas. The first relates to the 
HIPAA, the Kennedy-Kassebaum bill. That legislation gives us 
major new responsibilities with respect to health care plans. 
We were able to absorb the work that we need to do this year on 
getting the implementing regulations in place. But enforcement 
activities and the technical assistance activities that I 
mentioned earlier to help employers and health care plans and 
employees understand and meet the requirements of the 
legislation will start to hit us in the budget year. We are 
asking, therefore, for an augmentation of 63 FTE and about $6 
million to help us do that work.
    Our second request is in the 401(k) area. To ensure that we 
can continue our important crack down effort, we are asking for 
16 FTE and about $1.6 million.
    We're asking for another 10 FTE and $1 million just to help 
us support our technical assistance effort in general. The 
materials that we're producing and the increased attention that 
we're getting on these issues is resulting in more calls and 
more requests for help from the agency. We need to meet those 
requests for information and help, and do it in a timely way.
    Finally, and perhaps most critically for our on-going 
effort is our request for $3 million to complete the new Form 
5500 processing system. You allowed us to initiate its 
development last year with an augmentation of $6 million. The 
form 5500, as you know, is the document used by all the pension 
and other benefit-related agencies--by us, by the IRS, by the 
PBGC--for not only data for enforcement efforts, but for 
research as well. It really is the critical document that is 
submitted by employers providing these plans. It is essential 
that we modernize the processing of the reporting data so we 
get the information in a more accurate and timely way. And most 
importantly, with the new system, over time we will actually 
save the Federal Government money because it will cost us less 
in operating costs. The additional $3 million requested this 
year to complete that effort is critical to our being able to 
carry out our mission, and we ask for your favorable 
consideration.
    I would be happy now to answer any questions that you have 
on these or any other activities that we might be doing. Thank 
you.
    [The opening statement and biography of Olena Berg follow:]

[Pages 497 - 502--The official Committee record contains additional material here.]


    Mr. Miller. We will proceed with Mr. Seal next, then we 
will have some questions.
    Mr. Seal, let me first of all express the condolences of 
this committee to you and the members of the PBGC on the recent 
death of Martin Slate. He was the Executive Director for the 
past four years. It shakes up an organization that works 
closely together and it is a personal loss. I'm sure it puts 
you on the spot to be here so quickly too. But you've been with 
the agency for a number of years, so I appreciate that. We 
would be glad to hear your presentation at this time.

                           opening statement

    Mr. Seal. Thank you, Mr. Chairman, and good afternoon. I am 
pleased to be here today to present the Pension Benefit 
Guaranty Corporation's budget request for fiscal year 1998.
    For 22 years now, PBGC has insured the pensions of working 
men and women when their private defined pension plans have 
terminated or failed. This year PBGC will be responsible for 
the benefits owed to about 480,000 people in more that 2,400 
pension plans. Overall, we ensure the benefits of about 42 
million people in 50,000 plans.

                       insurance program surplus

    I am truly pleased to report to you that for the first time 
in PBGC's history, the single employer insurance program, our 
largest program, ended 1996 with a surplus. With the funding 
reforms of the Retirement Protection Act of 1994, no major plan 
terminations during the year, and significant income from our 
investments, assets now exceed liabilities over the long-run by 
$869 million. The multi-employer insurance program, our second 
program, also remains financially strong.
    This milestone is a dramatic change from just a few years 
ago. In 1993, for example, the Corporation's long-term deficit 
in the single employer program was almost $3 billion. PBGC's 
improved financial condition is in large part the result of the 
Retirement Protection Act, which was intended to improve the 
funding of pension plans and to strengthen PBGC. We and the 
American public owe thanks to the members of this committee for 
your support of the 1994 pension legislation. We are also 
obviously grateful to Martin Slate, our former Executive 
Director, in providing the vision and leadership that led to 
the enactment and the support for this legislation.
    Our new financial strength should be a reassurance to those 
who are concerned about the future of the pension insurance 
program and the workers and retirees whose benefits we protect.

                             strategic plan

    PBGC has developed a five year strategic plan to address 
the Corporation's mission through basically four goals: first, 
to protect existing defined benefit plans and their 
participants, and encourage new plans; second, to provide high 
quality services and accurate and timely payment of benefits; 
third, to strengthen our financial programs and systems; and 
finally, to improve internal management operations. Our 1998 
budget request will enable us to move ahead with the 
initiatives essential to meeting those corporate goals.
    I would like to now just give you a couple of examples 
under each of these goals of what has been accomplished over 
the last year.
    Our first goal, protecting on-going plans. Our expanded 
early warning program and litigation program are designed to 
prevent plans from being terminated by PBGC and keep them on-
going with their private sector sponsors. In the last four 
years, we have had over 40 early warning settlements that 
provided almost $15 billion in new pension funding and other 
protections for about 1.5 million workers and retirees. Last 
year alone, that amounted to an additional $1 billion.
    PBGC is striving to make sure that our regulations and 
procedures meet the public's needs. Last year, we used a 
negotiated rulemaking process to develop new regulations which 
both strengthen and simplify the way companies must report 
events that have an effect on the security of workers' pensions 
and the pension insurance program. We had a 14-member committee 
representing both business and constituency groups come to a 
consensus and the final rule went into effect in December.
    Goal number two, responsive services. People depend on PBGC 
for their pensions. During 1996, we completed 66,000 benefit 
determinations for participants, which is triple the number we 
did in 1993. Last year, PBGC trusteed more than 250 pension 
plans, and that's also more than we've ever done before, as 
we've continued a concerted effort through streamlined 
processing and enhanced technology to address the inventory of 
plans that have built up over many years.
    Our Customer Service Center, which was established almost 
two years ago, is in full operation. It uses state-of-the art 
technology so that our customer service representatives can 
quickly access the data they need to respond accurately to 
those calling the Center. We answered nearly 93,000 phone calls 
last year from our participants.
    Goal number three, strengthen financial management. We have 
accomplished a major overhaul of the Corporation's financial 
systems and we continue to refine our information systems to 
ensure that we can keep pace with growing demands. Intensive 
efforts over the past few years have equipped us with reliable 
financial programs and systems. As a result, for the fourth 
year in a row, we have received an independent, unqualified 
audit opinion on our financial statements. The audit contained 
no material weaknesses and was performed by our Inspector 
General and an independent CPA firm.
    Starting in 1998, PBGC will operate a new integrated 
accounting system that covers both the pension plan trust funds 
and the premium-based revolving fund for which we're 
responsible. This integrated system will make our financial 
transaction processing more efficient and definitely more 
reliable.
    Goal number 4, improved internal management. PBGC has 
developed management systems for monitoring critical 
information, including new systems on participant data, case 
tracking, legal management, and premium collections. These new 
systems improve our ability to rapidly process and retrieve 
important data, and they provide high quality service to our 
customers. We have continued our commitment to a strong 
employee development program, recognizing that our most 
valuable organizational resource is a well-trained staff.
    In conclusion, we believe we have made significant progress 
in achieving a secure pension system and a strong insurance 
program. We do believe, however, that we have to remain 
vigilant as our economy changes. Our first ever year-end 
surplus in 1996, as well as improved customer service, 
financial and management programs provide the foundation to 
support PBGC's long-term responsibilities, and it should give 
confidence to the 42 million people whose pensions we ensure 
that PBGC will protect their retirement benefits.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions.
    [The opening statement and biography of John Seal follow:]

[Pages 506 - 512--The official Committee record contains additional material here.]


                          contractor trustees

    Mr. Miller. Thank you, Mr. Seal. Let me begin by asking 
some questions of you, Mr. Seal. My home area is Sarasota/
Bradenton in Florida. I have become aware of some problems with 
PBGC because of a constituent company in my area. PBGC is sort 
of a quasi-independent agency; you have your own stream of 
money and so you have a certain independence, and maybe one 
wonders if you're taking too much independence and such.
    You contract people sometimes to serve as trustee for 
programs you take over; is that right?
    Mr. Seal. That's correct.
    Mr. Miller. Is that always the case?
    Mr. Seal. It is not always the case, but where we have 
concentrations of plans that have been trusteed, we generally 
will contract out to plan administrators. In many instances, 
they are administrators who are already familiar with the plans 
that we're trusteeing. What we have found is that they have 
helped to provide a continuation of services to workers and 
retirees of those plans without an interruption.

                   independent investment management

    Mr. Miller. What is the policy with respect to those 
individuals serving on the board of directors of these 
companies?
    Mr. Seal. They do not serve on the board of directors. We 
do have an independent investment management firm which may 
serve on a board of directors. They are independent of PBGC. We 
create, if you will, an iron curtain between us. But they are 
responsible for maximizing the pension assets in terms of 
decisions that they would participate in on any company board 
of directors.
    Mr. Miller. As their goal is to basically sell the stocks 
they hold and they serve on the board, that would be a conflict 
of interest under SEC, would it not? There's a specific company 
in Florida that the investment manager from Cincinnati has been 
trying to get on the board of directors of the company and he 
is supposed to be in the process of liquidating the shares of 
stock they own. That would be a major conflict of interest.
    Mr. Seal. We would have to get into the particular details 
on that. I think the firm you may be referring to is UTC.
    Mr. Miller. Yes.
    Mr. Seal. The latest information we have on that particular 
case is that the company has sold the preferred stock and that 
is what the independent investment manager was managing for us. 
And so I don't believe the issue of a seat on the board is any 
longer a significant issue at this time.
    Mr. Miller. But if he were to serve on the board, wouldn't 
that be a potential serious problem? How would he be able to 
liquidate? He would have inside information. If his job is to 
sell that stock, right, he has control of alarge amount of UTC 
stock. Apparently he serves on the board of a couple other companies, 
Kaiser Ventures and----
    Mr. Seal. Yes. The firm is called Pacholders Associates, 
Inc. and they do serve on one or two other boards.

                   independent investment management

    Mr. Miller. And you don't envision that as a potential 
conflict? If his responsibility is to sell those shares, he 
would have inside information as a board member, right? Maybe 
someone else is going to help you answer the question.
    Mr. Seal. The primary mission for the investment manager is 
to protect the assets for the pensions of the plans that we've 
trusted.
    Mr. Miller. Right. But also to sell those----
    Mr. Seal. Not necessarily.
    Mr. Miller. Those limited marketable assets, the intention 
is to eventually--I mean, it's not going to be in existence 
forever, is it?
    Mr. Seal. Our assets, our total portfolio now, which is 
about $12 billion, is almost 40 percent in equities, in various 
stocks. So that the charge to the investment manager is not to 
sell the stock, it is to preserve and to hopefully protect and 
grow the pension assets for the plans that we've trusteed. So 
that does not necessarily mean that they would sell the stock. 
They could hold the stock for a long period of time if that may 
be in the best interest of the pensioners.
    Mr. Miller. So the policy then is that the trustee could go 
on forever and ever and ever. It is a career job then you are 
creating, no? In effect, you're saying they are not going to 
sell the stock. I would think they would want to diversify and 
get out of one holding.
    Mr. Seal. Well, that's going to depend on the individual 
circumstances, obviously. We don't have a policy that says you 
must sell the stock after a certain period of time.
    Mr. Miller. There is no policy. Then you are saying it 
should continue to exist forever, no?
    Mr. Seal. No. I am not saying that.
    Mr. Miller. But if you serve on the board, then you can't 
sell it because you're going to have insider information. 
You've got a conflict there is seems like.
    Mr. Seal. We can follow up, if you'd like, with something 
for the record on that issue, but we feel confident that there 
in fact is no conflict of interest.
    Mr. Miller. Should there be an arm's length relationship 
between the investment manager and the corporation? You seem to 
be saying no.
    Mr. Seal. There is an arm's length in terms of their 
service on the board. We do not direct the investment manager 
in terms of decisions they would make sitting on a board of 
directors.
    Mr. Miller. But if he serves on the board, then there is no 
longer an arm's length in the management of the company, right? 
That's what I'm getting confused about. What's the difference?
    Mr. Seal. The pension plan which they represent owns stock, 
in this case it is a successor company, and the charge of the 
investment manager is to protect the interests of those 
pensioners in terms of any decisions made by the board of 
directors.
    Mr. Miller. And you're saying the policy is not to sell 
that stock?
    Mr. Seal. No.
    Mr. Miller. I thought the policy was as soon as feasible 
the assets ought to be liquidated, no?
    Mr. Seal. No.
    Mr. Miller. That's not the written policy.
    Mr. Seal. No, that is not the policy.
    Mr. Miller. Who oversees how long that person could stay 
there. I mean, you could make a career out of this, right? You 
could get on the board and stay there. Do you want a degree of 
independence on that rather than completely under your control?
    Mr. Seal. Theoretically, the investment manager could sit 
on the board of directors for a long period of time. We have 
not had that experience to date. This is a way for PBGC in 
effect, if the investment manager holds a large amount of stock 
in a company, to protect the pensioners' interest.
    Mr. Miller. If I were the stock manager, I would want to 
diversify those holdings, wouldn't you, if it's UTC? If you can 
sell some, go ahead and invest in some other.
    Mr. Seal. Our portfolio is very broad, very diversified. As 
I mentioned, we have about 40 percent of our portfolio in 
equities, about 60 percent in fixed income securities, 
primarily treasury bonds.

                        fiduciary responsibility

    Mr. Miller. Shouldn't the trustee for this particular fund, 
the UTC one, I'm using that as an illustration, shouldn't he 
try to diversify his investment for the pension? No?
    Mr. Seal. Let me ask our Chief Financial Officer Tony 
Calhoun to answer that.
    Mr. Miller. Okay. Please give your name for the record.
    Mr. Calhoun. My name is Anthony Calhoun. I am the Chief 
Financial Officer for PBGC. Certainly, Mr. Chairman, there is 
an arm's length relationship between us and Pacholders in that 
we do not direct them to sell or how to vote. Their job is to 
maximize our investment. Usually when we get stock like this, 
we have received it in lieu of money for a plan that has 
failed. And so this is what we have as part of that situation. 
We have received some stock in lieu of many millions of dollars 
of unfunded liability.
    We have fiduciary responsibility to all those pensioners. 
Our objective only is to maximize that investment. It will 
invariably be sold at some point, but we do not direct them 
like please liquidate in a fire sale. That's not our objective. 
Our objective is to get maximum value and recover as much of 
that unfunded liability as we can.
    Now there is a judgement call, and that's what we pay 
Pacholders for, to make a judgement about when the value is 
approximately as high as we can get it. We pay them for their 
financial expertise and advice and on some occasions they 
choose to sit on a board when there is a large amount of 
holdings. As all people who sit on boards, they have an 
interest in the company.

                            sec regulations

    Mr. Miller. Would you be governed by SEC regulations? If 
somebody from Pacholders now serves on the board, he has inside 
information as far as when to sell the stock. I'm not a lawyer, 
I have some stocks but not a lot, certainly not in this 
company, but there is a conflict of interest there, isn't 
there?
    Mr. Calhoun. He is subject to SEC. Like, when he chose to 
get on the board, he would have to notify, and when we have 
certain holdings and so forth, he would follow all SEC 
regulations.
    Mr. Miller. It sounds like you're opening yourself up to 
some major SEC problems there. But I'm not the lawyer andyou 
are, so you know better than I.
    Mr. Calhoun. We've been through this for some time and it's 
not been a problem.
    Mr. Miller. Well, I'm sure you have but I see real 
conflicts there. I don't want to belabor this point, and I'm 
taking up my time.
    Mr. Calhoun. I don't want to belabor it either, but the big 
issue you have to keep in mind is we do have a fiduciary 
responsibility to maximize that asset as best we can and for 
the pensioners whose money we're holding.
    Mr. Miller. Let me let Mrs. Lowey ask some questions. I'm 
still confused and maybe I can get a better explanation later.
    Mrs. Lowey.

       pbgc investment manager on a company's board of directors

    Mrs. Lowey. I had another question, but I appreciated your 
asking your question because the more you asked it the more 
confused I was. I would follow up with one thing just to 
clarify. Are you saying, Mr. Seal, a member of the PBGC board?
    Mr. Seal. No.
    Mrs. Lowey. A member of the pension board?
    Mr. Seal. A member of a company's board of directors.
    Mrs. Lowey. May be a member of what board? PBGC or another 
pension----
    Mr. Seal. May be on the board of directors of another 
private company where we----
    Mrs. Lowey. Managing a pension?
    Mr. Seal. No. No, not managing a pension. It is our pension 
manager who sits on that company's board of directors because 
as part of a settlement the PBGC was given stock, and it was a 
sizeable amount of stock to the point where the investment 
manager was entitled to have a seat on the board of directors.
    Mrs. Lowey. I just want to say I would be interested in 
further discussions of this, Mr. Chairman. It seems to me a 
direct conflict of interest. I wonder whether the pension 
manager wouldn't recuse himself of any decisions related to his 
company. This seems to me to be a conflict of interest in terms 
of buying and selling and maintaining the pension.
    Mr. Seal. We're dealing with probably four different 
entities.
    Mrs. Lowey. Maybe we should discuss this.
    Mr. Seal. I would be glad to follow up if you would like.
    [The information follows:]


[Page 517--The official Committee record contains additional material here.]



    Mrs. Lowey. So perhaps I should deal with some other 
things. I understand what you're saying and I'm totally 
confused as well. I look forward to the explanation.

                         kennedy-Kassebaum bill

    Ms. Berg, I thank you for your presentation. You mentioned 
that you have a brochure, which I saw although I must admit I 
didn't read it carefully, regarding the new Kennedy-Kassebaum 
bill. I imagine you must be getting an enormous amount of calls 
related to that. As I understand it, although that bill 
preserved the person's option of buying insurance, I shouldn't 
say option, person's right to buy insurance even though they 
had a pre-existing condition, it did not regulate in any way 
the rate of that insurance.
    To me, this is open field day for the insurance companies. 
I would be very interested if you have had many calls, 
thousands of calls. In other words, if a person has a policy 
for $1,000 a year, whatever, she or he may have the right to 
continue to purchase insurance with a pre-existing condition. 
But are there any guidelines? Do you have any regulatory 
authority? Or, can the insurance company decide to give her 
insurance, change the terms of that insurance, and charge her 
$10,000 a year? And what can you do about it?
    Ms. Berg. There are two major kinds of situations. One is 
when someone, because they've changed their employment, is 
moving from their current situation into another group health 
care plan. One of the provisions of the Kennedy-Kassebaum bill 
is that in that situation you cannot discriminate against that 
person, because of their pre-existing condition or their health 
status, in how you treat them in the new group plan.
    The other situation is when someone moves into the 
individual market because they've perhaps moved to a company 
that doesn't offer insurance to its employees. That's where the 
issue becomes one of what is going to happen in the market. 
There were estimates done while the bill was under 
consideration that suggested that the impact probably wouldn't 
be that great. We really won't know until we begin to see the 
movement of people into the individual market. The first 
provisions of the Kennedy-Kassebaum bill take effect this July 
and then plans come into compliance about a year after that. We 
will then start to see how this all operates.
    Mrs. Lowey. So you are saying that if they go into another 
group plan, even though they have a pre-existing condition, 
they may not be discriminated against and their rate is the 
same as everyone else in that company?
    Ms. Berg. Yes. They could not be charged a higher rate 
because, for instance, they have a particular health problem.
    Mrs. Lowey. But if they go into the individual market, 
they----
    Ms. Berg. They would have to be charged whatever the 
premiums are in the individual market. What is unknown--and 
again, the original estimates were that people expected the 
impact to be fairly slight--is what will happen to the overall 
individual market as a result of people moving back and forth. 
It will just take some time to see how all that sorts out.
    Mrs. Lowey. What are your responsibilities in that regard? 
In other words, you say it hasn't been implemented as yet so 
you do not have many calls--or do you?
    Ms. Berg. So far, the additional calls that we got after 
the passage of the bill from October until I think the end of 
December, that initial couple of months when there was a lot of 
press about the bill having passed, we got something close to 
11,000 calls. Most of those callers were asking when does this 
take effect, will it help me, I'm about to move from one job to 
another, what will this mean for me if I have Cobra coverage; 
those sorts of things. When we announced the first regulations, 
which we issued jointly with HHS and Treasury, last week, in 
one single day after that we got 1,100 calls.
    We anticipate that as the provisions begin to take effect 
we will get many questions of this kind and others. That's the 
reason for trying to anticipate a lot of this by putting out 
the booklet to give people examples and answers to their 
questions so they will know how the legislation affects them.
    Mrs. Lowey. In other words, if, in fact, a person is in a 
particular category of people and the only difference is that 
person has a pre-existing condition, and if that person has an 
escalated rate of insurance, would you have the right to react 
to that, or would it require other legislation?
    Ms. Berg. There would be enforcement. By whom depends on 
the exact situation. If it is a group plan where we have 
enforcement authority, it would be us. If it is in an insured 
plan where enforcement occurs at the State level, that's where 
it would occur. If it is in the individual market, it would be 
HHS. So it depends on the circumstances. But, yes, there would 
be someone who could step in and help.

                    mental health parity provisions

    Mrs. Lowey. I would be very interested in hearing about 
what kind of actions have come to your attention in this 
regard.
    The other area where I believe you have enforcement 
authority is the mental health parity provisions. First of all, 
when will the provisions be finalized? Do you think they are 
adequate for the real world out there? As I understand the 
bill, it just did not go far enough in my judgement. If we're 
talking about parity, then should an insurer be able to limit a 
client to 20 sessions in a year, for example? You wouldn't 
limit someone to, let's hope they don't, 20 broken legs in a 
year or 20 visits to an orthopedist in a year. Perhaps you 
could explain that.
    Ms. Berg. There were discussions of this sort as this 
legislation was moving along as well as compromises made. We 
will put out regulations that enforce the bill as it passed and 
then we will begin to hear from people as to their experiences 
under that law. We haven't issued those regulations yet. The 
provisions of that bill take effect next January. We will be 
working on the regulations and will have them out in time. As 
far as what the actual experience will be and whether you will 
hear from your constituents that more needs to be done, I think 
we will find that out after we see how well the provisions of 
this bill operate.
    Mrs. Lowey. Is it your understanding that based upon the 
legislation, or is that still to be decided, an insurance 
company can limit the number of visits to a provider of mental 
health services?
    Ms. Berg. My understanding is that, just as with physical 
kinds of conditions, you do have discretion in plan benefit 
design, yes.
    Mrs. Lowey. Let me say this, I look forward to seeing the 
regulations because I think there is a lot of confusion. People 
were hopeful that the Kennedy-Kassebaum would bring about real 
mental parity. I think it took a step in the right direction 
but, from the information I have, perhaps it is not adequate. 
So before we comment, maybe we should see the regulations.

                          pension underfunding

    I just want to say to Mr. Seal, having been here in this 
committee in 1993 and being astounded at a potential S&L 
disaster again, I certainly want to congratulate you and all 
the people who were involved. I wish the public who remain 
skeptical of ``bureaucrats,'' people in Government could see 
that this is a case where there is real success, and I thank 
you. However, I understand that the surplus does not mean that 
all pension plans are adequately funded. Perhaps you can update 
us on the extent to which certain pension plans are still 
under-financed.
    Mr. Seal. Thank you for those comments. In terms of overall 
pension underfunding, about two-thirds of the defined benefit 
plans across the country are very healthy. But we do have what 
has been a rather persistent core of underfunding amongst the 
other third of the pension plans. Our latest figures are really 
as of the end of calendar 1995, and that indicated that we had 
about $64 billion in underfunding.
    Mrs. Lowey. Billion?
    Mr. Seal. Billion. That figure went up from 1994 because of 
interest rates. When interest rates fall, as they did in 1995, 
pension underfunding tends to go up. We don't believe that's a 
long-term situation. We do believe, and we think we're seeing 
it already, that the Retirement Protection Act of 1994 has put 
in the right incentives for healthier pension funding and that 
over the next ten to fifteen years you will see that 
underfunding number consistently going down.
    Mrs. Lowey. Thank you very much.

                     utc pension plan underfunding

    Mr. Miller. I'm still a little confused and maybe you can 
clarify a couple of things for me. This company I'm familiar 
with, UTC went bankrupt or filed for reorganization and the 
pension I guess was underfunded and so the pension fund got a 
block of stock. Is that a correct understanding?
    Mr. Seal. That's correct.
    Mr. Calhoun. That was in lieu of about $90 million of 
unfunded liability today.
    Mr. Miller. How much stock did they get?
    Mr. Calhoun. I think it was about 15 percent of the 
company, something like that.
    Mr. Miller. So the question is now, what do you do with 
that? The pension fund is independent from the company, for the 
former UTC employees prior to bankruptcy?
    Mr. Calhoun. What has happened is we have the liability 
now.
    Mr. Miller. Right.
    Mr. Calhoun. Now as part, we receive some monies or 
whatever assets the plan has, we now have incorporated into our 
assets. They are not a separate entity, they are just rolled 
into our assets. We also have the liability of paying those 
pensioners the rest of their lives.
    Mr. Miller. The ones prior to the bankruptcy?
    Mr. Calhoun. Right. Now the difference between what we 
received and what we're going to have to pay is approximately 
$90 million. We also received some stock. The stock, depending 
on how much we ultimately get for it, will make up some of that 
difference. Our objective, so that we don't have to pay that 
$90 million out of our other assets or out of our premiums, 
would be to maximize the return on that as best we can. 
However, we do not do that directly with any company because we 
are a governmental entity and we are sensitive to some of the 
things you are concerned about.
    We do have to work with these assets when we get them this 
way to make sure that we get the best value that we can. That 
is what we are attempting to do. We do not direct how the 
person should vote if they are on the board, we do not tell 
them seek a seat, don't seek a seat, they make a judgement, but 
they are also trying to maximize the return on our asset. As we 
are in that capacity, we are suddenly now an investor, just 
like Warren Buffet or anybody else, trying to make a decision 
as to if I have a sizeable position in a company, I want to 
maximize my return. Any investor wants to do that.

                   Trusteed Assets Liquidation Policy

    Mr. Miller. Right. But part of your policy, as far as 
investment policy, is limited and marketable assets received 
from terminating plans for the settlement of PBGC's claims will 
be liquidated as soon as feasible. That's not applicable 
anymore then, is that right?
    Mr. Calhoun. No. It says ``feasible,'' and by feasible, 
you're trying to get the maximum return you can get.
    Mr. Miller. If the trustee is going to be liquidating that 
stock, selling that stock, and he serves on the board, there is 
not a conflict with inside information with SEC regulations? 
Are you exempt from SEC regulations?
    Mr. Calhoun. No. What is happening here, he is in the same 
position as any other investor, anybody else that owns stock in 
a company that has a sizable position that also has a board 
seat. He can decide to sell or not to sell.
    Mr. Miller. ``As soon as feasible'' is as long as the 
trustee wants to keep the job.
    Mr. Calhoun. Unfortunately, there is always another one out 
there. So they don't have to make that decision to keep a job.

                             PBGC Oversight

    Mr. Miller. Okay. I'm still confused a little bit.
    I do have concern of oversight. Who oversees your agency? 
You have three cabinet secretaries?
    Mr. Seal. Yes.
    Mr. Miller. They are obviously very busy people so they 
really don't have time to oversee. Who really----
    Mr. Seal. We have a board of directors made up of the 
Secretaries of Labor, Commerce, and Treasury. If they cannot 
attend, they send representatives who are at the assistant 
secretary level. We also obviously have oversight by the Office 
of Management and Budget. We have an independent advisory 
committee that reviews our investment strategies and our 
portfolio, meeting once every two months. We have, as I 
mentioned in my oral testimony, independent audits every year 
done now by a private CPA firm.
    Mr. Miller. As Mrs. Lowey has said, you've come a long way 
from where you were a few years ago, so I commend you on that.
    Mr. Seal. I appreciate that.
    Mr. Miller. Actually, what is happening with the 401(k) and 
such, I think hopefully we can continue to expand that.
    What percentage of people are covered now? Did I hear 45 
percent of the American people now have some type of retirement 
other than Social Security?
    Ms. Berg. Of the private sector workforce, yes.
    Mr. Miller. So if you take the total workforce including--
--
    Ms. Berg. If you take the total workforce, it is 50 
percent.
    Mr. Miller. Okay. Fine. So that number has gone up at a 
steady rate, has it, over the past?
    Ms. Berg. It went up at a steady rate after the passage of 
ERISA and for the last decade or more has pretty much levelled 
off. That was one of the major reasons for the interest in the 
Small Business Job Protection Act last summer and instituting 
the new ``SIMPLE'' plan, a very simple pension plan. We're 
hoping to get small companies involved because that is where we 
find less coverage. Three out of every four employees of a 
large company have pension coverage. Only one out of four in 
companies with less than one hundred employees has pension 
coverage.
    Mr. Miller. Are IRAs considered?
    Ms. Berg. No, we are not counting IRAs for this purpose. 
But there, too, if you look at people who are eligible to 
contribute to an IRA, less than 10 percent do. So, again, we're 
trying to get these participation numbers up through our 
education campaign.
    Mr. Miller. Thank you all very much for coming here today. 
We appreciate your testimony.
    The subcommittee will take a brief recess.
    [The following questions were submitted to be answered for 
the record:]

[Pages 523 - 549--The official Committee record contains additional material here.]


                                          Thursday, April 10, 1997.

                      OFFICE OF INSPECTOR GENERAL

                               WITNESSES

CHARLES C. MASTEN, INSPECTOR GENERAL
PATRICIA A. DALTON, DEPUTY INSPECTOR GENERAL
F. M. BROADAWAY, ASSISTANT INSPECTOR GENERAL, OFFICE OF INVESTIGATIONS
JOHN J. GETEK, ASSISTANT INSPECTOR GENERAL, OFFICE OF AUDIT
SYLVIA T. HOROWITZ, ASSISTANT INSPECTOR GENERAL, OFFICE OF MANAGEMENT 
    AND COUNSEL
JAMES E. McMULLEN, DEPUTY ASSISTANT SECRETARY FOR BUDGET
STEVEN COSSU, DEPUTY ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS

    Mr. Miller [assuming chair]. Good afternoon. As you heard 
before, Mr. Porter has a back problem, which is a very painful 
thing, and he is unable to attend hearings this week, so I have 
been asked to sit in.
    Let me welcome you. You have a rather lengthy statement; 
I've glanced at it, and if you could kind of paraphrase it; in 
the late hour, no other Member is here.

                             Introductions

    Mr. Masten, welcome, and introduce the people with you, 
too.
    Mr. Masten. Thank you. To my right is Ms. Patricia Dalton, 
the Deputy Inspector General; and to her right is Mr. Steven 
Cossu, the Deputy Assistant Inspector General for 
Investigations; to my left is Mr. John Getek, the Assistant 
Inspector General for Audit; and to his left is Ms. Sylvia 
Horowitz, the Assistant Inspector General for Management and 
Counsel.

                           Opening Statement

    Good afternoon, Mr. Chairman and members of the 
subcommittee. Thank you for inviting the Office of Inspector 
General to discuss our appropriations request for fiscal year 
1998, as well as the management and programmatic issues and 
challenges facing both the Department of Labor and the OIG. I 
will summarize my statement and ask that it be entered in its 
entirety for the record.
    Mr. Chairman, I know that Congress--and this subcommittee 
in particular--are very concerned and committed to ensuring 
that the programs of the Department of Labor are effective and 
meeting their mission, and I share that concern and commitment. 
As you are aware, the Department of Labor faces numerous 
challenges in carrying out its mission over the next several 
years. Chief among these challenges will be the Department's 
ability to comply with the Government Performance and Results 
Act, known as GPRA, which becomes effective this October.
    In our effort to do our part in meeting this challenge, and 
consistent with our responsibility under the IG Act, my office 
is in the process of drafting a strategic plan. This plan 
outlines some of the very ambitious goals for the next few 
years. In the context of our appropriations request for fiscal 
year 1998, which totals $47,046,000 and 450 FTEs, there are 
several major components within this plan which will require 
sufficient resources to be implemented effectively.
    Number one, we intend to ensure that our audit and 
investigative activities help the Department's programs and 
services reach and maintain an optimal level of performance; 
address key issues of interest to the Congress; and ensure that 
the taxpayers' interests are served. In doing this, we intend 
to expand our traditional audit and investigative functions to 
increase our focus on improving program performance. This 
includes providing consultation and technical assistance to the 
program agencies within the Department.
    Number two, we intend to maintain--if not increase--our 
level of effort in combatting labor racketeering.
    Number three, we intend, through our evaluation and 
inspection program, to conduct quick, objective, and reliable 
reviews of programs and operations to assist the Department and 
the Congress in ensuring program performance and efficiency.
    Our ability to achieve these goals will largely be 
determined by the support that we receive from Congress.
    In an effort to conserve time, I have documented very 
detailed concerns in my full statement, and at this time my 
staff and I are prepared to answer any questions you or any 
member of the subcommittee may have.
    [The prepared statement and biography of Charles Masten 
follow:]

[Pages 553 - 568--The official Committee record contains additional material here.]


                          Wage and Hour Cases

    Mr. Miller. Last year we asked a question about Wage and 
Hour and--they were before us this morning, the Employment 
Standards Administration. But the question is that you were 
going to evaluate how they select--there was a concern that 
they could be using selective policies that may not be as 
objective as they should be. Were you evaluating that?
    Mr. Masten. Yes, Mr. Chairman, we did, and Mr. Getek is 
prepared to give you a detailed statement.
    Mr. Getek. Sir, we looked at the wage and hour process. We 
talked to 281 executives and asked them questions about how the 
process worked, how they made the selections, how they 
responded to complaints, and how they handled selected areas. 
We also took a random sample of 330 cases to look at how they 
dealt with the various cases. We found that approximately 255 
were based on complaints and 75 were directed cases.
    We found no instance of any bias in their selection. When 
they handle the complaints, they handle those on a ``first in, 
first out'' basis, which is primarily what comes into the 
organization.
    For the directed cases, the people who are in a managerial 
position, and I believe some quality teams, they sit around a 
table and decide what some of the directed areas will be, and 
from that discussion they make their selection. Once they 
decide they're going to do a directed case, it is forwarded to 
the actual Wage and Hour offices, who then make a determination 
as to where specifically, they're going to go. And how do they 
do that? They look at telephone books; they might look at Dodge 
reports, or whatever else is out there. So they really don't 
know exactly who those employers are in a particular area.
    Mr. Miller. There was an abuse out in California a couple 
of years ago with a Regional Director of the Department of 
Labor who was terminated. So there is a concern there, and--
these are the directed cases; as the gentleman said this 
morning, for example, they're going to target the nursing area.
    Mr. Getek. Yes, sir.
    Mr. Miller. So that's an arbitrary sort of decision. It's a 
low wage, so they're just going to go after it? Is that their 
policy? And that's okay, I guess?
    Mr. Getek. Well, it's primarily because it's low wage.
    Let me also add that we were looking at what they do when 
they collect back wages, the civil monetary penalties, and 
within that process we looked at 672 case files just to see 
what was happening in terms of the collection process. What we 
found there was that 77 percent of those cases were complaint-
driven, and 23 percent were directed. What we concluded was 
that we found no evidence of selection being made on anything 
other than the results of recent investigations, and most of 
the recent investigations arecomplaint-driven. So we found 
nothing that would suggest that they were targeting anybody for any 
reason other than that there was a need, that people were in a low-wage 
industry.
    Mr. Miller. So all low-wage companies are targeted?
    Mr. Getek. Well, that's primarily where they believe they 
should devote their resources.

                              davis-bacon

    Mr. Miller. Okay.
    Also, I think I saw a report from you about Davis-Bacon. 
Just shortly before this, Dr. Abraham of the BLS was here and I 
was asking her why BLS couldn't do that job. They have a very 
high level of integrity and respect--I mean, they may not 
exactly collect that data now, but they certainly have the 
ability. I think you came up--there were problems with the 
collection of Davis-Bacon information, is that right?
    Mr. Masten. Mr. Getek is also prepared--I brought my 
expert. [Laughter.]
    Mr. Miller. That's the way to do it.
    Mr. Getek. Yes, sir. We found problems with the 
methodology, the way the WD-10--which is the basic source 
document--comes in. Anybody who wants to send that information 
in from the affected area has the opportunity.
    What we said is that when we looked at the methodology, BLS 
selects people that they're going to gather statistics on in a 
statistical manner, and certainly it's on a voluntary basis, 
but at least the selection is done that way in an unbiased 
manner, and those who are sent the forms have the opportunity 
to send them in, whereas the current system that Wage and Hour 
uses, if they are looking for this information, anybody who is 
in that area can send it in, as well as third parties who have 
an interest. So it was similar to ``if you don't vote, you 
don't count.'' That's kind of the way that it was explained to 
us.
    Mr. Miller. So do you come up with recommendations on how 
it should be changed?
    Mr. Getek. Yes, sir. We suggested that they consult with 
the Bureau of Labor Statistics to determine what would be the 
best methodology, and to pursue that. And they said, in 
response to the audit report, that they would consider that.
    Mr. Miller. Do they use a modal wage? Are you familiar with 
that, rather than a median?
    Mr. Getek. I'm not exactly sure. I know that on the WD-10s 
there are wages for a particular craft. I would assume that it 
would be averaged out. The problem that could also come into 
play is that if there are only a few people who submit the form 
in the craft, that could affect the wage for a lot of folks. So 
in terms of averaging, it would seem you would need a number of 
people to be in there to get the average, and that's not always 
the case.
    Mr. Miller. Dr. Abraham was saying that she thought--she 
wasn't absolutely certain--that was a modal issue. So if it's a 
mode that you're working with, the most frequently occurring--
if, for example, the labor rate is $15 an hour, and other wages 
could be $14 or $13 or $17, but if it's the union wage, it 
would be the most frequently occurring one, so it would 
automatically be the one that pops up. I didn't realize that 
was the methodology. A mode is useful on certain----
    Mr. Getek. There is average, mode, and mean, and I just 
don't know what they do.
    Mr. Miller. You all wouldn't look at the accuracy of that 
type of number versus a median number or something?
    Mr. Getek. What we found was that the Wage and Hour people 
who processed the WD-10s did a fairly good job of screening out 
things that did not belong in there, for whatever reasons. I 
don't know whether they used the mode, the mean, or the 
average.

                 government performance and results act

    Mr. Miller. Let me go on.
    The Government Performance and Results Act, as you 
mentioned, is supposed to take effect this year. Give us your 
overall assessment of where the Department of Labor stands with 
respect to implementation of that act, and tell us what the 
role of the Inspector General is in this process.
    Mr. Masten. Presently, the Department is educating the 
agencies within the Department on exactly what the intent of 
the act is all about, having them submit plans. I believe there 
are two pilot programs in the Department that are on record now 
that OMB will be looking at.
    As far as my office is concerned, we have an Office of 
Performance Audits as well as an Office of Evaluation and 
Inspection that are in a position to provide technical 
assistance in helping them come up with performance measures 
that will be needed in order to carry out an effective GPRA 
plan.
    Mr. Miller. So will additional resources be used for this?
    Mr. Masten. We don't have any additional resources. The 
resources that we have in place now, we just prioritize those 
to assist in this endeavor.

                           labor racketeering

    Mr. Miller. In your prepared opening statement you 
expressed concern about the adequacy of the budget for your 
Office of Labor Racketeering. Tell us what the priorities are 
for that office for the coming year, and tell us why you are so 
concerned about the funding for that office.
    Mr. Masten. All right. I will defer that question to Mr. 
Cossu, who is the Deputy Inspector General for that office.
    Mr. Cossu. Mr. Chairman, the Inspector General's Office has 
set priorities for the Labor Racketeering Division, primarily 
to weed out and eliminate, as much as possible, the influence 
of organized crime in unions and affiliated employee benefit 
plans. Paramount in that is our concern with respect to the 
pension arena, and the intent to focus in on the service 
providers within that arena, which have increasingly been 
involved in corruption within those plans.
    Another area of concern has to do with the health care 
provisions which employee benefit plans offer. We have concerns 
with respect to bogus unions which are created specifically to 
deal with that service. They are set up specifically to sell 
and market medical insurance.
    Those are the primary concerns we have.
    Mr. Miller. We have a series of questions, and I am sure 
some of my colleagues will have too, that we will submit in 
writing to you, and you can respond.
    Mr. Masten. We'll get back to you on them.
    Mr. Miller. Thank you very much for being here today.
    The subcommittee stands adjourned.
    [The following questions were submitted to be answered for 
the record:]

[Pages 573 - 602--The official Committee record contains additional material here.]


                                          Wednesday, April 9, 1997.

                        CONSOLIDATED MANAGEMENT

                               WITNESSES

PATRICIA WATKINS LATTIMORE, ACTING ASSISTANT SECRETARY FOR 
    ADMINISTRATION AND MANAGEMENT, DEPARTMENT OF LABOR
EDMUNDO A. GONZALES, CHIEF FINANCIAL OFFICER, DEPARTMENT OF LABOR
JAMES E. McMULLEN, DEPUTY ASSISTANT SECRETARY FOR BUDGET, DEPARTMENT OF 
    LABOR
MARSHALL S. SMITH, UNDER SECRETARY, DEPARTMENT OF EDUCATION
THOMAS P. SKELLY, DIRECTOR, BUDGET SERVICE, DEPARTMENT OF EDUCATION
KEVIN L. THURM, DEPUTY SECRETARY, DEPARTMENT OF HEALTH AND HUMAN 
    SERVICES

                           Opening Statements

    Mr. Dickey [assuming chair]. I believe that each of you has 
a prepared statement, and we will receive a summary of each of 
your statements, beginning with Labor, then HHS, and Education, 
and then proceed with questions.
    Are you ready to go? Who starts? Ms. Lattimore.
    Ms. Lattimore. Yes, sir.
    I am pleased to appear before you today to discuss 
management issues at the Labor Department and to summarize some 
of the major accomplishments of the Department during this 
Administration.
    With me today are Edmundo Gonzales, our Chief Financial 
Officer, and Jim McMullen, our Deputy Assistant Secretary for 
Budget.

                 government performance and results act

    As we approach the 1999 implementation deadline for the 
Government Performance and Results Act, there is a great deal 
of discussion about how the Government goes about achieving 
results. At DOL we like to think that the achievement of 
results has always been our guiding principle. The management 
approach established by Secretary Reich has allowed us to hit 
the ground running on Results Act implementation.
    As you know, the Department of Labor contains agencies with 
a variety of statutory obligations. One of the foundations to 
our success in our first term was on exercising departmental 
leadership to craft these disparate responsibilities into a 
unified whole. Our approach has been:
    To assess our progress from the previous year;
    To analyze the needs of our customers and other 
stakeholders;
    To leverage our resources by fostering interagency 
coordination and participation, both within DOL and with other 
Cabinet agencies;
    To create performance agreements between each agency and 
the Secretary which identify tangible outcomes which are, in 
turn, reflected in the Secretary's performance agreement with 
the President; and finally,
    By aligning our resources for the achievement of our goals 
by building a budget that supports our strategy.
    I believe that the management approach established by the 
Secretary anticipated the Results Act quite nicely, and we have 
many positive accomplishments to show for it.

                         ``no sweat'' campaign

    One example of how a carefully executed strategic plan can 
produce dramatic results is our ``No Sweat!'' campaign against 
sweatshops in the garment industry. We are seeing genuine 
results from our innovative strategy, which drew from many DOL 
agencies. In monitored areas, we found that the percentage of 
garment firms violating minimum wage requirements dropped 18 
percent since 1994, and firms found violating overtime 
requirements dropped 23 percent.
    Working with the White House, the apparel industry, unions 
and consumers, we have helped forge an ``Apparel Industry 
Partnership'' which is working to ensure that the goods they 
buy are made under sweatshop-free conditions. This campaign won 
national recognition and the Ford Foundation/JFK School of 
Government's Innovation in Government Award.

                           america's job bank

    To help Americans get their next job, we created what we 
believe has been the enormously popular America's Job Bank, the 
largest and most diverse job bank on the Internet. In addition 
to Internet access, America's Job Bank is available at nearly 
2,000 local State employment services offices; at U.S. military 
transition offices throughout the world; at thousands of 
multimedia computer kiosks throughout the Nation; and at 
America's colleges. The number of hits on the America's Job 
Bank has expanded dramatically in one year, from 3.7 million in 
January, 1996 to 12.2 million this past January.
    In conjunction with the Education Department, we have 
helped Americans get their first job by involving 150,000 
companies and over a half-million high school juniors and 
seniors in programs made possible by the School-to-Work 
Opportunities Act, and by developing skills standards for a 
wide range of industries and occupations through the National 
Skills Standards Board.

                            welfare-to-work

    As a result of its unique expertise in developing the 
Nation's workforce, the Department will serve as a leader in 
facilitating the Federal Welfare-to-Work effort for the entire 
Government. We are expanding existing programs of the 
Employment Training Administration that serve welfare 
recipients and leveraging resources by involving, among others, 
the Veterans' Employment and Training Service and the Women's 
Bureau. Additionally, we have developed resource guides and a 
Website to assist Federal agencies, as well as the private 
sector and others, to recruit and hire welfare recipients.

                       small business assistance

    The Department has undertaken a number of initiatives to 
assist small businesses. To provide compliance assistance tools 
for workers and small business owners, we are in the process of 
developing a series of what we call ``expert systems,'' our E-
LAWS project. These are interactive systems that embed complex 
information on regulations in a computer model and, through a 
series of fact-specific queries, guide the user to an answer to 
his or her specific question. We are currently engaged in a 
pilot to develop and integrate these expert systems as a 
primary tool for communicating information on regulatory 
compliance. Our fiscal year 1998 budget request includes $2 
million, which would allow us to take the next step in 
expanding this innovative initiative.
    Another small business effort involves OSHA, Occupational 
Safety and Health Administration, in greatly expanding its 
efforts to encourage small business participation in the 
regulatory process through consensus-based rulemaking, and the 
agency's small business stakeholders' outreach program.

                     management approach successes

    The success of our management approach encourages us to 
accelerate and expand it, as called for by the Results Act.
    Linking planning, performance and budgeting has not always 
flowed naturally for the Department or Government agencies. In 
our GPRA pilot phase, we learned that successful implementation 
required a cultural change among managers and staff that 
transforms their focus from one of process to that of 
performance and accomplishment. To foster this change, we have 
been engaged in an education campaign that drives this message 
home. We have placed primary emphasis on the need to develop 
high-quality performance measures, and we are focusing on a 
coordinated enforcement agenda among the different worker 
protection agencies. We are also pointing out to our agencies 
how success is fostered by coordinating their plans with other 
agencies with similar missions.
    The Results Act calls for phased implementation, and at 
DOL, both OSHA and ETA were selected to participate in these 
pilot projects. As a result of the advantage this head start 
gave them, these were two of the agencies--along with 
thePension Benefit Guaranty Corporation--with whom we have already 
initiated consultation with this committee. We have found the 
consultation engaged in earlier this month to have been most 
constructive.
    We believe that the legacy of achieving results established 
by Secretary Reich leaves the Department well positioned for 
the successful implementation of the Results Act.

                          financial management

    In the area of financial management, the Department has 
taken major strides in the implementation of the Chief 
Financial Officers Act. With this committee's help, the role of 
the DOL's Chief Financial Officer has been clarified in a 
Secretary's Order. The new structure has been approved by OMB, 
and by the Inspector General, whose audit opinion states that 
the issue of the Department's compliance with the CFO Act could 
be closed upon final issuance of these regulations.
    The Inspector General's audit of the fiscal year 1996 
consolidated financial statement found that the principal 
statements fairly presented those funds over which the 
Department exercises direct control, with the exception of two 
audit scope limitations, both of which are beyond the control 
of DOL at this juncture.

                         information technology

    In the area of information technology, with the passage of 
Clinger-Cohen, we have established the position of the Chief 
Information Officer within the Department and are placing 
strong emphasis on achieving a structured and goal-oriented 
information technology environment. We have established and 
chartered a Capital Planning and Investment Board for 
information technology, which will bring high-level management 
focus to the Department's information technology environment in 
general, and the Year 2000 conversion effort in particular.
    To track progress and share information on Year 2000 
readiness, we have instituted two levels of monthly meetings in 
the Department, one with our Year 2000 project managers and 
another with the Department's information technology managers. 
To keep senior management involved and informed on an ongoing 
basis, Year 2000 status reports are provided to our Capital 
Planning and Investment Board at regular intervals.
    Through the combined effects of actions completed, those 
currently underway, and ongoing coordination and information 
sharing, we believe we are well on our way to meeting the Year 
2000 challenge.
    This concludes my prepared statement. We thank this 
subcommittee for the opportunity to discuss our accomplishments 
and achievements.
    [The prepared statement and biography of Patricia Lattimore 
follow:]

[Pages 607 - 618--The official Committee record contains additional material here.]


    Mr. Dickey. Mr. Thurm.

                    opening statement of kevin thurm

    Mr. Thurm. Good morning, Mr. Chairman. I am Kevin Thurm, 
Deputy Secretary of the Department of Health and Human 
Services. I am pleased to join you today to talk about what we 
have done--and will continue to do----to manage the Department 
more effectively and efficiently.

                      management priorities at hhs

    When we at HHS target our resources responsibly and 
innovatively, when we team up with our public and private 
sector partners, and act as tough, savvy managers, we can 
improve the efficiency of our Department and the health and 
well-being of the American people. And, with the flexibility 
provided by this subcommittee, that's exactly what we're doing.
    First, under Secretary Shalala's leadership, we are 
choosing priorities where we can make a real difference, and 
focusing on a critical bottom-line: results.
    Second, we are using the tools given to us by Congress to 
create a Department with better management and more 
accountability.
    And third, we are working across our Department, and in 
partnership with nonprofits, the private sector, and other 
Federal, State and local agencies, to get the job done.
    Mr. Chairman, let me give you a few concrete examples.
    First, the Child Support Enforcement Program is a 
partnership among HHS, 30 States and localities, and other 
stakeholders. In 1996 alone, this partnership collected $11.8 
billion from deadbeat parents, an increase of 50 percent since 
1992.
    Second----
    Mr. Dickey. What period of time was that?
    Mr. Thurm. Since 1992, we have increased child support 
collections by 50 percent.
    Mr. Dickey. Good. Okay.
    Mr. Thurm. Second, to combat Sudden Infant Death Syndrome, 
or SIDS, we teamed up with the American Academy of Pediatrics 
and the private sector to send a critical public health 
message: putting babies to sleep on their backs reduces the 
likelihood of SIDS. And today we are seeing real results. 
Between 1992 and 1995, SIDS deaths declined by 30 percent.
    Third, with Operation Restore Trust, several agencies 
within HHS teamed up with the Department of Justice, five 
States, the health care industry, and the public to fight 
health care fraud and abuse. In just two years, we have already 
obtained 69 criminal convictions for fraud or abuse and 
excluded 177 providers from the program. And for every one 
dollar invested in fighting fraud, we have saved ten dollars 
for the American taxpayers.
    That is the same type of results and accountability that we 
are demanding throughout the Department.
    Let me be clear: we are aggressively implementing the 
Government Performance and Results Act. It was the challenge of 
the Results Act that guided us during our fiscal year 1998 
budget process, when all our operating divisions submitted 
performance plans for at least one program--a full year ahead 
of schedule. Now we are reaching out to other agencies and 
organizations that share our goals, so that we can find new 
ways to measure and ensure performance in health and well-
being.
    And having just completed our draft strategic plan, we will 
soon be consulting with Congressional committees and our other 
partners and stakeholders. We plan to finish our extensive 
consultations in early June, analyze what we have heard, and--
as appropriate--incorporate these suggestions in a final plan 
by September 30th.

               financial and technological accountability

    But our commitment to accountability extends far beyond 
that. Mr. Chairman, at HHS we are committed to managing our 
budget responsibly. And we are doing it, in part, by 
implementing the Chief Financial Officer Act, which has 
significantly strengthened our Department's financial 
management. For example, we have increased the use of 
Government credit cards for small purchases from $25 million in 
1995 to over $38 million last year----
    Mr. Dickey. Small purchases of what?
    Mr. Thurm. Of goods, of supplies.
    Mr. Dickey. Medical supplies?
    Mr. Thurm. No. I think these are administrative supplies.
    Mr. Dickey. Okay.
    Mr. Thurm. Thereby cutting paperwork and saving money.
    We are developing a new centralized system so that we can 
better track $139 billion in grants and get the most out of 
every dollar.
    Early this summer, we will publish the first HHS Annual 
Accountability Report to show the public and the Congress where 
the money came from, where it went, and what we did to make 
sure it was spent effectively.
    And, to implement the Information Technology Management 
Reform Act, we have appointed a Chief Information Officer to 
strengthen the way we manage information technology. For 
example, we are consolidating 27 data centers into 4 data 
centers, thereby saving more than $57 million over the next 
five years. We are also ringing in the year 2000 by making sure 
all our information systems convert successfully. Of the $91 
million that we estimate this will cost, $76 million will be 
internally funded.

                          employee excellence

    Finally, Mr. Chairman, as we move forward to balance the 
budget and shrink our workforce, we are working to ensure that 
we don't lose the dedication, commitment, and creativity of our 
employees. That's why, last December, the Secretary launched 
her Quality of Worklife Strategy to improve employee 
satisfaction, improve training, and better manage change in the 
Department. And, that's why we will continue to work with our 
employees and with the Congress to give all Americans what they 
deserve: good health and well-being, and good Government.
    Mr. Chairman, again I want to thank you for giving me the 
opportunity to testify here today. I will be happy to answer 
any questions that you may have.
    [The following statement and biography of Kevin Thurm 
follow:]

[Pages 621 - 629--The official Committee record contains additional material here.]


    Mr. Dickey. Thanks to both you and Ms. Lattimore.
    Dr. Smith.
    Mr. Smith. Good morning, Mr. Chairman; good morning, Mrs. 
Northup. With me today is Thomas Skelly, who is Director of our 
Budget Service.
    Mr. Dickey. I know him.
    Mr. Smith. That's a good thing. [Laughter.]
    That's good for me. It's not good for him, I don't think. 
[Laughter.]

                  opening statement of marshall smith

    Mr. Smith. This morning I am going to describe briefly our 
progress in a few key areas of management, with a more detailed 
discussion contained in the written testimony that I am 
submitting for the record.
    President Clinton inherited a Department of Education that 
had long been criticized for its management weaknesses. A GAO 
report observed, shortly before the President took office, that 
``long-standing management problems hamper reforms at the 
Department.''

                             strategic plan

    One of the first steps in overcoming these long-standing 
management weaknesses was the development of a strategic plan 
for the Department in 1994, with four priorities driving the 
deployment of human and financial resources behind clear 
strategies for carrying out the reform. These priorities 
include:
    Helping States and communities to enable all students to 
reach challenging academic standards;
    Creating comprehensive school-to-work systems in every 
State;
    Ensuring access to postsecondary education and lifelong 
learning; and
    Transforming the Department into a high-performance 
organization.

                   government performance results act

    The strategic plan also helped inject discipline into the 
management process by requiring measurable performance 
indicators for each priority, a key step toward compliance with 
the Government Performance and Results Act.
    This early effort on performance indicators laid the 
groundwork for developing the program performance measures that 
we will be submitting with our 1999 budget request. The Office 
of Management and Budget has now approved performance measures 
for 17 of our programs, covering about 70 percent of our 
budget, and we have begun to consult with the subcommittee 
staff on these measures.
    The Performance and Results Act is a natural for the 
Clinton Administration, which came to office focused on getting 
results, as demonstrated by the Vice President's National 
Performance Review. One of the best examples of getting results 
at the Department is the dramatic reduction in the cost of 
student loan defaults. With help from Congress, we moved 
decisively to address this problem by reducing the default rate 
22 percent to 10.7 percent, and more than doubling collections 
on defaulted loans from $1 billion to $2.2 billion. As a 
result, the net cost of defaults dropped by more than three-
quarters, from $1.7 billion in 1992 to $400 million in 1996.
    GPRA will also help us measure the results of our programs, 
but the full story of program effectiveness will come only when 
it is possible to link those results with the costs of 
achieving them. This requires improvements in cost accounting, 
an area in which the Department has long been criticized for 
weakness.

                        management improvements

    In response, we are building our financial management 
systems from the ground up. The core of this effort is a new 
automated processing system which will integrate our payments, 
grants and contracts, and accounting systems into a single 
administrative and financial management system. Once fully 
implemented in 1998, the Department will be able to process 
grant applications and conduct business with vendors 
electronically; improve procurement processes; and produce more 
timely and accurate financial information for its program 
managers, program recipients, and the Congress.
    The Department is also demonstrating that improving 
performance and streamlining Government go hand-in-hand. Wehave 
reduced the size of our staff, cut the number of programs we 
administer, eliminated unnecessary regulations, and decreased the 
paperwork burden on our customers and staff alike. Meeting the 
President's commitment to reduce the size of the Federal Government was 
a special challenge, since the Department had already seen its 
workforce fall by nearly 40 percent since 1980. Nevertheless, the 
Department is ahead of schedule in reaching the 12 percent staff 
reduction called for by the President, thanks largely to a successful 
buyout incentive program. By 1998 we will have cut 571 FTEs from the 
1995 ceiling, or 90 percent of our goal.
    Each of President Clinton's budgets has included 
substantial numbers of program eliminations, phase-outs, and 
consolidations. With the help of this subcommittee we have 
succeeded in eliminating 64 programs, totaling roughly $625 
million.
    Because we also want our customers to focus on results in 
the form of higher educational achievement, and not on 
compliance with rules and regulations, the Department has 
eliminated 923 pages of regulations, or about 39 percent of our 
total.
    In addition, we have greatly expanded waivers of statutory 
and regulatory requirements that stand in the way of innovative 
reform efforts.
    We are eliminating paperwork and red tape through 
electronic data exchange and on-line communications by 
encouraging consolidated applications for Elementary and 
Secondary Education Act programs and by reducing reporting 
requirements.
    These steps permit States, schools, and teachers to focus 
on what really counts: educating students, not paperwork.

                         ed 1998 budget request

    To continue making changes like these, we are asking for 
$489 million in total discretionary budget authority for 
Federal administration in 1998, an increase of $25 million over 
the 1997 level.
    Mr. Dickey. What percent is that?
    Mr. Smith. It's a little bit more than 5 percent, 5.1 or 
5.2.
    The request includes $3.1 million for the ``One Pubs'' 
initiative, which would reinvent the way in which the 
Department produces and disseminates its publications, and 
provide one-stop shopping for customers seeking publications.
    The request also provides new resources for the recently-
established Chief Information Office, including $3 million to 
begin the modifications needed to make the Department Year 
2000-compliant.
    In conclusion, we believe we have a record to be proud of 
in managing the Department. The dollars provided by this 
subcommittee are critical to our continued success. I urge you 
to give careful consideration to our 1998 request for 
management, and I will be delighted to answer any questions you 
may have.
    [The following statement and biography of Marshall Smith 
follow:]

[Pages 633 - 641--The official Committee record contains additional material here.]


    Mr. Dickey. Thank you, Dr. Smith.
    Let me go down this quickly.

                            osha is working

    OSHA, Ms. Lattimore, is really working. The OSHA 
arrangement, I know, in my district and in my State--that the 
cooperation between business and labor is working. We owe a 
debt of gratitude to Joe Dear in that respect. That is working, 
and I hope we keep it going.
    I didn't understand in your report when you said something 
about ``hits.'' Is that a football term?
    Ms. Lattimore. The number of times that a particular home 
page on our Internet system is accessed.
    Mr. Dickey. Okay. I thought you were talking about a 
linebacker----
    Ms. Lattimore. No, no, no. [Laughter.]

                          reducing crib deaths

    Mr. Dickey. And Mr. Thurm, you talked about turning babies 
on their backs. The older they get, when they want to stop us 
from snoring, they get us off our backs; you understand that, 
don't you?
    Mr. Thurm. Yes, sir. [Laughter.]
    Mr. Dickey. When is the age when you start that?
    Mr. Thurm. The crucial period as I understand it, Mr. 
Chairman, is zero to six months.
    Mr. Dickey. All right. I'm past that. [Laughter.]

                          program eliminations

    Mr. Dickey. What you said about closing 64 departments, Dr. 
Smith----
    Mr. Smith. Programs, right.
    Mr. Dickey [continuing]. Programs, I mean--the problem that 
I see is that no one rushes up and says, ``Please cut my 
program,'' or, ``Please cut my department,'' and so forth, but 
I really believe you're in a patriotic mode when you're doing 
this thing, and it's not good for any of us. When I came on 
this committee--when I asked to get on it, they said, ``You're 
not going to like it. It's not like what we had before, because 
you're going to be saying no more than you're saying yes.'' But 
I think somewhere down the line we're going to get some impact 
in that respect, and people are going to say thank you for it.
    I think they are saying it now, but just to themselves, 
because we get so many ``hits'' in trying to do this.
    All right. Let me get to the form of this, the discipline.

                    federally funded data ownership

    I don't know who can answer this question. There have been 
several instances lately in which federally funded grantees 
have refused to release data supporting their findings. We saw 
it in the CDC research relating to firearms, and in EPA with 
respect to data supporting more stringent air quality 
standards. All of this data was collected using taxpayers' 
funds, yet there is some ambiguity as to who owns the data and 
whether or not there is public access to it.
    As officials of your respective Departments responsible for 
grants, grants policy, Paperwork Reduction Act, related 
activities and procurement, what is your Department's policy on 
ownership of data, the collection of which was paid for by 
Federal funds?
    Mr. Smith. I can start, if you'd like.
    Mr. Dickey. Yes, Dr. Smith.
    Mr. Smith. We haven't had any situations of this sort, so 
we are not covered under the problem at this point. All data 
that come to us--all data that are gathered through contracts--
are available immediately to us. They become, basically, public 
domain data after a period of time.
    Under our grants, we get submitted reports at the 
Department. We can look at any data that are gathered by our 
grantees. GAO can look at any data that are done in the area of 
oversight.
    The problem really hasn't occurred, the nature of the 
problem that you've described.
    Mr. Dickey. Well, we don't want it to occur. It's really 
remarkable to sit here on this side and say, ``Well, we'd like 
to see a copy of that report,'' and not get it year after year. 
The ownership is what the key is.
    Any other Departments want to comment on that?
    Ms. Lattimore. Like Education, we have not encountered a 
problem with that.

                   availability of data funded by hhs

    Mr. Thurm. We were one of the Departments that did 
encounter it, Mr. Chairman.
    Let me state the general policy, and then address the 
specific situation with the CDC research.
    The general Department policy is to make results of 
research grants available to the public. In addition, the 
Federal Government has the right to obtain, reproduce, publish, 
or otherwise use the data for Federal purposes.
    The issue in question, with the CDC researcher, is that the 
data was ultimately made available. That is our general policy, 
and we will continue that.
    Mr. Dickey. Well, just tell me why the public shouldn't 
have access to that as soon as it is collected. What is the 
rationalization?
    Mr. Thurm. Well, I think as a general matter, the 
researchers want to have some time to look at the data. But the 
public should definitely have access to the data.
    Mr. Dickey. Nobody is stopping, say, Dr. Kellerman from 
looking at the data?
    Mr. Thurm. That's correct.
    Mr. Dickey. If you give it out--what I'm saying is, just 
give me some kind of rationalization so we can go on to the 
next question. I mean, he's sitting there, looking at it; we've 
asked him year after year, and we're just now getting it. How 
is it hurting his work or the Department's work to also copy 
and release the information in the process?
    Mr. Thurm. It's not, Mr. Chairman.
    Mr. Dickey. Okay. Well, I agree with you. Thank you for 
your honesty.
    Mr. Smith. Mr. Chairman, if I may, there are a couple 
situations which you might imagine. One is if the data have 
anything to do with the Privacy Act; that is, if releasing the 
data does in fact violate the Privacy Act in some way or 
another. It's up to the investigator to protect the privacy of 
subjects in that regard.
    The second issue is that when you have collected data, 
often you take a good, hard look at it over a period of time to 
ensure that the data themselves are accurate. You don't want 
other people looking at it, because you know a lot more about 
those data, and you can make a judgment; if they are inaccurate 
or they are invalid for some reason, you want to be able to say 
that. You need to investigate and you need to look----
    Mr. Dickey. But doesn't that take away somewhat from the 
objectivity of it? The longer you sit there and hold it and the 
more you put it under a bushel, the more it looks like you're 
cooking the figures?
    Mr. Smith. Well, I think in the context of a grant, you are 
expected to produce the data and the results in a given period 
of time, and at that point, then, the data become available.

                 government performance and results act

    Mr. Dickey. Okay. Thank you.
    How are each of your offices developing performance 
standards under the Government Performance and Results Act, and 
what kinds of standards are you considering?
    Who wants to go first? Mr. Gonzales, do you have anything 
to say about this?
    Mr. Gonzales. Oh, yes. This is the most important thing we 
are working on right now.
    I came from private industry, where we had really made an 
effort to try and quantify nonfinancial results, and then tie 
the dollars to it so that we could do a better job of cost-
benefit evaluation of investments. I worked in this area in 
public schools so that we could do a better job of reinvesting 
the money into the programs that we felt were the core 
programs--not that the others were not good, but that we really 
needed to concentrate our focus because of the scarcity of 
funds.
    Essentially, that's what we're trying to do here. It's an 
iterative process----
    Mr. Dickey. It's a what kind of process?
    Mr. Gonzales. Iterative process. Essentially, it is 
improvement. You start out with a key set of assumptions about 
what are your mission and your goals; you test your first 
indicators to see if they are in line, aligned with those 
assumptions. What happens is that you find out you need to do 
some work on your mission and your goals.
    And then you start attaching the dollars to that, and then 
suddenly you have to go back and work again on the mission and 
goals, and then on the indicators. And essentially, that's the 
crystallization of improvement.
    We are at a place now where I think our more mature 
programs understand what their performance indicators are. How 
those internal indicators relate to the societal outcomes is 
quite a debate. The accounting piece is very difficult, the 
marrying of the dollars to----
    Mr. Dickey. Are you saying that this is not altogether 
scientific?
    Mr. Gonzales. Sir, this is an art. This is not a science.
    Mr. Dickey. All right. Okay.
    Mr. Gonzales. And the idea here is that you go back and 
forth until you get some way to convey what is happening with 
your program, and what are you getting for it.
    The other part of it that is very difficult is to make sure 
that all the key stakeholders understand that this is an art 
form, that you are working and trying to get improvement and 
purification of data so that everybody really understands and 
can make a more objective decision.
    We're working on that. It's going to take years to do it, 
but I am convinced that the TQM program really did get hold of 
a lot of people, and they are working their way through the 
structures of the different programs, and as a result they're 
not satisfied with nonanalytical decisions.
    Mr. Dickey. I have been told two things. One is that you do 
a lot of hard work, and it's appreciated up here on the Hill; 
and the other is that this is your last day. Is that right?
    Mr. Gonzales. It is, sir.
    Mr. Dickey. Let me ask you this. Would you like for me to 
make it harder on you and just cross-examine you so that you'll 
say, ``I'm so glad,'' or do you want it easy? [Laughter.]
    Mr. Gonzales. Mr. Dickey, I have to tell you, I am so 
honored to have served in a governmental capacity that I would 
do anything, answer any questions you have.
    Mr. Dickey. That's wonderful. That's wonderful. Thank you 
for your service.
    Where are you going?
    Mr. Gonzales. I'm going back to Albuquerque to work with a 
private firm.
    Mr. Dickey. Well, they're lucky.
    All right, other Departments?

                   availability of grant-funded data

    Mr. Thurm. Mr. Chairman, let me expand on the answer that I 
gave to the prior question about the research data, before I 
get to the GPRA.
    We support the policy described by the Department of 
Education, that those who do research need time to make an 
accurate and objective analysis of the data, but that it should 
be turned over for Federal purposes as soon as possible 
thereafter.
    Mr. Dickey. That sounds like a revisionist statement. I 
liked your other one better. [Laughter.]
    The problem is, with Kellerman's situation--and that's all 
I really know about--he said, ``Yes, we will soon give you that 
data.'' We didn't get it, nor did we get an explanation.
    Now, what I'm saying is that it was insulting to us not to 
get a response, period. Then it was insulting that we didn't 
get the data. What I'm saying is that we're trying to work 
together for the good of folks, and that's not working 
together. If our request was out of line, somebody should have 
said, ``Now, wait a minute, you're out of line because this is 
what's going to happen,'' and so forth. No one said anything. 
Silence offended in this case, and I think it's going to play 
hard on those things in the future.
    I liked your other statement, but I understand your second 
one, too.

                       gpra implementation at hhs

    Mr. Thurm. If I can address your question with respect to 
the development of performance standards: Our operating 
divisions are now undertaking to create goals and performance 
measures for our fiscal year 1999 budget request, with 
assistance from staff offices and our Office of the Secretary. 
Our operating divisions are going through periods of 
consultation with their partners and customers at the grass 
roots, consulting with State and local governments, and the 
constituencies of the programs. These measures will be part of 
our fiscal year 1999 budget request.
    With respect to the questions of what kinds of standards we 
are considering, I can give you a couple of examples. With 
respect to the Child Support Enforcement example I mentioned in 
my oral statement, in connection with the States, we have 
identified two primary targets. The first is the amount of 
dollars collected by the States, and the second is the number 
of children whose paternity is identified. Similarly, with our 
Child Immunization Initiative, we are identifying the rates of 
vaccination among children from zero to two years of age, and, 
second, the incidence of vaccine-preventable diseases.
    Like Mr. Gonzales' testimony, we see the GPRA process as 
providing us with some discipline----
    Mr. Dickey. The what process?
    Mr. Thurm. The GPRA, the Government Performance and Results 
Act process, Mr. Chairman. It is providing us with----
    Mr. Dickey. Did Ronald Reagan initiate that? [Laughter.]
    Mr. Thurm. No, Mr. Chairman.
    Mr. Dickey. Okay.
    Mr. Thurm. The discipline to lay out a strategic plan for 
the Department, to derive performance measures, and then 
ultimately to provide performance reports so that we can 
measure ourselves on the success our programs have, based on 
the measures we have agreed to.
    Mr. Dickey. Thank you, sir.
    Yes, sir?

                          performance measures

    Mr. Smith. Mr. Chairman, our experience is similar to the 
experience in the Labor Department and HHS.
    One observation that I think is important is that some 
programs lend themselves to quantitative targets and standards 
of the sort that you mentioned in your question. In particular, 
our programs on the delivery of loans and grants and other 
things, and associated issues having to do with them, with 
default rates--we've set a standard there;we've gone from 22 
down to 10; we're going to keep that; we want to keep moving it down. 
That's fairly easy to do.
    It's a lot harder to do when we're talking about a major 
education program, a State program, but one that is intended to 
help local and State districts, because it is sometimes 
difficult to attribute causality directly to the program rather 
than to the overall effort of the local and State school 
districts.
    So we are, as are the other two Departments, working hard 
on development of measures of that sort. And I agree with Kevin 
that this process has brought a great deal of discipline into 
the Department and in the development of the indicators for the 
17 programs that I mentioned in my testimony. We went back and 
forth and back and forth with the Department staff, and then 
with OMB, and since then we have been discussing it with staff 
on the Hill, and I think each time we get a little bit better 
insight into the kinds of information that will be useful to 
the different people in different parts of the Government. And 
we also get better insight into the kinds of information that 
are available to gather, and how we can then make decisions--
both decisions having to do with budget, but also decisions 
having to do with the way we implement the programs.
    So I think it's been very helpful. We are just getting out 
of the blocks on this one, and I think you will see some really 
good stuff over the next two or three years.
    Mr. Dickey. I'd like the panel to direct your attention to 
the gentlewoman from Kentucky, Mrs. Northup, for 10 minutes of 
questions.
    Mrs. Northup. Thank you.

               education funds directed to the classroom

    I would like to start by directing my questions to some of 
the education issues. Your total budget is $37.9 billion, I 
think.
    Can you give me an estimate of what percentage of that 
makes it to the classroom? I guess what you'd have to do is 
break it down into how much gets--literally, checks get written 
and out the door to the States, and then it can be absorbed by 
State Departments of Education, by local districts.
    For example, Title I--I visited a school over the break 
that has Title I; they desperately need more money, and their 
concern is the amount that was absorbed at the district level, 
that was absorbed at the State level, that never came down 
because of the administration of the program nationally.
    Mr. Smith. Yes. I think it's a good question. You have to 
eliminate from that $37 billion estimate, of course, all those 
programs that have to do with higher education, since they 
don't really apply----
    Mrs. Northup. Right.
    Mr. Smith [continuing]. And the loans and grants and all 
that sort of stuff. And if we might, we should also eliminate 
some of the programs like construction, which is in that budget 
but it isn't passed yet----
    Mrs. Northup. Yes. Let's just talk about what's being 
administered.
    Mr. Smith. Exactly.

           percent of title i funds that reach the classroom

    Let me go right to Title I, because I think Title I is 
important. All these are kind of estimates. When one takes a 
look at our overall budget, about 2 percent of our overall $39 
billion budget goes to Federal administrative expenses, and 
that includes all the resources that are used for the contracts 
that go out to deliver student aid and other things. So it's 
not just people----
    Mrs. Northup. All 5,000 employees?
    Mr. Smith. All 5,000 employees, all those contracts. We 
have substantial contracts that deliver student aid. In fact, 
in our Department we have 5,000 people, and we deliver roughly 
$30 billion now; we have an increase in this budget, as you 
know. In terms of dollars delivered per person, we are the most 
efficient Department by a long shot in the entire Government.
    Mrs. Northup. How much is the total Title I amount?
    Mr. Smith. The total Title I amount this year, I think, is 
about $8 billion. The request is about $8 billion. That's not 
precise.
    Mrs. Northup. Let me just say that that would come to 
about--let's see, did you say $8 billion?
    Mr. Smith. Right, $8 billion.
    Mrs. Northup. That would be about $80 million if Kentucky 
got their proportion----
    Mr. Smith. Since you're a 1 percent State, right.
    Mrs. Northup. And then in my district, that would be $16 
million.
    Mr. Smith. Okay. Well, let me go through----
    Mrs. Northup. Why don't my classrooms----
    Mr. Smith. Well, let me go through the percentages and I 
can tell you.
    Two percent, in effect--not of the $8 billion, though; it's 
a separate appropriation--2 percent of the total administrative 
money goes to administrative overhead at the Federal level. One 
percent, only 1 percent, can be held at the State, and only 
half of that, I believe, can be held for administrative 
purposes. The other half has to be held for technical 
assistance purposes and other things.
    That takes us down to 97 percent. The rest all goes down to 
the local district. Now, the local district--there isn't a 
control over the local district. This was a point of 
considerable debate in the last reauthorization of the 
Elementary and Secondary Education Act. In fact, all of us 
wanted to come up with a way of controlling the amount of 
administrative costs at the district, and yet we couldn't do it 
because we couldn't agree. And this was in discussions with 
Republicans and Democrats alike and with staff members and 
others. We couldn't really agree on what was administrative and 
what was in support of classroom operations. Is professional 
development administrative? Is the person who runs the 
curriculum area, and who works with the Title I teachers in 
particular in curriculum, is that a person who is 
administrative, or is that a person who is really working hard 
on getting the classroom work correct.
    So that became a real difficult point. What we've done, 
however, is gone out--in part at the prodding of people's 
questions, just like yours--and we've asked one of the Big 8 
firms to take a look at two different places, in Milwaukee and 
South Carolina, a city and a State, and in both places we found 
that the districts use 93 percent of their funds on instruction 
and instructional support, non-administrative stuff. Now, 
instructional support would be professional development, and to 
some it might look like administrative work, but by and large 
most of us don't think it is. I see you nodding, so you 
probably don't either; you think it is closer to the classroom, 
certainly, than somebody who is just paying checks out and so 
on.
    So our best estimate now, in answer to your question, on 
the basis of pretty hard data in these two areas, is about 
93percent of the Title I funds reach the classroom or are directly 
concerned with instruction of students.
    Title I is our largest program, and therefore dominates 
this answer, in effect--
    Mrs. Northup. Yes.

            special education funds that reach the classroom

    Mr. Smith. The other programs have a slightly larger amount 
of money that can be held at the State level, up to 5 percent 
or so in some cases. But again, most of those funds, as in 
Special Education, go to support services for Special 
Education, and these are people--
    Mrs. Northup. Now, wait a minute. This is exactly the 
problem. They go to Special Education. But if the schools, if 
the program, if the district decides that Special Education 
means that the child is going to be mainstreamed, and there are 
going to be 24 kids in that class and an aide that is going to 
help the teacher and everything, the money may not help the 
Special Education child; you know, the child that may need the 
intensive help may not get it. It just sort of gets lost in all 
the educational funds.
    Mr. Smith. Well, I think that is a bit of a problem. On the 
other hand, in Special Education, as you know well, there is a 
set of provisions to protect the child, the individualized plan 
for the student and so on, and the Federal money and the 
Federal protections serve a very useful role in that regard. It 
has been protecting children over the past 20 years, as you 
well know. It has changed a great deal.
    Mrs. Northup. We are all aware of how many parents are 
filing suit, saying that that money reaches the school but it 
never serves the child.
    Mr. Smith. Yes. I mean, there are suits like that, that's 
right.

                 outcomes of federal education spending

    Mrs. Northup. Let me ask you--I guess more importantly, 
what are we accomplishing? Are the reading scores going up? 
We're spending all this money, $38 billion. Are the reading 
scores going up? I look back here--I believe this is what you 
said was available in your report to the committee on outcome--
if you look back here on your status guide, red, yellow, and 
green, of all the outcomes, there's one green. There are no 
yellows, and the rest of them are either red or amber; I guess 
that that means they've barely shown any improvement.
    I think our concern is, how many of these dollars are we 
going to spend? Ultimately the whole test is, does this child 
succeed better in school? I'd just like to give you an example 
in Kentucky. You've talked about the ED-FLEX program. You all 
use Kentucky all the time as the example of progressive 
schools, the KERA program. I've been very engaged in that. One 
of the most successful parts of it is site-based decisionmaking 
because we have that in Kentucky. I believe that you all won't 
let us take part in that program; is that right?
    Mr. Smith. In which program?
    Mrs. Northup. Because Kentucky--any school that has school-
based decisionmaking receives waivers and has rewards and 
sanctions based on whether kids learn at a higher level.
    Mr. Smith. Right.
    Mrs. Northup. I believe that those schools are prohibited 
from ED-FLEX demonstration money.
    Mr. Smith. I don't believe so. There are two different 
waiver authorities. There is one waiver authority under--well, 
there are actually four or five different waiver authorities, 
but there is a set of waiver authorities under our programs, 
under Title I which covers almost all of the SEA, and under 
GOALS 2000, which covers even more than the SEA. They are open 
to that. It may be that the State stops them from----
    Mrs. Northup. No, actually, it was the State Department of 
Education that asked me to ask this question, because they feel 
like--like I said, this has been held up as probably one of the 
most progressive things since teachers and parents that 
literally serve as the Board and run the schools. It's been 
very successful, but because----
    Mr. Smith. I cannot imagine a reason that there would be 
any holdup. I will----
    Mrs. Northup. Are you aware of any States that are 
ineligible to participate?
    Mr. Smith. No. ED-FLEX is a special provision where we give 
the authority to the States themselves to give waivers. We are 
allowed to do that for only 12 States now. We were given 
authority for six, then we were given authority for a second 
six, and we are now up to nine States, I believe, so there are 
three others that are open.
    I will be glad to look into this. I know the Commissioner 
down there very well, and we will talk to them about it.

                    education department employment

    Mrs. Northup. Let me ask you one other question. You have 
said in your report, and verbally here today, that the 
employment has declined since 1980 by 40 percent?
    Mr. Smith. The number of FTEs. Yes, that's right.
    Mrs. Northup. What's the percentage of decline since 1992?
    Mr. Smith. Tom.
    Mr. Skelly. That percentage of decline since 1992 is 6 
percent.
    Mrs. Northup. Okay. So actually, the majority of that was 
achieved before this Administration was engaged in it.
    What about--can you give me any idea of what sort of change 
in part-time employees, employees that aren't counted in FTE or 
under contract?
    Mr. Skelly. Part-time employees are counted in our full-
time equivalents, and we have had an increase in those. I would 
have to estimate that, maybe, from 100 to 200 part-time 
employees.
    Mrs. Northup. And what about under contract, and not 
considered Federal employees?
    Mr. Skelly. Under contract we probably have--through 
contracts and guaranty agencies, and through similar 
contracts--up to 20,000 employees, people who are----
    Mrs. Northup. And how has that changed?
    Mr. Skelly. That has increased since 1994. We have hired 
additional contractors to work on the direct student loan 
program for both originating loans and servicing loans.
    Mrs. Northup. And can you give me any idea, eliminating 
higher education?
    Mr. Skelly. Other than the student aid area, we have not 
had a big increase in consultants or contractors.
    Mrs. Northup. But it hasn't gone down?
    Mr. Skelly. It may have gone down just because we didn't 
have money to pay as many people, because we were concentrating 
resources on the student aid program.
    Mrs. Northup. Why do you always talk about the decrease in 
the Department of Education since 1980, since the only thing 
relative is what the decrease or increase has been since 1992 
or 1993?
    Mr. Smith. Yes. Well, I guess we used 1980, because that 
was when the Department was formed. So at the very first time 
that the Department existed, when it was broken off from HEW--
--
    Mrs. Northup. I think if we're trying to see the direction 
that the Administration is going, that's more relative now.
    Mr. Smith. Yes. That's fine. We'd be glad to give you 
figures on all of this, if you'd like.
    [The information follows:]

               Education Department Employment Since 1992

    Employment in the Education Department has declined over 
the past 5 years due to reinvention and restructuring efforts 
combined with technology and financial management improvements. 
By 1998, as reflected in the Department's budget request, 
employment levels will have decreased by 6 percent, from 4,859 
full-time equivalent (FTE) employees in 1992 to 4,560 FTE in 
1998.

                          performance measures

    Mr. Smith. Just to go back to your ``where do we stand'' 
issue on the indicators, we've taken a pretty tough stand on 
this green, amber, red. In fact, as you may know, there was a 
recent announcement about the National Assessment of 
Educational Progress math scores. They've gone up since 1990; 
they went up in 1992; they went up again in 1996, all three 
grades. I think we can attribute that to a lot of hard work, 
partly by the Federal Government, but mostly by States and 
local districts, around some of the math reforms. We are 
hopeful of finding the same kinds of things in reading.
    Again, as you know, as we've talked before, we are now 
focusing a lot on reading and math, since we see those as 
really core areas. Students have to be able to read 
independently by the 4th grade or they are in real trouble in 
school.
    Mr. Dickey. Thank you, Anne.
    The gentlewoman from Connecticut, Ms. DeLauro, do you have 
any questions?
    Ms. DeLauro. Yes, I do. Thank you, Mr. Chairman.
    Mr. Dickey. What a surprise. [Laughter.]
    Ms. DeLauro. You must be a lawyer, Mr. Chairman. You knew 
the answer to the question before you asked it.
    Mr. Dickey. I think you're right.
    We have only five minutes.
    Ms. DeLauro. Fine. I'll move quickly.
    I want to say thank you to all of you for being here today. 
I apologize for not being here at the outset; there are just 
too many hearings, but I do have a couple questions.

                             welfare reform

    As we take a look at management practices, it's important 
to take a look at how Government Departments are coordinating 
their efforts. There's rarely a problem that people face that 
falls neatly into one Department, whether it's Labor or 
Education or Health and Human Services. I think this is 
particularly true of welfare reform.
    HHS administers assistance to individuals, but those people 
may also need to complete high school or receive job training 
to become part of the workforce.
    If you can, please comment for me on how the Departments 
are working together to implement welfare reform.
    Mr. Thurm. If I may, the Department of Health and Human 
Services is working quite closely with the Department of Labor 
on implementing welfare-to-work programs, working through 
issues involving successful implementation of the welfare law, 
with particular emphasis on moving those who are on welfare to 
work. As you suggested, some of the programs are divided among 
these relevant Departments, and we've placed a premium on our 
coordination, although we need to maintain a focus in that 
area.
    Ms. DeLauro. Just a quick follow-up on that. Is there a 
mechanism in place to take a look at--there are lots of 
editorials, lots of articles in the paper talking about various 
States when they are moving people off of welfare to work. Is 
there any mechanism to monitor the kinds of jobs, the quality 
of jobs, the wages, the benefits, part-time, full-time, so that 
we are not looking short-term where we can all say ``Yes, it's 
working,'' versus what then happens within six or seven months 
as a result? Is there a mechanism for monitoring and evaluating 
the quality of jobs that people are getting?
    Mr. Thurm. Two answers to that. With respect to programs 
that were implemented prior to the welfare reform bill, signed 
last August, and with respect to waivers that the Department 
gave to States to implement welfare reform, we have evaluation 
components with those waivers to track people who are already 
in those State programs.
    With respect to the new bill, the Department is putting 
together a comprehensive research agenda that seeks to build on 
work that is being done not only throughout the Federal 
Government, but also by the States, and by private and 
nonprofits. We'll be relying on the States to provide data with 
respect to the very questions you raised.
    Ms. DeLauro. Fine.
    The last question on this is, are we also monitoring across 
the Departments the money that is, if you will,``saved.'' Is it 
then being used not to substitute for general fund purposes, if you 
will, but going back into the wrap-around services that have to do with 
child support and transportation and others? We faced a situation in 
this country a number of years ago where we talked about 
deinstitutionalization. A variety of areas were supposed then to be 
focused in and coordinated to help that person that was 
deinstitutionalized. We found that that didn't--it was a wonderful 
concept, but it didn't materialize; ergo, a portion of our homeless 
problems have to do with what happened there.
    I am thinking in terms of the management of putting the 
systems in place where we're watching these kinds of pieces.
    Mr. Thurm. As you know, one authority in the bill passed 
last year accorded the States discretion to implement the 
Welfare Reform Act. We believe the research we'll be doing will 
track what the States are doing, and we'll be able to come back 
and tell the Congress the successes and the concerns that we 
have after a period of implementation, that the States have 
authority to implement this.
    Ms. DeLauro. Okay.
    The last question, if I might--Mr. Chairman, I'm looking at 
your clock here----
    Mr. Dickey. You've got more time, Rosa, if you want it.

                             e-laws project

    Ms. DeLauro. Okay, just one more.
    The E-LAWS project is a way to help small businesses to 
understand the regulations that affect them. Can you comment on 
the E-LAWS and the other efforts by the Department of Labor to 
address the needs of small businesses, and also the question 
about whether Health and Human Services and Education have 
undertaken similar kinds of initiatives to help grantees 
understand regulations?
    Ms. Lattimore. It's my understanding that we all are 
working at different aspects of that. The E-LAWS was something 
that came out of our policy shop, in working with our 
regulatory agencies. It experimented first in helping people 
understand veterans' preference, in working with the veterans, 
and providing easy access--in ``layman's terms,'' so to speak--
of what can be somewhat complex regulations. We are almost 
doing them as self-educating systems, that if I am a small 
business and I can get to the Internet, I can find any topic I 
need to help me in either establishing or understanding the 
various Federal provisions that impact my business.
    The area that we're working at in E-LAWS is our first 
incursion into this. We're getting good feedback so far from 
those people in the stakeholder community that we have been 
talking to, and we hope that once we have the technology 
mastered, for one, it will be easier to emulate across other 
regulatory areas that we have.
    Ms. DeLauro. Thank you.
    Thank you, Mr. Chairman. I appreciate the time.
    Mr. Dickey. Thank you all. We stand in recess until 2:00 
o'clock.
    Goodbye, Mr. Gonzales.
    Mr. Gonzales. Goodbye, Mr. Chairman.
    [The following questions were submitted to be answered for 
the record:]

[Pages 655 - 1613--The official Committee record contains additional material here.]







                           W I T N E S S E S

                              ----------                              
                                                                   Page
Abraham, K.G.....................................................   445
Anderson, B.E....................................................   223
Barron, W.G......................................................   445
Berg, Olena......................................................   493
Broadaway, F.M...................................................   551
Calhoun, Anthony.................................................   493
Cossu, Steven....................................................   551
Dalton, K.V......................................................   445
Dalton, P.A......................................................   551
Gatek, J.J.......................................................   551
Gonzales, E.A....................................................   603
Herman, Hon. Alexis..............................................     1
Horowitz, S.T....................................................   551
Lacey, D.J.......................................................   445
Lattimore, P.W...................................................   603
Masten, C.C......................................................   551
McAteer, J.D.....................................................   223
McMullen, J.E..............................107, 223, 445, 493, 551, 603
Seal, John.......................................................   493
Silva, Mary......................................................   107
Skelley, T.P.....................................................   603
Smith, M.S.......................................................   603
Taylor, P.M., Jr.................................................   107
Thurm, K.L.......................................................   603
Uhalde, R.J......................................................   107
Watchman, G.R....................................................   223
Wyrsch, M.A......................................................   107








                               I N D E X

                              ----------                              

                           Secretary of Labor

                                                                   Page
Addressing Needs of Business and Labor...........................    91
Apprenticeship...................................................    39
Black Lung:
    Impact of Proposed Regulations on Black Lung Debt............    85
    Regulations..................................................    81
Budget Agreement.................................................    92
California's Hazard Communication Standard.......................    80
Davis Bacon:
    Davis Bacon and Minority Employment..........................    39
    Design and Implementation of Wage Survey Program.............    66
    Initiative To Improve Wage Determination Process.............    96
    Modal Rate...................................................    73
    Process Justification........................................    63
    Wage Surveys.............................................29, 56, 61
De-Barment Regulations...........................................    74
Department of Labor and Union Campaigns..........................    72
Discretionary Spending Increase..................................    21
Dislocated Workers...............................................    54
Drunk Driving....................................................    45
Education and Skills.............................................    93
Employees' Compensation Appeals Board............................    75
Ergonomics.......................................................25, 30
    NIOSH Involvement in Rulemaking..............................    47
    Proposed Ergonomics Standard.................................    90
    Training Grants in Ergonomics................................    26
    Timetable for Ergonomics Rulemaking..........................    44
Family Medical Leave Act/Comp Time Proposal......................    46
Federal Contract Compliance......................................43, 57
FY 1998 Request for ESA..........................................    23
FY 1999 Performance Goals and Measures...........................    52
Helper Regulations...............................................    38
International Program for Elimination of Child Labor.............   101
Job Appointments at DOL..........................................    45
Job Training:
    Program Effectiveness........................................    41
    Programs For Minority Youth..................................    42
    Program Proliferation........................................    40
    Reform Bill..................................................    92
    Reform Legislation...........................................    24
Liaison to Business Community....................................    24
LM-2 Forms.......................................................32, 69
Maine 200 Program................................................    37
One Stop Career Centers..........................................    28
Opening Statement................................................     2
Opportunity Areas for Out-Of-School Youth........................    52
Pensions.........................................................    35
Preparation for the Next Century.................................    31
Preparation for the World of Work................................    23
Professional Judgment Budget.....................................49, 98
Program Consolidations and Eliminations..........................   100
Pro-Union Procurement Regulations................................    48
Public Service Announcement Expenditures.........................    60
Replacement for Joe Dear.........................................    36
Requested Increases for OSHA.....................................    22
School-To-Work...................................................    59
Small Business Initiatives.......................................    94
Staffing Levels..................................................    22
Supplemental--Continuing Resolution..............................    95
Targeting Industries For Investigation...........................33, 70
Unemployment Insurance Computers.................................    56
Unemployment Insurance Service...................................    77
User Fees Proposal...............................................   101
Welfare-To-Work..................................................34, 94
    Welfare-To-Work and DOL Regulations..........................    81
    Welfare-To-Work Jobs Challenge Initiative....................    96
Welfare Reform...................................................    53
Workers in the Construction Industry.............................    86
Work Opportunity Tax Credit......................................    31
Workplace Violence Guidelines....................................    88

                 Employment and Training Administration
                   Veterans' Employment and Training

Employment and Training Administration:
    Alien Labor Certification....................................   184
    Apprenticeship........................................148, 192, 194
    Budget Justification.........................................   719
    Budget Summary...............................................   109
    Centers for Employment and Training..........................   197
    Competency-Based Occupational Training.......................   194
    Coordination Between Departments of Labor and Education......   197
    Critics of Employment and Training...........................   208
    Department's View on Waivers.................................   206
    Dislocated Worker Assistance.................................   170
    Federal Contractors and Helpers..............................   196
    Federal Unemployment Tax Act (FUTA)........................207, 217
    Foreign Academic Researchers.................................   183
    Government Performance and Results Act (GPRA)................   161
    Job Corps........................................135, 149, 185, 198
    Job Training Programs.................................142, 163, 205
    National Farmworker Data Base................................   205
    Migrant Workers............................................155, 203
    OIG Audits...................................................   169
    One-Stop Career Centers...............................144, 181, 220
    Opening Statement..........................................107, 111
    Out of School Youth..............................147, 151, 163, 209
    Outplacement.................................................   160
    Outreach Workshops...........................................   161
    Pilot Programs...............................................   150
    Preparing for the Future.....................................   211
    Program Effectiveness........................................   107
    Reinventing Government.......................................   207
    School-to-Work.............................................175, 216
    State Administration of Welfare..............................   143
    Summer Youth.................................................   173
    Trade Adjustment Assistance..................................   144
    Unemployment.................................................   138
    Unemployment Insurance.......................................   109
    Welfare Reform...............................................   151
        States...................................................   153
    Welfare-To-Work.......................................170, 216, 218
    Workflex.....................................................   156
    Workforce Programs...........................................   206
    Work Opportunities Tax Credit................................   197
    Year 2000 Computer Conversion..............................157, 219
    Youth Training...............................................   214
Veterans' Employment and Training:
    Accomplishments..............................................   139
    Budget Justification.........................................  1497
    Disabled Veterans............................................   221
    Homeless Veterans..........................................126, 189
    Interagency Cooperation......................................   140
    Opening Statement..........................................125, 127
    State Programs.............................................141, 191
    Travel Policy................................................   141
    Young Veterans Unemployment Rate.............................   212
    Veterans' Needs..............................................   140

             Occupational Safety and Health Administration
                 Mine Safety and Health Administration
                  Employment Standards Administration

Occupational Safety and Health Administration:
    Balance Between Enforcement and Cooperative Programs.......335, 386
    Budget Justification.........................................  1182
    California's Hazard Communication Standard.......260, 327, 333, 397
    Construction Industry......................................393, 396
    Compliance Programs..............................317, 324, 330, 336
    Computer Programs............................................   399
    Drugs and Alcohol in Workplace...............................   339
    Drunk Driving................................................   398
    Enforcement..................................................   275
    Ergonomics........................263, 276, 289, 296, 320, 350, 394
    Fit Testing..................................................   313
    Five Year Enforcement Data...................................   333
    Flexible Regulations.........................................   312
    FTE Levels...................................................   317
    FY 1998 Budget Request.......................................   315
    Industry Specific Regulations................................   392
    Methylene Chloride.....................267, 285, 288, 290, 302, 364
    Nursing Home Initiative...............................309, 325, 385
    Opening Statement............................................   223
    Peer Reviews in OSHA Rulemaking............................300, 389
    Performance Based Standards..................................   319
    Postal Service.............................................297, 389
    Referrals From Outside Parties...............................   316
    Residential Construction.....................................   257
    Risk Analysis................................................   391
    Safety and Health Programs............................318, 337, 338
    Silicosis....................................................   399
    Small Business Initiative....................................   275
    Site Specific Injury and Illness.............................   318
    Smoking in the Workplace.....................................   393
    Stakeholder Participation....................................   395
    State Plan Modifications.....................................   361
    Targeting the Health Care Industry...........................   288
    Technology Based Regulatory Controls.........................   345
    Training and Education Grants................................   344
    Training for Compliance Officers.............................   394
    Tuberculosis...............................................310, 314
    Voluntary Protection Programs.........................322, 332, 340
    Workers Compensation Costs...................................   282
    Workplace Violence Guidelines...............255, 263, 321, 349, 360
Employment Standards Administration:
    Black Lung............................................277, 409, 425
    Budget Justifications:
        Black Lung Disability Trust Fund.........................  1168
        Salaries and Expenses....................................  1090
        Special Benefits.........................................  1152
    Child Labor Legislation......................................   256
    Comp Time....................................................   285
    Davis-Bacon Act..................................258, 274, 401, 419
    Federal Employees Compensation Act...........................   408
    LM-2 Forms.................................................255, 414
    ``No Sweat'' Garment Initiative..............................   443
    Office of Federal Contract Compliance......................406, 440
    Opening Statements...........................................   236
    Peer Review Process..........................................   299
    Perception of Collusion......................................   286
    Prevailing Wage Survey.......................................   298
    Quality Management...........................................   416
    Wage and Hour..............................................287, 405
    Sweat Shops..................................................   296
    Targeting Industries for Investigations......................   300
Mine Safety and Health Administration:
    Budget Justification.........................................  1238
    Coal Mine Dust...............................................   412
    Employment Reduction.........................................   410
    Inspection Equipment.........................................   412
    Metal and Nonmetal Mines.....................................   414
    Performance..................................................   411
    Opening Statement............................................   247

                       Bureau of Labor Statistics

BLS Objectivity..................................................   463
Budget Justification.............................................  1298
    Prior Year Budget Reduction..................................   463
Commissioner's Tenure............................................   453
Comp2000 Survey..................................................   477
Computer System..................................................   464
Consumer Price Index:
    Adjustment...................................................   461
    Are Taxes Included...........................................   484
    Boskin Commission...........................454, 458, 468, 475, 484
    Budget Deficit...............................................   460
    Changes......................................................   465
    Cost of Living........................................453, 454, 468
    Experimental Measures........................................   453
    Improvements To..................................458, 462, 472, 486
    Measuring Cost of Housing....................................   466
    Revision Time Line...........................................   474
    Sample Size..................................................   459
    Substitution Bias............................................   461
    Supplemental Measures........................................   453
    Updating Market Basket of Goods..............................   460
Data Security....................................................   465
Davis-Bacon......................................................   456
    Current Data Collection......................................   457
    Quality Control of Data......................................   457
    Use of BLS Data............................................478, 483
    Wage Collection Information..................................   457
Government Performance and Results Act (GPRA)....................   476
National Longitudinal Surveys....................................   480
Opening Statement................................................   445
Programs Eliminated or Reduced...................................   485
Reimbursable Activities..........................................   481
Standard Industrial Classification (SIC) Revision................   480
Workload.........................................................   464
Workplace Fatalities.............................................   484

              Pension and Welfare Benefits Administration
                  Pension Benefit Guaranty Corporation

Pension and Welfare Benefits Administration:
    Bank and Insurance Company Assets............................   539
    Budget Increases.............................................   531
    Budget Justification.........................................  1010
    Budget Request...............................................   495
    Compliance Assistance........................................   494
    Contributions to Pension Funds...............................   546
    Customer Service.............................................   495
    Fraudulent Health Care Plans.................................   494
    Kennedy-Kassebaum Bill.....................................518, 543
    Mental Health Parity Provisions..............................   519
    New Health Care Responsibilities.............................   534
    Opening Statement............................................   493
    Retirement Savings Education...............................494, 543
    Retirement Savings Plans.....................................   545
    401(k) Protection............................................   493
Pension Benefit Guaranty Corporation:
    Budget Increases.............................................   528
    Budget Justification.........................................  1048
    Contractor Trustees..........................................   513
    Fiduciary Responsibility.....................................   515
    Financial Condition..........................................   524
    Government Performance and Results Act (GPRA)................   529
    Independent Investment Management............................   513
    Insurance Program Surplus....................................   503
    Opening Statement..........................................503, 506
    PBGC Administrative Budget...................................   523
    Pension Underfunding.........................................   520
    SEC Regulations..............................................   515
    Special Situation Investment Manager.........................   516
    Strategic Plan...............................................   503
    Trusted Assets Liquidation Policy............................   521
    Vacancy Announcements........................................   549
    Workload Factors.............................................   526

                      Office of Inspector General

Audit Priorities.................................................   579
Audit Contracts..................................................   594
Budget Justification.............................................  1562
Chief Financial Officer (CFO)....................................   578
Davis-Bacon...............................................570, 596, 602
Government Performance and Results Act (GPRA)....................   576
Health Insurance Portability and Accountability Act..............   591
Job Corps........................................................   599
Job Training Programs............................................   598
Labor Racketeering.............................................571, 578
Legislative Changes..............................................   585
Loss of Legislative Experience...................................   595
OIG Reductions...................................................   594
Opening Statement................................................   551
Payments to the Government.......................................   573
Reimbursable Program.............................................   592
Resolution of Audits.............................................   575
Significant Audits...............................................   580
Travel Reductions................................................   593
Wage and Hour Cases..............................................   569
Welfare-To-Work..................................................   601

                        Consolidated Management

America's Job Bank...............................................   604
Appropriations General Provisions................................   663
Chief Financial Officer (CFO)....................................   660
Departmental Management Budget Justification.....................  1369
E-Laws Project.................................................653, 668
Financial Management.............................................   606
Government Performance and Results Act (GPRA)........603, 644, 655, 669
Government Printing Office Policy................................   663
Information Technology...........................................   606
Inspector General Findings.......................................   662
Management Approach Successes....................................   605
``No Sweat'' Campaign............................................   604
Official Time....................................................   671
Opening Statement................................................   607
OSHA Is Working..................................................   642
Oversight of Functions...........................................   657
Performance Measures and Cost Accounting.........................   655
Small Business Assistance........................................   605
Structure of Management Offices..................................   656
Welfare-to-Work................................................604, 665
Welfare Reform...................................................   667
Working Capital Fund.............................................   661
Year 2000 Computer Problem................................658, 665, 670

                   (Department of Education Portion)

Education Department Employment..................................   650
Education Funds Directed to the Classroom........................   647
Federally Funded Data Ownership..................................   642
Opening Statement of Marshall Smith..............................   630
Outcomes of Federal Education Spending...........................   649
Percent of Title I Funds that Reach the Classroom................   648
Performance Measures......................................646, 651, 709
Questions Submitted for the Record...............................   655
Special Education Funds that Reach the Classroom.................   649

                             WITNESS INDEX

Kevin L. Thurm.................................................603, 629

                             SUBJECT INDEX

                  Consolidated Management Hearing: HHS

Appropriations General Provisions................................   678
Availability of Data Funded by HHS...............................   643
Availability of Grant-Funded Data................................   645
Commitment to a Lean, Effective Organization.....................   627
Cross-Servicing and Franchising..................................   625
Data on Program Spend-Out Rates..................................   679
Employee Excellence..............................................   620
Financial and Technological Accountability.......................   620
FY 1998 Departmental Management Budget Request...................   628
Government Performance and Results Act:
    GPRA Implementation at HHS...................................   646
    GPRA--Role of Management.....................................   673
    GPRA--Use of Performance Measures............................   699
    Managing for Results.........................................   622
Implementation of the Chief Financial Officers Act...............   623
Management Agreement with Inspector General Findings.............   678
Management Priorities at HHS.....................................   619
Medicare Transaction System......................................   680
Opening Statement of Kevin Thurm...............................619, 621
Operation Restore Trust..........................................   621
Oversight of Functions...........................................   674
Performance Measures and Cost Accounting.........................   674
Policies on Using GPO for Printing Department Documents..........   679
Program Support Center...........................................   676
Projects to Help Small Businesses................................   698
Quality of Work Life.............................................   626
Recovery of Medical School Billings..............................   696
Reducing Crib Deaths.............................................   642
Structure of Management Offices..................................   674
Welfare Reform:
    Interdepartmental Cooperation on Welfare Reform..............   697
    Welfare Reform...............................................   652
Year 2000 Computer Problem................................625, 677, 700